#### Global Trends 2020 -- East Asia

**The views expressed in this and other papers associated with the NIC
2020 project**

**are those of individual participants. They are posted for discussion
purposes**

**only and do not represent the views of the US Government.**

**Global Trends 2020 -- East Asia**

If the nine key drivers listed below continue along paths currently
apparent, East Asia will develop three broad trends to 2020. First,
Northeast and Southeast Asia will progress along divergent paths: the
countries of the North will become wealthier and more powerful, while
the largest states in the South -- Indonesia and the Philippines -- will
become poorer, more populous, and more unstable. As Northeast Asia acts
as a political and economic centre of gravity for the countries of the
South, parts of Southeast Asia will be a source of transnational threats
to the countries of the North. Second, China's power will grow, along
with its intention and capacity to exercise influence in the region.
This will make its interaction with the US, both bilaterally and in
terms of the influence each power exerts on the other states of East
Asia, one of the most important shaping forces in the region to 2020.
Third, a range of powerful transnational forces will affect East Asian
societies, transforming human aspirations, political attitudes,
state-society relations and patterns of governance. As globalisation
pulls humans towards greater urbanisation, consumption and social
dislocation, societies will become demanding of governments in different
ways and with a range of new expectations. These transnational forces
are likely to exercise a major influence on how inter-state relations
develop in East Asia and between East Asian states and others.

But many of the drivers will spur endogenous reactions, for example
government policy responses, that will modify their trajectories. Then
there are events that could send each of these trends along a different
path. While any particular trend-changing event individually may have a
low likelihood of occurring, the likelihood of *none* occurring is not
very high. As we look further into the future towards 2020, the
likelihood of current trends continuing undisturbed falls.

**1. Demographics**

Northeast Asia and Southeast Asia will develop diverging demographic
patterns to 2020. This will set up important economic, migration and
political dynamics within East Asia as population pressures lead to
people movements, and political reactions to those movements.

In line with the trend in the developed world, the states of Northeast
Asia will begin to experience a significant slowing of their population
growth rates. Japan's population will peak by 2006 and then begin to
decline. South Korea and China will experience the beginnings of an
absolute decline in population after 2020. These three states will also
have significantly ageing populations. By 2020, 25% of Japan's
population and 15% of Korea's will be over 65; nearly 400 million
Chinese will be over 65 by 2020.[^1] These states will seek to manage
their ageing populations while preserving economic growth and levels of
public goods provision: economic restructuring and increased imports of
labour-intensive manufactures will be part of the response, as will
limited immigration in key sectors like health care.

In contrast, the populations of Southeast Asian states will grow
strongly. Indonesia, the Philippines (where the population is projected
to double -- to 170 million -- within 30 years) and Vietnam are
projected to have the greatest population increases by 2020, but others
will not be far behind. And the birth rates of Muslims will probably
continue to be higher than in other religious/ethnic groups. This means
that states such as Malaysia will become less ethnically balanced,
others such as Singapore will become more so, and countries like
Thailand and the Philippines with disadvantaged Malay minorities may
face even worse internal separatism.

In Indonesia, the Philippines, and perhaps Burma, population growth
rates threaten to outstrip economic growth and the capacity of
governments to provide basic infrastructure and public services.
Southeast Asia's two most populous states face the prospect of becoming
poorer by head of population despite moderately positive absolute
economic growth projections. And the strain of population growth on
education systems could see a decline in literacy levels, a trend with
negative portents for future economic growth.

Urbanisation will concentrate the population pressures on economic
prosperity, infrastructure and the environment in China and most of
Southeast Asia to 2020. In China, economic incentives, water shortages
and environmental damage will drive people to the southern cities at a
rate that will see near-equality of China's rural and urban populations
in 2020. Capital cities in Southeast Asia, already overcrowded, will
continue to draw people from rural areas, placing a growing strain on
already-inadequate infrastructure and public services. In Indonesia,
provincial capitals may absorb some of the urban migration, but Jakarta
will not escape further overcrowding.

The economic drivers of internal migration to the cities will also spur
migration between countries in East Asia. Southeast Asians, currently
quite mobile within the region, are likely to begin to try their luck
more often further afield, in Northeast Asia and elsewhere in the
developed world. A major change could occur in the willingness of
populations to migrate illegally. Population and poverty pressures could
see significant outflows of illegal immigrants to the developed world
from societies that have not hitherto produced them, such as Indonesia,
the Philippines and Malaysia.

