In January, 44 ECs led by Professor Willy Shih (TOM) and Professor Meg Rithmire (BGIE) traveled across Asia to study globalization and international relations on the ground. Gabriel Ellsworth and Ryo Takahashi (MBAs 2020) report.
On January 5, 2020, an arduous undertaking was under way as 44 ECs, two professors, two program managers, and staff from the HBS Asia-Pacific Research Center in Hong Kong gathered in Shenzhen, China, for a briefing to kick off a journey that would span Shenzhen, Zhuhai, Hong Kong, Yangon, Colombo, and Hambantota. Equipped only with carry-on luggage, the students prepared for an intense two-week itinerary, which was fitting given the colossal theme of the new course: understanding China’s One Belt One Road (一帶一路), also referred to as the Belt and Road Initiative (BRI).
The new Immersive Field Course (IFC), known as “IFC Asia” for short, was co-led by Professor Willy Shih (TOM), an expert on supply chains who has spent decades in industry, and Professor Meg Rithmire (BGIE), an expert on contemporary political economy with a focus on China. Together, they helped students understand China’s Belt and Road from both an operations perspective and a political economy perspective.
Exploring Shenzhen and the Pearl River Delta, the “Workshop of the World”
The course began in Shenzhen, which grew from a quiet fishing village 25 years ago to a bustling urban metropolis with a population of 13 million people. An important manufacturing hub in China’s Pearl River Delta, home to some of China’s biggest technology companies and with an average age of 32.5, the city feels youthful and vibrant. The city has grown 14,000x in the past 40 years and accounts for 2.6% of China’s GDP.
Students visited the Shenzhen-Hong Kong Science and Tech Innovation Special Cooperation Zone to understand how special economic zones (SEZs) are designed and how they can help to spur investments. SEZs bring not only important FDI into the region, but also the knowledge to manufacture higher-value products. Today, Shenzhen has grown to handle over 70% of mobile phone exports from China to the world. To observe a prototypical example of an export-driven Pearl River Delta company, students visited Man Wah Furniture’s production facility in Huizhou district, Shenzhen. The Hong Kong-listed company makes 65% of its sales in the United States.
Students also visited Yantian International Container Terminal in Shenzhen. Roughly 30 miles away from Hong Kong, the port handles 13 million twenty-foot equivalent units (TEUs) annually, making it one of the busiest container ports in the world. We not only witnessed the scale of the operations but also sensed acutely that container terminals are thermometers of the global economy. Of China’s annual 10 million TEU exports to the United States, 3.2 million go through Yantian, and the U.S.-China trade war has significantly affected the port.
The following day, we snaked our way up the Pearl River Delta to visit Midea’s (美的集团) microwave oven facility. Since producing its first microwave in 1999, the company has made over 381 million microwaves, which has allowed Midea to run down the learning curve and become a globally competitive manufacturer of home appliances. The company has acquired KUKA, a German automation company, and also has a controlling stake in Toshiba’s home appliances division, to which it was a long-time production subcontractor.
Crossing into Hong Kong
We then crossed the famous Hong Kong–Zhuhai–Macao Bridge from Zhuhai into Hong Kong. The 55-kilometer-long bridge—the world’s longest sea-crossing bridge—which came at a steep price tag of US$40 billion, was notable in how it was almost entirely devoid of traffic. In theory, the bridge was a good idea, promising to reduce transit time from 3 hours to 75 minutes. But since the idea was aired in 2002, during the eight years of construction other bridges were built, which, combined with the difficulty of getting the licenses required to cross the bridge, subsequently dampened traffic. This was an important lesson that the regional economy can change before infrastructure projects with long lead times are complete.
Nevertheless, we marveled at the enormous engineering feat; the designers had to be careful not to impede the tidal flow of the Pearl River Delta, steer clear of known dolphin habitats, and undergo construction in a way that avoided interfering with the busy approach paths to Hong Kong International Airport.
Once in Hong Kong, students had discussions with Kerry Logistics as well as Victor Fung, Group Chairman of Li & Fung. In a sense, Kerry Logistics was a forerunner to the Belt & Road by connecting China to Europe with freight forwarding capabilities before China’s official “Go West” strategy was unveiled.
Students were invited to a dinner reception with Dr. Fung, who emphasized the importance of thinking about the geopolitics involved before making manufacturing choices. Dr. Fung also described the region’s production dynamics using a “flying geese model,” in which Japan was at the head and less costly countries would “race to the bottom” as outsourcing destinations for manufacturing. Eventually, these countries would grow, and production would move further south.
Yet in a world where global supply chains are becoming more fluid and faster than ever before, said Dr. Fung, this model is also being fundamentally disrupted; the rise of Manufacturing 4.0 and digital manufacturing means that minimum order quantities are lower and that players need to be more nimble and agile.
