Clear evidence suggests the importance of health service provider payment incentives for achieving efficiency, equal access, and quality, including attention to primary, secondary, and tertiary prevention. “Pay for performance” may be on the cusp of significant expansion in Asia, and reform away from fee-for-service has been underway for several years in several economies. Yet despite the policy relevance, the evidence base for evaluating payment reforms in Asia is still very limited.

China in particular has been undertaking significant reforms to its health care system in both rural and urban areas. With the expansion of insurance coverage and need to resolve incentive problems like “supporting medical care through drug sales,” there is an urgent need for evaluating alternative ways of paying health service providers. Evidence from policy reforms in specific regions of China, as well as other economies of the Asia-Pacific, can provide valuable evidence to help inform policy decisions about how to align provider incentives with policy goals of quality care at reasonable cost.

To illuminate these questions, the Asia Health Policy Program and several collaborating institutions are planning to convene a conference on health care provider payment incentives on November 7-8, 2008 in Beijing. The conference will highlight and seek to distill “best-practice” lessons from rigorous and policy-relevant evaluations of recent reforms in China and elsewhere in the Asia Pacific.

The organizing committee – including health economists from Shorenstein APARC, Peking University, Tsinghua University, and Seoul National University – reviewed submissions in June 2008 and accepted sixteen. The conference papers cover payment issues in Korea, Japan, China, Taiwan, Thailand, Tajikistan, the Philippines, and the US, and the disciplines of economics, health services research/health policy, public health, medicine, and ethics. Topics include institutionalized informal payments; the impact of global budget policies on high-cost patients; public-private partnerships; public-sector physicians owning private pharmacies; evidence-informed case payment rates; payment and hospital quality; bonuses and physician satisfaction; physician prescription choice between brand-name and generic drugs; and differences in pharmaceutical utilization across insurance plans that pay providers differently (fee-for-service versus capitation).

Policymakers from China’s National Development and Reform Commission and Ministry of Health will also speak at the conference. Selected research papers will be published through the Shorenstein Asia-Pacific Research Center either in a special volume or in a special issue of an English-language health policy journal.

South East Asia Forum Director, Donald Emmerson discusses what impact, if any, there will b e on US-North Korean relations and ASEAN-North Korean relations once Pyongyang signs the Treaty of Amity and Cooperation at next week's Southeast Asian regional security meeting in Singapore.

As the world’s most dynamic and rapidly advancing region, the Asia-Pacific has commanded global attention. Business and policy leaders alike have been focused on the rise of China, tensions on the Korean peninsula, Japan’s economic recovery and political assertiveness, globalization and the outsourcing of jobs to South Asia, Indonesia’s multiple transitions, competing forces of nationalism vs. regionalism, and the future of U.S.-Asia relations.

What is the near-term outlook for change in the region? How might developments in the economic, political, or security sphere affect Asia’s expected trajectory? And how will a changing Asia impact the United States? These were among the complex and challenging issues addressed by a faculty panel from the Shorenstein Asia-Pacific Research Center (Shorenstein APARC) and the Eurasia Group at the Asia Society in New York on January 23, 2006.

Moderated by director of the Freeman Spogli Institute for International Studies Coit D. Blacker, the Olivier Nomellini Family University Fellow in Undergraduate Education, the panel included Michael H. Armacost, the Shorenstein Distinguished Fellow, former Under Secretary of State for Political Affairs, and former Ambassador to Japan and the Philippines; Donald K. Emmerson, the director of the Southeast Asia Forum at Shorenstein APARC and noted expert on Indonesia; Harry Harding, the director of research and analysis at the Eurasia Group in New York and University Professor of International Affairs at George Washington University; and Gi-Wook Shin, the director of Shorenstein APARC, founding director of the Korean Studies Program, and associate professor of sociology at Stanford.

Q. COIT BLACKER: WHAT IS THE MOST DIFFICULT, CHALLENGING ISSUE YOU SEE?

A. HARRY HARDING:

In China, we are seeing a darker side of the Chinese success story. Millions of people have been lifted out of poverty, China's role in international affairs is on the rise, and China is an increasingly responsible stakeholder in an open, liberal global economy. Yet, the world is now seeing the problems China's reform program has failed to resolve. China's new five-year plan seeks to address a number of these issues, providing a plan for sustainable economic development that is environmentally
responsible and addresses chronic pollution problems, for a harmonious society that
addresses inequalities and inadequacies in the provision of medical care, insurance
and pension systems, and for continuing technological innovation, as part of China's
quest to become an exporter of capital and technology.

A. GI-WOOK SHIN:

The world should be deeply concerned about developments on the Korean peninsula. Two pressing issues are U.S. relations with South Korea and the nuclear crisis with the North. It is not clear when or whether we will see a solution. Time may be against the United States on the issue. China and South Korea are not necessarily willing to follow the U.S. approach; without their cooperation, it is difficult to secure a successful solution. The younger generation emerging in South Korea does not see North Korea as a threat. Our own relations with South Korea are strained and we are viewed as preoccupied with Iraq and Iran, as North Korea continues to develop nuclear weapons.

