READING MATERIAL VII

Chapter 7

Globalization and the Asia-Pacific and South Asia

This chapter will discuss the relationship between the process of globalization and
the region of Asia-Pacific and South Asia. This also deals with a framework along three
trajectories: the region as an object impacted by globalization, the region as a subject
pushing globalization forward, and considering the region as alternative to globalization,
which will present a series of snapshots as a way to oEer a larger tapestry of the relationship
between process, place, and globalization in the Asia-Pacific and South Asia.

The Historical Connections Of Globalization And Regionalization

In the contemporary world, globalization and regionalization are inescapable twin

concepts. Though these two are not novel processes. Both however are intertwined and
relevant to each other since the 1980s and during the 1990s after the end of the Cold War.

There are motivating forces behind the interest of states and nations towards regional
cooperation. The relationship of the regionalization process with the globalization process
must be particularly considered. There is a historical context in which regionalization and
globalization took oE and the events that aEect these developments. There are two
processes seemingly in tension in the contemporary world politics:

a.) Globalization that integrates economic, political, social, and cultural lines and

b.) the emerging influence of Asia as global force.

For purposes of discussion Asia confines only Asia-Pacific and South Asia. It covers
largest and populous state (China and India), generates the largest share of global GDP and
in its sheer size emerged over the past decades as a new political force in the world.

Sweeney contends that the beginnings of globalization go back to the period when
human beings first put a boat into the sea. This implies that globalization and regionalization
are classic concepts, which existed since time immemorial. The end of the Cold War was
particularly important in changing the context by which states conducted their security and
political relationships. According to organizations in the 1990s. First, it emancipated the
states from geopolitical and ideological constraints; second, the growing global
interdependence and the consolidation of neo-liberal international financial institutions.
When the USA became the sole superpower in the 1990s, the regional cooperation policies
and agreements was further strengthened.

The task to define globalization is highly controversial. Fundamentally it is defined as

the increased flows of goods, services, capital, people, and information across borders. The
same holds true on the definition of a region. What criteria to follow whether cultural,
commercial or historical is no less controversial and a daunting task. Basically a region is a
group of countries in the same geographically specified area. On the other hand,
regionalization is the societal integration and the often undirected process of social and
economic interaction. This concept is diEerent from regionalism, which pertains to the
formal process of intergovernmental collaboration between two or more states.

Globalization has economic, cultural, social and/or political implications in the

contemporary world. What is the impact of globalization to the nation-state and its central
role within the inter-national system is very challenging. Hence globalization gradually
undermines the nation-states' capacity, autonomy, and sovereignty. At the present times,
global economy guarantees the mobile international investors the upper hand over domestic
political authorities.

Among the important reasons behind regionalism include security concerns and the
promotion of peace and stability. Regional economic integration enhances confidence
building within a region. For instance, the European Union, its main goal was to pacify the
conflicting relationship between France and Germany. Other examples include ASEAN
Regional Forum and the Shanghai Cooperation Organization.

Civilizations comprise culture and identity. The states have increasingly defined their
interests in civilizational terms after the Cold War world. Huntington (1993) identified nine
major civilizations- Western, Latin American, African, Islamic, Sinic, Hindu, Orthodox,
Buddhist, and Japanese. But it cannot be denied that economic motivations are the main
motivational forces behind the contemporary new regionalism. The globalized economy
today challenges the states' capacity and their maneuver room. Hence these states regain
some control over the flows of capital by joining and cooperating in regional organizations.

The strategic trade theory argues that domestic companies benefit from belonging to
a regional market big enough to allow them scale economies while still being protected from
global competition. This is the benefit as the regional organizations will allow the national
companies the opportunity to succeed in a very competitive global market. Non-state actors
often act as the impetus towards (new) regionalism.

Let us clarify on whether or not globalization and regionalization are conflicting

processes. The very nature of globalization is by nomenclature global while regionalization
is naturally regional. Another advantage of regionalization in the world system is that the
economic activity develops the potential benefits coming out from a liberalized global
economy. Regional organizations privileges the regional partners over the other states.
These respond to the states' attempt to reduce the perceived negative eEects of
globalization. To a certain extent, regionalism is a kind of counter-globalization.

The development of regionalization and inter-regionalism is indeed global in nature.

