Threats to Asia's Stability -- And a Potential Solution(1)

 Asia faces two main risks to its stability that could mushroom into a sequence of events triggering confrontation and crisis, even leading to armed conflicts casting their ugly shadows over much of Asia.

 Asia faces two main risks to its stability that could mushroom into a sequence of events triggering confrontation and crisis, even leading to armed conflicts casting their ugly shadows over much of Asia. 

The first main risk is Japan.

Japan was the economic success story until around 1990. Since then, its economy has been in almost continuous recession. That gives birth to three main problems for Japan, Asia and the rest of the world.

Psychologically the Japanese have lost belief in themselves. They have no trust in their ability to marshal changes through the political and social system. Japan was the only model successfully combining Asian culture with Western industrialization. That boosted pride and confidence inside Japan and gave the rest of Asia heart. When the model ran aground, the Japanese were at a loss - bewildered about what to do. The rest of Asia lost the model they looked up to - almost universally admired.

Economically, Japan is no longer "pulling" the rest of Asia along. The Japanese market may still be the biggest, but the Japanese economy is a secluded economy. According to the World Bank, Gross Foreign Direct Investment amounts to 0.9 percent of Gross National Product, compared to 4.3 percent for China, 5.1 percent for the United States, 13.3 percent for Germany, 16.4 percent for France and 38.7 percent for the United Kingdom.  India is almost on par, with 0.6 percent. From 1990 to 2000, the percentage fell for Japan from 1.7 percent to 0.9 percent, while it rose between two and five times for the other main industrialized countries. In the mid-nineties, Foreign Direct Investment in Japan was $46 per capita compared to between $1500 and $3500 for the other main industrialized countries. There is a lot of talk but no real prospect of a fundamental economic recovery in Japan. Those who have the power to change the system are those who will lose if it takes place - so it will not happen. Deflation may be bad economic policy, but it boosts purchasing power among people living off their pensions. The Japanese age pyramid ensures that, electorally speaking, such bad economic policy will continue. 

Politically, Japan does not know how to cope with its own problems. The rest of Asia does not know how to cope with a baffled and secluded Japan - almost invisible in world politics and world economics. Its power confers upon Japan a robust, if not leading, role. But politically, Japan sees the world through the prism of impotence. Japan and most of Asia is at a loss watching the failure of the Japanese model.

The Japanese island-mentality may direct the nation towards a nationalistic attitude, with the further risk of a more militaristic Japan. The trend may be initiated or strengthened by the rumblings coming out of North Korea. The U.S. request for a Japanese role in the Middle East may do the same. A more nationalistic and possibly militaristic Japan will destabilize the whole of Asia.

The second main risk is Islamic extremism.

A large, almost overwhelming number of Muslims want to live in peace with other religions, in conformity with the great tradition of Islam as a tolerant religion.  In the 1999 Indonesian elections, the Islamic political parties that advocated the introduction of Islamic law (sharia) received only 14 percent of the votes cast. But that does not preclude the Islamicization of society. What has emerged in Indonesia - the largest Muslim country in the world - is a dichotomization, with a secular state but a society turning more and more towards Islamism.  The risk is that moderate Islamic political parties are overtaken from within by small, fanatical groups opting for a theocratic state.   

Southeast Asia is the fault line in the struggle between Islamist terrorism and modernity. In this part of the world, a string of countries have adopted Western-style societies and benefit greatly. If the West cannot win the struggle here, the West cannot win it anywhere.

Another area at risk is Central Asia.  Central Asia used to be a forgotten part of the globe. Czarist Russia and the Soviet Union held sway over this large land mass without anybody really bothering it. Not so anymore. This is where some of the world's largest reserves of oil and gas are located. But to bring the crude into the industrial areas of the United States, Europe, Japan, China and soon India, it needs to be transported through geographically prohibitive and hostile territory.

The ´stan´ states, as they are called, do not really have a national identity. They are embryonic entities vulnerable to outside influence. And several of them have a large majority of Muslims from which terrorist organizations can recruit. In contrast to South East Asia, dismal economic and social conditions provide an attractive base for potential terrorists.

To limit the effects of Japanese weakness and Islamic extremism, prosperity needs to be institutionalized.  The focal point - the battleground so to speak - for any attempt to change Asia's direction is the process of institutionalization in Asia, like the EU in Europe and NAFTA in North America. There are two players in this game, a third one warming up and a fourth one with the power to tilt the balance in one or the other direction and holding the cards close to its chest.

China and Japan are the two players.  China has proposed a Free Trade Area (FTA) with Southeast Asia and recently boosted this offer with the idea of a strategic partnership.  Southeast Asia has responded to China's offer favorably. They welcome any stability and prosperity to be gained from economically strong China.