In Asia: Weekly Insight and Features from Asia

From January 25-29, the world’s most powerful leaders from the public and private sectors gather in the Swiss town of Davos to try to agree on measures that will eventually impact billions of people across the world. The event is being held against an unprecedentedly gloomy global economic picture.

While many Asian nations have shown great resilience to the global economic crisis, the European slowdown is threatening their heavily export-dependent economies. Photo by flickr user OlliL.

The World Bank recently reported that the world economy will grow by only 2.5 percent in 2012, far below initial estimates of 3.6 percent. In Europe, leaders have yet to come up with a comprehensive solution to the eurozone crisis. As a result, World Bank forecasts for eurozone growth are now predicted to be at -0.3 percent, down considerably from a low but slightly positive 1.8 percent. In order to deal with this situation, IMF Managing Director Christine Lagarde recently called for a “larger firewall” against default in Greece, Spain, and Italy through a European Stability Mechanism (ESM).

While the World Bank predicts a positive growth forecast of 2.2 percent for the United States, problems in the eurozone are having an impact on U.S. growth. The Department of Commerce estimated that U.S. exports to eurozone countries dropped 6 percent in November of last year. In addition, a contentious U.S. election season could give lawmakers an incentive to move slowly on economic issues – including taxes and the budget – which could further impair the U.S. economy.

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For much of the past two decades, many Southeast Asians have expressed frustration that U.S. policy treated their region with benign neglect or indifference, and that the United States’ attention was episodic rather than consistent.

In 2011, the Obama administration announced that the U.S. needed to pay greater attention to the Asia-Pacific, particularly Southeast Asia. In the past, many Southeast Asians have expressed frustration that U.S. policy has neglected the region. Photo by Karl Grobl.

In 2011, the Obama administration announced that the U.S. needed to make “a strategic pivot” in its foreign policy, where over the next decade the dynamic will be to downsize the United States’ presence in the Middle East and Afghanistan, and to invest more and pay greater attention to the Asia-Pacific, particularly Southeast Asia. In the past year, Washington accelerated its relations with Southeast Asia in a number of symbolic and important ways. The U.S. was the first non-ASEAN country to establish a dedicated mission to ASEAN in Jakarta, named and confirmed a special representative and policy coordinator for Burma (also known as Myanmar), and expanded and deepened its bilateral relations with most Southeast Asian nations, particularly Indonesia, Vietnam, Malaysia, and Cambodia. Moreover, the Obama administration has made clear that it wants to be involved in regional architecture where ASEAN serves as the “fulcrum,” to borrow Secretary of State Hillary Clinton’s word. Hence, the importance of U.S. participation for the first time in the East Asia Summit (EAS) as a full-fledged member this past November in Indonesia. By engaging ASEAN nations, both multilaterally and bilaterally, the U.S. is dispelling the widespread belief in the region that it does not have a sustained commitment to Southeast Asia and its importance in helping to address both regional and global issues.

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In 2011, Asia grappled with a host of devastating shocks, both natural and man-made. As challenging and economically harsh as they have been, they have provided an opportunity for Asia’s emerging economies to dramatically assert their economic resilience and regional influence.

Despite a suffering global economy Asia, mostly driven by emerging super-powers like China and India, has emerged as a credible long-term partner for the United States and the European Union.

Despite a global economy plagued by low economic growth, high unemployment rates, and threatening debt levels, Asia has emerged as a credible long-term partner for the United States and the European Union, shedding its long-familiar image as merely a trade partner. Driven by emerging super-powers like China and India, Asia in 2012 is more self-confident in positioning itself as a global economic, financial, and political power.

A Year of Challenges

In 2011, two major natural disasters underscored Asia’s place at the center of global trade. March’s massive 9.0 earthquake off the northeast coast of Japan and subsequent tsunami constituted the most expensive natural disaster on global record, with a total estimated cost of $235 billion, according to the World Bank. In Thailand, monsoon flooding over the past six months has resulted in approximately $45 billion in economic losses thus far. In both cases, global supply chains were severely disrupted, sending ripple effects through the global economy.

Additionally, a stagnating eurozone and anemic U.S. recovery have created market anxieties over the strength of Asia’s own recovery. While Asia’s emerging economies are still on a growth trajectory, slumping global trade tied to a potential slide of the eurozone and the U.S. economies back into recession could slow Asia’s growth significantly. At the same time, Asia’s two largest emerging economies face serious domestic challenges of their own. China may find itself face-to-face with its own real estate bubble in 2012, and critics are quick to point out that consumer spending and household consumption lag far behind overall growth. Meanwhile, India’s large fiscal deficits threaten to derail its already slowing recovery. The government now faces the stark choice of raising taxes, which may further dampen growth, or cutting popular programs for the poor.

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One of the virtues of a regular exercise at peering into a new year is that you can check your own predictions from the past year. My predictions that I made here for the Philippines in 2011 were correct in three of four instances:

• Peace talks did begin (those with the Moro Islamic Liberation Front had more progress than those with the National Democratic Front).

• The budget system continued to work as the 2012 budget was signed into law in mid-December 2011 (with the government adopting a national payroll system for government employees).

• And, of course, boxer Manny Pacquiao defeated Shane Mosely.

My political prediction, though, that there would be continued concern with factionalism in the administration of President Benigno S. “Noynoy” Aquino III, did not pan out. While there continues to be talk of disruptive internecine feuding among certain groups, there has been relatively little evidence of that beyond the walls of the palace in the past 12 months.

Some of what transpired in 2011 happens so regularly that it does not merit the term “prediction.”  As one of the most disaster-prone countries in the world, when the Philippines is struck by a tragedy of the scope of the recent typhoon Sendong (international name Washi), one is not surprised but can instead try to draw lessons for future preparedness.

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My colleagues in The Asia Foundation’s Environment Program recently returned from Bangkok, where the Asia-Pacific Climate Change Adaptation Forum they were scheduled to attend was canceled due to the worst flooding in Thailand in 60 years.

Bangkok residents evacuate flooded neighborhoods during Thailand's worst flooding in over half a century. Experts predict that massive floods will hit Asia’s coastal megacities even harder due to stronger storms and sea level rise. Photo: Voice of America.

The disaster resulted in over 600 deaths, approximately 10 million lives affected, $21 billion in lost revenues from major industries, and an estimated $24 billion dollars in damage to property, according to the World Bank. Technical specialists blame the disaster in part on an unusually wet monsoon period coupled with the bad timing of a seasonal high tide in the Gulf of Thailand, but also on the government’s inefficient watershed management and infrastructure for draining high floodwaters on the Chao Phraya river.

In October, the Foundation’s country representative in Thailand, Kim McQuay, blogged about the poor readiness of the recently elected Puea Thai government and the Bangkok Metropolitan Authority to protect communities and businesses and to coordinate recovery for flood victims. In November, In Asia interviewed McQuay about the lack of foresight and responsibility on behalf of a succession of Thai governments and other stakeholders to undertake necessary preventive and mitigation plans that build resiliency to natural disasters.

So it’s sadly fitting that a flood prevented a network of adaptation practitioners from meeting to discuss solutions on how to make watershed management, among other challenges for strengthening disaster preparedness, more resilient to climate change. In fact, it was in the script. According to a 2009 World Wildlife Fund report, massive floods – predicted to be even harder on Asia’s coastal megacities due to stronger storms and sea level rise – are bound to disrupt business-as-usual more frequently by 2050 as a result of missed investments in crucial urban infrastructure over the past few decades.

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