The economic crisis in Asia is affecting IT more than other markets, but it is also an opportunity for western companies - that was the message from the speakers at the World Congress on Information Technology in Fairfax, Virginia last week.
The World Congress is a biennial event that brings together IT industry leaders to discuss global issues facing the industry. Speakers at this year's event included former world leaders Margaret Thatcher and Mikhail Gorbachev, as well was industry experts such as Dell chief executive Michael Dell, Netscape chief executive Jim Barksdale and Larry Ellison, head of Oracle.
Among the main topics at the Congress were the year 2000 problem, electronic commerce and bringing information technology to developing regions. While speakers painted a rosy picture of the IT market, fears over the impact of the Asian economic crisis were on many speakers' minds.
Opening the World Congress, Harvard University economist Jeffrey Sachs blamed the Asian crisis not on the nepotism that was widely reported, but on irrational behaviour by international capital markets. He said Asia had been caught in 'an incredible trap of euphoria followed by panic'.
He pointed out that the worldwide investment industry pumped $250 billion in short-term loans into Indonesia, Malaysia, Thailand, Korea and the Philippines in the period between 1994 and 1996, and then panicked in 1997, taking all the money back. 'Asia became a a victim of its own success, not of its failures,' Sachs said.
He described the consequences of the crisis as 'short term but severe', an opinion that appeared to be shared by Asian speakers.
Kuo Yun, president of the Institute for Information Industry in Taiwan, claimed the IT industry had been hit harder by the crisis than other sectors.
For instance, in the first quarter of 1998, the PC market in Indonesia, Thailand and South Korea shrank more than 70 per cent compared to a year earlier. In Malaysia and the Philippines, the fall was almost 50 per cent.
But like most Asian speakers at the Congress, Kuo Yun's aim was to convince western companies to invest in the area. He focused on Asia-Pacific, an area which provides opportunity for sales growth.
Government-sponsored projects are creating the infrastructure for IT companies to flourish. And by weakening local currency, the crisis has made manufacturing in Asia cheaper.
The Asia-Pacific region has a very low penetration of IT. Kuo Yun pointed out that IT spending in the US is 3.53 per cent of GDP. In the Asia-Pacific region, the average is 2.35 per cent.
San Xiangju, chairman of China's Tian Jin free trade zone, pointed to another statistic: 'China, with its 1.2 billion people, has only 8.5 million PCs, and only 620,000 of them are connected to the internet. This means there is a huge market right there. The PC market in China grows at a 50 per cent yearly rate.'
While this low penetration makes for a huge potential market, large, government subsidised IT infrastructure projects are creating opportunities for foreign companies and refuelling the economy.
Yong-Teh Lee, chairman of the Federation of Korean Information Industries, said 10 million Korean households will be able to access the internet by 2000 - putting Korea in a position to be one of the first Far Eastern countries to capitalise on the internet's potential.
The backbone for this network consists of 21,000km of fibre optic cable, which were laid by Korean power company Kepco alongside its electric ground wires.
Korea is also in the process of setting up its own Silicon Valley, dubbed 'Media Valley'. Located 40km from the capital Seoul, it will combine a concentration of IT companies and universities. According to Yong-Teh Lee, 550 companies, including 30 foreign businesses such as Hewlett Packard and Intel, have decided to open branches in Media Valley.
Malaysia also has its national infrastructure project - the Multimedia Super Corridor (MSC). Othman Yeop Abdullah, chairman of Malaysia's multimedia development, said the MSC was part of a government plan to redirect investments towards more productive sectors.
Othman Yeop Abdullah claims 218 companies have already applied to be a part of MSC - 12 per cent from Europe, eight per cent from the US.
The MSC will eventually be linked up with Korea's Media Valley, as well as with similar projects in Taiwan and Singapore.
Margaret Thatcher also referred to Asian markets in her speech at the Congress. She said she believed the root cause of the Asian crisis was corruption. But she added: 'Some of the countries in Asia were absolutely sound. Countries like Singapore, Hong Kong and Taiwan have retained their soundness. They have been affected by what has happened, but because they are not corrupt and have a rule of law, they are in reasonable shape.' She believes these countries will recover much faster than the likes of Thailand and Indonesia.
China, meanwhile, has remained largely unaffected by the crisis and San Xiangjun made the most of country's recently won respectability - as a promoter of economic stability in the Far East - to promote the free trade zone.
'In 1997, the GDP was $950 billion and in 1998 the growth rate will be kept at eight per cent. But, at the same time, the inflation rate will be less than three per cent.
It means this is a huge and stable market,' he said.
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