How Will Southeast Asia Position Itself in Asia's Future in an Age of Scarcities?

Summary

Southeast Asia's economic prospects will be framed by four major trends: lower global growth, demography, urbanization, and, most crucial of the four, the coming age of scarcities. Together they weave a new tapestry for Southeast Asia's future.

Global Growth

Over recent decades the world has enjoyed exceptionally high economic growth rates. There have been examples of high growth (like Britain at the beginning of industrialization, Germany around 1900, and the United States at the same time), but that was never global growth. Now millions all over the globe have been lifted out of poverty and gross domestic product (GDP) per capita has reached approximately US$4,000 for China — the most populous country in the world.

With this background it seems surprising, even astonishing, that lower growth looms ahead. The reason is that this high growth was fuelled by borrowing, which basically means that the present encroached into future consumption — this was especially seen in the United States with saving rates at around zero for the household sector over several years. In 2005 United States households were actually dissaving compared to a historically high savings rate of 14.6 per cent in 1975. At the end of 2011 the household savings rate was around 4 per cent.

(The much maligned eurozone managed a household savings rate of 13.9 per cent for the second quarter of 2011.)

The figures tell a disquieting story. After World War I global sovereign debt rose to 70 per cent as the major countries borrowed to finance the war. It fell during the interwar period when debt was at least partially paid back. After World War II it rose again and this time approached 100 per cent of GDP. Again it was paid back and in 1970 it was only 30 per cent of global GDP. Waters seemed calm, but over the recent decades when high growth opened opportunities for savings, countries should have saved to prepare for rainy days, but they actually did the opposite and borrowed to increase spending.