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January 08, 2013

Minister Shanmugam delivers speech at annual Turkish Ambassadors' Conference 2013

ST_20130108Credit: AFP
 

MINISTER K SHANMUGAM'S SPEECH AT THE 2013 ANNUAL TURKISH AMBASSADORS' CONFERENCE, ANKARA, TURKEY, 4 JANUARY 2013

I        INTRODUCTION

Your Excellency,

Professor Ahmet Davutoğlu,

Minister of Foreign Affairs

Ambassadors

Distinguished guests

Ladies and Gentlemen

A very good afternoon,

And thank you for having invited me to join you here in Ankara.

1                 It is a privilege to speak to you about “The Developments in Asia and their Implications”. 

II       SIGNIFICANCE OF SPEECH IN TURKEY

2                 First of all, I think it is significant to make this point in the region, particularly here in Turkey, that the Middle East and Turkey have always played a central role in world history.  As early as the 11th century, before the Italian Renaissance, the Seljuks were building universities in Baghdad.  This continued a long tradition of Islamic scholarship, and kept learning alive in the Mediterranean through the Dark Ages.

3                 Present-day Turkey rose as a great power during the 14th century.  The rise of Turkey changed the course of history in middle Europe and Central Asia.  A bridge between East and West, Turkey had a ringside view on the shifts in momentum between East and West.  From the 16th century, power shifted from East to West.  Slowly, Turkey, the Mid-East and Asia were overtaken as the West strode ahead.  

4                 Now, another momentous shift is taking place between the West and the East, both in terms of economic power and relative weight in world affairs.  To be sure, I do not subscribe to the theories foretelling the decline of the West (broadly defined).  The West has huge reservoirs of scientific expertise, technology, capital and skill, and will come back from its current travails.  This may take time but the West is not in permanent decline.  The shift between the West and the East is relative: the East is catching up. 

5                 Turkey is well-placed to be an active participant in this shift.  It is closely linked to Europe.  It is a member of the G20 and NATO.  Most importantly, Turkey is a significant strategic player that sits in the middle between East and West.  Turkey’s unique geographic position, coupled with its cultural affinity with both East and West, allows it to work with both regions.  At the same time, Turkey’s modernity, progress and democracy is a model for countries throughout the world and Asia, including those with substantial Muslim populations.

III     THE SHIFT

6                 This new narrative of Asia’s renaissance is underpinned by the shift in the world economic centre to Asia.  Currently, almost a third of the world’s middle class live in Asia.  One third of the companies on the Forbes Global 500 are Asian.  This number will increase.  Prior to the financial crisis, only one Asian country – Japan – was part of the G8.  Now, five Asian countries – China, India, Japan, Korea, and Indonesia – are part of the G20.  By 2050, Asia could account for over 50 percent of global GDP.  China and India are also likely to be among the world’s three largest economies in a matter of decades.  

7                 According to British historian Niall Ferguson, there are six reasons why the West overtook the East and moved ahead in the last five hundred years:

·        Encouraging competition among political entities;

·        Science;

·        Democracy;

·        Modern medicine;

·        Consumerism; and

·        The Protestant work ethic. 

8                 We can debate if these were the only factors in explaining the predominance of the West or make an argument for other factors, but it is clear that Asia is now catching up on many of the factors which made the West successful in the last five hundred years.

IV     CONSEQUENCES

9                 This historic shift in momentum involves a number of key players across Asia. One cannot look at the rise of Asia without looking at five dynamic parts: China, India, Japan, South Korea and Southeast Asia.  I would like to briefly touch on a few key players, namely India, Japan and South Korea.   Because of time limitations, I will not be able to do these three countries justice.  I will focus more on China and Southeast Asia. 

10               India is already a giant and has strong prospects.  India is the world’s tenth largest economy and Asia’s third largest.  India has a young and dynamic population, solid universities and a growing middle class, and a potentially huge domestic market.  If India overcomes a number of structural challenges, it could be a top-tier power.  Beyond the negative headlines, India is undergoing a period of transformation that will surprise everyone.  Some Indian states are growing very strongly.  We are talking about a total population in these states of about 80 to 90 million people.  Indian citizens are also increasingly rewarding good governance.  These trends will move India forward in the right direction.  It is not possible to fully analyse Asia without looking at India and its potential power projection. 

11               As the world’s third largest economy and the second largest in Asia, Japan continues to be an important player on the regional and international stage.  Japan, however, faces major challenges, in particular a slowing economy and ageing population.  But it is still an economic heavyweight.  It is an industrial powerhouse and one of the most technologically advanced nations.  It is also wealthy.  It continues to be a major source of overseas investment and also serves as a key export market for China and other Asian countries.  Japan also plays a key role in the regional architecture.  The US-Japan security alliance is important for stability in the Asia Pacific.  Japan will remain an influential voice amidst other major economies in Asia. 

