[Interview] Integrity is the foundation stone of lasting success

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Rajiv Biswas is senior director and Asia Chief Economist at IHS Global Insight. His new book is Future Asia: The New Gold Rush in the East (see my review: here). He has studied at the London School of Economics and Imperial College and has published over 100 articles on economics, trade and investment. Biswas’s family has roots in South Asia, and he has lived in Burma, Ethiopia, Japan and the UK. He joins us in this exclusive interview on the rise of Asian entrepreneurs, the VC industry in the region, and the importance of financial stability and regional cooperation.

YS: How was your book received? What were some of the unusual responses and reactions you got?

A: The feedback from readers to my book has been very positive. I have been pleasantly surprised about how enthusiastic the comments are about the preface, in which I share my own personal experiences of living in some of the world's poorest countries. Maybe I should have expanded that section of that book!

YS: What trends do you see in the venture capital industry in Asia?

A: The VC industry is becoming well developed in the large Asian economies with significant financial centres, notably Japan, South Korea, China and India. However the VC industry in Southeast Asia is still relatively weak, as there has not been the depth of entrepreneurship and innovation compared with the large Asian economies.

One important trend that should support the future growth of the Asian VC industry is the rapid growth of wealth created by entrepreneurs in many emerging Asian economies, which creates a widening VC investor base. Catalysts can also be introduced to accelerate the growth of VC funds, including creation of junior stock markets as a route for VC exits as well as the provision of favourable VC tax incentives.

YS: Most of the case studies in your book feature MNCs; what are your findings with regard to Asian startups?

A: Asia already accounts for 30% of world GDP, so the rise of Asian entrepreneurs has been spectacular over the last three decades across the Asian region, including Japan, South Korea, China, India, Taiwan and Hong Kong. SE Asia is also an important focus for Asian entrepreneurship, in Malaysia, Indonesia, Thailand and Vietnam.

YS: What are the typical challenges Asian entrepreneurs face as they scale up their company from an emerging economy market to a mature economy market?

A: Many Asian entrepreneurs have successfully built domestic businesses but are now looking to tap broader market opportunities across the Asia-Pacific region. This requires a very different corporate capability, including market intelligence on foreign markets, understanding the political, regulatory and operational risk environment in foreign countries, acquiring local talent to manage foreign operations and having international banking, legal and marketing partners who can support international expansion plans.

YS: What are the chances of a South Asian alliance or East Asian alliance becoming as solid as ASEAN?

A: In "Future Asia", I discuss some of the political fault lines that still divide Asia. One of these major fault lines is between India and Pakistan. Unfortunately I am rather despondent about the prospects for a South Asian alliance, mainly because of the deep rifts that still divide the two nations. I believe that the high-level leadership of both countries, as well as the business leaders of both nations, are generally supportive of closer economic relations and working together to improve living standards and reduce poverty. After all, if Germany and France could create an integrated, peaceful EU from the ashes of ruined Europe after slaughtering each other in two World Wars, then why can’t India and Pakistan build a new co-operation?

However the political turmoil in Pakistan means that powerful non-state groups based in Pakistan remain a clear and present danger to India, and continuously undermine efforts to strengthen bilateral relations. Nevertheless, there is more scope for closer co-operation amongst other South Asian countries, and India should give high priority to building strong ties with Sri Lanka and Bangladesh, where there are considerable opportunities for stronger economic co-operation. Bhutan and Nepal are also very important strategically for India and must be a top priority for closer ties.

Beyond South Asia, India needs to substantially lift its economic ties with ASEAN countries such as Indonesia and Vietnam, with the combined GDP of the ten ASEAN members already bigger than Indian GDP and fast growing consumer markets creating opportunities in many sectors.

YS: What trends will we see in the coming years in terms of Western companies buying Asian companies? And vice-versa?

A: The rapid growth of Asian GDP and the rise of Asian MNCs is changing the global corporate landscape. Asia-Pacific MNCs now make up 192 out of the Fortune Global 500, and this rise of Asian corporate giants is set to continue. While there will continue to be plenty of Western M&A acquisitions of Asian firms, there will be a rising trend of Asian firms doing M&A acquisitions of Western firms, as well as rising cross-border M&A within Asia.

Rapid growth in revenues of large Asian MNCs, combined with the rapid ascent of Asian financial institutions, will create a lot of financial firepower to back these M&A deals over the decades ahead. Asian MNCs will increasingly challenge Western MNCs for global market share as well as technological leadership in key industries.

YS: What are the chances that the Japan-like bubble-burst of the 1990s may hit China and India also?

A: The Japan bubble economy was characterized by soaring real estate and equities market valuations that were classic symptoms of financial bubbles that have been repeated time and again through history. When that bubble burst, it created an implosion in the banking system and corporate sector that took Japan almost two decades to recover from.

China and India both have tremendous population pressures which will inevitably be reflected in property and land prices in urban centres. There will be a natural tendency towards greed and speculation, so governments, central banks and retail banks in China and India have the frontline responsibility to ensure that property or stock market speculation fuelled by debt do not create asset bubbles that will bring these economies crashing down.

No country is too big to fail – even the US came to the brink of financial disaster in the 2008-2009 financial crisis and a large portion of the blame must be allocated to inept US financial services regulation. They preached loud to the Asian countries after the East Asian crisis in 1997, but then repeated all the same mistakes themselves a decade later.

YS: What is your next book going to be about?

A: According to legend Sir Isaac Newton discovered the law of gravity when an apple fell on his head as he sat under a tree. A few days ago, a coconut almost hit me on the head as I sat under a palm tree in Singapore. Fortunately or unfortunately, it missed by a whisker and hit my foot, so I am still looking for that big inspiring idea for my next book!

YS: What is your parting message to the startups and aspiring entrepreneurs in our audience?

A: I admire the fantastic gung-ho spirit combined with technical skills of the new generation of young entrepreneurs rising in Asia. They are helping to build their nations. My only message would be to put integrity first and above all else. Integrity is the foundation stone of lasting success. History is littered with examples of entrepreneurs whose paper empires and personal fortunes were destroyed when they deviated from the path of integrity.

[ Follow YourStory.in’s research director Madanmohan Rao at http://twitter.com/MadanRao ]