A. DONALD EMMERSON:

In Southeast Asia, a key problem is uneven development, both in and between the political and economic spheres. Potentially volatile contrasts are seen throughout the region. Vietnam is growing at 8 percent per year, but will it become a democracy? It has not yet. Indonesia has shifted to democracy, but absent faster economic growth, that political gain could erode. Indonesia's media are among the freest in the region;
multiple peaceful elections have been held--a remarkable achievement--and nearly all Islamists shun terrorism. Older Indonesians remember, however, that the economy
performed well without democracy under President Suharto. Nowadays, corruption
scandals break out almost daily, nationalist and Islamist feelings are strong, and the
climate is not especially favorable to foreign investment. While Burma's economy
lags, its repressive polity embarrasses the Association of Southeast Asian Nations
(ASEAN). How long can the generals in Rangoon hold on? Disparities are also
international: dire poverty marks Laos and Cambodia, for example, while the
Malaysian and Thai economies have done well.

A. MICHAEL ARMACOST:

Japan is a "good news/bad news" story. The good news is that Japan has found a new security niche since the end of the Cold War. Previously, when a security problem loomed "over the horizon," they expected us to take care of it while, if prodded, they increased their financial support for U.S. troops stationed in Japan. During the first post-Cold War conflict in the Persian Gulf, Japan had neither the political consensus nor the legal framework to permit a sharing of the risks, as well as the costs, and this cost them politically. Since then, they have passed legislation that permits them to participate in U.N. peacekeeping activities, contribute noncombat, logistic, and other services to "coalition of the willing" operations, and even dispatch troops to join reconstruction activities in Iraq. Clearly, their more ambitious role is helping to make the U.S.-Japan alliance more balanced and more global.The bad news is a reemergence of stronger nationalist sentiment in Japan and more generally in Northeast Asia. In part this is attributable to the collapse of the Left in Japanese politics since the mid-1990s. This has left the Conservatives more dominant, and they are less apologetic about Japanese conduct in the 1930s and 1940s, more inclined to regard North Korea and China as potential threats, more assertive with respect to territorial issues, less sensitive to their neighbors’ reactions to Prime Ministerial visits to Yasukuni Shrine, and more eager to be regarded as a “normal” nation. Many Asians see the United States as pushing Japan to take on a more active security role and, in the context of rising Japanese nationalism, are less inclined to view the U.S.-Japan alliance as a source of reassurance.

Q. COIT BLACKER: WHAT ARE THE COMPETING AND CONFLICTING TENSIONS BETWEEN REGIONALISM AND NATIONALISM?

A. HARRY HARDING:

In China, there has been a resurgence of nationalism over the past 10 to 15 years. Since the end of the Maoist era and the beginning of the reform movement, the leadership has embraced nationalism as a source of legitimacy, but this is a double-edged sword. It places demands on the government to stand up for China’s face, rights, and prestige in international affairs, especially vis-à-vis Japan, the United States, and Taiwan, at times pushing Beijing in directions it does not wish to go.

A. DONALD EMMERSON:

In Indonesia, it is important to distinguish between inward and outward nationalism. Outward nationalism was manifest in Sukarno’s policy of confrontation with Malaysia. ASEAN is predicated on inward nationalism and outward cooperation. Nationalist feelings can be used inwardly to motivate reform and spur development. But there are potential drawbacks. Take the aftermath of the conflict in Aceh. The former rebels want their own political party. Hard-line nationalists in the Indonesian parliament, however, are loath to go along, and that could jeopardize stability in a province already exhausted by civil war and damaged by the 2004 tsunami.

A. GI-WOOK SHIN:

Korea is a nation of some 70 million people, large by European standards, but small in comparison to the giants of Asia, especially China, India, and Russia, making Korea very concerned about what other countries are doing and saying. Korea is currently undergoing an identity crisis. Until the 1980s, the United States was seen as a “savior” from Communism and avid supporter of modernization. Since then, many Koreans have come to challenge this view, arguing that the United States supported Korean dictatorship. Koreans are also rethinking their attitudes toward North Korea, seeing Koreans as belonging to one nation. This shift has contributed to negative attitudes toward both the United States and Japan

Q. COIT BLACKER: GENERATIONAL CHANGE IS ALSO A MAJOR ISSUE IN CHINA, THE DPRK, AND JAPAN. WHAT DOES IT BODE FOR POLITICAL CHANGE?

A. MICHAEL ARMACOST:

Japan has had a “one and a half party system” for more than half a century. Yet the Liberal Democratic Party has proven to be remarkably adaptive, cleverly co-opting many issues that might have been exploited by the opposition parties. It is clearly a democratic country, but its politics have not been as competitive as many other democracies. As for the United States, we have promoted lively democracies throughout the region. But we should not suppose that more democratic regimes will necessarily define their national interests in ways that are invariably compatible with ours. In both Taiwan and South Korea, to the contrary, democratic leaderships have emerged which pursue security policies that display less sensitivity to Washington’s concerns, and certainly exhibit little deference to U.S. leadership.

A. GI-WOOK SHIN:

In both North and South Korea, a marked evolution is under way. In the South, many new members of the parliament have little knowledge of the United States. Promoting mutual understanding is urgently needed on both sides. In the North, the big question is who will succeed Kim Jong Il—an issue with enormous implications for the United States.