Chinese will probably make their way into Southeast Asia, not as
low-cost labour, but as entrepreneurs (and criminals) seeking investment
opportunities. Already-established ethnic Chinese communities will
continue to be successful, and will serve as economic links to the
mainland China economy. If ethnic Chinese populations in Southeast Asia
are attacked or threatened, it may produce a nationalist reaction in
China that forces Beijing to exert its influence in Southeast Asia,
possibly leading to political tensions. A serious economic downturn or a
sustained bout of civil conflict in China could see a major,
destabilising outflow of Chinese into Southeast Asia.

A populous, urbanised, and interdependent East Asia will be vulnerable
to disease epidemics. The Pearl River Basin in southern China, which
combines high population density and close contact between humans and
animals will continue to be an incubator of dangerous zoonotic
diseases.[^2] Some states will be more able to handle SARS-type
outbreaks than others. Japan, with its advanced healthcare system and
practiced emergency services, will be more effective in containing an
outbreak than Indonesia, with its rudimentary health care systems and
tenuous control over the movement of people across its borders.

AIDS, a widespread problem in East Asia which has not yet become
obvious, will begin to bite as large numbers of the infected begin to
die. It will have a disproportionate effect on working and childbearing
generations and regional militaries. While the prospect of a cure for
AIDS is feasible between now and 2020, this will probably not affect its
lethality among those with advanced infections, and will have much less
impact among populations and countries that are in denial about or lack
the resources to tackle their AIDS problem.

**2. Natural Resources and the Environment**

Most states in East Asia are reliant on energy supplies external to the
region and will become more so. The demand for energy will outstrip
domestic reserves even in oil-producing states like Indonesia. East
Asian states will grow more dependent on Middle Eastern oil, but will
seek to diversify supply through Central Asian and other sources of
energy. This, and the tendency for East Asian states to take equity in
resource projects, means that Japan and China will take an even greater
interest in developments in important oil-producing regions than they
are now. China in particular will be determined to protect its sea lanes
to the Middle East. East Asia's thirst for oil and gas is also likely to
allow Russia to exercise resource diplomacy in regional politics.

Population growth in Southeast Asia and environmental damage across the
region mean that East Asia will see a rise in tensions over common pool
resources, such as water and fish. Some states will be pushed towards
open confrontation. Water and fishing disputes are already common and
these may intensify, particularly during supply emergencies. The effect
of the damming of the Mekong on fragile ecosystems -- and the economic
activity they support -- downstream could lead to tension between China
and its southern neighbours, testing China's commitment to regionalism.
The search for new sources of key resources, like hydrocarbons, could
lead to further conflicts over territoriality.

It is likely that irregularities and shifts in rainfall patterns will
continue and perhaps increase to 2020. An ongoing northward movement of
monsoon activity, or the foreseeable increase in the 'dwell times' of El
Nino, could see an increase in droughts and water shortages in Southeast
Asia and seriously affect crop yields. These patterns will have a
significant impact on regions in which there is a dependence on
subsistence agriculture, or where there is existing environmental damage
such as erosion and deforestation, or where rivers and other water
courses have been diverted into large infrastructure projects. Many of
the environmental problems in East Asia will be worsened by their
cumulative nature, such the effect of land-clearing practices on water
supplies and salination in parts of Java.

**3. Science and Technology**

While internet coverage of East Asia will probably not be complete by
2020 -- some rural communities may not even have electricity by then --
an increasing number of East Asians will be regular users of the
internet, especially among younger people. Societies and economies will
deepen their dependence on the internet as a conduit for communication,
business and administration. The internet will be progressively
engineered to better cope with random disruptions, but it will continue
to be vulnerable to targeted disruptions of key nodes. As developed
countries harden their internet nodes against random and purposive
attacks, it could begin to magnify the exposure of developing countries
to cyberspace 'hiccups'.

