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23 November 2013, Gateway House

The Manipal Dialogue: Asia together

From November 17-19, Gateway House and Manipal University hosted ‘The Manipal Dialogue,’ where 18 select scholars from 15 Asian nations discussed and debated the concept of an 'Asia, Uninterrupted.' T.V. Mohandas Pai, Chairman, Manipal Universal Learning, delivered the following speech as his keynote address.

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Today the world is at an inflection point, seeing tremendous change. It is not very often you see a change of such magnitude.

Asia used to be the largest economic power on this planet, led by India and China right from the dawn of civilisation. Only in the 18th and 19th century, with the increase in trade from Europe led by Great Britain and the domination of the East-India Company, we saw the rise of Europe and a change in global dynamics. This decade and the next we shall see a reversal, when Asia shall rise again. The last 300 odd years would seem a blimp in the long history of Asia, though the impact of those years would be very far reaching.

This change is driven by three forces: forces of globalisation, demographic change and technology.

Globalisation is an irreversible force. It gathered speed after World War 2.  It was the realisation that war is no longer acceptable that led to the formation of the European Union as a trade/economic bloc after WW 2. It was the realisation that global trade is the major determinant of change and growth that lead to greater peace.  But the most important phenomena were the student revolutions in France in the late 50s and in the U.S. around the Vietnam wars. For the first time young people rose up and said they no longer would fights wars and obey the dictates of the established order. That led to a liberal movement and the Hippie movement, which created a counter culture where war was abhorrent.

This rebellion of the young profoundly changed the attitudes to war after the great killing of WW2.

The post-WW2 global power architecture was built on the pre-war structures as far as Asia was concerned and saw the continuation of the then existing political power structure excluding those defeated in the war. Asia’s economic power was almost non-existent and Asia was a bit player. In the last 30 years the Eco system has changed tremendously and today Asia is the global engine of growth. The integration of the financial markets, the massive flows of capital to the emerging markets and the outsourcing boom have brought markets closer together. The financial crisis of 2008 demonstrated how a crises starting in America could bring the whole world to its knees.

Globalisation has also become irresistible because of trade.

Today in Asia we have 5-6 trillion dollars of reserves built up in many economies like China, Japan, S.E Asia, India and Middle East. These reserves are in currencies of the U.S. and Europe. The savings of Asia are financing the consumption in the United States. Globalisation also means capital flows increase and a commonality of ownership develops. Also currencies are majorly influenced by global events and financial markets.  Today about four trillion dollars of foreign exchange is traded across the world every day. The markets are getting integrated at the trade level.

China has become the factory of the world and has overtaken Germany to be the largest exporter and possibly the largest importer. The integration of China into Europe and America means that the west is dependent on China to ensure that inflation is in check and that consumption can be sustained. You will be surprised to note, in the last decade, income of the U.S middle class has not risen but inflation has been kept in check because of access to cheap goods. There has been an enhancement of the quality of life in Europe and in the United States, driven by the rise of China. At the same time we are seeing the flow of intellectual power from all parts of the world to the emerging markets reversing the flow of the past decades. Because of market dynamics the world is competing for the best talent, inviting the best and the brightest to work in their countries.

Intellectual Property and Design increasingly determine value. This is exemplified by Apple. Apple charges $500 for the iPhone for which only $108 is spent in China for manufacturing, the rest goes to the design and intellectual input from Apple.  The world is becoming a single market place with severe competition for the best talent in the world.

There is demographic change taking place with its own dynamics, notably the aging societies in Europe. I’m told, today, there are 3 young Germans to pay for the pensions of one senior German. In 10 years there will be only two Germans to pay for this. Scandinavia and Germany are both seeing a decline in population. The diversity in demographics is also a major driver. Fifteen percent of the French population is North African and Muslim. Fifteen percent of the U.K’s population is of Asian ethnicity and by 2050 this figure is expected to be 25%. The U.S. by 2050 will be majority Hispanic. Imagine the Hispanics dominating the political economy of the United States, what will be the impact on the world?  You will see the rise of a Hispanic bloc, a Chinese bloc and an Indian bloc across the globe.

Demographic changes can mean economies shrink too. Japan is a classic case. Japan currently has a population of 127 million. This is expected shrink to 97 million by 2050 and 67 million by 2100, according to some studies. Just last year more diapers were sold to senior citizens than babies. If you shut the door to immigration the only result is a shrinking country as your population ages.

So the demographic changes are reshaping the world and in this Asia has a distinct advantage.

