On March 25, 2005, Stanford University Press will publish Prospects for Peace in South Asia, the inaugural book in a new series of "Studies of the Asia-Pacific Research Center." Designed to showcase APARC's cutting-edge research on contemporary Asia, the series will feature the varied work of the Center's faculty and the unique interdisciplinary perspective that informs it. According to Andrew Walder, director of APARC, "We are delighted to begin this series with Stanford University Press, which has a large and distinguished list of books on modern East Asia. It is a perfect way to showcase the best of the scholarly work to come out of APARC." Two more books have recently been added to the series pipeline.

Prospects for Peace in South Asia addresses the largely hostile, often violent relations between India and Pakistan that date from their independence in 1947. The most persistent conflict between the two neighboring countries over Kashmir has defied numerous international attempts at resolution.

The struggle over Kashmir is rooted in national identity, religion, and human rights. It has also influenced the politicization of Pakistan's army, religious radicalism, and nuclearization in both countries. Dossani and Rowen's incisive volume analyzes these forces, their impact on relations between the two countries, and alternative roles the United States might play in resolving the dispute. While acknowledging the risks, the book is optimistic about peace in South Asia. The key argument is that many of the domestic concerns -- such as territorial integrity and civilian-military rapprochement -- that had fueled the conflict have now abated.

"Volatile relations between India and Pakistan reflect issues deeper than territorial ambitions over Kashmir and predate their nuclear capability. That is a key theme of the book. The book is particularly timely: as India turns increasingly vibrant and globally important and Pakistan begins to clear the shadows of its past, policymakers need to understand the issues that will drive relations into the long-term," said Rafiq Dossani, co-editor, senior research scholar at APARC, and director of its South Asia Initiative. The volume's co-editor, Henry S. Rowen, is director emeritus of APARC, senior fellow at the Hoover Institution and emeritus professor of Public Policy and Management at Stanford's Graduate School of Business.

Chris Farrell: Remember the dot-com boom of the 1990s? It seemed as if every entrepreneur with a good idea and a PC could challenge established companies for customers. Brick-and-mortar companies jumped on the e-commerce bandwagon. The demand for digital workers soared. Long-time computer professionals hopped from job to job, pulling down more money with every employer. Newly minted college graduates juggled multiple job offers. But when the Y2K problem emerged in the latter part of the '90s business and government quickly realized there still weren't enough IT workers on hand to find and repair the computer glitch. The quick fix? Hire computer professionals overseas. And that temporary solution permanently changed the global economy.

Paul Saffo: Y2K was huge in getting the ball rolling on offshoring.

Farrell: Paul Saffo is director of the Institute for the Future, a high-tech think tank in Silicon Valley.

Saffo: But once they went overseas, they discovered it's not just a matter of cost. These programmers overseas are often better than the best you can get in the United States.

Farrell: Ireland, the Philippines, and Israel were among the more popular destinations for offshoring Y2K programming fixes. But India became the offshore capital. It had plenty of high-tech companies staffed with well-educated English speaking digital workers. Thanks to India's steep import barriers in the 1980s, no one could afford new computer systems. So Indian tech workers were the world's leading experts in the older software languages that needed upgrading. Suhas Patil is chairman emeritus of semiconductor maker Cirrus Logic.

Suhas Patil: And they were listening to their customers and what their needs were, and as the recognition came that systems had to be upgraded to not have the problem based on the Y2K issues, that's how they got their break.

Farrell: And made the most of the opportunity. AnnaLee Saxenian is Dean of the School of Information Management and Systems at the University of California, Berkeley.

AnnaLee Saxenian: I think the importance of Y2K was overwhelmingly about establishing Indian companies' reputation among US customers and helping begin a set of customer supplier relationships that have simply taken off in the last four years.

Farrell: Of course, Y2K contracts ended in 2000. Yet many Indian companies took advantage of their now sterling programming reputations to negotiate for more sophisticated work. Research. Software development. Accounting services. Long-distance medical advice. Rafiq Dossani is a senior research scholar at Stanford University.

