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<pre>Old world, new opportunities....
exchanging knowledge with East Asia
Summary of advisory report 25
Asia's emergence
A country's contribution to the worldwide development of knowledge depends on its level of
prosperity; as regards science and technology, the exchange of knowledge is primarily confined
to the rich, industrialised countries. In Asia, until recently, only Japan counted on this score.
Now the Asian tigers, like South Korea and Taiwan, are rapidly jumping on the bandwagon and
are increasingly making their mark on the world's technology stage. Other countries are
following in their wake, particularly the larger ones. In practically all the countries of East Asia,
national incomes are growing by 5 to 10% per annum, a figure unequalled anywhere else in the
world. In combination with their huge populations - half of the world population lives east of
Pakistan: 200 times as many as in the Netherlands - the centre of the world economic stage is
shifting fast to East Asia.
The dynamics of the growth centres in East Asia is being reflected in employment in Europe.
Some branches of industry have virtually disappeared altogether, such as large-scale
shipbuilding. In other sectors, major parts of new business activities, such as electronics and
the car industry, have ended up in Asia. The emergence of these industrial sectors is resulting
in a sharp rise of Asian countries on the R&D ladder.
Opportunities for Dutch businesses in Asia
The emergence of East Asia also creates opportunities; a powerful consumer market is being
created from which European companies can benefit. Food, oil and chemicals are industrial
sectors in which Asian companies are less prominent. And that applies equally to IT-related
services, the most rapidly growing sector of the economy. If the Netherlands manages to attract
jobs in this domain, the emergence of Asian industrial countries will not constitute a threat but
will in fact offer opportunities. To be able to take advantage of these opportunities, we first have
to ensure that there is a sound training infrastructure in our own country. The quality of the
scientific and technological base at home are the main link in the exchange of knowledge, also
between the Netherlands and Asia.
Individual companies can improve their competitive edge by having some of their production
done in countries where wages are low and people are clever and service-minded. Overall
corporate activities may increase in scale as worldwide distribution enhances companies'
competitive position on an expanding world market. This in turn may boost employment in
general and in Europe in particular. One can illustrate how great the growth in the world market
frequently is from the investments that are needed in China alone to achieve its goals in the
field of telecommunications; every year three times as much will have to be invested as the total
amount West Germany had to put into East Germany after German unification.
Viewed as a whole, the Netherlands does not score badly in East Asia. From an international
point of view the Netherlands is a trading country and an investment country and this is a profile
that emerges in Asia as well. The Netherlands accounts for 10% of all the trade between the
European Union and East Asia, 10% also being the percentage of the Netherlands in the total
trade of the EU (excluding trade between the member states). By comparison, the Netherlands
accounts for approximately 5% of the EU's Gross Domestic Product (GDP). In the domain of
direct foreign investment, the Netherlands position is even stronger, certainly in comparison to
other EU countries. Only companies in the United Kingdom invest more in Asia than Dutch
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<pre>companies, both in absolute figures and as a percentage of GDP. Other European countries lag
far behind; Dutch companies invest more in East Asia than French and German companies put
together.
Cultural differences
Companies and institutions that want to take advantage of the growth prospects on the East
Asian market will have to do business there. To be able to do so successfully, they have to take
into account the local culture. Generalising, one might say that Asians are more collectively
orientated and Europeans more individually orientated. In East Asia emphasis is more on
tradition and family ties than in Europe. Agreements are much more readily concluded between
persons rather than between companies and the economy follows the path of the unwritten law
rather than law of the statute books. This distinction does not imply that all countries in East
Asia are identical, any more so than the countries of Europe are. If anything diversity in East
Asia is greater than in Europe; Japan culturally is a continent in itself differing dramatically from
the other archipelagoes and the Asian continent. International companies have specific
approaches to each country because of these cultural differences. In Japan and South Korea,
people prefer to work for a (major) national company while in Taiwan the highest ideal is to
have one's own business. The possibilities for Western companies also differ from country to
country, as emerges from the company profiles in the individual countries. In Japan and South
Korea the economy is almost entirely concentrated in the hands of local companies, while
Taiwan and Singapore have many major firms which are owned by foreign parent companies,
including Philips and Shell.
Business locations policy
To be able to take advantage of opportunities on the changing world market, the major
multinationals in particular carry out large-scale studies. They have their own staff for this and
they are also advised by specialist companies including banks. These studies are ranked
among these companies' corporate secrets. However, one can readily gather from investment
decisions what the relatively sound options are: these are the places where many businesses
have already been set up. If one company comes to the conclusion that a certain location is a
favourable one, there is a big chance that another company in the same sector will reach the
same conclusion. US and Japanese companies wanting to set up a distribution centre in the
north west of Europe on the whole will follow their fellow countrymen who have already opted
for a distribution centre in the Netherlands.
A company that is the first to set up business in a place is reminiscent of those pioneers
hacking their way through the jungle. A second person that comes along can take advantage of
the track that has been formed and as time goes by a path is created that many can use. This
creates opportunities for smaller companies who would otherwise be unable to pay the price of
pioneering work on the East Asian market. Dutch universities seeking cooperative ties could opt
for Asian institutions which are located on a path that has already been cleared away by a
Dutch business. The Netherlands for example is the distribution country of Europe so, when it
comes to cooperation, there are gains to be made by opting for places which function as
distribution centres in Asia, such as Singapore, Hong Kong, Shanghai and Tokyo.
