Present State of the World
30th Annual Plenary Meeting
Opening Ceremony, 10 May 2012
By Goh Chok Tong, Former Prime Minister of Singapore
Friends and colleagues,
Thank you for inviting me to address the Inter Action Council today on the “Present State of the World.”
I have had the pleasure of visiting Tianjin several times. Here in Tianjin, one can be excused for forgetting that the world faces many troubling challenges. I have been struck by the scale of Tianjin’s ambition and vision, and the pace of its development. The clearest example is the Tianjin Binhai New Area, a major economic development area to the east of Tianjin City. It is about 3,000 square kilometres in size. That is more than four times the size of my country, Singapore.
Like Singapore, Tianjin is home to many major global companies. It is also home to a government-to-government project between Singapore and China called the Tianjin Eco-city, a large-scale “green” development in one of the 10 zones in the Tianjin Binhai New Area. I had the privilege of proposing this project to Premier Wen Jiabao who immediately accepted it, given China’s desire to achieve sustainable development. The joint venture partners, backed by the Tianjin authorities and the two governments, have worked very hard and I am particularly pleased with the significant progress that has been made. We have transformed a tract of barren salt flats and a lake used for toxic waste into a sparkling, environmentally friendly city, which – when completed in about 10 to 15 years – will house up to 350,000 residents. The Eco-City will serve as a model of sustainable development for the rest of China.
Tianjin clearly illustrates the unprecedented economic growth China has experienced since Deng Xiaoping opened the country to the outside world in 1978. China’s growth will continue unabated, though at a slower rate, reflecting the maturing of its own economy and the global economic slowdown. At the same time, China’s emergence as an economic powerhouse will have a profound impact on the global economy and far-reaching implications on the geopolitical landscape.
Hence, I believe that it is appropriate for us to discuss the “Present State of the World” with China’s rise as a backdrop. In introducing this topic, I will not be prescriptive but instead try to highlight the key trends that have shaped, and will continue to shape our world. I will also pose some questions along the way that I hope we can address during the plenary session.
Current Global Transition
The world has changed profoundly over the last five years. This is hardly an insightful observation. In today’s highly interconnected world, economic dependence on other countries is a reality. It is also impossible for any country to isolate itself from major geopolitical changes and transnational issues like terrorism, pandemics and climate change. But my point is that picking our way through these changes often confounds us.
Take for instance the so-called “Arab Spring” that has changed the face of the Middle East. From Egypt to Libya and from Yemen to Syria, the aftermath of the uprisings and the legacies they will leave behind is unclear. It will take many years for new national leaderships to right their ship of state and restore equilibrium. What will be the ideology of the new leaders? Would they be secular or religion-based? To put it starkly, will they be pro or anti-West?
Transnational terrorism, fuelled by violent religious extremism, remains a potent threat despite the deaths of Osama bin Laden and other key al-Qaeda leaders. There has also been a worrying trend involving self-radicalised “lone wolf” terrorists who are motivated by extremist ideology – jihadist or otherwise. How should nations and societies deal with these worrying threats?
The state of the global economy remains weak. The U.S. economy has picked-up slightly, with leading indicators pointing to a nascent recovery, but questions over the sustainability of this recovery remain. However, the Eurozone is in a mild recession, and a sustained recovery is uncertain. Europe needs to address fundamental structural challenges for it to regain confidence and sustain its growth in future. Will the austerity measures work? Are the European governments politically strong enough to take tough, painful policy decisions and will Europeans accept prolonged austerity measures with high joblessness? If Europe does not address these serious challenges well, how will this affect the world economy? I am personally holding my breath as I watch the EU deal with its crisis.
I am glad that Asia has emerged relatively unscathed. Asia’s resilience is based on sound economic fundamentals. It has learnt its lessons well from the Asian Financial Crisis in 1997 and 1998. China, India and Southeast Asia continue to grow at a steady pace, albeit a shade slower than in the last decade. As the U.S. and EU struggle, can domestic consumption replace exports to drive Asian economies and help them to remain resilient?
