East Asian growth on the decline?

By Jusuf Wanandi

JAKARTA (JP): A lot of questions have been raised both from within and without the region as to whether East Asia is reaching the end of its dynamic growth. Some have predicted that the region might go bust as a result of new confrontations that the region cannot cope with, confrontations between China and Taiwan or an outburst of hostilities on the Korean Peninsula. On top of these, there are overlapping claims in the South China Sea between China and some members of the Association of Southeast Asian Nations (ASEAN) that have not really been stabilized.

Questions have also been raised about the region's economic growth and dynamism. Paul Krugman believes that the region's growth has not been due to productivity. Recently, some countries are experiencing a slowdown in exports and growth has gone down from an average of 9 percent to 8 percent per annum, while in some countries the current account deficit has become unsustainable.

The APEC meetings in Manila were predicted to fail to come up with concrete steps toward trade and investment liberalization. The first Ministerial Meeting of the World Trade Organization (WTO) in Singapore was also expected to fail because of a confrontation between developed and developing nations, on such issues as the social clause and competition policy.

Last but not least, questions have been asked about the impact of political changes in the large developing countries, such as China, Indonesia and Vietnam, which as yet have to demonstrate a smooth leadership succession.

A closer look will show that the Asia-Pacific region has overcome the challenges that it has faced in the politico- security field as well as from the economic field. It must be stated that East Asia is only part of Asia-Pacific and the real entity we are speaking about is the greater region of the Asia- Pacific.

Both sides across the Taiwan Strait are now behaving well and restraining themselves after excessive outbursts during the presidential election in Taiwan. This is a complicated situation and no quick and easy solution is to be found but at the same time, both sides recognize the importance of not pushing the issue overboard because the region that needs them for development will not take that lightly; the region's peace, stability and economic dynamism will be greatly affected by their relations.

It is not likely that a major confrontation, as we saw at the beginning the year, will happen in the future. One important reason is that the strategic relations between China and the U.S. are now based on stronger commitments from both parties. Therefore, this relationship will become more balanced with a proper place being given to all aspects of the relations' security, economic and human rights interests.

One difficult part in the triangular relations between China, Japan and the U.S. is the new interpretation of the U.S.-Japan alliance. Transparency and continuous explanation are a "condition sine qua non" to make this alliance palatable to the Chinese. In the end, they have to accept that a U.S. forward- deployment in the Western Pacific is good for the stability and peace of the region, including for themselves. As a Pacific power, the U.S. will remain present in the region for its own national interest because it has to protect its investments and trade in the region.

Japan has maintained its good relations with China despite some concerns about China's nuclear testing earlier and relations with Taiwan. Also, China has shown restraint with regard to the adventure of some Japanese rightist group on the Senkaku or Diaoyutai islands.

Russia is not yet playing a major role in the region due to its domestic preoccupation. However, the extension of NATO into Central Europe will move it closer to China and it is trying to develop a more balanced foreign policy after following the West closely. India is not an immediate factor in the Asia-Pacific region, although it is interested to be more involved in the future.

On the Korean Peninsula, signs are that the uncertainties about the leadership in the North might soon be over and, therefore, greater certainty in their policies could be expected.

North Korea is facing tremendous economic difficulties and it can be expected that they are more willing to participate in the region, especially since the submarine incident has been overcome with South Korea.

China and the U.S. have, in their own ways, a certain influence on both South Korea and North Korea and must use it to create a more stable peninsula.

The South China Sea's overlapping claims have been stabilized between China and ASEAN, due to the creation of a dialog mechanism. At the official level, there are the ASEAN-China Senior Officials Meeting and bilateral Senior Official Meetings (Vietnam-China and Philippines-China), while at the second track level there is the Indonesian-initiated workshop series on the South China Sea, where confidence building measures and modes of cooperation between the claimants are being developed in the areas of environment, navigation and resources.

In the broader regional context, the Manila Action Plan for APEC has become an important milestone in APEC, because it has successfully laid down the first steps toward achieving the goals of Bogor, namely free and open trade and investment in the region in 2010 and 2020.

The problem now is to develop a credible mechanism for evaluation and overseeing its implementation. Concrete proposals in the area of trade facilitation have been argued upon and the principles of economic and technical cooperation, that are so important to the developing part of the region, have been formulated. The private sector's participation in the process has also increased.

The WTO Ministerial Meeting in Singapore is a victory of consensus and compromise between developing and developed nations and has again shown the leadership of APEC in the process, especially on the information technology agreement. It has been the spirit of consensus and compromise in APEC that paved the way for a successful and productive WTO meeting.

Meanwhile, it is widely believed that the economic slowdown in the region is mostly cyclical and that the region's growth will stay at around 8 percent. There is also the belief that governments have the political will to undertake the necessary structural changes.

ASEAN's commitment to build a sound regional community has been mainly shown through its support for regional institutions such as APEC and the ASEAN Regional Forum. Because only then could it guarantee a stable, peaceful and dynamic Asia-Pacific.

This regionalism is also conducive to creating an environment for making the necessary changes in domestic politics, especially for the larger developing countries.

The regional environment and domestic economic development policies will be all right and there is a strong political will to overcome the problems identified and recognized. However, the Achilles heel of the region is domestic political development in some of the developing nations in the region.

It is still uncertain how these problems will be solved and what impact they are going to have on the region. Perhaps one thing is clear: A peaceful, stable and economically dynamic environment in the Asia-Pacific will be helpful to domestic change, but is not a decisive factor.

The writer is Chairman of Supervisory Board of the Center for Strategic and International Studies.