Rafiq Dossani: India is now growing at 70-80 per cent a year in offshored services ... services which are maintaining an accounting system, maintaining an HR system, doing claims processing, that's growing easily at 70 per cent, maybe even higher.

Farrell: Offshore also came onshore during Y2K. The town of Mountain View lies at the heart of California's Silicon Valley. Housed in one of the many nondescript low-rise office buildings that crowd the region's business avenues is the Indus Entrepreneur, or TIE. It is a networking base for the Indian high-tech Diaspora.

Shankar Muniyappa: Y2K was a big opening as early as 98.

Farrell: Shankar Muniyappa is director of information systems for TIE. He came to America for Y2K-and stayed.

Muniyappa: Myself and many of us believe still believe this is the place where you need to be if you want to be middle of innovation.

Farrell: Some 30,000 Indian IT professionals now live and work in the Valley. Rafiq Dossani of Stanford University:

Dossani: At least 25 per cent of the start ups have Indian employees at fairly senior levels working for them. And ... there's a whole infrastructure therefore being built around them because it's a substantial number now, so you see shopping malls you see business services and so on catering to this particular immigrant community.

Farrell: That community is adding vitality to the American economy. Still, many American high-tech workers are threatened by the offshoring of white collar jobs. The numbers are murky, but according to Mark Zandi of Economy.com 370,000 non-manufacturing jobs moved overseas over the past fours years-with most of the information technology jobs going to India. Salaries are down too. Still, the big factor behind the loss of 1.5 million jobs lost since Y2K is improved business efficiency or productivity - not offshoring. And Y2K also played an important role in boosting business efficiency.

Economists initially looked at Y2K as a productivity killer.

Imagine a town threatened by a rising river. Every able-bodied person in town is put to work stacking sandbags. It's necessary work to save the town - but it's unproductive work. Nothing gets built. No food gets grown.

With the Y2K bug, programmers, chief information officers, project managers, and other digital workers were getting paid to do unproductive work - stacking sandbags of silicon. No innovative investments. No new productivity enhancing software.

But economists were wrong. Y2K wasn't a flood. Instead, think of it as clearing a path choked with underbrush. Once the trail is open, it is much easier to zip from point A to point B. Y2K gave companies an excuse to clean up their software and hardware underbrush - a critical factor in today's improved business productivity. Paul Saffo:

Saffo: A lot of companies said well, gosh, if we're going to have to spend all this money to fix our software let's also see what else we can do at the same time, so it was an invitation to replace a whole bunch of stuff. ... So it forced people to ask hard questions about how they were using things and in the best instances people really did become more efficient.

Farrell: The result? Companies used the new systems they installed to cut costs and work smarter - and hire fewer workers.

[Voice of Leonard Nimoy: "Do you have hard copies of all your important documents ... such as bank statements."]

That's Leonard Nimoy, Mr. Spock from Star Trek. He's narrating the Y2K Family Survival Guide video - one of thousands of products peddled by prophets of doom. Y2K did bring home how reliant we all are on computers. Many of us still don't back up critical data at home. The same isn't true for business and government. Many learned from Y2K just how vulnerable information systems are to a malicious attack or unforeseen disaster. Case in point: Y2K actually helped some businesses survive 9/11.

[News broadcast of President George W. Bush: "I've directed the full resources of intelligence and law enforcement communities to find those responsible and bring them to justice."]

The attack on the World Trade Center stopped trading on the New York Stock Exchange. Against the odds, that citadel of capitalism opened six days later.

John Koskinen: The reason the markets, securities markets, were able to open the Monday after the Tuesday of 9-11 was they still had the test scripts that had been developed in 1998 and 99.

Farrell: John Koskinen credits preparations for Y2K. He was President Clinton's Y2K czar.

Koskinen: ... they were able to in effect take all of those Y2K scripts and make sure that all the transactions with all of the major players would close. Without that they never would have been able to do it in the time frame with the confidence they had.