Communications technology, including the internet and mobile telephony,
may affect political outcomes. Though the dissemination of information
and ideas through the internet may have peaked, as technological
advances are likely to provide governments with a greater ability to
control information flows, communications technology will interconnect
populations as never before, providing people with multiple, independent
sources of information about the government and society. The internet
may also see traditional political machines in technologically-advanced
countries lose ground to younger generations able to communicate
electronically with voters. In China and elsewhere in East Asia the
internet may also act as an incubator and disseminator of nationalist
and extremist views.

East Asia will continue to try to develop centres of scientific and
technical innovation to rival those in the US and Europe. Many talented
East Asians will continue to be attracted to the big centres of research
in Europe and North America, although a reverse tendency is beginning to
develop, where East Asian scientists who have worked in the US are
beginning to return to their own countries, taking their experience and
expertise with them. Most East Asian countries' already-impressive
capacity to adopt and use innovations from elsewhere will probably
quicken, sometimes resulting in East Asian countries' picking up and
applying American technological breakthroughs faster and more
effectively than US industry can.

**4. The Global Economy and Globalisation**

East Asia's integration into the global economy is likely to continue,
with most states opening their economies further in order to attract
investment. This broadly positive outlook, however, is contingent on
maintenance of an open international economic and trading system.

Constraints will persist in the shape of institutional weaknesses and
the desire to protect sensitive sectors, as in Japan. But the imperative
of economic growth may also lead to institution-building. The diversion
of investment towards China and India may spur Southeast Asia to
implement plans for a single economic community and investment area by
2020.

China is set to reap the biggest gains from globalisation in East Asia
to 2020. Beijing aims to maintain its current growth trajectory and
quadruple GDP by 2020, becoming the world's largest economy. But China
faces challenges that could restrain growth: AIDS, pension shortfalls,
environmental degradation, social unrest and problems that could flow
from a stalled or mismanaged economic transition. China also faces
ongoing dilemmas in complying with multilateral trade agreements while
seeking to maintain its high economic development rates.

Foreign direct investment flows into China will continue to outstrip
those to Southeast Asia because of ongoing structural weaknesses there.
And Chinese exports will increasingly compete with Southeast Asian
exports on global markets. But China's expansion will also provide large
economic opportunities for Southeast Asian economies. Overall, they
stand to gain more than lose from Chinese growth.

Economic development in East Asia will be uneven, heightening
disparities within and between countries. A growing divide may emerge
between richer cities and poorer rural communities. States and
populations bypassed by investment and development will grow more
resentful. Political tensions will rise between developing and stagnant
communities --- especially if governments focus on urban centres at the
expense of hinterlands. Economic disparities will also drive labour
migrations, another contributor to political tensions.

Increasing integration with the global economy will continue East Asian
economies' vulnerability to economic shocks, and periodic crises and
downturns are inevitable. The gap between states adapting more or less
efficiently may grow, affecting regional relationships. Indonesia stands
out as a country likely to struggle to meet the challenges of
globalisation, increasing the risks of social and political volatility
and making Jakarta an often awkward and sullen partner in the region.

Recurring economic crises could lead some East Asian states to become
more insular and increasingly disaffected with global economic and
financial institutions. Crises will also affect the development of
regional economic and financial monitoring and policy mechanisms. If
mechanisms such as an Asian Monetary Fund are looked to in times of
crisis, and are effective in their responses, regionalism will be
reinforced as a political and identity imperative, possibly at the
expense of global institutions.

**5. National and International Governance**

*National Governance*

Authoritarian states in East Asia are unlikely to be able to avoid
ceding some control and popular participation in government in the years
to 2020. China will struggle to maintain an authoritarian political
system as the economy expands and a generation of the Chinese elite
becomes increasingly familiar with democratic concepts and expectations.
And ruling interests in Laos, Cambodia, Vietnam and Burma will face
growing public recognition that they are responsible for sclerotic
systems that are obstacles to more promising futures. But the changes in
these states may not amount to full-scale, Western-style democracy, and
greater popular participation may not necessarily bring stable or even
better government.

Most democratic or quasi-democratic states in East Asia will face
challenges to their established structures and cultures of governance.
Indonesia, the Philippines and Thailand will be increasingly unable to
reconcile entrenched interests with the needs of the people, and as
their democratic systems prove unable to deliver on expanding popular
demands, threats to democracy could arise. Extended periods of
experimentation and fine-tuning the frameworks of government, from Japan
to Indonesia, are in store. More authoritarian states like Singapore may
find popular demands for greater accountability and participation will
rise as economic growth rates flatten. Literacy rates will remain high
in Northeast Asia but could well decline in parts of Southeast Asia such
as Indonesia, the Philippines and Burma, reinforcing the dangers to
democracy south of the equator.

