Speech by Senior Minister Goh Chok Tong at the US-ASEAN Business Council's 2nd Annual Leadership Dinner, 1 Dec 2004- Change and Stability in Asia

SPEECH BY MR GOH CHOK TONG,SENIOR MINISTER, AT THE US-ASEAN BUSINESS COUNCIL'S 2ND ANNUAL LEADERSHIP DINNER, 1 DECEMBER 2004, 8.00 PM AT SHANGRI-LA HOTEL
CHANGE AND STABILITY IN ASIA

Thank you for inviting me to share my views with you this evening. I will try and keep my remarks brief, as an aid to digestion, rather than a cause for indigestion.

2 First, let me pay a tribute to the US-ASEAN Business Council (USABC). You are a good friend of Singapore and ASEAN. You have fostered closer relations between the US and ASEAN, including Singapore of course. I have heard that when American business speaks, Washington sits up. We in Southeast Asia, too, take notice of the views of American investors. Over the years, the USABC has played an important role in drawing attention to significant trends and opportunities in ASEAN. You have made a difference to our development.

3 My theme tonight can be summarised in one line: a changing China is changing Asia and a changing Asia will change the world. Changes in China, and also India, are altering global patterns of trade and investment, creating new global production chains and putting upward pressure on prices of commodities, including oil. The transformations are of a depth and scope unprecedented in world history. One may be able to imagine the outlines of a new landscape but no one can predict how the changes will exactly turn out.

4 I do not need to persuade businessmen that behind the very uncertainties are hidden business opportunities. I believe, therefore, that an understanding of geopolitical forces is essential if we are to realise the opportunities. I hope to contribute to this understanding tonight.

China is Changing the Region and Beyond

5 The China story is well-known. At its 16th Party Congress two years ago, the Chinese Communist Party (CCP) boldly announced that China's GDP would quadruple by the year 2020, ie 4 times in 18 years. I do not think this is mere bombast or propaganda. After all, Goldman Sachs has predicted that the Chinese economy could surpass Japan's by 2016 and overtake the US to become the world's largest economy by 2041.

6 China was the world's largest economy up to the late 19th Century. The changes of fortune that China had since endured remind us that growth is never a straight line. There will be many unforeseen ups and downs as China grows and opens itself further. However, as China grapples with serious challenges, history teaches us that China has exerted a deep influence on the rest of East Asia, whatever its internal state. That is why many people outside China are immensely concerned over the possibility of overheating and whether there would be a soft landing for the Chinese economy.

7 I think China will manage a soft landing. The key reason for my confidence is the high quality of Chinese political leaders and senior officials. They understand the problems. They learn fast. They have the vision and commitment. The Chinese leaders are analytical, pragmatic and resolute, and have demonstrated these qualities by how they dealt with the SARS and other crises. Going forward, a group of leaders who have been educated and trained abroad will assume the leadership of China. With their wider international exposure and first-hand experience of the western world, they will prove formidable.

8 I expect the Chinese Communist Party (CCP) to remain in charge. Communism may have failed worldwide but in China, the CCP has succeeded in providing the people with security, stability, and prospects of a better life. Chinese leaders know that the mandate of heaven now descends only on those who deliver. Having tasted the fruits of market policies, the Chinese people will accept nothing less. There is no other way but forward.

9 And this is true not merely of China but of all Asia. All Asian countries want to catch up with the West and with each other. This is a fundamental political imperative. No Government can ignore it and survive. Once Deng Xiaoping decided that the colour of a cat was less important than its ability to catch mice, ideology in China, and later Asia, was replaced by pragmatism. A changing China is forcing change throughout Asia and beyond.

India is Also on the Move

10 For much of its post-independence history, India sought to be non‑aligned. It tried to minimise its linkages with global markets. It experimented with socialism of a Fabian rather than Marxist variety, while suspicion of China tilted it towards the Soviet Union. With the end of the Cold War, India quietly discarded old doctrines and alliances. It sought better relations with the US, China and ASEAN. Although India's market reforms began later than China's, they have stayed on course for more than a decade. I visited India 5 times as Prime Minister over the last 10 years. I can see the change in the environment, and most importantly, in the mindset of politicians and business leaders.

