External Economic : Strategy Management

• Inter-regional cooperation
• External stability and sources of conflict
• The move towards Asianization

As the awareness of being Asian and a critical stance towards the West increase, the influence of the USA on Asia may fade. It has been argued that future conflicts will be primarily rooted in cultural differences, and will thus occur between different civilizations. A civilization in this context is defined as a cultural grouping at the

broadest level with which people can identify - beyond religion, race and nationality. As interactions between different civilizations increase, so does the awareness of differences between cultures.

The question then is: is there a single or several Asian civilizations? Where are the similarities and differences within the region, or between Asia Pacific and the West?



Asia Pacific is home to three of the seven or eight major civilizations: they Confucian, Japanese and Islamic groupings. (Hindu civilization is a separate civiizat dominating the Indian sub-continent.)

The division of Asia between various civilizations may have seri( consequences for any attempts to integrate the region economically and politically. long as Japan considers itself unique, it will not be able to integrate fully and emerg� a regional leader. By joining the G7 (the group of the seven most influential econol powers), it has become an associate of the West and set itself apart.

China, on the other hand, could become the new epicentre of the reg through its Confucian roots which naturally connect it to Taiwan and the Overs Chinese in Southeast Asia. Should Confucian thought regain influence in China, it co also find coimnon ground with the Korean and Vietnamese cultures. At this level abstraction, the differences between a Confucian-orientated, but Chinese-i civilization and the Japanese world become arbitrary and give way to commonalit One could then envisage a single Asian civilization solidly underpinning a far-reach regionalization process under Chinese leadership.

Such an East Asian civilization would leave others stranded. India would not the region; nor would Australia. What choices, however, would there be for Christ Filipinos whose culture resembles that of Latin America? And where would counti with several civilizations such as Malaysia, Singapore and Thailand see their destiny?

In Asia itself the present debate emphasizes commonalities rather ti differences. The strongest advocates of Asianization today come from neither China i Japan, but Singapore and Malaysia. Led by Lee Kuan Yew, they depict Asian values superior to those of the West, and often talk of 'Western decadence'. Malaysia's pri minister Mahathir still argues for an East Asian Economic Caucus which would br together only Asian nations. Not surprisingly, Malaysia emphasizes good relationsh with Asian neighbours, even with China, and loses no opportunity to complain lou about supposedly Western interference in its internal affairs.

Asianness is clearly visible in daily life: Asians continue to prefer Asian music Western pop stars; Japanese, Chinese, even Indian soap operas are staple even entertainment across much of Asia. Karaoke bars dot the urban landscape and holid abroad are increasingly taken in neighbouring countries.

Asian values provide a common thread across the region. While for the West inviolability of the individual is dogma, in East Asia the individual exists only in context of family and society. In contrast to the European welfare state, East As societies rely on the mutual support of families. Asians favourably compare their o thriftiness and deferment of present enjoyment for future gain with American-st overspending and indebtedness. Asians, they argue, make every effort to educ themselves; they display a strong work ethic and thrive in a morally healthy, consens orientated environment.

This somewhat idealized picture begs several questions:



Will the so-called Asian values still hold once Singapore or Malaysia reach the same standard of living as Switzerland or Japan?

How much of a morally healthy, consensus-orientated environment does one find in China or Indonesia today?

How much are Asian values truly accepted across Asia's diverse cultures and religions?

If 'Asian values' are equally valid and ingrained among Confucian Chinese, Buddhist Thais, Shintoist Japanese, and Muslims from Indonesia and Malaysia, then what is so special about them? Are they in any way specifically Asian, or are they simply common sense that can be shared by anybody in the world?

The boundaries of some Asian countries result from historical accident rather than longstanding national identities. In a decade that has witnessed the disintegration of the Soviet Union and Yugoslavia, the foundation of many new states and the reunification of Germany, the inviolability of countries or nation states is called into question. Neither separatist movements nor unifying forces in Asia Pacific should be underestimated. One cannot help thinking of indonesia, Malaysia and the Philippines, although none is under imminent threat.

