MetaScan 4 – The Future of Asia: Implications for Canada

Policy Horizons | Horizons de politiques December 1, 2015

Executive Summary

Over the next 10–15 years, the world will experience two influential sources of change: the rise of Asia and the accelerating advancement of digital technologies.This study uses strategic foresight methods to examine the potential surprises and disruptions that could result as these two forces collide and interact to shape the future of Asia and the world. The study does not predict a particular future, but explores a range of plausible futures to critically assess current assumptions about Asia and better understand the policy challenges and opportunities that could arise for Canada.

Asia’s rise

With a growing economy,expanding middle-class and rising geopolitical clout, Asia is expected to play an increasingly influential role on the world stage. With a projected population of five billion people by 2030¹, Asia could eventually dominate the international economic and geopolitical order. Global trade patterns are already shifting to Asia as India and China exert more global economic and political influence. Asia’s most powerful leaders are proving to be strategically adept at driving the international policy agenda and capable of challenging the primacy of western based institutions. Notwithstanding Asia’s diversity and complexity, emergent changes at the scale of the continent are transforming both Asia and the world. This study moves beyond the usual country level analysis to explore these broader system level changes, focusing on developments in the economic, social, energy and geostrategic systems in Asia and interactions among them.

The digital revolution

In parallel to Asia’s rise, the accelerating development and application of technologies including artificial intelligence (AI), data analytics, sensors, robotics,virtual telepresence and the Internet of Things are starting to transform economies and societies everywhere. By 2030, almost all of the world’s population will have access to low-cost Internet connected smart devices linking them to global society, consumer markets, education, and work opportunities. New business models will emerge and expand, whole industries may experience more rapid cycles of rise and decline, and governments may find their policies outdated for the economic, political and security realities of the digital world.

Asia meets the digital revolution

The convergence of Asia’s rise and the digital revolution has the potential to trigger unexpected impacts with global repercussions. The two forces may amplify each other as Asia’s need for infrastructure creates markets of a scale that drives rapid technological innovation and brings down costs, while massive government investments in digital connectivity, renewable energy and skills position many Asian countries for success in the new economy. At the same time, rapid changes in the economy, employment,values and security brought on by the digital revolution could also breed instability, particularly in the context of high citizen expectations and fragile governance regimes. Just as Europe and the United States (U.S.) dominated the industrial revolution, a number of Asian countries are planning to ride the wave of the digital revolution to greater prosperity and global influence — and many have the potential to do so. However,Asia’s rise in the digital era may not replicate the American hegemony of the industrial era, as the powers of the nation-state are challenged by a more interconnected digital world. Multiple future scenarios are plausible, and in the context of rising uncertainty, deserve to be considered.

Using foresight to explore implications for Canada

Since Canada’s future could increasingly be shaped by Asia, exploring some of the unexpected policy challenges and opportunities that may lie ahead is a prudent exercise. This study used the Horizons Foresight Method (described in Appendix 1) and takes the reader through a thought process that is intended to stimulate his or her own thinking about how changes in Asia could reshape Canada’s economy and society. It begins by listing some commonly held assumptions that consciously or unconsciously shape the policy designer’s thinking about the expected future for Asia. The study then identifies a number of insights about potentially disruptive changes that could alter Asia’s expected future and uses a range of future scenarios to explore how these disruptive changes could interact to create surprises. Next,it describes some of the key policy challenges and opportunities that Canada may confront as a result of these potential changes. Finally, it tests the initial commonly held assumptions against the findings of the study in order to develop more robust assumptions for use in policy,planning and research.