11 The desire not to be left behind by China will ensure that India stays on its reform path. Markets were worried that liberalisation would slow down with the unexpected defeat of the BJP (Bharatiya Janata Party) earlier this year. But the new government quickly signalled that liberalisation and reform would continue. Indian leaders know that India can continue to progress only by exposing its industries to the forces of global competition.

12 The Indian democratic form of government is messier than China's command system. Reforms will be uneven, politically complex and stressful. But I believe India's democracy is robust enough to cope. It has many strengths, not the least of which is a large pool of well‑educated English speaking professionals and workers. Whoever is in charge will not want India to lag behind a dynamic and growing China. So India, too, will ride on the wave of globalisation. Goldman Sachs has predicted that India's economy could overtake Japan's by 2032 or 16 years after China has done so.

ASEAN is Adapting to New Realities

13 With India and China changing, the countries in Southeast Asia have no choice but to follow suit. ASEAN has made a fundamental strategic choice in favour of integration through the ASEAN Economic Community (AEC). Though the target date is a distant 2020, the move nevertheless signals a radical shift in how the region sees its future; a shift reaffirmed by ASEAN leaders at the just-concluded 10th Summit in Vientiane.

14 I do not underestimate the practical difficulties of integration. Southeast Asia is characterised by political, economic and cultural diversity rather than natural coherence. No surprise, therefore, that the pace of ASEAN integration and liberalisation is slower than ideal. But the train has left the station. And ASEAN's journey must be seen in the context of broader trends.

15 Asia is slowly but surely coalescing, driven by the increasing integration of the Americas and EU expansion. The giant economies of India, China and Japan will provide balancing and competing weights. Sovereignties in Asia are not at the stage where countries can accept the kind of supranational institutionalisation that characterises European integration. Asian integration will therefore be looser and more open, without a single dominating centre like the European Commission or European Parliament. But it is nonetheless inexorable. The entire region is being sewn together by changing patterns of trade, investment and production chains.

16 ASEAN does not want to be left out of this process, especially when it was the pioneer of regional co-operation in Asia. We want closer and deeper ties with China, India, Japan, Korea, the US, Australia and New Zealand, formalised in a web of regional and bilateral Free Trade Agreements. To make this work, ASEAN must keep up the momentum of integration. Just before the ASEAN Summit in Vientiane, the 4 newer members of ASEAN - Cambodia, Myanmar, Laos and Vietnam - met separately and vowed to seek economic integration. I cheered when I heard the news. They have overcome their diffidence about their ability to compete in an integrated ASEAN economy. The original ASEAN 6 have also agreed to advance their integration in 11 priority sectors under the ASEAN Framework Agreement from 2010 to 2007.

17 These two developments indicate that ASEAN recognises that not to change means being thrown out of the economic arena by powerful centrifugal forces generated by China's and India's growth. Integration and change are not just economic requirements. They are necessary for survival.

US Role is Critical to Asia's Stability

18 Historically, changes of the scale that are currently underway have been profoundly unsettling to international order. Geopolitical shifts of lesser magnitude have led to wars in the 19th and 20th Centuries. Strategic stability is not to be taken for granted, particularly in Asia where there are many territorial and other unresolved issues left over from historically complicated relationships. The matrix of post-Cold War interests is also complex. 11 years ago, an American scholar, surveying great power relations in Asia, concluded that it was "ripe for rivalry".[1]

19 It was a striking phrase. But history is not doomed to repeat itself. The clear preference of most in Asia is to pursue national aspirations through trade and the market, not war. The key determinant of Asia's stability is American policy. The US role will remain central to the maintenance of the stability of the international system for the foreseeable future.

