Is the Asian Century Really Here?

The Covid-19 pandemic has not been the west's finest hour. Most western governments failed to contain the deadly outbreak and the resulting economic damage effectively. And by pursuing inward-looking and protectionist policies, they have contributed relatively little to an effective international response to the coronavirus.

Against this background, some regard the current crisis as a tipping point that will accelerate Asia's global resurgence. They point out that Asian countries managed the pandemic better than the west did, and argue that the region's robust and resilient economic performance over the past half-century demonstrates the superiority of its governance systems.

In fact, the twenty-first century will belong to Asia only if the region can develop unified, collective leadership. Asia is already a major global power, accounting for 60 percent of the world's population and about 40 percent of global GDP in purchasing-power-parity terms. And with eight of the world's 15 most populous countries (China, India, Indonesia, Pakistan, Bangladesh, Japan, the Philippines, and Vietnam), Asia is more than just China.

Moreover, India and Japan—the world's third and fourth largest economies, respectively, in PPP terms—also are economic superpowers. Over the last 50 years, the per capita incomes of Japan, Singapore, South Korea, and Taiwan have risen fast and caught up with western levels. China, India, Indonesia, and Vietnam are now following the same path. And Asia is expected to continue growing strongly in the coming decades: McKinsey & Company forecasts that by 2040, the region will account for more than half of world GDP and 40 percent of global consumption.

Sceptics argue that several domestic challenges could jeopardise the region's long-term growth. Some East Asian economies, including China, Japan, and South Korea, have rapidly aging populations that are now shrinking. This means they will no longer enjoy the demographic dividends that previously supported the region's strong growth.

Naysayers also point to growing income and wealth inequality, which is undermining social cohesion and political stability. And political upheavals may become more likely if authoritarian Asian governments fail to deliver higher living standards and satisfy growing demand for democracy.

But Asian policymakers have successfully addressed previous obstacles to strong and sustainable growth. East Asian governments in particular have been pragmatic and relatively uncorrupt. Many have committed themselves to providing important public goods such as education, health care, and information and communication technology infrastructure. Good governance has also supported the effective functioning of markets.

Asian countries have nurtured competent private sectors, too. A well-educated and skilled labour force, along with well-directed economic policies, was key to building up diversified and technologically sophisticated export industries. And Asian firms have shown great dynamism and agility in responding to both the 2008 global financial crisis and the Covid-19 pandemic.

But the Asian century currently seems a distant prospect, mainly owing to its lack of unity. China is clearly an economic and military superpower, but its authoritarian model does not appeal to the region's democracies. Japan and India are also leading regional and global players, while Australia, Indonesia, and South Korea, all G20 members, play important political and economic roles as well. Little wonder, then, that an effective formal regional institution like the European Union is entirely absent.

Despite establishing regional bodies such as the Association of Southeast Asian Nations and the East Asia Summit to resolve economic and political differences, Asian leaders have yet to share a common vision for regional integration and cooperation. And with geopolitical tensions rising in the East and South China Seas, the Korean Peninsula, and along the China-India border, military conflicts remain a possible threat to regional peace and prosperity.

External actors will continue to play a key role in the region, partly because Asia is heavily dependent on its exports to the United States and the EU. True, with Covid-19 disrupting global supply chains, companies now prefer to localise or regionalise their production networks. This shift could deepen trade ties among Asian countries, where a growing middle class is expected to generate its own demand for production.

But America and the EU, as well as emerging markets in Africa and Latin America, will remain important trade partners for Asia. The region's future trajectory will thus depend on how effectively it can prevent global trade protectionism and minimise the impact of US-China strategic competition, which is the single biggest obstacle to the development of collective Asian leadership.

After all, Asia still relies heavily on the US for peace and security. Many countries, including Australia, Japan, the Philippines, and South Korea, are US allies and do not want to choose sides. Within the framework of the Quadrilateral Security Dialogue, or the Quad, the US, Japan, India, and Australia are strengthening ties to confront China's increasing regional influence. The group also recently announced a plan to deliver Covid-19 vaccines to Southeast Asian countries, while China has been supplying its own vaccines to much of the developing world. Unified Asian leadership can emerge only once China and the US compromise and cooperate.

An increasingly prominent Asia will have to assume greater responsibilities and obligations. The region's governments must actively engage in solving regional and global challenges, and cooperate constructively with other regions. And they must contribute to improving global governance. There will be no Asian century until Asia's leaders recognise that it must also be a century of shared global prosperity.

Lee Jong-Wha, Professor of Economics at Korea University, was chief economist at the Asian Development Bank and a senior adviser for international economic affairs to former South Korean President Lee Myung-bak.

Copyright: Project Syndicate, 2021.

www.project-syndicate.org

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