Farrell: A record 2.4 billion shares traded on the New York Stock Exchange the day it reopened.

Y2K was a unique economic event. Earlier jolts to the economy, like the 1973 oil price hike and the 2001 attack of 9/11, were shocks. But the Year 2000 arrived right on schedule. The surprise was how little immediate impact the much-feared transition had on the economy. Yet we're still living and working with the economic impact of Y2K five years later.

For Marketplace and American RadioWorks, I'm Chris Farrell.

In light of the rise of Asia in research and development (R&D) and the challenge it poses on American supremacy, SPRIE invited industry and academic R&D leaders for a panel discussion entitled "The Globalization of R&D" on February 10, 2005. The panel included Dr. John Seely Brown, visiting scholar, Annenberg Center, USC; Dr. Kris Halvorsen, vice president and director, Solutions and Services Research Center, Hewlett-Packard; and Dr. Yoshio Nishi, director of research at the Center for Integrated Systems, director of Stanford Nanofabrication Facility, National Nanotechnology Infrastructure Network. Participants discussed a wide array of issues, including the economic rationale for new models of R&D, national/regional comparative advantage in R&D, and the coordination of global R&D.

The Economic Rationale for New Models of R&D

Dr. Nishi highlighted the economic rationale behind the quest for new models of R&D. While back in the early 1990s, a $200 million investment in R&D would grant a semiconductor company a one-year lead in technology, by the early 2000s, a one-year lag would transpire with the same investment level. Such an escalation of R&D cost points to the mounting importance of the efficiency of R&D--or as Dr. Nishi put it, the importance of generating "the right technology at the right time for the right cost." The economic forces will not only alter how R&D activities are organized and distributed within and across firms, markets, regions, and countries but also influence the breadth and depth of knowledge searches. For example, R&D alliance might become a viable and lucrative scheme for cost/risk sharing in R&D. The search for non-silicon-based devices might rise in importance as silicon fabrication reaches its limits. By the same token, the division of innovative labor across nations/regions might deepen to further exploit respective comparative advantages.

Regional Comparative Advantage in R&D

One strand of development is the globalization of R&D, which necessitates comparative advantages across regions. Dr. Brown maintained, "I'm moving my analysis from individual firms to [regional] 'niches.' What I see happening is that thousands of [regional] niches are developing all over the place. What's interesting is how dynamic these niches are in building their unique capabilities." The availability of innovative talents, for example, varies significantly across regions. Invoking "the law of large numbers," Dr. Brown pointed out that given its enormous population size, Asia could produce a large number of engineers, even if they are only a tiny fraction of the total population. Currently, the U.S. produces 50,000 engineers every year; the number is 500,000 for Asia--and it is rapidly growing. Meanwhile, more and more immigrant talents choose to return to their home countries after receiving higher education and some work experience in the U.S. Few U.S. companies can afford to ignore such alarming trends. "We need to move with the market for talent," commented Dr. Halvorsen who overseas HP's global R&D activities. Take HP's R&D effort in Bangalore, India as an example. The effort had a humble start in the mid-1980s. Yet, within ten years, the number of local technical staff grew to 3,000. Today, the number is approaching 10,000.

Market-specific demand also pushes R&D to relocate. As Dr. Halvorsen put it, "when success depends on [geographical] closeness, … you need to do design in close loop with the rest of the activities." Furthermore, overseas R&D might well find its way back into the U.S. As explained by Dr. Brown, "The rise of the middle class in China and India at 1/10 of the price point [of the U.S.]" could spur innovations at 1/10 of the price point. Innovations taking place in China or India might be totally unheard of in the U.S. and eventually finds its way into the U.S. market.

