"The Future is Asian" by Parag Khanna is one of the books that I read during the lockdown. Written before the onset of COVID-19, Khanna explains in the book why this century belongs to Asia compared to the last century that belonged to America and the one before that belonged to Europe. The book is worth reading for a holistic journey of Asia's history and how global affairs have been trending and shaping the world towards an "Asian future". I believe that the future in front of us in Asia in the post-pandemic world presents both bright opportunities and considerable challenges. I will discuss some of these in this article.
It is interesting to see how countries across the world are faring in the fight against COVID-19 and how leaders in various countries are stewarding their respective countries through this crisis. Great leaders from Winston Churchill to Franklin D Roosevelt rose to the occasions when history presented them with great challenges. We do not see any such global leadership today rising to lead the world out of this pandemic. Every country is fighting the disease in its own way without any global consistent standards for alert levels or roadmap for reopening of the countries, economies and the borders. In the age of unilateralism and ultra-nationalism, multilateralism and global cooperation have taken a backseat. In Asia, South Korea, Taiwan, New Zealand and some others did well to contain the virus. India benefited from the strong leadership of Narendra Modi who made the bold decision to shut down a large country with over 1 billion people and millions of migrant workers who work in large metros to earn a humble living. Some blame him for his authoritarian presidential type of leadership but to his credit he consulted with the chief ministers of various states through video consultations and brought consensus in a widely divergent country on the need of the continuation of the lockdown despite great economic loss and hardship for the poor people. His popularity has increased to near 80 percent putting economic stagnation, unemployment and controversy over the citizenship act behind. Most countries in Asia are led by older leaders who do not have designated successors. Who will succeed Modi or Xi Jinping of China when they move on? No one knows. The future leadership of the large countries in Asia and who will lead them could potentially decide how the next decades will turn out for Asia. Jacinda Ardern is a breath of fresh air but she runs a relatively smaller country, she is popular globally for her handling of the Christchurch massacre and now handling of the COVID-19 situation but she cannot be the driver of change in Asia from one corner of the continent. The next generation of leaders in India, China, Japan and South Korea will shape the coming decades for us. This may be an opportunity for a new pragmatic generation of leaders to emerge in Asia or there could be leaders who are more inward looking and far more nationalistic. Sometimes leaders are shaped by history, once again, the question is – can the next generation of political leadership rise to these occasions to shape the opportunities and face the challenges to come in Asia?
We have been blessed with relative peace in the Asia Pacific region for the last few decades. Asia has some of the flashpoints that can not only start regional conflicts but could even turn into global and nuclear wars. The Korean peninsula, Taiwan, Hong Kong, India-Pakistan, India-China border conflicts could start a serious global conflict any time. There is a school of thought that economic prosperity will drive the path to progress and wars are a thing of the past. Just like 9/11 and the current pandemic, the "black swan" event could happen and these are the most likely sources of origin for the next global conflict. The US-China tensions are likely to subside post November presidential elections. Whether there is a Trump 2.0 or a Biden presidency, both sides will have to move on from the rhetoric and come back to the table as they both need each other.
Supply chains disruptions
In a simplistic view, Asia is the factory to the world while Europe and the US consume what Asia produces. The intricate global supply chain is poised for some major disruptions. According to Kearney's US Reshoring Index report, the shift in sourcing from China has been going on for the past six years and even before the start of the US-China trade tensions. Supply chains are shifting from China to Vietnam, Mexico, and Europe and to other Low Cost Countries in Asia. The report states, "From 2018 to 2019, US manufacturing imports from China declined by 17 percent, a total drop of roughly $90 billion. However, US manufacturing imports from other Asian LCC countries increased by $31 billion in 2019. Similarly, manufacturing imports from Mexico rose $13 billion."
Supply Chains are not easy to shift and it is a gradual process. While some manufacturing will shift to these countries, critical supply chains will see more near-shoring and re-shoring. This will impact Asia as countries like Vietnam, India, Singapore, Indonesia and Bangladesh will benefit from some of these shifts. We will also see more intra-regional Asia to Asia flows including transhipments while the US will also shift more production back home and will take advantage of the America-Mexico-Canada (USMCA) agreement replacing NAFTA that will shift some productions to Mexico and Canada from Asia.
A country requires massive investments in infrastructure, friendly investment and labour laws, abundant supply of low cost labour and political stability to become an ideal source of manufacturing. One factor we often overlook is the culture of the country. Watch the Oscar winning documentary, "American Factory" on Netflix to understand what I mean. You cannot overnight transform a country into a manufacturing hub. China has done this over the last few decades to become "the factory of the world". If it was so easy, some of the Low Cost Countries in other continents would have become economic powerhouse by now but this has not happened. Vietnam is certainly emerging as a potential candidate to be that "one" country in a "China plus one" manufacturing hub in Asia.
