The Future Is Asian

by Parag Khanna

  Though many Western economists have portrayed Asia’s rise as merely catching up with the West, it could well be that Asia is leapfrogging it. Asia no longer faces deficiencies in the money, technology, or talent needed to fund and scale companies in any industry. An older generation of Asians has been accustomed to receiving Western technology and having to figure out how it could suit their needs. But today Asians are focused on finding Asian solutions to Asian problems. Rather than copying Silicon Valley firms, Indians now take lessons from Chinese tech companies. Shailendra Singh, the managing director of Sequoia Capital India, says that his industry has never seen wider or deeper investment opportunities for tech leapfrogging. The start-up CeeSuite has automated the investment banking lifecycle for the vast pool of regional SMEs that could never afford Wall Street banks. Its founders are also creating a virtual accelerator that digitizes the stages and lessons of the start-up process, from crowd-funding investment through initial coin offerings (ICOs) and blockchain-based business models. Cybersecurity companies are thriving in Singapore and expanding from there. Asians are learning and adapting as much or more from each other as from the West.

  The ride-sharing industry is emblematic of how Western companies are losing out to local rivals for both strategic and cultural reasons. As recently as 2015, it seemed as though Uber was taking over the world. But thanks to SoftBank’s consistent support for a suite of Asian car-sharing firms—Didi Chuxing (DiDi) in China, GrabShare in Southeast Asia, and Ola Cabs in India—Uber’s valuation dropped below that of DiDi, which bought Uber’s China operations (after which SoftBank bought Uber shares at a discount).28 In Russia, Uber was subsumed by Yandex.Drive; in Southeast Asia, Uber sold its operations to GrabShare, which took another $1 billion in investment from Toyota. Now DiDi is expanding into Brazil, Ola Cabs (in which DiDi has invested) is moving into Australia, and Careem leads in the Gulf region. These Asian firms collectively own the Asian space while challenging Uber everywhere else. In many Asian cities, Uber is no longer the market leader but a transport solutions partner for indigenous champions. In stark contrast to Uber founder Travis Kalanick, DiDi founder Jean Liu—one of fifty recently minted billionaire Chinese females—is considered a nurturing mentor to her regional peers. Grab CEO Anthony Tan has said, “There’s this sense of brotherhood, that we’re in this battle together. Let’s show them the power of Asia.”29

  Feeding and Fueling Asia

  Autarky, not conquest, is the holy grail of geopolitics. Countries and regions that achieve self-sufficiency in natural resources, agriculture, industries, and technology can liberate themselves from the risks of foreign dependency. North America is self-sufficient in oil and gas, while Europe is striving for alternative and renewable power to substitute for its dependence on Russia’s hydrocarbons. The more Asian economies integrate, the better they, too, will be able to pursue autarky.

  Energy has been one of Asia’s greatest sources of both economic and geopolitical vulnerability. Yet even as Asia’s energy consumption rises, the risk of energy competition sparking conflict has been reduced due to the diversification of supplies and the rise of alternatives and renewables. East Asia alone consumes 80 percent of the world’s liquefied natural gas (LNG) but, lacking a natural gas production and distribution infrastructure, the region has paid prices twice as high as in Europe and four times higher than in the United States. But as Qatar’s LNG flows eastward, Russian natural gas is delivered to China and the Pacific, and Australia (thanks to Japanese investment) is overtaking Qatar as the world’s leading natural gas supplier, Asians will get more and cheaper energy. In late 2018, Shell, together with partners from Malaysia, China, Japan, and Korea, announced the construction of a massive LNG facility on Canada’s western coast that will deliver gas to Asia in just eight days, versus twenty from the US Gulf Coast. Singapore’s Keppel leads the world in the construction of offshore oil rigs and in 2017 deployed the world’s first floating gas liquefaction vessel to cater to growing global LNG demand. Asian countries are also ramping up investments in all energy sources from oil and gas to nuclear, wind, and solar power.

