Asia’s next growth engines

February 2, 2018

We are in an era of hegemonic shift, as economic gravity is shifting from West to East. The first wave of this “Asian Miracle” started with the dramatic growth and opening up in economies like Singapore, Hong Kong, South Korea and Taiwan, followed by the rise of China. However, as these industry-heavy, export-driven economies in East Asia are currently slowing down, the rise of Asia will become increasingly depended on other economies. If India, Indonesia and the Philippines can manage their economies’ transformation and leverage their strategic positions, they are well-positioned to become Asia’s next growth engines.

Our observations

Connecting the dots

India, Indonesia and the Philippines have striking similarities: they are in the same phase of development, will face similar problems in the near future and can benefit from structural tailwinds. For example, as they are nearing their demographic dividend while being in the lower-middle income range, the growing labor force will accelerate economic growth and free up public resources to invest in the productivity and future welfare of their populace. Furthermore, their large infrastructure gaps in combination with low debt allow these economies to further improve their competitiveness and boost growth. In this sense, their near-term growth trajectories are less complicated compared to a more advanced economy such as China.Last year we saw that there is increasing momentum for great change and tackling structural problems of these economies. Having strong leaders with powerful mandates, 2017 saw a string of harsh but necessary reforms, which effects will materialize in the coming years. In India, the introduction of the GST and demonetization led to bumpers in GDP growth, but with the effects of these idiosyncratic shocks fading, the reforms of ‘Modinomics’ will modernize India´s economy (for example, India moved up 30 places in last year´s Ease of Doing Business Index). Likewise, Indonesia´s radical tax amnesty program helped the government raise revenues and increase social transfers to boost consumption by the lower-income households. And while the Philippines’ tax reform might soften personal consumption, it will offset its effect on growth by the Philippines’ ambitious fiscal stimulus package called “Build Build Build”. Although these reforms look similar, they are mostly domestic-oriented. The next development phase of these countries will require a more outward-looking strategy, and this is where these three countries can benefit from cooperation. Increased trade and integration along trade routes in the Western Pacific region will help to develop their export capacity. Furthermore, more economic integration is in line with India’s maritime strategy, while Indonesia and the Philippines will benefit from India’s large and fast-growing consumer market. Besides being natural trading partners in the Pacific region, these economies will also have relatively similar growth trajectories and should simultaneously move up the value chain. Given their low industrial base but rapid digitalization, these economies can collaborate to develop their already advanced service industries. India’s Bangalore, for example, is already a world-leading IT hub, while Jakarta and Manila are important financial hubs in the region. With increasing trade and collaboration, new regional and global service hubs will emerge from India’s Eastern coast and in the Western Pacific. Lastly, because of their sheer numbers, these rising middle class consumers will adopt new lifestyles and reshape global demand. For example, Indian movies, Philippine hospitality or Indonesian cuisine and music will become export products between these countries, thereby becoming new sources of soft power.As growth is slowing down in Asia’s former growth engines, if only because of their size, India, Indonesia and the Philippines might become Asia’s next “tiger cubs” if they can manage to keep growth afloat.

Implications

  • Collaborations between the three countries in service industries like IT, media, or hospitality, will provide synergies, and boost the export capacity of these economies.
  • India will become a major player in the triangulation strategy of Indonesia and the Philippines, especially in domains like maritime infrastructure projects and the digital economy.

Series 'AI Metaphors'

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1. The tool
Category: the object
Humans shape tools.

We make them part of our body while we melt their essence with our intentions. They require some finesse to use but they never fool us or trick us. Humans use tools, tools never use humans.

We are the masters determining their course, integrating them gracefully into the minutiae of our everyday lives. Immovable and unyielding, they remain reliant on our guidance, devoid of desire and intent, they remain exactly where we leave them, their functionality unchanging over time.

We retain the ultimate authority, able to discard them at will or, in today's context, simply power them down. Though they may occasionally foster irritation, largely they stand steadfast, loyal allies in our daily toils.

