Second, industrialisation has stalled in some countries. Historically, a strong industrial base has been vital for low-income countries to transition to middle- or high-income status because manufacturing can absorb a large amount of unskilled labour from the agriculture sector. This has been the experience of Japan, South Korea, Taiwan and, recently, China. 

However, some Asian countries are experiencing what Harvard University professor Dani Rodrik calls “premature deindustrialisation”. For instance, in Indonesia, the contribution of manufacturing (excluding oil and gas) shrank to 18 per cent of gross domestic product between 2011 and 2016, from 30 per cent before the 1997-98 Asian financial crisis. Furthermore, even if these countries were able to establish a good manufacturing base, it no longer produces as many jobs, due to affordable labour-saving technologies. 

Lastly, the development of global value chains plateaued in 2010. The hallmark of Asian growth was facilitating the flow of capital and technology through regional production networks, lowering the barrier for developing countries to participate in and benefit from trade. But the rise of domestically sourced intermediates owing to industry upgrading, particularly in China, coupled with anti-globalisation sentiment, poses a threat to that model.  

The changing economic structure means Asia has to seek a new growth model, different from the traditional manufacturing-driven growth. Indeed, most services in the developing world are usually informal and non-tradeable, and the tradeable segments such as financial services and information and communications technology demand high-skilled labour. However, technological improvement and digitalisation have allowed services to be commoditised, segmented and traded just like goods in the global supply chain.

With protectionism in the West unlikely to disappear soon, Asia, which views globalisation positively, looks set to speed up regional integration in goods and services, trade and finance. In fact, intra-regional trade and foreign direct investment reached 57.3 per cent in 2016 compared with 55.9 per cent between 2010 and 2015, according to the Asian Development Bank. And intra-regional cross-border tourism is becoming a new growth engine for many Asian countries like Thailand, the Philippines and Japan. The trend is poised to continue.  

Yizhe Daniel Xie is a PhD candidate at the Graduate School of Asia Pacific Studies, Waseda University, in Tokyo. Recently, he was a visiting researcher at the Institute for Economic and Social Research, University of Indonesia, in Jakarta and the Philippine Centre for Economic Development, University of Philippines, in Manila