As 2016 ends, we are likely to remember it as earth-shaking and game-changing. It was a year of surprises that included Brexit and the elections of President Duterte and Donald Trump, and even the win of the Chicago Cubs and the defeat of the Golden State Warriors. Perhaps all these occurred because 2016 is the year of the Monkey, noted for naughtiness and a preference for, well, monkey business.
The political upheavals reflected a worldwide mood of protectionism, anti-globalization and a revolt against political correctness by the elite. A pivotal issue in both Brexit and the Trump election was open immigration (for immigrants legal or otherwise and refugees), a policy regarded by the liberal establishment as humanitarian but by the majority as threatening to jobs, peace and order, and the fabric of society.
The same attitude was reflected toward free trade, a linchpin of globalization. While it had generated economic growth, the widening gap between the unimaginably rich and the rest of society didn’t help the cause of globalization. Neither did it help that overpaid rascals responsible for global financial crises were given financial rescue packages and light, if any, punishment, while bankrupted shopkeepers and homeowners were left to suffer the crises’ consequences. The advice to tighten belts some more was hardly an enticing diet prescription for the starving.
All these has led to a volatile global scenario. Already Trump has scuttled the TPP (Trans Pacific Partnership) and enunciated an “America First” policy as the guiding mantra for his approach to international relations and trade. Furthermore, while Brexit may be problematic for the United Kingdom, the European Union itself appears to be on shaky ground.
These developments in the West have serious consequences for Asia, whose growth strategies have relied on export-driven manufacturing primarily to the US and EU markets. With the looming unreliability of these markets, quo vadis Asia? Clearly, Asia has to accelerate its initiatives toward making this the Asian Century. After all, the case for less reliance on the West had its genesis during the Asian financial crisis, when the West, led by America and the International Monetary Fund, dragged its feet toward a financial rescue package on grounds of moral hazard, in contrast to its mad rush to provide one for Mexico during the earlier Mexican crisis. I personally witnessed this as chair of the Apec finance ministers at that time.
To achieve the kind of dynamic economy the West has attained, Asia needs to put indispensable economic pillars in place:
- A robust and globally recognized financial system. Asia has the world’s highest savings rates but continues to rely on Yankee and Euro bonds for large-scale finance. The fledgling Asian bond market and the recent recognition of the Chinese renminbi as an international reserve currency are important elements upon which to build Asian finance.
- Widespread development of infrastructure. Since this requires significant levels of financing, China’s infrastructure bank, the AIIB, is a step in the right direction. But increased Asian influence on the World Bank’s leadership structure (should its president always be American?) and the IMF (should its head always be European?) may also be needed.
- Intra Asian agreement on security arrangements concerning potential flash points such as North Korea and the South China Sea. Asian countries must evolve a modus vivendi on such matters or leave their fate to a continuous US role as the regional policeman of last resort.
- Further development of an Asian trade community. The EU model with its open trade and borders is a good one to emulate but without a Pan Asian government or common currency. The Asean Economic Community and Regional Comprehensive Economic Partnership are positive inputs for the formation of a trade community based on a market whose population is 60 percent of the world’s.
Taking steps along these lines will result in an Asian Century, but crafted primarily by Asian initiative. That should give Asians something to crow about as we enter the Year of the Rooster.
Roberto F. de Ocampo, OBE, is a former finance secretary. He was Finance Minister of the Year in 1995, 1996 and 1997.