12               South Korea is a rising middle power and increasingly active on the global stage.  It is the fourth largest economy in Asia and the fifteenth largest economy in the world.  South Korea is also.  It is a member of the G20, OECD, and assumed its second term as non-permanent member of the UN Security Council from 2013 to 2014.  Even as it has intensified its economic ties with China, South Korea has remained a close US ally.  Tensions on the Korean Peninsula continue to present challenges for regional security. 

13               India, Japan, South Korea as well as ASEAN – which I will discuss later – all play an important role in shaping this so-called “Asian century”.

14               Let me focus a little more on China because it is the biggest factor in Asia’s rise and by itself will make a huge impact.  China’s rise is an epochal event.  I will look at three key questions:  First, China’s likely trajectory in the context of the challenges it faces.  Second, the likely dynamics between China and the US, because this – more than any other relationship – has implications for everyone in Asia.  Third, I will speak on the prospects for Southeast Asia in this context. 

V  CHINA

15               China’s per capita GDP today is less than US$6,000.  At its current rate of growth, China’s GDP in purchasing power parity terms is expected to exceed the US’ in 2016.  Based on market exchange rates, China’s GDP could triple to US$17.7 trillion by 2030.  That is only 18 years away.  While straight line projections are not very reliable, the secular trend and conclusions are clear: China will succeed and become a superpower in every sense of the word. 

16               The Chinese have in huge abundance the central, critical element for success: high quality human potential.  In 2012, China’s universities produced 6.8 million graduates.  An estimated 600,000 are engineers, of which 10,000 hold PhDs.  The Chinese are highly intelligent, creative, with a deep sense of national pride.  They want China to take its rightful place in the world. 

17               In recent years, China has made remarkable technological leaps.  China today boasts 9,300km of high-speed rail.  Just last week, China launched the world’s longest bullet train service from Beijing to Guangzhou.  That is slightly longer than the distance from New York to Miami.  Less than ten years ago, China’s first high-speed trains were entirely supplied by German, French, Canadian or Japanese companies.  Today, China competes for high-speed rail projects around the world, including here in Turkey.

18               China has also made significant progress in its space programme.  The first manned Chinese space mission, the Shenzhou-5, took place in 2003.  In 2015, China will launch the first module of its space station.  This is scheduled to be completed in 2020, just as the International Space Station is due to retire.  

19               I have only mentioned a few examples of China’s recent achievements.  One can give many other statistics to describe China’s successes, but the real questions are how fast China will continue to move and the implications for Asia.  To assess that, we need to in turn consider the key issues China has to deal with in the coming years.

The Challenges China Faces

[A] Economic Challenges

20               China faces three sets of “divide” challenges, namely the rural-urban divide, the coastal-inland divide, and the income divide within cities.  These “divides” will have profound implications for China’s political and social stability in the coming years.  China’s export-oriented economic model is also unsustainable in its current form, and needs to be re-structured to focus on internal consumption as well.  At the same time, China needs to re-balance the share of its economy between the state-owned enterprises and the private sector. 

21               China will have to address these economic challenges against the backdrop of increasing urbanisation.  China crossed a milestone in 2011 when, for the first time, there were more Chinese living in urban areas than in rural areas.  This trend will continue.  China needs to create two to three hundred million jobs over the next twenty to twenty-five years for growing numbers of people moving to the urban centres. 

22               These are massive challenges on a scale and level of complexity that no other country, except India, faces.  

[B] Social Challenges

23               China’s population is aging rapidly.  According to some estimates, China had 185 million people over the age of 60 in 2011.  The ratio of working-age to retired people may go from 8:1 to 2:1 by 2040.  In a few years’ time, labour market growth may decrease.  Significant resources will be needed to look after the elderly.  The need for social welfare is increasing, in key areas such as housing; healthcare; basic medical coverage; pension coverage and education. Education, for example, is estimated to cost around 2.2. trillion yuan. 

24               China’s leadership knows that China has to make itself internally strong.   And for that, it has to deal with all of these challenges successfully.  If you look at China’s track record over the last 30 years, China will find a solution to these challenges. 

25               China’s leaders have shown what their priorities are.  At the 18th Party Congress, President Hu Jintao called for GDP per capita to be doubled by 2020. He acknowledged the need for more equitable development, and described the need to strengthen social management to improve the delivery of basic public services.  President Hu’s administration has laid out the following as key components of his policy framework:

·        Social construction;

·        Social management;

·        “Minsheng” – meaning focusing on people’s livelihoods.

