Airport Economist

By Tim Harcourt

Traveling the globe in pursuit of the whys and wherefores of Australian international business success, this narrative unravels the economic life of several diverse countries. From Sydney, Singapore, and Seoul to St Petersburg, Seattle, and Santiago, this witty and informative guide draws from interviews with business leaders, entrepreneurs, government officials, academics, farmers, and even celebrities to uncover the world of export beyond economic textbooks and financial spreadsheets. With a clever turn of phrase, clever observations, and the grunt of supporting data, this investigation paints an eccentric and uncommon picture of financial fortune down under.

• Language: English
• Publisher: Allen Unwin
• Release date: Jun 1, 2008
• ISBN: 9781741763270

Book preview

THE AIRPORT ECONOMIST

The airport economist has a website

www.theairporteconomist.com

THE AIRPORT ECONOMIST

Tim Harcourt

First published in 2008

Copyright © Tim Harcourt 2008

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act.

Allen & Unwin

83 Alexander Street

Crows Nest NSW 2065

Australia

Phone:  [phone]

Fax:      [phone]

Email: [e-mail]

Web: www.allenandunwin.com

National Library of Australia

Cataloguing-in-Publication entry:

Harcourt, Tim.

The airport economist / Tim Harcourt.

Crows Nest, N.S.W. : Allen & Unwin, 2008.

9781741755121 (pbk.)

Exports—Economic aspects—Australia.

Foreign trade promotion—Australia

Set in New Baskerville 10/12 pt by Midland Typesetters, Australia

Printed and bound in Australia by McPherson’s Printing Group

10 9 8 7 6 5 4 3 2 1

CONTENTS

Introduction

ASIA

1 Everybody loves Raymond

2 Love thy neighbour? Living with ASEAN

3 Motorcycle diaries

4 Shanghai of the tiger

5 Lost in translation

6 Switched on in Seoul

7 Mumbai be right, I may be crazy

THE MIDDLE EAST AND AFRICA

8 Sheikh, model and mall

9 Prosperous on the Bosphorus

10 Tim Tams to Tel Aviv

11 Free (trade) Nelson Mandela

EUROPE

12 Pushkin meets Pitjantjatjara

13 A chip off the old bloc?

14 The Italian job

15 Berets, baguettes and board shorts

16 A tale of two World Cups

17 The Kylie effect

THE AMERICAS

18 All the way with the USA?

19 Blame it on Rio

20 Don’t buy from me, Argentina

21 Red hot Chile

COMING HOME

22 Bringing it all home to Kath & Kim

Conclusion—the airport economist’s Ten Commandments

The airport economist’s useful websites in trade and economics

The A to Z of exporting

Acknowledgements

INTRODUCTION

ONCE UPON A time, in the 1970s, when stagflation (double-digit inflation and unemployment) ravaged western economies, economists were dispatched to lands near and far to offer ‘advice’ (some for free, some paid for). A famous example was in 1974 when the father of the Chicago School of economics, the late Milton Friedman, visited Australia to offer his advice to policymakers down under. Friedman, well known for his economic advice to the Pinochet regime in Chile, suggested the usual medicine to Australian policy-makers: Fight inflation first by using monetary policy, balance the budget, deregulate the financial markets, and reduce the size of government. However, Friedman gave this advice at a hastily arranged press conference at the airport on arrival in Australia, before he had got the chance to examine conditions in Australia and meet with Australian officials. As a result, local opponents of his policies coined the term ‘airport economist’ for Friedman.

Since then, a number of airport economists have been identified, some also bestowing wisdom upon a country without actually leaving the airport arrivals lounge. Take Jeffrey Sachs, who flew around the world giving advice to the transition economies after the fall of communism and also in Latin America before becoming a strong anti-poverty campaigner. During the Asian financial crisis of 1997–99, the likes of Indonesia had many visits from airport economists, particularly those with the International Monetary Fund (IMF) and the World Bank. Unfortunately for the IMF (and even more so for the countries involved) identical policy advice was offered to several countries on one whirlwind trip (and, embarrassingly, someone forgot to proofread an otherwise standard document so that, for example, the word ‘Malaysia’ wasn’t replaced by the word ‘Indonesia’ when required). This particular incident revived the original basis of the ‘airport economist’ concept, that there is a one-size-fits-all approach to policy, and that visits to actual countries are more for show than investigation.

However, all that is really just a quick history lesson on the term and not in fact why I called this book The Airport Economist. I have always wanted to write an economics book and have a particular interest in how economic integration on a global scale affects local communities. On the other hand, I have always wanted to write what is sometimes dubbed an ‘airport book’, that is, one that is accessible and read by lots of people! Like many travellers, I do much of my reading on planes and find airport bookstores fantastic value. So, like a true ‘two-handed’ economist wanting to write both an economics and an airport book, I decided The Airport Economist had to be the answer.

