The Responsibility of Asia's rise - Janmejaya Sinha

For at least a decade now, the world has been preparing for the emergence of Asia. Many have dubbed the 21 century as Asia’s and many countries in the continent are working to make this true. On a review of some basic economic statistics, the shift in world economic power over the next 10 years will be stark. By 2013, the EU, Asia and the US will be equal-sized economic blocks contributing roughly 25% of global GDP. In contrast, in 2000, EU formed 32%, the US 28% and Asia 20% of global GDP. By 2020, China, Japan and India will be with the US and Germany at the top five economies of the world. Together, the three Asian countries will form 27% of global GDP. What is even more significant will be the accompanying shift in consumption patterns.

Today, 5% of the world’s consumers — or, the US population — provide $10 trillion of global consumption. All of Asia, with about 45% of the world’s population, adds up to only $7 trillion. But by 2020, Asia will consume $21 trillion of global produce, 140% of the US at that time, which will be consuming $15 trillion.

Thus, over the next 10 years, Asia will consume $15 trillion more than it does today, much more than three times the $5 trillion that the US will add over the same period. This will be a dramatic shift in global consumption patterns that can be ignored by companies at their own peril. The population dynamic will, if anything, only make this impulse stronger: Asia’s average age will rise from 29 to 32 in the next 10 years while it will go from 40 to 43 in Europe and 37 to 38 in the US.

There have always been strong companies in Asia, even today, if you sort through billion-dollar-revenue companies globally and correct them for double holding of some groups, you find about 12,500 companies of which 3,500 are from Asia. This share is bound to rise in the next 10 years. In fact, as Boston Consulting Group’s research on the top 100 companies from rapidly-developing economies (RDE) has shown, more than 70% of these companies are emerging from Asia. Given the rapid growth of Asian economies, this is not surprising.

As illustration, India had about 25 billion-dollar companies in 2000 and today, the figure has grown almost seven times to about 160. This growth is accompanied by an increase in its importance on vital issues for the planet’s survival. Today, while carbon emissions per head are really low in Asia, it is still the largest contributor to carbon emissions with the fastest growth rate. The demand for safe water by populations emerging out of extreme poverty and deprivation in many countries has not been met and will be the most critical shortage it will need to tackle in the years ahead.

Yet, Asia as a continent or a region is large, diverse, spatially spread, and at different levels of maturity. The idea of Asia has been slow to develop for itself despite the attempts of some regional groupings such as Asean and Saarc. The relations between many countries are soiled by bitter histories and the maturity that wealth brings in such discourse is largely lacking. On balance, the debates between countries with similar histories in Europe is much more mature and balanced. There is much jingoism and a poor appreciation of common purpose for the planet and, in fact, for the region itself. Asia, for good reason, till now has seen itself at the fringe of the global economy and has been focused quite substantially on selling to the American consumer and competing with one another to do so.

If you look at trade patterns, over time the share of inter-Asian trade has risen from 31% in 1990 to 45% in 2008. This is a very large number already and will grow even further in the coming years. The popular psyche still suffers from a colonial hang up and within the region itself, each country has a need for respect which suggests a fundamental immaturity or a lack of real self-confidence in its dealing with each other. This could work in the old world order as all of Asia fought each other to capture the American consumer, in the era that is coming upon us, where the consumer will be Asia itself — will the old ways work?

Asian economies and political leaders have to get ready to bear the heavy responsibility of global leadership. This is a big challenge because there is such great poverty, old enmities, disputed borders and a history of great economic competition. To begin with, there is a need for enhanced regional collaboration based on enlightened self-interest and a recognition of the medium-term imperatives. This is important for Asia’s own development. If you dig deeper into EU and the US as a block, one is a unified country and the other is a fairly well-integrated community with a common currency and free factor flows within the region.

I believe there is a need for a new idea of Asia: one that is less jingoistic, with a better understanding of common purpose and with some statesmanship from the bigger countries. China, Japan and India will need to show a leadership that will have to at least acknowledge that their power might be frightening to their neighbours. A new paradigm will need to be evolved in how they deal with each other. A common vocabulary developed to discuss issues on which there is a large agreement and a rhetoric that is less threatening and more cooperative on issues on which there is less agreement. This is going to be a long journey given the national trade-offs between liberty and economic progress that have been made in different countries and which are now institutionalised.

Japan and India have democratic systems that have often caused gridlock and slow agreement on economic policy. China with growing affluence will need to find ways to open its political system over time. Business leaders and the population at large have the most to gain from the emerging Asia. They need to coax the political leadership and the media into a less strident vocabulary for discussion. Asia needs it and, in fact, so does the world. Asia has to rise to the leadership challenge that its destiny provides it in the 21 century.

(The author is chairman (Asia Pacific) of The Boston Consulting Group. Views are personal.)

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