The Coordination of Global R&D

While the globalization of R&D brings many promises, it also poses acute challenges to firms that need to coordinate R&D efforts across national boundaries. As Professor William Miller pointed out, "Increase in R&D cost forces specialization. Then you have to put together an assembly of specialists. The problem is that they are everywhere. Therefore, being able to pull them together becomes the differentiator." The story of Li & Fung serves as a perfect example. Li & Fung is a global leader in the apparel business. In 2002, the company contracted with 7,500 factories in 37 countries and generated a revenue of $5 billion. In an industry with thin margins of a few percent, the company continues to uphold a return-on-equity of 30-50%. Yet, Li & Fung owns no factories. Its competitive advantage lies entirely in its expertise in assessing and orchestrating the unique capabilities of each of the 7,500 suppliers. As Dr. Brown summed up, "Making money will depend less on what you own than on what you can mobilize--[i.e. the ability to] orchestrate."

In a parallel argument, Dr. Halvorsen proposed the new model of "meta-national" R&D. Different from the traditional multinational setup, where R&D is orchestrated from the center and diffused to the peripheral, in a meta-national setup, innovation for different parts of the system are consciously placed in different parts of the world. Advances are made in parallel and feedbacks flow bi-directionally.

An even more decentralized model was advanced by Dr. Brown. Dubbed a "swarm ecosystem," such a system is characterized by one (or more) assemblers and hyper-competition among a constellation of component suppliers. The assembler merely provides the focal model with no detailed design, and leaves it to the component suppliers to compete for coming up with the best fit. In this model, the assembler does not orchestrate the development process from top-down; rather, progress is made from the bottom-up. Yet, at the end of the day, only the fittest component suppliers survive and the result is a highly efficient and competitive system that best exploits its own niches.

Other Issues

Panelists and the audience also engaged in lively discussions about intellectual property rights, organizational learning, institutional innovations, the role of public policy, and the impact of culture on innovation. The globalization of R&D--particularly rising competencies in Greater China and their network of relations to Silicon Valley and their worldwide implications--is a new priority area of research for SPRIE.

President Bush has claimed a renewed mandate, and has begun to reshuffle his national security team. Condi Rice will move to State; Steve Hadley will move up at the NSC. Rich Armitage and Jim Kelly, who have borne much of the day-to-day responsibility for U.S. policy in Asia, are leaving along with Colin Powell. What might we expect of the Bush administration in its second term?

Generally speaking, continuity rather than change is likely to be the watchword in foreign policy. Above all, the Middle East and South Asia are likely to remain the principal preoccupations of American concerns. In Iraq, Washington will seek to acquit its commitments - to hold elections, train Iraqi security forces, and accelerate reconstruction projects - with whatever measure of dignity and honor it can muster in the face of excruciatingly difficult choices. With Yassar Arafat's death, American engagement in Israeli-Palestinian issues is destined to increase. And Iran's bid for nuclear weapons will continue to challenge the United States and Europe.

Thus Asia will not have pride of place on the Bush agenda. Yet it will continue to command Washington's attention. Why? Because it is in Asia that the interests of the great powers intersect most directly. Asia is the world's most dynamic economic area, and it is becoming more tightly integrated. Washington cannot afford to neglect South and Southeast Asia, for in these areas Islam presents a relatively moderate face. And North Korea, of course, poses a direct and growing challenge to the administration's nonproliferation policy.

Fortuitously, the United States is better positioned in Asia than in most other regions. Our military presence remains sizable and retains mobility and flexibility. Our economy continues to generate solid demand for Asian exports and is a robust source of direct investment. While criticism of American policy is widespread in the region, it is not expressed with the virulence that is seen in Europe and the Middle East. Above all, Washington has cultivated the Asian great powers assiduously, and has managed to improve relations with Tokyo, Beijing, Moscow, and New Delhi - a substantial accomplishment. It remains to be seen whether it can work in concert with others to ameliorate the sources of discord on the Korean Peninsula and over the Taiwan Straits.

