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IN 1980, Asia contributed 19 per cent of global GDP. Today, its share has almost doubled to 36 per cent. By 2020, this figure will rise to 45 per cent. Asia should be able to sustain a growth rate of between 4 per cent and 6 per cent per annum over the next 20 years. Of course, there will be many challenges. The first set of challenges is managing domestic complexities arising from the very forces brought about by rapid growth. As countries develop more complex economies and plug into global business and financial networks, politics also becomes more pluralistic. New interest groups will emerge and displace traditional arrangements. Dislocations and conflicts are inevitable. Whether it is Hindraf (a Hindu activist group) in Malaysia, Muslims in Gujarat, or the millions of rural poor in India and China, there are countless groups who feel they have been marginalised and denied a share of their country's growing prosperity. All governments, from both developed and developing countries, face similar pressures. But the problem is particularly acute for developing countries seeking to sustain high growth rates while absorbing the socioeconomic forces that are dramatically changing their societies. The second set of challenges pertains to global economic and geopolitical risks. Global economic risks have increased significantly due to the high degree of financial and economic integration of global markets. The point was brought home vividly with the sharp global financial market correction due to the sub-prime mortgage meltdown (in the US). There is now a clear risk of a US recession. While Asian economies are less fragile and dependent on the US today, they are not 'decoupled' from the United States economy as much as some had believed. A major global geopolitical uncertainty is the situation in the Middle East. For decades, the military dominance of Israel and the US has underpinned the balance of power in the Middle East. However, Hizbollah's psychological victory over Israel in Lebanon in July 2006 shattered the myth of Israeli supremacy. American difficulties in Iraq and widespread anti-American sentiments in the Arab street have also severely affected the US role in maintaining the strategic balance. The third set of challenges concerns regional geopolitical risks. The three most serious flashpoints in the region are the situation on the Korean Peninsula, cross-Taiwan Strait relations and Pakistan. Although the six-party talks have become the institutionalised framework to manage tensions, progress on North Korea's denuclearisation has been slow. At present it is the process that is crucial even if there has been little substantive progress. If the process falters, dangerous complications will set in. But sooner or later, the core issues cannot be avoided: Are the US, Japan, South Korea, China and Russia prepared to allow North Korea to possess nuclear weapons? And can the present equilibrium between China, Japan and South Korea be maintained if North Korea does not give up its nuclear weapons? Cross-strait relations have become calmer with the US and China publicly taking similar positions against Taiwanese independence and for the maintenance of the status quo. The Taiwanese people have certainly noted international sentiments and have expressed their desire, in the recent Legislative Yuan elections, for the government to focus on economic development and pragmatic cross- strait cooperation. But reckless electioneering may lead to a miscalculation in the run-up to the March presidential elections. Taiwan will for a long time remain a point of tension between the US and China. China has declared its determination to preserve Taiwan as part of China by any means necessary, while the US has made clear that it is against Taiwanese independence and any other unilateral change to the status quo. The situation in Pakistan has further deteriorated after the assassination of former prime minister Benazir Bhutto. Should the country slide into civil conflict, Islamic militancy would be unleashed in full force. Pakistan could become a base for militant groups with ties in South-east Asia, including southern Thailand and Indonesia. An imploding Pakistan would certainly heighten the threat posed by the possible proliferation of its nuclear arsenal and know-how to militant groups and rogue states. Underlying these specific issues are the increasingly complex interactions among the major powers and other regional players. Economic growth is reordering the established East Asian equilibrium and restructuring US-China relations, Sino-Japanese relations, India-China relations and India-Japan relations. As they search for a new modus vivendi with each other and other regional players, strategic stability is not to be taken for granted. East Asia has its special sensitivities. Here are a few examples. China and India are ancient civilisations with long histories, deep cultural memories and great ambitions. In 1962, they fought a brief but bloody border war. In recent years, both have realised this frosty relationship does not serve their strategic interests or their desire to grow their domestic economies. Last month, (Indian) Prime Minister Manmohan Singh and (Chinese) Premier Wen Jiabao issued a joint agreement stating both sides are 'convinced it is time to look to the future in building a relationship of friendship and trust, based on equality'. Yet old suspicions and sensitivities linger. China and India are jostling for influence in their border regions with Myanmar and others. Recently, the Indian Navy chief publicly sounded the alarm about the deep-water port being built in Gwadar in Pakistan with Chinese financial assistance. As neighbours, China and Japan share an uneasy historical relationship that stretches well beyond the memory of World War II. Last April, Premier Wen made an 'ice-melting journey' to Japan. Prime Minister Yasuo Fukuda reciprocated with a visit in December to 'welcome the spring' in Japan-China relations. Perhaps because the ice has just melted and it is still early spring, ties are only starting to warm up. While I do not underestimate the sensitivities, I believe Japan and China can forge a new relationship. I could give further examples of historical sensitivities from other regions, including South-east Asia. But my point is simple: All countries in East Asia must work hard to overcome, not forget, history. This will not happen by itself; it will require a conscious effort. Fortunately, all countries in East Asia share a vital common interest in preserving stability for growth. They thus also have a strong common interest in forging new institutions and structures to manage their differences and the new strategic complexities. We are engaged in a common search for a new regional architecture - reflected in Asean, the SCO (Shanghai Cooperation Organisation) and the East Asia Summit, among others. This process has only just begun and our final destination is far from being in sight or even agreed. In the meantime, the recognition across the region, whether explicitly or implicitly, of the strategic indispensability of the US is a stabilising factor. No major Asian country really believes it would be better off if the US were not present. None of the major issues in the region can be managed or resolved without the participation of the US.