China is a special case because of its size and history. In contrast with the ASEA.N countries, it is racially rather homogeneous with tightly controlled minorities,

and religion has no important role. This, and the strong desire of the Chin1 leadership to re-establish itself as a superpower, argues strongly against the probabil of a break-up such as happened in the former Soviet Union. However, minorit harbour dissidents who may be prepared to fight for independence; econoi disparities between China's coastal regions and its hinterland could also threaten country's unity in the long run. With potential disintegration looming in background, China has reintegrated Hong Kong, will soon bring home Macao, and actively pursuing the reunion with Taiwan. The latter raises by far the most criti issues, in terms of sovereignty and self-determination. Taiwan's fate will have a stro impact on the stability of the whole region.

In the split nation of Korea, the border between North and South will eventua disappear. While South Korean officials draw up plans for a slow, smooth transitic crisis management will probably be needed once the physical and ideological barrh that keep an homogeneous people apart are dismantled. A united Korea will internally unstable and externally weak, to the relief of its neighbours who fear t emergence of an assertive and militarily strong united country.

There are several territorial disputes in the region, some of them between ASE} countries, others between China and its neighbours. The major bones of contention the Kurile Islands in the north of Japan and various small islands in the China Sea. T Kuriles, currently occupied by Russia, belong historically to Japan; they are the cau for cool bilateral relations. China's seizing of the Spratly Islands, which are claimed several countries, raises suspicions about further expansionist moves.

Ideological differences have lost significance since the end of the Cold War. W the exception of North Korea, the probability of a conflict between communist ai non-communist nations has receded. Pressure to improve the economic well-being their people has pushed governments towards pragmatism, while the major commun powers have withdrawn their support from smaller countries and undergroui movements in the region.

Internally, however, ideological antagonism still exists. In China and Vietnam ti authorities persecute those who dare question the monopoly of the Communist pail Hard-line anti-communist countries such as Indonesia suppress even movemer vaguely leaning towards socialist ideas. In Cambodia, a civil war based on ideologic differences rages on.

Great power rivalries continue to shape the foreign policies of Asia Paci] countries, though in a new way. The former Soviet Union has faded away. Althoul Russia remains geographically an Asia Pacific country, its influence has becon negligible. This decline is more than compensated for by the re-emergence of China. nuclear power in the 1960s, a permanent member of the security council of the UN the beginning of the 1970s, China has taken a truly leading role in the region sin internal turmoil and ideological warfare with its neighbours subsided. Today, wi Hong Kong, Taiwan and the Overseas Chinese in its orbit, China is undoubtedly superpower.



China's influence is only partly balanced by Japan - a country often described as an economic giant but a political dwarf. The subliminal rivalry between the two rarely surfaces, but clearly exists. It is complicated by a long relationship, embittered by Japan's invasion of China in the 1930s and 1940s. Since the Japanese emperor's visit to

China in 1992, the two countries oPenly acknowledge their mutual economic dependence, and bilateral relations have warmed considerably. Japanese capital is pouring into China. Japan, however, remains wary of China's recent political assertiveness and the newly belligerent orientation of its armed forces.

With large military bases in Japan and South Korea and a naval fleet, the USA balances the influence of Japan and the growing assertiveness of China, and provides a security umbrella for the whole of Asia Pacific. Politically, it has close bilateral ties with a number of Asian countries and tries to direct their governments towards US ideals such as democracy, human rights or market liberalization. Through its membership of APEC, the USA has found a way to extend its influence multilaterally.