Hence the new regionalism should not be considered as the barrier to political globalization
but rather, it is completely compatible with it, if not a source of encouragement. The diEerent
motivations and forces behind the states' renewed interest in pursuing regional cooperation
policies are numerous and inseparable. The complex mixture of motivations and factors are
used to better mitigate and manage the the perceived negative eEects of globalization. It is
axiomatic though that regional cooperation policies, which are states' rationally chosen
policies for the numerous concrete objectives already discussed. Thus, the increasing
regionalization diminishes the sovereignty and autonomy of the nation-states.
Understandably, the states have to abide to the regional organizations norms that regulate
their behavior.

The Economic Growth Of South Asia

The export-oriented growth in South Asia should not be curtailed by the possible
protectionism made by the advanced economies. The World Bank reported that South Asia
remains the fastest- growing region in the world, widening its lead relative to East Asia.
Specifically, the regional GDP growth rises from 6.7 percent in 2016 to 6.8 percent in 2017,
and 7.1 percent in 2018.

The regions in South Asia have to be flexible to the higher trade barriers imposed by
the advanced states. Hence this global integration has been contributory to economic
development and poverty reduction. Selective protectionism would result to trade diversion
away from the established suppliers. These South Asian economies also considered the
advanced economies as their largest export markets.

India leads the group for South Asia as a whole. The GDP growth of India will grow to 7.2
percent in 2018, after rising by a slightly lower than expected 6.8 percent in 2016. In the case
of Pakistan, it is expected to accelerate to over five percent this year. While Nepal and
Maldives are coping up with their respective economic backlashes. Bangladesh had
remained strong with a high growth record.

There is a contagion or domino eEect when regional developments occur in one part
of the world. Indeed the increasing developments in inter-regional cooperation manifests
that the regionalization process is global in nature. Regionalism is seen here as critical part
of the political economy of globalization. Hence the core driving force is global though the
manifestation is regional.

The Effects Of Globalization

The technological revolution and scientific discoveries since the 1980s have
stimulated the further development of globalization. The dominion of neoliberalism resulted
to the prevalence of exploitation over cooperation and the widening gap between the rich
and the poor. This is also where the democratic principles have yielded to market laws.

Stability then became threatened with the unprecedented explosion of global social
inequality. The concentration of wealth has been speeding up in a short span of time.
Unexpectedly today 1% of the world population has the same wealth of 82% of the world
population. Sad to note that the 200 richest individuals now possess the same wealth of the
2.2 billion people. This scenario has become uncontrollable.

Another threat to the stability of human kind is the increase of robotization. This
accounts today to 12% of the industrial production and is estimated to reach 62% in 25
years. Macro-regionalization is the new paradigm to be investigated upon. This is the
recompositing of the international order towards the creation of a specified number of macr-
regions. There are pivotal states in the world, which aspire to become the centers of gravity
for small countries and thus create their own macro-regions. This results to the inevitable
friction and overlapping interests.For example, the European Union comprises one macro-
region in which Germany emerges as an economic development leader. On the other side,
Russia is also working in the strengthening of its influence and expanding the area to appear
as a world power. Reaching the vision of the international order is also dreamt by China,
India, Turkey, Nigeria, and Brazil to become a macro-regional power.

A multi-polar world has two sides but it is rather viewed as more logical and viable
than a unipolar one. There is still a controversy though on whether this macro-regionalization
is the first or best alternative solution for the medium or small countries. The challenge now
is on how to neutralize the dividing forces, which provide the lines of separation but not in
the sense of encouraging hegemony. How to balance the essential need for regional
solidarity and for better global governance should be properly addressed especially at the
global level.

The UN agenda consists of many open opportunities for research and collaboration
to tackle certain issues, which are not squarely defined, but requires proper experimentation
and collective learning eEorts. This requires a genuine collaboration and international
scientific cooperation to strengthen the irreplaceable role of the United Nations.
Consequently, there will be new ideas and concrete proposals that can emerge in order to
establish a healthier and more harmonious relationship in this ambitious process of
globalization.

Economic globalization has both the positive and negative eEects. On the positive
side, it has improved the standards of living for the many people in Asia. When these
countries reach a certain level of development, there are pressures to improve workplace
and the environmental conditions with a confident voice in the global stage as they counter
inequities and loopholes of geopolitical structures. On the negative aspects, the
international capital movements have produced new inequalities of every kind.

There is a huge concentration of the benefits of growth upon the advanced sectors within
and among societies while aggravating the conditions of those disadvantaged ( Richard Falk
in Gills 47-49).

