Asia in 2030

Asia’s Capabilities in 2030-Scenario Building for Future Dr. Pankaj Jha

Associate Fellow,IDSAAbstract

With the common understanding developing that the ongoing phase is the Asian century which has been rightfully justified in terms of more than average growth in Asia, in spite of the global recession, shows and certifies the buoyancy of Asian economies. In this regard the rising Asia, more particularly India and China are seen as the harbingers of new economic order and the erosion of the Brettonwoods system. This would not only be possible when the defence, strategic, trade, investment clout of Asia increases at the international level. The paper takes an overview of the developments that would be there in Asia which would determine the course of development as well as struggle within Asia. In the paper detailed analysis about defence issues and military capabilities has been purposely being left out because that would have meant greater error percentage. The issues that have been discussed are those of population, per capita income, aged dependence, defence expenditure and climate change. This paper is an attempt to create scenarios as well as do forecasting about the possible trends which would be prevalent in Asia in 2030.

Scenario building is a tedious process and in spite of so much knowledge it is not feasible to decipher the scenario in a precise manner. Asia is also witnessing very strong and influencing factors like economic growth, globalization, liberal trade, migration, defence modernisation, climate change, global warming, population growth, ethnic frictions, demographic changes to list few which are supposed to change the course of future in the next two decades. Though nobody can predict the exact future but still people, decision makers, managers and strategic thinkers try to decode it, though with varying degrees of error, so as to think about the likely possibilities. The ensuing question is why do scenarios work? The plausible reason is that people recognize the truth in a description of future events. The story resonates in some ways with what they already know, and then leads them from that resonance to reperceive the world. Observations from the real world must be built into the story. The only way they can emerge there is for the storyteller to sample evidence from the world before spinning the tale1.The scenario building process thus involves research-skilled hunting and gathering of information. This is practiced both narrowly-to pursue facts needed for a specific scenario-and broadly- to educate oneself, so that one would be able to pose more significant questions2.

Every scenario requires specific research. Some subjects however emerge again and again in the work which is common in deciphering the scenario. These include:

Science and TechnologyThis force is one of the most important drivers of future events. It literally shapes the future. Politics can change, but a scientific

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innovation, once released into the world, cannot be taken back. Thus, keeping track of new developments in physics, biotechnology, computer science, ecology, microbiology, engineering, and other key areas is a special duty.

Perception shaping eventsThe rising levels of carbon dioxide in the atmosphere have been detectable mold since the early 1970s but these were ignored till the time when international leaders as well as scientists articulated their concerns in various forums. This has led to various companies and business enterprises seeking policies to counter that threat3.

International economicsThis acts as a major factor in terms of deciphering the course of action for the new developing countries and developed countries to negotiate terms of trade and investment as well as economic of scale and global labor cost would deter -mine Manufacturing Centers and global trade norms.

International politics New international politics as well as struggle for dominance in international forums are going to decide the future course of international politics as well as the influence it would have on the domestic politics. International politics in multilateral forums as well as new configuration emerging due to rising powers and existent hegemony would lead to struggle for control in international politics.

EnvironmentOne of the major issues of concern has been the environment as well as the process of saving the earth from global warming and changes in the global climate because of unpredictable changes in currents and the ongoing spate of storms or typhoons would be a major international concern

EnergyEnergy perhaps is the most unpredictable as well as most scare resource which would drive power struggle as well as commercial battles among nations to secure their energy supplies and also the safety of the supply of energy would be one area which would see remarkable changes in coming years.

Apart from all these issues there are a number of issues like ethnicity, transnational crime, terrorism, piracy, defence and population which would make corrections or create diversions in the course of future. Though almost all these factors would act in tandem so as to determine the future of the world but population would be the one major concern especially in Asia which would be the major factor in making or unmaking of the Asian century. While the Asian population would comprise the highest in the world, the ensuing urbanization would put pressure on existing resources. UN Population Council in one of its report says Asia could reach an urban population of 2,615,000,000 in the year 2025. The challenge is posed by Todaro and Smith in saying that "While it is true that cities offer the cost-reducing advantages of agglomeration economies and economies of scale and proximity as well as

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numerous economic and social externalities, the social costs of a progressive overloading of housing and social services, not to mention increased crime, pollution, and congestion, tend to outweigh these this historical urban advantage." 4 While population would be major concern both in terms of struggle for resources as well as availability of cheap labour and sustaining economic growth momentum. But there would be also major issues like aging population, trade, defence, energy and climate change to list the selective few.

Within Asia, the economic growth as well as changing nuclear capabilities has changed perceptions about threats. Defence planning and modernization has been directly proportional to the threat perceptions well as alliance relationship of that particular country with the major powers in the region. Of late the international strategic scenario has been witnessing the evolution of coalition politics at international level and issue based support for international developments. This has put almost all the major powers on a sticky wicket and every power is trying to optimize its national interests with least possible costs. The scenario, as of date, is such that none of the multilateral organizations both at the international level and even at the regional level are capable of providing /assuring the complete security of the nation or region. Even more, few of the overenthusiastic strategic experts have negated the possibility of traditional wars among nations. The question is when the interstate conflicts have not diminished, how the possibility of war can be discounted. This paper would be a crystal gazing of the priorities that would exists in the year 2030 and how the nations would perceive their nations interests in the year 2030. Though a number of nations have clearly defined timelines as well as programme of procurement for their interest and national security but it cannot be ruled out that the commercial angle and the combinations and permutations would come into effect, in case of any war or small skirmishes. The non –traditional security threats would remain as a main point of concern as well as cooperation but then hedging against any possible traditional and non-traditional threats would be there. The surge in enhancing defence capabilities is also dependent of the economic growth and allocation for defence. The economic growth depends largely on trade and investment. In terms of Gross Domestic Product at Purchasing Power Parity, India would overtake Japan by 2020 and would emerge as the second largest economy in Asia(see graph 1.1).

