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Subject: The Burma Out! Christmas Spy Service

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   All we need now, is a few more junta nuts.

Supporting a Genuine war upon drugs and human rights abuse.
Sydney 2000 : Burma Out! 
http://www.mihra.org/2K/burma.htm

Tx has the private prison system too of course

Rr

Subject: Decade Forecast: Asia


STRATFOR.COM's Global Intelligence Update - December 22, 1999

Global Intelligence Update
December 22, 1999

Asia's Future Centers on China and Japan

Summary

Grappling with the future of Asia means we must tackle two central
questions: the extent to which Asia can recover from the economic
disaster of 1997 and the political consequences of that collapse.
The Asian economic crisis marks the end of an era. The future of
Asia depends on the future of China, the region's largest nation,
and Japan, Asia's largest economy.


Analysis

Asia's explosive economic growth lasted for several decades and
embraced most of east and southeast Asia. The universality of
growth profoundly impacted the region's psychology, particularly at
a time when the United States was in decline. It seemed that a
lasting change of the guard was underway. Not only was there a
sense that Asia was surpassing the United States as the center of
international economic life, but there was a deeper belief that the
very nature of international power was changing.

For the United States, power rests on the three pillars of
economics, politics and the military. In recent times, Asia, and
particularly Japan, has rested its power almost exclusively on
economic growth. Prior to the economic crisis in 1997, Asia
appeared to be surpassing the United States economically and seemed
to be redefining the meaning of international power by rendering
traditional, politico-military considerations obsolete.

Asia's rapid economic growth overshadowed the need for military
competition. Moreover, the United States provided for the military
defense of much of Asia. The U.S. Navy served to protect the
region's strategic interests, including shipping lanes, while
keeping in check potential regional powers, like China and Russia.

With intra-regional disputes muted by the shared economic focus,
Asia did not have a great politico-military power. Nevertheless,
the theory went, Asia's economic vibrancy rendered American
military power moot. Indeed, American expenditures on military
power had undermined its own economic competitiveness.


After The Asian Economic Crisis

The Asian economic crisis shattered the region's self-image. Asia
would no longer be the vibrant center of the global economy. A new
consensus emerged with the view that Asia had sown the seeds of its
own disaster. Far from being miraculous, Asian economic growth was
the problem. The economy that had fueled Asian growth had also
undermined capital structure. After all, any economy can grow if it
is indifferent to profit.  It can compete on price and it can
afford investments that would appear irrational in an economy that
measures success by rates of return on capital.

Much said about Asia prior to 1997 was, in retrospect, overblown
nonsense. After all, if the Asian savings rate, work ethic and
discipline were all dedicated to a fundamentally flawed project
then Asian excellence was itself flawed. This realization has been
psychologically shattering. Lacking any politico-military power,
Asians had to confront the illusion that they were at the dynamic
center of the global economy. The burning issue in Asia,
particularly in Japan, was a project in self redefinition that
highlighted unique excellence.

Asia will emerge from the current economic crisis in a markedly
changed condition, but it will remain an influential and
potentially dangerous region. East Asian and Pacific nations
comprised 29.4 percent of the world's GDP in 1997. This unbalanced
over-dependence on the economy as a measure of power will give way
to a more balanced reality, in which economic power by itself will
be supplemented by political and military power.

China exemplifies this tendency. In the face of serious economic,
China has sought to stabilize itself by resorting to other types of
power. It has tried to revive an ideological defense of its
government. It has used military and political forces to suppress
opposition. And it has projected a more complex profile beyond its
borders, moving from a country primarily interested in economic
relations to a nation interested in great power status. Beijing has
made it known that it expects to exercise international political
power based not only on its economic strength, but on its military
power.

Thus, one major consequence of Asia's economic crisis is the return
of Asia to a more normal, balanced status in the world. China has
already returned to a self-image in which power rests on military
and political power as well as economics. We expect that the rest
of Asia will return to this more traditional understanding. In
particular, Japan, the second largest economy in the world, is
likely to abandon its reliance on economic growth in favor of a
more balanced approach, adding politico-military power with the
purely economic.

The future of Asia depends on the future of China, the largest
country, and Japan, the largest economy. This view is quite
traditional. Of course, these countries are vastly different, but
they share two things in common. First, both of their economic
experiments have encountered profound difficulties. Second, each
will face serious domestic political consequences, which will have
severe repercussions for the world.


The Turmoil in China

China has managed, at least publicly, to minimize its economic
problems.  All Asian economies lack transparency, which means that
they are able to falsify many of the statistics about themselves
and therefore appear healthier than they are.