So why did the airport economist choose the destinations he travelled to? It was a matter of covering the world in a vaguely comprehensive fashion and also going to places where Australia has a reasonable (if in some cases developing) economic presence. It was also important to get the balance right between Asia, Europe and the Americas whilst finding some room for emerging markets in the Middle East and Africa.

But you can’t go everywhere (man). Criticised by some for travelling too much as prime minister of Australia, when one of Gough Whitlam’s staffers reported that the United Nations had created three brand new countries, Gough allegedly replied (with a touch of sarcasm): ‘The UN is creating countries faster than I can f****** well visit them!’ Well, the UN is creating countries faster than the airport economist can visit them but you have to make a start somewhere. In any case, as my publisher said, we had to leave some countries for the sequel.

The airport economist’s journey was greatly assisted by access to the Australian Trade Commission’s global network. The Australian Trade Commission—better known within Australia as Austrade—is the federal government agency that helps Australian companies crack the global economy. Traditionally, Austrade has helped Australian companies to export, but with new forms of globalisation sweeping international business Austrade has also supported Australian companies to set up joint ventures, strategic alliances, licensing and franchising arrangements, international aid procurement and foreign direct investment. The Austrade global network covers 62 countries with nearly 120 locations. If the domestic network is added, Austrade has coverage from Adelaide to Zagreb.

Naturally, because of the nationalityof the airport economist and his association with Austrade, this book takes on an Australian flavour. However, whilst The Airport Economist mainly focuses on opportunities for Australians in the world and looks principally at trade and commercial questions, I hope that both non-Australians and non-economists (who may not get as excited as I do about the wonderful world of trade and economics) will still enjoy the ride. In particular, I hope that students—both Australian and international—might find trade and economics as interesting as I do and even consider a career with an international focus. In addition, I hope that some small businesspeople and budding entrepreneurs out there, who hadn’t thought a lot about the opportunities of the global economy before, decide to stick their own toe in the water beyond our shores.

ASIA

1

EVERYBODY LOVES RAYMOND

Why is Singapore more famous for its engineers than for its ballet dancers? What is the new Singaporean obsession with ‘creativity’? The airport economist investigates.

THERE’S NO DOUBT about it, Singapore works. If you like order, cleanliness, intelligence and efficiency then you’ll like Singapore. Singapore is not very big—just a city on an island, really—but as a regional economic player in Southeast Asia and beyond it has done very well on all counts. The city-state has transformed itself from a relatively poor nation in the 1960s to an affluent, service-based economy with living standards at OECD levels—well ahead of most of its Southeast Asian neighbours. Singapore has almost become a ‘Switzerland of Asia’, with its strengths in international banking and finance.

So what is the reason for Singapore’s success? One is education. Singaporeans are just so damn smart. In fact, the airport economist himself is a beneficiary of the Singapore brain-fest. When I was studying economics at the University of Adelaide, most of the students in the year ahead of me were from Singapore or Malaysia. They were literally my neighbours, too, as we shared a dorm corridor in a residential college. All this happened by chance as this group of students—some of Singapore’s best and brightest—were meant to go to Oxford to study nuclear physics and become rocket scientists, but a glitch in Singapore’s otherwise near perfect education allocation-cum-manpower planning system meant they ended up in Adelaide studying economics with me.

This mix-up had two consequences, the first immediate, the second more long-term in nature.

The first consequence was that I was suddenly surrounded by all this brainpower, particularly in quantitative, technical subjects like mathematics, statistics and econometrics. Accordingly, my grades in these difficult subjects were greatly enhanced thanks to my Singaporean classmates/corridor neighbours. Economists often talk about ‘externalities’ or ‘spillovers’, which refers to a private action having social consequences which are not factored in to the original decision. Usually spillovers are negative, such as when a private factory pollutes a river (which causes social costs not accounted for in the initial commercial decision). However, there can be positive externalities or spillovers too. In this case, the Singaporeans’ talents at mathematical economics ‘spilled over’ into my orbit as they helped me to understand the difficult techniques required to excel at the coursework.

Fortunately, there were ‘gains from trade’ to be had. Economists also often talk about ‘comparative advantage’. The theory goes that if you are relatively good at something you should trade with the person who is relatively good at something else. It works for nations as well as people. So when it came to writing economic essays—particularly of thesis length—I was able to help my classmates and pay them back for the help they gave me with quantitative methods.

