Agami Briefs are AAA’s outlook reports. Agami (आगामी) which means upcoming in Hindi, are concise memos on important forthcoming events. Agamis aim to inform Members of what to keep an eye out for and when.
Earlier in the year AAA gave a rundown of our top geopolitical risks for Asia in 2020. In light of the unprecedented challenges brought on by coronavirus, we are revisiting these picks with new views and opinions on the issues to watch. We wish all our Members good health during these difficult times.
Needless to say, forecasts of the important issues to watch this year have been eclipsed as the coronavirus swept across the world. Some issues, however, remain salient. AAA’s own forecasting of the top geopolitical risks in Asia this year which included developments in the South China Sea, Hong Kong’s tenacious protest movement, and the U.S. presidential elections in November, have not lost relevance in spite of the world’s focus on coronavirus. Rather, the pandemic has added a new layer of complexity to these issues that will need to be accounted for as we move into the second half of the year.
Tensions in the South China Sea
There have already been movements in the South China Sea that have caused concern and irritation for claimant states who are all dealing with health crises at home and who cannot effectively focus state resources to deal with another major crisis. So much of foreign policy depends on seizing the narrative in the public international – or at least regional – space, particularly on issues that countries do not have a competitive advantage on.
Being crowded out of that space at this time means that diplomats can no longer rely on megaphone diplomacy as a tactic but must either take the initiative or act in association with other like-minded parties. That has become increasingly difficult to achieve and renders even the slightest of moves in the South China Sea overtly hostile and egregious.
Hong Kong Protests
Hong Kong’s protest movement has seen a quick return ever since the easing of movement restrictions in the city. As the movement evolves into a broadchurch incorporating moderate liberal constituencies seeking a return to a more strict definition of one country two systems and groups actively opposed to China, there is both a risk that the movement could turn endemic and therefore unresolvable or too diverse in its objectives that it will inevitably invite more extremist factions to break away.
There are signs that the latter situation has been realised to a greater degree but it is still far too early to make a certain assessment. Nevertheless it seems apparent that the SAR government’s successful management of the pandemic has done little to improve trust with the people. If the point has not been made more clear – popular grievances in Hong Kong are no longer rooted in performance metrics and will be increasingly defined by the politics of ideology and identity.
US Presidential Elections
The U.S. presidential election will remain a defining event for Asia this year not merely because of the impact that U.S. relations has on Asia but because the result will either confirm or reject the importance of anti-China political positions in the U.S. mainstay for years, if not decades, to come.
It is no longer a surprise to anyone that a large cross-party bloc of the U.S. establishment has grown fiercely oppositional to China’s moves in many areas. It continues to be of interest how the flavour of that opposition develops. In the maximalist view, the average American will begin to think of China as a threat to world peace and this will have serious implications on how the strategic rivalry between the U.S. and China will play out in the next 5 years. In the minimalist view, the average American will perceive China as a party to be treated with caution and suspicion, but still by and large a competitor rather than a threat. How the coronavirus is understood in American society will play a critical role in the shifting of national perspectives towards China and will surely be a subject of considerable importance when election season begins later this year.
Agami Briefs are AAA’s outlook reports. Agami (आगामी) which means upcoming in Hindi, are concise memos on important forthcoming events. Agamis aim to inform Members of what to keep an eye out for and when. In this first brief, we look at the key elections happening in Asia for 2020.
SCS disputes have gone on for at least 5 decades since China and South Vietnam fought a brief battle over the Paracel Islands in 1974, resulting in PRC control over the islands till this day. Numerous clashes between the navies and fishermen of China and other claimant states in Southeast and East Asia over the succeeding years have been a repeated source of resentment for the latter.
With China’s rise as a middle-income country and regional military power, these clashes have now seen a greater resolve from Beijing to assert its claims as an increasingly “core” issue.
Since
Beijing’s rejection of a 2016 Hague ruling voiding China’s claims in the SCS
based on its nine-dash line, Beijing has sought to enforce its claims through
physical means. This strategy has weakened Beijing’s already halting efforts to
establish a Code of Conduct (CoC) in the SCS and has also revealed the lack of
options that other claimant states have to effect their sovereign claims to portions
of the SCS.
