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Asian century in peril

Ehtesham Shahid
Filed on June 9, 2020
Covid-19 has turned a sustained period of growth in Asia into a tumultuous uncertainty

(Shutterstock)

In April 2020, the International Monetary Fund (IMF) announced that for the first time in 60 years, Asia as a region will not register any economic growth

Much before the dawn of the new millennium, the 21st century was declared as the Asian Century. There was near consensus that if certain demographic and economic trends persist, the Asian dominance would soon be complete and even extend to politics and culture. 

Already home to more than half of the world's population, Asia is still on its way to generate more than 50 per cent of global GDP by 2040, almost 40 per cent of global consumption, and has half of the world's middle class.

However, the plot has thickened with the Covid-19 pandemic, turning things upside down for Asia, as it has for the rest of the world. The slump is likely to be more pronounced in Asia considering the continent was among the fastest-growing regions in the world. 

In April 2020, the International Monetary Fund (IMF) announced that for the first time in 60 years, Asia as a region will not register any economic growth. So even as the fundamentals remain strong for Asia, the economic environment has changed drastically. 

But, has the Asian century dream turned into a nightmare? On the face of it, this will depend on how quickly normalcy returns to the continent and its engines of growth go on overdrive. It will also depend on how other parts of the world grow after the pandemic.

Asia before Covid-19

Projections favouring Asia's rise as an economic powerhouse has been going on for years. In his book - The Future is Asian - Parag Khanna famously wrote: "In the nineteenth century, the world was Europeanised. In the twentieth century, it was Americanised. Now, it is being Asianised - and much faster than you may think".

It has been a belief for a long time that if Asia continues its run, by 2050 it's per capita income could rise six-fold in PPP terms to reach the levels that exist in Europe today, making some three billion additional Asians affluent by current standards.

Going by this calculation, by the middle of the century, Asia would regain the dominant economic position it held 300 years ago before the Industrial Revolution began. 

Around 60 per cent of Asia's trade is happening within the continent, which is the same proportion as the European Union. The process of integration - labelled as 'Asianisation of Asia' - is starting to bear fruits as intra-Asian growth exceeds Asian trade with the rest of the world. 

Asia's response to Covid-19 has also largely been rapid and adequate. By the beginning of June, most countries across the region announced plans to reopen for business, focusing on rebooting economies devastated by the pandemic.

What could derail the 'Asian Century'?

For all its potential and upward trajectory, there are still around two billion poor people in the continent, mostly in South or Southeast Asia, around 35 per cent of the world's poorest, according to World Bank. 

Given the heavy economic impact Covid-19 is set to have on these economies, Asia has a long way to go in achieving its objective of totally alleviating poverty. 

There are always possibilities of a flare-up of the many conflicts that have kept the continent on tenterhooks. From renewed pitched battles on the streets of Hong Kong to the unending saga of Rohingya refugees in Myanmar, conflicts across Asia are craving for attention.

Recent skirmishes on the India-China border have raised concerns about the equilibrium going haywire. The India-China border tension hasn't eased matters on the other side of South Asia, where two nuclear-armed nations, India and Pakistan, remain eyeball to eyeball over age-old conflicts.

Covid-19 has turned a sustained period of growth in Asia into a tumultuous uncertainty. Some of the challenges the continent faces may have come irrespective of the pandemic but now they seem to have raised their head at the wrong place at the wrong time.

If the treatment of the WHO, following the pandemic, is anything to go by, the role of global institutions in determining the shape of the new world order only gets murkier. 

The pandemic has necessitated a massive re-orientation of resources, a major re-think in economic policies, and a huge mobilisation of the animal spirit. With wind gone from its sails, this could be quite choppy waters to navigate for Asia.

How efficiently Asia tackles the crisis and takes off as the world re-opens for business will determine the race of the century. Whichever way one looks at it, the Covid-19 pandemic will be seen as the tipping point for Asia, and beyond.

Ehtesham Shahid is a senior journalist and editor in the UAE. This column is the abridged version of an academic paper first published by TRENDS Research & Advisory. 

 


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