It's Not The Asian Century.(Global Investor)

Byline: Ruchir Sharma; Sharma is head of co-head of global emerging markets for Morgan Stanley Investment Management.

In economic and financial circles, the mere mention of Asia these days typically conjures up images of booming growth, surging consumer spending, rapidly modernizing cities and buzzing entrepreneurial energy. However, the reality is that beyond the sensational growth stories of China and India, many other parts of the continent are struggling to regain lost glory and are under-performing their global peers. The most obvious case of disappointment is Japan. While it's popular to associate China's rise with a decline in U.S. economic power, America's share in the global economy has remained stable this decade at just under 30 percent. Japan's share, on the other hand, has fallen to less than 10 percent from more than 15 percent a decade ago. In statistical terms, China is barely making up for Japan's decline in the growth league tables, with Japanese growth averaging a measly 1 percent this decade compared with the global average of 3.5 percent over the same period. The fundamental reasons for the Japanese decline are all too familiar -- poor demographics, stagnant wages, anemic consumer spending and dismal policy responses (compounded by a closed corporate culture and banking system).

But while investors are getting increasingly accustomed to the notion of a secular decline in Japan's economic might, it is the relative underperformance of Asia's many developing countries that's truly surprising them. Outside of China, growth in East Asia has averaged 5 percent over the past three years, which is well below the global emerging-market average of 6.5 percent and a distant cry from the 8 to 9 percent growth rates that were commonplace in many of these countries before the Asian financial crisis in 1997-98. From South Korea to Thailand, domestic demand in much of the region has been rather moribund during the current global expansion.

Popular talk revolves around how Asia is decoupling from the United States in economic terms. But the "Asia is coming into its own" construct is undermined by the lack of significant domestic demand drivers in the erstwhile East Asian tigers. To be sure, the share of exports headed to the United States from these economies has been reduced in recent years, but only to be redirected to China, leaving them as dependent as ever on export-led growth.

Following the Asian financial crisis, many of the countries in the region focused on fortifying themselves against any external shock ...