[Kajian Post] Asia’s Challenges in Becoming the Center of Global Economy

Oleh : Jalu DibyoSanwasi | Staff Divisi Kajian Kanopi 2012 | Ilmu Ekonomi 2012

The global economic power is currently experiencing a shift from the previously dominant West to the rising East, giving the East an opportunity to become the new center of global economy. The growing influence of the East can be vividly seen within many borders, including those located in the West and the East.China, for instance, has increased its presence within the global economy by increasing its share of global GDP from 2.19% in 1980 to 14.35% in 2011. Moreover, over to the West, London has recognized Asia’s growing importance by becoming the first international Yuan-denominated bond trading hub. However,despite theprogresses that have greeted the East, Asia still has to tackle many obstacles before becoming the center of global economy. Among them,Asia will have to face the problems of economic disparity, climate change, low government quality, and reliance on Western market.

Asian nations are challenged by economic disparities that have the ability to hinder growth. Economicdisparities canlead to protests that distract citizens from productive activities. The Occupy Wall Street movement, that protested against the increasing gap, from 40 times in 1980 to 500 times in 2011, of salaries between top and low-level employment positions, has caused many productive workforces to indulge in protests instead of working. Furthermore, when such protests become violent, they also have the potential of deterringinvestments. Since investors greatly value the certainty and safety of their investments, violent protests commonly triggered by poor groups in developing Asian nations tend to scare them away. It is therefore without doubt that Asia needs to overcome economic disparity in order to optimize growth.

In addition to economic disparity, Asian growth also faces problems created by climate change. The changing climate makes crops harder to grow and in turn delivers a blow to the agricultural industry. Due to climate changes, annualrice yields in China have decreased by 4289 tons between 1990 and 2007. Moreover,the rising sea levels will also threaten Asia’s long-term growth. According to the Asian Development Bank, the sea ispredicted to cause a loss of $17.4 trillion by submerging cities and industries that are located relatively low. Hence, if Asia plans on sustaining its growth, it needs to take actions in protecting the environment.

Low government quality within various Asian nations alsoposes as an adversary towards Asia’s economic development. Many developing nations within Asia have low quality government that smears Asia’s image within the eyes of investors.The World Economic Forum Global Competitiveness Report shows that the inability of many Asian governmentsto provide good infrastructures have hindered Asian growth bydiscouraging investors that are planning to invest in that particular Asian nation. Moreover,the government’sinability toefficiently allocate finite resourceswillprevent Asia from reaching its full potential. Development has been taken aback as resources that can be allocated to scientific research have had the tendency to be lost in corruption.Consequently, Asian nations cannot ignore the low quality of its government institution if it wants to grow effectively.

In addition to income disparity, climate change, and low quality government institutions, Asia is also facing serious problems by becoming dependent on Western markets. Since around 36% of Asia’s export goes to either the USA or EU, Asia is vulnerable to the fluctuations and plunges of the European and North American economy. For instance,Asian nations that have high reliance on the West, such as Japan, have experienced decreased growth of around -6.9% during the American financial crisis.Furthermore, Asia has recently seen a decline in income because the European financial crisis has decreased Asian exports to Europe from $801 billion in 2008 to $641 billion in 2009.By diversifying its export destinations and decreasing its dependence on Western markets, Asia will be less vulnerable to the crisis that occurs within any particular borders.

Asia is on a course to becoming the center of global economy. Over the last decade, Asia has seen many improvements that havebrought them closer to that particular glory. Nevertheless, Asia has not yet wear the crown and still has to face many obstaclessuch as economic disparity, environmental sustainability, low government quality, and reliance on Western markets before it reaches its goal. Those problems are large and cannot be tackled by one particular Asiannation. Hence, in order to successfully overcome the challenges lying on their path and become the center of global economy, Asian nations must cooperate and tackle those adversaries together.

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