A. DONALD EMMERSON:

Indonesians have a noisy, brawling democracy. What they don’t have is the rule of law. Judges can be bought, and laws are inconsistently applied. The Philippines enjoyed democracy for most of the 20th century, but poverty and underdevelopment remain rife, leading many Filipinos to ask just where democracy has taken their nation.

A. HARRY HARDING:

China has seen a significant increase in rural protests. There has been an increase in both the number of incidents and the level of violence. People are being killed, not just in rural areas, but also in major cities like Chengdu. We are seeing a new wave of political participation by professional groups, such as lawyers and journalists, galvanizing public support on such issues as environmental protection, failure to pay pensions, confiscation of land, and corruption. A new generation has been exposed to the Internet, the outside world, and greater choice, but it is not yet clear at what point they will demand greater choice in their own political life.

 

WHAT WOULD YOU ADVISE THE PRESIDENT ON U.S. POLICY TOWARDS ASIA?

In the lively question-and-answer session, panelists were asked, "Given the chance to talk to the U.S. President about change and improvement in U.S.-Asia policy, what would you say?"

MICHAEL ARMACOST: I am struck by a mismatch between our interests and our strategy in Asia. In some respects our Asia policy has become something of an adjunct of our policy toward the Middle East-where we confront perhaps more urgent, if not more consequential, concerns. Asia is still the most dynamic economic zone in the world; it is the region in which the most significant new powers are emerging; and it is where the interests of the Great Powers intersect most directly. Also, it is an area where profound change is taking place swiftly. We are adapting our policies in Asia to accommodate current preoccupations in the Muslim world, rather than with an eye to preserving our power and relevance in Asia.

HARRY HARDING: It is striking how much Asian nations still want us around- as an offshore balancer and a source of economic growth. Yet they want us to understand the priorities on their agenda as well as our own. We are seen as obsessed with terrorism and China. We should exhibit more support for Asian institution building, as we have with the European Union. We also need to get our own economic act together-promoting education, stimulating scientific research and technological innovation, and reducing our budget deficits-and quit resting on past laurels. Requiring Japan to accept U.S. beef exports and then sending them meat that did not meet the agreed-upon standards has been a setback for our relations, since the Japanese public regards the safety of its food supply as critically important.

DONALD EMMERSON: Most opinion-makers in Southeast Asia are tired of Washington's preoccupation with terrorism. To be effective in the region, we must deal-and appear to be dealing-with a wider array of economic, social, and political issues, and not just bilaterally. The United States is absent at the creation of East Asian regionalism. For various reasons, we were not invited to participate in the recent East Asia Summit. Meanwhile, China's "smile diplomacy" has yielded 27 different frameworks of cooperation between that country and ASEAN. We need to be more, and more broadly, engaged.

MICHAEL ARMACOST: The establishment of today's European community began with the historic reconciliation between France and Germany. I doubt that a viable Asian community can be created without a comparable accommodation between China and Japan. Some observers believe that current tensions between Tokyo and Beijing are advantageous insofar as they facilitate closer defense cooperation between the United States and Japan. I do not share that view. A drift toward Sino-Japanese strategic rivalry would complicate our choices as well as theirs, and I hope we can find ways of attenuating current tensions.

This past autumn, the Freeman Spogli Institute ( FSI ) in conjunction with the Woods Institute for the Environment launched a program on Food Security and the Environment (FSE) to address the deficit in academia and, on a larger scale, the global dialogue surrounding the critical issues of food security, poverty, and environmental degradation.

“Hunger is the silent killer and moral outrage of our time; however, there are few university programs in the United States designed to study and solve the problem of global food insecurity,” states program director Rosamond L. Naylor. “FSE’s dual affiliation with FSI and Stanford’s new Woods Institute for the Environment position it well to make significant steps in this area.”

Through a focused research portfolio and an interdisciplinary team of scholars led by Naylor and Center for Environmental Science and Policy (CESP) co-director Walter P. Falcon, FSE aims to design new approaches to solve these persistent problems, expand higher education on food security and the environment at Stanford, and provide direct policy outreach.

Productive food systems and their environmental consequences form the core of the program. Fundamentally, the FSE program seeks to understand the food security issues that are of paramount interest to poor countries, the food diversification challenges that are a focus of middle-income nations, and the food safety and subsidy concerns prominent in richer nations.

CHRONIC HUNGER IN A TIME OF PROSPERITY

Although the world’s supply of basic foods has doubled over the past century, roughly 850 million people (12 percent of the world’s population) suffer from chronic hunger. Food insecurity deaths during the past 20 years outnumber war deaths by a factor of at least 5 to 1. Food insecurity is particularly widespread in agricultural regions where resource scarcity and environmental degradation constrain productivity and income growth.