International System in Transition
Beyond these specific challenges, the world is in fact undergoing a profound transition of power and ideas. For the last 200 years, the international system has been shaped and defined by the West. Since the end of the Second World War, this has been largely a Western-shaped world supported by the UN system and Bretton Woods institutions, themselves largely Western creations. That era is now drawing to a close. When President Barack Obama announced at the G20 Summit in Pittsburgh in September 2009 that the G20 would replace the G8, he was in effect acknowledging the end of the post-World War II era.
Asian growth, in particular the spectacular growth of China, India and the East Asian economies, is the main catalyst of change in today’s international system. The OECD estimates that based on current trends, emerging economies will account for nearly 60% of world GDP by 2030. Perhaps of greatest significance, China overtook Japan in 2011 as the world’s second-largest economy. Correspondingly, Chinese industry giants such as Huawei, Lenovo, Haier and the China National Offshore Oil Corporation are making their presence felt in various sectors of the global arena. In contrast, sub-Saharan Africa managed a respectable but slower annual average growth rate of 5.7% in the past decade. Many analysts expect Latin America to grow by 3.5 to 4% annually, although some countries could grow in excess of 6%.
These changes have raised many fundamental questions on the models of growth and the shifting balance of power to the East. China and some other East Asian countries are regarded by some quarters as an aberration to the Western historical narrative, because East Asian capitalism is able to flourish without Western liberal democracy. But is it an aberration? Or can countries flourish with Asian capitalism, i.e. a mix of market economy and state-owned-enterprises, and less liberal democracy or even one-party rule? Or to put it in another way, is market failure the root cause of many of the current economic and financial crises or is it political failure? These questions are being asked with increasing frequency, including in Western democracies, because of the financial and economic crisis and the high unemployment rates in the developed world and the political gridlock in many western countries.
However, it would be incorrect to characterise the global economic shift as “Asia rising, and the West declining.” The changes in the distribution of power that are occurring are relative, not absolute. It is not as if a Western system will be replaced by an Asian system. Also, the Asia that is growing is an Asia that has been profoundly shaped by centuries of contacts with the West and from which it adapted best practices from. Indeed, much of Asia, including Singapore, owes a debt to the West. The West has played a significant role in providing technical assistance, market, capital and investment that have been crucial to our development. Moreover, Asia has a strong interest in a Western economic recovery simply because it is now coupled with the West in a globalised economy.
U.S.’ Essential Role in the Global System
Some commentators have argued that the U.S. is a nation in risk of decline because of its fiscal situation. But the U.S. will remain the dominant global player for many more decades. No major issue concerning international peace and stability can be resolved without U.S. leadership, and no country or geopolitical grouping can yet replace America as the dominant global power. The U.S. remains a huge market for most economies and there is no viable alternative to the U.S. dollar as an international reserve currency in the short to medium-term. U.S. leadership in ideas and innovation in many fields remain unmatched. Thus, the U.S. has a critical role to play in leading and managing the transition from one international system to another.
Still, the last decade has shown that the U.S. cannot effectively exercise power alone. It must negotiate coalitions, such as the G20, to manage the international economy. It is widely recognised that the G20 had coordinated a global response to the 2008-2009 financial crisis, and helped avert a global economic depression. The current G20 is by no means the final or only possible configuration. But it is clear that there is no going back to G8 to solve the world’s problems.
I have briefly mentioned the role of emerging economies. There has been much talk about the BRICS in particular – BRICS with an uppercase “S” with the inclusion of South Africa to Brazil, Russia, India and China. The BRICS are undoubtedly important components of the new international system. They have the potential to become key global players, but – for the present and perhaps for the foreseeable future – they are all still primarily regional powers.