Culturally, US influence ranges from Hollywood films and hard rock caf to hamburgers, chewing gum and, more importantly, its prestigious universities where Asian families are proud to enroll their brightest children. In none of these dimensions can China or Japan match the influence of the USA, although its efforts to impose its own values on Asian societies lead to occasional anti-American outbursts. Asia, however, largely acknowledges the stabilizing role of the USA. Japan simultaneously opposes and appreciates its interdependence with the USA. China rejects Americans meddling in its affairs, but at the same time admires its enormous financial, military and technological power. Deep down, the other Asia Pacific powers trust neither Japan nor China to secure their future. As a neutral, non-Asian superpower in Asia, the USA thus remains welcome, if only as a lesser evil.

As the twentieth century ends, Asia finds itself dominated by one non-Asian and two Asian superpowers. It is doubtful whether this constellation can provide the

stability which the region needs to continue its rapid economic development.

Suspicions are that two of the players will collude to undermine the position of the third.

Asia Pacific has had far less success than Europe and North America in institutionalizing economic and political cooperation. Historical legacies, gross disparities among countries and alliances with different superpowers still prevent the region from



speaking with a common voice in international negotiations and reaching a consei on important issues.

The APEC group is one of many recent initiatives to increase cooperat Structured as a debating club whose decisions are not binding, it certainly lacks te Representing 50% of the world's population, 50% of its output and 40% of gic trade, it is closer to a mini-World Trade Organization than a regional forum based common interests. APEC cannot even claim to be a truly Asia Pacific body, sinra members include the USA and Canada. No wonder that some governments (Mala in particular) feel that their efforts to promote greater Asian unity have been hijack

ASEAN, formed in 1967, groups Thailand, Malaysia, Singapore, Indonesia, Philippines and Brunei. A tightly knit anti-communist group, for many years it effective mainly in security matters. Despite many attempts to foster inter-ASEAN ti and investments, member countries still do most of their business with outside partn To avoid becoming irrelevant when communism faded and Vietnam became a potet new member rather than a common enemy, ASEAN launched AFTA, the ASEAN I Trade Association. AFTA is supposed to convert the area into a free trade zone in future, but so many exceptions and exemptions were built into the last agreement it should not be expected to give much of a boost to member economies, nor to gre influence business investment decisions. The admittance of two new memi (Myanma and Laos) in addition to Vietnam did not add to its clout.

The failure of governments to bind their countries together is in sharp contrast

with the increase in inter-regional trade and investments. The close liflks between China, Taiwan and Hong Kong are the best example of the conflict of interests between governments and business communities.

The leading forces for regional economic integration are the Overseas Chinese, with their nationless enterprises and multinational firms, mainly of Japanese and more recently also of Korean and Taiwanese origin. The Overseas Chinese are the dominant investors in China, and Hong Kong and China are each other's largest trading partner. TaiwaneSe and Korean firms are important investors in Vietnam, while Singaporeans play an important role in Malaysia and the Philippines.

While inter-regional trade and investment is growing considerably, one cannot talk of the emergence of a third large trade bloc: trade with, and investment in, other parts of the world are also expanding. Exchanges with European countries often exceed those with next-door neighbours. Most of developing Asia is increasingly dependent on funding and technology from Japan - whose exports and investment are still overwhelmingly directed at the USA. The role of Singapore and Hong Kong as transshipment centres also leads to artificially high inter-regional trade figures. The increase of activity within the growth triangle of Singapore, Johore (Malaysia) and Batam (Indonesia) reflects the integration of adjacent localities rather than an increase in inter-Asian trade and investment. Similarly, the intensification of exchanges between Hong Kong and southern China was only the prologue to the former colony's integration into China.

Much of the trade and investment flow within Asia Pacific is based on a division of labour, in the sense that different countries carry out different activities in the value chain. The country of destination and final consumption is frequently a third one, often the USA. For example, Matsushita's 14 plants in Malaysia are financed by the Japanese and induce exports of machinery, parts and components from Japan; however, their main objective is to establish 'triangular trade' with the USA so as to capitalize on Malaysia's Generalized System of Preferences (GSP) status and the absence of quotas for certain products from Japan. While statistically such investments and exports from Japan count as inter-regional trade, it is doubtful that they lead to closer regional integration.