Singapore’s Leader on Asia’s Future

In the 1980s, the East Asian story was about Japan and the Newly Industrializing Economies, what was called the “flying geese formation.” Today, the nature of East Asian cooperation has changed.

The whole of East Asia is taking off. China is rapidly emerging. Japan is growing again. After the Asian financial crisis, Korea is remaking and reforming itself.

In Southeast Asia, ASEAN countries have undergone political transitions, restored confidence and resumed growth.

Beyond East Asia, countries such as India, Australia and New Zealand are also growing and adding to the vibrancy of the whole region.

The question is: How can we strengthen cooperation in East Asia, so as to sustain growth and prosperity for countries all across the region?

First, we need to manage China’s integration into the region. China’s growth into a heavyweight economic player is the central reality in Asia.

It brings tremendous opportunities to all, but also causes major changes to the status quo. Countries must make difficult adjustments to adapt to the changes and benefit from the rise of China.

China is already the major economic partner of many countries in East Asia. Trade is growing both ways — imports as well as exports. Greater China (Mainland China, Hong Kong and Taiwan) is among the top five trading partners for almost every Asian country — including Japan, South Korea and Singapore.

Overall, the Asian countries see China’s emergence as a major plus. They are striving to strengthen their economic ties with China and to benefit from the great opportunities opening up.

China’s growth is fostering regional economic integration and producing a new division of labor among the countries.

A digital camera from Akihabara that says ‘Made in Japan’ actually has its casing made in China, the CCD image sensor developed in Singapore and the optical lens manufactured in Japan.

However, China is also a formidable competitor. It is developing a broad range of capabilities. It competes with developed countries in R&D and high-end manufacturing and with developing countries in low cost, labor intensive operations.

So whether it is the hard disk drive industry in Singapore, textiles and garments in the United States or Europe or automobiles in Japan and Thailand, industries all round the world will come under strong pressure.

Countries have to restructure and upgrade their economies, develop new competencies, adapt to the new reality and prepare their peoples in order to benefit from China’s growth.

Second, we must strengthen co-operation among other Asian countries, so that even as China’s economic weight grows, it does not become the only growth engine in East Asia.

Countries have to restructure and upgrade their economies, develop new competencies, adapt to the new reality and prepare their peoples in order to benefit from China’s growth.

Cooperation among other Asian countries will produce a multi-focal, multi-connected pattern of growth, broader and more robust than a ‘hub and spokes’ configuration where every link either starts from or ends in China.

Third, East Asia must stay outward looking and not become closed or protectionist. Dynamic and vibrant as it is, East Asia depends critically on its links to other parts of the world.

Between the United States and China — although rivalry will never be entirely absent — there is no fundamental clash in ideology, unlike during the Cold War. China too depends on the market economy and pushes for economic growth and prosperity for its people.

The United States and China have already developed a substantial economic relationship, which will make conflict very costly. This gives both sides a strong incentive to manage differences and cooperate with each other.

We live in an unprecedented era, when almost everywhere in Asia we see growth, progress and hope.

But to realize the promise of stable and prosperous East Asia, we need to continue to strengthen cooperation, resolve differences, and put in place a regional architecture which enables all countries to grow in peace.

Adapted from the author’s remarks at the 11th International Conference on the “Future of Asia,” on May 25, 2005.