Tuesday, September 2, 2014
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Asia’s Giants Under New Management

BALI – More than one-third of the world’s population lives in just three countries: China, India, and Indonesia. With all three undergoing significant political transitions – whether electing a new leader or experiencing a recently installed leader’s first key decisions – this is a decisive moment in shaping the global economy’s future. If Narendra Modi and Joko “Jokowi” Widodo win the upcoming elections in India and Indonesia, respectively, they will join Chinese President Xi Jinping in spurring regional economic growth – likely causing Asia’s rise to global economic preeminence to occur faster than the world ever imagined.

In the year since Xi assumed the Chinese presidency, he has centralized power to a remarkable degree. Not only has he positioned himself as General Secretary of the Chinese Communist Party and Chairman of the Central Military Commission; he has also neutralized potential rivals, including former Chongqing party boss Bo Xilai and former security chief Zhou Yongkang.

Consolidating power in a country as large and messy as China is extremely difficult, making Xi’s accomplishment remarkable, to say the least. After all, it took Xi’s predecessor, Hu Jintao, far longer to achieve a similar degree of authority. But it is only a first step. Xi is now attempting to use this power to push through the difficult reforms that Hu and his prime minister, Wen Jiabao, have been widely criticized for neglecting.

Despite the pressure to make up for lost time, Xi knows that he must be pragmatic in his reform efforts. First, he must build a national consensus capable of overcoming the powerful vested interests that oppose changes – including the dissolution of monopolies, improved market regulation, increased transparency, and tax reform – that would level the economic playing field.

While Western leaders generally support Xi’s market-oriented reform strategy, they remain puzzled by his devotion to the CCP. To the Western mind, any truly effective reformer must be a closet democrat, like the Soviet Union’s last president, Mikhail Gorbachev.

But Xi has no intention of being the People’s Republic’s last president, and the Soviet Union’s collapse in the wake of Gorbachev’s political reforms taught him the importance of balancing change with stability. For Xi, the CCP’s appeal lies not so much in its ideology as in its capacity to help bolster China’s prosperity. Indeed, China’s current leaders are modernizing nationalists, not communists. They recognize that China’s success over the last three decades is a direct result of its shift toward a more open economy and a freer society – a shift that will continue under Xi.

Another modernizing nationalist, Narendra Modi, is likely to become India’s prime minister following the elections that started this month. Modi’s pro-business approach is a major theme of his election campaign, and ordinary Indians are hopeful that his policy program will enhance their wellbeing.

As Chief Minister of Gujarat, Modi worked to encourage foreign investment, provide around-the-clock electricity, build roads, and engage in intelligent urban planning. Annual economic growth in the state averaged more than 10% from 2006 to 2012, when the Gujarati city of Ahmedabad was short-listed for the Lee Kuan Yew World City Prize.

But history haunts Modi’s campaign – namely, the deaths of more than 1,000 people in anti-Muslim riots in Gujarat in 2002. Though the Supreme Court cleared him of all personal wrongdoing, the tragedy’s legacy persists, making it difficult for Modi to win Muslim votes without alienating his Hindu nationalist base.

This has not prevented Modi from taking political risks, beginning with his assertion that India needs toilets more than temples. But his decision to run for Prime Minister is by far his riskiest move, as it will test his national appeal.

Of course, even if he wins, Modi will never be able to consolidate power to the degree that Xi has, owing to India’s separation of powers and democratic constitution. At best, he will lead a coalition government, in which his capacity to make compromises and connect with unlikely allies will dictate his success.

Jokowi, the governor of Jakarta, will face a similar challenge if he wins Indonesia’s presidential election in July, given that his party, the Indonesian Democratic Party of Struggle, will not have a majority in parliament. Fortunately, he is a skilled politician – popular, but not populist, with tremendous persuasive powers.

These qualities enable Jokowi to deliver results, exemplified in his success in convincing Jakarta’s slum dwellers to leave their shanties to allow for urban development. Under his leadership, highway projects that had been blocked for 16 years have been relaunched in the city.

Like Xi and Modi, Jokowi is focused mainly on economic development. In this regard, his background as a furniture manufacturer and exporter is a major asset, enabling him to bring a level of hands-on knowledge and experience that past Indonesian presidents have lacked. Given Jokowi’s business acumen, he understands that Indonesia must improve its logistical capabilities if its economy is to engage the world.

Perhaps most important, Xi, Modi, and Jokowi are all pragmatists. They know that, in order to achieve rapid economic growth and modernization – a key priority for all of them – they will need to compromise with opposition forces at home and adopt best practices from abroad. Their shared desire to engage the modern world suggests that their leadership will improve the lives of their countries’ citizens. And better lives for one-third of the world’s population will benefit the rest of us as well.

Read more from "Modi's Operandi"

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