  Since Asia consumes most of the world’s fuel, minerals, and food, it is only natural that commodities are traded in Asia as well. Ten trillion dollars of the global economy is made up of commodities production and consumption, and Asia now consumes more than half the world’s supplies of coal, aluminum, nickel, copper, and zinc, as well as cotton, rubber, and palm oil, and imports most of the world’s iron ore and other key ingredients of steel production. In the 1980s, 80 percent of the world’s gold trade took place between the United States and the European Union, whereas today most gold is traded within India and China.30 In recent decades, Western firms and markets have dominated the commodities trade, especially in mining, where Western cartels held an oligopoly of both pricing and regulatory power. But the playing field is leveling. Singapore has become the second largest physical trading hub for commodities, handling bulk buying, shipping, and storage contracts. The regulatory environment has matured to handle derivatives for commodities futures and risk management, as well as debt markets to finance production and trading activities. This has given Asians more confidence to exercise legal leverage within the commodities industry. In a recent dispute between the mining giant BHP and China, Singapore was chosen as the site for arbitration.

  Because the main fuel-consuming sectors in Asia are steel production, industrial manufacturing, and transportation, Asia on the whole is not yet anywhere near a green energy landscape. The Gulf states, Iran, and Russia are among the world’s largest oil and gas producers, with Emiratis and Qataris annually releasing more emissions per capita from their jeeps and air-conditioning than nearly any other country in the world. Meanwhile, China and India are two of the world’s top three aggregate energy consumers (the United States ranks second). China continues to build coal-powered electricity plants at home—fueled partly by US coal exports to China—as well as abroad in Pakistan and Iran. Most of the world’s largest coal-producing companies (and coal power financing banks) are Chinese, while most of the world’s most squalid cities—Karachi, Mumbai, Delhi, and Dhaka—are in South Asia. Calcutta now ranks as India’s most polluted city, and nationwide more than 2.5 million deaths each year are attributable to pollution (versus 1.8 million in China).31

  ASIA’S RESOURCE SYSTEM

  Asia is the largest producing and consuming region of the world for both food and energy. As more efficient agricultural techniques take hold and infrastructure linkages expand, Asian countries will be better able to compensate for droughts and crop failure and meet one another’s food import needs, as well as meet the region’s growing energy demand.

  But Asia is also joining Europe in taking aggressive measures to reduce environmental degradation, though the challenge is on a far greater scale. In China, coal and oil are peaking as a share of energy production.32 China is spending more than $100 billion per year on non–fossil fuel energy and is aiming at acquiring 15 percent of its total energy consumption from such alternative and renewable sources by 2020. Hydropower represents 80 percent of the country’s renewable power and 70 percent of its new power-generating capacity. Wind power is a much lower share at 12 percent but growing fast.33 More than 2 million people work in the solar-power industry in China compared with 200,000 in the United States, installing solar panels on buildings and even on new highway surfaces. In 2015, State Grid Corporation of China provided continuous power from only renewable sources to the 5 million residents of Qinghai province for a full week. With the help of Western architects and designers, China is deploying smog-eating towers that suck in smog and pump out purified air, recycling the captured waste into products such as jewelry, and smog-eating bicycles that release clean air with each turn of the pedal. China is also implementing European-style cap-and-trade carbon market schemes in the most industrialized provinces.

  In addition to industrial output, transportation is among the first targets of any government s
erious about cleaning up its environmental footprint. China has set a target for 40 percent of the residents of its megacities to use public transportation by 2020, with slightly lower percentages targeted for big, medium, and small cities that have less congestion. It has also mandated that all automotive companies—foreign and local—sell electric cars or risk being banned from selling diesel vehicles. Just as Europe has done for decades in demanding high product safety standards to access its markets, China’s powerful regulatory signals have jolted the global automotive industry. When the Trump administration pulled the United States out of the Paris climate agreement, California governor Jerry Brown led a delegation of states representing half of the US GDP to Beijing to sign a declaration pledging their commitment to the goals.

  India’s later start at industrialization has allowed it to focus on clean energy inputs into its growing manufacturing sector. Like China, India has plans for dozens of new nuclear reactors and solar farms. Renewable power grew from 2 percent of the country’s energy supply in 2012 to 13 percent by 2015, with the industry on course to produce nearly 200 gigawatts of renewable power by 2022. For the 250 million Indians who still lack electricity or suffer from power outages during summer heat waves, the government is accelerating new solar-power and biomass projects.

