Development model need to adapt with geo-economic shocks

Marc Saxer, Photo: Bonik Barta

Marc Saxer, director, Friedrich-Ebert-Stiftung (FES) Office for Regional Cooperation in Asia. The Friedrich-Ebert-Stiftung (FES) is the oldest political foundation in Germany helps to promote democracy, build transnational networks and others. Anika Mahjabin of Bonik Barta caught up with Saxer and discussed superpowers' geopolitics in the Asian region and how it affects Bangladesh.

Mr. Marc, in one of your articles you said that Washington has long started to shift its diplomatic and military footprint in the Indo-Pacific as part of its ''Pivot to Asia''. What part does it play in the politics of South Asia? 

The 'Pivot to Asia' you refer to was introduced by the Obama administration already decade ago. There is a very strong bipartisan consensus in Washington D.C. that the only power in the world that can be potentially par with the United States is China. Therefore, this school of thought believes that the USA should focus its strategic competition on China. Of course, a lot of things have happened since then. For instance, the USA got entangled in regional conflicts such as Afghanistan, Ukraine and potentially now in the Middle East. So this Pivot to Asia has not been straightforward. But it is the overall strategic thinking in Washington D.C. to move American attention, to move American capabilities towards the Pacific.  

Is it possible for smaller countries like Bangladesh to remain neutral in the middle of two big competitor- the US and China amidst their trade and geopolitical rivalry?

Well. I'm working in this region, talking to a lot of people. I can tell you that without a few exceptions, most countries in the Asia Pacific try not to choose sides. They try to balance between rival superpowers. There is an overall understanding that bipolar bloc building and technological bifurcation would result in an economic loss for all. Some countries try to balance in order to avoid opportunity costs. That's the overall posture. However, the interesting question arises, is this a sustainable posture? Because there are structural trends that may force countries to choose sides against their best interest. And that will be the question that will determine the answer to your question.

What potential effects might these geopolitical tensions have on the South Asian countries? In the next decades, will there be any implications, especially in Bangladesh's economy?

What's happening is we are moving into strategic competition. We may call that cold war 2.0.  It is going to play out in the field of economics and technology. Different from the age of globalization of the past thirty to forty years, when the world economy was organized around the principles of markets and cost efficiency. We are now seeing geo-politicisation of the way the global economy is organised. For example, if you want to access your export market it will depend on whether the target market considers you a friend or not. So you either be invited in or you are asked to leave.  If the two superpowers decide to de-couple the world of technology, you may have to choose your infrastructure, both IT and communication from one tech world, but also the product you export have to comply with these technological standards. If you invite investors to build infrastructure, there may be pressure to choose a side from one or the other. If countries having sovereign debt crises and they need a bailout there could be a pressure to choose. If you take the bailout from one side or the other. So all of these structural trends may put you in a tough spot politically.

Photo: Bonik Barta

Also, there will be an impact on the development model of most Asian countries including Bangladesh. Asian development models are usually based on the triangle of cheap labour, export-driven growth, catch-up industrialization. Already with the pandemic, we shifted towards more resilience, and today we focus more on reducing geopolitical vulnerabilities. Both will accelerate digital automation, robotization, algorithms and artificial intelligence. This will put enormous pressure on the comparative advantage of your labour. Because the old industrial countries will be able to produce at the same cost either within their own market or in countries close to them. There is no need to offshore labour to far away places. Second, if you need export for growth, but the entry to your export markets is politicised, you may end up being shut out of some vital markets. Finally, catch-up industrialization means that you need technology transfer and you need to be integrated into the global supply chains. But these are precisely the things that are now being weaponized in the Cold War 2.0. So technology transfer no longer follows market logic but it follows geopolitical logic. So a lot of people started thinking very hard about how to adapt their development model to these geo-economic shocks, and more generally how to manoeuvre in this new geopolitical world

You mentioned in an article that in the future, important economic, technological, and infrastructural decisions will increasingly be subject to geopolitical considerations. What effects will it have on the developing nations in this region?

It will affect the validity of your development model. A development model is the paradigm that guides your journey towards development over decades. In Bangladesh and other Asian countries, you have used the comparative advantage of cheap labour to generate export-driven growth and gradually move up the global value chain. This has worked very well for a lot of East Asian nations who have marched from LDC status all the way to G-20 economies. Think Korea, Taiwan, and several Southeast Asian countries like Thailand. Bangladesh is more or less following the same path. But the problem is that now these external circumstances, the environment in which you operate is changing dramatically. So the big worry is that the ladder to move up the value chain is being kicked away.  

Do you believe that Indo-Pacific-focused political complexity will help South Asians in establishing their political rights, particularly Bangladesh?

I'm deeply convinced that the question of democratization is decided locally. I think overall the influence of external actors on the question of the domestic governance regime tends to be overestimated.

However, in this new geopolitical competition, countries tend to fare better if there is a broad consensus on the foreign policy posture. If you are internally divided, great powers may exploit these divisions to exercise influence. This is why it is so important to have an inclusive conversation about the course the country is taking, including stakeholders from all sides.

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