ASEAN Must Balance China in Asia
Lee Kuan Yew is senior minister of Singapore.
Singapore-Fifty-five years after World War II is time enough to
gauge the potential and capabilities of the various peoples and countries
of East Asia. By the close of the 20th century, anti-colonialism and anti-communism
had ceased to be the critical issues. And the financial crisis of 1997-2000
has shown how differently the various governments and the peoples have
used these last 55 years. There is enough data for us to draw more than
tentative conclusions as to their future performance.
There is a neat divide between Northeast and Southeast Asia. Japan, Korea,
Vietnam are East Asians who adopted the Chinese script for centuries and
with it Confucian philosophy: hardworking, thrifty, always saving for
the education of the next generation and for a better tomorrow. The most
outstanding people have been the Japanese; their recovery from the ashes
of defeat has been spectacular with the help of American markets and patents.
The Japanese are now going through a difficult period as they settle on
a new model around which they will regroup in a national consensus and
Next, the transformation of the big cities along the China coast, like
Shanghai, Guangzhou, Dailan, Tianjin, Xiamen and Beijing itself, when
extrapolated for another 50 years, will mean a giant of an economy. Per
capita, China's GNP may still be about one quarter to one third that of
the US, but its total GNP and technological competence will make it a
By 2040, China and Japan's combined GDP will exceed that of the United
States. These developments will shift the economic center of gravity of
the world from the Atlantic to the Pacific. Already, American trade with
East Asia exceeds that with Western Europe. By 2050 the living standards
of nearly 1.75 billion people in Northeast Asia will reach levels approximately
that of present-day Japanese. The high growth rates of East Asian countries
in the last four decades were not fortuitous. They spring from the intense
cultures of peoples keen to acquire new knowledge and master new technology.
Six hundred million in Southeast Asia will achieve about half the per
capita GDP of Northeast Asia.
China will be a formidable player in the region. No combination of other
East Asian economies-Japan, South Korea, Taiwan and ASEAN will be able
to balance China. The Russian Federation will not be a major player for
at least another 20 years. Therefore the role of America as the balancer
is crucial if we are to have elbow room for ourselves. There was a time,
at the height of the Asian economic miracles, around 1990, when Indonesia
believed that it could carve out an area of influence for itself, when
the US forces left Subic Bay. Hence in 1990 when we gave the US access
to our bases and allowed them to maintain a logistics support unit in
Singapore there were protests. But when in the mid-1990s China built facilities
on the islands in the Spratlys and the Paracels, especially after fishermen's
huts were built on Mischief Reef, it was not only the Philippines who
realized that the dismantling of bases at Subic Bay did not add to security
and stability. Attitudes toward the American access to Singapore bases
underwent a silent change.
This need for the US as a balancer is clear to Korea, Japan, Australia,
New Zealand, the Philippines, Singapore and Indonesia. Malaysia has taken
a contrary view. Vietnam, Laos, Cambodia, Thailand and Burma, on mainland
Asia, as distinct from archipelagic Southeast Asia, take different views.
To meet the economic challenge of China's attractiveness to foreign investments,
the ASEAN countries will have to combine their markets in an ASEAN Free
Trade Area. It will be tough to compete against a homogenous China that
is likely to grow at 7-9 percent per annum. Hence the pressures on ASEAN
countries to combine their markets. Without this, the ASEAN countries
will be left out by international investors.
The way Northeast and Southeast Asia have responded to the financial crisis
reflects the differences in their cultures and political systems. Before
the crisis, Southeast Asia was more open and outward-oriented. Northeast
Asia, Korea, Taiwan and Japan, were seen as xenophobic to foreign investors,
with many non-tariff barriers to trade. Korea has shown determination
to implement the structural reforms agreed with the IMF. Thailand and
Indonesia have yet to complete their structural reforms to their banking
and corporate sectors. Because of Northeast Asia's aggressive liberalization
and deregulation, this differentiation between Southeast and Northeast
Asia is now gone. As a result, foreign direct investment and portfolio
inflows into Northeast Asia have risen strongly, and those to Southeast
Asia have slowed.
The country worst hit by the financial crisis has been Indonesia, for
the present mired in not just economic but political and social turmoil
as well. It will take some years to heal the ethnic, religious, provincial
and other divides that have been ripped open. Until Indonesia's leaders
restore order in Indonesia, investor confidence will be weak.
Despite regional autonomy, lasting solutions to Indonesia's current difficulties
must come from Jakarta.
That said, any fallout from problems in Indonesia is minor compared to
the consequences of a clash of arms across the Taiwan Straits. That could
change the course of developments in the whole of the Asia-Pacific. In
Taiwan, with a new president whose party stands for independence, the
danger has increased.
Another flash point, the Korean peninsula, now looks less likely to blow
up. But reunification and peace are not at hand. It looks more like a
protracted struggle. It is neither in the interest of the North, nor of
China, to have the North absorbed by the South. The North will use every
leverage-missiles, nuclear proliferation and the danger of collapse to
extract concessions from the South and the US, giving the minimum as quid
back to index