26               Social management has now been identified as a key issue.  China’s leadership has looked at various countries, including Singapore, to see what they can learn in areas such as anti-corruption, city planning, environmental management, and maintaining social order and political stability.  The Chinese leadership has also made significant achievements in improving the people’s welfare.  However, in the years ahead, China’s new leadership will have to structure a new social compact with its population.

27               General Secretary Xi Jinping outlined the following key priorities in his inaugural speech:

·        Addressing the people’s needs;

·        Combating corruption;

·        Continued commitment to reform and opening-up;

·        And establishing better mutual understanding between China and the world.

28               General Secretary Xi’s father, Xi Zhongxun, was a well known reformer.  Xi Zhongxun had backed CCP leader Hu Yaobang, who disagreed with the Tiananmen crackdown and was sidelined as a result.  General Secretary Xi’s first provincial visit was to Guangdong.  This visit replicates Deng Xiaoping’s famous Southern Tour in 1992 and symbolically reaffirms the new leadership’s commitment to continuing economic reform.  During his visit, General Secretary Xi dispensed with the usual ceremony and protocol – to set an example of the CPC’s new regulations to cut excesses by Party officials.

29               General Secretary Xi is also likely to undertake fiscal reforms, focusing on the following areas:  re-allocation of capital between central, provinces and local authorities; relooking the role of state-owned enterprises and increasing their dividend payouts; a calibrated opening up of capital accounts and removing subsidies, which will increase opportunities for trade.

30               Real challenges remain and vested interests may try to block change especially economic change.  Corruption is one of them.  President Hu noted in the 18th Party Congress work report that corruption “could prove fatal to the Party and even cause the collapse of the Party and the fall of the state”.   Nonetheless, there is a palpable sense of optimism about General Secretary Xi and what the new leadership can achieve.  In his first speech to the Politburo on 17 November 2012, General Secretary Xi said that corruption would “doom the party and the state” if it was not tackled.  Although there is no political instability, mass incidents are said to have taken place in various parts of China.  This is something the leadership has to focus on.

31               There has been a lot of breathless coverage in the media about whether there will be political change (usually labeled as “reform”).  This is wide off the mark.  China’s leadership will not rush into change.  Instead, it will try to manage change.  President Hu’s remarks that China would “never copy a Western political system” and should not revert to the “old path that is closed and rigid” or take the “evil road of changing flags and banners” are indicative.  China’s leadership is more concerned with good governance, progress and stability.  They know most of the suggestions for political change may weaken China and impact its growth.  They look at what happened when the Soviet Union pursued glasnost before perestroika and do not want to repeat that same experience.  The Chinese look at Western prescriptions for China with much suspicion.  They see a wish on the part of some in the West for China to be weak, ineffective.  The Western media, too, often paints a distorted and superficial picture.

32               China’s leadership is pragmatic and aims to choose the best people for the job.  Of course, the system is not perfect.  There will be internal politics.  But on the whole, it is a rigorous system where only tested people, many of whom have had to run provinces bigger than many European countries, can rise to the top.  I am not an apologist for China, but one must look at the facts.  In 30 years, China has achieved what no other country has achieved.  500 million people have been lifted out of poverty.  The lives of 1.3 billion people have been completely transformed.  It is safe to conclude that China’s main focus in the near future will be internal, and that its leadership will pursue a steady course in tackling the key issues.

33               How will China play its part in Asia, in this context?  I will come back to this after I consider the role the US is likely to play in Asia.

VI               The United States

34               The US’ role as a global superpower has been increasingly questioned in recent years.  The US economy has suffered, swinging from the mortgage crisis to a financial crisis, and now a crisis over debt sustainability.  This has led many in Asia to be dismissive of the US. 

35               In many ways, the US continues to have tremendous potential.  They have the best universities in the world.  The US’ technological and military lead is unlikely to be surpassed in the near future.  Particularly impressive is the US’ continued focus on innovation.  Innovations in the extraction of Shale gas for example could have a substantial impact on the comparative cost of energy and make the US a net exporter of energy.  In other field such as robotics and 3D printing, the US continues to lead the pack.  Such an edge could wipe out the manpower cost advantages of other countries and drive a manufacturing boom in the US.  The US has an effervescent environment for ideas and attracts the top talent from around the world.  As Bismarck put it, there is a special providence that watches over “children, drunkards and the United States of America”.  With its very substantive alliances, economics interests and military presence, the US will remain a serious player in many parts of the world, including Asia. 