Many East Asian states have in the last decade experienced a growing
tendency of populations to blame their governments for bad things that
happen, such as the SARS epidemic. This trend will probably continue,
particularly as popular communication is further facilitated by new
technologies, placing greater expectations on governments with a limited
capacity to deliver. This effect may be more pronounced within
authoritarian states, where populations are newly-able to affect
government policy, and have not yet become cynical and apathetic about
governance issues. In many East Asian countries, from China to
Indonesia, public opinion and popular nationalism are establishing
limits to government policies. This trend will possibly continue, with
dangerous consequences if the region becomes prone to confrontations.

*International Governance*

Regional structures of governance in East Asia will develop slowly to
2020. While a strong leader and vision for institutional regeneration
are unlikely to emerge from within any of its member countries, ASEAN
will continue to be too important to other states to be allowed to
wither. ASEAN and APEC will remain vital aspects of China's policy of
regional engagement. China has capitalised on ASEAN's
post-economic-crisis lack of leadership and direction to build its
influence in Southeast Asia, and will continue to do so. Japan's and
South Korea's relationships with ASEAN are to some extent pulled along
by China's influence and initiatives, and will continue to be. All three
countries have an ongoing interest in ASEAN+3, and will probably move
towards a separate North Asian economic grouping as well.

While APEC will continue to be an important forum, especially for annual
Leaders' meetings, East Asian concerns about US regional dominance could
see East Asian regionalism channelled increasingly into regional
institutions that do not include the US, like ASEAN+3. But different
levels of government accountability in the region will mean that deep,
European-Union-style integration will not develop by 2020. East Asian
institutions that exclude the US may be used by regional states that are
aligned with the US to balance between China and the US. The growing
economic weight of East Asian economies will see pressure for more of a
voice within multilateral economic institutions like the IMF and the
World Bank.

East Asian institutions will move away from progressing according to the
'lowest common denominator' principle: institutional development will
partly be driven by increasing institutional flexibility that allows the
formation of economic 'coalitions of the willing'. As competition
increases for investment and trade access within East Asia, and between
East Asian states and others, there will be conflict over the fairness
of trade and investment rules and agreements. Such conflicts will become
more common as manufacturing capacity is relocated within East Asia and
as growth performances diverge.

**6. Future Conflict**

East Asian states will arm at different rates, resulting in an even
greater preponderance of military weight in Northeast Asia by 2020.
Japan will probably retain the most technologically sophisticated armed
forces in East Asia, apart from those of the US. It will revise its
constitution to allow it to play an increasingly active role in its own
defence. South Korea will continue with its military expansion, focused
less on defending against the North and more on building a capacity that
may eventually be required to defend the interests of a reunited Korea.
China's military modernisation will proceed apace, driven by the desire
to deter US intervention in the Taiwan Straits.

Southeast Asian armed forces, apart from those of Singapore, will remain
third-tier acquirers of military equipment: unable to produce much of
their own, unable to afford cutting-edge materiel or even large amounts
of readily-available average-quality equipment. This may change in the
highly unlikely event of an arms race. Most Southeast Asian states have
been slowly developing their air and maritime capabilities. Their
small-scale air and maritime weapons purchases, while currently not
constituting a serious capability, have established platforms for the
future development of serious air and maritime forces. Buying more
capable missiles will be a key military objective for many states in
East Asia.

The possibility of major inter-state conflict in East Asia to 2020 will
remain moderately high compared to other regions. The Korean peninsula
and Taiwan Straits issues will likely come to a head by 2020, risking
conflict or giving rise to new security dilemmas. Korean reunification
would place pressure on the US-Japan alliance, since the US troop
presence in Northeast Asia could no longer be justified by the need to
defend South Korea, and could lead to Japan and a reunified Korea to
acquire nuclear capabilities. The resolution of the Taiwan issue would
see China free to reorient its strategic attention elsewhere in the
region and along its borders. The discovery of large hydrocarbon
deposits in the South China Sea would add another conflict detonator to
the region.

