THE ASIAN CENTURY? Page

THE ASIAN CENTURY?

Has the Asian Century truly arrived, and more importantly, can it be truly realised?

This article is based on a discussion held on the subject “Asia in the 21st Century: Development and Cooperation” conducted by the Centre for China and Globalisation (CCG), in which Synergia Foundation was a participant.

No other continent can match the dynamism and diversity that Asia possesses. Asian economies and societies have been consistently working towards enhancing their contribution to the prosperity of the region and the world. The Asia Pacific region is uniquely situated at the intersection of regional trade, economic cooperation, and complex security architectures, giving it an influence far beyond its shores.

The 2021 ADB (Asian Development Bank) report titled “Asia 2050: Realising the Asian Century” predicted the 21st century to be an Asian one, with half of the global GDP being produced in Asia. As we progress into the third decade of the century, we ask how true these forecasts have been proved. With the world entering a period of vertical globalisation, the Asian region, dependent on other regions for its critical minerals, may be left behind. We may therefore witness two pivots; one is an emergence of a multialigned multipolar world where countries will choose to align depending upon the issue and their national interests.

ASSESSING THE ASIAN CENTURY

The Asian economies have amply demonstrated their vitality, potential and dynamism for development, particularly in the wake of the war in Ukraine and post-pandemic. The ASEAN is playing an increasingly meaningful role in global and regional governance, and acting as a catalyst for the region to transform itself, trying to be the agenda-setter for the world.

Goldman Sach’s report, “The Global Economy in 2075: Growth Slows as Asia Rises,” says that China would be the largest economy in the world, followed by India, with Indonesia at No four behind the U.S. Also, if Pakistan corrects its trajectory, it could join this elite group. With two Asian countries at the top of the economic pile, how will it shape the world order, especially if the two strongest Asian economies continue to spar with each other militarily along their disputed borders?

Asia is in the middle of a historical transformation. If it continues this trajectory, by 2050, the per capita income will rise six-fold in purchasing power parity to reach Europe’s current levels. The Asian Century will be characterised by various facets which will have a bearing on the future shape of Asia.

Asia has benefited from globalisation and the rule of law ensured by multilateral organisations. What will be the impact on Asian economies with the fragmentation of the global market, the internet, and most importantly, global institutions?

Conflicts within Asia continue to raise their ugly head, whether in the Global Commons in the South China Sea or the Indian Ocean or in the high Himalayas between Asia’s two largest nations. How will these be managed and kept below the boiling point if not resolved fully?

How will Asia deal with the current trend of weaponisation of anything, and everything-trade, economy, technology etc?

Dr. RONG YING, Vice President, China Institute of International Studies

First and foremost, they’re two contrasting trends in terms of development. One is that the continuously rising Asia has shown an intensive habit of cooperation based on mutual understanding and mutual support for win-win cooperation. And the other hand, there are worrying trends where attempts are made to divide instead of uniting, to decompose those pushing for cooperation. Furthermore, some countries in the region are pursuing a kind of Indo-Pacific strategy with cold war colours, which, if that were to be disturbed severely, would develop the probability of endangering the region.”

There is a global threat to critical infrastructure that is not deterred by sovereign boundaries, which rival nations will unleash on each other causing, collateral damage to the regional and global economy notwithstanding. This is bound to lead to disrupted supply chains so valuable to Asia both as a supplier and a buyer.

The race for advanced technologies will pit one nation against another within Asia and beyond. Since technology translates to national power, the competition will dwarf any cooperation that we may wish for.

Last is the resource race: Asia is energy deficient and depends upon imports, and it is a manufacturing hub and, therefore, would intensely compete for critical minerals. And all this will happen under the shadow of violent climate change events that are particularly nasty in Asia.

Geopolitics plays a vital part in the growth of Asia. There have been two contrasting trends in terms of developments. On the one hand, is an encouraging habit of cooperation based on mutual understanding, and on the other, worrying trends to divide and disrupt, endangering the region and global security. Sustainable development remains difficult, and the post-COVID recovery has been uneven. The geopolitical situation in many regions of Asia remains contentious and on the brink of conflict, making a mockery of claims of regional cooperation and collaboration.

As per the ADB, one of the most important risks to the Asian Century scenario is the middle-income trap. This implies that middle-income countries cannot reach the rank of higher-income nations (a per capita national income of more than $ 40,0000). Only a few economies in Asia, such as Japan, Korea, Taiwan, and Singapore has been able to get out of the middle-income trap.

Other middle-income countries have been unable to move to high-income countries for several reasons. For example, the loss of international cost competitiveness due to rapid wages increases without productivity growth. Second, lack of productivity growth due to limited investment in infrastructure, human capital, R&D and innovation. Third, the economic and financial crisis due to the collapse of real estate bubbles, capital outflows, and the vulnerabilities of the banking sector. Fourth, social and political instability results from rising inequality, corruption, and environmental damage.

