As per the World Bank in its latest announcement, “Growth has picked up across the region and is projected to strengthen over the next few years. And almost all MENA countries have moved to reduce or eliminate energy subsidies, identify new sources of non-oil revenues, and expand social safety nets to shield the poor from adverse effects of change.”
Meanwhile the World Economic Forum informs that the MENA region hosts the world’s elite today and tomorrow by the Dead Sea shore, to try and debate some of the region’s current issues. Jordan has already held the WEF’S gathering in the recent past; refer to MENA-Forum.
ByMirek Dusek, Deputy Head of the Centre for Geopolitical and Regional Affairs, Member of the Executive Committee, World Economic Forum
For thousands of years, the Dead Sea has attracted visitors from far and wide, drawn by legends of its power to heal and rejuvenate. On 6-7 April, 1,000 key leaders from government, business and civil society will gather on its shores for the World Economic Forum on the Middle East and North Africa (MENA). Over two days they will confront the issues facing more than 400 million people.
A region of two opposing systems
The Arab world is a region of two contrasting systems. One system features a dynamic private sector, digitally native youth and open economies. The other has a bloated public sector and closed, controlled economies.
Most people in the Middle East and North Africa (MENA) interact with both systems, facing a mixed reality. Wealth sits side-by-side with poverty; an exciting entrepreneurial culture struggles with leaden bureaucracy; and an insatiable appetite for the new is balanced with a reverence for tradition.
How these two systems interact – and whether the dynamic, forward-looking system can thrive while respecting the traditions of the Arab world – is among the most important issues the region is facing today.
Five key questions
The following five areas will determine whether the Arab world can successfully move towards the system of innovation and competitiveness.
1. Can the Arab world develop a new, sustainable economic and social framework?
The social contract in much of the Arab world has relied on state-provided employment. This is unsustainable. Nearly half the population is under 25, and a quarter of those are unemployed. Add the biggest gender gap in the world, and it’s clear a new framework is needed.
2. Can a mechanism for conflict resolution be developed?
Ongoing humanitarian disasters in Syria, Yemen and Iraq require immediate attention, as do the longer-term projects of rebuilding fully functioning states. The region has been home to long-standing tensions, and unless these are mitigated, a thriving, competitive region will be hard to realise.
3. Can an ecosystem of entrepreneurship and innovation be developed?
The stories of individual success in the region are too often ones of thriving despite the economic framework. An ecosystem that nurtures innovation and encourages firms to flourish and grow is needed.
4. Are countries prepared for the Fourth Industrial Revolution?
Changes in the way we work are happening more quickly than most societies are prepared for. There is a short window for establishing the right regulatory environment, and reskilling people to make sure they – and the larger economies – can capture the opportunities of technology.
5. Will addressing corruption and transparency be a priority?
Governance reform is a “must do” issue in the region and disillusionment caused by perceptions of corruption is particularly strong among young Arabs.
Global questions, Arab answers
While other regions have grappled with similar questions, the Arab world needs Arab solutions, that capitalize on the unique strengths of the area while accounting for its important sensibilities. There are good examples of this starting to happen.
The UAE is playing a leading role in integrating the region into the global economy. The new Emirates Centre for the Fourth Industrial Revolution, run by the Dubai Future Foundation in partnership with the World Economic Forum, is working to shape governance and capacity issues in the MENA, and it could shape data protocols across the world as a whole. Europe is enforcing strict data protections and regulations, while the United States is taking a more liberal approach. The Arab solution being developed may not just be a better fit for the region, but for elsewhere as well.
Saudi Arabia already has an influential voice as part of the G20, and it’s a voice that can grow. In 2020, it will host the Riyadh Summit, presenting an opportunity for greater impact on the regional and global agenda. A forward-looking programme that strengthens the MENA economies and the global economy as a whole will be an important step toward long-term success for the area.