Conflict within Southeast Asian states, in the form of separatist
insurgencies and terrorism will continue. Sporadic communal violence
will plague some of the Southeast Asian states, with the potential to
influence broader Islamic movements and to draw dangerous militants into
the region. It is possible that China could face sustained internal
armed unrest, either from separatist movements along its western
frontiers, or from its growing pool of the disgruntled unemployed,
particularly including demobbed PLA soldiers.

**7. Major Power Dynamics**

The roles of and interaction between the region's major powers ---
China, Japan and the US ---are likely to undergo significant change by
2020. The US's military, entrepreneurial, economic, scientific and
technological strengths should ensure it remains the predominant power
in East Asia for some time, though its ability to translate its power
into influence will depend on how skilfully it manages its wide array of
regional relationships. US security relationships in the region are
likely to endure, though changes in the US forward presence, and in US
and regional threat perceptions, may lead to a loosening of these ties.

China's influence in East Asia will loom ever larger --- whether it
succeeds or fails. Between now and 2020, China is likely to develop even
more into an economic and political centre of gravity, exercising a
growing influence on the calculations of other states. Growing Chinese
influence will not require nor develop into a network of formal
alliances. Its regional initiatives will increasingly be followed by
others, and East Asian states will become more careful to avoid crossing
its interests.

The US and China have strong incentives to avoid confrontation. Their
relationship inevitably contains elements of competition. But China
needs the US to remain strategically engaged in North Asia as a
restraint on Japan's military and nuclear development. The US, in turn,
looks to China to exert a restraining influence on North Korea. In the
short term, shared economic interests are likely to outweigh economic
frictions. But in the longer term, constructive economic relations will
depend on the state of the wider political and security relationship.

Rising nationalism in China, and fears in the US of China as an emerging
strategic competitor, could fuel an increasingly antagonistic
relationship, with Taiwan the likeliest catalyst for crisis. Despite
awareness of the risks in all three capitals, the potential for
miscalculation will remain. A combination of factors, including China's
military capability developments and the 2008 Olympics, point to
2008-2010 as a particularly dangerous period.

China's growing regional power and influence will pose a dilemma for
Japan. Japan's responses could include competition with China, drawing
closer to Washington or attempting a more assertive regional role. A key
determinant will be the nature of any final settlement on the Korean
peninsula. Nevertheless, Japan's will and capacity to play a larger role
in the region will remain open to question.

All regional states want to avoid having to choose between the US and
China. The US will remain important for economic and security reasons,
and to forestall the possibility of Chinese hegemony. But accommodating
China's rising power will increasingly be their main pre-occupation.

**8. Ideational Flows**

Western culture and political values will continue to exercise a
powerful influence on East Asian societies to 2020. These will partly be
driven by the other aspects of globalisation, and partly by conscious
strategy of the US, which will continue to be deeply attached to its
values and assertive in spreading them abroad.

Non-Muslim East Asia is likely to absorb and adapt to the continuing
spread of Western values. In Buddhist-influenced societies such as
Thailand, value systems are generally tolerant and pragmatic, less
concerned with shaping society than with shaping the self. Many East
Asian states have already absorbed many of the shocks of Western
culture, adapting certain elements while rejecting others. The East
Asian youth culture, centred on Japan but also affecting other North
Asian youth populations, will continue to be largely an indigenisation
of Western youth counter-culture rather than a rejection of it. East
Asian youth, like their counterparts elsewhere, will continue to
experiment with lifestyle sampling and contained rebellion in the form
of designer drug use, fashion, and other types of non-conformity.

Yet reactions against Western values are likely. The question of an East
Asian identity will probably arise again before 2020. Common reactions
to the advance of Western values, and fears of their consequences for
Asian societies, have the capacity to promote intra-regional
identification with an amalgam of 'Asian values', and have the potential
to shape regional governance structures.

More destabilising will be reactions within Muslim East Asia to the
spread of Western values. The growth of Islamic fundamentalism, already
well advanced in states like Indonesia and Malaysia, will continue as
Muslim populations react negatively to Western values such as
secularism, sexual liberation, and even democracy. Strongly influenced
by developments within Islam in the Middle East as well as indigenous
extremism, East Asian Islam will manifest violent elements for some time
to come.