Government support
The role of the government is limited. The government must in any event not seek to set a trend
by itself opting for suitable places for Dutch businesses to move to. Nor can it do so in view of
the fact that the embassies employ only a fraction of the people who work for companies on
location analyses. The government has to latch on to the choices already made and tread the
well-worn paths. Should the occasion arise, embassies can explain where those paths are and
where good guides are to be found. To be able to fulfil this briefing role well, it is important for
the focus of embassies' work to shift more profoundly from diplomacy to business activity than
has currently been catered for in the latest foreign policy review. By having greater resort to
people with a lot of business experience in the countries in question, a relatively high-quality
service can be provided.
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<pre>It is unnecessary for the base for these activities to be in the embassies; the British Council, to
judge by the way it works, is an example that springs to mind. In Indonesia and Japan, the
Netherlands has similar agencies. The Netherlands ought to be developing back-up activities in
more countries for example by setting up Holland Houses; places where people can meet for
cultural exchange but also for services to Dutch businessmen, just as university business
centres cater for new entrepreneurs. It would be financially impossible to set up a Dutch agency
in each country, but it would seem relevant to do so for China at any rate.
The European Union should be encouraged to create a more pervasive presence on behalf of
the member states. Where such a path is difficult of access, the Netherlands could seek
cooperation with small countries in north west Europe so that they can develop activities
together.
Exchange of knowledge
For the private sector, knowledge is a weapon in the competitive battle that either has to be
kept secret or has to be protected by means of patents. In the private sector, knowledge is
being exchanged by means of partnerships between parent and subsidiary companies, by
exchanging licences, by entering into joint ventures etc. It is in this way that knowledge
exchange is possible between the Netherlands and East Asia, for example between Philips in
the Netherlands and its Asian subsidiaries or between Fuji in Japan and its Tilburg
establishment.
Subsidiaries which now play an explicit role in the transfer of knowledge frequently started as
sales and distribution outlets. Trading relations that are set up now in East Asia could constitute
the seeds from which future knowledge trees grow.
For the exchange of knowledge in the public sector, the opportunities are partly determined by
the difference in emphasis between Asian and Western countries. In the West the emphasis is
on science and in East Asia the stress is on technology. As a result, Asian efforts in the
scientific field do not appeal greatly to the Western imagination. The Asian emphasis on
technology is connected with cultural factors and is reinforced by the fact that emerging
industrial countries as a rule first devote themselves to upgrading existing technologies. As
countries become more prosperous, scope arises for pioneering developments in the field of
technology but also in science. Compared to Europe and the US, the East Asian countries still
devote comparatively little time to long-term research so that there is relatively little scientific
knowledge to be obtained there.
To prevent Dutch universities operating like tiny mosquitoes randomly biting an Asian elephant,
the Council would advise that individual institutions enter into twinning partnerships with fellow
East Asian institutions. To some extent these already exist, but frequently they are relationships
between unequal partners set up on the strength of objectives related to development
cooperation. In the case of exchange of knowledge, equality has priority. Dutch students,
graduates and lecturers who study or work for some time in East Asia will serve to enrich our
own society.
Until now the emphasis in the exchange of knowledge has been on conveying knowledge to the
country in question, for example by having Asian students study in the West. By taking greater
advantage of the opportunity of acquiring knowledge abroad, the flow in the other direction
should be given greater priority. We are not talking here solely of theoretical knowledge but also
applications of that knowledge. Not just knowledge from books, but knowledge from experience.
More attention needs to be paid to cross-cultural learning.
One point to latch on to for strengthening mutual cooperation could be Japan's need to
strengthen its scientific orientation. The Netherlands could take advantage of Japan's lead in
the technology field by having engineers gain experience in Japan.
The Council believes the activities must not be confined to encouraging exchange within the
university world. Exchange between universities and companies is important. At the moment a
modest start has been made on this by means of a programme that annually allows twenty
young graduates from the Netherlands to train with a company or institution in Japan. The
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<pre>Council would advocate that this programme should be dramatically expanded both in terms of
numbers (thousands rather than dozens), but also in terms of target group (not just graduates)
and the country of destination.
Summary for the fast, action-oriented reader.
The philosophy for a relationship with East Asia in the knowledge domain is:
       Follow the path already trodden by Dutch companies.
       Continue unabated with attracting Asian companies in the Netherlands.
       Do not confine the knowledge relationship to purely substantive knowledge; encourage
        cross-cultural learning.
       Devote more attention to acquiring knowledge rather than conveying knowledge so that
        the score is more evenly balanced.
The main action points are:
       Strengthen embassies' economic orientation and their briefing function for companies;
        make use of people with business experience in Asia.
       Set up Holland Houses in Asia; meeting places for cultural exchange-cum-business
        centres for Dutch entrepreneurs starting new businesses in Asia.
       Encourage twin ties between Dutch and Asian universities.
       Set up a large-scale programme for the practical training of Dutch people (also from
        companies) in Asia.
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