Asian Pioneers’ exclusive Asia series.
By Rachel Bui
Published on: 27/02/2019
At Asian Pioneers, we are always experimenting with new concepts and storytelling approaches. This series on Asia will be updated as further information, ideas and feedback land in our inbox. This initiative is an effort to build a shared understanding and to promote dialogue about Asia.
We are almost two decades into the 21st century. Never before has our civilisation achieved so much remarkable economic, social and technological progress as it did over the last century. The 20th century saw many political changes, particularly in Asia, where modern economies and nations emerged from old colonies and empires. Japan, Taiwan, South Korea and China transformed from self-sufficient, agricultural co-ops to global manufacturing and technological powerhouses over the span of a few decades. After two centuries of being dormant, the Chinese economy roared ahead, leading modern Asia into the new millennia. With India and Southeast Asia as emerging economies with great potential, the rise of the Asian century is a narrative that we think is worthwhile to unpick and analyse.
With over 4.5 billion people, Asia currently has 60 percent of the world population. By 2050, this figure is estimated to increase to 5.2 billion people. The Asian region has some of the densest cities on the planet: Manila, Mumbai, Hong Kong, Calcutta, Macau and many more. The Asian economy consists of 49 different nation-states and another six countries that are partially in the Asian region. The combined current GDP in the Asia Pacific region alone in 2017 is $27.3 trillion, more than a third of the 2017 global current GDP value of $80.7 trillion. The GDP of the region increased by $22.2 trillion (4.3 fold) from 1990 to 2017. While East Asia and China have started to slow down, India and Southeast Asia are speeding ahead, driving growth in the region and the rest of the world.
After 30 years of miraculous growth in the second half of the 20th century, China is now the second largest economy in the world, only after the United States. While China is now the world’s leading manufacturer, it is also competing with the US on many advanced fronts in areas such as space, artificial intelligence and life sciences. Tech giants such as Baidu, Alibaba and Tencent (collectively known as BAT) are pioneering innovative technologies in e-commerce, logistics and gaming while investing in some of the world’s largest tech companies such as Epic, Snap, Lyft and Magic Leap. Alibaba and Tencent also provide early-stage funding into Southeast Asian tech startups such as Tokopedia, SEA and Go Jek, adding the needed fuel to ignite the Southeast Asia burgeoning startup scene. However, everything comes with a trade-off. Environmental and air pollution have increasingly become significant concerns for China as the country’s economic engine continues to maintain its momentum while transitioning to a greener economy.
Japan was the leader in Asia when its economic miracle took off in the 70s and 80s. Companies such as Sony, Toyota, Honda, Yamaha and Nintendo transformed local Japanese brands into global household names by exporting innovative electronics, quality cars and musical instruments into the homes of middle-class families in the West. After the Japanese financial asset bubble bursted in the early 90s, Japan moved into the lost decades and economic growth stalled ever since.
While Japan has transitioned from an export-led manufacturing economy to one focused on high-quality services and design, its traditional culture and the Keiretsu industry structure have not changed much since the post-war years. With an ageing economy and an insular Galapagos syndrome, Japan has struggled to innovate and find growth in the new millennia. Fortunately, companies such as Softbank and Rakuten have been a driving force of innovation in the country. The founder of Softbank, Masayoshi Son is also one of the most prominent Japanese businessmen in the country. Though these companies are household names in Asia, their collective impact is still relatively small compares to the much larger established Keiretsu system in the Japanese economy. The land of the rising sun will need to open up to further reform in the next decade by relaxing its closed migration policies and change its perspective on the role of women in Japanese society if it wants to rediscover its entrepreneurial past.
India has been growing at an average annual growth of around 7 per cent over the last 20 years, it has the second largest population in the world after China. Diversified conglomerates such as TATA, Reliance and Adani are constructing nation-building infrastructures, connecting cities and changing the shape of the rural-urban landscape. These conglomerates are vital economic players in the Indian economy. Internationally, Tata is known for building affordable cars but is also the local operator of Starbucks through a joint venture with its US counterpart. Similar to Chinese companies, Indian companies are also venturing out to the West in countries such as Canada and Australia to acquire foreign natural resources to meet the increasing demands of the Indian economy. While India’s influence is growing internationally, India still has many domestic challenges ahead. Uniquely to India is its caste system, which continues to be an impediment to the growth of the nation as it restricts upward social mobility and talented people from pursuing the best opportunities the country has to offer. Fortunately, its diaspora — many who are world leading executives — and Western-educated student returnees would provide the much needed change and leadership for the country moving into the next decade.
Southeast Asia has finally entered the Gilded Age following the decades of poverty after gaining independence from colonial powers. Similarly to India, the Southeast Asian region is rapidly developing with an average 5-7% growth annually. Cities all over the Association of Southeast Asian Nations (ASEAN) countries are modernising at a breathtaking pace with new buildings, industries and infrastructures appearing in the skylines of Ho Chi Minh City, Manila, Bangkok and Jakarta every day. The region has also leapfrogged earlier technological developments adopted in the West, bypassing innovations such as credit cards for mobile wallets instead. Young entrepreneurs provide the much needed change into old industries such as banking and retail by inventing novel and useful technologies. Nevertheless, Southeast Asia is still largely uncompetitive due to the significant influence of state-owned enterprises. To follow in the footsteps of the Asian tigers, ASEAN governments will need to play a much more proactive role in the promotion of free trade, make the necessary reforms to boost foreign direct investments and increase the productivity of their respective nations. The beacon for Southeast Asia is in its young workforce, with more than half of the ASEAN population below 30 years of age. This group will be key consumers in the decades to come and they will drive the future prosperity of the region.
Asia is an exciting region with much potential in the 21st century. Continuous stable growth is essential to political stability. China, Japan and the rest of the Asian tigers demonstrate that the successful manufacturing and export-led growth model can lift hundreds of millions of people out of poverty within a few decades. Nevertheless, the Asian region is prone to financial crises due to euphoric growth. Governments need to establish regulatory frameworks to reduce reckless behaviour in private markets as an asset burst could set the region back by a decade or two as evident by the Asian financial crisis in the late 90s. Throughout history, empires had been won and lost as a result of macroeconomic instability coupled with natural disasters. Climate change is another issue that various governments in Asia will need to be well prepared for as they move forward into the next decade as perverse weather conditions may drive flood, famines and riots.
Despite these challenges, we think the upcoming decade in Asia is incredibly exciting. There are many opportunities to innovate and introduce world-changing technologies to solve some of humanity’s greatest problems at scale. With some of the brightest talent coming from Asia, we believe that this region is worth paying closer attention.
In this Asia series, Asian Pioneers will highlight some of the key Asian economies — their history, successes and the challenges ahead. ∎
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