The great power confrontation between the United States and China may result in economic fragmentation between the two countries and the West and East. Here, the West includes G7 countries and the European Union. The East includes China and Russia, given that the West has already imposed sanctions against Russia to decouple it from their economies.

World Economic Forum fragmentation is a major risk to the Asian Century and would mean that trade and investment between the two blocks will be significantly reduced. Supply chains will be divided between the two blocks, and the flow of information, knowledge, ideas, technologies, and human talents between the two blocks will be severely cut.

Fragmentation will reduce economic efficiency, increase production costs, and lower GDP worldwide. The IMF and WTO both predict high costs, which are higher for China than the rest of the world because of China’s significant interdependence with the global economy. So, this suggests that it is in the best interest of all countries, including China and others, to avoid such economic fragmentation.

However, some economic decoupling in the hightech sector related to national security may be unavoidable, keeping in view the rising security paranoia.

KEY RISKS TO ASIAN CENTURY

Asia, especially China, has benefited immensely from globalisation, from the existing world order enabled by the WTO. However, WTO is getting overloaded and marginalised with many trade disputes no longer being addressed in the WTO. This is a critical threat to future integration, globalisation and productivity gains. There are seemingly irrevocable differences over data issues, environment, industrial policies, state subsidies and most important, the concept of national security.

Increasingly, production and economic logic are based on National Security. This creates a huge problem because what exactly is National Security? Almost everything can be securitised, even food; thus, there will be a price to pay, a little premium that takes into account supply chains, inefficiencies, and the price to pay for protecting National Security. And if this goes on, the likelihood is that inflation or price increases.

The Asia Region has four fundamental challenges: Economic recovery, Education, Energy and Environment. Economic recovery and equitable prosperity must be the foundation. Education to strengthen human capital development and to prepare the youth for future requirements is critical. Asia is an energy-deficient region and must soon transition to a low carbon

TAN SRI MICHAEL YEOH, President, KSI Strategic Institute for Asia Pacific.

The region needs a lot of innovation. And the more innovation it can create, the better will be for the future prosperity of our region. It also needs huge investments in infrastructure development. And this is where developed countries like China, Japan, and South Korea can contribute to other nations in Southeast Asia. Asian countries also need investments to scale their productive capacity, green logistics, and green partnerships. Finally, I would like to stress integrity. Many countries face challenges of governance, integrity, transparency, and accountability.”

economy. Climate change will have a more severe impact on Asia. Therefore, the region has no choice but to collaborate on climate action, even at the cost of their economic well-being, as it is a matter of survival.

With the world entering a period of vertical globalisation, the Asian region, dependent on other regions for its critical minerals, may be left behind. We may therefore witness two pivots; one is an emergence of a multialigned multipolar world where countries will choose to align depending on the issue and their national interests. Secondly, we may see the return of success to many Asian societies, including China and India.

The red flag here is that these two large Asian countries must settle their border disputes and learn to live together, as they have lived for more than 5,000 years without maps or boundaries. If they don’t do this, there are collateral consequences that can come, which can put the entire region at risk. We might also see the rise of outliers like Turkey and Iran, who would like to be part of the larger narrative in Asia.

There is already intense competition for finding natural resources, which would only get fiercer; water wars are a real possibility.

The biggest challenge will be how we arbitrage and balance the increasing inequality caused by technology within countries, which would undermine social cohesion and stability and the rise of fringe thoughts. And most of the capacity will have to be managed regionally because larger global institutions like the UN are fading away. So, it will be a global problem, but we will have to solve it locally.

It may be the Asian Century, but it is not yet the Asian century. The Western world – North America and Europe – if you add them up, they are still

As per Mr Tan Sri Michael Yeoh, President of KSI Strategic Institute for Asia Pacific, the challenges confronting the Asian region can be met through the four ‘I’s’-innovation, infrastructure, investment, and integrity.

More cooperation is needed in connectivity and stable supply chains, working together to boost green energy transition, and giving more impetus to the economic development corporation.

However, the most critical is managing the looming great power competition between the U.S. and China to prevent it from turning into a military confrontation. Tensions can be mitigated by both powers seeking a middle ground where they can cooperate- climate change, pandemics, external debt of developing countries etc, are some areas that are of mutual benefit. To begin with, China and the U.S. must establish guardrails, with other regional countries creating the environment for these guardrails to stay firm.

Within Asia, Japan has a role to play in preventing the fragmentation of the world economic order by acting as a bridge between the U.S. and China through a constructivist and stable bilateral relationship with China. Together, China and Japan can revitalise trade and investment by further developing themselves into a higher-level Trade Agreement. They can conduct a free consultation on CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership).

