RUNNING OUT OF CHEAP LABOUR

AS WE proceed through the second decade of what promises to be the Asian Century, expectations of continuing dynamism in the region need to be tempered with caution.
After 30 years of reporting on the region, we applaud its remarkable success in transforming swamps into modern metropolises within a generation.
But we are fully cognisant that this facade of strength could be so easily undermined by a number of emerging issues in what is an increasingly complex world.
Equally, we acknowledge Asia’s ability to adapt in times of adversity and crisis.
Asia survived the 1997 Asian Financial Crisis with a “V” shaped recovery. 
The exporting engine of Asia was then shaken by a dramatic collapse in world trade in the aftermath of the 2008 Lehman crisis. It pulled through with domestic consumption on the back of China’s growth.
With such resilience in mind, in this, our 30th anniversary issue, we have dared to look at Asia in tomorrow’s world.
The coming onslaught of what are known as disruptive technologies will test Asia’s ability to adopt. Will these technologies be game-changers or spoilers?
Asia has shown that it can adroitly adapt to new technologies — the Internet, smartphones and so on. Far from being daunted, Asia has embraced such technologies, which have led to a boom in Internet shopping, social media and highly-automated manufacturing. Taiwan has been working on nanotechnology, new advanced materials and bio-sciences for many years at its Hsinchu Science and Industrial Park, which housed the first generation of such advanced research and development in Asia.

YET unquestionably, new technologies are going to be both a boon and a curse for different countries. Much will depend on their current state of economic development.
For those with many young workers seeking jobs in factories, the greater employment of robots in factories, or use of three-dimensional (3D) printing in manufacture, will test their capacities to adjust. Will such jobs still be available into the future?
For others, robots will enable them to retain a manufacturing base, in the face of labour shortages and rising wages. 
Ironically, the world’s most populous region is running out of cheap labour, particularly in its most industrialised economies. Ageing of the workforce is one reason for the shortage. A higher standard of living is another, as better-educated Asians shun jobs that their parents were eagerly prepared to accept. 
Some of the richer Asian countries will also have to rethink their immigration policies to enable workers from poorer nations to supplement their dwindling workforces.
How Asia turns technological advances to its advantage will determine just how the region manages — or muddles — through increasingly difficult times ahead.
Hopefully, new technologies will provide real solutions in dealing with a myriad of serious problems — unfortunate byproducts of industrialisation and rapid growth.
These have been well canvassed. They include environmental degradation, water shortages, energy demand, and many more. We did not attempt to address these problems in this issue. Not because we think they are less important — to the contrary. But space does not allow. Rather, we singled out the issue of ageing because it will impact significantly on the region’s future economic growth prospects. The Asian Development Bank warns that Asia’s demographic dividend will turn into a demographic tax.

THE days of double-digit voracious growth in Asia are mostly likely behind us.
Working from a larger base, GDP rates for all the once-dynamic countries of East and Southeast Asia will slow to single digit. As Asia ages, GDP growth rates will slow. 
One increasing burden on national budgets  in Asia will be welfare (for the aged) and healthcare (for victims of environmental degradation).
Nowhere is the list of problems more urgent and, in some sense, desperate than in China. Many books have been written predicting dire outcomes unless Beijing can deal with a series of issues confronting the leadership .
In its China 2020 series of reports in 1997, titled Clear Water, Blue Skies, the World Bank estimated the cost of air and water pollution in China at between 3.5 and 8.0 per cent of GDP. In the same series, the Washington-based bank examined two extremes in the broad spectrum of possibilities.
One is that China could suffer a condition called Sino-sclerosis because it has failed in its reforms to deal with serious issues like environmental degradation and corruption. The other possibility is a China with an agile, modern and extremely adaptable economy.
China today is at something of a cross-roads. As Chris Patten, former Hong Kong Governor, says, we all hope for the best outcome for China (see page 29) — the alternative is simply not tenable.
Victor Fung, a leading Asian voice on business in international forums, and someone with an intimate knowledge of the Chinese hierarchy, is hopeful that China’s current leader is seizing the moment to strike at the heart of corruption.
Fung says President Xi Jinping is now investigating reports of corruption in the powerful State-owned enterprises. None is more powerful than China National Petroleum Corporation, where former Chairman, Jiang Jiemin, is under a cloud. Corruption charges have claimed the scalp of former high-profile party figure, Bo Xilai. Others in high places, including the 70-year-old Zhou Yongkang, dubbed by overseas media as China’s security tsar, are also now implicated.
Some people remain sceptical as to how far Xi can, or will, go without jeopardising his own position. Successive previous leaders launched anti-corruption drives early in their administrations, only to see these wane, and the problem of corruption become more entrenched — and worse.
But some challenges, like ageing, will be difficult to resolve. Even if China had the will to change its one-child policy immediately, it would still take a long time, as they say, to turn the Titanic around.
We have focussed on China, rather than India or Japan, in this issue because of the global discussion on how China will be the largest economy in the world, and will play a key role in the global economy. If China was to stumble, that would have a far-reaching impact on the global community, not least its immediate neighbours in East Asia.

ASIA’s emergence on the global economic map has simply been remarkable. 
In 1983, when ATI first published, the collective GDP of this region was some US$2,076 billion, compared with the United States’ economy of US3,506 billion. Today, it is US$20 trillion (see table). In short, Asia’s economy has grown 10-fold in three decades, even allowing for Japan’s two-decade stagnation. With reserves totalling almost US$6.9 trillion, it holds the bulk of the world’s spare cash.
More growth is anticipated in coming years — as more Asians move into the so-called consuming class. In The World in 2050, a report first published in 2011 and subsequently updated by HSBC economist Karen Ward, six countries are identified in this region as among the world’s top 20 economies. Ward ranks China on top of her list, followed by India in third position, Japan (4th): South Korea (13th), the Philippines (16th) and Indonesia (17th).
Many other long-range forecasts, including one from the global accounting house, PwC, enthusiastically endorse the ascendancy of the Asian Century. However, as the cliché goes, past performance is no guarantee of future performance.
Many of these countries will likely be caught in what is known as the middle-income trap, despite sharing an ambition to be high income countries (upwards of US$40,000).
Singapore, Japan and Brunei (thanks to its oil) have each reached the next rung. Korea is caught awkwardly between middle income and the low end of high income. China, Thailand, Malaysia, Indonesia and the Philippines will struggle to become high income countries.
Asia grew rapidly under authoritarian governments, with autocratic leaders who had visions for their countries. Think Deng Xiaoping, Mahathir Mohammad, Suharto, Lee Kuan Yew — each has left an indelible legacy on his nation. 
In an age when citizens are more worldly and politically savvy, it is hard to envisage a new generation of leaders — befitting the mould of their predecessors — stepping into the ring.

* Florence Chong is Editor of ATI Magazine.

This comment is taken from our 30th anniversary issue, Asia in Tomorrow’s World. For full details of the contents of this issue, click here. Copies of Asia in Tomorrow’s World are available at $13.50 each (including postage). To order, call (61 2) 9970-6477 or email admin@asiatoday.com.au