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POWER ON THE PACIFIC RIM : Briefing Paper : Assessing the Future of the Pacific Rim : A consultant sees worsening Japan-U.S. relations, growing pains for South Korea and strong prospects for Malaysia.


MANILA — As the Pacific Rim has exploded into roaring economies called Tigers and Dragons, suffering coups and corruption along the way, Robert Broadfoot has tried to keep tabs.

Broadfoot, 41, is managing director of Political & Economic Risk Consultancy Ltd., one of several Asian consulting groups that provide detailed business research, political analysis and country-by-country evaluation for corporate clients.

Broadfoot, a native of Oneonta, N.Y., started his company in 1976. It now has offices in Hong Kong and Singapore and uses a network of 40 economists and political scientists to keep tabs on 11 countries for 1,200 clients. Here are some of the consultant's latest assessments:


Relations between Japan and the United States are likely to deteriorate this year. Washington is unhappy because of what it perceived as Tokyo's less than enthusiastic support for the Persian Gulf War and is likely to fight harder in trade bargaining as a result.

Japan's booming economy was hardly slowed by either the Gulf crisis or an equity market crash. The engines of growth were capital spending and consumption, creating an opening for U.S. companies. "You've got to go there," he says. "You've got to make a substantial investment. It's not a closed market. It's just an expensive market."


Korea faces growing pains. Its export-oriented economy is slowing and faces increasing competition from both Japan, in more technologically sophisticated products, and other emerging Asian nations in labor-intensive manufacturing. Its stock market collapsed, and its shaky coalition government almost did several times. Despite Germany's example, unification with North Korea seems as distant as ever.

With 43 million people, Korea is an increasingly attractive market, but it won't be easy. "The Koreans still have very xenophobic feelings," says Broadfoot. "They see companies trying to break in as a threat."


The political scene is as unclear as ever, but the leadership has regained the domestic stability it sought after the Beijing uprising of 1989. The collapse of Communist regimes in Eastern Europe has only intensified China's isolation, however. No one knows what will happen when Deng Xiaoping, still the most powerful leader, dies.

Multinational companies are bidding to join China's petrochemical industry. For most business people, however, China remains a difficult place. It will become more so if Congress doesn't renew China's most-favored-nation status. "The days of using China as an export base for the U.S. are limited," Broadfoot says. "You go in there now at your own risk."


After years of solid growth, Taiwan is also in a painful period. The ruling Kuomintang government survived the most severe leadership crisis since its founders fled mainland China four decades ago. The roller-coaster equity market collapsed, the country's export surplus shrank, domestic investment fell flat and manufacturing actually recorded negative growth.

But the government has announced plans to spend a staggering $300 billion over the next six years to update its infrastructure. "A lot of it is political," says Broadfoot. "And a lot of it is to rev the economy up."


With the 1997 handover to Communist China fast approaching, the quintessential capitalist colony faces growing uncertainty and fear. Multibillion-dollar plans to build a major new airport and port have bogged down as China waffles. The brain drain is worsening as more than 60,000 businessmen, entrepreneurs, engineers and others emigrate each year. And the world-wide recession hit especially hard.

"Right now we're in a state of limbo," says Broadfoot, uncertain whether Chinese policy will allow Hong Kong to remain an international economic center or reduce it to "a base for business in southern China. . . . It's going to be very uncomfortable until we know."


After a year of almost Biblical plagues--an earthquake, drought, typhoons, energy crisis and incessant instability--it's hard to be optimistic. Political infighting has already begun for the 1992 presidential race, but little is being done to restart an economy that stumbled badly last year. Many Filipinos hope simply to find jobs rebuilding Kuwait and Iraq.

"It's a place that passes off wishful thinking for planning," says Broadfoot. "You still have the same . . . groups equating family interests with national interests. There is good money to be made. But you've got to be a niche player, more than anywhere else."


With the Communist leadership rejecting radical political change, the impoverished country's only real hope is the end of the U.S. trade and aid embargo. Despite increased cooperation from the Bush Administration, that isn't likely soon. Meanwhile, smuggling and corruption impede even modest economic progress. Only offshore oil exploration attracted major foreign investment interest.

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