The dislocations brought about by rapid development could also see the
breaking down of traditional social values. This may lead to a
widespread value-free anomie or the rise of alternative value systems. A
possible transformation could occur in how China views its rightful role
in the world, towards a desire for much more assertive competition with
the US and to play a decisive role beyond East Asia.

**9. Trends in State Structures**

The most likely candidate for state failure in East Asia is North Korea,
yet failure is not inevitable. There are three possible futures for the
DPRK. One is a disorderly collapse of the state, attended by economic
and social chaos and massive refugee outflows. Another is a gradual
process of reforming North Korea's economy trending towards a smooth
re-unification with South Korea in the future. A third possibility is
that the North Korean state will stagger on, propping up its sagging
economy with injections of aid and continuing to stifle popular dissent.

After its experience with East Timor, Indonesia will be sensitive to any
challenges to its territorial integrity by any of its provinces. Any
further secession from Indonesia will further raise its resentfulness
and suspicions of the outside world. Indonesia as well as its neighbours
in Southeast Asia will be unable to allay the porousness of their
borders to transnational flows. States like China and Indonesia may be
forced toward granting greater autonomy to the provinces.

A likely longer-term effect of the War on Terror will be the greater
attention paid by East Asian states to border protection and the
devotion of more resources to internal security and surveillance. A
prolonged period of increased alertness to transnational terrorism has
seen the removal of some of the limits to forceful government action
against security threats. States are also likely to define and deal with
other challenges as security threats.

Indonesia, the Philippines and Burma face futures in which their
burgeoning populations and festering social conflicts will threaten to
outstrip the state's capacity to provide basic infrastructure, services
and security. Their governments will be increasingly
internally-focussed, and while not failing, will be unable to move their
countries forward or develop them significantly.

It is possible that the 'governance gap' between viable states and weak
states will widen in the years to 2020. Strong states that are
well-positioned to attract further investment and make the most of
opportunities presented by the global market will become stronger, while
unstable states are likely to continue to be bypassed by investment and
growth, adding to their instability and marginalisation. A major issue
for East Asia and elsewhere will be whether transnational threats from
failing states will threaten stronger states, and in turn whether the
governance gap needs to be narrowed through concerted action.

**'Wild Cards' That May Alter East Asia's Future to 2020**

1\. *China crashes*, as the drive for economic growth unleashes social
and political forces that the Communist Party is unable to appease or
control. An initially non-violent protest movement spreads via the
internet, but becomes violent when the Chinese government reacts with
force. Unrest frightens away investment and chokes economic growth.
China provokes conflict with Taiwan as a last desperate ploy to unite
the population behind the Communist Party.

2\. *Multilateral trade negotiations stall* for a decade as developing
countries raise their demands in the Millenium Round talks, and
developed economies react by turning inwards and trying to construct
OECD-only agreements. Disruption of trade and financial flows causes
major economic distress in East Asia, strengthening nationalism and
support for chauvinist leaders.

3\. *Democracy fails* in Southeast Asia, with the combination of
populist considerations and protracted policy making procedures in
several countries combining to exacerbate a regional crisis. Some states
in East Asia enter a phase of populist authoritarianism. In Indonesia,
this brings to power a charismatic nationalist leader determined to
unify all of Malay Southeast Asia.

4\. *Protracted communal conflict* between Muslim and non-Muslim
populations begins in eastern Indonesia and spreads into southern
Philippines, Malaysia and Thailand. Massacres of ethnic Chinese lead to
growing pressure within China for Beijing to intervene. An increasingly
Islamic Pakistan, and a range of Islamic terrorist groups, warn China
against intervening.

5\. A *technology-led economic boom* brings a concentrated surge of
economic growth to East Asia, leading to a rise in regionalist identity
and pride. This, and a defensive reaction from the US and Europe, drives
the rapid formation of a regional political and economic bloc that
begins to demand a greater say in global fora.

[^1]: ^^ While China's demographic trends will develop along lines
    similar to those in the developing world, they are of course the
    result of different causes, predominantly the one-child policy. This
    will bring consequences for China not experienced in Japan and
    Korea, such as the economic and social effects of a pronounced
    male-female imbalance and the political effects of an indulged and
    self-interested generation of 'little Emperors'.

[^2]: ^^ The result of a virus crossing from animals to humans.