China has three advantages in this.  First, it is so vast, with
many of its regions so backward, that the sheer collection and
collation of economic statistics is impossible.  Second, China is a
communist country.  This means that it has a bias in measuring
economic activity in terms of output rather than profitability.
One can go bankrupt on high output.  In addition, as a communist
country, it regards economic statistics as political property and
therefore tends to falsify those statistics.  Finally, it maintains
an Asian banking system with accounting rules that do not assure
high levels of fiduciary responsibility.  Particularly when trouble
arises, Asian banks have the ability to manufacture more
satisfactory realities than would otherwise be the case.

While no one, not even the Beijing government, has a clear idea of
what is happening in the Chinese economy, it is clear that the
economy is much worse than China had hoped after the 1997 crisis.
It is also clear that Beijing is extremely concerned about the
social and political consequences of economic failure. Under Deng,
China abandoned its ideological justification for its government in
favor of a functional justification. Say what you might, the
economy worked.  Following 1997, it is difficult to ignore the fact
that it is not working.  Returning to Maoism is hardly the
solution. Thus, the government has been using direct measures to
maintain control, from suppressing Xinjiang separatists to crushing
Falun Gong.

It is important to understand the extraordinary domestic
transformation China has undergone since 1995. The government
responded to the economic crisis by imposing powerful social,
political and security controls on the population. Clearly, Beijing
has been worried, and with good reason. Under Deng's redefinition
of socialism, the government's legitimacy depended on its economic
performance. Now, the economy is doing poorly, with little reason
to expect improvement. So support for the government needs to be
gathered through means other than economic.

A tremendous tension underlies China. Coastal China continues to
look to the exterior for economic relations that enable growth,
while inland China sees, in this region, the seeds of destruction
for a united China. In the 1990s, China's coastal region performed
extraordinarily well, but Chinese leaders are wary of foreign
forces. Now the government is increasingly depending on inland
China to serve as its foundation.

This is a very old story in China. Over the century, it has
vacillated between an isolationist peasant-based economy and an
open, merchant-based economy. In the former model, China is poor
but virtuous and the emperor is secure. In the latter, some Chinese
are rich, others are poor and the emperor is vulnerable to the
plots of the coastal merchant's foreign friends. Mao chose the
former peasant-based course and closed off China from the
imperialists. Deng tried to control the open model and have the
best of both worlds. While the economy surged, all sins were
forgiven. Now that the economy is weak, no sin can be overlooked.

Beijing cannot simply seal off the coastal cities. They can throw
out foreign telecommunications companies. But the government and
its officials are themselves so deeply enmeshed in trade with the
West that enclosing China is a difficult option, short of a massive
governmental purge and a reign of terror like the Cultural
Revolution.  The government has neither the stomach nor the
legitimacy for such an undertaking. Therefore, in spite of China's
weakened economic condition, official and unofficial ties with
foreign businesses will continue, resulting in an intensifying
disparity between coastal entrepreneurs and the rest of the
country. Beijing will try to tax the entrepreneurs to placate the
countryside. The entrepreneurs will resist, and tensions will rise.

Can the tensions be contained? Can China resist the manipulation of
foreign business interests and their Chinese allies without
triggering a massive reaction form the interior? Beijing's policy
under Jiang has been to attempt to balance these forces, to
maintain a massive if lessened degree of commerce with the West
while using the interior to control the coastal officials. It is a
balancing act that is difficult to maintain and in Chinese history,
one which usually tilts to one side. Mao was no fool. He took an
extreme course because he knew he would lose control if he tried
both.

We therefore expect a massive shift in China in the coming decade.
On the whole, the greatest probability is for a serious
fragmentation of China's national fabric. Toward the end of the
decade, China will resemble China of the 1920s more than China of
the 1990s. Another possibility is a massive return to the anti-
Westernism of  the 1950s and 1960s. Beijing can maintain its
national integrity by following the Maoist road. However, given
government corruption, and the deep involvement of senior party
official's families in foreign trade, it is an unlikely outcome
short of a Maoist rebellion. Our forecast is for a deeply troubled
China, increasingly torn by domestic strife, with a government, in
the face of it, alternating between brutal repression and
helplessness. In short, as with Russia, one should not confuse
China's facade with its reality.


The Rise of Japan

With China in turmoil, the nation likely to take a leading role in
Asia is Japan, even though it is not a role that Japan relishes. We
should, however, bear in mind two important facts. The World War II
generation responsible for Japan's defeat has died and the post-war
generation that made peace with being a purely economic country has
been discredited by the country's decade of economic failures.
Thus, the new generation regards the war as ancient history and is
deeply suspicious of Japan's economic road to greatness.