Graph 1.1-Gross Domestic Product at PPP 5

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Source: ADB Database and Key Indicators for Asia and the Pacific 2009,ADB Publication ,Manila, 2009

The economic growth would be subject to rise in production and trade. The competitiveness of Asia’s trade—and of its increasingly sophisticated production networks in particular—depends on efficient, fast, reliable, and seamless infrastructure connections. Vast parts of Asia—inland and remote areas, landlocked countries, and distant islands—are isolated economically as well as geographically; so much of the region’s huge potential remains untapped. While some of the existing infrastructure in the region is world class, most of it is below average. Rapid economic growth in recent years has put enormous pressure on Asia’s infrastructure, particularly in transport and energy, but also in communications. Unless it can be significantly improved, infrastructure will continue to be a bottleneck to growth, a threat to competitiveness, and an obstacle to poverty reduction. Better connectivity with inland areas, for instance, would boost trade and economic growth in coastal areas, as well as inland ones. These issues present an opportunity for the region to take collective action to further enhance regional cooperation, particularly in environmentally sustainable and greener infrastructure development. The challenge is to build better and seamless connections across Asia and thus to the rest of the world6. But apart from trade and defence issues the one major challenge would be to manage population as well as ensuing struggle for energy resources.

The world energy system will continue to be dominated by fossil fuels with almost 90% of total energy supply in 2030. Oil will remain the main source of energy (34%) followed by coal (28%). Almost two-thirds of the increase in coal supply between 2000 and 2030 will come from Asia. Natural gas is projected to represent one quarter of world energy supply by 2030; power generation provides the bulk of the increase (see graph 1.2).7

Graph 1.2-Global Energy Mix Trends -2030

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Note: Mtoe stands for millions tonnes of Oil EquivalentSource: Dr. Fatih Birol, World Oil Outlook to 2030, Economic Analysis Division, International Energy Agency, 2002

As is apparent the oil would be the major consumable in terms of consumption of various sources of energy and this might lead to intense struggle for resources as well as international pressure for energy efficiency. Even if we sketch the graph with regard to energy imports South Asia, China and South Asia would be major importers which might lead them to struggle with America and European nations for energy (see graph 1.3).

Graph 1.3-Global Imports of Energy-Region wise Estimates

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Source: Dr. Fatih Birol, World Oil Outlook to 2030, Economic Analysis Division, International Energy Agency, 2002

Though Asia would act as a major importer but within Asia, in Japan, the energy demand pattern would be similar to the trends observed for the other industrialised regions but the decrease in the oil market share is more rapid; oil is replaced by natural gas and primary electricity (nuclear in Japan and renewable in Australia).Asia experiences the most rapid energy demand increase among all regions because of a strong economic growth (progression of 3.7%/year for the per capita GDP between 2000 and 2030). The energy intensity of GDP decreases annually by 1.5% on average with the greatest gains occurring in the 2000-2010 period. Energy consumption in this region reaches exceeds 6 Gigatons of Oil Equivalent (Gtoe) in 2030 with a per capita consumption significantly lower than in the Europe (1.5 versus 4.6 toe/year). Because of the abundant resources in the region, the share of coal remains high (42%) and does not change significantly. In contrast, the shares of oil and gas increase rapidly to the expense of biomass that is almost phased out (6% of GIC in 2030 compared to 30% in 1990)8.

The energy imports would increase the vulnerabilities of the large nations and the security of sea lanes would be a priority for large importers including India and China .As is shown in the Figure 1.1 security of Straits of Hormuz and Malacca Straits would be a priority and Asian nations might see commercial conflicts as well as cooperation for the same. Asia, excluding West Asia, would comprise of 36 per cent of oil imports.

Figure 1.1-Global Energy Supply through Sea Lanes

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Source: Noé van Hulst, Director, Long-term Co-operation and Policy Analysis, The World Energy Outlook and The Challenges for Asia, ASEAN Energy Business Forum 2005, Siem Reap, 12 July 2005 at http://www.nautilus.org/aesnet/2005/AUG3105/IEA_VanHulst.pdf

The rising energy consumption would be subject to increasing industrialization as well as increased demand for energy by the rising population in Asia.

Demographic Changes in Asia

In the next two decades demographic changes in Asia would deter mine as well as move complicate issues with regard to governance, security, energy, employment, productivity, trade and resources. On the one hand countries like China and Japan would be struggling with regard to its aged population and would have to make larger allocations for health, social security and pensions. In terms of regional perspectives while East Asia would be witnessing higher dependency ratio but Southeast Asia as well as South Asia would be having a rather younger population, thereby giving them the productivity and other advantages (see graph 1.4) .

Graph 1.4-Population Growth Rates-Region wise Projection (1995- 2030)

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Note: The Central and West Asia Does not include Middle East/West Asian Countries due to lack of data, so the data might be exaggerated/underestimated. It does include countries like Pakistan and Afghanistan.Source: Source: ADB Database and Key Indicators for Asia and the Pacific 2009,ADB Publication ,Manila, 2009 and Author’s Calculations

In case individual countries are accounted then as we can see very well in the figures that has been provided by OECD database, the Japan and Korea would be facing the negative rate of growth in population while China would have decelerating population growth while India would be rising far ahead in terms of growth(see table 1.1), though Israel would be surpassing India but in terms of quantum growth, India would become a country of comparatively young population.