This year, there is a possibility that Malaysia may file a UNCLOS legal suit to clarify the limits of its continental shelf, and Indonesia could follow a similar path in response to what it says are recent Chinese incursions into its exclusive economic zone north of the Natunas Islands.
As this year’s ASEAN chair, Vietnam is also likely to prioritize ASEAN unity against Chinese encroachments in the SCS and will not be satisfied with a watered down CoC.
If these developments take place, it is not implausible that Beijing will double down and seek to assert its claims over the SCS in a more forceful manner as they have done before. When that occurs, ASEAN will face its greatest test in recent years.
Hong Kong’s protest movement is seeing a transformation into a permanent political movement with its mass weekly demonstrations seeing dwindling attendance since the new year.
A large number of district councils are now filled with pro-democracy individuals who are supportive of the protest movement. These district councils are expected to expand their mandate from a narrow administration of their constituencies to wider political interests, and should be seen as new staging grounds for future mass mobilisation.
Although Chief Executive Carrie Lam has managed to retain Beijing’s confidence, she will be reporting to a new Director at the Liaison Office of the Central People’s Government of Hong Kong, Luo Huining. What steps he takes to assert Beijing’s authority or to manage the relationships between the now energized pro-democracy bloc in Hong Kong remain to be seen. But what is certain is that he will be eager to avoid any new protests from escalating as they did in 2019.
If Lam does not act to solve some of Hong Kong’s major woes in housing affordability and economic inequality, or makes a misstep in dealing with the outstanding legal cases involving protesters, we could see mass protests break out once more. If such protests last as long as they did in 2019, investors that held out last year may well pack up for good.
Very little can be predicted about the outcome of the US Presidential Election in November. If Donald Trump achieves reelection it will spell 4 more years of continued US withdrawal from Asia. By then, much of Asia would have recalibrated their strategic bets making any future US reengagement beyond 2024 an especially difficult task.
Even if the Democratic nominee triumphs, there is no guarantee that US presence in Asia will be strengthened nor that its Asian partners will throw caution to the wind and welcome the Americans back unconditionally.
The rise of nationalist movements in Japan and Southeast Asia that began well before Trump’s inauguration already presents a hurdle to building trust with any new US administration, though what other choices remain for countries facing a relentless China is anyone’s guess.
It is not clear how Trump or a new US president will deal with the on-and-off issue of North Korea. As it has been for decades, the North has never been a serious existential threat against the US – even while it claims to be so. The real impacts have always been viscerally felt in South Korea and Japan, and how the US president acts towards its East Asian allies – whether reassuring or extracting – will be a better marker of how the wider North Korean issue will be dealt with after the 2020 elections.
Callsfor the “Muslim world” to put greater pressure on China for its treatment of its minority Muslim population in Xinjiang are destined to fail. The economic reasons for the reluctance of many Muslim-majority states are obvious but they are not even the prime reasons for the perceived indifference.
China’s Muslims represent a vastly different religious culture from Muslims in other parts of Asia – let alone to those in the Middle East – making it difficult for Uyghurs and other minority ethnic groups to create the kind of communal understanding required for Muslims elsewhere to regard Xinjiang as a religious conflict instead of a domestic issue.
Ethnic conflict involving Muslims in other parts of Asia further complicate matters. In Myanmar, India, the Southern Philippines, Southern Thailand, and elsewhere, Muslim minorities are in conflict either with their governments or with majority ethnic groups; which constrains Asia’s Muslims from building a broad consensus against any one particular party.
Neither does a state capable of providing leadership in the region exist in Asia, nor have any expressed the ambition to do so. Saudi Arabia is a considerable power in the Middle East precisely because of its immense wealth and its willingness to exploit it to indenture its neighbours. But the largest and most resourced Muslim nation in Asia, Indonesia, does not share similar inclinations towards its fellow Muslim-majority states – Bangladesh, Brunei, Malaysia, and Pakistan.
Neither has Saudi Arabia, which no doubt exercises clout within the Sunni Muslim world, shown that it is prepared to take on China about its Uyghur issue. The Saudis are well aware that what happens in Xinjiang ultimately does not rise to an existential problem worth sacrificing the closerelationship that the Kingdom shares with China.
