The anti-globalisation sentiment sweeping Europe and the United States is the greatest threat to the Asia-Pacific in the years ahead, a risk consultancy firm said on Monday.
"The backlash in Asia-Pacific's two biggest markets against globalisation is the greatest threat to this region's overall economic and political security over the next decade, never mind the next year," said Control Risks in a report.
"Since the end of the Cold War, the Asia-Pacific has been the globe's greatest beneficiary of the resulting vast liberalisation of trade, direct investment and supply chains. The region's middle classes have profited enormously from this process in a way that the middle classes of the US and Europe feel, at least more recently, that they have not."
These come on top of raging territorial tensions.
While the consultancy noted that such clashing forces have been at odds for decades, China's pressure has added a new dimension.
"What has changed is a new willingness by a resurgent China to press these claims and a new apparent ambivalence for the US to actively police them," the consultancy pointed out.
Japan, which has always looked to the US for security, will now begin to "self-insure" against Chinese aggression by ditching its peace constitution and ramping up its military spending, Control Risks said.
Meanwhile, countries in South-east Asia, such as Malaysia and the Philippines, are drawing closer to China, taking a hedge against US uncertainty.
"Providing China doesn't seek to flaunt its territorial expansion, tensions in the South China Sea may actually decline, but divisions within ASEAN are likely to increase."
China will also hold the spotlight, as it may raise "punitive regulation" against foreign businesses in the country.
Its "regulatory whiplash", as Control Risks puts it, would be the worst side-effect from potential trade disputes between China and the US, with the US soon to be led by incoming president Donald Trump.
China's slowdown and Western protectionism will also serve up a heady brew of populism in many parts of Asia.
"Elites in this region will seek to shore up their legitimacy through populism. This will vary in style, but the intent will be the same - shore up faltering political machines with popular gestures," it noted.
"In Malaysia, Prime Minister Najib Razak will continue to fight a rearguard action against his poor standing by wooing conservative Muslims. In the Philippines, President Rodrigo Duterte, who built his mandate from the very beginning on populist gestures, will continue to skirt the country's more intractable problems with dubious campaigns."
Control Risks is less concerned about the impact of fragmenting ISIS forces, saying Asia's terrorism risk landscape has been, and should stay, considerably more benign.
"The lines of communication are long between East Asia and the Middle East, and there is no refugee crisis to exploit and conceal within. Asia lacks the sheer numbers of individuals with the experience, access to weapons and suicidal intent on the scale of the Middle East or Europe."
This article was first published on January 17, 2017.
Get The Business Times for more stories.