Globalization is also regarded as a "paradigm shift," which includes the cultural and
social shift in our value system and lifestyle while recognizing and accepting the diversity of
the other system or culture, in the ethnic or religious aspects. As Thomas Friedman (2005)
noted, "what is new is the system, what is old is power politics, chaos, clashing civilizations,
and liberalism;" they are all part of the new world order and "the interaction between this
new system and all these old passions and aspirations make this process a very complex
one.

Globalization In The Asia-Pacific Region

The Asia-Pacific Region is the only region in the world whose economic ties are
considered significant. This has not really experienced military factor in the national politics.
The regional countries have now become postmodernist states, which focused mainly on
strengthening their welfare, science, and technological developments. The regional
integration is not contradictory to the process of total globalization. But this rather includes
the desire to collectively develop a common policy and political solution, which are
acceptable to all, taking into account the universal welfare of the parties concerned.

Among the most successful economic development models are South Korea,
Taiwan, and Singapore, which triumphantly emerged from the crises of the 1970s and 1980s.
There was a slowdown in world economic growth in the 1970s and 1980s, which exacerbated
social contradictions in the developing countries.
 Based on research studies, the economic development and success are always
intertwined with the globalization processes and the correctness of institutional structures.
There must be proper understanding of the increasing globalization of economic activity and
the planning, implementation, and eEectiveness of the diEerent policies (Beeson, 2007;
Dunning, 2000; Dosch, 2006; Litsareva, 2007; Konstadakopulos, 2002; Chang and
Ramkishen, 2001; Nesadurai, 2003). These elements also hold true of the role of South
Korea, Taiwan, Singapore, Malaysia, and Thailand in policy-making and the particularity of
national policies (Bowie and Unger, 2002; Yeh and Lin, 2012; HuE, 1994; Meyer, 2001; Nah,
2005; Niels, 2007; Pang, 1982; Schein, 1997; Sum, 1996; Tongzon, 2002; Zainal-Abidin, 2000;
Watkins, 2002).

Singapore is an example of a country with a highly competitive environment and

flexible taxation policy. It has then the largest banking center. Their strategy includes the
significant reduction of the tax burden on foreign businesses thus completely relieving
foreign companies and private investorsfrom taxation within the five-year period. This
system has encouraged the transnational corporations to begin funding and developing
research and development for industrial exploitation (Property Tax, 2008). Singapore has
become the second engine of the world economy contributing more than one-third of the
country's GDP growth is its financial sector. Its international monetary exchange is one of
the world's leading financial centers, concomitant with London, New York, and Tokyo (Niels,
2007).

An important outbreak also in Singapore is the establishment of the Southern

triangle, which help in solving the acute labor shortage with the aid of the southern state of
Malaysia and the Indonesian provinces. This Government of Lee Kuan Yew, however, was not
confined by the geographical factor of a country's attractiveness to foreign investors.

Their unskilled labor force became employed in the manufacturing, shipbuilding, and
engineering. Various trainings were given to the labor resources, which formed the basis of
the country's economic growth. Watkins (2002) stressed that the Government formulated a
leadership strategy of training the skilled labor resources in the Third World.

Pang (1982, 549-553) noted that the influx of skilled workers, professionals, and
entrepreneurs with capital and production experience with the rights to stay for a long-term
in the country became evident in Singapore. There is a reduction in the labor-intensive
industries and services and the development of high-tech areas. Certain privileges were
guaranteed like the special working status and the right to permanent residence for the
highly skilled workers and wealthy Chinese from Malaysia, Indonesia, Hong Kong, and the
Taiwan.
 Japan had developed a detailed scientific, technical, and innovation policy, which
strengthened its production and the growth of macroeconomic indicators. Such that the
basics of this industrial growth are made through structural innovations as there was a
transition from a trade policy to a production policy, and the reorientation of exports, which
further stimulates the foreign investments. The same story with South Korea, Taiwan,
Province of China, and Singapore, which subsequently developed into the most powerful
regional motors. They likewise have modelled after the Japanese economic system. At the
end of the twentieth century and the beginning of the twenty-first century, the advanced
economies utilized scientific and technological systems.