China’s ties with other Muslim-majority states in Central Asia through the Shanghai Cooperation Organisation have also made it far too costly for these states (namely Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Pakistan, and the other observer states and dialogue partners) to express disagreement with China’s domestic activities (nor for that matter are those states in any high moral position to do so).
These cultural and geopolitical dynamics of Muslim identity politics in Asia have been the primary reasons why we expectations of a cross-national Muslim bloc to emerge are misguided – in spite of what unsettling information, videos, photographs, interviews, or satellite imagery are published about the state of Xinjiang’s Muslim population.
The history of Chinese state action against its Uyghur community is well known, but it has only been in recent years that the international scrutiny over its practices has compelled Chinese officials to manage public sentiment more assertively.
Chinese officials have not denied that large numbers of ethnic minorities in Xinjiang – estimates place it at upwards of 1 million – have been placed in mass detention facilities. But they have accepted that whatever reputational losses they suffer from the repression of an ethnic minority are suffered in places – such as the U.S. and Western Europe – which already do not hold China in high esteem to start with.
They have decided that whatever harm is done to their ambitions to be seen as a moderate, credible, and responsible actor on the world stage have been sustained in countries that are unlikely to accept China as a co-equal power anyway; so what harm is done is easily reckoned and predictable.
It is the lack of new challenges to the situation in Xinjiang that suggests that while muchinternationalpublicity has been generated since 2017, there is no good reason to believe that the mass detention of Uyghurs will stop anytime soon.
So far China has been able to respond to existing criticism by making various perfunctory claims that no one has been detained, or that those held in mass internment facilities have been kept either for a short time or for educational or vocational reasons, or that they have voluntarily admitted, or have already “graduated.”
It is true that these changing narratives are a response to heightened public interest, but much of that interest has escalated in tandem with ongoing U.S.-China strategic competition rather than as a consequence to opposition from Muslim-majority states which have not and cannot consolidate their positions in any meaningful way.
Any objections against China’s actions now might also place Asia’s Muslims in an awkward position of taking common sides with the U.S., which has historically been regarded by Muslims with greater suspicion and mistrust than the Chinese are viewed in Asia.
These are not immutable perceptions and over a long time it is possible that Muslim-majority states in Asia may decide to take a collective and forceful stand against China. But for now Asia’s Muslims can do little more than express gentle dissent in muted and symbolic support for their compatriots in China’s largest province.
By Daud Hassan M.
Editor’s note: The author uses the term “Muslim” to refer to all ethnic groups in Xinjiang, China who subscribe to the Islamic faith. AAA knows that in addition to Uyghurs, there are other Muslim minority ethnic groups such as the Kazakhs and the Hui who live in Xinjiang.
Agami Briefs are AAA’s outlook reports. Agami (आगामी) which means upcoming in Hindi, are concise memos on important forthcoming events. Agamis aim to inform Members of what to keep an eye out for and when. In this first brief, we look at the key elections happening in Asia for 2020.
Tsai Ing-wen, Presidenta de República de China (Taiwan) y Presidente Salvador Sánchez Cerén.
January – General elections in Taiwan
Taiwan voters go to the polls on 11 January 2020 to choose the President, Vice-President, and all members of the Legislative Yuan. President Tsai Ing-wen will be running for reelection despite resigning as chair of her party in 2019.
If she wins, it will be her last term as president. While Han Kuo-yu of the KMT remains her main rival, opinion polling has given Tsai a strong lead since mid-2019.
As voters continue to watch for China’s response to the crisis in Hong Kong, what stance candidates take on the handling of cross-straits ties will be a decisive factor in these elections.
President Moon Jae-in‘s Democrat Party faces a tough fight against Liberty Korea in 2020. Polls have shown waning support for the Democrat Party in recent months as a result of corruption scandals involving the justice ministry.
Moon’s pacific approach towards North Korea has also not shown much reliable progress. As the North’s December deadline for US concessions is likely to pass without any agreement, tensions may well resume, placing Moon’s Sunshine policy in the crosshairs.
September – Local and regional elections in Indonesia
Local and regional elections in Indonesia in Q3 will be the first elections since President Joko Widodo begun his new term in office.
