Is this the Asian Century? Potential and challenges in Asia growth
Updated: Mar 25, 2021 2:56 PM
A diverse politically fragmented region with the immense potential of production and utilization, Asia sets out to be the future for global economic prosperity.
The rise of China and India explains Asia’s economic eclipse of the rest of the world.
By Rajesh Mehta & Diksha Mittal
A diverse politically fragmented region with the immense potential of production and utilization, Asia sets out to be the future for global economic prosperity. Europe governed the 19th-century while the United States dominated the 20th century. Forthwith, the 21st century belongs to Asia. An expert views it as “restoration” as Asia accounted for more than half of world economic output for 18 of the last 20 centuries. Substantiating a tectonic shift in global power, Asia confirms to steer universal discourse.
Asia’s fraction of global goods trade rose from 25 percent in 2000–02 to 33 percent in 2015–17. In contrast, Europe’s share waned from 26 to 22 percent, and North America from 25 to 18 percent from 2000 to 2017. Past the epoch of Western hegemony, Asia is returning to commerce and cultural exchange that prospered before European colonialism and American predominance. With a swift rise, today, the Asian territory has an increasing global share of trade, capital, people, knowledge, transport, culture, and resources. This multi-civilizational order bonds five billion people through business, finance, infrastructure, and diplomatic networks – representing 40 percent of global GDP creating a new Asian system.
Japan stood as the first leader of the postwar Asian growth miracle. The “Tiger” economies including Hong Kong, Singapore, South Korea appeared next which was then followed by China. The recent fourth wave comprising South and Southeast Asia forms to be the pillar of the modern Asian narrative. Being highly diverse, Mckinsey research identifies four distinct Asian groups, each at a different phase of economic development contributing to the region’s global surge. First Asia involves China operating as an anchor economy. In 2013–17, it accounted for 35 percent of total Asian outbound FDI. The second group including Japan, Singapore, and South Korea defines “Advanced Asia”, all being highly urbanized and connected. Next comes the “Emerging Asia” – Indonesia, Laos, Malaysia, the Philippines, and Thailand providing high growth capacity, owing to rising productivity and consumption. By contrast, the fourth faction “Frontier Asia and India” has the lowest average share of intraregional flows, amounting to just 31%. However, the numbers are set to increase with young labor forces and fresh market opportunities as they integrate with the rest of Asia. Dynamic intraregional networks, in particular, industrialization, innovation, and cultural and mobility confirm to reinforce those flows and connections.
The rise of China and India explains Asia’s economic eclipse of the rest of the world. India became the world’s third-largest economy while China exceeded the US in terms of PPP. Indonesia is set to overtake Russia by 2023 as the sixth biggest economy. Vietnam, one of Asia’s fastest-growing economies, overtook 17 countries in a ranking of economies in PPP terms since 2000, including Belgium and Switzerland.
In the past couple of decades, Asian economies have eventually thrived to become world players. In the aftermath of the global financial crisis of 2008-09, advanced countries experienced a decline in GDP – U.S. (-2.5 percent), U.K. (-4.2 percent), while the Asian countries fared substantially well. China’s Belt and Road Initiative introduced in 2013, a USD 1 trillion global infrastructure development program seeking to connect China with the rest of Asia, the Middle East, Europe, and the Americas better interconnect the Asian countries both economically and politically. It must be noted that though China has taken the lead in Asia and is crucial in the broad Asian system, it will not dominate Asia. Moreover, it portrays a highly prosperous Asian supercontinent resurfacing on the world stage.
In the last 30 years, poverty in Asian countries has tremendously reduced. A buoyant middle class has emerged across a rapidly developing Southeast Asia. By 2050, the Asian Development Bank estimates, 3 billion Asians could have living standards similar to those of Europe. Earlier Asian economies illustrated low-cost manufacturing. However, now these very countries are capable of manufacturing sophisticated and tech-driven products. India is coming upfront to become a global manufacturing hub. Asia is, therefore, the emerging engine of growth in modern production and services.
It appears that the uplift path of Asia goes beyond its performance. The Asian community is spread all over the world drawing primary influences. President Joe Biden and Kamala Harris’s presidency speck the power and level of dominance that the Asian people play in the American territory. Today as the world continues to fight the pandemic, Asian economies have been ahead of many advanced Western nations in terms of the progression and response to the catastrophic. The pandemic has accelerated the speed of changes that would have happened anyway. At a time when other countries are clenched by vaccine nationalism, India’s unparalleled leadership in vaccine diplomacy by reaching out and helping other countries places favorable interests of integration. Asia has been debuting on the world stage exhibiting its efficiency in government, business, and healthcare.
With Asia establishing the pace for a new stage of globalization: revitalization, border disputes, and micro-conflicts in South and Southeast Asia can derail Asia from earmarking the century. Cambodia-Thailand dispute, India-Pakistan conflict, India-China dispute, China-Japan tensions, North and South Korea clash tend to deviate Asia’s adventure. While demography is largely responsible for Asia’s economic predominance; many of Asia’s largest economies are aging rapidly, due to falling fertility rates and longer life expectancies. With Japan’s population already declining, South Korea and China are set to follow.
To compete and evolve, Asia needs to, consequently, deepen its interconnection both economically and politically. Many challenges facing Asia, from vaccines to climate change, compel collective action. But rather than joining together, the region is fracturing into rival political, economic, and security blocs. The nations, hence, need to put aside territorial disputes in favor of integration to experience an optimistic wave of growth. More than half the world’s population lives in Asia. Beyond trade relations with the rest of the world, intra-Asian growth, and stability will drive-in cordial upliftment. This internal process needs to be addressed successfully in facilitating Asian economic resilience as the regional comprehensive economic partnership unfolds.
Unification of the South Asian region will serve to address development concerns by helping nations close poverty gaps and attain food and energy security. The World Bank estimates that regional cooperation and engagement will yield energy savings of about $17 billion in capital cost reductions through 2045. The economic bloc would need to focus on cooperative investments to facilitate infrastructural connectivity and flows and create the platform for the next generation of digital innovation. Dismissing domestic sentiments from the economic rationale, engaging in diplomacy should be the way forward for countries that do have qualms about the integration.
Moving forward Asia is determined to mark an inflection point as the continent will become the new center of the world. The global economic order is poised to change by 2050 as six of the seven largest economies in the world are projected to be Asian economies in 2050 led by countries like India and Indonesia. If Asia remains united and cooperates amicably, Asia’s strength will expand to foster exclusive growth patterns. It will then not only be the manufacturing hub for products and services but also become the global powerhouse to drive-in innovation for economic prosperity.
(Rajesh Mehta is a Leading International Consultant & Columnist working on Market Entry, Innovation & Public Policy. Diksha Mittal is a public policy researcher working closely with Mr. Mehta. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)