The emerging markets of Southeast Asia differ markedly from other parts of the world in more ways than the admirable fact all the countries in the region exhibit robustly dynamic economies.
Unlike the Middle East, Africa and large parts of the former Soviet Union, many parts of Southeast Asia enjoy a relatively free press, at least outside China. Interestingly, there is a range of political models from fully fledged democracies such as India to single communist party systems such as China but broadly speaking they all exhibit social stability, relative religious tolerance and, to varying degrees, respect for property rights and the law.
The Arab Spring left huge Muslim populations in Asia largely untouched even as it set the Middle East alight. Taken as a whole, these are hugely positive events and no doubt have contributed and will continue to contribute to above average growth, the creation of a growing middle class and domestic stability.
Maybe because of this stability, we worry little about the wider picture and mostly focus on GDP figures, PMI numbers and consumption data. The reality is, though, we could also be overanalyzing such issues. China is not going to have a recession, nor are the other economies of Southeast Asia. Large, and in most cases still growing, populations coupled with the above advantages will see to that. So what else should concern us?
When those more obvious qualities are stripped away, underneath is a region still riven with nationalism of a much more aggressive kind than found in more developed parts of the world and more akin to other less successful emerging markets.
Like Southeast Asia Europe suffered terribly from two world wars, yet both its population and its politicians hold a much more conciliatory and forgiving view of their old adversaries. Indeed, the European Union was founded in large part on a universal desire to avoid ever having such conflict again and nation states have sacrificed a lot in terms of independence and, arguably, prosperity to achieve the current state of mutual respect.
The rise of minority nationalist parties in Europe suggests that strains still exist and politicians ignore them at their peril but they are highly unlikely to result in another European war like WWII. But, in Southeast Asia, the same length of time has passed yet nationalist sentiments exist much closer to the surface and are actively fanned by politicians from time to time if they deem it suits them.
There is little or no admission of past guilt, no sense of contrition or forgiveness for the events of WWII in the region. Distrust is, therefore, rife and angers flair other territorial and trade issues that are frequently seen through the lens of that historical perspective.
Supply Chain Dependence
One has to hope that the integrated nature of Southeast Asia’s economies and interdependence of supply chains, finance and cross-border trade would act as a restraint in the event of flashpoints over issues like the Senkaku/Diaoyu islands in the East China sea — China’s extension of its territory by concreting over coral atolls in order to create new Chinese islands — instability in North Korea’s totalitarian regime and maybe the longest running issue, China’s claims on Taiwan.
Particularly as after Iraq, Afghanistan and Libya it would seem Donald Trump does speak for a majority of U.S. society who would sooner countries sorted out their own problems, rather than rely on Uncle Sam’s protection. In a near future where the U.S. is less willing to speak quietly and carry a big stick, flashpoints have more potential to escalate than before.
We can see how Saudi Arabia has stepped into Yemen when they could see the U.S. would not, expect more of that in the years to come, regional players taking on the role that would historically have been fulfilled by the U.S. In Asia, the balance of risk is still on the side of common sense, shared interests and mutual gain trumping nationalistic pride, but then they said exactly the same about Europe before World War I.