VII    US-CHINA DYNAMICS

36               The US-China relationship will increasingly define the status quo in global relations for the foreseeable future.  There is a tendency in popular discourse to describe the US-China relationship in very stark terms as the dynamic between Rising and Dominant Powers.  For instance, Graham Allison of the Harvard Kennedy School observed that conflict occurred in 11 of 15 cases where a rising power emerged to challenge a ruling power.  His view is that although conflict is not inevitable, history suggests that it is likely. 

37               But there is reason to be more sanguine about US-China relations. I think there is reason to be sanguine about the current US-China relationship.  I do not think that China and the US are locked in a zero-sum contest.  In today’s globalised world, both countries large and numerous interlocked interests both economically and geo-politically.  In some ways, these linkages means “mutually assured destruction”.  China is neither Japan nor the USSR, who were the two countries challenging US dominance in various periods of recent history.  China now is stronger than both these countries were.  China is comfortable about itself.  China is also comfortable about its culture and not trying to be like any other. 

38               China has made clear its preference to continue with the existing international order while it focuses on internal priorities and grows in economic and military strength.  It is perhaps important at this juncture to briefly outline China’s historical approach to international relations.  China as the Middle Kingdom regarded itself at the centre of the world.  Chinese institutions at that time were based on this premise.  The Middle Kingdom did not need a Foreign Ministry as it recognised no peer.   China under several empires was strong and prosperous, and neighbouring countries would come to the Chinese Emperor in tribute.  There was little need for foreign policy.  If there was trouble on its periphery, Beijing would simply dispatch an imperial envoy to mediate. 

39               This changed following the catastrophic Boxer Rebellion in 1898 and the occupation of Beijing by Western expeditionary forces.  It was when China was at its weakest that it finally admitted the need for a Foreign Ministry.  That is the historical context for China’s approach to foreign affairs.  But China’s foreign policy is evolving quickly in line with international norms. 

40               We frequently hear questions on China’s role in the international order.  Many talk about China and the US playing a G2 role in dealing with global issues.  Thus far, this is a role that China has not expressed keen interest in.  The primary focus for China thus far has been internal, and focused on economic development.  This could of course change.

41               The key to the US-China relationship is how both countries will be able to come to some form of accommodation in the context of their complementary and competitive interests.  We already see this taking shape in East and Southeast Asia.  Smaller countries will have to learn to adjust to this reality.  If this plays out globally, we are likely to see a relatively stable international order.  Global economic growth is also likely, given the potential arising from restructuring in the Chinese economy. 

42               There are of course risks, and possible disruptive scenarios such as territorial disputes in East and Southeast Asia. 

43               Media commentaries in China, for example, frequently make the claim that the US’ pivot to East Asia is a means to contain China.  Such claims feed suspicions that the US does not want China to become stronger and is encouraging various claimants to act as proxies to take on China.  These same commentaries also adopt the dichotomous view that the US is a declining force and that the power balance will move in favour of China in the longer term.  China is thus characterised as the “victim”, whose legitimate claims are being questioned. These media commentaries, particularly on the decline of the US, create dynamics of perception that possibly impact policies. 

44               Similarly, many in the US see China as being less than forthcoming about its true intentions in these territorial disputes.  They view with concern the military build-ups of the PLA, missiles, aircraft carriers, submarines and advanced fighters.  They think that China is making untenable claims, including its nine-dotted line claim in the South China Sea, affecting the freedom of navigation in international waters. This US discomfort stems from the lack of a new modus vivendi with a rising power in an area which the US has long considered its lake, the South China Sea.  It is unfortunate that both countries do not share an enthusiasm for international frameworks established to deal with such territorial disputes.    The US is not a party to UNCLOS while China's attitude towards UNCLOS appears increasingly ambiguous.  This is not unusual as great powers are generally ambivalent about international law.  International law has to instead suit their needs. 

45               Some other claimant states in these territorial disputes see China as unwilling to play by the rules of international law, and established frameworks such as UNCLOS.  China is claiming resources which are prima facie within the EEZs of the other claimant states.  There is also quite a prevalent view that China is playing for time in these disputes.  As China grows in strength – militarily and economically – its dominance will grow and will lead to eventual conclusions in China’s favour. 

46               To add to these suspicions, issues of sovereignty are often inextricable from feelings of nationalism.  China alone has nearly 600 million vocal netizens.  Neither the Chinese Communist party nor leaders in the other claimant states can be seen as “soft” on sovereignty issues.  The new Japanese government, for example, has a more nationalistic approach and has made statements about beefing up its military in response.  But the Japanese government is likely to take a prudent course. 