To produce a knowledge-based economy, the government policies and foreign

investments play an important role in strategic alliances with their economic and innovation
breakthroughs. Research and innovation activities are particularly important in the creation
and sale of scientific and technical products from the production to the industrial use stage.
These comprise the creation of software and systems that will address the data collection,
reprocessing, and transmission of the computing systems. According to the Materials of the
Institute of Government Accounts and Finance (2004), there must be a close cooperation
between science and industry that will lead to a change in the structure and nature of the
economy. The latter is highly dependent on new knowledge and ideas.

For instance in the Republic of Korea, their government solved their employment
problems by creating new research institutes. There is the development of science and
technology, which are associated with the arrivals of foreign Koreans returning mainly from
the United States in the middle 1970s. After these Koreans gained massive trainings in the
leading universities in the United States, they came back to their native lands subsequently.
Additionally, the Taiwanese society has also transformed its people through the Taiwanese
universities' competitiveness on the world stage. There are three main areas developed-
attracting foreign students; providing opportunities for Taiwanese students to go abroad; and
implementing international cultural and educational exchanges and cooperating with the
other states.

The globalization of learning is evidently popular in the Republic of Korea, which

became known in the international community. South Korea has been able to attract foreign
talent through the support of e-learning in the universities and the e-learning programs
became adopted. This country has contributed to improving the quality of education through
information and communication technologies; specifically its national project known as
Digital Education.

In Singapore, the foreign labor resources influenced its innovative capacity by

quantity and quality. The immigrants are a significant part of Singapore's workforce; the
policy on foreign workers took a separate direction. The Singaporean Government defined
the requirements down to the level of professionalism of foreign workers, which was
reflected in a three- tier system of foreign labor employment. The workers therein are
assigned statuses depending on their qualifications and monthly income. A very important
aspect of this policy is that the Singaporean Government has always emphasized equality
regarding the valuable contributions of all immigrants in the development of Singapore.
Undeniably, Singapore's world-class educational center is an integral part of the country's
innovative economy. Moreover, its industrial products become more complex which attract
new investments. And even in the face of economic downturns, Singapore's export
performance improved considerably. It narrated that the country is moving into the "second
industrial revolution." HuE (1994) reported that the Singaporean Government assigned the
task of developing knowledge-based production based on research and development not
only in the sphere of computer software but also in the engineering projects. Thus, a
knowledge-based society and a knowledge-based economy are formed based on the highly
trained competitive professionals who are connected in the internationalization globally
peace.

Inevitably, the world has become a global village through the growing process and
influence of globalization. Its real and strong actualization are concretized in the fields of
technological development, economy, financial flows, communication networks and the
value systems. Hence it has become a commonplace in all social sciences a long time ago.
Through trading, the world has become one. This is also true in the growth of the Asian region
and the Asian economies, which integrate them into the global economy.

The factors contributing in the progress of the Asian intra-regional trade include the
rise in regional income, the elimination of the trade barriers, and the advances in production
and transportation technologies. The intra-regional trade in Asia is described by the high
proportion of trade in parts, components and intermediate products (Ando, 2006;
Kimura,2007; Kimura and Ando, 2005). The People's Republic of China is contributory in the
intra-regional component trade. China is regarded as the last leg of the production chain. It
assembles final products and exports them to the rest of the world (Eichengreen, et.al.,
2004; Gaulier, et.al.,2005). It can be simply stated that the intra-regional trade in Asia is trade
creating rather than trade diverting. Hence its expansion is both the regional integration and
its integration with the world which are strengthened.

The trade dynamism variable given by the ratio of external trade to GDP is routinely
used to describe an economy's degree of trade integration with the global economy. The ratio
besides developing economic eEiciency, this economic integration promotes policy
coordination, which will minimize future conflicts in the regions of imports should be
assessed based on the amount of trade between the two economies and the result is the
degree of bilateral trade integration. There are numerous alternatives to reduce the trade
hindrances in the region. The adverse dollar shortage eEect on trade experienced in the
recent global crisis is apparent today. But China, for example, launched a pilot scheme for
cross- border trade settlement in Renminbi by selecting firms in the five Chinese cities and
Hong Kong.

By theory, an increase in the degree of trade integration between the economies does
not necessarily mean that the business cycles are synchronized. But the impact depends on
the shock and nature the increased trade connections. It means that if trade integration
induces production specialization across economies, which are targeted by sector-specific
shocks, then trade integration will lead to the synchronization of the business cycles. While,
if the trade is of an intra-industry nature, then this logic is inapplicable.