Table 1.1- Annual Population growth in percentage in Asia

2000 2005 2010 2015 2020 2025 2030

Japan 0.19 0.06 -0.17 -0.34 -0.49 -0.62 -0.73

Korea 0.84 0.21 0.26 0.1 -0.02 -0.12 -0.25

Turkey 1.59 1.28 1.14 0.98 0.87 0.76 0.63

China 0.81 0.61 0.56 0.52 0.42 0.28 0.1

India 1.76 1.56 1.41 1.25 1.08 0.9 0.72

Indonesia 1.37 1.27 1.1 0.9 0.76 0.67 0.57

Israel 2.19 1.8 1.57 1.3 1.13 1.04 0.95

World 1.32 1.21 1.15 1.06 0.95 0.83 0.71

Source: OECD Statistics database

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The interesting part is with China and India are growing both in terms of Population, its is interesting to note that India would overtake China in terms of population by 2029/30 when both India and China would be having a population of 1.6 billion each(See Graph 1.5). This would mean further struggle for resources and issues like health, social security, aged population and the percentage of working population in total population.

Graph 1.5- Population Comparison, India and China Trends

Source: Source: ADB Database and Key Indicators for Asia and the Pacific 2009,ADB Publication ,Manila, 2009 and Author’s Calculations

Within Asia, Indonesia would become another major country with huge potential for growth in terms of population as well as investment. This might mean that India, China and Indonesia would be vying for investments in Asia as well as it would have to cater to the unemployment and resource rationing for meeting the ever growing population. One important issue would be catering to aged population and its dependency on working population.

Aged Dependency Ratio

The one major issue which would be making and unmaking the economic growth as well as sustaining the momentum of growth would be the dependency ratio of aged population on the working population. If one takes a rather conservative estimates then it shows that South Asia would have the least aged dependency followed by East

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Asia(though data about Japan is missing so it is rather skewed observation )followed by central and west Asia(see graph 1.6) .

Graph 1.6- Aged Dependency Ratio in Asia Trends


The aged dependency ratio might be partially offset in case it is compensated by the proportional increase if per capita income over years.

Per Capita Income Growth Region wise

While the per capita income of the East Asian Countries (see graph 1.7) excluding Japan would be increasing at a phenomenonal rate it would be south Asia which would become the hub of production activities due to the low income as well as cheap labour. Though south Asia might find competition from the African republics, but it would be dependent on the fact that how far the African countries would have resolved the internecine conflicts as well as inter ethnic clashes in the region.

Graph-1.7-Per Capita Income Projection - 2030(in US dollars)

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Eastern Asia

While India and China are stated to be the growing economies in Asia as per the forecasting done by Professor Carlyle Thayer, India would be behind China by about one and a half decades in terms of national income as well as surpassing GDP of countries like Germany, Japan and US (see graph 1.8).The rising income would translate into larger provisions for military in the next two decades.

Graph 1.8-China and India Comparison Timeline

Source: Carl Thayer, Strategic Context: Australia and the Region, Senior Officer Operations Planning Course, Defence Establishment Fairbairn, February 26, 2007

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In the present circumstances global military expenditure in 2008 is estimated to have totalled $1464 billion. This represents an increase of 4 per cent in real terms compared to 2007, and of 45 per cent over the 10-year period 1999–2008. Military expenditure comprised approximately 2.4 per cent of global gross domestic product (GDP) in 2008, or $217 per capita9.

The 15 biggest spenders in 2008 are the same as in 2007, although some rankings have changed. In particular, in 2008 China was for the first time the world’s second highest military spender and France narrowly overtook the UK. The top 15 spenders display a wide variation in their rates of military expenditure per capita and as a share of GDP as well as in their rates of increase since 1999. Saudi Arabia’s military burden—that is, military expenditure as a share of GDP—was 9.3 per cent in 2007 (the latest year for which figures are available), which was exceeded only by Oman, while the Republic of Korea (ROK, or South Korea), Russia and the USA also exceeded the global average of 2.4 per cent. At the other end of the spectrum Australia, Canada, Brazil, Germany, Italy, Japan and Spain all had military burdens below 2 per cent. France, Germany, Italy and Japan have had slow or even negative real-terms growth in military expenditure since 1999. The spending of the other top 15 countries increased substantially. China and Russia increased their spending most rapidly, with each nearly tripling their spending since 1999. South Korea, Saudi Arabia and the USA also increased spending by more than 50 per cent10. Now if we take different military expenditure of Asia’s top spending major powers and extrapolate it to arrive at figures for the 2030. In fact these are liberal estimates and it seems feasible owing to the North Korean missile crisis as well as nuclear tests which has jeopardized the prolonged defence structures with regard to US allies in Northeast Asia and Japan and south Korea looking for increasing their defence expenditure as well as rise of China might lead to increase in defence expenditure. In case of projections for the future it is a known fact and an interesting development that Asia would be rationalizing its defence expenditure and barring countries like China which would be supported by rising GDP and per capita income to sustaining its military modernization, almost all countries like Japan, Korea and India would be more keen to build deterrence capability. The projectile movement of the region wise estimates especially verifies the trends in East Asia (see Graph 1.9). West Asia would be following the East Asian trends with the possible nuclearisation in west Asia while south Asia would reach a freezing point two decades from now.

