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Web-only Exclusives November 30, 2000 From Our Correspondent: Hirohito and the War A conversation with biographer Herbert Bix From Our Correspondent: A Rough Road Ahead Bad news for the Philippines - and some others From Our Correspondent: Making Enemies Indonesia needs friends. So why is it picking fights? |
OCTOBER 1, 1999 VOL. 25 NO. 39
Success - One Measure
Public and private sectors can target 'parallel' goals
By POTE VIDET
A panel discussion on a somewhat inter-galactic topic, "Global Corporations vs. Nation States," led off the CEO summit at this month's Asia-Pacific Economic Cooperation (APEC) conference in Auckland. At this meeting, corporate leaders joined forces to influence government leaders meeting a few blocks away. In the discussion period, I put forth a thesis that private-public dialogue should focus on the definition of "success" in the corporate and government arenas, with an attempt to find common objectives.
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As Motorola's vice chairman Gary Tooker noted in his response to my comments, however, leaders in both sectors should focus on longer term indicators of success. Legendary investor Warren Buffett epitomizes corporate success through a long-term strategic focus leading to maximizing shareholder value. A similar long-term approach by governments would reap benefits for stakeholders - the citizens. As a banker, I would offer one definition of long-term corporate success: maximizing return on capital, which is a function of two key variables - growth and efficiency.
As governments in the region undertake reform, we should transpose the private-sector concept of maximizing return on capital to public-sector objectives. Similar to successful corporations, successful governments increase the size of the national economic pie through growth and efficiency gains. Therefore the equivalent of "maximizing return on capital" to a policymaker should be instituting policies that allow for an efficient utilization of his nation's capital and resources for the public good.
To achieve this, political reform and economic reform must go hand-in-hand. Obvious examples of misallocation of resources resulting from limited political reform are corruption, cronyism and money politics. Less obvious examples include a politicized bureaucracy and creation of high barriers to entry in key industries. In such an environment, success factors revolve around developing deep government relationships, with less emphasis on efficiency and technology. The resulting lack of competitiveness becomes evident in an increasingly globalized environment.
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Using the example of Thailand, I believe such a "parallel" public sector framework has been developed, as noted here:
In Thailand, the new constitution requires detailed financial disclosures by cabinet members as well as certain officials. A free press and active NGO community have played an important watchdog role, making the "fear of getting caught" a greater deterrent. And regulatory entities have been given more "teeth." But the threat of penalties must be real, under a strong legal and court system. Ultimate success lies in their effective implementation. In short, the three-pronged approach of legally required disclosures, third-party watchdogs and tough enforcement should lay the foundations for a more efficient allocation of resources for the country.
At the APEC CEO summit next year, I would propose a "Warren Buffett Award" for the government leader that best epitomizes the concept of "maximizing return on capital" through efficient allocation of resources for the long-term benefit of national stakeholders.
POTE VIDET is the Singapore-based managing director of Credit Suisse First Boston and a former deputy commerce minister of Thailand
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