Asian Economic Trends and Their Security Implications

As the final product of a project dealing with the security implications of Asia's financial and economic turmoil, this report considers the sharp economic reversals suffered in the Asian region in 1997 and 1998 and the marked but widely varying evidence of significant recovery among the different countries of the region. The report then turns to the medium- and longer-term trends with respect to economic growth, military spending, and military investment in five countries in the greater Asian area: namely, Japan, China, India, South Korea, and Indonesia. The five countries were selected by agreement with the sponsors from a larger set addressed in RAND's previous analyses in 1989 and 1995 of long-term economic and military trends. India, a South Asian country, was included along with the four principal East Asian countries in light of its size and enhanced military prominence. Following the analysis of these longer-term economic and military trends, the report considers the security implications of these trends with respect to alternative security environments in the region, changes in the intraregional balance of military and economic power, and such other issues as prospects for multilateral security cooperation, support for forward-based U.S. forces in the region, and alliance burden sharing. While acknowledging the major uncertainties inherent in these as well as other forecasts, the authors use the gross domestic products (GDPs) and accumulated stocks of military capital as rough proxies for the respective economic and political power of each of the five countries, thereby drawing several inferences from the estimates including the following: Japan's relative economic and military power will diminish appreciably in the region over the 2000-2015 period. China's economic and military power will diminish somewhat relative to those of India. However, the absolute gap between China's GDP and military capital, and those of the other three countries will grow substantially.