Peeking under the surface of = globalization - Print Version

=20

Peeking under the = surface of=20 globalization

By Daniel Altman

Friday, May 4, = 2007

Every day, newspapers and television broadcasts are full of numbers = that=20 supposedly tell the public how the global economy is doing. Like the = markings on=20 a thousand thermometers, the numbers go up and down: stock market = indexes,=20 payroll data, interest rates, quarterly earnings, trade deficits, you = name it.=20 The problem is, none of these numbers tells you how the global economy = actually=20 works.

But what if you could go behind the scenes - freeze the global = economy for a=20 sliver of time, just long enough to get a really good look at it? Then = you'd=20 have a pretty good idea of what was connected to what and who relied on = whom.=20 You'd see how the global economy is like an enormous machine crammed = with six=20 billion interlocking cogs and wheels - one for every person inside. = Unfreeze the=20 action, and the cogs and wheels whirl away as the world's workers spring = back=20 into action.

Not everyone's wheel is the same size, but everyone's wheel matters. = To use=20 another metaphor: Think of the proverbial butterfly that beats its wings = in the=20 air over Australia and helps to cause a hurricane thousands of miles = away in the=20 Gulf of Mexico. Like the earth's own atmosphere, the economy is a closed = system=20 - everything's connected, and every individual's actions instantly = affect=20 everyone else.

Sometimes this fact is lost in the countless hours of commentary on=20 television and radio, to say nothing of the endless articles and books, = about a=20 topic vaguely called globalization. Yet much of the resulting debate = amounts to=20 "globalization good" or "globalization bad." And that kind of = name-calling=20 doesn't do much to help you cope with the changing world.

The only empirically obvious truth is that the forces often labeled=20 "globalization" - the integration of markets, the spread of ideas, the=20 formalization of the world trading system, and whatever else you care to = place=20 under the umbrella - are here to stay. Wouldn't it be better - and more=20 interesting - to take a broad sampling of facts and judge for = yourself?

A nighttime drive along Nguyen Van Troi Street - Ho Chi Minh City's = version=20 of the Las Vegas strip - is a study in outrageous contrasts. The = graceful=20 colonial villas that house official offices behind forbidding metal = fences have=20 been swamped by trendy caf=C3=A9s, bars, restaurants, and shops open = until the wee=20 hours. The patriotic banners hanging nearby, all in gold letters on a = red=20 background, are barely legible in the blinding light of thousands of = tubes of=20 neon.

Is this really a Communist country? Not on your life. The = entrepreneurial=20 tradition is just too deeply rooted. Dozens of private businesses dot = the=20 sidewalks. New storefronts selling everything from silk bathrobes to spa = treatments are popping up all over Ho Chi Minh City. Likewise, the old = Honda=20 Dream mopeds are quickly giving way to racy new Yamaha scooters. Entire = families=20 still pile on, just like they used to, but they're not wearing plain = white=20 shirts and dark trousers anymore - now it's tight jeans, designer tops, = and=20 plenty of makeup.

Vietnam didn't get this way all by itself. Foreign companies have had = a hand=20 in the country's growing prosperity. Naturally, they didn't get involved = out of=20 charity. They're trying to find cheaper places to make their products, = or new=20 people who might buy them.

It's a mission that has often led to controversy, with accusations = raging=20 from substandard treatment of workers to wrecked indigenous cultures. = But=20 arguments against companies reaching around the world to produce or sell = are=20 being washed away, if not always answered, by the twin tides of trade = and=20 investment. The more relevant question today is whether these = multinational=20 relationships can be managed in a way that benefits both guests and = hosts.

Intel, the microchip maker, would respond with an emphatic yes. The = company=20 has been operating in Vietnam since 1997, the year when several = countries in the=20 region experienced financial crises that deterred many other businesses = from=20 investing. In 2000, the United States opened trade relations with = Vietnam for=20 the first time since the two countries stopped fighting. And it was then = that=20 Intel sent Than Trong Phuc home.

Phuc left Ho Chi Minh City on the last night it was called Saigon, in = one of=20 the last helicopters to take off from the roof of the American Embassy. = Soon=20 afterward, he was adjusting to life as a newly minted California = teenager.=20 Today, three decades after he fled Vietnam, he is the living embodiment = of=20 Intel's shrewd strategy for expansion into developing countries.

It's a sweltering summer day outside, but Phuc and Le Quoc Anh, a=20 Vietnamese-American born in Virginia, are sitting at a conference table = in the=20 cool comfort of Intel's air-conditioned offices. Phuc, a trim man with a = gray-flecked mustache who runs the operation, is flipping through a = slide=20 presentation on his laptop while Anh, his jovial public relations = manager, takes=20 notes.

As each slide pops up on the projection screen, Phuc's steady gaze = checks=20 with his audience to make sure his explanation has sunk in. One slide = elicits a=20 special mention, though. "This is the Communist Party of Vietnam Web = site," Phuc=20 says brightly as the projector shows an image taken from a Web browser. = "We made=20 the headline!" And indeed, there on the screen is Intel's name, in an=20 announcement of the deal that is supposed to bring Vietnam to the = cutting edge=20 of the digital era. "I thought the day would never come," Anh adds.

Phuc and Anh agree that if they brought this slide to their immigrant = friends=20 in the United States, they would not believe it. But cooperation with = the=20 government is the name of Intel's game in Vietnam.

In a way, it has to be. Foreign companies' access to Vietnam is still = tightly=20 controlled by the government, and the government has a profound = involvement in=20 the lives of Vietnamese. "The government's role in Vietnamese society is = pervasive," Phuc says. "Their influence and their mind share is = everywhere."=20 Rather than seeing this unusual situation as a handicap, however, Intel = has=20 tried to exploit it.