Actions not words
There is a dire need for a new collaborative platform that brings governments together with businesses and other stakeholders in private-public cooperation. This is the aim of the World Economic Forum’s summit in Jordan. By convening members of the public and private sectors, and bringing new voices into the arena, such as the 100 Arab Start-ups, we hope to facilitate forward-leaning dialogue that understands and respects the values and culture of the region.
The International Monetary Fund (IMF), keeps on pressing on all economic and policy issues of the day in every country. Doing so for all these years, it has, in the end, amassed such knowledge and experience that enabled it to have a worldwide view of the latest trends. Tackling corruption in government could save $1 trillion in taxes, but not only that as we were recently told, it could also resolve many of the plethora of all related issues throughout all regions in the developing and developed world alike. A point in case is elaborated on this particular article that is republished here for its obvious importance, especially for those developing countries of the MENA region.
No country is immune to corruption. The abuse of public office for private gain erodes people’s trust in government and institutions, makes public policies less effective and fair, and siphons taxpayers’ money away from schools, roads, and hospitals.
While the wasted money is important, the cost is about much more. Corruption corrodes the government’s ability to help grow the economy in a way that benefits all citizens.
But the political will to build strong and transparent institutions can turn the tide against corruption. In our new Fiscal Monitor, we shine a light on fiscal institutions and policies, like tax administration or procurement practices, and show how they can fight corruption.
Political will can turn the tide against corruption.
Corruption helps evade taxes
We analyze more than 180 countries and find that more corrupt countries collect fewer taxes, as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks. Also, when taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.
We show that overall, the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.
A few countries’ reforms generated even higher revenues. Georgia, for example, reduced corruption significantly and tax revenues more than doubled, rising by 13 percentage points of GDP between 2003 and 2008. Rwanda’s reforms to fight corruption since the mid-1990s bore fruit, and tax revenues increased by 6 percentage points of GDP.
Corruption also prevents people from benefiting fully from the wealth created by their country’s natural resources. Because the exploration of oil or mining generates huge profits, it creates strong incentives for corruption. Our research shows that resource-rich countries, on average, have weaker institutions and higher corruption.
Corruption wastes taxpayers’ money
The Fiscal Monitor shows that countries with lower levels of perceived corruption have significantly less waste in public investment projects. We estimate that the most corrupt emerging market economies waste twice as much money as the least corrupt ones.
Governments waste taxpayers’ money when they spend it on cost overruns due to kickbacks or bid rigging in public procurement. So, when a country is less corrupt, it invests money more efficiently and fairly.
Corruption also distorts government priorities. For example, among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries. It also impacts the effectiveness of social spending. In more corrupt countries school-age students have lower test scores.
Corruption is also a problem in state-owned enterprises, such as some countries’ oil companies, and public utilities like electric and water companies. Our analysis suggests that these enterprises are less efficient in countries with high levels of corruption.
Where there is political will, there is a way
Fighting corruption requires political will to create strong fiscal institutions that promote integrity and accountability throughout the public sector.
Based on the research, here are some lessons for countries to help them build effective institutions that curb vulnerabilities to corruption:
Invest in high levels of transparency and independent external scrutiny. This allows audit agencies and the public at large to provide effective oversight. For example, Colombia, Costa Rica, and Paraguay are using an online platform that allows citizens to monitor the physical and financial progress of investment projects. Norway has developed a high standard of transparency to manage its natural resources. Our analysis also shows that a free press enhances the benefits of fiscal transparency. In Brazil, the results of audits impacted the reelection prospects of officials suspected of misuse of public money, but the impact was greater in areas with local radio stations.
Reform institutions. The chances for success are greater when countries design reforms to tackle corruption from all angles. For example, reforms to tax administration will have a greater payoff if tax laws are simpler and they reduce officials’ scope for discretion. To help countries, the IMF has built comprehensive diagnostics on the quality of fiscal institutions, including public investment management, revenue administration, and fiscal transparency.
Build a professional civil service. Transparent, merit-based hiring and pay reduce the opportunities for corruption. The heads of agencies, ministries, and public enterprises must promote ethical behavior by setting a clear tone at the top.