The United States, to be sure, confronts some daunting challenges in Asia. If the U.S.-Japan alliance is in excellent condition, defense cooperation with Seoul remains troubled by the sharp divergence in U.S. and Korean perspectives on North Korean aims and strategy. Nor have we found a solid basis for pursuing with Pyeongyang's neighbors a coordinated approach to the six-nation talks. Regional economic cooperation is taking shape along pan-Asian rather than trans-Pacific lines. Developments in the Middle East threaten to "Arabize Islam" in Southeast Asia. And the "Johnny One Note" quality of American diplomacy - i.e. its preoccupation with international terrorism - often plays poorly against Beijing's more broadly based effort to provide regional leadership.

Nor is America unconstrained in its policy efforts in the region. Our military forces are stretched thin globally, impelling some downsizing of deployments in Asia. Huge fiscal deficits loom, and with growing bills falling due in both Iraq and Afghanistan, resources available for policy initiatives elsewhere are likely to be tight. The president has succeeded in pushing negotiations with North Korea into a multilateral framework, yet Washington is being pressed by its negotiating partners to adopt a more conciliatory posture. The democratization of Asian nations, while welcome, does not automatically facilitate U.S. diplomatic objectives. Recent elections in South Korea and Taiwan were decisively shaped by a new generation of voters. Governments in Seoul and Taipei are increasingly accountable, yet viewed from the United States, they are not extraordinarily sensitive to Washington's views, let alone deferential to its lead.

With these considerations in mind, one should expect President Bush and his foreign policy team to continue cultivating close ties with the Asian powers. Whether Washington can effectively utilize those relationships to roll back North Korea's nuclear program and avert crises in the Taiwan Straits will depend heavily on its relationships with the governments in Seoul and Taipei. And at the moment South Korea appears determined to expand economic ties with the North virtually without reference to Pyeongyang's nuclear activities. Taipei remains preoccupied with efforts to assert its own identity while counting on American protection.

In the end, of course, foreign policy rarely sees carefully laid plans bear fruit. Someone once asked a new British prime minister, Harold MacMillan, what would drive foreign policy in his government. He answered without hesitation, "Events, dear boy, events." I expect the same may be true for Mr. Bush.

Washington -- For the two regions hit hardest by the Asian tsunami waves, international relief efforts are being complicated by more than the rising death tolls and physical devastation -- they are also war zones.

In the Indian Ocean nation of Sri Lanka and Indonesia's western Aceh province, bitter conflicts threaten to slow even further the painstaking work of locating victims, repairing infrastructure and caring for hundreds of thousands of refugees, according to relief workers and regional experts.

The Sri Lankan government and the rebel Tamil Tigers, which have fought a two-decade civil war, Tuesday traded barbs over the relief efforts and refused to work together -- and instead launched competing efforts.

Across the Indian Ocean, at the northern tip of Sumatra Island in Indonesia, the province of Aceh has been a no-go zone for most international aid organizations and journalists since May 2003, when a new government crackdown was launched in the 28-year struggle against the Free Aceh Movement.

Aid organizations scrambled to get into Aceh while former residents seeking to go back to find relatives complained Tuesday that the Indonesian government, which has been accused of widespread human rights violations in the area, continued to limit access, providing only two-week visas.

Academic analysts expressed hope that the tsunami tragedy might spur some badly needed progress in the two conflicts by creating opportunities for humanitarian cooperation. But at least in the short term, the warring factions were jockeying for advantage -- and in the process slowing rescue and relief efforts and putting more lives at risk.

"The contending sides, both in Sri Lanka and Aceh, are racing to provide relief," said Donald Emmerson, a senior fellow at Stanford University's Institute for International Studies and director of the Southeast Asian Forum.

"At stake is the legitimacy of the government on the one hand -- Colombo and Jakarta -- and the Tamil Tigers and the Free Aceh Movement on the other. If the response of the Sri Lankan and Indonesian governments is insufficient, there could be a crisis of legitimacy in those two areas, which have been engaged in civil war for some decades," he said.

In Sri Lanka, the minority Tamils, who are Hindu, have waged civil war against the country's majority Buddhists since 1983, and a 2002 cease-fire remains brittle. "Tens of thousands have died in an ethnic conflict that continues to fester" since the cease-fire, according to an unclassified report by the CIA.

