Bright future if Asia pulls together

Asia can enjoy a bright future in the next 20 years if the region's major players - China, Japan and the United States - work together and accommodate one another, Prime Minister Lee Hsien Loong said in Tokyo yesterday.

If not, a less rosy scenario might arise: one where a fractious Asia is fraught with territorial and nationalistic tensions.

Mr Lee, in sketching these two potential scenarios in a speech on what could happen in Asia in the next 20 years, said that on balance, he is confident Asian countries will cooperate to achieve the happier outcome. In such a scenario, there would be a stable and prosperous Asia, where countries work together "to advance their shared interests", he said.

The US, which would remain the world's top superpower, would continue to engage Asia in not just security matters but also trade, investments and education, he said in his keynote speech marking the 20th anniversary of the annual Nikkei conference, which Mr Lee Kuan Yew used to attend.

The US would also reach a new working arrangement with China, which by then would have established itself as a status quo power that adheres to international law and norms and gives smaller countries space to thrive, PM Lee said.

Meanwhile, Japan would revitalise its economy and work with its neighbours to put the shadow of the wars, like the Sino-Japanese War, behind them, he added.

Against this stable geopolitical backdrop, regional economic cooperation would thrive and ASEAN would continue to play a central role in the region as "an effective neutral platform for major powers to engage one another".

But this is not a foregone conclusion and a "less benign" scenario is also possible, Mr Lee said.

That could result if "the tremendous growth in China's size and power prove too much for the regional order to accommodate".

Should that happen, US-China ties would be marked by distrust, China's influence in the region would be "merely tolerated" by smaller countries, and friction would fester among Asian countries amid "unresolved historical issues, territorial disputes and nationalist populism". It would be a setback to economic integration and force ASEAN countries to choose sides, he said. "Everyone loses in such a scenario."

Which scenario awaits Asia will depend on two main factors, Mr Lee said. The first is the evolution of US-China relations - "the most important bilateral relationship in the world", Mr Lee said.

"On both sides, there are those who doubt and distrust the other's intentions," he noted. "It will require great restraint and wisdom to overcome this distrust and reach a workable and peaceful accommodation."

The second factor is how nationalism develops in the region: whether as a source of national pride and beneficial competition across borders, or as a virulent sentiment fuelling defensiveness and insecurity, he added.

Individually, the US, China and Japan also face challenges, Mr Lee said. The US is steeped in a mood of "angst and withdrawal" from the strain of having to play the world's policeman, while China has to transform its society and politics to meet the needs of a new generation.

Both China and Japan also have to tackle their ageing populations and manage relations with their neighbours, he added.

But the positive scenario is more likely, Mr Lee concluded. "I am confident the US will not relinquish its decades-long position as an Asia-Pacific power, and I am hopeful that as China's power grows, it will find ways to continue integrating smoothly into the international system."

Both scenarios, however, assume there will not be war in the next 20 years; otherwise, "all bets are off", Mr Lee said. He warned that war in Asia was not impossible, saying growing tensions over territorial disputes and the Korean situation remain flashpoints.

Malaysia's Prime Minister Najib Razak, in his keynote speech at the event, called on Asian leaders to promote economic integration, tackle rising inequality and ensure regional tensions are dealt with through diplomacy.

Mr Lee said in a Facebook post last night that he stayed for Datuk Seri Najib's session. "It was good to catch up with him again."

United States

Resilient, dynamic and entrepreneurial society

"Some people say that the US is in permanent decline. I do not believe this. The US is a very resilient, dynamic and entrepreneurial society.

I believe that in 20 years' time, the US will remain the world's pre-eminent superpower. (It) will still be the world's most advanced economy, leading the world in innovations, technology and talent.

Shale gas will enhance the competitiveness of US industries, and could also be an additional tool of US diplomacy. The US armed forces will still be the most formidable and technologically advanced in the world.

The US will continue to have a huge stake in Asia. The US will still have in Asia important interests, large investments, major markets and many friends. And it will have every incentive to engage Asia across a broad front."

China

Powerful, influential, but fast growing old

"The biggest change in Asia in the next 20 years will be the growth of China's power and influence. The World Bank forecasts that China will be the world's largest economy in PPP (purchasing power parity) terms by the end of this year. In 20 years, it will have grown three or four times larger.

Second-tier Chinese cities like Chongqing or Guangzhou will join Shanghai and Beijing among the world's leading metropolitan areas. Many more Chinese companies will be global leaders, like ICBC, Haier and Alibaba.

The People's Liberation Army will be a much more advanced and powerful fighting force, commensurate with China's economy and power.

But... China will be one of the most rapidly ageing countries in the world. In 20 years' time, China will have nearly 300 million seniors aged 65 and beyond, which is almost the size of the whole US population today. So China is likely to grow old before it gets rich."

Japan

A major power but with demographic challenges

"I am confident that in 20 years' time, Japan will remain a major power. It will still be one of the world's largest economies, with great strengths in science and technology. It will continue to contribute to regional peace and stability within the framework of the US-Japan Security Alliance.

But like China, Japan faces a very difficult demographic challenge. In less than two decades Japan's population will have shrunk by almost 10 million people, which is the equivalent of two Singapores.

In 20 years it will be a century after the Sino-Japanese War and the Pacific War. So another key question for Japan is whether Japan and its neighbours, especially China and Korea, can come to terms with this history, and work together on win-win cooperation for the future."

Two Scenarios

Peaceful region, or one with more disputes

"One scenario is that Asia remains at peace.

The US and China find a new modus vivendi, competing for influence but with a sufficiently strong overall strategic relationship to accommodate each other on many issues. Japan revitalises its economy and recovers its confidence.

Greater economic interdependence will raise standards of living for all, and contribute to a peaceful region in a virtuous circle. But if things do not work out right, we will be contemplating another, less benign scenario.

There are more trade disputes, even currency wars, and tit-for-tat protectionism. The result is less shared interest in one another's success, more frictions and disputes, and fewer restraints when things go wrong.

With the big powers at odds, ASEAN countries are forced to choose sides. Everyone loses in such a scenario."

This article was first published on May 23, 2014.
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