Can Asia remain stable amid the political shock waves from the West?

Daniel Wagner says while better prepared than in the past, regional governments and the people must avoid overreacting to tumultuous events emanating from the US and Europe

PUBLISHED : Monday, 30 January, 2017, 8:00am
UPDATED : Monday, 30 January, 2017, 5:25pm

As the world continues to gyrate from the political paradigm shift under way with the rise of “alternative” political movements, many countries will struggle to adjust to the “new normal”.

For developing nations and emerging markets, the stakes are particularly high as their ability to continue to grow economically and maintain social order will often depend on the continuation of a delicate balance between the rights of individuals, protection of domestic industries, minimising income disparity and maintaining security. This becomes more difficult when the status quo elsewhere is being disrupted. Governments that fail to anticipate the pace and depth of change may, in the end, fall.

Several countries hold the key to how political change manifests itself in Asia in 2017 and beyond. Apart from the obvious influence of China, India and Indonesia, some of the smaller and hitherto less influential nations may be crucial to just how dynamic political change in the region becomes. The Philippines has already proved it can punch well above its weight, by dramatically altering its political, security and military status quo. Its embrace of China has succeeded in upending decades of bilateral and multilateral norms.

Malaysia also has the potential to alter the landscape. It, too, has extended its hand to China. Under Prime Minister Najib Razak, its simultaneous embrace of the country’s Pan-Malaysian Islamic Party raises questions about whether it may ultimately adopt some elements of Islamic Law, which Indonesia is also in the process of doing.

Outrage in multi-ethnic Malaysia as PM Najib’s government backs Islamic law

Will other countries with a historical orientation towards the US change that stance, as the Philippines has done, and shift towards China? Will the embrace of some aspects of Islamic law in Malaysia and Indonesia result in an inexorable move toward Islamic law more broadly with time?

Asia faces a number of significant risks this year. If China oversteps its bounds while flexing its muscles, widespread condemnation in Asia and beyond could cause tension to heighten throughout the region.

The rise of political Islam requires a balancing act from Indonesian President Joko Widodo

If the US were to overcompensate for missing the mark on its “pivot to Asia” policy and ramp up its military presence in the South China Sea – as threatened by the Trump administration – that would also worsen regional tension.

Watch: Trump’s pick for top diplomat likens Beijing’s activities in the South China Sea to Russia’s in Crimea

If North Korea successfully launches long-range ballistic missiles, a stern response from the US is likely to result, and the threat of war could spiral. If Indonesia fails to manage its Muslim extremist groups, regional terrorism could rise. And, if Myanmar’s “experiment” with democracy proves to be a failure, all the progress made in the past few years could be lost, with the military retaking control of the government and other democratic movements in the region losing impetus as a result.

US to prevent China from taking over territory in international waters

The continued rise of economic nationalism is perhaps the biggest threat to cross-border trade, investment and lending in Asia.

Since so many Asian nations depend on international trade to maintain economic growth, a deterioration in the global trade regime will have a potentially severe impact across the region.

A gradual rise in oil prices will place economic pressure on consuming nations. The effects of a continued slow decline in China’s economic growth will surely be felt around the region. And, as multilateralism continues to be eroded, and the US either threatens to withdraw or actually withdraws from many of the world’s most important trade and investment agreements – as it has with the Trans-Pacific Partnership – a variety of Asian countries will undoubtedly wish to follow suit. This could lead to a vicious cycle away from multilateralism.

Depending on how the US addresses the ongoing disruption of the status quo in Asia in the next four years, it will either choose to yield to China’s rise or exist in tandem with it. The US knows it cannot supplant China’s rise, even as its growth rate continues to fall in the longer term.

The US knows it cannot supplant China’s rise, even as its growth rate continue to fall

The limited success of America’s “pivot to Asia” demonstrates the challenge any nation faces in projecting its power long distance in the 21st century. The same will be true of China, as it develops its “blue water navy”. That said, the US is not in danger of becoming irrelevant; it has too much history and too many significant allies in the region. It is, however, in danger of becoming less relevant over time. As China, India and Indonesia continue their rise, and as Asia’s tiger economies continue to grow and mature, America’s political, economic and security role in the region will become less significant, and less meaningful. China is the logical country to pick up the slack, but when and how will this be done?

How Asia’s four tiger economies can regain their verve

What seems clear is that 2017 presents a degree of rising political risk to Asia that has not been seen in quite some time. Asia is now much better prepared to address the idea of radical political change than in the past, with democracy firmly entrenched in most of the region. But history has shown that a single event can upset the proverbial apple cart, and quickly.

It will be incumbent upon Asian governments, and people, to resist the urge to overreact to the shock waves emanating from the US and Europe. If it is able to do so, Asia will find that it richly deserves the high expectations placed on it, and may then show the rest of the world how a diverse range of countries can weather political change while maintaining stability.

Daniel Wagner is managing director of Risk Cooperative and co-author of the new book Global Risk Agility and Decision Making