The Tamil rebels control much of the country's north and east, including coastal areas severely damaged by the tsunami. The Tamil Tigers are conducting their own relief efforts and have made separate appeals to donor countries and the United Nations for assistance.

Even the immense scale of the tsunami damage did not appear to tamp down the deep-seated atmosphere of confrontation.

The Tamil Rehabilitation Organization said in a statement that "assistance channeled through the government of Sri Lanka has failed to reach the displaced in the northeast." It said that one-fourth of the people killed in the northeast were in Tamil-controlled areas.

A military spokesman, Brig. Daya Ratnayake, responded that the government was doing everything it can to help those affected in government-controlled areas and criticized the rebels for trying to score points amid the suffering.

In Aceh, where rebels are waging a fight for independence, there were some hopeful signs in the face of the horrific destruction. The Indonesian government and the Free Aceh Movement reportedly agreed to a cease-fire Tuesday to let aid efforts reach those in need.

However, aid officials worried that it would take days to get assistance to Aceh, where the majority of Indonesia's deaths occurred. And they said the conflict already has constrained aid efforts by limiting access to the region.

"International nongovernmental organizations have not been allowed into the conflict area since May 2003," said Michael Beer of the Washington-based Nonviolence International, whose field office in the provincial capital of Banda Aceh was lost, along with three of its four staff members. "This has hampered efforts already. The conflict has set back the international community, because they are starting from zero and have been excluded for political reasons."

"Even without the rebellion it is a tough area for the government to go in," said Blair King of the National Democratic Institute for International Affairs, a nonprofit in Washington. "That is exacerbated by the political situation."

The Stanford Project on Regions of Innovation and Entrepreneurship (SPRIE) is a multidisciplinary research program of the Asia-Pacific Research Center (APARC) at Stanford University which focuses on innovation and entrepreneurship in leading high technology regions in the United States and Asia. SPRIE has an active community of scholars at Stanford as well as research affiliates in the United States, China, Taiwan, Japan, Korea, Singapore, and India.

New Fellowships

As part of a new initiative on Greater China, SPRIE will select two outstanding post-docs or young scholars as the inaugural SPRIE Fellows at Stanford for the academic year 2005-2006 for research and writing on Greater China and its role in the global knowledge economy. The primary focus of the program is the intersection of innovation and entrepreneurship and underlying contemporary political, economic, technological, and/or business factors in Greater China (including Taiwan, Mainland China, Singapore). Topics of particular interest include, but are not limited to, university-industry linkages, globalization of R&D, venture capital industry development, networks and flows of managerial and technical leaders, and leading high technology clusters in Greater China. Industries of ongoing research at SPRIE include semiconductors, wireless, and software.

SPRIE Fellows at Stanford will be expected to be in residence for at least three academic quarters, beginning the Fall quarter of 2005. Fellows take part in Center activities, including research forums, seminars, and workshops throughout the academic year, and are required to present their research findings in SPRIE seminars. They will also participate as members of SPRIE's team in its public and invitation-only seminars and workshops with academic, business, and government leaders. Fellows will also participate in the publication programs of SPRIE and APARC. The Fellowship carries a stipend of $40,000.

How To Apply

Applicants should submit

1. A statement of purpose not to exceed five single-spaced pages which describes the research and writing to be undertaken during the fellowship period, as well as the projected product(s) that will be published;
2. a curriculum vitae (with research ability in Chinese preferred); and
3. 2 letters of recommendation from faculty advisors or other scholars. All applicants must have Ph.D. degrees conferred by August 30, 2005.

Address all applications to:

Stanford Project on Regions of Innovation and Entrepreneurship,
Asia-Pacific Research Center,
Encina Hall -East 301,
Stanford University,
Stanford, California
USA 94305-6055

Questions? Please contact Rowena Rosario, Administrative Associate

Deadline for receipt of all materials: January 14, 2005

Applicants will be notified of fellowship decisions in March 2005