SM Teo Chee Hean at the ISEAS' 25th Regional Outlook Forum

"Whatever Happened to the Middle Way?"

Mr Choi Shing Kwok,
Director and CEO, ISEAS - Yusof Ishak Institute

Distinguished Guests

Ladies and Gentlemen

Good morning. I am happy to speak at the 25th Regional Outlook Forum organised by ISEAS. Over the years, ISEAS has done good work analysing the political, security and socio-economic trends in Southeast Asia and providing useful insights for policymakers. The Regional Outlook Forum is a useful platform for scholars, experts and policymakers to exchange views on global economic and political trends, and to discuss major challenges facing our region. I am glad that ISEAS has continued to organise the Forum this year, allowing participants to join us virtually, from virtually anywhere in the world.

A Disrupted World

COVID-19 has accelerated many global trends and caused major disruptions, to our region and the world. At the individual level, it has affected the health of many, disrupted our way of life, how we work, and how we do business. At the global level, it has accelerated pre-existing geo-political trends. In particular, US-China rivalry has intensified. Competition between the two major powers, which manifested itself over trade, has spilled over into other domains. Apart from major power rivalry, multilateralism has been disrupted, with international organisations like the World Health Organisation (WHO) facing difficulty coordinating a global response. Global supply and production chains have also been put under great stress.

But what has brought about these trends? Clearly, they are not just triggered by COVID-19.

In many countries, these trends have been fueled by a sense that the fruits of free trade and globalisation have not been distributed equitably. At the same time, the digital revolution has brought both real and imagined threats to existing economic sectors and jobs, raising anxieties and fears. This will be further accentuated by 5G. A failure to equip workers and small businesses particularly to deal with these changes has led to growing social divisions. Social media echo chambers and fake news have reinforced these divisions. This pits people against one another and fractures social and political stability. These have fueled a wave of nativism and protectionism - both among the left and the right. People have congregated on the extremes, leaving the middle ground empty.

These dynamics have in turn shaped politics. There is diminished trust in political and social institutions meant to intermediate between groups with different views to find common ground. Politicians find it expedient to define their ideologies and platforms to appeal to specific segments of society - their "base". It has become easy to arouse the basic human instincts - anxiety and fear, greed and envy - for the purposes of gaining political capital. The "other side" is characterised in extreme terms. We have seen this happen in both developed and developing countries.

We have also seen this trend in international relations, where it is expedient to externalise domestic problems. But once such narratives take hold, the space for dialogue narrows.

Against this backdrop, the middle ground is shrinking. There is no place for the middle way, the moderate voice which seeks a meeting of minds and consensus.

This will lead to a fractious world, dominated by the extremes, where outcomes are seen in zero-sum terms, rather than making attempts to seek shared win-win solutions. This will harden attitudes within countries, on issues such as race and religion, access to opportunities, and income and wealth distribution. Is this the right way? Or would it be much better to channel our energy and effort into reaping the opportunities and benefits of digitalisation or the green economy, to grow the pie rather than fighting over a stagnant or even shrinking one? Which pathway will bring us closer to solutions to deal with the global challenges that we all face - securing our recovery from COVID-19, climate change, counter-terrorism and counter-proliferation?

What should we do, to build better lives for our people and to build a better world? Let me highlight three key areas, namely (i) Governance; (ii) Multilateralism; and (iii) Partnerships.

Governance

First, we should focus on good governance - which is the key to bringing a better life for our people - rather than on dogma or ideology.

Here in ASEAN, many countries continue to face real development challenges, and struggle to provide the infrastructure, housing, power supply, healthcare and other services that their populations need. Overall, ASEAN has a young population that is projected to grow, but countries can only reap this demographic dividend if they invest in education and developing their young. At the same time, there are also growing numbers of seniors who have healthcare and retirement needs which, if not adequately provided for, will strain the budgets of the state, individuals and families.

