Seattle Sizzles

Last year, a psychological benchmark was breached when the capitalization of Petrochina exceeded US$1 trillion, making it the most valuable company on earth. This was more than twice the value of the world’s second valuable company, Exxon Mobil.

Add to that the continuing sub-prime mortgage crisis in the United States and the falling greenback, and it’s easy to assume that the Asian markets are not just “emerging” but have “emerged” – proof that the Pacific Century has moved irrevocably from rhetoric to reality.

But before anyone waves the banner of victory, it is worth studying a notable success story on the opposite side of the Pacific – Seattle.

A city of approximately 600,000, Seattle is the home of, or has given birth to, many global businesses, including Microsoft, Amazon, Boeing, Starbucks, Costco, Expedia, Weyerhaeuser, and UPS. In addition, many large US domestic businesses can trace their roots to Seattle: Nordstrom’s, Alaska Airlines, and Safeco.

In contrast, consider the leading global brands from Asia (excluding Japan): Singapore Airlines (Singapore); Lenovo (China); Samsung, LG, Hyundai (South Korea); San Miguel (the Philippines); Arcelor-Mittal, Oberoi (India); Cathay Pacific (Hong Kong, China); Acer, Taiwan Semiconductor (Taiwan); Thai Airways (Thailand).

Indonesia, Malaysia, and Vietnam do not have any major international brands.

With a combined population of more than three billion, emerging Asia has produced approximately the same number of leading global brands as Seattle with a population of under a million.

Why does this matter when the trend is clearly in Asia’s favour? Because strong brands ultimately drive strong growth economies over the long term.

Despite all the bad news about the US recently, its proportion of the global economy has remained at about 30 per cent over the last decade. In contrast, Japan’s share has dropped to 10 per cent from 15 per cent a decade ago. Since globally contestable output – goods and services that are subject to international competition – account for about one third of global output, countries with strong brands are likely to be winners.

Though emerging markets have 85 per cent of the global population, their economic output accounts for only 21 per cent of the global GDP. In order for them to increase their share of the world’s economic pie, they might study some success stories. Seattle would be a great place to start.

Lesson 1: Not size, but innovation

In addition to being the birthplace of so many global brands, Seattle is home to the grunge music movement. Despite its small size, it has the second largest number of theatres in the US, after New York. Jimi Hendrix and Quincy Jones spent their formative years in the city.

According to the US Census Bureau, Seattle has the highest proportion of college graduates of any US city. The University of Washington plays a role similar to Stanford University’s in Silicon Valley in being an incubator of new ideas. All this art and innovation breeds an innovation culture.

The lesson has been absorbed by some markets. The Esplanade in Singapore has helped place the city on the itinerary of the world’s leading artistes. The large Dashanzi arts district in Beijing complements the newly opened National Theatre near Tiananmen Square. South Korea and China have been producing the most edgy, critically acclaimed films in Asia.

Lesson 2: Diversity equals strength

The foreign-born population of Seattle rose by 40 per cent in the 1990s. Diversity has been credited for driving the dot.com boom in Silicon Valley, with one-third of its engineers being foreign-born. 

Again, Singapore has picked up on this lesson. Lenovo’s CEO lives in Singapore and its chairman in North Carolina. Singapore’s largest bank, DBS, just hired an American as its CEO. Singapore recently liberalized its visa policies to allow qualified professionals to enter the country to look for work – instead of waiting to be given a job first before coming in.

In China, more foreign students are entering its leading universities, Beijing and Tsinghua. Leading white-goods company Haier has hired an American to be its chief marketing officer. Hong Kong is now looking at its “soft” infrastructure such as schools to entice more qualified professionals to live there. There are a million expatriates living in South Korea, which is quite a change for a country once known as the “Hermit Kingdom.”

Lesson 3: Free trade enhances the economy

Seattle, of course, has been the beneficiary of America’s commitment to free trade. Similarly, Asean countries are dropping barriers to allow more intra-bloc trade. China is encouraging more trade liberalization – although perhaps not fast enough, given its trade imbalance. India’s markets are starting to open up more with special economic zones. And Indian multinationals are shopping for foreign companies. But the license raj still exists, as do antiquated restrictions in sectors such as retail.

Lesson 4: Rule of law leads to affluent societies

Again, Seattle has benefited from America’s commitment to the rule of law. The same cannot be said of all Asian cities, where the rule of law is applied unevenly. Singapore, Hong Kong and Taiwan have strong rule of law, but politics in other countries has played havoc with the law.

Both Thailand, with its military coup last year and the resulting laws that were discriminatory towards investors, and Indonesia, with its anti-monopoly commission’s ruling against Singapore’s Temasek’s stakes in two leading Indonesian telecoms companies, have set their economies back.

Lesson 5: Value add

Seattle’s companies have never been component manufacturers for original equipment manufacturer (OEM) companies, producing goods for someone else to brand.

Malaysia has factories that produce for OEMs, which are now sourcing from cheaper countries such as Vietnam and Cambodia.

Singapore, in particular, has tried to stay ahead of the value curve by constantly upgrading its industrial sector. Biotech, for example, is a new area of growth. Solar power is yet another new focus.

In India, the government of Andhra Pradesh has built a high-tech city for its software, hardware, and biotech industries. Its planned development is in contrast to the chaotic growth of the more famous Bangalore.

No discussions of Seattle can be complete without mention of its open, welcoming society. Start-ups are flocking to the city. After California and Massachusetts, Washington state is now tied for third place with Texas in attracting the most venture capital in the US.

Google now has an R&D lab in Seattle’s cool Fremont district, where there is a statue of Vladimir Lenin and a whimsical concrete troll underneath a bridge.

Looking at “best practice” success stories elsewhere is always a good way to see how and where one can improve one’s own city’s performance. Such “competition” can be a source of inspiration.

Finance Minister Tharman Shanmugaratnam in his budget speech last week referred to Austin, Texas, among other cities, as a centre of innovation. It holds the third-highest number of patents in the US and is a leader in clean technology. It was also recently named by Moody’s as the best place to do business in the US. It’s possible that Seattle is eyeing Austin as it strives to improve its own performance.

Lesson 6: Giving back

Finally, one last lesson from Seattle, perhaps the most important of all: If it is a place you want to live in, then it is a place you would want to contribute to.

Asian cities aspiring to First World status should try to become places where talented people of all kinds would want to put down their roots.

Published in The Straits Times, February 19, 2008