At the start of 2023, the catch words are flux, realignment, reset, new world order, pivot, tilt. I am no Nostradamus, or the sage of the Lal Haveli, Rawalpindi. At best I gaze upon the stars.
My favorites – Ayesha Omer or Malaika Arora. With due apologies to the occupants of the previous hotel Sherazad on constitution avenue and the swagger sticks in Rawalpindi, here is my take on the Geo-Strategic dynamics in 2023 and beyond.
1- USA
The USA will continue to rule the roost. The Cassandra’s will repent. As of December 2022, most numbers look good. GDP is close to US$ 20 trillion. GDP per head is US dollars 62,500. GDP breakup is Agri 1%, Industry 19%, Services 80%. Human development index is 92.4%.
Health care spending is a hefty 17.1% of GDP (an alarming figure). Education is 5% of GDP. R&D spending is close to US$ 550 billion. The business numbers also look good. Off the 10 largest non-financial institutions in the world, eight are American. Of the largest banks, by market cap, four are American. J.P. Morgan Chase is number One.
The USA is a relatively safe country. Flanked East and West by the Atlantic and the Pacific Oceans, Canada to the North and Mexico in the South. Both very very good friends. To coin a new term – ‘TRIMERICA’. An occasional flair up in the Caribbean. Just sent in a SWAT team from Latincom.
The big number is the defense budget of approximately US$ 700 Billion. And a network of stations, bases and alliances around the world. The stronger alliance is the Anglo-Saxon alliance (the English-speaking club the USA, UK, Canada, Australia). So, any prediction that the USA is in terminal decline is off the mark.
2- GCC Countries (KSA, the UAE, Oman, Qatar, Bahrain, Kuwait).
In precolonial times, and going back to the ancient ages, the Middle East dynamics were based on three powers – Arabs, Turks and Persians. We are now witnessing the return of this Trioka. The GCC countries have emerged as a substantial power bloc – financially, politically and commercially.
The football World Cup (staged in Qatar recently) showcased what they can achieve. The GCC has a combined GDP of US$ 1.75 trillion (approx.) and an indigenous population of 55 million. In the last 47 years, since 1975, the petrodollar has driven a substantial part of the world economy – infrastructure, military, education, healthcare.
Western and Far-Eastern corporations and those indigenous to the GCC have earned profits that would boggle the mind, if fully disclosed. GCC spending will continue on an epic scale. Each trying to outdo the other. The monarchies of GCC know that it is a buyers’ market.
For the right price everything is available – secret technology, Bollywood and Hollywood babes, brands, influence, votes, military hardware, sporting teams, sporting icons, works of art – you name it. And they are not shy to flaunt it.
The sovereign wealth funds of GCC countries are mega loaded – A.D.I.A. (US$ 800 Billion), K.I.A. (US$ 600 Billion), Q.I.A. (US$ 400 billion). More so, the family funds of the royals are even bigger but not subject to disclosure. The wider Arab world is also benefitting from their largesse.
Egypt is the most consequential country in the Arab world. It (Egypt) is receiving dollops of cash from GCC. Egypt only approaches the IMF as a protocol gesture. The IMF of the Arab world is the GCC. The GCC is now on the cusp of being a global power.
3- China
The Twentieth Congress has just concluded. The Communist Party of China (CCP) has tightened its grip with President Xi at the wheel. There are some worrisome indicators, but the CCP has shown that it has the backbone and the resolve to confront them.
The numbers are impressive – GDP is approximately US$ 13 trillion. Of which agriculture is 8%, manufacturing 29%, services 52%. The principal exports are Telecom equipment, electrical and mechanical goods, office machinery, clothing and apparel.
The Reserves are at a mind boggling US$ 3.3 trillion. China’s defence spending hovers around US$ 200 billion. The armed forces are the largest in the world – regular 200 million, reserves 600,000 men. China’s outreach, through various initiatives of which the Belt and Road is one, is making friends around the world.
At least at the moment. Africa is a major beneficiary. So is Pakistan through CPEC (Chhina-Pakistan Economic Corridor). It is thought that China’s foreign policy shall continue to be pragmatic, devoid of emotions. Efforts to provoke China may backfire.
China’s only weakness appears to be its “soft power”. China needs to develop and globalize its brands, media, showbiz, tourism etc. It is in the realm of possibilities that China may play a role as a “pacifier” in a conflict-ridden world.
Tibet is the most important geography within China. Seven major rivers’ source emanates in Tibet. These rivers flow south, west, north and east. With climate change issues on the world, this area could become a gold mine.
4- Japan
What to make of Japan? A commercial and industrial powerhouse from 1960 to 1990. Sanyo, Toyota, Mitsubishi, Sony, Toshiba, Sharp, Kobe Beef, Nikomoto Pearls. Even today it is the world’s third largest economy.
An island nation of 380,000 sq.km. with an arable quotient of only 11.7%. The GDP is impressive at US$ 4.8 trillion. Agriculture amounts for only 1% of GDP, industry 29%, services 70%. Japan’s post-war growth was powered by the ‘Asian Martial’ Plan at the mighty MITI (Ministry of International Trade & Investment). In 1990, the economic growth hit a speed breaker. It has stalled since then. (Please see the writer’s previous article in this newspaper).
Various stimulants have not worked, even Abenomics. Japan, after achieving dominance in automobiles, ship building, consumer electronics, rail road’s etc., did not fully integrate with the 5th Industrial wave – electronics, I.T., software, (to name a few). Now Japan struggles. And some cultural issues exacerbate the problem – an ageing population, a hostile immigration policy and low participation of women in the workforce to name a few.
