HOW WILL THIS PATTERN UNFOLD?
• The ASEAN nations
Mike Smith not only backs continued growth in China, but believes the potential of South East Asia is under-rated by many. It is home to some 600 million people (making it more populous than all of Latin America) is rich in agricultural potential and in energy and mineral resources. It has a young and vigorous population and appears poised for China-style growth.
Smith envisages a belt of urban development – they would be called megacities almost anywhere but in Asia – stretching down through Vietnam, the Philippines and Indonesia and upwards through Malaysia and Thailand.
“This will entail a construction program approaching the scale we have witnessed in China over the past 25 years and triggering the same demand for resources and services,” he says.
“As China’s labour costs rise and it transitions to services and to higher value manufactures, we can expect South East Asia to become the manufacturing hub, much in the same way as China inherited the mantle when Japan (and later South Korea) became affluent.”
Yasushi Takahashi is buoyant about prospects for the Mekong countries – Vietnam, Thailand, Laos, Cambodia and Myanmar - not only as prospering economies in their own right but as beneficiaries of trade flows between the two great emerging economies of China and India.
These Mekong countries are the bridge along which millions of dollars of two-way trade will flow annually. Make that billions.
Primarily though, there is Indonesia, the world’s fourth most populous nation. World Bank forecasts suggest Indonesia’s GDP will surpass Germany and Japan within 30 years.
There is also the Philippines with more than 100 million people, largely young, educated and fluent in English (still the preferred language of global business). And Vietnam. It is easy to see why the region’s potential excites our panel.
Owen Hegarty agrees with all the above, but nominates a further catalyst: Resources.
The massive urbanisation of Asia will trigger a new wave of resources demand, he says, and a large part of it will be met from South East Asia itself which is rich in mineral potential and relatively undeveloped.
Not only SE Asia will benefit: Hegarty notes Far East Russia is also rich in resources and will experience growth of its own. Russia’s focus will progressively turn from Europe to the east.
There may be a global over-supply of many key resources for the next few years (resulting from a period of over-investment) but time and growth will correct that.
• India: Hurdles and hopes
There is caution about whether India can sustain the growth rates achieved by China (or by Japan and South Korea during their development phase). Some observe wryly an Indian ‘take-off” is a perennial dream, forever promised and forever just over the horizon, but others remain optimistic.
Whichever viewpoint you adopt, the reality is the sheer size of its population ensures with even moderate growth it will become one of the world’s top three economic powers by mid-century.
Sam Walsh sees positives: He points out India has a young population with rising aspirations. He sees challenges aplenty for India’s Narendra Modi (for whom he has considerable respect) but believes solid growth will come, albeit on a state-by-state basis rather than in a single national transformation.
The global impact may be modest now because it is starting from a low base, but 20 years of compounding growth will see India a major economic force.
Yasushi Takahashi is even more optimistic: He sets a date of 2022 as the turning point for an Indian take-off. That is, among other things, the point at which India will officially become the world’s most populous nation, but he sees various other forces aligning to create the necessary impetus. Not least of these is that even at current rates India’s economy will have almost doubled, giving it a critical mass.
While he acknowledges the vast variability between Indian states and the constraints India’s federal system puts on the capacity of the central government to drive development, he is optimistic the conspicuous prosperity of the progressive states will be a catalyst for reform elsewhere. This latter point is shared by Prof Tan Kong Yam.
The entire group agree it will require a withering of India’s caste system and gender discrimination for the nation to fully unlock its vast human potential but, even as we wait for that, growth will continue.
The IMF, World Bank and Asia Development Bank all predict it will become one of the world’s big three economies over the next 20 to 25 years.
• Japan’s pioneering challenge
Then there is Japan. For all the intellectual and commercial energy that made it the first Asian Tiger (and currently the world’s third largest economy) Japan faces an ageing population and shrinking economy.
It is a problem many developed nations face, particularly in Europe, but Japan has, at least for now, chosen not to pursue an immigration or guest worker program - tools that have allowed the USA and other nations to defer the impact of lower birth rates.
Japan is probably world leader in developing strategies to meet this “de-population” challenge, but our contributors are divided on whether these can fully offset a shrinking workforce and a constrained domestic market.
Mitsui’s Yasushi Takahashi is firmly in the positive camp. He points out the proportion of the population that is economically productive (aged 16 to 65) peaked 20 years ago and the problems created by this are already being addressed through an emphasis on productivity -- with capital investment, technology (including robotics) and improved work practices, maintaining both output and competitiveness – in services as well as products.
Increasing female participation in the workforce and delayed retirement for older workers are also redressing the balance. Over time, selective immigration may also be a tool, he says.
And Japan long ago began the transition from labour-intensive mass-manufacturing to technology and capital intensive industries.
Takahashi sees synergies for all parties in the strengthening relationship between Japan and ASEAN nations. Even as China grows, Japan will still be an influence in shaping the new Asia, he says.
Ageing and declining populations are a feature of almost all the advanced economies (Germany has demographics not dissimilar to Japan’s). The world will be watching Japan’s success.