Beyond our region, the major economies face pressing domestic challenges too. China needs to address the growing income gap particularly between its rural and urban populations, and the gap in development between its coastal regions and inner provinces. China also needs to avoid falling into the middle-income trap before its population ages. The US, on the other hand, needs to deal with its growing inequality gap, its "culture wars", and to create sufficient new jobs for another generation of middle-class workers with higher aspirations. It also needs to invest significantly to upgrade its basic education and infrastructure.

Every country faces different circumstances and challenges. This means that each country will have to organise itself, derive its own guiding principles for governance, structure its system, and find its own blend of social and economic policies, based on its own unique circumstances. Finding the right formula and continually refining it will provide the pathway for each country to address its challenges for the long term.

Practical governance needs to be informed by actual experience and outcomes. Neither the dictum of "from each according to his ability, to each according to his need", nor the "invisible hand" of the market, provide an adequate policy playbook. The 20th century has shown how each, taken literally, has failed to deliver. Each has to be tempered by the realities of each country and society. We should take a logical rather than an ideological approach, and evolve our policies over time, based on actual experience, to meet changing needs and requirements - to realise the collective potential of our people, and provide fair access to opportunities and distribution of outcomes. That is the best way to achieve stability and continuity of policy, and achieve sustained progress towards a better life for all.

We should let the proof of good governance be in the eating.

Multilateralism

Second, instead of acting unilaterally for our own narrow self-interests, we need to be guided by principles which serve the good of the broad community of nations. We live in a much more interconnected world - the same ecosphere and biosphere. We should uphold a rules-based, multilateral system where the rules are set and accepted by the broad community of nations. It is hard work, takes time, requires compromise and consensus, and can be imperfect - such as the Paris Agreement on Climate Change, negotiations at the WTO, and cooperative action at the WHO. But it is important work to be done to broaden the middle ground for countries to work together and prosper together.

Here in ASEAN, multilateralism has been key to our region's growth and development. Despite being a region diverse in culture, history, ethnicity, religion and political systems, Southeast Asian countries set aside our differences and resolved to work together for the common good of the region. We formed ASEAN in 1967. ASEAN has been a source of stability and strength that allowed ASEAN countries to grow; and ASEAN to grow, from 5 to 10 countries today. It has also provided the ASEAN countries a platform to engage the major powers, and other countries and regions. This has allowed us to put across the perspectives, needs and priorities of countries in our region, for example through our Dialogue Partnerships, the ASEAN Defence Ministers Meeting-Plus (ADMM+), the Regional Comprehensive Economic Partnership (RCEP), and other ASEAN-centred mechanisms and platforms. This gives us the initiative to shape our own region's future rather than have it shaped for us.

Beyond ASEAN, countries big and small around the world have also benefited by committing to a rules-based multilateral order. China's entry into the WTO in 2001 was a major step. These developments have created a more stable and predictable environment, and facilitated globalisation and free trade. Developing countries were able to grow rapidly and create good jobs for their people. None more so than China, whose economy grew by 5 times in real terms in the last twenty years. This is not just a statistic, but has had a profound effect on the lives of individuals and families, raising more than 800 million people out of poverty since China began to open up and reform its economy in 1978. And so too the economies of Southeast Asia have benefitted. No country, no matter how large, nor its level of development, could do well by being an island unto itself. Developed countries, including the US, have found bigger new markets for their goods in the fast growing developing countries. For example, in the three years before the trade war, from 2015 to 2017, close to 60% of Boeing's total revenue came from outside the US. In 2017, 202 new commercial aircraft were exported to China, making up 26% of Boeing's global deliveries that year. So too for Airbus, which delivered 176 new commercial aircraft to China in 2017, which comprise 25% of its global deliveries that year. Boeings, beans, beef, Beaujolais and BMWs flowed one way; while clothing, consumer goods, and presents for Christmas flowed the other way. Increasingly, tourists and business travellers, investments and ideas flow both ways. These flows brought development and mutual benefits, reduced poverty, and brought the world closer together.