China is seeing a change of the one child policy just now but it is said that China could become older before it becomes richer. India has a young population with 650 million under the age of 30 and till 2050 India could be the supplier of talent to the world. The African continent and middle-east are young, in the Middle-East 75% of the population are under the age of 18. When these people grow up with high aspiration, linked to the internet and high consumerism you can imagine what the world will be. While the developed world is ageing and shrinking, Asia is seeing an increase of young people.

Technology is re-shaping the world. Technology has made human life more enjoyable and long lasting. The average life expectancy of a human being in the world today is 72 years. In 1900 the life expectancy of an Indian was 27 years. In 1947 it was 31 years. Today it is 67 years. Women live till 88 in Japan, men till 85. The time is not far when people will live till 100. Technology has allowed people to deal with diseases and pain more easily thanks to better drugs and medication. Technology has led to stem cells research which can regenerate organs. Many billions of people around the world can look forward to a more healthy and longer life.

The rise of the internet is significant. Throughout human history knowledge belonged to a few and the great many were in ignorance. The creation of the printing press led to an explosion of knowledge but even then things were limited. We saw how libraries in Nalanda, Takshila and Alexandria were burned by invaders. When you want to invade a country the first thing you do is destroy the intelligentsia and the libraries which has the stored knowledge of the culture and its history. Today, the internet is accessible to entire humanity with the accumulated knowledge of the ages available to everybody free of cost. It is leveling the knowledge field across the world – a child in Timbuktu, in New York, in Manipal, all could have access to the same knowledge base. This access driven by technology means everyone has an equal chance. This is why tyrannical governments which seek to oppress its people will not be able to maintain control of information. So the whole idea of national boundaries has to also change. The biggest country in the world will soon be Facebook as an entity which has the largest number of people networked with each other.

The change on the base might not be high but the change at the margin is incredible. Talk to a 14 year old in any part of the world and you will see a very different person. The difference is this generation is born with technology, has access to an enormous pool of knowledge and has no idea of the past and is more concerned about the present and instant gratification. These people will be the future of the world as the next generation in power.

The world in the next 20 years when this generation dominates will be very different and technology will be at the heart of it. Behind all this, innovation cycles are moving faster. Change is so rapid, that within 15 years the quantum of change will be high and this will accelerate generational differences all across the world. This will also be a source of conflict. We will see people living longer and with greater knowledge across the world. Technology is also democratising society across the world because ideas can easily spread. The idea of Christianity took 500 years to spread, Buddhism took 600 years. The Internet took 20 years.

In all this change Asia will be the shining star. M. D. Nalapat said that the 19th century was the British century. The 20th century was an American century. The 21st century will be an Asian century. Asia once again will rise to be a dominant economic power in the world.

Asia makes up 35% of the world’s GDP and is growing at 5-6% annually. Asia makes up more than 60% of the world’s population who are also the youngest. If 60% of the world is growing at 5-6% what will be the impact on the world’s resources? What will be the impact on oil prices, commodities, consumption of iron ore, sustainability and climate change? All of these will become key issues. There will be a conflict between the rising markets and aspirations of Asia and the developed markets which is already consuming more than they should.

The planet is already seeing consumption at 1.5 times its ability to replenish itself. What this will result in is something we need to debate. But when Asia grows at 5%, North America grows at 2-3%, Europe grows as 1-2%, Asia could be 50-60% of the World’s GDP by 2030 and the dominant economic power.

So the time has now come to consider a great idea. The idea of an Asian common market without a political union and without a common currency—because it is almost impossible to even debate that. But we need an Asian common market to be a trade bloc where there is reduced friction to trade so that more intra-Asia trade can take place, easier flow of talent and access to capital. Asia has 5-6 billion dollars of reserves. This, plus manufacturing and talent can drive the continent forward. Yes, there will be political conflict and unresolved issues which could take 100 years to be resolved, but we need not let it bog us down. Trade dominates. And India-China trade is almost 80 billion dollars.  If you look at the trade between Southeast Asia and China you will see a trend that trade is increasingly the dominant theme.

Asia has technology, energy, the market and the finance to be a world in itself. But what Asia lacks is a common market as a meeting place. Existing world powers encourage splitting Asia into blocs- the idea of SAFTA, ASEAN, GCC etc. but the west is not talking of a common Asian market. What is needed today is an idea so strong so compelling that it brings people together. The global architecture—World Bank, IMF, UN etc. — which runs the world today must change. The 21st century will be the Asian century driven by trade, movement of people, capital, culture and tourism, and above all, an idea, the idea of Asia, Uninterrupted.

This text was the keynote address delivered by Mohandas Pai, Chairman, Manipal Universal Learning, during the Manipal Dialogue, an international conference organised jointly by Gateway House and Manipal University. You can read more about the Dialogue, here.

This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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