Keep pace with new challenges as technology and opportunities for wrongdoing evolve. Focus on areas of higher risk—such as procurement, revenue administration, and management of natural resources—as well as effective internal controls. In Chile and Korea, for example, electronic procurement systems have been powerful tools to curtail corruption by promoting transparency and improving competition.
More cooperation to fight corruption. Countries can also join efforts to make it harder for corruption to cross borders. For example, more than 40 countries have already made it a crime for their companies to pay bribes to gain business abroad under the OECD anti-corruption convention. Countries can also aggressively pursue anti–money laundering activities and reduce transnational opportunities to hide corrupt money in opaque financial centers.
Curbing corruption is a challenge that requires persevering on many fronts, but one that pays huge dividends. It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.
With no details reported on the final electricity price agreed for a 500 MW solar project to be built in Oman, speculation will center on whether the victorious Saudi power company and its Kuwaiti partners have again trumped lower offers from overseas rivals. The winning ACWA says:
With big players from France, Korea, China, Spain, India, Turkey and the U.K. all having expressed an interest in developing a 500 MW solar park in Oman, the organizing body will have surprised hardly anybody by eventually settling on a winning consortium led by Saudi Arabia’s ACWA Power and two Kuwaiti partners.
The winner was reportedly announced late on Sunday night by Kuwait’s state-owned news agency KUNA. pv magazine has been unable to verify that decision, which was reported by news wire Reuters yesterday.
According to the Reuters report, ACWA and partners the Gulf Investment Corporation and the Alternative Energy Projects Co have landed the contract to develop the project at Ibri, 300 km west of Muscat.
Originally announced as a $500 million project, the Ibri scheme is now being reported as a $400 million plant but the commissioning date of early 2021 is unchanged.
The decision of commissioning body the Oman Power and Water Procurement Company (OPWP) will come as a fresh snub to French energy giant EDF, which last year submitted the lowest bid for a 300 MW scheme in Saudi Arabia – SAR0.06697/kWh ($0.018) for the energy generated – only to lose out to ACWA despite the Saudi company offering a higher tariff of SAR0.08872. The Reuters report did not carry any details of final negotiated power tariffs in the Omani procurement exercise.
EDF was one of 12 bidders shortlisted by the OPWP after an initial request for expressions of interest attracted 28 enquiries from around the world. Indian state-owned utility NTPC Ltd was filtered out at the first stage but that left big solar companies including Engie, X-ELIO, Hanwha Q Cells, BP, Chint, GCL New Energy and Abengoa in the running.
The OPWP announced in November there were three consortia left standing, with ACWA and its partners joined by a group made up of Chinese manufacturing giant Jinko Solar, French oil major Total and state-owned Abu Dhabi concern Masdar; and a third bid, from Japan’s Marubeni Corp and the Oman Gas Company.
“Developing an angel investor pool in the Middle East will create more opportunities and will strengthen regional economic growth” said Ramesh Jagannathan, Managing Director of startAD when introducing his article for Arabian Business weekly dated March 16, 2019.
Financing the angel investment market in Africa, Asia, Europe and America is estimated to be worth $50bn
We live in an exciting age for entrepreneurs. Fuelled by governments in the Middle East, the desire of transforming to an entrepreneurial based economy and boosting investment into building a healthy start-up ecosystem is high-up on the agenda. While there are sufficient funds to fuel potential start-ups in the ecosystem, the risk averse nature of venture capital (VC) firms mean they tend to concentrate their investments in later stage start-ups with crisper valuations. In a mature ecosystem, less than 1 percent of start-ups receive VC funding, and in emerging markets, this number drops by a factor of two. As VC investments continue to move towards more mature start-ups, there is a widening void of funding for early stage start-ups. The effect is not as severe in mature ecosystems as in an emerging ecosystem for a number of reasons.