The second consequence came to light many years after we all graduated. Over time, all these talented Singaporeans have ended up back home running the place. Adelaide has made its mark on Singaporean public life—at the highest levels.

Probably the most famous example from my university days is Raymond Lim, a new young gun in the Singaporean government. Lim has held a number of high-level portfolios including Minister for Transport, Minister for Trade and Industry, and Minister for Foreign Affairs. Like his namesake from the Grammy-winning US television series Everybody Loves Raymond, Lim is clearly a man to watch in business and political circles in the city-state. One of the ‘magnificent seven’ (a group of seven emerging politicians hand-picked by then Prime Minister Goh Chok Tong), Lim is responsible for ensuring that Singapore remains competitive and innovative in the post-industrial age. When the airport economist met Lim at his office in Singapore, he was upbeat about his country’s prospects. ‘We are keen to nurture our creative industries and encourage innovation in the new Singapore,’ he explained. ‘Singapore is a high-income, mature economy with many knowledge-based industries. In this environment, our best chance is to encourage building our own human capital, support local entrepreneurship and to encourage other countries’ businesses to base themselves here in Singapore.’

One example of the ‘incubator’ approach is Singapore’s Torch Centre, a base for 25,000 small- and medium-sized enterprises (SMEs) from China. The Torch Centre provides a launch pad for SME internationalisation to the rest of Southeast Asia and beyond. Lim says foreign ownership is not an issue in an entrepot economy like Singapore: ‘We don’t mind if they’re not Singapore-owned, we just want them to be Singapore-based.’ It is hoped that, once again, Singapore can use its comparative advantage to great effect: without vast land, natural resources or a large population, the city-state has had to use its knowledge and capacity to be an international business hub to succeed. I guess it has got to be said that Singapore has a pretty good track record on this score, so the incubator approach should help the city-state to continue its winning streak well into the future.

So that’s the good news. There’s no doubt that Singapore is efficient and clean and its citizens are, on average, highly intelligent and well-educated, but there is something missing. What happens when a nation can produce lots of engineers but very few ballet dancers, or plenty of world-class superannuation fund managers but few artists or novelists? Well, to be frank, it becomes just a little bit dull. In short, Singapore needs a bit of livening up on the creative front, some left-brain stuff to go with its already impressive, almost exploding, right-brain achievements.

That’s what Raymond Lim told me that he and his generation of hot-shot legislators wanted to change about their island home. Lim wants Singaporeans to unleash their creativity on the world (or at least on each other in the first instance).

They certainly have been trying. Singapore’s ‘renaissance’ in arts and culture is symbolised by the new durian-shaped concert hall seen as you drive into town from Changi Airport. To the uninitiated, the durian (Singapore’s national fruit) has a most unusual smell but a fabulous taste. It also has an important symbolic place in the Singaporean heart, so while Sydney has its eggshell-shaped Opera House, Singapore has its durian.

In multimedia, too, Singapore’s creative industries have made some progress. For example, Lim is very proud of the fact that in a global competition to develop documentaries for the National Geographic channel in Asia, six out of the ten winners were Singapore-based.

However, despite these promising signs, there’s something funny going on. The creativity campaign, like all things Singaporean, seems very systematic and planned. For instance, a number of government buildings display ‘Be Creative’ banners in their foyers and there’s even talk of having all Singaporeans attend mandatory creativity classes on Saturday morning, from 10am to 11.30am sharp. Sure, there’s plenty of evidence that creativity can have economic benefits as economist Richard Florida showed in his seminal book, The Rise of the Creative Class. And how it’s transforming work, leisure and everyday life about US cities with a high proportion of creative industry workers or ‘creative classes’ (as well as ethnically diverse and gay populations). But can creativity be, well, ‘created’ by a government regulation? It remains to be seen.

In any case, whether legislated or not, Singapore’s creativity drive is creating some unique opportunities for Australia which, as a nation of sports junkies, actually does very well on the creative exports side. For instance, the Sydney-based Bell Shakespeare Company has brought drama education to Singapore. Company founder and national treasure John Bell sees Singapore and Shanghai as the focal points for Bell Shakespeare’s mission to bring Shakespearean method to Asian students with an Australian style. ‘Drama is about performance, but also training and education. We have had great success in helping budding Singaporean actors learn about theatre. It has been a great education for us as well,’ Bell explains. As a result of Bell Shakespeare’s foray into the drama market, Singapore may well become a land fit for thespians.

Creativity is the latest injection into Australia’s economic relationship with Singapore, which had mainly been based on services, including in professional areas such as architecture, financial services and education.

Architectural