Our final stop in Hong Kong was a rare tour of the Cathay Pacific Cargo Terminal, where we were received by James Conlin, Head of Global Partnerships. The terminal does 40% exports, 20% imports, and 40% transshipments, and Cathay aims to be the most customer-centric air cargo service provider. Air cargo has experienced a recent boom with the rise of e-commerce, said Conlin. But Cathay must address variability in demand (e.g., with many new product launches occurring at specific times of the year) and must also adapt to the migration of manufacturing sites.
Yangon, the New Crossroads of Asia
To prepare for this portion of the trip, the professors assigned Where China Meets India: Burma and the New Crossroads of Asia, a 2012 book by Harvard College alumnus Thant Myint-U (AB 1987). Thant Myint-U paints a vivid picture of the changing landscape of Burma (Myanmar), which was isolated for many years but has attracted significant Chinese investment in recent decades.
On Friday, January 10, we took the three-hour flight from Hong Kong to Yangon, where we were graciously hosted for a welcome dinner by alumni Ei Phyo Han (MBA 2015) and Rudolf Gildemeister (MBA 1998). We enjoyed a delicious sampling of Burmese cuisine, for the first time in many of our cases.
The next day, we visited the Thilawa Special Economic Zone outside Yangon. This visit was unique on our itinerary in that the site featured a strong Japanese, rather than Chinese, presence. We were honored to have a briefing with Yoichi Matsui, a JICA specialist from Japan whom the Burmese government asked to draft a new SEZ law for the whole of Myanmar.
Many in Burma view Thilawa as a model SEZ. Matsui explained Thilawa’s distinctive features. First, among the businesses active within the Zone, he has endeavored to attract not only those manufacturing goods for export but also many whose products and services are intended for the Burmese market; indeed, 55 of the 92 manufacturing projects at Thilawa are domestically focused. Second, Thilawa offers a “one-stop shop” for companies: all of the government agencies with which they need to interact have branches located onsite in Thilawa, which saves time. Moreover, these branches do their work in the “back office,” with no in-person interaction with investors, and they have the license to grant approvals without consulting their ministerial headquarters; these measures are intended to reduce corruption.
After Thilawa, we drove to the site of what will one day be New Yangon City for a briefing with Serge Pun, one of the country’s most prominent business leaders, active in the promotion of this development. New Yangon City is a project to develop a new area across the river from Yangon; some have compared it to Shanghai’s Pudong. For now, however, it is early days for the development. After our briefing, we took a boat ride down the river, next to what developers hope will someday be a thriving metropolis but at present is mostly empty grassland, with a few villages scattered throughout. Pun faces the challenge of attracting investors to what is, by his own admission, a very long-term project; his goal is to build New Yangon City to a growth engine employing 2 million people.
That night, we had a dinner reception with Aung Naing Oo (MPA 2000), a former director of the Myanmar Peace Center, about the long and complex peace process that the country has undergone over the last few decades. A notable takeaway from this session was the difficulty of balancing the administration of justice with the need to bring warring stakeholders to the negotiating table.
Sunday, January 12, was a more relaxed day, for we had the opportunity to tour Yangon with local young professionals. The highlight was a uniquely memorable, delicious lunch at Shan Yoe Yar restaurant, which serves the cuisine of Shan State. Notable dishes included deep-fried sea bass with tamarind sauce, pounded fragrant mushroom, and grilled black sticky rice with stinky tofu. Other groups made their way to explore local markets in Yangon and visited historic sites, and we all felt that we were able to develop a better understanding of the Burmese people’s views.
Monday began with a symposium at which your reporters, along with several other groups of students, presented the research that they conducted for their IFC final papers. Our audience of distinguished local guests, including the World Bank’s Lead Economist for Myanmar and the Ambassador of the Kingdom of the Netherlands, provided insightful commentary on our papers as well as from their own experiences in Myanmar and asked probing questions about our presentations.
In the afternoon, we had briefings with two companies. The first, HyalRoute, lays fiber optic cable in Myanmar, the backbone of high-speed Internet connections throughout the country. When we asked HyalRoute’s executives how companies can build infrastructure in regions experiencing conflict, they stressed the importance of a combination of patience—many meetings with government officials were required—and impatience, as well as transparency.
The second company, CITIC (previously the China International Trust Investment Corporation), is a Chinese state-owned enterprise (SOE) active in the development of a port and SEZ in Kyaukphyu, Rakhine State. They showed us a video showcasing very detailed, ambitious plans for the future of Kyaukphyu—a marked contrast to Thilawa, where the leadership seems to be following a more organic, bottom-up approach. Regarding opposition by Western NGOs to CITIC’s projects, the chairman commented, “We just come [to Myanmar] to do business.” He spoke also about the leverage that local governments have in negotiations with Chinese SOEs: when the Burmese government expressed discomfort with CITIC’s original 85% stake in Kyaukphyu, CITIC had little choice but to accept a reduced 70% share.