Angel investors have traditionally filled this void. For example, in the US, annual angel investments of $24bn are being made in over 64,000 start-ups. In fact, 74 percent of all Silicon Valley investments are from entrepreneurial angels, who were previously a founder or a CEO of their own start-up. The phenomenon of “founders funding founders” highlights the organic nature of the process, that they are “local” and have a deep understanding of the entrepreneurship ecosystem and play a vital role in building the ecosystem. This deep knowledge helps to mitigate some of the risks that come with ambiguous valuation of early stage start-ups. More than 60 percent of the angels become active mentors of the start-ups they have invested in and generally take a board seat. More than half of them have a technology background.
By 2030, 88 percent of the next billion people joining the middle class will primarily come from India and China
Having the “right” angel investor tends to de-risk the entrepreneurial process and increases the start-ups’ success rate in raising funds in future rounds. Angels generally see 11 percent of their portfolio producing positive returns.
On the other hand, in emerging ecosystems, there is a dearth of previously successful entrepreneurs, thereby creating a “catch 22” situation. The time scale of the process to build a sustainable entrepreneurial ecosystem is made more acute by the fact that 67 percent of start-ups fail at some point in the process due to inability to raise a subsequent round of financing. The paradox is this: to have a healthy, sustainable entrepreneurial ecosystem, one needs a significant pool of high quality start-ups to cater to a large consumer middle-class and angel investors who have been successful entrepreneurs, preferably within the ecosystem. In other words, while having significant individual or group (eg syndicates) wealth is necessary, they are definitely not sufficient to build a robust ecosystem in an emerging economy, if the wealth is not “hard-wired” to local entrepreneurial experience. Ecosystems are organic in nature.
In India and China, this enigma has been resolved. While the pool of technology talent in these two countries has always been immense, due to the absence of middle-class, post WWII saw a significant “brain drain” from India and China to the US and Silicon Valley. The exodus of the “cream of the crop” from India, especially from the Indian Institutes of Technology (IITs), was unstoppable after the 1970s and from China since 1979, when the Chinese government started to send its best and brightest students and scholars to the US to catch up with western science and technology. By 1990, about 33 percent of all scientists and engineers in Silicon Valley were from India and China. Of these. 71 percent of these Chinese and 87 percent of these Indians arrived after 1970.
Going forward, by 2030, 88 percent of the next billion people joining the middle class will primarily come from India and China. We are now seeing a significant reverse “brain drain” of Indians and Chinese engineers, scientists and investors back to their homelands. About 80 percent of those returning hold graduate degrees in science, technology or business. China now boasts a sound angel investment culture, and while it’s still in its early stages in India it is gaining steam rapidly as the VC infrastructure is getting foundationally strong.
Turning our focus now to the UAE, and the GCC countries, the opportunity to “ride the wave” of India and China’s global tech dominance is crystal clear. But there are still gulfs to cross, such as the absence of a large, local technology talent pool. Without a disciplined and informed state-of-the-art process that dovetails to a VC infrastructure – by leveraging the local societal sensibilities and strategic inter-governmental alliances – the strength of access to large sums of local capital could quickly become our Achilles’ heel.
By all the ingredients for a master recipe to create a dominant UAE digital economy are in place and we need to diligently prepare, suit up and ride the long wave
Peter Thiel, co-founder of PayPal, discussed the role of governments in stimulating entrepreneurial ecosystems and compares the strengths of funding (supply side) versus founding based (demand) policies. Thiele recommended supply side policies as a mechanism to catalyse growth. However, in emerging economies, we could describe it as a “many body problem”.
We need to stimulate the process of accelerating the flow of global start-up talent into the ecosystem through the UAE.
Besides the government, this process should embed the local competency private sector stakeholders, such as in aviation, energy, transportation and logistics and finance industries. The Venture Launchpad programme at startAD is a classic example that shows significant promise.
Simultaneously, we should educate the regional angel investors about the mechanics and rigors of angel investment in digital start-ups and democratise access. The annual Angel Rising Symposium, now in its fifth year, brings the best minds from around the globe to discuss the best practises that are regionally relevant. The third piece of the puzzle is about building local capacity. StartAD and Khalifa Fund are partnering together to build the acceleration ramp to the global digital economic highway through programmes such as Ibtikari and Pitch@Palace.