Another way ahead is by making existing trade agreements work better through regulatory deepening and increased membership of regional trade groups. The G20 is an ideal platform, whose presidency is held by India for the next year to reach some sort of consensus on these vexing issues.

In all of this, think tanks, too, have a role. There is a need to foster greater collaboration among think tanks in the Asia-Pacific region by identifying areas of prioritisation like SDGs, global governance, reforms to the international financial architecture etc.

In conclusion, Asia is at the crossroads of whether it can continue to grow rapidly and realise the Asian Century. Asian countries must continue to work hard to get out of the middle-income trap and cooperatively avoid the Asian Catastrophe. Asia and the rest of the world must make every effort to avoid global economic fragmentation.

fifty per cent of the world economy. If you add all of Asia, they shall come to 30% of the world economy and similarly with trade.”

BERT HOFMAN, Director of the East Asian Institute.

MASAHIRO KAWAI, Representative Director, Economic Research Institute for Northeast Asia (ERINA); and Professor Emeritus, University of Tokyo

Asia has yet to achieve the Asian century, where the region produces more than 50% of world output, as it currently produces only 34% (at the market exchange rate) or 42% (at the PPP conversion rate) of world GDP.

Asia faces enormous challenges in realizing the Asian century, including the tasks of overcoming the middle-income trap stemming from domestic economic, social and political impediments and avoiding the “Asian catastrophe” due to possible political and security conflicts within Asia and/or with the west.

The most prominent risk is that great power competition between the United States and China divides the world into two blocs, i.e., the west (including the G7 and European Union countries) and the east (including China and Russia), whose economic consequence will be disastrous, particularly for Asia.

Thus, Asian countries need to convince the two major powers to manage their competition and avoid military confrontation, cooperate on globally urgent issues (climate change, pandemics, developing country debt problems, etc.), and limit the coverage and intensity of economic security measures. Japan can also contribute to this process by rebuilding a constructive and stable bilateral relationship with China, while working closely with the United States, ASEAN and other Indo-Pacific countries.

TOBBY SIMON, President & Founder, Synergia Foundation

Asia is in the middle of a historic transformation. If it continues to follow its recent trajectory, by 2050, its per capita income could rise sixfold in purchasing power parity (PPP) terms to reach Europe’s levels today.

It would make some 3 billion additional Asians affluent by current standards. By nearly doubling its share of global gross domestic product (GDP) to 52 per cent by 2050, Asia would regain the dominant economic position it held some 300 years ago, before the industrial revolution.

The Asian century will be characterized by the fragmentation of the economy, internet, and global institutions, contested global commons, the weaponization of trade, economy, and technology and disrupted supply chains. Advanced technologies will dominate the narrative on how nations interact with each other, especially with the rise of knowledge-enabled weapons of mass

Our world is now entering a period of Vertical Globalization. The geopolitical blocs are forming according to interest. And as the world splits into multiple groups, these new blocs — both formal (i.e., alliances) and informal (i.e., trade corridors) — could reshape everything from supply chains to sustainability. As nations across the world look to transition to electric vehicles, a new geopolitical bloc is forming in Latin America that could “call the shots” for everybody — from China to Tesla.

A prime example is the lithium alliance being eyed by Mexico, which nationalized its lithium industry earlier this year. They hope to bring together countries like Argentina, Bolivia, and Chile – the four nations controlling most of the world’s lithium. This is the same in terms of several other raw materials. They seek to govern the production and trade of a resource that’s fast becoming one of the most critical commodities in the world.

The New Global Green Deal, behind which China is the leading force, serves as a positive example that puts into question the US-held idea that China is the adversary of the West and of Western values. By providing investment capacity in renewable technologies and green infrastructures, supported by technologies made and sold by Chinese companies, the narrative has begun to change in favour of China. In 2030 experts are raising the question: is China the new benign hegemon in international affairs, succeeding the United States in providing common goods to the international community?

We will have a new paradigm in Asia. It will be different in two significant dimensions. First, we may see deeper challenges to the era of Western domination of world history or the emergence of a multi-aligned world. Countries will choose to align depending on their interests. Second, we will see the return to the success of many Asian societies, especially the two most populous societies of China and India. The two countries must settle their border disputes and learn to live together as they have lived for the past 5000-odd years without maps or boundaries. Third, we might see the rise of outliers – like Iran and Turkey.

To achieve this promising outcome, Asia’s leaders will have to manage multiple risks and challenges, particularly: Increasing inequality within countries, which could undermine social cohesion and stability, the risk of getting caught in the “Middle Income Trap” for a host of domestic economic, social, and political reasons, Intense competition for finite natural resources, as newly affluent Asians aspire to higher standards of living, rising income disparities across countries, which could destabilize the region, global warming, and climate change, which could threaten agricultural production, coastal populations, and numerous major urban areas and last but not the least, poor governance and weak institutional capacity, faced by almost all countries in the region.