The big story for East Asia in 2008 is probably another season of sterling economic growth for the jumbo economies of China and India. Notwithstanding the sub-prime problems which threaten to dampen US economic growth and consumer demands for East Asian products, the two economic juggernauts are likely to steam ahead.
Simply put, the US sub-prime problem is unlikely to derail economic growth in East Asia. Even if the sub-prime problem were to persist, it might well turn out to be a boon to East Asia - a great opportunity for as evidenced so far by Asian sovereign funds buying into reputable financial institutions and assets in a globalised world.
2008 will bring its fair share of surprises, shocks and opportunities. Former US Secretary of Defense Donald Rumsfeld defined crystal-ball gazing for analysts succintly, “There are ‘known knowns’; there are things we know we know. We also know there are ‘known unknowns’; that is to say we know there are some things we do not know. But there are also ‘unknown unknowns’ - the ones we don’t know we don’t know”.
To be sure, there will be “unknown unknowns” in East Asia in 2008. Paradoxically, if one can forecast regional crises such as financial meltdowns or epidemics, these are merely “known unknowns” and not “unknown unknowns”, because East Asia has already experienced and is better prepared for such crises, institutionally and psychologically. Rather than to speculate on “unknown unknowns” for 2008 - which by definition cannot be anticipated - it would be more useful to consider the “known knowns” and the “known unknowns” as we gaze at East Asia over the coming year.
As suggested earlier, the “known known” is the continual economic rise of China and India. It is also apparent that Vietnam, Singapore and South Korea are likely to register strong economic growth. Lee Myung Bak, the new Korean president, will focus on economic revitalisation rather than “sunshine” policies towards Pyongyang and democratisation.
There will also be a new president in Taiwan this year. It is not inconceivable that exasperated Taiwanese voters will support a Pan Blue KMT president rather than another Pan-Green DPP candidate given the corruption and economic mismanagement of the Chen Shui Bian presidency. If this scenario were to come to pass, tension between Beijing and Taipei will lessen because a Pan Blue president will not support de jure independence for Taiwan. A KMT President is also likely to focus on economic revitalisation and better governance, rather than the politics of de jure independence and ethnic cleavages. Expect an economic rebound for Taiwan if a Pan Blue candidate were to recapture the presidency.
Warmer Sino-Japanese relations are likely to be anticipated with the down playing of controversial historical issues with dovish Japanese Prime Minister Fukuda Yasuo at the helm. Japan's domestic politics will remain in a gridlock as opposition parties are in control of the Upper House. Even if the ruling Liberal Democratic Party (LDP) and its ally, the New Komeito (Clean Government Party), were to win the forthcoming Lower House Election this year, the ruling coalition is unlikely to secure a two-thirds majority to override the vetoes cast by the opposition in the Upper House. However, if the Democratic Party of Japan (DPJ), the number one opposition party, were to win the 2008 Lower House Election, it would mean the end of LDP one-party dominance at the national level since 1955.
It is also clear that Japan, which gobbled up US assets (including cultural icons like the Rockefeller Center) in the late 1980s and early 1990s, has not seized the opportunity to buy into Citibank, Morgan Stanley and UBS during the sub-prime woes. That China, Singapore and Middle Eastern sovereign funds have the resources and will to act but not Japan suggests that the Japanese sun will be eclipsed if it cannot put its house in order.
The 2008 outlook for Southeast Asia will probably be mixed. The Government of the Philippines and the Moro Islamic Liberation Front (MILF) might well conclude a peace accord after settling the issue of an “ancestral domain” for the Moro people and bring the armed conflict in Muslim Mindanao to an end. This conflict happens to be the longest running insurgency in Southeast Asia. Indonesia will further consolidate its nascent democracy and few Indonesians want a return to the corrupt one-man dictatorship of the Suharto regime.
Political turbulence in Thailand is a “known unknown”. What is known is that the King is deeply loved by the Thai people and the final arbiter of the political system. Less clear is whether the People’s Power Party, the surrogate party of former Prime Minister Thaksin in exile, will be able to cobble together a parliamentary majority to form the government. The Muslim insurgency in Southern Thailand will continue to simmer with no solution in sight to address the alienation of an ethnic minority over issues of economic deprivation, cultural identity and political autonomy.
Myanmar and its appalling human rights record remain an embarrassment to ASEAN and have taken the shine off a promising regional community. Whether political violence will breakout again in Myanmar this year remain uncertain. The dilemma for ASEAN and other powers is that neither economic sanctions nor friendly engagement, work in the case of Myanmar because the military junta is hell bent on sustaining power.
Malaysia is another “known unknown” as it faces a general election this year amidst rising ethnic polarisation and tension. While the issue of ethnicity has always defined Malaysian politics, it took on an additional layer of complexity when previously passive Malaysian Indians took to the streets in mass protests apparently alienated by economic marginalisation and the insensitive razing of Hindu temples built on land with unproven title deeds. Malaysia has a civilisational importance beyond itself - a confluence of the major civilisations of Islam, Confucian, Indian and the West - which can be a model of multiculturalism, modernity and democracy. It would be a tragedy indeed if Malaysia were to descent into a vicious cycle of ethnic tension and political violence.
East Asia will continue to benefit from the sustained economic rise of China and India amidst fears of the US sub-prime problem and its fallout. What remains unclear is whether East Asia in 2008 and beyond can offer anything useful and inspiring to the world in terms of ideas and values beyond manufacturing products to keep consumers satiated.