The country among the BRICS with the greatest global potential is China. China, like Russia, is a Permanent Member of the United Nations Security Council. Its decision to abandon an unworkable planned economic system resulted in its transformation and spectacular growth, as well as increasing integration with the international system. Many countries have prospered because of China’s rise and count China as one of their top trading partners. However, nothing in China’s long history has prepared it for a global role. Thus far, China appears to have defined its global interests in a selective manner. This is unlikely to be sustainable. China will inevitably have views on many global issues when its interests are affected. China can also expect to be called upon to play a bigger role on the global stage in areas outside its core interests. These will increasingly enmesh China in the global system and geopolitics.
The other major emerging Asian economy is India. India too, has undertaken major economic reforms and plugged itself into the international economy. To stay on the track of high and steady growth, it must get its politics right, and focus on pushing reform forward and developing its infrastructure.
Although we cannot simply extrapolate China’s and India’s past growth to project the future, their basic trajectory of growth is set.
Importance of Sino-U.S. Relationship
Given the indispensible role of the U.S., and the growing economic and geopolitical weight of China, the Sino-U.S. relationship will undoubtedly define any new international system.
Some degree of competition between an incumbent superpower and an emerging one is expected and inevitable. However, conflict is not. It is true that China’s growing economic clout has been accompanied by a growing defence budget. This year, China’s military spending passed US$100 billion for the first time. Though this is only one-seventh of the U.S. defence budget, it has led to anxiety for some countries, especially in Asia, over China’s growing military power. The U.S.’ moves to station marines in Darwin and talks over an increased military presence in the Philippines are seen as part of a larger strategy to “contain” China.
The media has also made much of the U.S.’ “pivot” to the Asia-Pacific. But the fact of the matter is that the U.S. has long played a major role in East Asia. It provided the foundation of the stability that has led to more than 30 years of growth and prosperity. It would also be a mistake to focus only on the U.S. military presence in East Asia to the exclusion of other dimensions of U.S. policy.
There are compelling reasons for the U.S. to continue engaging the region, many of them economic. The U.S. can also play a constructive role in its engagement with regional organisations and vehicles such as ASEAN, the East Asia Summit, as well as Free Trade Agreements (FTAs) like the Trans-Pacific Partnership or TPP. U.S. engagement is and should continue to be multi-faceted. This will continue to bring mutual benefits to the U.S. as well as the region.
Any rhetoric of “containment” is dangerous. My view is that any attempt by the U.S. to contain China will not work, nor will countries in the region want to take side on this.
Is the U.S. and China relationship a zero-sum game? Can it not be seen in win-win terms? Is “containment” the right strategy or is “engagement” not a better alternative? The rise of China does not imply the decline of the U.S. Conflict should and can be avoided, if competition and rivalry take place within a stable international framework. It is good that China and the U.S. are working together to ensure that their relationship is one based on cooperation, and not confrontation, engagement and not containment. Such cooperation will be necessary to manage challenges that are not in either country’s interests, such as those involving the nuclear programmes of the Democratic People’s Republic of Korea (DPRK) and Iran. While some stresses and strains are to be expected, and will be further complicated by domestic politics and geostrategic considerations, I believe that the world and Asia are large enough to accommodate both the interests of China and the U.S.
Regional Response to Shifting Geostrategic Environment
The Sino-U.S. relationship is already the most important bilateral relationship in East Asia. It sets the tone for the whole region. Many countries’ foreign policy calculations take both the U.S. and China into account.
Constructing a stable external environment for growth is not a straightforward matter in these times. Although countries have developed increasingly interdependent economies, market forces and shared economic interests by themselves do not create a stable environment for continued growth. Against this backdrop, regional integration and multilateralism have become important vehicles for countries to secure more markets, and protect economic as well as political-security interests. This is so in the Middle East (Gulf Cooperation Council), South Asia (SAARC – South Asian Association for Regional Cooperation), Africa (African Union), Australia and the Pacific island countries (Pacific Islands Forum), the countries on the Pacific Rim (APEC) and Southeast Asia.
