[Book Review] Future Asia: The New Gold Rush in the EastMadanmohan Rao
by Rajiv Biswas; 2013 Palgrave Macmillan, New York (Amazon); 10 chapters, 197 pages
Future Asia looks at how a consumer and business revolution driven by Asia will sweep through the world order in the next decade. With its traditional growth engines in the US and Europe failing, the world is looking to Asia for economic solutions. The rise of consumer markets, MNCs, banking institutions and entrepreneurship from China, India and ASEAN (Association of Southeast Asian Nations) are increasingly being seen as the new growth drivers for the world.
Western multinationals face increasing competition from rapidly growing multinationals in emerging economies, such as Hyundai, Tata and Acer. But regional and global competition for natural resources such as oil, water and land will heighten political tensions. Existing structures of global political and economic governance will also increasingly be challenged (especially the United Nations, World Bank and IMF), as the rise of new Asian economic powers alters the global geopolitical order that has dominated the world since the end of World War II.These changes are well captured by Rajiv Biswas, senior director and Asia Chief Economist at IHS Global Insight. He has previously worked as an Asia-Pacific expert for The Economist Group, UBS, The Commonwealth Secretariat, the Royal Bank of Scotland, and the Japanese government. He has studied at the London School of Economics and Imperial College and has published over 100 articles on economics, trade and investment. Biswas’s family has roots in South Asia, and he has lived in Burma, Ethiopia, Japan and the UK.
In media interviews, Biswas has also criticised the sense of disbelief in Europe that Asia can be growing when Europe is so weak; many European companies have seen Asian markets as ‘helpful’ but not the main focus. He predicts that the tipping point will come around 2020, when the GDP of emerging markets will be greater than that of developed economies.
The book begins by tracing the birth of modern Asia after centuries of colonialism, and becoming independent in the middle of the 20th century right in the middle of the Cold War. Asian countries witnessed horrendous loss of life in the middle of the last century: the partition of India, the war between North and South Korea, Vietnam’s wars with France and the US, the Japanese invasion of China, and the communist purge in Indonesia.
The world looks very different now, thanks to a range of economic waves: (1) Japan (2) South Korea, Taiwan, Hong Kong, Singapore, Malaysia (3) China (4) India (5) Indonesia, Thailand (6) frontier economies: Vietnam, Cambodia, Bangladesh, Myanmar, Sri Lanka.
Challenges for Asia in future include losing some competitive advantage as wage levels rise (eg. movement of low-cost manufacturing from Japan to China, and then on to southeast Asian countries), fiscal management (eg. Japan losing two decades of growth), and shortage of management talent (eg. for globalising Indonesian companies).
China is the first developing country to meet the United Nations’ Millennium Development Goal of halving its population living in poverty. China is the world’ second largest economy, and India’s GDP may exceed that of Japan in 2025. There will be a shift back to the historical balance prior to the Industrial Revolution, when China and India accounted for a much larger share of the global economy.
The number of Asian middle class consumers will reach 3 billion by 2030, or 66 per cent of the world total (up from 500 million in 2010, or 28 per cent).
“The ranks of Gen Y young middle classes in Asia are large and growing. With their strong focus on IT connectivity through mobile phones and laptops, they are also changing the world of advertising increasingly towards digital media,” explains Biswas, though the rest of the book does not dwell enough on the rise of digital Asia and a new generation of startups.
Though China, South Korea and India started off at the same levels of development in the 1950s, India has fallen behind the others. Its per capita GDP income levels are only a third of China’s, it has extremely high levels of government debt, there are serious infrastructure and water management shortfalls, and its efforts for poverty alleviation are not adequate.
But there are tremendous opportunities ahead for India with the addition of 20 million new middle class consumers each year, talent vitality, and a larger youthful profile than China. Given the rise of India’s automotive and component sectors, it is hard to believe that till less than 20 years ago the car industry was dominated by the antiquated Fiat and Ambassador models.
The “real catalyst” for the more dynamic performance of the Indian economy has been the IT industry. The IT sector has also served as a “benchmark for Indian excellence,” creating greater confidence in the Indian corporate sector about the ability of Indian firms to compete globally and aim for best practice global standards.
Though global finance has been dominated by European and then American companies for centuries, financial heavyweights from Japan, Hong Kong, Singapore, China, India and Malaysia are emerging. Regional financial hubs for wealth management are well established in Singapore, Hong Kong and Malaysia (especially for Islamic banking). Asia has developed a monetary cooperation framework in the Chiang Mai initiative, though much more effort will be needed for it to succeed.
The book is full of interesting titbits and anecdotes. Hong Kong is the biggest market for Swiss watches. Asia will be the largest air transport market over the next 20 years. Asia accounts for a growing share of the world’s Fortune 500 companies, billionaires and ‘centa-millionaires’ (worth 100 million).
While Germany and France are responding well to the rise of Asia, countries such as Spain and Portugal are way behind (quite ironic, since they were the first Europeans to arrive in Asia in the colonial era). Japan also needs to improve its engagement with the rest of Asia, and step down from its earlier arrogance; but it still has technological leadership and a disciplined professional workforce.
“If the platform for greater regional economic cooperation can successfully be built, the Asian Century can be Asia’s golden age,” Biswas concludes.