Make no mistake that Japan will continue to be an economic powerhouse. But unless it carries out structural reforms it will be overtaken. Japan has the next ten years to supercharge its growth or face the consequences of becoming a second-tier power.
5- European Union (EU)
The EU was born as a consequence of the Second World War. Eastern Europe was over taken by communism. To ensure safety of western Europe, the USA launch the Marshall Plan and other far-reaching initiatives. De Gaulle and Konrad Adenauar played a major role in the formation of European Economic Community (ECC) and thereafter the EU.
Readers should know that in modern history, post-1500, Europe has played a consequential role in world history. Perhaps the most important. The wars within. Then the outward expansion (colonialization) by the empires. The loot and plunder of colonies. And the enrichment of Europe. Pre-Covid, the Euro zone had a population of 337 million.
The economy was US$ 13 trillion. Agriculture 2%, industry 25%, services 73%. The EU continues to be the largest market, largest exporters, largest balance of payments surpluses. But all is not well. The UK opted out. Others are reviewing. The Ukraine issue has shaken things up.
Rightwing governments are being voted into power. (Poland, Hungary, and most recently Italy). Decisions and consensus are hard to achieve. The rich EU counties are peeved at bailing out lazy southerners. The Greece bailout costs close to Euros 300 billion. EU lacks the military muscle and now the energy muscle.
They look to the USA to bail them out. For strategic planners it would be prudent to factor in EU’s current paralysis. Going forward it makes sense to create a two-tier the EU. With the four large economies in the top tier (France, Germany, Italy, Spain). No analyst can predict how the EU will go. Better to go to the casino in Monte Carlo and place a large bet. Same odds.
6- Russia
The Bear. Russia. Stradling eleven time zones. Previously home to the longest serving dynasty in history – the Romanovs. Written off in 1990. Derided as a second-rate power. The vultures were circling. Then a strong man emerges. Vladimir Putin. By 2010, Russia was back in its leadership role. Area 17 million sq.km. GDP US$ 1.6 trillion. GDP per capita US$ 11500 (pre-covid figures). But NATO continued to expands east-wards. Not recognizing that Russia too had a ‘Monroe doctrine’.
The result was the Ukraine fiasco. One could see it coming. Resultantly, Europe is in an energy crisis. Dominos are falling. Even before Ukraine, Russia was strategic to the world. Vast farmland, energy deposits, mineral wealth, historic ties with the (near abroad). The communist linkages going back to the 1917 and now the energy Czar. Countries, far and near, would do well to keep a good working relationship with Russia.
7- Countries to watch
India
India. Economically ascendant. Democratically descendant. Most economic numbers look good. GDP approximately US$ 3 trillion. Agriculture still yields 16% of the GDP. Health spending 3.79%.
India is emerging as a great friend of the West (read the USA,. EU.). As a counter to China. India has the elements to succeed – a good education system, soft power, reasonable military prowess. India’s great strength is its diaspora that settled in the Far East, Africa, and the Caribbean countries over the centuries.
The current Non-Resident Indians (NRIs), the businessmen, the professional class and the academics exercise huge clout. India’s ascendancy will depend how it engages with its neighboring countries.
8- Turkey
The Treaty of Lausanne will lapse in 2023. Unshackling Turkey after 100 years. Turkey’s location is par excellence – its all about location, location, location. After the Ukraine fiasco, Turkey is front and center. It controls the supply chain for food and energy. Area 784000 sq.km. Population 81Million. GDP US$ 900 billion. GDP per head US$ 9500. Good industrial base. Top class military. Major player in Central Asia, the Middle East, Eastern Europe. Erdogan is up for elections. The chips fall as they may.
9- Iran
Always in the news for the wrong reasons but not a country to mess with. People forget that the Persian Empire existed and thrived long before Julius Caesar was smitten by Cleopatra. Area 1.6 million sq.km., Population 82 million. GDP US$ 500 billion. GDP per head US$ 5500. Iran is going to be around. It has great economic potential. Their hydrocarbon reserves are immense. No political or diplomatic solutions in the neighborhood are viable without involving Iran.
10- Indonesia
The Largest Muslim nation. Population 270 million. A country where the most deadly regime change operations was unleashed in the late 60s “Dethrone Seokarno, Crown Suharto”. 5 million dead, mostly communists and Islamists. Has recovered. Currently well governed. GDP in excess US$ 1 trillion. huge industrial base, growing middle class. Abundance of rubber, tin, palm oil.
11- Israel
Startup nation. Upstart nation. Call it what you will. Its here to stay. The Abrahamic Accords, signed during President Trump’s term are a significant development. Jarred Kushner netted US$ 2 Billion for his efforts. Except for Iran and Pakistan, most countries in the proximity are normalizing relations with it. The GCC countries are sourcing a lot of technologies from Israel, especially cyber surveillance and cyber security. Most technology in this field is developed in Israel. It is then rebranded in the USA for onward sales. Going forward, Israel has a cutting edge technology in the (green area – water management, desertification, hi-tech agriculture). Such technology is vital for future survival.
No such article is complete without covering Latin America and Africa. Because of space limitation, they will be covered in the next article. Post-Covid it is difficult to access the correct data. Most data in this report are sourced to Economist Intelligence Unit.
Copyright Business Recorder, 2022
The writer is a former Executive Director of the Management Association of Pakistan
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