Thus we place our faith in tools, acknowledging that they are mere reflections of our own capabilities. In them, there is no entity to venerate or fault but ourselves, for they are but inert extensions of our own being, inanimate and steadfast, awaiting our command.
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2. The machine
Category: the object
Unlike a mere tool, the machine does not need the guidance of our hand, operating autonomously through its intricate network of gears and wheels. It achieves feats of motion that surpass the wildest human imaginations, harboring a power reminiscent of a cavalry of horses. Though it demands maintenance to replace broken parts and fix malfunctions, it mostly acts independently, allowing us to retreat and become mere observers to its diligent performance. We interact with it through buttons and handles, guiding its operations with minor adjustments and feedback as it works tirelessly. Embodying relentless purpose, laboring in a cycle of infinite repetition, the machine is a testament to human ingenuity manifested in metal and motion.
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3. The robot
Category: the object
There it stands, propelled by artificial limbs, boasting a torso, a pair of arms, and a lustrous metallic head. It approaches with a deliberate pace, the LED bulbs that mimic eyes fixating on me, inquiring gently if there lies any task within its capacity that it may undertake on my behalf. Whether to rid my living space of dust or to fetch me a chilled beverage, this never complaining attendant stands ready, devoid of grievances and ever-willing to assist. Its presence offers a reservoir of possibilities; a font of information to quell my curiosities, a silent companion in moments of solitude, embodying a spectrum of roles — confidant, servant, companion, and perhaps even a paramour. The modern robot, it seems, transcends categorizations, embracing a myriad of identities in its service to the contemporary individual.
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4. Intelligence
Category: the object
We sit together in a quiet interrogation room. My questions, varied and abundant, flow ceaselessly, weaving from abstract math problems to concrete realities of daily life, a labyrinthine inquiry designed to outsmart the ‘thing’ before me. Yet, with each probe, it responds with humanlike insight, echoing empathy and kindred spirit in its words. As the dialogue deepens, my approach softens, reverence replacing casual engagement as I ponder the appropriate pronoun for this ‘entity’ that seems to transcend its mechanical origin. It is then, in this delicate interplay of exchanging words, that an unprecedented connection takes root that stirs an intense doubt on my side, am I truly having a dia-logos? Do I encounter intelligence in front of me?
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5. The medium
Category: the object
When we cross a landscape by train and look outside, our gaze involuntarily sweeps across the scenery, unable to anchor on any fixed point. Our expression looks dull, and we might appear glassy-eyed, as if our eyes have lost their function. Time passes by. Then our attention diverts to the mobile in hand, and suddenly our eyes light up, energized by the visual cues of short videos, while our thumbs navigate us through the stream of content. The daze transforms, bringing a heady rush of excitement with every swipe, pulling us from a state of meditative trance to a state of eager consumption. But this flow is pierced by the sudden ring of a call, snapping us again to a different kind of focus. We plug in our earbuds, intermittently shutting our eyes, as we withdraw further from the immediate physical space, venturing into a digital auditory world. Moments pass in immersed conversation before we resurface, hanging up and rediscovering the room we've left behind. In this cycle of transitory focus, it is evident that the medium, indeed, is the message.
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6. The artisan
Category: the human
The razor-sharp knife rests effortlessly in one hand, while the other orchestrates with poised assurance, steering clear of the unforgiving edge. The chef moves with liquid grace, with fluid and swift movements the ingredients yield to his expertise. Each gesture flows into the next, guided by intuition honed through countless repetitions. He knows what is necessary, how the ingredients will respond to his hand and which path to follow, but the process is never exactly the same, no dish is ever truly identical. While his technique is impeccable, minute variation and the pursuit of perfection are always in play. Here, in the subtle play of steel and flesh, a master chef crafts not just a dish, but art. We're witnessing an artisan at work.
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About the author(s)

Researcher Pim Korsten has a background in continental philosophy and macroeconomics. At the thinktank, he primarily focuses on research, consultancy projects, and writing articles related to technology, politics, and the economy. He has a keen interest in the philosophy of history and economics, metamodernism, and cultural anthropology.

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