After Jokowi’s reelection in April 2019, he has moved quickly to try and boost growth in Southeast Asia’s largest economy. The grand plan involves the liberalising of investment and labour laws with a view to cutting red tape and permitting a greater share of foreign ownership in previously restrictive industries.
Whether Jokowi is successful in improving the economic picture will play only a marginal role in local and regional elections, which have historically been determined by candidates’ personal appeal to a constituency rather than to their political affiliations. Nevertheless how the elections proceed will test Jokowi’s uneasy partnership with his rival Prabowo Subianto (now Defence Minister).
Singapore’s 18th general elections are legally required to be held by April 2021, but it is highly likely that they will take place in 2020 and very likely after the government’s Budget speech in February 2020.
While the relatively poor showing of the Singapore economy in 2019 will impact voter confidence, the uncertainty from the US-China trade war may sway many to go with the safe choice – as it did in 2001 after 9/11. However, a possible opposition coalition could also upend electoral dynamics drastically, and how the ruling party responds will be critical in determining its fate or fortune.
The economic benefits of free trade is the prime mover for the multilateral trade liberalisation process which nearly every state in the world is party to. Compare this with the level of regional trade – free trade in a regional bloc. Many regional states enter into numerous bilateral and plurilateral trade agreements ranging from just one to more than twenty.
The reasons for this asymmetry are the result of the pressures of domestic and international life. For instance, states have to balance domestic forces that come into play which regularly threaten the public interest for the benefit of special interests. Certain industries are immensely profitable when globally-oriented, and these industries will tend to pressure the state to embrace regionalism.
More importantly the stage of domestic economic development is a decisive factor in who to partner in a trade agreement. Many regional trade agreements (RTAs) are formed by members in similar economic positions or with complementary economic agendas.
Domestic pressures to form RTAs are confounded by international trends. The economist Richard Baldwin argues that a domino theory of regionalism explains a non-member state’s preference to join in a RTA whose members are buyers of its exports. A state’s export industry suffers a disadvantage if it does not join in such a RTA.
The domino theory explains the enlarging of large trading blocs like the Canada-US Free Trade Agreement, now the North American Free Trade Agreement (NAFTA) and the European Free Trade Association (EFTA), now part of the European Union (EU) and predicts a further expansion of other free trade agreements like the RCEP and CPTPP.
Problems with the WTO
The role of the WTO has also been criticised for allowing states to ‘get away’ with regional deals. Much of the criticism is directed at Article XXIV of the WTO constitution which amounts to a departure from the precept of non-discrimination and its associated Most Favoured Nation (MFN) principle.
The article, which grants exemptions for ‘customs unions and free-trade areas’ from the MFN rule is notably weak in enforcing the criteria spelled out for such exemptions. These problems are due to the fact that the requirements of Article XXIV that were intended to facilitate bona fide free trade have been largely ignored.
These include the inordinate decade-long duration of negotiations allowed under the auspices of any free trade deal and a vague requirement for the liberalisation on ‘substantially all’ trade between the FTA members.
Furthermore, FTAs entered into by developing countries are generally exempted from applying MFN tariffs through the enabling clause which has the effect of allowing developing countries to escape the MFN regime scot-free. States that wish to enter into an RTA need to report to the WTO for assessment of eligibility to Article XXIV, but evidence has shown that over the past two decades the special use of Article XXIV has instead transformed into the very common and abusive employment of its provisions.
The question then is whether or not the reasons for regionalism apply equally to the multilateral efforts of the WTO. The answers to this question are broadly divided into what are called the ‘stumbling block’ and ‘building block’ views on regional trade.
Are RTAs stumbling or building blocks of the WTO?
RTAs have been argued to contribute to a more rules-based system as codification, enforcement and compliance are generally more aggressive than in those found at the WTO.
The clearest example of rules-based governance is exhibited in Europe where regional integration has given way to a predominance over national trade policy. Even if such a system is not possible in every part of the world, RTAs tend to exert more pressure on member states to establish predictable trade behaviour since it is likely that a high degree of trust exists among member states in regional settings.