Without doubt, the Association of Southeast Asian Nations, or ASEAN, is the most developed and effective of all these regional organisations. For instance, ASEAN has continued to be in the “driver’s seat” of various regional fora, trying to shape them and steer their direction as much as possible. After the Asian Financial Crisis of 1997, ASEAN found itself wedged between a resurgent India and China. There was really no other choice than to pursue deeper integration to “hold our own” in between the two powers.
All ASEAN members recognised the need to marry national with regional thinking, or run the risk of becoming irrelevant. This led to the ASEAN Charter being adopted in 2007. The Charter was a milestone in ASEAN’s evolution. It forms the foundation of efforts to make ASEAN a more effective and rules-based organisation, as well as to enhance integration across three pillars: political-security, economic and socio-cultural. ASEAN’s objective is to achieve an ASEAN Community by 2015. This will not be a supranational body like the EU, but rather an articulation of a common identity and shared values among the diverse populations in our region.
The core of these efforts is in the economic sphere. With a combined population of 600 million and a combined GDP of US$1.8 trillion, its objective is to create a single market and production base to make ASEAN more dynamic and competitive. ASEAN has made good progress. It has concluded a Trade in Goods Agreement, the ASEAN Comprehensive Investment Agreement, and a network of free trade agreements with our Dialogue Partners. To maximise and synergise the benefits from these FTAs, ASEAN is now working on a Regional Comprehensive Economic Partnership (RECEP) or “ASEAN++” FTA framework. We see the RECEP initiative, together with the ASEAN+3 and ASEAN+6 FTAs, as well as the TPP, as steps towards a broader Free Trade Area of the Asia Pacific. This will entrench an open regional economic architecture that will help to promote prosperity and stability.
Regional integration in Southeast Asia is also supported by initiatives beyond traditional economic activities. A key example is the Master Plan on ASEAN Connectivity, which is meant to better integrate ASEAN through enhanced physical, institutional and people-to-people links. There is also cooperation on issues such as sustainable development, health and the fight against narcotics. For instance, pandemics are a priority area for cooperation in the East Asia Summit, an ASEAN-centered organisation, alongside disaster management, education, energy and finance. The East Asia Summit has also begun discussions on food and energy security. This cooperation will support and buttress regional integration in an open and inclusive manner.
I have dealt with ASEAN at some length because its member countries are taking gradual but careful steps to integrate their countries with one another, the ASEAN region with East Asia and East Asia with countries across the world. It is an example of how we can build a more peaceful world based on fostering understanding and constructive cooperation, much like what the European Union did earlier.
The geopolitical landscape is shifting and dynamic. The boundaries between geopolitical and domestic issues are also blurring. Better educated and connected citizens will demand a bigger say on international issues and how their governments respond to them. No foreign policy initiative can succeed if it does not rest on a foundation of strong domestic support. Adjustments will be necessary at the global, regional and domestic levels, both in Asia and the West, as well as between Asia and the West. It is likely to be a long transition, with attendant crises and challenges.
I am aware that I have not covered many parts of the world or some other pressing issues. Africa, for example, is an important emerging continent but its impact on the world will probably not be felt for some time. Many countries there are doing well but a few still are mired in internal conflict. However, I am confident that the important issues that I have not touched on will be raised and deliberated in the plenary session.
Before I end, I would like to pose the same two questions that I raised when we met in the quaint and charming city of Quebec last year. Is the world better today than last year? My own view is that it is. Will it be better tomorrow? I am afraid that I do not know the answer. But I know that for it to be so, a conscious and concerted effort will be required on the part of all countries to solve the world’s economic problems, to manage the many transnational challenges and to avoid and manage potential sources of conflict, while a more balanced, stable, and interdependent global system takes shape. Members of the InterAction Council have experiences in dealing with similar problems before. Hopefully, our deliberations and resolutions here will contribute to this effort to bring about a better world.