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sia faces growing tensions, economic slowdown and high poverty but also has reasons to be optimistic

Asia generally is seeing rather dark clouds on the geopolitical, social, and economic horizons. This is the most critical moment in Asia for at least 30 years, but there are also a few reasons to be optimistic.

Elusive peace

Though the spectrum across the continent varies, rising tensions and conflicts are not being abated. There is mayhem in West and Central Asia in an arc stretching from Yemen to Afghanistan. In South Asia, though it was hoped that regional tensions would diminish following recently elected Indian Prime Minister Modi'€™s invitation to his counterparts in neighboring states to attend his inauguration, this has proved not to be the case as the temperature between Islamabad and New Delhi continues to rise.

Relations between the two Asian giants, India and China, are fragile and potentially explosive. The East Asian panorama features significant territorial disputes in the South and East China Seas. Japan (the world'€™s third biggest economy) is at loggerheads with China (the second biggest) and with South Korea (the 11th biggest) over territory and history. In doing an Asian geopolitical scan one must not overlook the fault lines in the Korean peninsula between North and South.

Every single large Asian country has issues with all or some of its neighbors, whether over territory, resources, ethnic minorities, or indeed a combination of all of these. China may be notionally situated in East Asia, but its territory extends to Central Asia, across the borders of which Beijing watches developments nervously, especially the rise of Islamism in light of the impact and influence it may have on China'€™s Muslim minorities, estimated to be some 20 million.

China'€™s dependence on energy and resources from West and Central Asia is huge and growing. China is the biggest foreign investor in the oil sector in Iraq. Trade between Iran and China, currently about $40 billion, is projected to increase five-fold in the coming decade. While relations with Russia, following the Ukrainian imbroglio, have improved, they remain riddled with potential confrontations.

In addition, Asia is the region with the world'€™s greatest concentration of nuclear powers: Israel, Iran, Pakistan, India, China and North Korea, with both Russia and the US also counting as regional nuclear powers. Whether this should be on the asset side of the geopolitical balance sheet '€“ in the sense that countries do not engage in conflict when confronted with the prospect of mutually assured destruction (MAD) '€“ or on the potential disaster side is a much-debated topic. But the potential consequences are quite horrific.

Peace may very well elude Asia in the early 21st century. The many disputes between neighbors, rivalry over scarce resources, and the rise of nationalism, all fuelled by populist politics, make the geopolitics of Asia potentially explosive. Malign geopolitics will have a malignant impact on economics.

Disappointing economic outlook

If the geopolitical picture is full of dark clouds, the socio-economic outlook is not as brilliant as one could have hoped. Abenomics does not seem to be doing the trick in Japan. South Korea and Taiwan are a bit in the doldrums. There are growing worries about a hard landing of the Chinese economy, which even in more optimistic scenarios will witness a significant decrease in growth.

Though there are great hopes that India will regain its sparkle under Modi, outcomes remain to be seen. So on the economic front, by no means are we seeing undiluted good news. This matters a great deal for the continent itself, for meeting rising social expectations and attenuating risks of spreading social unrest. It also matters for the planet as Asian economies, especially China, are the world'€™s growth locomotives '€“ in Africa, Latin America, and also among industrialized economies.

Perhaps the most disturbing news of all was the announcement very recently made by the Asian Development Bank (ADB) that as a result of using the wrong criteria poverty in Asia is much greater than had been assumed. The '€œmargin of error'€ is not trifling: instead of an estimated 473 million Asians living below the poverty line, the actual figure is 1.5 billion.

This makes the proportion of poor Asians leap from 12.7 percent to 41.2 percent. This shatters one of the articles of faith about the Asian economic miracle: that the growth, even if not fairly or evenly distributed, did result in massive poverty reduction. There no doubt has been poverty reduction, but presumably not as massive as had been believed. According to the latest data, two in five Asians remain poor. That is a lot of poverty, misery and deprivation '€“ the darkest cloud of all.

Pockets of prosperity

Nonetheless, there is no doubt that Asia '€“ especially Eastern Asia, to some extent Southern Asia, alas not Western and Central Asia '€“ has come a very long way in social and economic development. Indonesia'€™s recent presidential elections have given high hopes for a new start and the end, or at least erosion, of endemic corrupt cronyism.

Furthermore, the countries across Asia have become much more mutually interdependent in trade and investment. With the current massive investments China is making in Asian continental and maritime infrastructure '€“ including through the founding of the Asian Infrastructure Investment Bank (AIIB) '€“ a new 21st century Asian space is being created. Finally, even with the lower growth figures forecast over the medium term, East and possibly South Asia should be seeing more prosperity. With all the alarming dark clouds on Asian horizons, there are a few silver linings. The challenge will be for global, and especially Asian, leaders to dissipate the clouds and maximize the silver linings. Will they be up to it?