FSE is currently assessing the impacts of climate variability on food security in Asian rice economies. This ongoing project combines the expertise of atmospheric scientists, agricultural economists, and policy analysts to understand and mitigate the adverse effects of El Niño-related climate variability on rice production and food security. As a consequence of Falcon and Naylor’s long-standing roles as policy advisors in Indonesia, models developed through this project have already been embedded into analytical units within Indonesia’s Ministries of Agriculture, Planning, and Finance. “With such forecasts in hand, the relevant government agencies are much better equipped to mitigate the negative consequences of El Niño events on incomes and food security in the Indonesian countryside,” explain Falcon and Naylor.

FOOD DIVERSIFICATION AND INTENSIFICATION

With rapid income growth, urbanization, and population growth in developing economies, priorities shift from food security to the diversification of agricultural production and consumption. “Meat production is projected to double by 2020,” states Harold Mooney, CESP senior fellow and an author of the Millennium Ecosystem Assessment. As a result, land once used to provide grains for humans now provides feed for hogs and poultry.

These trends will have major consequences for the global environment—affecting the quality of the atmosphere, water, and soil due to nutrient overloads; impacting marine fisheries both locally and globally through fish meal use; and threatening human health, as, for example, through excessive use of antibiotics.

An FSE project is analyzing the impact of intensive livestock production and assessing the environmental effects to gain a better understanding of the true costs of this resource-intensive system. A product of this work recently appeared as a Policy Forum piece in the December 9, 2005, issue of Science titled "Losing the Links Between Livestock and Land."

Factors contributing to the global growth of livestock systems, lead author Naylor notes, are declining feed-grain prices, relatively inexpensive transportation costs, and trade liberalization. “But many of the true costs remain largely unaccounted for,” she says, including destruction of forests and grasslands to provide farmland for feed crops destined not for humans but for livestock; utilization of large quantities of freshwater; and nitrogen losses from croplands and animal manure.

Naylor and her research team are seeking better ways to track all costs of livestock production, especially hidden costs of ecosystem degradation and destruction. “What is needed is a re-coupling of crop and livestock systems,” Naylor says, “if not physically, then through pricing and other policy mechanisms that reflect social costs of resource use and ecological abuse.” Such policies “should not significantly compromise the improving diets of developing countries, nor should they prohibit trade,” Naylor adds. Instead, they should “focus on regulatory and incentive-based tools to encourage livestock and feed producers to internalize pollution costs, minimize nutrient run-off, and pay the true price of water.”

LOOKING AHEAD

The future of the program on Food Security and the Environment looks bright and expansive. Building on existing research at Stanford, researchers are identifying avenues in the world’s least developed countries to enhance orphan crop production— crops with little international trade and investment, but high local value for food and nutrition security. This work seeks to identify advanced genetic and genomic strategies, and natural resource management initiatives, to improve orphan crop yields, enhance crop diversity, and increase rural incomes through orphan crop production.

Another priority research area is development of biofuels. As countries seek energy self-reliance and look for alternatives to food and feed subsidies under World Trade Organization (WTO) rules, the conversion of corn, sugar, and soybeans to ethanol and other energy sources becomes more attractive. New extraction methods are making the technology more efficient, and high crude oil prices are fundamentally changing the economics of biomass energy conversion. A large switch by key export food and feed suppliers, such as the United States and Brazil, to biofuels could fundamentally alter export prices, and hence the world food and feed situation. A team of FSE researchers will assess the true costs of these conversions.

The FSE program recently received a grant through the Presidential Fund for Innovation in International Studies to initiate new research activities. One project links ongoing research at Stanford on the environmental and resource costs of industrial livestock production and trade to assess the extent of Brazil’s rainforest destruction for soybean production. “Tens of millions of hectares of native grassland and rainforest are currently being cleared for soybean production to supply the global industrial livestock sector,” says Naylor. An interdisciplinary team will examine strategies to achieve an appropriate balance between agricultural commodity trade, production practices, and conservation in Brazil’s rainforest states.

“I’m extremely pleased to see the rapid growth of FSE and am encouraged by the recent support provided through the new Presidential Fund,” states Naylor. “It enables the program to engage faculty members from economics, political science, biology, civil and environmental engineering, earth sciences, and medicine—as well as graduate students throughout the university—in a set of collaborative research activities that could significantly improve human well-being and the quality of the environment.”

Discussions began, tentatively at first, as the delegates slipped into the roles they had been assigned and for which they had prepared for several months. The tension mounted as they anticipated meeting with their heads of state, to whom they would propose their country’s goals for the upcoming U.N. Security Council meeting.

Thus began the Third Annual IDL Student Conference in International Security, sponsored by the Initiative on Distance Learning (IDL). IDL offers Stanford courses in international security to nine Russian universities via distance-learning technologies. Its annual conference brings together top students and instructors from each of the participating universities with students and faculty from Stanford. This was the first year that the conference centered on an international security simulation, led by political science professor Scott D. Sagan, director of CISAC, and Coit D. Blacker, director of FSI. Sagan has been conducting such security simulations for eight years at Stanford and other U.S. universities.

This year’s simulation scenario was the referral of Iran to the U.N. Security Council by the International Atomic Energy Agency (IAEA) for failure to fully disclose its nuclear activities. Council delegates convened in the Russian provincial capital of Yaroslavl, 150 miles northeast of Moscow, due to “security concerns”— as they were informed—about U.N. headquarters in New York.