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Graph 1.9-Defence Expenditure Region wise Estimates over years

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Source: Sam Perlo-Freeman, Catalina Perdomo, Elisabeth Sköns and Petter Stålenheim, Military expenditure in SIPRI Yearbook 2009: Armaments, Disarmament and International Security,Stockhoklm, 2009 and SIPRI Military Expenditure Database

Owing to the lack of credible data on Central Asia, the region has been discounted from over all analysis of the defence expenditure. In case we compare the defence expenditure at global level and the Asian defence expenditure, the following conclusions can be drawn. While the world military expenditure would take an upward flight, the Asian defence expenditure is not symmetrically following the global trend (see graph 1.10) which means that Asia would not be contributing solely to this rising global expenditure, it might be other theatres of conflict which would be contributing to the total. Asia would rather become comparatively peaceful and cooperative mechanisms might emerge in the long run which would build trust and foster economic development in the region.Graph 1.10-Military Expenditure (Asia and World Trends, 1999-2030)

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1 Peter Schwartz, The Art of the Long View: Planning for the Future in an uncertain World, Doubleday, New York,1991,p.602 Peter Schwartz, The Art of the Long View: Planning for the Future in an uncertain World, Doubleday, New York,1991,p.603 Peter Schwartz, The Art of the Long View: Planning for the Future in an uncertain World, Doubleday, New York,1991,p.62-644 Aleem Guipal, Opportunities Within: The Asian Scenario in 2030 at http://www.associatedcontent.com/article/1012994/opportunities_within_the_asian_scenario_pg2.html?cat=9

5 Purchasing power parities (PPPs) are calculated by comparing the prices of identical goods and services in different countries and applying expenditure weights of GDP. These price comparisons are made by calculating price relatives, which are the price of a specified good or service in one country divided by the price of the same item in another country. For example, if a 300 ml can of Pepsi costs Rp16.42 in country A and $3.24 in country B, a price relative can be calculated as 3.24/16.42, or about 0.20. Price relatives are calculated for several hundred items covering all the final expenditure components of GDP and PPPs are then obtained as the weighted average of these price relatives. The weights used are the shares of expenditure on each item in total GDP. Further details at http://www.adb.org/Documents/Books/Key_Indicators/2009/Part-III.asp 6 Infrastructure for a Seamless Asia, Asian Development Bank and Asian Development Bank Institute,2009,p.iii

7 World energy, technology and climate policy outlook 2030 - WETO - Directorate-General for Research Energy, European Commission,2003,p.38 World Energy, Technology and Climate Policy Outlook 2030 - WETO - Directorate-General for Research Energy, European Commission,2003,p.279 Sam Perlo-Freeman, Catalina Perdomo, Elisabeth Sköns and Petter Stålenheim, Military expenditure in SIPRI Yearbook 2009: Armaments, Disarmament and International Security,Stockhoklm,2009,p.179

10 Sam Perlo-Freeman, Catalina Perdomo, Elisabeth Sköns and Petter Stålenheim, Military expenditure in SIPRI Yearbook 2009: Armaments, Disarmament and International Security,Stockhoklm,2009,p.183

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As is clearly visible it would not be Asia which would be contributing maximum to increase in global military expenditure ,rather it would or might be US engagements at global level as well as problems arising within Africa or Latin America two decades from now on. This clearly shows that theatre of conflicts as well as major power rivalry might shift to other areas.

Graph 1.11- Defence Expenditure in Asia (1990-2030, at 2005 US$ constant Prices)


While China would be touching the current US military expenditure in 2030 while India, Japan and Korea would be rationally justifying their military expenditure at a deterrence level. In the case of west Asia, four countries has been sampled to know the trends by 2030 and the countries are Iran, Pakistan, Israel and Saudi Arabia. Taking into effect the exponential function of forecasting y=a (E)bx where a and b are constant and x is a variable denoting years, it shows that Iran is likely to overtake Saudi Arabia as the largest military spender in west Asia by 2025/26 which clearly predicts that Iran is likely to become a major power of the region in the next two decades and with the nuclear know how and the probable capability of fabricating nuclear bomb, it is surely going to a major strategic player at the global level also.

Defence Expenditure in Asia (1990-2030, at 2005 US$ constant Prices)

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Graph 1.12-Defence Expenditure Trends in Central Asia and West Asia

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After analyzing the trends with regard to GDP, aged dependency, population and military expenditure, it would be feasible and prudent to do country wise analysis to configure the status of the major powers in different regions of Asia in the next two decades.

China

With regard to China there is not dearth of research papers have been written and there have been alarmist as well as constructivist notions of the rise of China. In order to pragmatically analyse the rise of china and how far it would impinge on the security of the other nations, it would be prudent to see China’s military might, demographics, education, energy and strategic objectives that it might pursue in 2030.

Already the world’s preeminent energy and trade interstate seaway, the Indian Ocean will matter even more in the future. Global energy needs are expected to rise by 45 percent between 2006 and 2030, and almost half of the growth in demand will come from India and China. China’s demand for crude oil doubled between 1995 and 2005 and will double again in the coming 15 years or so; by 2020, China is expected to import 7.3 million barrels of crude per day — half of Saudi Arabia’s planned output. More than 85 percent of the oil and oil products bound for China cross the Indian Ocean and pass through the Strait of Malacca11.