More extensive liberalisation of other barriers to trade, such as in non-tariff, regulatory and structural barriers have also generally been more common when we compare RTAs to multilateral agreements.
The reason for this can also be attributed to trust and also because it has been notoriously difficult to accommodate the needs of every member in a multilateral agreement. These policies of liberalisation have, according to the WTO, ‘lock in’ effects on the MTL process in that they cause trade rounds to proceed on a more liberalised footing than they would otherwise.
However, none of the reasons for the ‘building block’ case given address the central question on whether they positively affect the MTL process. Creation of a rules-based trading regime and intra-regional liberalisation can bring benefits to a regional bloc and still be coincident with the impediment of the MTL process especially if they act to substitute the larger process in the long run.
Recall that the United States began a reversion of their multilateral approach after the Tokyo Round. The US-Canada FTA marked the start of a significant shift in the US position towards regionalism which has not reverted.
The economist Jagdish Bhagwati argues that the US shift diverted political will away from the multilateral framework and lead to ‘trade fatigue’ across the globe as states began to focus their energies on regional and bilateral projects.
Progress during the Uruguay Round was sluggish in part because regional efforts to create NAFTA and the European market were elevated in precedence and in part because large regional blocs could be played as trump cards during trade rounds.
The US shift also created a void in the multilateral process, leaving the WTO (then-GATT) member states without hegemonic leadership to prevent free riding. The result was that the WTO’s agenda no longer had powerful support and states were not as keen to go along a path of liberalisation unhedged against the high likelihood of defaulting states.
But the US shift was not accidental even though Europe and Japan had by then become sizeable trading forces. The US pursuit for market access through bilateral and regional agreements was an attempt to stop its rising trade deficit with the rest of the world, a demonstration of how international aspirations are often supplanted by domestic concerns.
Now that two of the largest trading nations, China and the US, have given preference to regionalism and bilateralism respectively, the search for consensus in the multilateral framework is even more unlikely, given that both are also currently in the thick of a trade war.
Discriminatory trade has had a long history of winners and losers. From as early as the 17th century, Portuguese traders stationed in Macau received handsome profits by acting as middlemen during a Chinese trade embargo on Japan following Hideyoshi’s invasions of Korea in the late 16th century. Trade distortion as a result of discriminatory trade is bound to benefit some and hurt others in all its multifarious forms.
The late Jacob Viner argued that a customs union (CU) is substantially better for the world economy if the combined effect of increased trade within the bloc (trade creation) exceeds the diversion of imports away from efficient non-members to less efficient members owing to a relative increase in tariffs outside the bloc after liberalisation (trade diversion).
Trade diversion transpires when members in a CU are not low-cost producers and if there is high import demand for those goods in member states. Likewise, the effect of trade diversion is muted if the share of trade among member states was large prior to the establishment of the CU.
This was the case in Western Europe before the European Free Trade Association, and as a consequence, exacted marginal costs on countries outside the CU.
Another instance of the asymmetric effects of trade creation and trade diversion concerns China’s trade engagement with ASEAN. China has not entered into a customs union with ASEAN, but its FTA with ASEAN (ACFTA) exhibits trade creation just like any other RTA. This effect of trade creation within the ACFTA is likely to benefit Chinese exporters to a much larger degree than regionalism with Taiwan and Hong Kong.
Trade creation effects of RTAs and other forms of discriminatory trade regularly assigns winners to states with high levels of pre-existing trade. However, where there is low pre-existing trade and if the agreement involved a large trading nation and a small trading nation (a hub-and-spoke arrangement), an FTA between the two is likely to damage the world economy because the large state pays a small economic price for political support while the small state – with little significance to the world economy – benefits disproportionately from free trade.
Hub-and-spoke arrangements do not have substantial diversionary effects but they throw light on another question – to what extent are states and blocs willing to levy costs on the world economy through trade diversion for the purposes of self-aggrandisement?
Terms of trade and beggar-my-neighbour effects
Discriminatory trade improves the terms of trade for the trade bloc because more exports can now exchange for tariffed imports, and carries with it an increase in the national total benefit from trade.
In addition, because larger trading blocs (like customs unions) have greater monopsony power, the optimum common external tariff (CET) is usually higher and in inverse relation to the price elasticity of import supply.