Delegates’ opening statements reflected a wide range of views on Iran’s status with the IAEA. The U.S. delegation called for sanctions and showed little interest in negotiation. “We find the Iranian regime corrupt and repressive,” said Oleg Borisov, head U.S. delegate and a student at Petrozavodsk State University. He added, rather menacingly, “The United States is not intending to use military force unless Iran keeps up its nuclear capability and continues to support terrorism.”

At the other end of the spectrum, Venezuela, Pakistan, and Iraq indicated no willingness to consider sanctioning Iran. China urged delegates to “choose the only right option—diplomacy.”

By the end of the two-day session, delegates had overcome seemingly intractable differences during four intensive legal drafting sessions. The council’s resolution gave Iran three months to comply with IAEA demands and provided for Iran to obtain enriched uranium from Russia, with the production, transport, and waste disposal to occur on Russian soil under IAEA controls.

As a learning experience, the simulation is well matched to the IDL program’s goal of fostering critical analysis among a new generation of students in post- Soviet Russia. FSI director Coit Blacker wants to develop future generations of diplomats and policymakers whose worldview is shaped “by how they think, not what they’re told to think.”

After the session ended, students reflected on what they had learned. Putting themselves in others’ shoes seemed the most valuable aspect for many. Natasha Pereira-Klamath, one of the Stanford undergraduates who participated in the Yaroslavl simulation as a representative of the Russian Federation, said she was surprised at the “extent to which people reflected the views of their (assigned) countries.” This was echoed by other students, who expressed their surprise at how easy it was to begin thinking as a representative of another country, although their official position might be very different from their own.

“I’m glad to see the resolution passed today,” said Homkosol Bheraya, an exchange student from Thailand who attends Ural State University. “I hope that in the real world this can happen someday.” Perhaps she will be in a position to advance that goal. “My dream,” she said, “is to one day work for the IAEA.”

A new era is under way for global high-technology innovation and entrepreneurship, marked by the rise of Greater China. During the past several decades, Taiwan, Singapore, and others have developed as centers in key information communications technology (ICT) industries. More recently, from Beijing to the Pearl River Delta, markets for new products are expanding, competencies in new technologies are growing, and a new generation of high-technology regions is emerging. All these signs point toward China as a rising powerhouse, accelerating the shift of locus for the global high-technology arena across the Pacific.

The contours of the nature and pace of this change are already evident in some ICT industries but have yet to be fully analyzed. The Stanford Program on Regions of Innovation and Entrepreneurship (SPRIE) (SPRIE) is leading a research program to advance the understanding of the dynamic systems of innovation and entrepreneurship that drive China’s ascendance in high technology and its implications for the global knowledge economy.

CHINA'S QUEST FOR INDEPENDENT INNOVATION

No longer satisfied with China’s role as the world’s factory, Chinese government leaders have declared that zizhu chuangxin (“homegrown” innovation) is the watchword for the future. They are sounding an urgent call to reduce dependence on foreign technology and build China into an “innovation-driven economy.” As President Hu Jintao said, “homegrown innovation” is the “core of national competitiveness”— the path to sustainable economic prosperity and global leadership.

Last May, SPRIE co-sponsored Greater China's Innovative Capacities: Progress and Challenges, a two-day, invitation-only workshop at Tsinghua University in Beijing that attracted scholars from Europe, the U.S., and Asia, as well as Chinese industry leaders and government policymakers. More than 70 participants tackled topics such as indicators of innovative capacity (patent data and journal citations, for example), reforms of Chinese research institutions to spur commercially useful innovation, and the changing roles for innovation of the state, multinational corporations (MNCs), and domestic firms.

A few numbers illustrate China’s progress over the past decade. Total R&D spending nearly tripled, reaching 1.3 percent of GDP in 2005, even while GDP doubled. China is now ranked third worldwide in overall R&D spending (after the U.S. and Japan), with targets to increase spending to 2 percent of GDP by 2010. Science and engineering PhDs more than doubled between 1996 and 2005. And China’s growth rate of U.S. patents granted has eclipsed Japan, Taiwan, or Korea, with an even steeper trajectory in Chinese-authored science and technical publications in international journals.

Yet, according to SPRIE Co-Director Henry S. Rowen, “the highest value-added work in China still is done largely in foreign-invested companies and increasingly in firms led by returnees who have been educated and worked abroad. Currently most R&D is focused on incremental improvements of existing products and services. Nevertheless, the key building blocks are in place for increasing technology contributions.” At MNC R&D centers like Nokia and Microsoft, top Chinese teams are beginning to contribute to worldwide product design and research. Through interviews at more than 75 firms in Beijing and Shanghai, SPRIE researchers have identified emerging competencies at some of the best domestic research labs and companies, ranging from multimedia chip design to communication equipment.

Huawei, the telecommunications networking giant with 2005 revenues of $5.9 billion, reports consistently spending more than 10 percent of sales on R&D. Boasting more than 10,000 researchers in China plus R&D centers in Bangalore, Silicon Valley, Dallas, Stockholm, and Moscow and 3,600 patent applications in 2005, the company epitomizes China’s growing pursuit of low-cost innovation, not just low-cost manufacturing and services.

