Much of the high growth in the past was the flash-in-the-pan variety ... All this we now know well.
This third millennium was supposed to kick off the Pacific Century. Remember all the yahoo about the tigers and the dragons? In 1993, it hit me in the face when I returned to this region after seven years in the US. Asia's growth rates, stock prices, property markets, industrial production, exports, you name it, were all roaring. China was the new Eldorado. And Vietnam was the latest tiger on the block. Asian skies were a jungle of construction cranes. In Hong Kong and Singapore, property owners would wake up in the morning to discover their net worth had doubled since they last checked, which was only a few weeks before. Asia's economic policymakers basked in their effortless success. And even the World Bank came out with a fat tome to explain "the Asian miracle".
Well, seven years is an eternity in economics. These days, if you suggest that we're into the Pacific Century, people are apt to ask, "which side of the Pacific?" To many, the answer is clear. Because on the other side, in North America, companies like Yahoo!, Qualcomm, Ebay and scores of Silicon Valley start-ups have come from nowhere to be world beaters, while many of the giant Asian conglomerates have, at best, stood still, and at worst, turned Jurassic.
And so we face the extraordinary fact that a company like Qualcomm, which didn't even exist in 1990, is almost four times the size of Hong Kong's venerable developer, Cheung Kong, in terms of market capitalisation; the online auctioneer Ebay is valued at more than five times Jardine Matheson; and the Internet portal Yahoo! is about triple the size of Singapore Telecom.
These are astounding comparisons. Back in 1993, if somebody had told me that a little start-up in San Jose whose only major asset was an e-mail software program called Eudora would, by the end of the decade, overtake the top three Asian corporations combined in terms of value, I would have laughed aloud. But that's what Qualcomm achieved.
ALL THE NEW WINNERS ARE THE ULTIMATE KNOWLEDGE CORPORATIONS. While the Internet has made more obvious the value attached to intellectual property, this is not as new as those who have just discovered the "knowledge economy" would have us believe.
For decades, Asian consumers have snapped up designer clothes, shoes, handbags, even food - and guess where most of the money has gone? Not to the manufacturers. Nor has it gone to the suppliers of the raw materials. The biggest bucks have been made by the companies who built and owned the brands and created the designs. In other words, those who provided the "knowledge" part of the product.
The success of McDonald's is a case in point. Local entrepreneurs own the outlets, and most of them do pretty well. But McDonald's rakes in the most of all - from its brand, management systems and technical know-how on, for instance, how to get every Big Mac exactly right.
The examples can be multiplied: from the move by Japanese manufacturers to emphasise aesthetics because they understood that product functionality was never going to be enough, to the success of Italian industry, which has been built on design (and not just engineering) excellence, in everything from sports cars to leather goods.
EVIDENCE OF THE KNOWLEDGE ECONOMY HAS BEEN IN ASIA'S FACE SINCE at least the 1970s. But we paid little attention. We were distracted by our own high growth rates, thinking that we had got the formula right and that we just needed to keep going the same way. We plunged into building more of the hard stuff that we thought was the fount of our success: industrial capacity, physical infrastructure, towering office blocks and even whole new cities.
Later, after the Asian crisis, we discovered that much of the high growth of the past was the flash-in-the-pan variety, driven by short-term inflows of capital, real-estate bubbles and wild borrowing. All this we now know well.
But the lesser told story was that, at the same time, there was massive underinvestment in the "soft stuff". For example, Hong Kong waited until the late 1990s to set out a comprehensive science and technology policy, and many other Asian tigers still haven't got one. Throughout the region, there has long been scant respect for intellectual property, reflected in rampant piracy and a reluctance to pay for consultancy services, research or ideas. Many of the most admired Asian companies haven't bothered with R&D or marketing or brand-building; after more than 30 years of the Asian miracle, there is scarcely a single Asian brand, or franchise, in any product line that has gained prominence outside the region. The arts and aesthetics have been so neglected that they have played virtually no role in Asian industry - which has consequently failed to move far beyond the stage of contract manufacturing. Maybe we thought that promoting the soft stuff wasn't for the big boys. Well, we now know the big boys were doing it all along - we just weren't looking.
Vikhram Khanna is Regional Economics Editor of The Business Times, Singapore.