The tendency for trade blocs is hence two-fold: expand membership and raise tariffs on non-members in order to improve the welfare of its residents and its terms of trade with respect to the rest of the world.
Such a situation is, of course, undesirable if you so happen to find yourself part of the rest, and gives further support to Baldwin’s ‘domino theory’ and Krugman’s three trade blocs hypothesis.
The effects that perpetuate these costs on non-members are termed ‘beggar-my-neighbour’ effects, a reference to the all-or-nothing card game that young teenagers played for leisure. These effects have serious consequences for the MTL process since affected nations are expected to take retaliatory measures against new FTAs through protectionism or by expanding their own network of FTAs, possibly through regionalism.
Customs unions that are sensitive to the potential for trade wars caused by ‘beggar-my-neighbour’ effects should adjust CET levels so that trade with non-members remain at pre-bloc levels. This proposition is the grounds for some recommendations which have called for the awarding of concessions and ‘lump-sum transfers’ to sectors that lose out from the creation of the CU by sectors that win so as to increase welfare for both members and non-members of a CU.
Trade diversion after the formation of a trade bloc is not the only attendant outcome on the world economy. Nuno Limao has argued that MFN tariffs could have been much lower on US Preferential Trade Agreement (PTA) goods in the absence of those PTAs.
He suggests that US PTAs acted as stumbling blocks to its own MTL that the US was pursuing prior to the Uruguay Round. States like the US would have had better chances of even freer trade had they continued along the path of multilateralism. But in defence of US doctrine, it is possible, if not, probable that that path was already moot.
New economic issues surface when we consider the nature of a RTA, FTA or PTA. All of these agreements are never as liberal as they appear and occasionally accomplish less than a multilateral agreement. For example, not all economic sectors are liberalised in Japanese agreements with other states. Protectionism continues to be the rule of thumb for agriculture, a desperately uncompetitive sector in Japan.
Coupled with domestic pressures discussed in the first part of this paper, most governments will succumb to industrial lobbying and take conservative approaches to trade liberalisation. A reduction of tariffs on substantially all trade within a trade bloc is a reasonable hope only if we pretend that weak traditional sectors and structural unemployment are small problems with quick solutions.
It is for this reason that Bhagwati insists that regional agreements should only exist if they lead to common markets. Trade, investment, migration barriers and barriers to the movement of the factors of production are eliminated in a common market so that states do not regress to selective protectionism as a failsafe option whenever liberalisation is inconvenient for their purposes.
A common market might also prevent forms of trade distortion caused by transshipment as is the case when a PTA non-member exploits a member’s low tariff rate as a conduit for entering the trading area. PTAs try to avoid this situation by instituting rules of origin (RoO) to identify goods eligible under the PTA, but RoOs are extraordinarily difficult to implement because a single product might have parts and materials from a whole chain of manufacturers situated in different countries.
The fact is that no matter the degree of intra-regional liberalisation of trade, protectionism is a real tendency that is impossible to eliminate in full.
Regionalism’s impact on trade flows
The amount of trade diversion is small if RTAs are made by ‘natural trading blocs.’ According to Krugman, these natural blocs also happen to form the majority of trading agreements. Low transportation costs within natural trading blocs is a key advantage that encourages trade even before the formal establishment of the bloc.
Trade diversion is unlikely to surge since member countries will continue to capitalise on low transportation costs and a large volume of preexisting trade. Krugman concludes that for the most part, RTAs are benign for the world economy, but only if (a large ‘if’) they do not result in a ‘totally fragmented world’ of small, numerous agreements which reduces world welfare.
Though regional trade blocs also have a tendency to increase tariffs, the level of tariff increase may be mitigated beyond a certain threshold of trade bloc expansion. The reality is quite consistent with this hypothesis and the few trade blocs that can reasonably threaten the world economy – NAFTA, EU and the Asian bloc – will tend to have tariffs that even each other out.
The result is that states will become subject to essentially equal external tariffs once they have consolidated. Of course, despite a powerful mutual incentive for trade blocs to implement beggar-my-neighbour strategies, it will be in everyone’s best interest if all acted to reduce tariffs rates multilaterally.
