Andrew Sheng

What lies ahead as Asean nears 50

There are two ways to see whether something is going to do well or badly - a top-down view or a bottom-up view. I spent more than a month travelling through Indochina and visited eight out of the 10 members of Asean in the last year to get a first-hand view from the ground up.

The regional grouping is just two years away from the 50th anniversary of its founding in 1967. This year, Malaysia chairs the community in a year that will fulfil the dream of an Asean Economic Community.

In a world awash with strife and uncertainty, Asean remains a rising star. McKinsey Global Institute has estimated that Asean - taken as a whole - is already the seventh-largest economy in the world, and by 2050 it will be the fifth-largest. Trade-wise, Asean accounted for a 7 per cent share of world exports in 2012, surpassing all Asian economies but China (11 per cent share).

With a US$2.4 trillion (S$3.25 trillion) gross domestic product (larger than India or Italy's) and a population of 620 million (100 million more than the European Union), Asean can power global growth. Asean's labour force is the world's third-largest and very young, with 50 per cent below 30 years old.

During my travels in local buses through Vietnam, Laos and Cambodia last month, I could sense on the ground Asean's rapid growth rate of more than 5 per cent per year. Every city and countryside I visited seemed to be under construction, very much like China in the last decade.

Cambodia, one of the poorest countries in the 1990s, achieved more than 7 per cent per annum growth over an extended period. A lot of this was through rapid urbanisation, which exceeded half of the population in 2013. According to the United Nations World Urbanisation Prospects, Indone-sia's urban population will nearly double to 228 million by 2050, with Asean having an urban population of more than 500 million by then. McKinsey estimates that 125 million households in Asean will join the middle-income class by 2025, an increase of 87 per cent.

War and water

AS I sat amid the ruins of Angkor Wat, I reflected on the two factors that struck me most about this tour around Indochina - war and water. Our tourist guide in Hanoi started her introduction to Vietnam's history as "fighting China for a millennium, France for a century and the US for two decades" and "we beat them all". You only have to see that parts of Laos and Cambodia still have unexploded bombs and see the musicians maimed by mines to remind yourself that this was a region marred by war.

I brought along Robert Kaplan's 2014 book Asia's Cauldron about how the South China Sea could be the next flashpoint of geopolitical conflict.

Born during the period of the Vietnam war, the Asean community realised that geopolitical neutrality and political stability were the anchors for peace and prosperity. Asean is now being actively courted by the US, Europe, China, Japan, India and Russia as well as the Middle East as a good friend and major trading partner. You only have to see how the rival proposals for trade and investments, particularly with the Trans-Pacific Partnership and regional groupings of Asean Plus Three (China, Japan and South Korea) as well as Asean Plus Six (India, Australia and New Zealand) to form the Regional Comprehensive Economic Partnership (RCEP), have basically geopolitical alliances in mind.

Unlike the European Union, Asean is not a political integration but an economic zone focused clearly on regional peace. Its fundamental strengths are its consensual nature of agreement, which can be highly frustrating for some, and its ability to get the balance of power right, not only among the external powers, but also within Asean. Even though Indonesia is by far the largest of the Asean nations, accounting for 40 per cent of the population and 36 per cent of GDP, one tends to forget that the continental side, from Myanmar to Vietnam, accounts for 27 per cent of the population and has the fastest growth potential.

The problems of Asean are shared with the rest of the developing world. Inter-country income disparity is narrowing but, within each country, inequality is still rising. Growth in the six less-developed countries remains far faster than that in the richer four - Singapore, Brunei, Malaysia and Thailand.

But the emerging six - Cambodia, Laos, Myanmar, Indonesia, the Philippines and Vietnam - all need higher levels of spending on infrastructure, education and health care in order to continue growing. Already, four Asean members have commented that they cannot meet the Asean poverty 2015 target of a poverty headcount ratio of 0 per cent. It was clear that fast growth has dealt substantially with extreme poverty, but, at the same time, the Lamborghinis I saw in Hanoi and Phnom Penh suggest the gap between the few urban rich and the mass rural poor is not being addressed.

The good news is that the Japanese, Europeans, Asian Development Bank and the new Chinese-led Asian Infrastructure Investment Bank are more willing to fund the infrastructure.

Furthermore, the fall in oil prices has meant that Asean members will enjoy cheaper energy and also enable Indonesia, Malaysia and Thailand to remove their energy subsidy policies, which in the last few years took up more than 30 per cent of total government Bud-get, or 4 per cent of GDP. This frees up funds for fiscal expenditure on infrastructure and dealing with social inequality.

Threat to rice bowl

HOWEVER, travelling through the Indochina countryside also revealed to me the importance of water in the whole ecology of the region. Almost all the water in the region comes from the monsoon rains and the rivers that flow from the Himalayas through Yunnan in China. The Mekong flows for over 4,800km through six countries, and provides water and transport for more than 80 million people.

Deforestation, global warming and changing weather patterns all threaten the fertile rice-growing areas from Myanmar to Vietnam, which depend on water availability. The region accounts for 12 per cent of global rice production. History showed that droughts and the associated malaria and water- based diseases accelerated the fall of the Khmer empire, the builders of the magnificent temples in Angkor. According to the Vietnam authorities, drought, salination and rising sea levels due to global warming may erode 40 per cent of the Mekong Delta in the next century.

Despite these challenges, I disagree with Kaplan that territorial disputes in the South China Sea over water and resources will be the end of a stable Pacific. First, there are just too many trigger points in the Balkans and Middle East before the East Pacific goes into armed conflict. Second, the region has too much to lose from rising trade and economic integration, not just within the region, but also with the US and Europe. Third, the powers that surround Asean are all nuclear powers and all great powers understand that the nuclear option can start with small skirmishes, with total mu-tual destruction if not managed.

One has to trust that having survived and thrived for nearly 50 years, Asean leaders have the common sense, pragmatism and moderation to understand that the regional and global future rests on a clear-sighted balance of power, opportunities and risks.

A cauldron needs an outside fire to be stoked. So far, Asean leaders have not lit their own cauldrons. The founding fathers of Asean had the foresight and overcame their differences to ensure the continued stability and prosperity of the region. One only hopes that outside powers have the wisdom and restraint to keep Asean growing in peace for the next 50 years.