However, obstacles to China’s drive for innovation are not trivial. Many Chinese institutions, though improving, still fail to provide an environment conducive for innovation, including a competitive and open system for R&D funding or effective intellectual property protection. As SPRIE associate director Marguerite Gong Hancock observes, “The current gold rush mentality for quick profits runs counter to breakthrough technology innovation that is typically the result of patient investments in research with long-term and uncertain payoffs. To date, some of the most innovative bright spots are not in disruptive technologies but in processes, services, and business models.”

One notable obstacle confronting Chinese high-tech firms is a leadership talent shortage, a problem that is the focus of another SPRIE research initiative.

HIGH-TECHNOLOGY LEADERSHIP IN GREATER CHINA

Since 1999, founders have led 24 Chinese firms to IPOs on NASDAQ. From this unprecedented number of startups to a rising class of billion-dollar giants going global, high-tech companies in China have a dramatically intensifying need for leadership.

To examine how China’s high-tech executives are facing this challenge, SPRIE partnered with Heidrick & Struggles, a leading executive search firm, to conduct more than 100 interviews with executives at both domestic and multinational high-tech firms operating in China.

Leaders face what Nick Yang (MS ’99), founder of wireless service provider KongZhong, described as “uncharted waters.” They must create a cadre of top leaders and managers in the face of an acute shortage of seasoned managers and globally capable executives. As John Deng, founder and CEO of Vimicro (a fabless semiconductor company with $396 million market cap), said, “I don’t lack other things, such as funding, infrastructure, or government relations. What I lack now is people.”

SPRIE Co-Director William F. Miller commented, “Interestingly, not one interviewee expressed an intention to adopt a management model that diverges significantly from the dominant global model,” a model defined by competencies well documented as key among U.S. and European executives. Based on the SPRIE-Heidrick study, some of these competencies currently are both more critical and more difficult to find in China: the ability to drive results, achieve customer orientation, provide visionary leadership, create organizational buy-in, model key values, and delegate and empower. The best leaders not only are seeking these competencies in senior executives but also cascading these attributes throughout their organizations.

The impact ripples throughout the talent pipeline, from recruiting to retaining to developing key people. High-tech leaders in China are deploying a wide range of new tactics. Miller noted, “To address pressing leadership shortages, executives are devoting an unusually large amount of their time and attention to talent and human resource issues.” As Mary Ma, CFO of computer giant Lenovo, stated, “I have become an HR manager. I spend 30 percent of my time on people and succession issues.” And the best companies are systematically using their best leaders to mentor and mold the next generation of professionals—the mid-level managers and team leaders, who are mobile, scarce, and frequently lack the full set of skills needed to drive results.

Emerging trends in leadership among China’s hightech executives may be a good harbinger, pointing to how and where this influential generation of China’s high-tech leaders are steering their firms—firms that have been charged with the task of leading China’s future economic growth.

FSI’s program on global justice (PGJ), now finishing its first year, explores issues at the intersection between political values and the realities of global politics. The aim is to build conversations and research programs that integrate normative ideas—toleration, fairness, accountability, obligations, rights, representation, and the common good—into discussions about fundamental issues of global politics, including human rights, global governance, and access to such basic goods as food, shelter, clean water, education, and health care. PGJ begins from the premise that addressing these morally consequential issues will require a mix of normative reflection and attention to the best current thinking in the social sciences.

In PGJ’s first year of operation, we had several visiting fellows. Adam Hosein and Helena de Bres, both dissertation fellows from MIT, spent the year researching and writing dissertations in political philosophy on issues about global distributive justice. Larry Simon, a professor at Brandeis University’s Heller School, director of Heller School’s Sustainable International Development Programs, and associate dean of academic planning, spent the winter and spring quarters working on a book on the relevance of the work of Paulo Freire to today’s poor.

Next year we will scale up the fellowship program. Helena DeBres will stay on as a postdoctoral fellow, continuing her research on utilitarian approaches to global poverty and fair distribution. She will be joined by Avia Pasternak, an Oxford PhD writing on issues about citizens’ responsibility in wealthy democracies to address issues of injustice elsewhere. Brad McHose, a UCLA PhD, and Kirsten Oleson, a recent PhD from Stanford’s IPER program, will also be affiliated with PGJ. Thorsten Theil will be a predoctoral fellow in the fall, writing on deliberative democracy and postnational politics. And Charles Beitz, a distinguished political theorist from Princeton whose Political Theory and International Relations (1979) remains the basis for much contemporary discussion of global justice, will be visiting in the winter and spring, working on a project on human rights.

Our principal activity for this past year was a regular workshop (coordinated with Stanford’s Humanities Center) covering a wide range of themes, from corporate social responsibility to the philosophical foundations of global justice, with participation from graduate students, research fellows, and faculty from political science, philosophy, economics, education, law, literature, and anthropology. In one of the liveliest sessions, Abhijit Banerjee, MIT economist and director of MIT’s Poverty Action Lab, presented his research and reflections on the strategy of using randomized field experiments to assess aid projects in developing countries. In a seminar jointly sponsored with CDDRL, Banerjee, a self-described aid optimist, expressed doubts about contemporary understanding of the determinants of economic growth and emphasized the importance of project-specific assistance and evaluation.