Reordering global power structures AS ASIA grows, a reordering of global power structures and institutions is inevitable. The status quo must change. Historically, any reordering of power in the world has been traumatic. It has more often than not led to or was the result of conflicts. But history is not doomed to repeat itself. Whether we can maintain the stability of the international order depends on how the West and Asia adjust to and accommodate each other. Ex-US deputy secretary of state, now World Bank president, Robert Zoellick, made the case for China to become a 'responsible stakeholder' in the international system. China would then be responsible for strengthening the international system from which it has benefited. What Mr Zoellick said applies equally to all stakeholders in the world. But to be a 'responsible stakeholder' requires a stake. And it is not unreasonable for Asia to expect some say in determining what that stake should be. The awkward truth is that current international political norms, practices and institutions were driven by the West, and no longer accurately reflect the real distribution of power in the world. They are therefore unable to fully meet key global challenges or the aspirations of rising powers. At the apex of the post- World War II institutions is the UN Security Council (UNSC). The current permanent members of the UNSC need to accept the fact that the inclusion of the rising powers would help enhance international stability and the relevance of the UN. Similarly, why should international financial institutions like the IMF and World Bank only be run by European and American appointees? While the logic for a reordering of global institutions seems irrefutable, in political life, logic is sometimes not necessarily the most important influence. Take the example of sovereign wealth funds (SWFs). Concerns have been expressed about SWFs from Asia and the Middle East gaining influence over sensitive industries in the West. Underlying the debate are irrational fears and a nationalistic backlash. As shown by the injection of liquidity into banks which require capital in the aftermath of the sub-prime mortgage crisis, SWFs are long-term players and this is a mutually beneficial process. The West and Asia should cooperate to work out transparency rules governing SWFs, while ensuring open investment regimes on all sides. The West should not respond to the resurgence of Asia with defensiveness or fear. Changing the status quo need not be a zero sum game between Asia and the West. The Asia that is rising in the 21st century is not the Asia that fell under Western dominance in previous centuries or one which is diametrically opposite in ideology. In fact, the key East Asian historical dynamic over the past two centuries has been the effort to emulate the West, at least selectively. Fukuzawa Yukichi, a leading intellectual of the Meiji era, believed Japan must break ranks with Asia and cast its lot with the 'civilised countries of the West'. Chinese intellectuals such as Liang Qichao sought to graft Western science and technology on to Chinese culture. Similarly, economic growth has not caused Asia to turn away from the West; rather it has brought it even closer to the West. For instance, today, Asia sends more students to the US for studies than any other region. China alone has more than 250,000 students studying abroad at any one time. This is unlike the Middle Kingdom attitude of Qing Emperor Qianlong, who told an envoy of King George III that China did not have the slightest need for England's manufactures. Equally, Asia must play its part. How the international order evolves will also depend on how Asia responds and reacts to the West. Asia has the responsibility to avoid the temptations of a simplistic triumphalism, to continue to learn from the West and take on a fair share of the burdens of managing and strengthening the international system that has enabled its success. If the West must shed its illusion of having all the answers, Asia must not fall into the same delusion. There are already some disquieting signs of Asian triumphalism that, if unchecked, may well provoke reactions that will not be in the interests of either Asia or the West. The necessity of acknowledging Asia's rise - and the consequent need for global adjustments - is not the same thing as a simple reversal of the historical pattern of relations between Asia and the West. What we may be witnessing - and what we must work towards - is the tentative emergence of an entirely new global configuration. None of the critical issues of our times can be effectively managed without the genuine collaboration of Asia, the US and Europe. Climate change is a compelling example. It is a historical fact that the developed countries in the West are responsible for the bulk of greenhouse gas emissions. No developing country in Asia or elsewhere will forgo the opportunity to catch up by accepting the measures that developed European economies have adopted to check the damage that was largely caused by Europe's historical emissions. (But) it is also a fact that large, fast-growing Asian developing countries, particularly China and India, are becoming major emitters and cannot shirk their responsibilities. Ensuring free and open markets through the Doha Round is another critical challenge facing the world. Major developed and developing countries in Asia and the West have benefited from free trade over the years. Unfortunately, these countries have not, thus far, demonstrated leadership to work out real compromises to bring these benefits to more people. Rudyard Kipling famously said 'East is East, and West is West, and never the twain shall meet'. That was in 1892. Today, we have met and interacted and our interdependence will only continue to grow.
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