G20 and the Asian continent

As Imran's govt aims to find its footing in the global institution

I write this as the leaders of the Group of 20 concluded their summit in Osaka, Japan. Pakistan was not present as it is not a member of the group of the world’s largest economies. It is the largest country by a number of measures that has been kept out of the group where a number of important decisions have been taken. Pakistan’s failure to gain entry can be attributed to poor economic diplomacy. India, as always, has not helped; its main approach towards its neighbour is to isolate it. In this endeavor, it has been remarkably successful. One of the important objectives the Government of Imran Khan must pursue is to gain entry into the world institutions from which it has been excluded. The G20 is one such institution. If Islamabad wishes to attract both foreign investment and foreign tourists, it has to attend to this task.

The G20 was formed almost two decades ago, on September 26, 1999. It has 19 member countries and the European Union. The Asian continent has eight members: Australia, China, India, Indonesia, Japan, Saudi Arabia, South Korea, and Turkey. Europe has six: France, Germany, Italy, Russia the UK, and the European Union. The Americas, North and South, have five members: Argentina, Brazil, Canada, Mexico and the United States; and the African continent has only one, South Africa. The Group’s chairmanship rotates annually among its 20 members. The chair is responsible for hosting the summit. Argentina was the host in 2018 with the summit held in Buenos Aires; Japan chaired in 2019 and convened the summit in Osaka. Saudi Arabia is back in the chair and will host the summit in 2020 although in view of the alleged involvement of the country’s senior leadership in the cold-blooded murder of the journalist Kamal Khashoggi, a United Nations’ agency that has investigated the matter and has objected to Saudi Arabia as being the host in 2020.

There are a couple of developments that should guide Islamabad in getting the country out of such isolation. First, it is part of the Asian continent that is now getting to be the most important and dynamic component of the global economy. Second, it has aligned itself with China while India, its rival in many areas has linked itself with the United States. It is my belief that Pakistan has chosen well but needs to cast the development of this relationship in the context of a global arrangement such as the G20.

The Osaka meeting was the third time that the G20 met in Asia. The two earlier meetings were hosted by China and South Korea. As Jamil Anderlini recently wrote in the Financial Times, “the G20’s importance highlights the lack of alternative structures that allow dialogue and political understanding, not least in Asia. That is especially worrying because of the region’s accelerating arms race. The rise of China, its military build-up and expansive territorial claims, has driven neighbours to spend unprecedented amounts on their military modernisation.” That reference to the Asian response to China’s rise was to other nations of East Asia and India, not to countries such as Pakistan, Indonesia and Malaysia that were happy to align themselves with China.

Asia has more than half of the world’s population of more than eight billion and its share will increase as it has some of the more rapidly growing populations. Pakistan, of course, belongs to that group of nations. That in Japan, Asia has one of the more rapidly aging populations, points to the continent’s demographic diversity. Because of aging, it is estimated that Japan will face a 380,000 worker-shortfall by 2025. A third of Japan’s people are projected to be over 65 years old by that year. This is the reason why a senior Japanese diplomat was reported by the Pakistani press as showing interest to import skilled Pakistani workers from Pakistan into his country. Asia is urbanising more rapidly than any other part of the world. It has 21 of the world’s 30 largest cities, two of which are in Pakistan and another half a dozen are in South Asia.

The global economic gravity is moving to Asia. By 2020, Asia’s economies as defined by the United Nations and measured in terms of “purchasing power parity (PPP)” will be larger than the rest of the world. This would be the first time in almost two hundred years that Asia would be placed in that position. That was the case in the 19^th century before the start of the period of European colonisation. Then the European nations aggressively advanced into Asia and quite deliberately destroyed the economic strength of the Continent. The British introduced opium into China and when Beijing resisted they used the military in the “Opium War” to turn millions of Chinese into addicts.

There is now dynamism in Asia. The continent will have half of the world’s middle class, defined as those living in households with annual per capita incomes of between $3,500 and $35,000. It is the middle class that drives economies and establishes the patterns of consumption. International commerce is an important component of this dynamism.

Compared to Asia, those in Europe and possibly also in the United States look tired and exhausted. Principal international economic organisations including the IMF, the OECD and the World Bank have been downgrading their forecasts of 2019 and 2020. For the Eurozone, the forecast is down from 1.8 per cent to 1.1 per cent. The consensus global economic growth forecast at 2.7 per cent in 2020 is 0.1 percentage point below the one offered in January 2019. The average Asian growth rate is projected to be four times of these rates.

While the global economy was hit by two developments, both the result of the actions taken by the United States Administration headed by President Donald Trump, the Osaka Summit skirted the issues. The first was climate change, the other being the stresses in the global trade system. Instead, the focus was on Trump’s bilateral meetings with Russia’s Vladimir Putin and China’s Xi Jinping. Washington under Trump had set back the rule based global order his country had worked hard to create after the end of the highly destructive Second World War. Working alone, the United States’ President used tariffs to impose his will on the rest of the world. While the bilateral contact between President Trump and Xi led to the restart of suspended trade talks between the two countries, most experts did not think that the resumed talks would lead to the easing of tensions between the two countries.

Published in The Express Tribune, July 08^th, 2019.

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