Leadership changes and the future of East Asia

Chinese President Xi Jinping (C) and South Korean President Park Geun-hye (R, front) meet with youth delegates from both countries after their talks at the Great Hall of the People in Beijing, capital of China, June 27, 2013. (Photo : Xinhua/Ma Zhancheng)

What will East Asia look like in 5-10 years’ time after the recent changes in leadership of some major countries? What are the emerging economic and political orders? Obviously, we don’t know, but we can try to make informed guesses on how the world might change and how Asia might transform on the basis of reviewing major trends and potential game changers.

Economic Asia and Security Asia

I read a few months ago an interesting write-up on the two tales of Asia. The first tale is about Economic Asia, which is a dynamic, increasingly integrated, a rising and successful region. The other tale is about Security Asia which is a dysfunctional region with rising nationalism, escalating territorial disputes, and a lot of distrust among their key actors.

The question on this essay is whether Security Asia would in the next few years destroy Economic Asia, and thus Asia is actually heading into a profound crisis. There are obviously different viewpoints, on how these two tales of Asia would reconcile. In a way, these different perspectives reflect our assumptions on how Asian countries will respond to the dynamics of these two different Asias, and how they will manage this Asian paradox.

One important factor is the relationship between the US and China as the two dominant players shaping security in Asia. The US is the largest economy of the world, a resident and predominant Pacific power since World War 2, and is determined to remain one, among others, through its rebalancing policy toward Asia. China is the second largest economy of the world, a rising Asian power, and is determined to build up its armed forces to enhance its security and to support its rightful place in an evolving world order. If their rivalry escalates, countries in Asia could drift into bipolarity, and indeed the dynamics of economic development in the region would be affected.

In the most ideal world, Asian countries would learn to accommodate China’s rising, and China would learn to address its neighbors’ concerns, at the same time, all parties involved in the territorial disputes would exercise restraint and pragmatism. In the most ideal world, the climate of peace and stability in Asia would remain positive to enable Asia to continue to focus on its economic developments, and the tale of two Asias would not end in a tragedy; instead the center of the world’s gravity would continue to shift towards Asia.

Leaderships of East Asia and ASEAN

President Xi Jinping has said that China wants stable and constructive relationship with the US insofar as the two countries have enormous shared interest. Under President Xi’s leadership, Beijing seems to be on the same page with Seoul and Washington on how to handle North Korea. President Xi has put denuclearization of Korean Peninsula as a matter of priority. In his inauguration speech, he said that his focus in the next few years would be on achieving Chinese dream of great renaissance of Chinese nation. He also said that China would focus on addressing domestic challenges such as declining growth rates, growing inequality, issues of governance, corruption, and environment to ensure that China will continue to modernise. At the California Summit, President Xi and President Obama tried to define a new model of relations between an established power and an emerging power.

In Japan, PM Abe adopted the Clinton era slogan “It’s The Economy, Stupid”. He engineered the selection of a new governor of the Bank of Japan who would back his plan to induce inflation target of 2% which would then bring down the value of Japanese yen. During his visit to Washington DC, he announced that “Japan is back” to underscore his commitment to economic revival, and to a leadership role in global affairs. Unfortunately, some of his recent remarks on history and nationalistic sentiments have led to increasing tension and greater distrust in Japan’s neighboring countries, even though those comments might just be rhetorical ahead of the upper house elections in July.

President Park Geun Hye took Pyongyang by surprise with a decisive action on Kaesong where she ordered South Korean workers to pack up and leave. Currently, her approval rating has been even stronger than the period leading to her election victory. Her recent trip to the US was outstandingly successful not only in terms of strengthening ROK alliance with the US, but also in terms of demonstrating Korea’s ability as a middle power actor to contribute to the future shape of the region.

In South East Asia, ASEAN solidarity has gone through different tests on a number of events. Nevertheless, ASEAN continues to make progress in the building of ASEAN Economic Community by 2015 with a combined population larger than Western Europe, and a combined GDP of around US$ 3 trillion. In general, ASEAN is in favor of the US taking an active and constructive interest in Asia. While territorial disputes between some countries in South East Asia and China have generated uneasiness and suspicion about Beijing’s ambitions and assertiveness, ASEAN as a group believes that the new leadership in China would take a pragmatic approach in addressing the concerns of its neighbors.

Crossroad between Confrontation and Economic Cooperation

So in a sense, countries in East Asia are at a crossroads where they have to choose between the path of confrontation and the path of economic cooperation which requires a climate of peace and stability. Obviously, apart from security related issues, in the economic area, there are critical risks that Asian countries have to deal with. In light of the uncertainties surrounding the Euro zone, slow and jobless recovery in other advanced nations, slowing down in China’s economy, threat of major currency devaluation leading to currency war, there could be increasing political pressures for government around the world to introduce protectionist measures. If indeed more and more countries are resorting to policy measures to protect jobs and domestic market, the impact of this “trade war” on the future growth of Asia would be substantial. Furthermore, East Asia must also embrace for possible financial shocks which would follow when the US and other advanced economies would stop its monetary easing, and thus create possible massive reversal of capital flows and possible bursting of asset bubbles in some Asian economies.

Despite the political and economic risks which need to be addressed, Asia’s future remains a promising one. The task now is for all the Asian leaders to continue to focus on crafting the climate and conditions that will propel the region toward continued development, progress and prosperity.

John A. Prasetio is Ambassador Indonesia to the Republic of Korea. He was a private sector businessman, and until recently he was the Founder and Chairman of CBA Consulting. He was also a Special Staff to the Minister of Industry, a member of the President’s National Economic Council and so on.