We may very well see a vaccine that could be invented at a lab of the University of Oxford or of a US pharmaceutical company but at the end of the day, factories in India and China will have the capacity to produce the billions of doses that will be needed to immunise the world. Founding Prime Minister of Singapore, Lee Kuan Yew mentioned in his last book, "One Man's View of the World" that Asia did not invent Google or any of the emerging new technologies, most innovations came from the silicon valley and then they were mass produced in the factories in Asia. It will require massive cultural shift to promote entrepreneurship and "out of the box" innovative thinking for some countries in Asia to innovate and lead the next generation of disruptive technologies.
Migrant workers and social unrest
The economies in many Asian countries like Bangladesh and the Philippines are dependent on migrant worker remittances. Shifts in supply chains, reduction in mega construction projects, low oil prices and economic recessions will lead to return of thousands of migrant workers from the Middle East to home countries. With not enough jobs being created at home, this could lead to social unrest in some of the developing countries in Asia. Automation will further reduce job opportunities in the labour intensive industries like readymade garments. As Carl Benedikt Frey has highlighted the history of automation and how this has replaced and created new jobs throughout the history of mankind in his book, "The Technology Trap", we will need next generation of leaders in Asia to be creative to reskill the workforce to create employment for the thousands of returning migrant workers in the public and private sectors. While we are seeing economic stimulus that the central banks are announcing in many countries, realities are that small businesses and individuals are not getting direct benefits from these programs in some countries. Time has come for direct cash payments to individuals. Countries like India which has implemented national ID projects like Aadhar and national automated payments systems like UPI that will tremendously benefit. "Basic National Income", an idea originated in the Nordic states but whose time has come for implementation in Asia. America was never built as a welfare state as the country emerged with deep distrust of federalism and with ethos of triumph of individualism with keeping the government out of the way. The great depression led to the creation of some of the social safety nets in the US that are still there and supporting people in the bottom of the pyramid. Raghuram Rajan drafted this concept during the last general election in India for the Congress party which lost the election miserably; a good idea had a weak platform. Andrew Young brought freshness of ideas to his presidential campaign as an aspirant of the Democratic nomination in the US with the same idea. His campaign did not go far. This will be a new concept but the post-pandemic economic reality will force many reluctant governments to embrace this at least for some period of time until the economy recovers and new employments are created. In addition to the migrant workers, there are thousands of workers in the 'gig' economy and people who work in the retail sectors and restaurants and live from pay check to pay check. They have to be taken care of.
Global playbook for the next pandemic
It sounds pre-mature but Asia has to prepare for the next pandemic after coronavirus. Whether it was Sars, Mers, and now COVID-19; most recent pandemics originated out of Asia. There is no global or regional playbook on how to handle a pandemic. There has to be a global standard and communication protocols binding all the member countries of the UN to it. Human memories are short-lived and I hope we simply do not just "move on" once a vaccine is developed and the situation comes under control.
Ecommerce, apps and privacy
Ecommerce and instant payments have taken off during the pandemic with exponential volumes. At the same time, there are apps being developed to help facilitate contact tracing and track entry-exit. Post 9/11, we are now used to invasive security checks at the airports. This will be another big change where we do have to disclose our whereabouts to the authorities for the benefits of society. It will be critical to maintain the confidentiality of these data and to protect them from bad actors through cyber security breaches.
We have overcome wars, pandemics, economic depressions before. We will overcome this one too. When I talk to people, they tell me how difficult this has been for them. Some people who live alone tell me how difficult it is when you cannot go out and meet friends and family. There are thousands of people who have lost their jobs and living without a pay check. Think about the migrant workers, labourers at home who are without their daily sustenance. I have come across people who have lost their close relatives. For them, death toll is not just a number but the permanent and irreplaceable loss of near and dear ones. No words can bring comfort to them.
At these times, there are also stories of victory of humanity over gloom and darkness. There are thousands of healthcare workers who are at the line of duty every day for long hours serving thousands of patients. I refuse to believe that mankind in the end will surrender to a virus, we will win this battle and we will come out of this stronger. This is the war of our generation and we hope to live to tell these stories to the next generation. I strongly believe that the future does not belong to any one particular region; it belongs to all of us. Asia needs other regions as much as they need us. Together, we will come out of this and collectively march towards a brighter future for the whole world.