  The sooner China and India transition to alternative energy, the less fossil fuel they will import from West Asia. As oil and gas prices decline, therefore, Asia’s largest energy producers are themselves accelerating their green transitions so that they can maximize their export revenues and spend less on domestic fuel subsidies they can no longer afford. With funding from Japan’s SoftBank, Saudi Arabia and the UAE are investing in carbon-neutral eco-cities and 200-gigawatt solar farms. China and Malaysia have together captured two-thirds of the global solar panel market, reducing the price of production by 90 percent. Batteries are another area in which Asian dominance has brought down global prices. China, Japan, and Korea together account for more than 90 percent of the world’s lithium-ion battery production, giving them an edge in powering their growing fleets of electric cars.34 China’s BYD Automobile Company is by far the largest electric car maker in the world and has recruited Warren Buffett as an investor and Leonardo DiCaprio as its poster boy. It is even making the next generation of double-decker buses for London. China is Tesla’s second largest market, but its market share is minuscule and will be further challenged by start-ups such as NIO, whose models sell at half the price of a Tesla and offer battery-swap stations nationwide. Ultimately, Tesla will wind up like Apple in China, an accessory for the well-off rather than a mass-market vehicle. Looking forward, Japan’s recent discovery of massive undersea rare earth mineral deposits will enable it to produce even lower cost batteries and other electronics for its customers worldwide—including Tesla, for which Panasonic is the main battery supplier.

  All Asians now accept the evidence that “green growth” is not an oxymoron. One by one, Asian cities are making their way toward the virtuous circle of public-private financing for clean energy and transport, lower electricity costs and reduced government subsidization, and job creation in erecting eco-efficient buildings and deploying smart sensors and meters. China’s Suning is building new low-energy data centers in all its business hubs. Hanoi, the city where today you are most likely to get hit by a motorcycle, plans to ban motorcycles and build a subway by 2030. The Philippines has begun to install tidal-power plants to harness oceanic wave energy that will allow entire islands such as Capul to be powered entirely off grid. And Adelaide, Australia, which over the past decade has transitioned to generating more than half its energy supply from renewables while promoting local agriculture through wastewater irrigation, has much to teach the rest of Asia about maximizing urban resources.

  Asia is the world’s largest food-producing and -consuming region, but few Asian countries use the modern machinery, irrigation techniques, and fertilizers required to get the most out of their farms. China’s major agribusiness companies now have modern food-processing plants to raise production, setting the stage for their expansion across Asia. China is also erecting entire towns of Spanish-like greenhouses to produce fresh fruit year-round. Rudimentary land rights and farm cooperatives would also enable more of Asia’s nearly 2 billion rural inhabitants to take out adequate loans to invest in better-quality seeds and tools for crop cleaning and packaging. India is using aerial surveys, satellites, and drones to complete a nationwide Digital India Land Records Modernization Programme (DILRMP) that will quickly qualify farmers for such services. With India’s extensive investments in agricultural output and rural development—and the infrastructure to connect farmers to markets—Prime Minister Modi hopes to double farmers’ incomes by 2022.

  Asia’s diverse fertile zones—from the Tigris and Euphrates to the Brahmaputra and Ganges to the Mekong and Yellow rivers—are being subsumed into a pan-Asian environmental system. The dry belt spreading from Iraq and Syria through Iran and Pakistan makes Western Asia increasingly reliant on food imports from as far away as Russia and South Korea. India has as much arable land as the United States (each 12 percent of the world’s total) and more than China (which has 9 percent), making its agricultural modernization a key factor in feeding Asia. Yet China’s diversions of the Brahmaputra River headwaters in Tibet have had significant consequences for the entire Gangetic civilization, much as its damming of the upper Mekong River has affected the agricultural production cycles of much of Southeast Asia. Meanwhile, China’s overconsumption and pollution of its major rivers could speed up nascent plans to divert Russia’s mighty rivers southward toward China’s cities and farmland.