From the moment Phuc arrived in Ho Chi Minh City, he set about = cultivating=20 government officials. His initial step was to understand their goals. = The first,=20 he says, is to increase the use of personal computers and the Internet. = The=20 second is to make Vietnam an exporter of high-tech items, and preferably = those=20 that don't require a lot of equipment to produce.

"In manufacturing on the hardware side, the capital cost is big," = Phuc=20 explains, adding that Taiwan already has the upper hand in that market. = Instead,=20 he says, "the government wants Vietnam to be an exporter of information=20 technology. All you need is a brain." With a million graduates entering = the work=20 force every year, the need for these jobs couldn't be plainer.

Intel's goal is clear, too, and Phuc makes no bones about it: sell = more=20 chips. But rather than simply hanging out a shingle and waiting for = customers to=20 arrive, Phuc spends most of his time actively working to develop the = market.=20 That means coming up with an endless stream of ideas for putting people = together=20 with computers, since more demand for computers implies more chips.

And so it came to pass that Intel, with just a handful of people = working out=20 of an office in Ho Chi Minh City, became the driving force for Vietnam's = entire=20 computer industry.

Phuc divided the market into three segments, separated by income. The = high=20 end presented no challenges; they'd buy whatever computers they wanted. = The low=20 end probably couldn't afford to buy any computers, so the question was = how to=20 give them access to software and the Internet in a community setting. = That's=20 when Phuc got to know Vu Duc Dam.

Vu was vice chairman to the people's committee in Bac Ninh, an inland = farming=20 province in the north. He had studied abroad and was interested in = promoting=20 Vietnam's digital future. But what would Bac Ninh's poor farmers do with = computers?

The answer, in part a product of Intel's constant brainstorming, is = now on=20 show at 200 community centers across Bac Ninh. Each one houses five = personal=20 computers and one printer. A local Web site created by the Agriculture = Ministry=20 offers daily crop prices. In addition, online maps clearly show the = boundaries=20 of land allotments, previously a frequent topic of disagreements. The = system can=20 also be used to set up distribution routes.

For farmers, it's a valuable resource. For Intel, it's 1,000 chips = sold.

Though farmers sharing computers is all well and good, Intel's prime = target=20 was always the middle segment of the population, a group Phuc now = estimates at=20 about three million households with income from $2,000 to $6,000 = annually. How=20 could Intel encourage these people to stretch their budgets and become = new=20 customers?

Working with the government's Communist youth group, Intel developed = a=20 program under the brand Thanh Giong, the name of a legendary Vietnamese = hero who=20 magically overcame disability to beat back the enemy of his people. To = beat back=20 the enemy of illiteracy (and thus unemployment), the program would sell=20 computers costing $265, $320 and $420. Intel acted as matchmaker between = suppliers in Taiwan and Vietnamese assemblers, whom it also helped with = testing,=20 debugging and quality control.

So far, the Thanh Giong systems have been selling at a rate of 3,000 = a month.=20 "Intel doesn't do this for free," Phuc says. "We don't even take a = loss." though=20 the program began in just a few provinces, now all 64 have followed the = Thanh=20 Giong lead. "And of course," Phuc adds, "we helped everyone."

Phuc's approach, which he credits in part to the ideas of Intel's = chairman,=20 Craig Bennett, has become a model for Intel divisions throughout = Southeast Asia=20 and Eastern Europe. The government is planning another Thanh Giong = program to=20 reach small businesses, which it hopes will triple in number in the next = five=20 years. The "digital Vietnam" agreement that Intel's chief executive, = Paul=20 Otellini, signed June 15 includes a stunning plan for the future: = computer labs=20 in all schools, e-government programs in all provinces, personal = computers in=20 all 900 hospitals and 260 universities, rural Internet rollouts, and = even=20 wireless Internet covering entire cities.

Intel has succeeded in Vietnam because its goal and the government's = are=20 roughly the same: more Vietnamese using more computers. Essentially, = Intel gave=20 the government a menu of options - all of which were good for Intel - = and=20 followed up on the ones the government liked. The company has taken = advantage of=20 cheap marketing and played up to local traditions. At worst, it can be = accused=20 of encouraging people to spend their money on computers instead of other = things,=20 perhaps including necessities. The situation could hardly be better.

Intel hasn't always been able to avoid controversy, however. Like = other=20 companies, it has been blamed for being a badly behaved guest. For = instance, by=20 building a large plant in Kiryat Gat, an Israeli town that belonged to=20 Palestinians before 1948, Intel became the target of boycotts from=20 pro-Palestinian groups. They accused the company of helping Israel to = limit=20 Palestinian families' ability to regain their ancestral homes. There is = no=20 shortage of other stories, especially involving American businesses.

Things are changing, though. Ironically, the same corporations that = activists=20 used to castigate for using sweatshops in poor countries may now be the = entities=20 most responsible for spreading progressive labor practices. For example, = Gap=20 Inc., which was once criticized for using exploitative clothing = suppliers on=20 three continents, has more recently been praised for coming clean about = its=20 violations of labor laws, pledging to reverse them, and even solving a = dispute=20 between workers and local bosses in Cambodia.

The company only changed its ways after years of sustained pressure = from=20 activists and consumers. But the case proved that under their watchful = eye,=20 multinational companies can bring progress as well as problems. When the = activists' voices and consumers' pocketbooks make visible examples out = of=20 offenders, it's much less likely that others will test the limits of = acceptable=20 behavior.

From "Connected: 24 Hours in the Global Economy" by Daniel Altman, = published=20 this month by Farrar, Straus and Giroux. Copyright =C2=A9 2007 by Daniel = Altman. All=20 rights reserved.

Notes: