Outlook for the new year
Updated: 2013-02-26 05:57
By Bernard Chan(HK Edition)
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For a while, as 2012 came to an end and the Year of the Snake arrived, it seemed as if the world might be heading towards a period of stability and calm. After several years of political crisis and economic volatility in various regions, surely we all deserve a quiet year or two, perhaps with modest but steady global economic development.
Unfortunately, it is far from guaranteed.
There is no reason to believe that the global economy is going to pick up meaningfully in the coming year. The huge imbalances in debt and surplus that came to a head in 2008 have not been resolved. In indebted developed countries, debt has been transferred from the private sector to governments, which are subsequently faced with the choice between austerity, which means depression, and loose monetary policy, which means inflation. The eurozone is facing contraction, while the United States, Japan and other economic powers seem to be heading towards competitive currency devaluations, which in turn could lead to trade wars.
This would be bad enough on its own, but the world is in the midst of regional political conflicts and crises. Even the developed world is not free of such problems, with the eurozone facing constant uncertainty owing to political scandals and the prospect of public unrest across Portugal, Spain, Italy and Greece.
The Middle East faces even more worrying scenarios. The situation in Syria looks like it is moving more and more towards a protracted civil war. Opposition forces are taking over more strategic sites, and government forces are lashing out in retaliation, causing refugees pouring into neighboring countries that already have political, social and economic difficulties of their own. Some analysts foresee Syria becoming a "failed state" with no proper government or law and order, just unending fighting and destruction. What used to be a middle-income economy would be a breeding ground for fundamentalist movements.
Egypt could be sliding towards financial and economic crisis if the country's political and economic instability leads to deterioration of reserves, capital flight and rapid currency depreciation. Tunisia is also seeing political uncertainty hit its credit ratings and thus its economy. In Libya, regional and religious factions are operating out of central control. The overthrow of old regimes in all these countries in recent years has not led to greater stability or prosperity - sadly, it has so far been the opposite.
Meanwhile, Israel continues day-to-day conflict over land with Palestine in the West Bank and Gaza. And in the background is Iran and its nuclear program, and all the terrible outcomes that could lead to.
This brings us to our own region, where we are staring at another nuclear nightmare scenario: the Democratic People's Republic of Korea. The DPRK unexpectedly launched its third nuclear test in the middle of the Chinese New Year holiday. Although this is potentially an extremely disturbing development, it could serve in a positive way if it helps us put other regional issues into some sort of perspective.
Japan's new head of government is considered to be a strong nationalist. Japan's dispute with China over the Diaoyu Islands is frequently in the news here in the SAR; what we don't hear so much about is that Japan also has conflicting territorial claims with the Republic of Korea and Russia. Similarly, while we hear about conflicting claims between China and some other countries over other parts of the region, we do not hear so much about other boundary disputes among those countries themselves; in fact, there are plenty of them.
The point is that while the territorial disputes among East Asian countries run the risk of inflaming public opinion, these countries have strong incentives to resolve their differences peacefully. Economically, there are very important relationships among China, ROK, Japan and the ASEAN countries. The region collectively forms the world's great economic miracle of the past 30 years, and its peoples can look forward to yet greater prosperity if national leaderships can manage their nations' relations sensitively.
DPRK, on the other hand, is a very different situation. China, ROK, Japan, Russia and the US need to cooperate, not simply for the good of continued economic development, but for the region's very security, maybe even that of the world. If they can achieve that, they can find ways to manage other regional issues, and the global outlook for the year ahead will be better for at least one part of the world.
The author is a member of the Executive Council and a Hong Kong deputy of the National People's Congress.
(HK Edition 02/26/2013 page1)