Sunday March 13 2011

Potential gains and losses from Arab change

Philip Bowring

The Arab awakening has implications for East Asia which deserve some thought in regional capitals. The most obvious, as demonstrated by Libya, is that several countries, and Africa generally, are so fundamentally unstable that those like China with money to spend in pursuit of friendship, construction contracts and commodities need to think twice before committing themselves too deeply.

Only slightly less obvious has been the determination and ability of China to rush planes and ships to rescue thousands of stranded nationals. That was beyond the capacity of any other Asian nation with workers at risk. Although this was simply a rescue mission, it sends a message to Asian countries with significant numbers of Chinese people, whether Chinese nationals or ethnic Chinese. However much China may say it respects national sovereignty, blood remains thicker than the watery ink of international rules. Empires often begin not with deliberate attempts of big countries to impose their will on weaker ones but with well-meaning efforts to protect their own citizens' lives and property when threatened by disorder in some foreign land.

Relevant to all of East Asia, not just to China, is another imponderable: what impact will Arab events have on relations between the Arab world, particularly North Africa, and Europe. That matters because Asia has long fulfilled a role which in principle should have been Europe's given its neighbours just across the Mediterranean. Why is it that Vietnam sells many times more shoes and clothes to Europe than Egypt, a country with a similar-sized population, passable physical infrastructure, high unemployment and low wages?

Europe has singularly failed to establish the same sort of relationship with its poorer southern neighbours that Japan, Korea and Taiwan have done with Southeast Asia and China, injecting capital and knowhow into these economies to take advantage of the export opportunities offered by the markets of Europe and the US.

This is not entirely Europe's fault. The Arab world has been mostly unreceptive to foreign investment and trade, lurching from an inefficient mix of Arab nationalism and socialist economics to varying forms of crony capitalism and military- or monarchy-based authoritarianism. The region continues to seethe at the Western implanting of an expansionist Israel on Palestine. But, assuming that the current ferment does lead to real change, what form will it take?

Egypt is pivotal. It is the most populous state and widely recognised as the Arab intellectual and artistic hub. The Egyptians face a dilemma. Socialism was an abject failure, and much of its legacy remains with an excess of government employees and state-owned industries. Yet the alternative, trade and a free-market model, is tarnished by its association with Hosni Mubarak.

For its own good, Europe badly needs a North Africa similar to Turkey and more in tune with its ideas of markets and democracy. If the opportunity arises, it must offer investment and trade access on a massive scale. But given that its own economy of stagnant and ageing populations can grow only very slowly, trade access would likely come at the expense of existing, mainly Asian, suppliers. Thus far, a united Europe has not become the trade fortress that Asia once feared. But that could change if Europe finds it desirable to underpin open, modernising new regimes with investment incentives and trade preferences which would seriously damage Asian exports.

That did not happen when the European Union moved to raise up Eastern European economies because they were relatively thinly populated. But North Africa has just the demographic conditions that Southeast Asia and China have to build huge labour-intensive, low-skill manufacturing export industries. An Arab awakening has economic as well as political implications.





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