by Radu Magdin

While Romania still looks mostly towards the West in terms of sources of growth, it should turn more towards the Global South and also explore connecting to the drivers of the Asian Century.

As lots of countries engage with China, India and sometimes Indonesia, Romanians should also explore a consolidated relationship with two booming countries, including from a demographic perspective, Pakistan and Bangladesh; like Romania, these players tend to be underestimated but may overdeliver.

In the 1930s, as the Meiji Restoration’s fruits gave Japan a seat at what seemed as a Western-only table of developed nations, a simple model was proposed as how that may translate into wider prosperity across Asia: the flying geese paradigm.

Quite simply, it stated that as Japan moves up the value chain in terms of manufacturing and services, lower value add supply chains will be systematically outsourced to its less developed neighbours. Later, Japan’s technological innovation will allow it to move upwards the supply chain, taking its suppliers with it and they themselves will outsource the lower value add of their supply chains to other less developed neighbours. Its simplicity may come across as almost quaint, from a world where trade was primarily in commodities and manufacturing, but the framing came back in the 1980s to describe the East Asian economic miracle and echoes of it are fairly self-evident in China’s Made in China 2025 or the Belt and Road Initiative. It also proved more or less correct, with the outflow of technological expertise and production methods playing a significant part both in South Korea’s and the Chinese mainland, as well as the Taiwanese province‘s development.  In other words, this is trickle-down economics going international and applied to global trade.

In other words, as the geese joined in, the East Asian economic miracle took hold to form what is, as of 2021, the two most dynamic areas for economic growth: East Asia and South-East Asia. A long way from the Minister of Trade being dismissed as a salesman of cheap electronics.

Now the question is whether other Asian countries will join the club with the same results. Most notably, the question mark looms large over Pakistan and Bangladesh. Included in Goldman Sachs’ Next Eleven, meaning the countries showing the most potential after the BRICs and JP Morgan’s own Frontier Five, these two might very well be the next where the economic miracle extends to. Yet, these two future demographic giants in Asia and their joining the gaggle would represent a departure from the constants of the paradigm: all of the countries previously mentioned were Confucian in culture, joined with an administrative class already well formed, and did so in the middle of the Industrial Age.

Current Successes

To be clear: Pakistan and Bangladesh are successes to a degree in their own right and their development is partially a matter of extrapolating from current trajectories. It thus makes a lot of sense to look beyond the trinity (China – Japan – India) and pay more attention to those more or less under-the-radar emerging market players, such as Pakistan and Bangladesh, that should be considered in the game for the success of the Asian Century.

Already, in PPP terms, Bangladesh’s GDP per person grew from an average of USD PPP 540 in 1990 to 1,909 by 2011, while Pakistan grew from USD PPP 1,200 to 2,789. This wasn’t paper growth amassing to the few. During the same period, life expectancy increased by a decade in Bangladesh’s case and 4 years in Pakistan’s, partially due to the fall of maternal deaths from 800 per 100,000 to 194 in Bangladesh’s case and from 490 to 260 in Pakistan’s case. Meanwhile, possibly helped by the rise of female literacy from 38% to 77% in Bangladesh and to 61% in Pakistan, as well as infant immunisation rate from 64% to 94% in Bangladesh’s case  and from 48% to 80% in Pakistan’s, the tragic death of children under the age of five has dropped from 139 per 100,000 to 46 in Bangladesh, with respective figures of 122 and 72 in Pakistan’s. In other words, in developmental terms, the successes have been significant, sustained and widely shared.

However, whether that extrapolation actually means convergence with the gaggle may rest on these three factors by which it differs. Both have some of the same things that propelled previous Asian countries in their development.

Both Pakistan and Bangladesh have relatively young and booming populations. Taking the United Nations’ medium scenario, which in the past has tended to underestimate in its projections the evolution of Muslim-majority countries, by 2050 Pakistan will have a population of about 338,013,000 – about three times that of Japan – later growing to 403,102,000 by 2100 – almost half of that of China and almost a third of that of India in the same time-frame in some scenarios – overall doubling the current estimate of 225,199,000. Meanwhile, Bangladesh’s 166,303,000 million is set to increase to 192,567,000 million by 2050 while a constant fertility rate scenario would put it at 216,835,000 by 2100.

In other words, there are plenty of would-be workers, savers and consumers.  Those would-be workers, savers and consumers are already enjoying rising standards, but their mass reflects in growth projections more widely. PwC estimates that by 2030 Bangladesh will already be the 28^th largest economy in PPP USD terms while Pakistan will rise to being the 20^th.  These are evolutions that cannot be ignored.

By 2050, the same study estimates that Pakistan will become the world’s 16^th largest economy, larger than some of the previous East Asian miracles, such as South Korea, and with an economy comparable in volumes to that of ‘first world’ countries such as France. In the same time frame, Bangladesh is expected to grow more than five-fold to reach being the world 23^rd largest economy, ahead of previous emerging markets success stories such as Poland, ahead of BRICs such as South Africa and only marginally behind countries such as Canada. That’s a long way from what Henry Kissinger called a development ‘basket case’, a country which will perpetually need aid in order to keep afloat.

The Elite Question

In other words, the trajectory and the setting are very much favourable to Pakistan and Bangladesh joining the Asian miracle. Whether it will actually happen rests less with these and more with the last factor in the East Asian development miracle: elites. Namely, the families which successfully translated their privileges in a predominantly agricultural society into parliamentary positions, access to bank credit, ownership of conglomerates and often were the first to reap the benefits of industrialization, liberalization and the move towards a market-oriented economy.

Much can be said about East Asian elites which led Japan, South Korea and China towards prosperity. Not all of it necessarily fits the mould of Lee Yuan Kew. Each continues to fight the slide towards the monopolization of power and wealth in the hands of the self-serving few. That said, during their boom, each country had the great benefit of an elite which supported an inherently national project: the nation’s interest trumped family interests.  That in turn allowed for growth to be widely shared and allowed for that growth to effectively translate into national public goods: world-beating educational systems, enviable infrastructure, efficient courts. In turn, that enabled the turning of circumstantial and temporary advantages, such as a demographic dividend or access to markets, into long term built advantages: a highly educated workforce, manufacturing clusters with significant economies of location, technological research and development which propelled them further when those circumstantial advantages stopped. For example, in China, a survey of American businesses conducted by the American Chamber of Commerce in Shanghai found that only 4% of companies plan to shift production to the United States and only 25% plan to leave China in the face of what could have been crippling sanctions. That’s not because of cheap labour but because China successfully turned that erstwhile advantage into the advantage of efficiency, clusters, and a notable research powerhouse.

If Pakistani and Bangladeshi elites follow the same path, the stage is already set for them to be the next in line to join the growing gaggle. But that means the current families which hold power have to put the national interest above their own. It’s a question which remains to be answered. Nonetheless, the future looks bright for Pakistan and Bangladesh.

www.forbes.ro