Key findings

While each reader will reach their own conclusions, the study identifies some key areas of change in Asia that Canada could anticipate and prepare for. These are not based on what is most likely, but rather on what is sufficiently plausible and disruptive to be worthy of the attention of policy makers. Highlights include:

Asia’s digital leap: Due to Asia’s infrastructure deficit, it is leap-frogging the West and building modern, fast, cheap and smart digital infrastructure. This digital connectivity may equip a large portion of Asia’s population to enter the global workforce and consumer market in ways that could accelerate the global transition to a digital economy. New technologies, job unbundling and radically evolving business models may be embraced and scaled up in Asia leading to downward pressure on incomes and prices, particularly in the West. Canada could face an extended period of economic and social disruption while governments, firms and individuals learn how to adapt to the new realities of a global digital economy.
Asia moves into virtual work and global digital services: As manufacturing jobs are lost to automation, Asia may use its low-wage advantage to move into global digital services for both high- and low-skilled work. Canadians may find competition coming from unexpected places, but also emerging opportunities to work in new ways.
Asia’s declining demand for oil: A variety of economic, technological, public health and policy decisions could shift Asia away from oil for transportation leading to lower than expected Asian demand for petroleum products and weaker global crude oil markets. As a relatively high cost oil producer, Canada may be challenged to compete against lower cost oil producers who are able to maintain supplies at lower prices to retain their market share.
Asian cooperation and declining western influence: Asia may develop regional institutions that facilitate deeper economic, diplomatic and security ties in the region. While consensus is more likely in economic areas, a more united Asian voice could reshape agenda-setting, norms and decision-making while reducing western influence in the region and internationally.
New Asian models: Asian societies are going through massive and rapid changes that will require extensive innovation in areas as diverse as consumer goods, health care, education and governance. Canada may be able to learn from Asia’s rapid advancement, adopting lower-cost or more effective strategies.

Next step — dialogue

This study is the product of a capacity building exercise that involved Horizons staff, 60 public servants and dialogues with 30 Asia experts.² The ideas are intended to encourage further dialogue and debate on core assumptions and emerging challenges and opportunities to help develop robust policies and strategies to address them. The study offers a new perspective by exploring a range of plausible futures beyond the expected future, and may assist Canada to prepare for the changes that lie ahead.

Exclusions

This study considered but did not develop detailed analysis on issues such as: demographics, aging, youth, religion, ethnic and border conflicts, climate and environmental issues, food and water security, and infrastructure, etc. These issues have been dealt with in depth by others.

Figure: FORCES OF CHANGE COLLIDE³

The Rise of Asia
Growing Share of GDP
Who’s in the club?: By 2030, India will join U.S. and China as the world’s three most important economies.
Growing Middle Class
Difficult to ignore: By 2030, Asia’s large population will be the most significant consumer market.
Demographic Window
Time to shine: Some of Asia’s most populous contries will benefit from a demographic window (when a country’s working age group is high, relative to dependents), offering potential for continued economic growth.
The Digital Revolution
Digital Economy
Digital Economics: Digital technologies, including artificial intelligence, robotics, 3D printing and the Internet of Things, are transforming manufacturing supply chains, service delivery and consumer behaviour.
Affordable Ultra-Smart Devices
Downward Pressure: Competition from open source alternatives is driving down the cost of digital devices. Lenovo’s A1900 smartphone will roll out in 2015 in India for as low as $42.
Ubiquitous Connectivity & Energy
Downtown to Backwater: Last-mile technologies and distributed energy solutions will provide Internet connections to even the most remote areas.

Summary of Insights and Policy Challenges and Opportunities

The following table summarizes the key changes (insights) that are shaping Asia and the potential policy
challenges and opportunities for Canada explored in this study.