20 This fact is perhaps more recognised in Asia than elsewhere in the world. Except where core national interests are threatened, there is little inclination to contest American primacy. No one wants to be on the wrong side of America if it can be avoided. They may not admit it publicly, but China and Japan; India and China; Russia and China; India and Pakistan; Russia and Japan, among others, find it easier to manage their relationships with each other with America present to hold the ring.

21 Still, Asian attitudes towards America are not all warmth and coziness. There is quiet discomfort with US pre-eminence generally, and with specific US policies, particularly those pertaining to the Palestinian‑Israeli conflict and aspects of the war against terror. This, plus the on‑going domestic political changes in Asia, creates a growing divergence between American power and American influence. This is America's potential strategic vulnerability. In the new pluralistic and populist - in a word, 'democratic' - politics that is emerging in many key Asian countries, the sustainability of the US presence in Asia is not a matter to be decided by the political elite alone.

22 After the Cold War and with advances in military technology, there is a temptation to regard the American military presence in Asia as a matter of choice rather than necessity. Voices in Asia are increasingly critical of the US presence, even in traditional US allies. Similarly, there are voices in Washington arguing that the US will not - and need not - stay where it is not wanted. Yet is it politically realistic to envisage a situation where Asia will continue to grow, and American businesses will continue to reap the great opportunities that Asia affords, without the stability that American power preserves?

23 My point is that we - Asians and Americans - need to constantly tend our garden and not take each other for granted. As a global power with wide-ranging responsibility, the US is perhaps inevitably always distracted by firefighting one issue or another. Power also means having the world's problems on your plate. Hence, organisations such as the USABC have an important role in focusing Washington's attention on the need for patient and consistent diplomacy in a region that may otherwise receive insufficient priority. I caution against benign neglect of the region.

Stability of US-China Relations

24 However, I am not pessimistic because the key relationship that underpins the region's stability is fundamentally sound. The key relationship I refer to is US‑China relations. This is today a complex and multi-dimensional relationship. As China rises it cannot be expected to acquiesce in the status quo. It will want its interests accommodated. As the pre-eminent power, the fundamental US interest is to preserve status quo. No front-runner in a marathon would want his lead challenged. Some degree of competition between the two is healthy; conflict is not.

25 Both Beijing and Washington recognise that it is in both their interests to maintain the best possible relationship with each other, at least for now. The very complexity of their relationship sets up a dynamic that makes for an essential stability. Simply put, US‑China relations are today too complex to be structured along any single dimension. The effort to balance and reconcile different interests brings the relationship into equilibrium.

26 The one issue that can upset the balance is Taiwan. There is a growing contradiction between economic forces that are increasingly integrating Taiwan's economy with the mainland and political developments in Taiwan which are inexorably pushing it away. As a result, both Beijing and Taipei now see a limited window to achieve what they want. This is a most dangerous situation where the possibility of miscalculation is high.

27 Taiwan's leaders are pushing the envelope towards independence, convinced that America will come to their aid, come what may. But the Chinese leadership will move to prevent Taiwan from breaking away, come what may. China has made it clear that it will use force, even at the cost of risking all that it has achieved in the last two decades. Chinese leaders must act no matter how grave the consequences because the alternative for them will be worse.

28 If the US and China get into a conflict over Taiwan, Chinese economic growth will be set back, perhaps for decades. So too the rest of Asia. But Taiwan will suffer the most. And Sino‑American relations will be soured for a generation or more, with incalculable consequences for the rest of East Asia.

29 A cross-strait conflict will also impact the rest of the world. To help prevent a conflict from arising, businesses can play a role. It can raise awareness of what is at stake directly to the Taiwanese leaders, and better still, the Taiwanese business and public. If the Taiwanese people realise the dire consequences of a misstep, they may well prefer the stability, security and prosperity which come with the status quo rather than jeopardise their well-being through any move towards independence.

30 The rise of Asia is the most significant strategic development of this century. Barring a conflict over the Taiwan Straits, I do believe that Asia can make good in this century. We must do all we can to ensure that this is indeed so. Asia's growth and prosperity will benefit not just Asians but also US and the rest of the world.

Thank you.