26 May 2005

The Coming Battle for Mastery of Southeast Asia

Ruminations from the Greater East Asia Co-Prosperity Sphere

They say a great idea never dies; it is merely adopted by others. In Europe, the Third Reich, Hitler's dream of a unified Europe was resurrected by the victorious Allies as the European Common Market, then the European Commission, and then the European Union. In Asia, since the 1960s, Japan, spurred on by America, resurrected its Greater East Asia Co-Prosperity Sphere, to the benefit of the economies and citizens of Southeast Asian countries.

With the stagnation of Japan's economic juggernaut and the expected ascendence of China, a battle for the mastery and the shape of the Greater East Asia Co-Prosperity Sphere has begun. The old US-Japan axis treated Southeast Asia in the beginning as a source of raw materials for Japan's industry, but very swiftly decided to industrialise the region in order to provide cheap manufactured goods for export to the axis. On the whole, Southeast Asia has little to complain about this arrangement as it was a real beneficiary, along with its new middle classes.

China's rise, on the other hand, does not augur well for Southeast Asian economies. Leveraging on cheaper land, cheaper labour, cheaper cost of manufacturing, the region bleeds blue collar, white collar and factories to China as it begins to integrate with the global economy. The problem is de-industrialisation and loss of skilled employment due to outsourcing to China - when both ends of employment cannot 'compete', when can Southeast Asians do better, cheaper than the Chinese? What does China need from Southeast Asia? It produces cheaper than them. Its workers, high or low-skilled, are cheaper than theirs.

The worry is Southeast Asia will serve no more than a source of cheap raw materials for its new master in the North. De-industrialisation. A roll-back, if not closure, of the knowledge economies of Singapore and Malaysia. An unwanted return to the bad old days of 19th century industrialisation, where central powers devastated the existing economies of occupied countries ("colonies") in their periphery into mere sources of raw materials for their hungry factories and their own middle classes.

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