Key Changes in Asia (Insights)	Policy Challenges & Opportunities for Canada
Asia’s new emerging consumer class and the rise of frugal innovation (links to policy challenge and opportunities #1)	1. Economic seachange
The emerging digital economy in Asia (links to policy challenge and opportunities #1, 2, 3 and 4)	2. Preparing for an increasing number of virtual workers
Ownership unbundling: the collaborative economy and open source (links to policy challenge and opportunities #2, 3 and 4)	3. Preparing for the rise of digital trade
The potential for social disruption (links to policy challenge and opportunities #8, 9 and 11)	4. Anticipating a world where traditional policy instruments are less effective
An Asian society in transition could alter global norms and values (links to policy challenge and opportunities #6 and 12)	5. Anticipating the declining demand for oil
Asia’s evolving governance models (links to policy challenge and opportunities #7 and 10)	6. Preparing for the (eventual) transition to a low carbon economy
Asia could drive innovation in 21st century social policy (links to policy challenge and opportunities #11)	7. Preparing for the rise of Asian institutions
The structure of energy demand is changing in Asia (links to policy challenge and opportunities #5)	8. Redesigning security policy around next generation threats
Asia is shifting from fossil fuels to renewable energy (links to policy challenge and opportunities #6)	9. Rethinking strategies for failed and fragile states
Asia’s institutional architecture could alter international relations (links to policy challenge and opportunities #7 and 12)	10. Adapting to adaptive authoritarianism
The sources of geopolitical conflict could evolve (links to policy challenge and opportunities #8 and 9)	11. Learning from and adapting to new Asian policy models
Asia’s digital dark side (links to policy challenge and opportunities #8)	12. Welcoming Asia’s growing confidence and expanding influence

Notes

¹ United Nations, Economic and Social Commission for Asia and the Pacific (ESCAP), “Population
Dynamics,” http://www.unescap.org/our-work/social-development(link is external).

² This study builds on an earlier foresight study that Horizons undertook in collaboration with the Strategy and Delivery Division in the Department of the Prime Minister and Cabinet of Australia in 2013 and< that resulted in a report that formed the basis of a policy discussion between Deputy Ministers and Secretaries at the Canada-Australia Public Policy Initiative (CAPPI) retreat that took place in Sydney in
January 2014.

³ References for each section of diagram as follows:

Growing Share of GDP
PWC. 2015. World in 2050: Will the shift in global economic power continue. http://www.pwc.com/gx/en/(link is external)
issues/the-economy/assets/world-in-2050-february-2015.pdf(link is external)

Growing Middle Class
Kharas, Homi. 2011. The Emerging Middle Class in Developing Countries.
Brookings Institution. http://siteresources.worldbank.org/EXTABCDE/(link is external)
Resources/7455676-1292528456380/7626791-1303141641402/7878676-1306699356046/Parallel-(link is external)
Sesssion-6-Homi-Kharas.pdf(link is external)

Demographic Window
Ørstrøm Møller, J. 2011. How Asia Can Shape the World. p. 331, Table 5-1 using data from United Nations’
World Population to 2300.

Digital Economy
Morelli, B. 2015. “The Internet of Things explodes.” HIS Technology. March 20.

PWC. “The Sharing Economy – sizing the revenue opportunity.” United Kingdom. http://www.pwc.co.uk/(link is external)
issues/megatrends/collisions/sharingeconomy/the-sharing-economy-sizing-the-revenue-opportunity.jhtml(link is external)

Number of Connected Devices
Morelli, Bill. 2015. The Internet of Things explodes. iHS.

Affordable Ultra-Smart Devices
The Economic Times. 2014. “Smartphone expansion cooling, prices dropping: Survey.” Dec 2. http://(link is external)
economictimes.indiatimes.com/magazines/panache/smartphone-expansion-cooling-prices-droppingsurvey/(link is external)
articleshow/45342025.cms(link is external)

http://demo.tizra.com/Kleiner_Perkins_Caufield_and_Byers_2014_Internet_Trends/73(link is external)

Ubiquitous Connectivity & Energy
Deloitte. 2014. Broadband: The lifeline of Digital India. http://www2.deloitte.com/content/dam/Deloitte/(link is external)
in/Documents/technology-media-telecommunications/in-tmt-broadband-noexp.pdf(link is external)

Edwards, Luke. 2015. “The internet space race is on: Google Loon vs. Facebook
drones vs. SpaceX satellites.” January 19. http://www.pocket-lint.com/(link is external)
news/131699-the-internet-space-race-is-on-google-loon-vs-facebook-drones-vs-spacex-satellites(link is external)

Leswing, Kif. 2014. “Microsoft wants to use white space broadband to connect rural
India to the Internet.” Gigaom. November 10. https://gigaom.com/2014/11/10/(link is external)
microsoft-wants-to-use-white-space-broadband-to-connect-rural-india-to-the-internet/