11 http://asianenergy.blogspot.com/2009/04/new-great-game-of-indian-ocean.html

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Within army China has embarked on modernizing tanks, new armoured personnel carriers, infantry Fighting vehicles and light utility and combat vehicles .If the usual cycle of replace and repairs are taken into consideration with the rising GDP and development in he case of China the mid life repairs and replacement would happen at 12 years and 24 years respectively. This is Subject to the fact that China develops its indigenous capability to support its army requirements. If we take into cognizance the armour and artillery pieces in existence in Chinese army i.e. PLA then most of them are of 1985 -1990 which would need replacement by 2020, at the most and thus Chinese army would have inducted new armour in its inventory which would be about a decade old. But the process of modernization and replacement would also depend on the position of the adversary or potential adversary; in that case China and Russia are likely to emerge depending on the strategic and global equations. In terms of artillery a majority of it is of late 1990s might be getting replaced or already replaced by 2030. In terms of army aviation by 20303 China would have entered the cyclic phase of modernization and replacement and would be enlarging and replacing its fleet of army aviation helicopters. China would be at the verge of becoming the most powerful nation in Asia with its army but the same cannot be said about the air force and navy. If we make a current audit of Chinese air force then it can be stated that with the decreasing Russian imports, China is trying to build its own indigenous capabilities but it would be interesting to see how the indigenous versions match up to the European and US fighters, because there has not been any direct confrontation between the two. China ,if it overcomes technical and technological embargo might be able to manufacture and deploy a number of jets in terms of quantity to threaten US dominance in Asia but it would be too far fetched an opinion to say that it would dominate Asia with its indigenous versions. By 2030, China either would have overcome the technical deficits and its fighters would have found markets among the poor nations of Asia and thus would have increased its leverage in those countries. China has been adopting or rather mirroring the same strategy as it has done in the commercial markets of flooding the market with cheap military equipment. It has been doing so in the case of Bangladesh, Thailand and a number of other countries in the recent past.

With regard to navy China would have made a mark with about three or probably four aircraft carriers and a number of submarines to deter US navy in the region.

Japan Japan’s Self defence forces strength of about 155,000 in 2009 would not qualify Japan as a major land based power but it ‘s strategic imprints would be more in the case of air power as well as naval capabilities. It would be also determined by the fact that how Japan caters to the nuclear neighbours like China and North Korea and its relations with US ,more in terms of alliance, with United States. The equipment that is in service in Japanese self defence forces has been of mid 1970s (tanks ) while Armoured Personnel Carriers are of 1960s and 1980s which is rather outdated by the present standards.Artillery,anti-tank weapons as well as air defence weapons need mid life repairs as well as replacement which would become due by 2015.In

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terms of army aviation barring few twin engine aircraft it has one of the most current helicopter fleet with the oldest being that of 1980s.The rather young fleet of army aviation would also be needing replacement or life extensions by 2030.So in all means 2030 would be a period of transformation, up gradation and new induction of weapons and military systems in Japanese army.With regard to Navy, Japanese Navy which is known by its guided missile destroyers, destroyers, frigates and comparative size of submarines, it is very likely that Japan would have to propone its modernization plans by 2025 so as to have up to date naval capabilities. Almost all its ships are of late 1980s or early 1990s barring few destroyers which are of post 2000 acquisitions. In terms of air power, though it is a US alliance partner but it would have to upgrade its capabilities so as to cater to any exigencies which might arise in the longer run its interceptor fighter aircraft are getting old (F-15J 1980 acquisition) and cater to its increasing domestic demand for security against rogue states.

Korea (South)

Republic of Korea which again is having the US security Umbrella would also be clamouring to have greater say in its defence matters and building deterrence capability against North Korea but in terms of numbers it would still be overpowered by nuclear capable North Korea. The major issue would be the decreasing Korean population and as the Graph 1.13 shows the negative rate of growth would increase Korean vulnerabilities in terms of production, economic growth and defence.

Graph 1.13-RoK Population Trends

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Source: Source: ADB Database, OECD Database and Key Indicators for Asia and the Pacific 2009,ADB Publication ,Manila, 2009 and Author’s Calculations

The inclement nuclear weather which has somehow disturbed the strategic thinkers in South Korea would determine the course of its military preparedness to counter North Korea or ask for US protection as well as assistance with regard to this. Though US has been making all the right gestures to North Korea but it needs to be seen that how far US would be prioritizing its strategic, defence and economic interests in the long run. As already US has suffered resistance against its troops stationed in South Korea, so if US with draws then there could be four possible scenarios:One, with the withdrawal of US there might be initiatives like Sunshine policy as well as Korean Unification by the peaceniks in South Korea. In the next few years this is sure that North Korea would be having a new leader as well as new policy with regard to engagement with its neighbour.Whether North Korea accepts certain overtures of South Korea and gets out of its reclusive phase would be an interesting development.Secondly, US seeks North Korea assistance and thereby things evolve peacefully and North Korea is given due consideration and relations improve between the two. The Nuclear Non-Proliferation treaty is sure to undergo certain changes and this would imply that there would be new nuclear order in existence in 2030. How many rogue states and how many nuclear states would be accepted in the Ivy League would be seen. With the changes in the international financial order as qwell as nuclear order due and certain changes are sure to happen it is going to be the Asian century.Third, South Korea tries to build up its defence capabilities and seeks nuclear counter measures (with or without US help), might lead to escalation of tensions and would see arms race happening in the Korean peninsula.

India

India with a growing population can become of the largest populated countries of world. The mantle of largest populated country is likely to come to India might overtake china. Going by the statistics as given by Asian Development bank and do some future scenario building, India’s population growth might go down and reach the 0.72 per cent (the figure envisaged by OECD statistics, shows the convergence between scenario and official approximation(see graph 1.14).

