Dec 31, 2008 THINK-TANK
The Straits Times
ON THIS last day of 2008, we wonder what lies ahead. Some hope that the global economy will stabilise next year. Others fear it will decline further. Recent headlines tend to the latter view.
Companies worldwide are cutting jobs. Asia is not immune. Chinese exports have fallen more sharply than expected. Not only are the big three American carmakers in trouble, but Toyota, the world's leading automobile company, has announced its first loss in 68 years. Even while offering hope of change, the incoming American president warns things will get worse before they get better.
The truth is we don't know what lies ahead. Take the Madoff scandal.
It was largely a Wall Street phenomenon. But its occurrence was emblematic of the nasty surprises that can spring up as markets shift and deleverage after years of easy credit and rapid growth. The possibility of 'black swans' appearing - Nassim Nicholas Taleb's symbol for the improbable and potentially catastrophic event - cannot be ruled out.
So looking ahead, we should perhaps not be thinking about the 'what' but the 'how': Not what will happen, but rather how we should respond to whatever happens.
# First, survive. This must be the default policy. Many CEOs are managing just day to day, concerned not about year-end profits but simply weekly or even daily cash flow.
Thailand seems to be in that mode - surviving from day-to-day - at the national level. Political instability in Bangkok boiled over in tandem with the global turmoil. If the instability persists, the country would run the risk of not just being marginal but also fragile.
The appointment of a new government under Mr Abhisit Vejjajiva could not have come at a more crucial time.
Some will question the circumstances of its formation - the product of street protests and a constitutional court decision that combined to oust the party that won the last election. Some may also criticise the unlikely coalition of interests that Mr Abhisit cobbled together to assume power.
But the new government is setting the right priorities on the economy. This can provide stability and pave the way for investments, job creation and social programmes. If Mr Abhisit's government delivers, the results will speak for themselves.
That is the logic of survival. Not just for Thailand, but for many other countries and companies that will face tough times in the year ahead. Realism and the will to take decisive measures will be key.
# A second equally important response is to strategise and think of the long term. Survival is basic, but a policy based only on that instinct risks becoming prone to short term-ism and dog-eat-dog competition. Cutting jobs and costs may be the simplest survival tactics. But they can result in the loss of talent and morale, which can cost much more in the medium to longer term.
If we play our cards right, Asia can emerge from this crisis more competitive and ready to race ahead. For some, less affected than others, there will be opportunities for investment that would have been difficult in normal times. For others, the stimulus packages that governments are promising across Asia and the world may provide new and additional sources of revenue and new business.
One strategy that bears particular attention is promoting sustainability. Profligacy, greed and unsustainable practices were among the root causes of the current crisis. It would be fitting if we emerged from the crisis more green and more efficient.
European leaders such as British Prime Minister Gordon Brown and French President Nicholas Sarkozy are talking about a 'Green New Deal'. The label borrows from Franklin Roosevelt's 'New Deal' during the Great Depression but adds another dimension to the stimulus packages that governments have promised. A 'Green New Deal' would grow the future economy in ways less dependent on fossil fuels and less taxing on the planet.
While not adopting the same label, US President-elect Barack Obama has proposed similar measures. His agenda includes investing US$150 billion (S$216 billion) over 10 years in clean energy technology, and creating five million new 'green jobs' in the process.
Asia needs similar thinking. Otherwise the region's predicted rise will be vulnerable to limited energy resources and will have too costly an impact on the environment.
Singapore is well poised to lead in this area by example. If it embraces this strategy, it can benefit as a hub for green technology and services in water, energy efficiency, solar power and so on.
# This brings me to a third strategy for the coming year. This is to reach out, engage and consider new ideas and plans.
Crises change the landscape. Even if one is not a direct victim, changing parameters can affect one.
If we compared the present to the 1997 Asian Financial Crisis, we will find that some companies that existed then have shrunk or disappeared altogether, while others have grown. Some countries that appeared to be doing well before 1997 have struggled in the past decade.
Those who wish to survive the current crisis will be well served if they prepare for the shock of the new. Not knowing what exactly lies ahead, we need to be more open to new possibilities, projects and partnerships, even if we have to evaluate each carefully.
[The truth is we don't know what lies ahead. So we should perhaps not be thinking about the 'what' but the 'how': Not what will happen, but rather how we should respond to whatever happens.]