Ever since US disengagement from the multilateral process, the proliferation of RTAs has not been commensurate with equal development in the multilateral process. The death knell of the WTO has come with the CPTPP in effect and the forthcoming signing of the RCEP. These agreements are a signal to the rest of the world that RTAs will most certainly be the preferred form of trade liberalisation in the long term.
While the real impact of these mega-RTAs on the world economy is still uncertain. Future trends, political exigences and present forms of regionalism that pursue strategic and foreign policy advantages over economic rewards will play a large role in the final analysis.
By Raymond Gallego
Editor’s note: The author has exercised his full exclusive rights over the article so our content policy does not apply. Please send all requests for use to editor@allasiaaffairs.com.
The Fourth Industrial Revolution (4IR) will create deeper inequalities across Asia by consolidating intellectual capital in a few already advanced states
The barriers to entry to developed status will be much higher than in the past and take far longer than it used to – “development limbo” will be widespread across Asia
On the political front, left-wing political platforms may become increasingly popular in Asian developing states as social mobility remains depressed
This would herald prolonged competition and conflict between the new Left and the still existing military establishment in many Asian states
We never
fully understand the impact of revolutions until the next one comes along. We
have seen this before when the Third Industrial Revolution’s breakthrough in
internet connectivity resulted in the kind of networked revolts in the Middle
East (early 2010s) and the type of online activism across the Western world
against sexual harassment, climate change, and police brutality, many years after
the Revolution began.
The “Fourth Industrial Revolution” (4IR) is well underway, and like the ones that came before, its effects will only be known much later on. But we can make some reasonable guesses as to its political consequences in specific areas by putting together what we know are the entrenched interests in those places and how those interests might be endangered by the changes to economic and social life.
Popular anticipation of Asia’s rise in the 21st century belies the many challenges that it faces in the 4IR. For one, economic development is not uniform across the region, even within sub-regions such as Southeast Asia and South Asia.
As the 4IR accelerates the speed in which technological progress occurs, states that already enjoy a talent and capital advantage will continue to benefit disproportionately.
In the 4IR, the driving force of economic growth will switch from advanced manufacturing to hyper-skilled talent resources. And states that are able to marshal these talents through not just high salaries, but also “perks”, “liveability”, and the other intangible qualities of a society that attract will become new areas of competition.
A few places that are in pole position – Japan, South Korea, Singapore, Hong Kong SAR, and Taiwan – to reap the most rewards from the 4IR will also be places that will need to decide what level of economic dynamism will come at the expense of some social harmony.
As talent is highly mobile, competing for the best talent will inescapably involve liberalising migration policies – in addition to optimising business set up procedures and reducing corporation taxes – but these are also frequently the sources of economic dissatisfaction among locals.
Asian economies that have not matured will face much higher barriers to development than those faced by the four “Asian Tigers” after the 1960s.
A positive loop of development and prosperity will operate in the 4IR. Countries that have the necessary infrastructure to host an ecosystem of innovation will stand to gain the most in the 4IR, and others who fail to do so will find it increasingly difficult to build alternative ecosystems because flows of talent will not be responsive to costs determinations alone.
Instead, talent and capital will move to places where R&D funding, high quality education standards, rapid testbed-ding, and other efficiencies prevail; and these have been harder to achieve than merely driving costs down.
The growth of the middle classes in Asia, oft-seen as the panacea for the global economy in the 21st century, is unlikely to rise steadily or quietly. The idea that a large middle class would set countries up towards a more progressive politics has been largely debunked. The middle class in the developed world today are some of the most vulnerable constituencies.
In the US and in Europe, moderate political platforms have been displaced by populist movements. And while there is a creeping sense in which those trends will affect Asia, the more likely scenario is that we will see a deep split in the sociopolitical climate between the developed states and those still undergoing developing.
In developed states, conflicts between local workers and expatriate or new migrants will become profound due to talent mobility in the 4IR. Political contests will also be defined more frequently on the question of native rights.
Corporations that wish to survive the discord need to be more active in making their hiring practices transparent or to present them more publicly if they are already transparent. Corporation-society relations ought to be a much more heavily invested function of any multinational operating in Asia.