47               These conditions make for a potent mix.  A small act perceived as antagonistic could lead to hasty responses.  This could result in an escalating cycle of chain reactions.  The risk of miscalculation is exacerbated in countries without a strong structure for inter-agency coordination.  Such a scenario cannot be ruled out, and has in fact happened over territorial disputes in recent years. 

48               A key challenge for East Asia therefore is building up the capability to negotiate around these risks.  We have tried to create multilateral platforms such as the ASEAN Regional Forum to build confidence among regional players and allow for discussion on security issues that impact the region.  If we succeed, East Asia and Southeast Asia have a bright future.  If the risk of conflict materialises, Asia will be set back in terms of development.  The most likely scenario is that we will negotiate around these risks. 

VIII            Southeast Asia

49               Allow me to touch on developments in Southeast Asia.  We have done well economically as a region.  Our combined GDP of almost US$ 2 trillion is larger than India for example.  ASEAN’s GDP as a whole has increased four-fold since 1998.  ASEAN was the world’s 9th largest economy and 5th largest trading entity in 2011 (after the EU, US, China and Germany). We are looking at robust economic growth over the next five years of around 5.5 percent.  ASEAN is rich in natural resources and has a hardworking and skilled young population of 650 million.  It is an important part of the Asian growth story and the Asian renaissance. 

50               ASEAN is on track to create an Economic Community by 2015.  This will allow us to form a single market and production base with tremendous economic opportunities.  ASEAN has made steady progress since the ASEAN Economic Community was first envisioned in 2003.  For instance, we have an ASEAN Trade in Goods Agreement in place since 2010.  We are now working to streamline regulations and liberalise services.  Intra-ASEAN trade grew at an average of 10.2 percent annually from 1995 to 2011, higher than the average annual growth in world trade (of 8 percent).  This shows the region’s potential and how far it can go. 

51               There is also a strong overlapping economic architecture.  ASEAN has FTAs with China, Japan, South Korea, India, Australia and New Zealand.  It is combining these FTAs into a single Free Trade Area with a combined GDP of US$17 trillion or about one-third of global GDP through the Regional Comprehensive Economic Partnership (RCEP).  Some ASEAN members are also participating in the Trans-Pacific Partnership (whose members are the US, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and potentially Thailand).  Connectivity is also increasing.  The Master Plan on ASEAN Connectivity includes projects such as the Singapore-Kunming Railway, ASEAN Highway Network and ASEAN Broadband Corridor.  ASEAN has also launched an Infrastructure Fund.  And ASEAN has lots of infrastructure projects.

52               Strategically, ASEAN is at the centre of important regional architectures including ASEAN +3, ASEAN Regional Forum, and the East Asia Summit.  ASEAN has dialogue partnerships with 10 countries and the UN.  If there is regional peace, the region will prosper tremendously.  Growth will lift off on an even higher trajectory.  ASEAN is at the centre of many initiatives.  There will be tremendous opportunities for Turkey to tap into ASEAN.

IX               TURKEY’S ROLE

53               There is space for Turkey to increase its linkages with East Asia.  As I pointed out earlier, we share historical cultural affinity.  This provides a good base for us to deepen our economic relationship.  Also, Turkey’s key strengths include high quality technology and lower costs than the EU. As Southeast Asia develops, demand for such high-technology goods is bound to rise.  Turkey is therefore well placed to meet such demand in our region.  The key challenge for Turkey would be to aggressively expand its presence in the region, and build up structured trade ties and commercial relationships.  This will not be a one-way relationship.  Turkey provides important access to the EU, which is a key market for most Southeast Asian countries. 

54               Singapore can partner Turkey in these ventures.  We are a natural business centre for Turkish companies looking to expand in Southeast Asia.   Singapore has done well despite our size and lack of natural resources.  For example, our population is the second smallest in ASEAN but our GDP of US$284 billion makes us the third largest economy in ASEAN and its most advanced.  Our per capita income is the largest in ASEAN at US$55, 000.  Singapore is a regional hub with good access to capital, technology and connectivity links.  Singapore and Turkey are also both practical people. 

55               Let me conclude by saying that political and economic relations between Singapore and Turkey are growing stronger.  We are strongly supportive of each other in international fora.  Singapore is about to negotiate an FTA with Turkey that will overlap with the EUSFTA.  We have also recently opened an embassy in Ankara.  There is room for further collaboration, particularly in the expansion of air services.  My PM has said that he would like to make a visit to Turkey.  There is a bright future for our two countries working together. 

56               Thank you. 

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