All the ingredients for a master recipe to create a dominant UAE digital economy are in place and we need to diligently prepare, suit up and ride the long wave, leading the MENA region.
Governments in the Middle East are becoming more
receptive to growing private sector involvement in their economies because
public sector debt in many markets is ballooning, an official from the World
Bank’s International Finance Corporation (IFC) has said.
Speaking on an investors’ panel debate at the
Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North
Africa (MENA) director, Mouayed Makhlouf, said: “For the first time,
because of the massive rise in public debt across the region, we see a
difference. Our narrative with these governments has changed. Now, they are coming to us and they are saying
‘can you help us with the reforms?'”
Makhlouf said that the MENA region needs to create
300 million new jobs – “basically, double the population” by 2050 due
to the burgeoning youth population in the region, and that Egypt alone needs to
create around 700,000 jobs per year, although he said it is MENA’s fastest
growing economy currently, with GDP growth of 5.3 percent, compared with a
regional average of around 2-3 percent.
“The social contract in MENA is as such where
most of the services (are) provided by the public sector. But what you have ended up with… is a huge
public debt that has been rising for the past few years,” he said, adding
that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in
Jordan and 150 percent in Lebanon.
“For us, the main thing we need to find in
this region are… growth and jobs. And
I really believe both of these things can only come through a larger private
sector participation,” Makhlouf said.
In a separate panel on the outlook for the region’s
banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices
that began in 2014 had created opportunities for
international banks to advise governments that are looking to
diversify on how to embark on “monetisation and privatisation” of
Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil
revenues fell, and had financed these through “various instruments where
banks have been involved”.
“And we expect to see that continue over the
next 2-3 years.”
Although total GCC fixed income issuance declined
by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied,
according to Kamco Research, JP Morgan’s Raza said the current pipeline is
A faster flow
Raza said that at this stage last year, “over
$15.4 billion worth of issuance was done in the MENA region – this year, it’s
He added that in 2018, “the loan market
was (at an) all-time high in this region”. Figures published earlier this month from
Acuris showed that syndicated loan activity in the MENA region last year
outstripped bond issuance – with $133 billion of syndicated loans issued,
compared to $89.5 billion in bonds.
Raza said that at the top end of the corporate
banking market, “there’s lots of activity still happening”.
“There’s still quite a decent pipeline of
financing and refinancing,” he said.
However, Citi’s Kamal argued that the market has
been much tougher for SMEs in recent years.
“I believe that there is room for improvement
for all countries in the region as far as creating the right balance for SMEs
(is concerned),” he said.
He said that “time and again” in tougher
economic times large corporates, government-related entities and even government
departments have delayed payments to SMEs, which causes cashflow problems and
affects their ability to repay creditors.
“And some of the legal framework that
surrounds the corporate sector – we all know about bounced cheques and the
consequences of that. In summary, what
happens is SMEs can’t stay back in a number of cases (to) fight through these
cycles. So, we see skips, people leave
and that does not leave a very strong impact as far as consumer confidence is
Yet funding shortages for private sector firms can
also create opportunities – not least for the region’s private equity sector,
according to Karim El-Solh.
Speaking on the investment panel, El-Solh said that
his firm’s pipeline “has increased dramatically as a result of a lack of
availability of funding for businesses elsewhere.
“The IPO market is not open; the bank
liquidity has dried up so for us it’s an opportunity to come and be a provider
of growth capital. We are seeing more
companies, better quality companies, we’re acquiring controlling stakes at
lower valuations,” he said.
Makhlouf said more opportunities need to be created
for the private sector, stating that levels of private sector involvement in
the economy in the region lag behind other emerging markets.
“MENA region is only one-fifth in terms of
private sector participation compared to Latin America,” he said.
This article originally appeared on Fast Company, it was republished by the World Economic Forum on 8 March 2019. It is to be noted that in the eastern end of the MENA region, notably in the Gulf Cooperation Countries, Asian populations and investments happily cohabitate with the respective native minorities.