Graph -1.14-India’s Population Trends

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India is likely to have the one of the largest population in Asia (see graph 1.15) and with a growth arte of 0.72 per cent as per the OECD statistics it might become the hub of production activity as well as service sector concentration. With least aged dependency ration as well as least per capita income among all the regions in Asia barring few countries of central Asia, it is but natural that production networks would seek cost advantages. India’s population as per the conservative estimates would reach 1.5 billion mark and this would make struggle for resources as well as equitable distribution of resources an arduous task. Still, the youthful population with least aged dependency and literate population it would act as a competition for cheap labour and investment in Asia.The struggle for resources would also lead to enhancing of defence capabilities for the Indian armed forces to protect their resources as well as commercial interests abroad. In terms of Navy, India would be having nearly three aircraft carriers as well as a number of advanced stealth frigates with guided missile capabilities but it would be lagging behind the other Asian powers in terms of submarine capabilities but it would have enhanced surveillance and electronic warfare capabilities. India would emerge as the major player in the Indian Ocean region though it would have not emerged as a competitor to China even in the next two decades but it would have enough deterrence capabilities. In terms of air power, it would have acquired the advanced Sukhois which would be nearing the replacement or mid life

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repairs but India would have been at the cyclic phase of phasing out of its aged fighters and would have replaced all its MIG series aircraft. It would have inducted fifth generation fighter aircraft and would have emerged as an undisputed air power in the region.

The issue would be of the land power namely capabilities in terms of army. The India because of present laggardness in terms of enhancing its artillery capabilities due to political and other compulsions would have lagged behind other powers in Asia but the indicatives with regard to military modernization would have been half underway. This would have meant a fleet of UAVs, integrated warfare approach and the sophisticated weaponry for the soldier. The induction of the AGNI series of Ballistic missiles in Army with the advanced inter continental capabilities, India would have the necessary firepower to negotiate with the other powers on confidence building efforts.

Graph-1.15-India’s Population growth over the Years


The risign population would also ensure struggle for energy and more imports of energy resoruces in the next two decades. India would have to rationalise and diversify its energy basket to acter to the needs of risign population(see graph1.16).India’s energy needs per capita consumption pattern would have grown by almost 50 per cent going by the prersent standards.

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Graph-1.16-India’s Energy Consumption Pattern

India's Energy Consumption,1990-2030

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Source: World Bank Database and Authors’ own calculations

As is visible in the following graph 1.17 petrol and its constituents would comprise the major fuel which would be consumed in India both for the industrial as well as non-industrial purposes. Though coal would constitute major segment in power generation but it would be subject to issues like environmental degradation as well as low ash content in the coal. On the other hand natural gas would remain as the least preferred source of energy barring the fact that better technologies are available for liquidification and easy transportation for natural gas. Also by 2030, it is sure that the world would have estimated the likely time period about the end of the fossil fuels and would have seriously started ;looking for alternatives or must have charted out a plan of action for non-renewable as well as nuclear energy. This would have meant that the energy would have reached a state of security and wars on the issue of energy and commercial interest cannot be ruled out at this stage. It also should be taken into account that with economic growth reaching the developed nation level by then, countries would have found a solution for the best optimal energy mix which would have been best for economic growth as well as climate change responsibilities.

Graph-1.17- India’s Energy Consumption Mix

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Among Asian countries India would still depend on coal for its power generation activities as well as few other industrial applications which would mean that India would be seeking low ash coal supplies from its neighboring countries but the sad part it if there would not be technology up gradation in medium term, it might have to take recourse to natural gas as power generation fuel for future.

Pakistan Pakistan, despite its internal security problems and ethnic fissures would be an important country due to its nuclear capabilities as well as a country most sought by United Sates owing to its war against terrorism in Afghanistan. Pakistan’s population would reach 260 million marks (see graph 1.18 which in comparison to India and China would be much less but in the south Asian context it would remain as a major regional power.

Graph-1.18-Pakistan Population Trends

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Pakistan Population Trends (1990-2008)

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In terms of per capita consumption of oil Pakistan would closely follow India with consumption of about 650 kg equivalent of oil(see graph 1.19). This means that within South Asia there were be more struggle for energy in the coming decades.

Graph 1.19-Pakistan Energy Consumption

Pakistan Energy Consumption

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Source: World Bank Database In terms of consumption of different variants of energy, Pakistan would have large share of oil/petroleum products, followed by coal and natural gas. While petroleum consumption is likely to escalate manifold

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(see graph 1.20), coal and natural gas are going to remain marginally incremental.

Graph-1.20-Energy Consumption Pattern (Different Energy Sources)

Energy Consumption Trends(1997-2030)

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Indonesia Indonesia is one Asian country which after more than a decade

of turmoil and terrorism incidents has come out as a potential competitor in Asian investment and energy scenario. Indonesia has been witnessing successful transition to democracy and a sound economic growth in this year. With year-on-year GDP growth of 4.2%, Indonesia outperformed other major economies in Southeast Asia in the first half of 2009, mainly because its large domestic market and its relatively low dependence on external trade (exports represent about 30% of nominal GDP) provided some insulation from the global economic turmoil. However, the impact of the global financial crisis and the slump in world trade took growth to well below the 6.3% rate recorded in the first 6 months of both 2007 and 200812.In terms of

12 http://www.adb.org/Documents/Books/ADO/2009/update/ino.pdf

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population growth it would be reaching the 0.3 billion mark(see graph 1.21)

Graph 1.21-Indonesia Population Trends

Indonesia Population Trends

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Though Indonesia would emerge as one of the major economies in Southeast Asia, it would be subject to internal stability and governance structures and institutions in Indonesia. It would also be interesting to see how Indonesia caters to its energy consumption as well as energy exports, through changes in energy policy in the coming years.