  Asia has the largest number of megacities facing water shortages from overconsumption. Some Chinese cities are projected to run out of clean water by 2020.35 India faces a crisis of water tables falling nationwide; Iranian protests have been spreading as taps run dry. Across the region, trillions of dollars of spending are necessary to fix leaky pipes and lay new ones, install efficient water management systems, and construct large-scale desalination facilities. Thus far, only in the wealthiest Asian cities such as Singapore has the combination of higher water tariffs, efficient utilities, and public awareness campaigns led to a decrease in average daily water consumption. Israel, which gets 55 percent of its water through desalination plants, will be selling its high-tech know-how to most of its Arab rivals. Much more environmental knowledge must emerge if the megaregion is to stave off ecological catastrophe.

  Asian cities from Dhaka to Jakarta also demonstrate the worst mismatches between vulnerability to rising sea levels and preparedness for coastal flooding. Should coastal inundations overwhelm today’s defensive measures—such as building massive sea barriers, raising roads, and channeling seawater into underground aquifers—urban refugees will be forced to retreat inland to more hospitable elevations. Then there are the Pacific Islanders, for whom moving “inland” buys little time and incurs an exorbitant economic cost. For the peoples of Oceania, the sea has been as much of a resource as their land; their folklore celebrates the unity of humanity, land, and water.36 The coming decades will test whether other Asians share this sentiment as a rising number of climate refugees from submerging Pacific island states such as the Solomon Islands, Fiji, and Kiribati arrive on firmer shores. Skyrocketing Asian greenhouse gas emissions have exacerbated their plight, and now Asian nations must decide how and where to relocate them. Equatorial Asians may have to become temperate Asians, changing the social fabric of Central Asia, the fertile borderlands between China and Southeast Asia, and eventually eastern Russia.

  The landlocked Himalayan kingdom of Bhutan has been thrust into the strategic spotlight as a major source of glacial runoff flows into the Brahmaputra River, making it both a flooding hazard and a hydropower source. Steering water away from the former toward the latter will require new cross-border Asian investment in hydrotechnologies. In the Tian Shan and the Pamir Mountains, Kyrgyzstan’s and Tajikistan’s hydropower poten
tial makes them crucial electricity providers for Xinjiang’s growing Chinese population. Meanwhile, Australia wants to sell solar and wind power to Indonesia, and Mongolia is generating solar and wind power both for itself and to export to China. The more Asians invest in resource-sharing technologies, the more they will integrate into a regional ecological system to complement their economic system.

  Asia’s spiritual revival has been an ecological motivator across the region. As hyperspeed industrialization chokes Asian cities from coastal China to New Delhi, ever more Asians are opting for a slower life outside the megacities and lending their support to Buddhist and Taoist eco-activist movements that advocate sustainable living. At Mao Mountain, a sacred Taoist site in eastern China, the abbot Yang Shihua calls upon followers to revere the statue of Laozi as a “Green God.” In 2018, the Buddhist Association of China successfully lobbied to block the IPO of a holy mountain site to prevent its overdevelopment. Even though religion is heavily regulated in China, Xi Jinping himself has called for China to return to its roots as an “ecological civilization.”37 Recent surveys suggest that all across Asia there is a strong willingness to pay more for sustainably sourced products.38 Young Chinese are no longer fond of shark-fin soup.

  Raising the Floor, Leapfrogging the Ladder

  If Asia were a single country of nearly 5 billion citizens, its income inequality would be far worse than in any other region. Yemenis earn scarcely $2,000 per capita per year, while Qatar’s per capita annual income has reached $125,000.39 A similar disparity exists between the citizens of Myanmar and Singapore. But for Asians, poverty remains so extensive that it is a far greater concern than inequality. South Asian countries, especially India and Bangladesh, have extensive rural masses living in extreme poverty. Nearly one-sixth of Indians belong to the dalit caste of untouchables. Hundreds of millions of Indians are malnourished, have no working sanitation systems, and defecate in the open. About 500 million Asians—approximately one-tenth of the region’s population—can be considered desperately poor. Still, from 1980 to the present, well over 1 billion Asians have been lifted out of poverty. Having achieved such spectacularly rapid gains in wealth in a single generation, Asians accept that inequality is an inevitable consequence of the tide that has lifted most boats. Their debates are thus not about lowering the ceiling for the wealthy but about raising the floor for the masses.