However, there has also been much discussion about security of supply chains. The warning signs had been there for some time. Take for example, a fire in a single semi-conductor plant in Japan last year disrupted factories across the world, in many industries which depended on their chips. The key shift that manufacturers may have to make is to move from a "just-in-time" and "lean production" model, to a "just-in-case" and "resilient production" paradigm. This is not a zero-sum issue, and should be framed as a recognition that we will have to incur some cost to build a more robust global supply chain - whether it be for chips, vaccines or masks - which can withstand disruptions that can arise - from natural or man-made causes.

Apart from COVID-19 and supply chain resilience, there are other key issues that require collective action and global solutions, such as terrorism, climate change and cybersecurity. Countries hope to see the US and China manage their outstanding bilateral issues. We hope that this will allow the two major powers to act in their own enlightened, rather than narrow, self-interest and work together to exercise global leadership to help all of us to collectively address our global challenges.

Partnerships

For a time, there was some prospect, perhaps even optimism, that the world could find a way to work together more inclusively and collectively. During the Global Financial Crisis of 2007 to 2008 which had its epi-centre in the US, efforts by the long-dominant G7, or more accurately then-G8 of major developed countries, on their own, were inadequate to deal with the Crisis. Thus, the G20 Leaders' Meeting was convened, and was able to take collective and concerted action to stabilise the world economy and restore growth. Contrast that however with when COVID struck, given the state of relations among several of the key G20 countries, the G20 was not able to muster the collective and concerted action to deal with the pandemic, even though this was urgently and greatly needed.

But do we need to depend only on the bigger countries to take the initiative, or on the US and China to reach a new modus vivendi? If contestation among them supersedes cooperation, can there still be a middle way? What can the rest of us do?

This brings me to my third point, Partnerships. Smaller countries have agency to step up and do something for ourselves through partnerships. We can come together with like-minded countries to help shape the global order, for example by taking steps to uphold and update the global security architecture or trading system, even if the major countries are unable to do so in the short-term.

We have seen many examples of this. The Global Governance Group (or 3G), of 30 small- and mid-sized countries, was formed to help make the G20 process more inclusive. The 3G is represented regularly at G20 meetings. The Trans-Pacific Partnership (or TPP) had its genesis in the P4 of Brunei, Chile, New Zealand and Singapore, which has come to fruition now as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (or CPTPP) after the US withdrew.

So too with how ASEAN formed the core of the RCEP with its six FTA partners, and persisted even after India pulled out. I am happy that RCEP entered into force 5 days ago. In June 2020, Chile, New Zealand and Singapore signed the Digital Economy Partnership Agreement (or DEPA), which aims to facilitate digital trade and create a framework for the digital economy. Now, China, Canada and South Korea have also expressed interest to join.

These developments, in particular the entry into force of the RCEP and the formation of digital economy partnerships - amidst a trade war between the major powers, are a reminder of what smaller countries can do to shape the global order when we come together.

Can we do more? Are there other areas that we can work together on? For example, can smaller countries or countries in our region find a way for risk pooling and "insurance", to collectively invest in vaccine production capacity so that supply can be ramped up quickly when needed?

Conclusion

In the last few years, we have stared into the abyss of what a dysfunctional world could look like. Let us internalise the lessons, and resolve that in this new year and in the coming years, we will work together for a better future. Ultimately, all of us are united by a common goal - to create a better life for our people, and to create a better world. We must think beyond the immediate, think in terms of enlightened self-interest, not narrow self-interest, and create new options and opportunities for ourselves.

Let us work together to reclaim the middle ground, and shape the future through building consensus and cooperation, to create a better future for our region and for the world. I wish all of you a productive Forum and a Happy New Year. Thank you very much.

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Topics: Economy, Trade, Governance, Foreign affairs