Heizo Takenaka: Transition takes years but Asia should soar on tailwind

Judy Lin, DIGITIMES Asia, Taipei 0


The world finds itself in a period of profound transition, where global events are reshaping the geopolitical landscape and since it will take at least a decade to evolve, people should be prepared and take advantage of the Fourth Industrial Revolution to turn crisis into opportunities, said Heizo Takenaka, a former Japan cabinet official and currently Professor Emeritus at Keio University in Tokyo.

Takenaka was invited to give a keynote speech on the topic of East Asian Dynamics on October 25 at the 30th-anniversary event of venture capital firm WI Harper Group in Taipei. He compared recent incidents with historical events and reminded the audience that the world is experiencing another "system transition", which can take years to settle.

He pointed out that Asia is playing a critical role in addressing the economic, environmental, and security challenges the world is facing.

"While there are headwinds in the global economy, there are also tailwinds, particularly in Asia," said Takenaka. With a high level of education and a significant portion of the world's population and trade, Asia, including countries like South Korea, Taiwan, and Japan, as well as neighboring ASEAN countries that have a younger population and deepening their regional integration, are well-positioned to play a crucial role in the transformation.

"We must devise unconditional globalization in the past to achieve economic security and economic growth," said Takenaka. "We need to take full advantage of the opportunity of the Fourth Industrial Revolution to develop our economy."

By "Fourth Industrial Revolution," Takenaka was referring to artificial intelligence (AI), Big Data, and generative AI, in which semiconductors play an important role. Japan, which saw its share in the global semiconductor market decline from more than 80% in the 1980s to less than 10%, is regaining ground by cooperating with Taiwanese companies such as Taiwan Semiconductor Manufacturing Co. (TSMC), United Microelectronics Corp (UMC), Powerchip Semiconductor Manufacturing Corp (PSMC), etc.

Balancing growth and security

However, the wars in Eastern Europe and the Middle East are adding a further constraint on the supply chain, which is already facing tremendous pressure trying to achieve carbon neutrality by 2050 to protect the environment from climate change. "New technologies are expected to overcome energy constraints and contribute to solving global environmental problems," Takenaka said.

One of the key challenges in this changing landscape is reevaluating global supply chains. The trend towards regionalization, which has been the norm for some time, is undergoing a shift. It's becoming crucial to act with a global perspective in mind.

"However, balancing economic development, growth, and security is no easy feat," Takenaka said, while decoupling is not advisable, de-risking should be considered in this new world order.

As the recent Russia-Ukraine conflict and attacks by Palestinian Hamas on Israel have demonstrated, the global security environment is undergoing a significant transformation from what is often referred to as the post-Cold War era. However, the 70-year peace era rendered multiple folds of expansion in global prosperity came to a halt as mechanisms such as the UN and World Trade Organization no longer function well. "The United States and China are at the center of a conflict that transcends beyond politics; it's a struggle between differing ideologies and power dynamics, and it's becoming more acute. Japan, Taiwan, and South Korea are necessary to ensure regional stability while upholding values like freedom, democracy, and rule of law," said Takenaka.

System transition often coincides with technological transformation

Takenaka pointed out, looking back at history, the world has experienced significant systemic transitions before. The creation of the United Nations, the end of the Cold War, and the advent of globalization all marked shifts in global systems. These transitions took time, often a decade or more, to settle into new orders.

Another critical lesson is that these transitions often coincide with technological transformations. For example, the Internet emerged when the Cold War ended. The Fourth Industrial Revolution, characterized by rapid advancements in technology, is reshaping the world again. Adapting to these technological changes will determine a nation's and a company's competitiveness.

Demographic changes, like declining birth rates and aging populations in Asian countries, necessitate incorporating the Fourth Industrial Revolution to revitalize economies. But a short-term concern is the slowing of the Chinese economy. While the IMF expects a 5% growth rate for China in 2023, experts caution that it might be lower due to issues in the real estate market. Similar challenges were faced by Japan in the 1990s, warned Takenaka, reminiscent of the lost decades of Japan. Yet, the cure lies in pursuing a smart, sustainable, and inclusive path, said Takenaka.

In conclusion, Takenaka emphasized that the world is in the midst of a transition, one that will bring about significant changes over the next several years. While challenges exist, opportunities are also abundant, particularly in Asia. With the right strategies and a focus on adaptability and innovation, countries in the region can navigate this transitional period successfully.