Richard Locke, a political scientist from MIT’s Sloan School, presented a paper based on his research at Nike and other lead firms in global supply chains that use corporate codes of conduct in their relations with suppliers. The principal finding of Locke’s research is that such codes have not been very successful in improving compensation, working conditions, or freedom of association for workers in firms that supply products to lead firms.

Amherst political theorist Uday Mehta presented a paper contrasting ideas about peace and non-violence to a seminar jointly sponsored with CISAC. Tracing the idea of a principled commitment to non-violence to Gandhi, Mehta suggested there are important costs to that principle (perhaps it requires devaluing justice), but that there are also costs to emphasizing peace as an alternative to principled non-violence: in particular, that the more conditional commitment to non-violence may end up being very permissive about the use of force.

Stanford economist Seema Jayachandran presented research on strategies for dealing with problems of odious debt. And we had workshops on the foundations of global justice with political theorists Michael Blake, Adam Hosein, Jennifer Rubenstein, and Sebastiano Maffetone; on citizenship and immigration with legal theorist Ayelet Schachar and anthropologist John Bowen; on human rights with Chip Pitts, a human rights lawyer; and on the World Bank with Sameer Dossani, a Washington political activist.

Next year, PGJ will initiate—in conjunction with Locke and his colleagues at MIT—a project called Just Supply Chains. The premise of the project is that the globalization of production is redefining employment relations and generating the need for fundamental changes in the basic institutions governing the economy. Corporations, unions, NGOs, national governments, and even international labor, trade, and financial organizations are all searching for new ways to adjust to the new international order and ensure that workers in global supply chains have decent levels of compensation, healthy and safe workplaces, and rights of association.

The project will explore three broad strategies for achieving these goals. First, it will address corporate codes of conduct and monitoring mechanisms to enforce these codes. Today, monitoring for compliance with “private voluntary codes of conduct” is one of the principal ways both global corporations and labor rights NGOs seek to promote “fair” labor standards in global supply chains. Likewise, a number of multi-stakeholder initiatives (MSIs) have banded together to promote a more collaborative/coordinated approach to improved labor standards. (The Joint Initiative for Workers Rights and Corporate Accountability in Turkey and the MFA Forum Project in Bangladesh are two of the best known examples.) But these initiatives, like the corporate codes, have produced very mixed results.

Second, much has been written about pro-labor administrative reforms by national governments (e.g., Dominican Republic, Argentina, Cambodia, and Brazil). But very little is known about whether these efforts are successful and, if they are, how to diffuse their success to other countries struggling with many of the same issues.

Third, there is speculation about how efforts at the ILO and WTO, joining labor standards to trade rules, might produce global improvements in compensation, work, and rights of association.

To explore these issues, the Just Supply Chains project will start next year with a series of workshops, bringing together “practitioners” engaged in these institutional experiments and scholars studying global supply chains, corporate responsibility, regulatory strategies, and normative ideas about global justice. We will examine what is already known about the conditions under which new arrangements and strategies can succeed in promoting fair wages and work hours, decent working conditions, and basic rights, including the right to organize collectively. The larger aim will be to define a research agenda animated by ideals of global justice, informed by understanding of current circumstances and social possibilities, and aimed at improving both our understanding and global well-being.

The Bill & Melinda Gates Foundation’s Agricultural Development Program has awarded Stanford University’s Program on Food Security and the Environment (FSE) and a team of collaborators $3.8 million over three years to conduct a quantitative assessment of the effect of biofuels expansion on food security in the developing world. This work will determine how different scenarios of expanded biofuels production in rich and poor countries will affect global and regional food prices, farmer incomes, and food consumption of the poor. In three case-study countries (India, Mozambique, Senegal), it will make a more detailed assessment of the opportunities and pitfalls associated with an array of possible biofuels development scenarios (e.g., using different crops for biofuels production, using marginal land versus highly productive land, etc.). We expect the work will represent the first systematic, detailed effort to address the effects of biofuels expansion on welfare in poor countries and the first available analytic tool for assessing possible biofuels investments in individual developing countries. Project collaborators include FSE, the International Food Policy Research Institute, the Center on Chinese Agricultural Policy, and the University of Nebraska.

Through this grant, the Bill & Melinda Gates Foundation aims to assess how biofuels may affect smallholder farmers in the developing world. This includes assessing both the risks, such as increasing food prices, and the potential opportunities for smallholder farmers to leverage biofuels to boost their productivity, increase their incomes, and build better lives for themselves and their families. The foundation and Stanford University will disseminate the findings widely to inform a broad audience, including policymakers.

FSE is also very pleased to announce a private gift from Lawrence Kemp for further work in the biofuels area. The Kemp gift will be devoted to building a team of faculty and students on campus who will analyze the transmission of global price effects to local markets, provide policy advice and communication on biofuels, and expand the field-level coverage of Stanford’s biofuels work.