Emerging Issues in 2030

Asian and European leaders estimate they will invest US$6.3 trillion in the energy sectors of developing Asian countries by 2030, following discussions in September 2009. The amount represents more than one third of the total global investment in the energy sector estimated for 1990-2020.In a declaration issued at the end of the 6th Asia Europe Meeting (ASEM) in Finland, the leaders of 25 European and 13 Asian nations agreed to share low-carbon and energy-efficient technologies with developing ASEM countries. The agreement was part of a larger pledge to intensify joint efforts to combat climate change and exchange information and early warnings on natural disasters. Asked whether they would accept mandatory caps on greenhouse gas emissions, the presidents of South Korea and Indonesia avoided the question, stressing instead their willingness to adopt alternative energy sources, according to Reuters and Associated Press reports.ASEM was set up ten years ago in Bangkok. This is the first time it has issued a declaration on climate change. The declaration sends a strong signal to the

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world that ASEM intends to tackle the threat that climate change poses to sustainable development," said Finland's Prime Minister Matti Vanhanen at the end of the meeting. Finland is the current holder of the rotating European Union presidency. The joint statement recognises that energy security and climate change are closely linked, and that countries can improve their energy efficiency by diversifying energy sources and investing in renewables.It also notes that developing countries have "legitimate priority needs" — to achieve sustainable economic development and eradicate poverty. Energy consumption in most emerging Asian economies is rising rapidly, but they are not bound by the UN Kyoto Protocol to reduce their emissions of greenhouse gases that cause global warming. India was formally inducted into ASEM at the meeting, along with Bulgaria, Mongolia, Pakistan, Romania and the secretariat of the Association of South East Asian Nations13.

Energy demand in Asia to reach 6,325 million tonne of oil equivalent (mtoe) by 2030 from 3,227 mtoe in 2006 projected recently released energy policy of Asian Development Bank (ADB). It also said China and India will account major shares. Rapid economic and population growth will drive much of the increase in energy demand. Industrialisation, urbanisation, and the replacement of noncommercial biomass fuels by commercial fuels will also contribute to increase demand. According to the policy note, other factors which will be responsible for increase in demand are increased economic activities, higher living standards, and greater consumption by households. While higher demand for energy from developing Asia has prompted concerns about energy security, long-term cooperative options need to be explored internationally to ensure production and use of energy at reasonable costs and in a sustainable manner. The 2009 energy policy is congruent with strategy 2020, enabling energy operations to be aligned with ADB’s overall strategy emphasizing energy security, facilitating a transition to a low-carbon economy, universal access to energy, and for achieving ADB's vision of a region free of poverty. The objective of the policy is to help developing member countries (DMCs) provide reliable, adequate, and affordable energy for inclusive growth in a socially, economically, and environmentally sustainable way. It will emphasize energy efficiency and renewable energy; access to energy for all; and energy sector reforms, capacity building, and governance14.

The hunger for energy would increase due to less reliance on natural gas for electricity generation (see table 1.2) and this would have meant stress on energy efficiency and high technology utilization for cutting emission and power generation.

Table 1.2-Share of electricity generated from natural gas

13T. V. Padma, Asia, Europe to invest US$6 trillion in energy by 2030 at http://www.scidev.net/en/news/asia-europe-to-invest-us6-trillion-in-energy-by.html

14 Energy demand in Asia to double by 2030, says ADB at http://www.financialexpress.com/news/energy-demand-in-asia-to-double-by-2030-says-adb/479990/

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Source: World energy, technology and climate policy outlook 2030 - WETO - Directorate-General for Research Energy, European Commission, 2003, p.87

One key determinant of the long-term gas supply pattern of Europe (and therefore of the EU) is the fast growing gas demand in Asia, and most particularly in China and South Asia. Gas requirements in the whole region are projected to rise at an average rate of 4.6%/year over the 2000-2030 periods, the highest growth among the regions. In contrast, gas production in that region will grow much less rapidly at 0.7%/year on average, and most of the gas produced in the South East Asia (Indonesia and Malaysia) will continue to be traded outside the region, mainly to Japan. As a result, Asia will switch from being a net gas exporter to a net importer around the year 2020. At that time horizon, more than 300 Gm3 would be required externally to meet the region’s gas demand; these volumes correspond to half of the total gas requirements. They would come mainly from the Middle East in the form of LNG (70%) and to a lesser extend from the CIS via pipelines (30%). In 2030, gas production is projected to decline dramatically in China and South Asia, resulting in the need for further external supplies, which would then represent some 80% of total gas demand in Asia. Over a thirty years’ time horizon, this evolution in Asia is similar to the projected situation in Europe, where 70% of the region’s gas demand would have to be met by external gas supplies. However, in the case of Asia, the bulk of external supplies are projected to come from the Middle East (70%), while in the case of Europe, it would originate principally from the CIS (77%). The significant projected gas exports from the Middle East to the Asian market, at the expense of the European market results from model’s comparisons between supply costs from the CIS and the Middle East to the importing regions and between the gas prices on the two regional markets, namely Asia and Europe15.

In line with the objectives of the 2009 Energy Policy of ADB, policy implementation has taken into account emerging issues and options, lessons

15 World energy, technology and climate policy outlook 2030 - WETO - Directorate-General for Research Energy, European Commission,2003,p.94

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learned from past operations, and the experiences of other development partners including the World Bank. It has also been supported by an examination of issues related to fossil fuels, power generation and district heating, power sector reforms and restructuring, regional cooperation, and the special needs of the Pacific DMCs16.For more efficient implementation, ADB will seek further collaboration with a wider range of development partners. To mobilise necessary funds and modalities for new initiatives for the energy sector, such as the energy efficiency initiative and carbon market initiative, a financing partnership facility and trust funds have been set up17.