We were in Burma just ahead of Xi Jinping’s first presidential visit to the country, which took place on January 17 and 18. At the end of that visit, Xi and State Counsellor Aung San Suu Kyi affirmed their commitment to “comprehensive strategic cooperation,” including on the BRI.
Sri Lanka was a must-see for us, as it has attracted significant international attention for its involvement in the BRI. We were fortunate to see the two key BRI projects in this island nation.
On January 15, we began the day with a tour of Colombo Port. Colombo is a key transshipment hub between India and the rest of the world, handling about 6 million TEUs of container cargo in 2017, making it the busiest container port in South Asia. Our host, Mr. Upul Jayatissa, Director of Logistics for the Sri Lanka Ports Authority, kindly came in on a Sri Lankan holiday specifically to brief us. Having visited Yantian in China, we were struck by how much less automated Colombo Port was.
Next we took a very short drive to the site of Colombo Port City, which, like New Yangon City in Myanmar, is an ambitious urban-development project. Slated for completion in 2041, Colombo Port City will feature office towers, luxury residences, an international school, and a convention center. Attracting commercial tenants will surely be a key success factor, and the lenders for the project stand to benefit when real estate values in the development rise.
The following day, we visited Hambantota. Located on the southern coast of the island, just a few miles from one of the world’s busiest maritime shipping lanes, Hambantota is the site of the port that the New York Times famously covered in a 2018 story with a provocative headline: “How China Got Sri Lanka to Cough Up a Port.” As we learned on the ground, many Sri Lankan leaders contest the Times’s narrative about the port, construction of which began in 2008. In 2017, the Sri Lanka Ports Authority and China Merchants Port Holdings formed joint ventures to manage Hambantota Port for 99 years.
While some have argued that Chinese actors have nefarious motives in Hambantota (such as building economic hegemony for China in Sri Lanka, or even laying the groundwork for a Chinese naval base), several Sri Lankan leaders whom we met pointed out that Sri Lanka stands to benefit significantly if the port and potential industrial lands surrounding it create a new hub of economic activity on the island. Some of us asked ourselves whether Hambantota Port is economically viable given that Colombo has continued to add capacity over the last decade by reclaiming land. For now, Hambantota’s activity comes primarily from roll-on, roll-off ships carrying vehicles from East Asia destined for sale in India and East Africa, as well as many cars made in India intended both for transshipment and for the domestic Sri Lankan market. What can Hambantota do to develop into a fully active container port?
As for the geopolitics of Hambantota Port, we were left to decide for ourselves which narratives we think are closer and further from the truth. Thus, our visit to Hambantota was a microcosm of the whole IFC, throughout which our professors encouraged us to keep asking questions and be open to changing our minds multiple times during the trip.
Back in Colombo, we heard from influential speakers with many years of experience in Sri Lanka. During a panel discussion, we asked which countries’ development stories Sri Lanka might most want to emulate. Multiple leaders cited Singapore, which tapped its geostrategic location to become an economic power despite a lack of natural resources. The key lesson from Singapore’s story, relevant to our infrastructure-themed IFC, was that “Singapore invested before the business was there.”
As we wrapped up the course on Friday, January 17, at a delicious dinner graciously hosted by Husain Akbarally (MBA 2015), we reflected on several themes woven throughout our time in Asia. First, the BRI is complex and multifarious; rather than being governed by a grand plan, it involves many different actors with different motives and priorities. Chinese companies developing BRI projects are continuously experimenting, discovering how they must adapt to the particular geopolitical context in each country where they make investments.
Finally, no one ever has the whole story. Those seeking greater understanding should consult multiple sources and be mindful of what those sources can and cannot disclose for strategic or political reasons. It was a fitting lesson for two student journalists. This discovery-packed journey through Asia was unforgettable. We think we can speak for all the ECs in IFC Asia when we thank HBS for making such an “immersive” trip possible.
Ryo Takahashi (MBA ’20), originally from Japan, is a management consultant and writer. Prior to Harvard Business School, he worked as a Project Manager at the World Economic Forum (WEF) and was a Senior Associate at McKinsey & Company. Prior to these roles he worked at the Economist and the Japan Times. His writing has appeared in Time magazine, the Economist, the Japan Times, and the World Economic Forum, among other outlets. He received his B.A. in Economics (with Distinction) from The University of Tokyo and was also a Rotary Scholar to the London School of Economics.
Gabriel Ellsworth (MBA ’20) came to HBS from HBS, where he worked for five years as a research associate, most recently as a casewriter with a faculty member in the Strategy Unit. This summer, he interned as a consultant with the Boston office of Bain & Company. He read English literature as an undergraduate at Yale, where he also studied Japanese and French, and currently he is studying Chinese at Harvard College. Gabriel was 2019 editor-in-chief of the Harbus and is a proud HBS Show Koala. As a young boy, he fantasized about becoming a novelist, but he quickly realized that he did not actually have any ideas for novels.