In the November 2007 issue of Environment, project collaborators Rosamond L. Naylor (FSE), Adam Liska, Marshall Burke (FSE), Walter P. Falcon (FSE), Joanne Gaskell, Scott Rozelle (FSE), and Kenneth Cassman demonstrate how high energy prices and biofuelspromoting agricultural policy result in higher food prices generally and then examine in detail the potential global effects of biofuels expansion in four countries for four crops—corn in the United States, cassava in China, sugarcane and soy in Brazil, and palm oil in Indonesia. They argue that in each case, the threats to global food security from biofuels expansion likely outweigh the benefits, especially in the short run. This is because in many poor countries these crops play an important role in the diets of the poor and because the poorest in the world typically spend more money on food than they earn in income through farming. They also note that “second generation” technologies such as cellulosic biofuels will likely not play a significant role in biofuels production over the next decade or longer—and thus in the near-term are very unlikely to be the win-win that their proponents suggest. “The ripple effect: biofuels, food security, and the environment” excerpted from Environment, November 2007

The integration of the agricultural and energy sectors caused by rapid growth in the biofuels market signals a new era in food policy and sustainable development. For the first time in decades, agricultural commodity markets could experience a sustained increase in prices, breaking the long-term price decline that has benefited food consumers worldwide. Whether this transition occurs—and how it will affect global hunger and poverty—remain to be seen. Will food markets begin to track the volatile energy market in terms of price and availability? Will changes in agricultural commodity markets benefit net food producers and raise farm income in poor countries? How will biofuels-induced changes in agricultural commodity markets affect net consumers of food? At risk are more than 800 million food-insecure people—mostly in rural areas and dependent to some extent on agriculture for incomes— who live on less than $1 per day and spend the majority of their incomes on food. An additional 2–2.5 billion people living on $1 to $2 per day are also at risk, as rising commodity prices could pull them swiftly into a food-insecure state.

The potential impact of a large global expansion of biofuels production capacity on net food producers and consumers in low-income countries presents challenges for food policy planners and raises the question of whether sustainable development targets at a more general level can be reached. Achieving the 2015 Millennium Development Goals adopted by the United Nations General Assembly in 2000, which include halving the world’s undernourished and impoverished, lies at the core of global initiatives to improve human well-being and equity, yet today virtually no progress has been made toward achieving the dual goals of alleviating global hunger and poverty. The record varies on a regional basis: Gains have been made in many Asia-Pacific and Latin American-Caribbean countries, but progress has been mixed in South Asia and setbacks have occurred in numerous sub-Saharan African countries. Whether the biofuels boom will move extremely poor countries closer to or further from the Millennium Development Goals remains uncertain.

Biofuels growth also will influence efforts to meet two sets of longer-run development targets. The first encompasses the goals of a “sustainability transition,” articulated by the Board on Sustainable Development of the U.S. National Academy of Sciences, which seeks to provide energy, materials, and information to meet the needs of a global population of 8–10 billion by 2050, while reducing hunger and poverty and preserving the planet’s environmental life-support systems. The second is the Great Transition of the Global Scenario Group, convened by the Stockholm Environment Institute, which focuses specifically on reductions in hunger and greenhouse gas (GHG) emissions beyond 2050. As additional demands are placed on the agricultural resource base for fuel production, will ecosystem services (such as hydrologic balances, biodiversity, and soil quality) that support agricultural activities be eroded? Will biofuels development require a large expansion of crop area, which would involve conversion of marginal land, rainforest, and wetlands to arable land? And what will be the net effect of biofuels expansion on global climate change?

Although the questions outnumber the answers at this stage, two trends seem clear: Total energy use will continue to escalate as incomes rise in both industrial and developing countries, and biofuels will remain a critical energy development target in many parts of the world if petroleum prices exceed $55–$60 per barrel. Even if petroleum prices dip, policy support for biofuels as a means of boosting rural incomes in several key countries will likely generate continued expansion of biofuels production capacity. These trends will have widespread ripple effects on food security—defined here as the ability of all people at all times to have access to affordable food and nutrition for a healthy lifestyle—and on the environment at local, regional, and global scales. The ripple effects will be either positive or negative depending on the country in question and the policies in play.

New Beginnings, a nonpartisan policy study group of former senior U.S. officials and other experts on Korea, will discuss the results of President Lee's visit and the prospects for forging a real partnership with South Korea at the World Affairs Council, San Francisco on June 3.

Panelists:

Michael H. Armacost, former U.S. Ambassador to Japan and the Philippines, and former Under Secretary of State for Political Affairs; currently the Shorenstein Distinguished Fellow, Asia-Pacific Research Center (APARC), Stanford University

Evans J.R. Revere, President of the Korea Society, and former Principal Deputy Assistant Secretary of State for East Asian and Pacific Affair

Gi-Wook Shin, Director of Shorenstein APARC and Professor of Sociology, Stanford University

Daniel C. Sneider, Associate Director for Research, Shorenstein APARC, Stanford University, and formerly a foreign affairs correspondent and columnist

David Straub, Pantech Research Fellow at Stanford's Shorenstein APARC, and a former State Department Korean affairs director

Bruce Pickering, Executive Director of the Asia Society Northern California (moderator)

This event is co-sponsored by the Asia Society of Northern California and World Affairs Council.