By Parag Khanna, Senior Research Fellow, Lee Kuan Yew School of Public Policy, National University of Singapore
This excerpt is from Parag Khanna’s book “The
future is Asian”. The book was chosen as February’s book for the World
Economic Forum Book Club. Each month, a new book will be selected and discussed
in the group. The author will then join in on the last day of the month to
reply to some questions from our audience.
When we look back from 2100 at the
date on which the cornerstone of an Asian-led world order began, it will be
2017. In May of that year, sixty-eight countries representing two-thirds of the
world’s population and half its GDP gathered in Beijing for the first Belt and
Road Initiative (BRI) summit. This gathering of Asian, European, and African
leaders symbolized the launch of the largest coordinated infrastructure
investment plan in human history. Collectively, the assembled governments
pledged to spend trillions of dollars in the coming decade to connect the
world’s largest population centers in a constellation of commerce and cultural
exchange—a new Silk Road era.
The Belt and Road Initiative is the
most significant diplomatic project of the twenty-first century, the equivalent
of the mid-twentieth-century founding of the United Nations and World Bank plus
the Marshall Plan all rolled into one. The crucial difference: BRI was
conceived in Asia and launched in Asia and will be led by Asians. This is the
story of one entire side of the planet—the Asian side—and its impact on the
Asians once again see themselves as
the center of the world—and its future. The Asian economic zone—from the
Arabian Peninsula and Turkey in the west to Japan and New Zealand in the east,
and from Russia in the north to Australia in the south—now represents 50
percent of global GDP and two-thirds of global economic growth. Of the
estimated $30 trillion in middle-class consumption growth estimated between
2015 and 2030, only $1 trillion is expected to come from today’s Western
economies. Most of the rest will come from Asia.
Asia produces and exports, as well as
imports and consumes, more goods than any other region, and Asians trade and
invest more with one another than they do with Europe or North America. Asia
has several of the world’s largest economies, most of the world’s foreign
exchange reserves, many of the largest banks and industrial and technology
companies, and most of the world’s biggest armies. Asia also accounts for 60
percent of the world’s population. It has ten times as many people as Europe
and twelve times as many people as North America. As the world population
climbs toward a plateau of around 10 billion people, Asia will forever be home
to more people than the rest of the world combined. They are now speaking.
Prepare to see the world from the Asian point of view.
To see the world from the Asian point
of view requires overcoming decades of accumulated—and willfully
cultivated—ignorance about Asia. To this day, Asian perspectives are often
inflected through Western prisms; they can only color to an unshakable
conventional Western narrative, but nothing more. Yet the presumption that
today’s Western trends are global quickly falls on its face. The “global
financial crisis” was not global: Asian growth rates continued to surge, and
almost all the world’s fastest-growing economies are in Asia. In 2018, the
world’s highest growth rates were reported in India, China, Indonesia,
Malaysia, and Uzbekistan. Though economic stimulus arrangements and ultralow
interest rates have been discontinued in the United States and Europe, they
continue in Asia. Similarly, Western populist politics from Brexit to Trump
haven’t infected Asia, where pragmatic governments are focused on inclusive
growth and social cohesion. Americans and Europeans see walls going up, but
across Asia they are coming down.
Rather than being backward-looking,
navel-gazing, and pessimistic, billions of Asians are forward-looking,
outward-oriented, and optimistic.
These blind spots are a symptom of a
related oversight often found in foreign analyses of Asia, namely that they are
actually about the United States. There is a presumption that Asia (and frankly
every other region as well) is strategically inert and incapable of making
decisions or itself; all it is waiting for is the US leadership to tell them
what to do. But from the Asian view, the past two decades have been
characterized by President George W. Bush’s incompetence, President Barack
Obama’s half-heartedness, and President Donald Trump’s unpredictability.
