For more than 20 years, it has been predicted there will be a power shift from the Atlantic to the Pacific. That shift has already happened, propelled by the rise of both China and India.

Any business wishing to take full advantage of the opportunities afforded by the region must understand the relationships between the various countries in Asia and how they have been shaped by history.

Regional misunderstandings can easily escalate because the region does not have any binding supranational entities like the EU or NATO to defuse tense situations. Instead, the Asia-Pacific relies on a number of less formal regional arrangements, such as ASEAN, that promote looser regional cooperation.

More often than not, the region tends to still function as a group of disparate countries with shifting alliances, coloured by histories that run deep.

September 3rd marked the 70th anniversary of the end of WWII in Asia and looking at how the various countries of the region commemorated the occasion offers a sense as to how deep these issues run.

China showcased its military prowess in a massive parade in Beijing overseen by President Xi Jinping celebrating its defeat of Japan in the war, which many interpreted as an attempt to stoke anti-Japanese sentiment.

Thisparadewas less to commemorate the end of WWII and more of a coming out party for China’s military, sending the message that China was strong again and ready to defend its interests in the region.

A few weeks earlier, Japanese PM Shinzo Abe went on Japanese television in what has become an annual ritual to offer remorse for the atrocities committed by Japan in WWII. However, in a move that raised more than a few eyebrows across the region, he did not offer a new apology of his own.

Such a move was interpreted as “insincere” and “left much to be desired” in China and South Korea, former WWII enemies.[1] However, you can also view Abe’s statement as his attempt to show contrition for past atrocities balanced against the desire to move forward.

Any discussion of this anniversary would be incomplete without mentioning South Korea, which suffered when Japan abducted tens of thousands of its women as sex slaves for its soldiers. PM Abe made mention of these women, but the government has not apologised since 1993 and the issue remains a sticking point in the complicated South Korean – Japanese relationship.[2]

The historical baggage that each of these three powers in East Asia carries makes it difficult to even begin engaging on the more substantive issues affecting their relationships.

INDIA – A CATALYST FOR COOPERATION?

India often gets short shrift when mentioned with China in the same sentence, but it is too big to ignore and merits being more present when discussing Asia.

While the Indian economy is approximately the size of Japan’s, the country still has the world’s largest number of poor people with more than 840 million living on less than US$2.00 a day.[3]

It’s expected to be larger than the U.S. economy within three decades and will have the world’s largest population by 2050.[4]

For all its potential, India is not yet playing a commensurate role in terms of shaping the region’s geopolitical framework.

What is clear is that India is taking steps to build its military capabilities in the face of greater regional uncertainty, of which China is a part. India is already the world’s largest weapons importer and is expected to spend US$100 billion of the next decade to modernise its military.[5]

Complicating matters is that China and India are becoming economically intertwined. India’s trade with China was only US$2 billion from 2000-2001 growing to US$65.86 billion in 2013-2014 and some predicting it could be near US$100 billion this year.[6]

It’s a somewhat schizophrenic situation for the Indian government as it tries to navigate the tension between needing China’s trade and investment dollars while also being concerned about China’s military build-up.

Perhaps instead of using the term “Asia-Pacific”, there should be a shift to thinking about the region as the “Indo-Pacific”. The Indo-Pacific is meant to describe the region connecting the Indian and Pacific Oceans through Southeast Asia.[7]

Such a description frames the region in a different way. It brings India more firmly into the security equation which could be a catalyst for greater cooperation throughout the region.

Bringing India into discussions about a new regional security framework adds a counterweight to China and the U.S. at the other end of the region. This could serve to create more space at the table effectively giving more countries in the region a voice in crafting the region’s future security framework.

THE U.S. AND CHINA RELATIONSHIP

Much of what is going on in the region revolves around the U.S. – China relationship.

A narrative has perpetuated whereby China’s gain or show of might is America’s loss or decline and vice versa. This narrative obscures the complexities and nuances of theU.S. – China relationship, particularly as it appears both sides want the same thing.

President Xi gave a speech in Beijing in April 2014 where he called for a new regional security architecture that is “open, transparent and equal”.[8]

U.S. Secretary of Defence Ashton Carter speaking at the Shangri-La Dialogue in Singapore a year later in May 2015 said that Asia-Pacific’s security architecture must be “inclusive, open, and transparent”.[9]

While Xi calls for an “equal” relationship, Carter wants an “inclusive” environment.

Words matter a lot in the Asia-Pacific and the hard part is figuring out how to move both sides closer to speaking the same language without either side feeling they are giving something up without receiving something equal in return.

There is no ready answer. The first step is moving away from the zero-sum narrative that has dominated U.S. – China relations and coming up with a new way to engage that is less competitive and more constructive.

The good news is that China intrinsically understands that it needs the stability the U.S. presence in the region provides to continue rising. In turn, the U.S. needs China to step up and help the region’s institutions evolve and become stronger.

BUILDING THE REGION’S SECURITY ARCHITECTURE FOR THE FUTURE

The opportunity exists to start building a more robust regional security architecture for the future. Instituting something region-wide more akin to APEC or the G-20 meetings would be a first step.

But any attempts to institute a more stable security framework have been pushed aside by the arms race heating up throughout the region.

Most countries are investing in building up their air and sea capabilities. Military spending in ASEAN more than doubled from 2000 to 2013 from US$15.7 billion to US$34.9 billion.[10]

Japan is looking to purchase an advanced Aegis radar-equipped destroyer, 17 surveillance helicopters, three advanced Golden Hawk drones, and six more F-35 fighters from Lockheed.[11]

India is also in negotiations to acquire a number of Fifth-Generation Fighter Aircrafts from Russia and Medium Multi-Role Combat Aircraft from Dassault of France.[12]

China is leading the regional arms race spending nearly US$130 billion in 2014 with a 10.1% increase planned for this year. Much of this money is going into high-tech equipment including submarines and stealth jets, as well as naval forces including an aircraft carrier.[13]

Suffice to say that there is an arms race in full force in the region and this means the chances of creating a forum where military leaders can discuss how to manage this build-up are less likely given the lack of trust among these nations.

Yet, the irony is that it’s of the utmost importance to create such a forum so that this arms race can be managed to prevent a full-blown crisis from occurring.