This is the generation that will define Japanese politics in next
decade. Members of this generation understand that Japan's decade-
long depression cannot end by the traditional solution of an export
surge into the United States. They also understand they cannot
force a Japanese recovery without a massive overhaul of the
country's financial system. Understanding this difficulty, they
realize that they must export, but not simply to the United States.
They are therefore looking to Asia, and experimenting with ideas
such as Asian Monetary Funds, Asian Common Markets and other Asian
solutions to Asian economic problems.

This new generation also understands that to make this happen, an
Asian political framework must be created. With Europe as a model,
they see that such a framework is not wholly incompatible with a
close security relationship with the United States. The new
generation is also aware that European countries, even with bad
memories of World War II Germany, nonetheless accept German
leadership if not primacy. By analogy, they know that a similar
scenario can be tried in Japan.

The thinking about economic solutions leads inevitably to the
political framework and with that, military underpinning. Much
nonsense exists about Japan being unarmed. With a defense budget of
some $35 billion, Japan's defense spending exceeds that of both
Russia and China. Tokyo has the second-largest navy in Asia -
behind the United States -- a substantial standing army, and its
technology is second to few. The military option is Japan's for the
taking, should it choose.

In our view, the post-war consensus within Japan about Japanese
political life cannot long survive the economic disaster of the
1990s and the passing of the generations that crafted that
consensus. The first decade of 2000 will mark a transition from
Japan thinking of itself as a great economic power to Japan
thinking of itself as a great power, period. Given the de-
synchronization of the global economy, we think Japan's shift is
inevitable.

This shift will intensify competition within the United States.  As
Japan seeks markets in Asia, including in China, it will face stiff
competition with the United States. Asian countries will find
themselves in a position in which they must make complex strategic
choices, rooted in economic, political and ultimately military
concerns. The opportunities for misunderstanding between the United
States and Japan will be substantial. Indeed, they will be
inevitable.

In fact, signs of such a shift in Japanese thinking have already
begun to appear. Discussions regarding the military's posture have
become less taboo as Japan is forced to reconsider its
vulnerability in the region. The government has already opened
debate on participation in U.N. peacekeeping forces, which will
inevitably lead to discussions on the relevance of Article 9 of the
Constitution, which bans Japan's use of military force to settle a
dispute. Japan has already begun to prepare for its own multi-
purpose reconnaissance satellite system, engaged in joint naval
exercises with neighboring nations, and debated the addition of
aerial refueling capabilities to its defense forces.

De-synchronization is a process in which massive segments of the
world economy begin moving in different, and even contradictory,
directions. If we are correct, and the strains on China will prove
more than the government can manage, then it follows that with the
U.S. economy moving one way and the Japanese economy moving
another, and with both obsessed with exports, the opportunities for
friction will be substantial. When our expectation of a United
States moving into economic problems later in the decade is
factored in, the friction is only likely to increase.


The Rest of Asia

As China's internal pressures intensify and Japan becomes more
assertive, the Korean Peninsula will become the epicenter of
tensions in Northeast Asia. The Korean Peninsula is both a remnant
of the Cold War and a traditional focal point of conflict between
China and Japan. In addition, both North Korea and South Korea have
recently accelerated moves to break out of U.S-imposed constraints.
The North is pursuing a diplomatic offensive and the South is
seeking to limit its reliance on the U.S. military.

In Southeast Asia, Indonesia will continue to be the center of
attention as it struggles to maintaining unity and redefine its
role among its neighbors. Strategically, Indonesia attracts the
attention of China, Japan, and the United States as it lies astride
major Asian shipping lanes. As well, the separatist struggles in
Indonesia may well redefine relations among Southeast Asian nations
as they struggle with the concept of non-interference over the fear
of a separatist domino effect should Indonesia disintegrate.

For the rest of Asia, domestic affairs will be conditioned by the
growing influence of Japan and the increasing resistance by the
United States to Japanese influence and power. It will be a time
when there are opportunities for playing the two powers against one
another.

There will be times when lesser nations are trapped between them.
Indeed, it is our view that the next decade will be marked by
countries -- from South Korea to Singapore -- trying to calculate
their best interests between the opportunities of Asian economic,
political and military structures dominated by Japan and their
relations with the United States. It will not be a simple or easy
time for any of them.

(c) 1999, Stratfor, Inc.
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