In terms of emissions the issue would be to curb increasing emission as well as cater to the growth requirements of developing economies (see graph 1.22).The rise in emission would be fuelled more by developing economies and less by transition economies which means India and Chain would not have been the main culprits as is projected by the international bodies and western writers.

Graph 1.22-Carbon Emissions –Energy Related

Source: Dr. Fatih Birol, World Oil Outlook to 2030, Economic Analysis Division, International Energy Agency, 2002

16Energy demand in Asia to double by 2030, says ADB at http://www.financialexpress.com/news/energy-demand-in-asia-to-double-by-2030-says-adb/479990/217 Energy demand in Asia to double by 2030, says ADB at http://www.financialexpress.com/news/energy-demand-in-asia-to-double-by-2030-says-adb/479990/2

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In the Asian context though India and China had been projected as major polluters but by 2030 the energy efficiency and emission norms would have been adopted by both countries, thereby falsifying the fabrications made by western agencies (as shown in graph 1.23)

Graph 1.23-Energy-related CO2 emissions

Source: World Energy, Technology and Climate Policy Outlook 2030 - WETO - Directorate-General for Research Energy, European Commission, 2003, p.33

India could lower its expected carbon emissions by up to half by 2030 through heavy investment in energy efficient technologies in the power, transport and agricultural sectors, a study has said. The paper, by consultants McKinsey and Company, argues that an assault on carbon emissions could disproportionately benefit India compared with other countries, by reducing its dependence on foreign oil imports and giving it an edge in green technologies. “Timely action [is] critical since India is making irreversible investments in infrastructure right now,” says the report, titled “Environmental and Energy Sustainability: An Approach for India”. The study comes at a critical time for India, which will be asked to take actions on issues such as energy efficiency and renewables at a climate change conference in Copenhagen in December that will try to forge a successor agreement to the Kyoto protocol. Independent studies released by the Indian government indicate that the country’s greenhouse gas emissions will rise from about 1.4bn tonnes last year to 4bn-7.3bn tonnes by 2031.India says that even though its per capita emissions could double to at least 2.77 tonnes per year of carbon dioxide equivalent over the next 20 years, the country will still be more efficient than developed countries, which emit as much as 20 tonnes per capita a year.The McKinsey report assumes India’s economy will

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grow by 6-9 per cent over the next 20 years, resulting in gross domestic product of $4,000bn and a population of 1.5bn people by 2030.It argues that with investment in efficient and alternative technologies, India’s carbon footprint could be reduced by 30-50 per cent to 2.8bn-3.6bn tonnes a year by 203018.

With regard to defence issue there would have been status quo achieved between the major Asian countries and the initiative would have come from the major powers themselves. The threat per caption within Asia would have reached a saturation point and US would be still ruling the global scenario though with an eroded stature. Asian countries would have reached a level of confidence and regional security structures would have become compliant and enforcing for the non-compliant countries.

Conclusion

Though scenario building and forecasting about the trends is a rather risky proposition but taking a rather conservative estimates and extrapolate it with the current trends does give a rather hazy picture of tomorrow. The issues that have been discussed in the paper listed out the possibilities and the after effects of such emerging scenarios, the prominent among them being the emergence of a new Asian order. While China with its current growth and military expenditure will emerge as the largest power in Asia but it would still be far behind US in terms of asserting global hegemony. China, though, would be growing at an exponential pace but will have irritants in terms of Tibet and Xinjiang, if these would not be addressed in the long run. Also it would have to curb its increasing wages due to high per capita income and the production shift is likely to go to south Asia and a number of countries of Southeast Asia and Africa. China would also have to cater to its rising population of aged people and have to make provisions for social security and health expenditure. India on the other hand will have to look for policy changes which might make it a lucrative investment destination due to literate and young population but it would also have to address issues relating to increasing urbanization as well as energy consumption. The more radical shifts in policy would have been the compliance with the international norms on cliamte change and cutting of carbon emissions. The statistical project in terms of military expenditure shows that Asia would have reached the pinnacle of nuclear deterrence and so expenditure on conventional weapons is likely to be stagnated, or just for replacement purposes (Asia would have become Europe by then).The larger global consensus on disarmament is likely to grow bolder as it has happened after the disintegration of Soviet Union. Japan and Korea would have to seek

18Joe Leahy , India ‘could halve emissions by 2030’ at http://www.ft.com/cms/s/0/9843f400-9d20-11de-9f4a-00144feabdc0.html

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answers to the problem of aging population and receding birth rates. Japan and Korea would have to diversify their investment and thus within Asia there would be growth of intraregional production networks.

With regard to central Asia it is likely to grow due to its energy resources and there would be commercial struggle between major Asian powers on garnering maximum equity in different oil fields and gas exploration sites.Few of the new regional powers which would become stronger and prosperous would be countries like Indonesia, Thailand and Philippines.Within south Asia the two most promising countries in terms of investment would be Sri Lanka and Bangladesh while Nepal would have to cater to the infrastructure needs and Bhutan would have to build necessary road and transport networks for earning the share in global economic revolution. There would be perceptible changes but there would be lingering issues like Terrorism, transnational terror logistics network, drug trafficking and the emergence of synthetic drugs, climate refuges from Maldives and Bangladesh. Myanmar would have conciliated to some form of guided democracy and Laos and Cambodia would have become the new investment destination for the Asian countries.

In the overall context Asia would be growing but the momentum would have been stagnated and there would have been new investment destinations. One thing for sure that will emerge is that the among the top 15 highest military spending nations Asia would have the least in that group. The phases of apprehensions would give hope for talks and amicable resolution of contentious issues.Asia would have reached the growth plateau by 2030.the scenario would be positive but definitely not pessimistic.

Notes

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