Why Africa needs a Southeast Asian type of regional renewal
Regarding economic development, China’s amazing success soaks up much of the attention. But another huge region has quietly begun what looks like a new phase of exponential growth: Southeast Asia.
The sustained enrichment of this region will transform the world, and carry important lessons for struggling countries such as those in Africa.
Southeast Asia was once almost completely colonised by European powers, and much of it was devastated by wars and internal strife in the mid-20th century. It remains largely poor, with notable exceptions including the wealthy city-state of Singapore, middle-income Thailand and Malaysia, an electronics manufacturing powerhouse that is approaching developed country status.
There was uneven growth throughout the region in the 1970s and 80s, and the 1997 Asian financial crisis was a brutal, long-lasting setback. In the 2000s, China surged ahead while Southeast Asia seemed like an also-ran.
SOLID BUNCH
But in the 2010s, growth accelerated all across the region. The standout is Vietnam, whose living standards have quintupled since 1990. It barely stumbled after 1997, and has accelerated again in recent years.
Vietnam has gained notoriety for following much of the same playbook as China: liberalising its economy, privatising stateowned enterprises, promoting manufacturing and exports, and holding down the value of its currency. But Vietnam is only the best of a solid bunch.
Indonesia and the Philippines, two archipelagic nations with large populations, also appear to be entering a phase of explosive growth, with incomes that have doubled since the turn of the century. Laos, Cambodia, and Myanmar are growing strongly as well.
Another success story is nearby Bangladesh; though typically counted as part of South Asia, it is enjoying a growth spurt that looks similar to that of its neighbours to the southeast. By some measures, Bangladesh is now richer than its neighbour India, whose economy has stumbled in the last few years.
It is important to remember all of these are still poor countries. Even after adjusting for local prices, they are nowhere near as rich as a developed country such as South Korea.
Even if they can sustain robust rates of growth, these countries will not reach developed-country status until about mid-century. That will entail other huge challenges, especially environmental ones; in addition to rising carbon emissions, Southeast Asia is already a major source of oceanic plastic waste.
Still, an entire region growing like gangbusters is an incredible accomplishment, and demonstrates the success of decolonisation and globalisation. That leads to the next big question: how did they do it?
The answer is that Southeast Asian countries are developing in much the same way other countries did decades or centuries earlier — by making stuff. The basic pattern is now wellknown. First a country shifts people from farms to cities, to make cheap items such as clothing, toys, furniture and fabric. Then it moves up the value chain to electronics and car parts.
Indonesia, the industrialisation of which stalled after the Asian financial crisis in the late 1990s, is the exception, though it still does a fair amount of manufacturing.
But that simple answer is unsatisfying. Which policies allowed these countries to jump into the global manufacturing chain? Some day, economic historians might offer studies that reveal that all the Southeast Asian countries enacted similar measures all at once. Or maybe they were all just in the right place at the right time.
As China’s wages and other costs have soared, multinational companies have gone looking for newer, cheaper sources of manufactured goods.
Southeast Asian countries had cheap wages and were located near China, requiring minimal geographic relocation of shipping routes and personnel. Rich countries such as Japan, Taiwan and South Korea already had strong ties to many of these countries, and could act as both sources of investment and markets for Southeast Asian goods.
Like the proverbial flock of geese, manufacturers and retailers simply moved to where it made sense to move.
AGGLOMERATION
This also fits with the theory of economic agglomeration, which suggests that regions develop one by one instead of all at the same time. As Asia has become the world’s economic centre, the entire region has eventually reaped the benefits.
That is a frustrating thing for Africa to hear. Located far from booming Asia, Africa may have to wait its turn to be the next manufacturing hotspot. And there are no industrialised rich nations in Africa to help kickstart its development — no equivalent of Japan or Singapore. That is not to say no manufacturing will be done in Africa; investment in it is growing, especially from China. But it is still a trickle instead of a flood.
What Africa might need is its own Japan — a pioneering country that can industrialise first, and then invest in the rest of the continent. That country might be Ghana, which has strong institutions, political stability, and good education and literacy. While Africa might have to wait a while to follow in Southeast Asia’s footsteps, that should not prevent individual African countries from trying hard to industrialise on their own.