The United States’ laundry list of perceived
threats—from ISIS and Iran to North Korea and China—have their locus in Asia,
but the United States has developed no comprehensive strategy for addressing
them. In Washington it is fashionable to promote an “Indo-Pacific” maritime
strategy as an antidote to China’s Belt and Road Initiative, failing to see how
in reality Asia’s terrestrial and maritime zones cannot be so neatly separated
from each other. For all their differences, Asians have realized that their
shared geography is a far more permanent reality than the United States’
unreliable promises. The lesson: the United States is a Pacific power with a
potent presence in maritime Asia, but it is not an Asian power.
The most consequential misunderstanding
permeating Western thought about Asia is being overly China-centric. Much as
geopolitical forecasters have been looking for “number one,” many have fallen
into the trap of positing a simplistic “G2” of the United States and China
competing to lead the world. But neither the world as a whole nor Asia as a
region is headed toward a Chinesetianxia, or harmonious global system guided by
Chinese Confucian principles. Though China presently wields more power than its
neighbors, its population is plateauing and is expected to peak by 2030. Of
Asia’s nearly 5 billion people, 3.5 billion are not Chinese.
Asia’s future is thus much more than
whatever China wants. China is historically not a colonial power. Unlike the
United States, it is deeply cautious about foreign entanglements. China wants
foreign resources and markets, not foreign colonies. Its military forays from
the South China Sea to Afghanistan to East Africa are premised on protecting
its sprawling global supply lines— but its grand strategy of building global
infrastructure is aimed at reducing its dependence on any one foreign supplier
(as are its robust alternative energy investments).
China’s launching the Belt and Road
Initiative doesn’t prove that it will rule Asia, but it does remind us that
China’s future, much like its past, is deeply embedded in Asia. BRI is widely
portrayed in the West as a Chinese hegemonic design, but its paradox is that it
is accelerating the modernization and growth of countries much as the United
States did with its European and Asian partners during the Cold War. BRI will
be instructive in showing everyone, including China, just how quickly colonial
logic has expired. By joining BRI, other Asian countries have tacitly
recognized China as a global power—but the bar for hegemony is very high. As
with US interventions, we should not be too quick to assume that China’s
ambitions will succeed unimpeded and that other powers won’t prove sufficiently
bold in asserting themselves as well. Nuclear powers India and Russia are on
high alert over any Chinese trespassing on their sovereignty and interests, as
are regional powers Japan and Australia. Despite spending $50 billion between
2000 and 2016 on infrastructure and humanitarian projects across the region,
China has purchased almost no meaningful loyalty. The phrase “China-led Asia”
is thus no more acceptable to most Asians than the notion of a “US-led West” is
China has a first-mover advantage in
such places where other Asian and Western investors have hesitated to go. But
one by one, many countries are pushing back and renegotiating Chinese projects
and debts. Here, then, is a more likely scenario: China’s forays actually
modernize and elevate these countries, helping them gain the confidence to
resist future encroachment. Furthermore, China’s moves have inspired an
infrastructural “arms race,” with India, Japan, Turkey, South Korea, and others
also making major investments that will enable weaker Asian nations to better
connect to one another and counter Chinese maneuvers. Ultimately, China’s
position will be not of an Asian or global hegemon but rather of the eastern
anchor of the Asian—and Eurasian—megasystem.
The farther one looks into the
future, therefore, the more clearly Asia appears to be—as has been the norm for
most of its history—a multipolar region with numerous confident civilizations
evolving largely independent of Western policies but constructively coexisting
with one another. A reawakening of Western confidence and vitality would be
very welcome, but it would not blunt Asia’s resurrection. Asia’s rise is
structural, not cyclical. There remain pockets of haughty ignorance centered
around London and Washington that persist in the belief that Asia will come
undone as China’s economy slows or will implode under the strain of nationalist
rivalries. These opinions about Asia are irrelevant and inaccurate in equal
measure. As Asian countries emulate one another’s successes, they leverage
their growing wealth and confidence to extend their influence to all corners of
the planet. The Asianization of Asia is just the first step in the Asianization
of the world.