The developing states – in particular those in Southeast Asia – will experience a different challenge. As the 4IR advances, inequalities resulting from higher returns on hyper-skilled talent over labour will exacerbate social tensions.
These inequalities will not be felt merely at the level of incomes (in fact many Asian countries have shown to have declining inequality since the 1990s), but on a emotive one as well. Opportunity inequalities will begin to matter more because cross-country comparisons has become easier to make for the average citizen. And the sense of opportunity at home is increasingly being lost from poor governance and outward migration to more developed cities.
On the political front, left-wing political platforms are set to gain renewed popularity across Asia. These New Left movements are likely to guarantee the middle classes a minimum and universal standard of living as a response to rapid automation and capital outflows resulting in the lost of a vast number of low-skilled jobs.
The appeal of the New Left will be felt most keenly in the developing Asian states where the military establishment retains a strong hand in the economy, not least because the latter has benefited tremendously from their close corporate compacts with big businesses for decades. Any calls to dismantle those relationships would deeply threaten the establishment’s survival, eliciting a strong and potentially violent response.
While Asia’s military establishments have survived for decades through many past economic crises, the old formula of state capitalism has been threatened by the need to adapt quickly to disruptive technology that has thus far exceeded the ability of most governments to regulate effectively.
The future of Asia in the 4IR is a future of enormous value though concentrated in pockets of Asia’s most developed cities. Elsewhere, prolonged social conflict is expected due to the difficulties faced by the middle classes to transform into a hyper-skilled workforce.
How prolonged and how intense these conflicts will be will depend, among other things, on the resolve of governments to distribute the (little) gains there are left in a far more equitable and just manner than before.
Indonesia, the 4th most-populous country and the 16th largest economy in the world, is becoming an increasing important country for South Korean businesses
A total of USD 7.3 Billion has been invested by South Korea since 2014 in a wide range of industries, including submarine technology and the construction of electric vehicles
South Koreans in Indonesia form a well-organised network of expatriates, who are greatly respected and admired by the locals due to their mastery of Bahasa Indonesia and familiarity with local customs
South Korea and Indonesia are two countries which one does not typically associate with each other. One is a wealthy East Asian country known globally for its technological prowess and mesmerising Pop Culture, while the other is a developing nation in Southeast Asia known for its Muslim-majority and its abundance of natural resources. They don’t seem to share much in common.
Yet despite these differences, both nations have had contact with each other for centuries. What’s more, the influence of South Korea in Indonesia is only set to grow thanks to ever-increasing business ties. It is no wonder then that South Korea ranks among the top 10 FDI sources for Indonesia, investing a total of 7.3 billion US dollars since 2014.
For instance, Hyundai Motors has recently pledged to invest USD 1.55 Billion to build an electric car factory in Indonesia, the first of its kind in Southeast Asia.
However, the relationship between the two countries does not limit itself to economics alone. There has been a recent intensification of cultural contact between South Korea and Indonesia – and it goes both ways.
Indonesians aren’t simply embracing the hallyu like everyone else. Many South Koreans are learning Bahasa Indonesia and choosing to live in Indonesia as well. But how did we get here?
Relations Before The 21st Century
Long before there was a unified South Korea, there were the Three Kingdoms, one of which was Silla. And long before there was Indonesia, there was the Buddhist Kingdom of Srivijaya, whose capital was located in the island of Sumatra.
Srivijaya was renowned internationally as a centre of Buddhist studies, so foreign East Asian monks would routinely spend some time in Sumatra studying Sanskrit before continuing their pilgrimage to India.
Hyecho, a monk from Silla, may have stopped by Srivijaya, but he did not stay long in order to focus on his journey to India in AD 723.
A more concrete example of Korea-Indonesia relations can be found in the 15th Century. Back then, the Kingdom of Majapahit, which many Indonesians consider to be the spiritual predecessor of their country, was the dominant power in the Indonesian archipelago. Chen Yen-Xiang, an ethnic Chinese official working for the Majapahit Court appeared in Korean records from 1406.
Back then, it was common for Southeast Asian Kingdoms to employ ethnic Chinese envoys as the leaders of trade and diplomatic missions to China and other East Asian countries.
Chen’s delegation, which mainly consisted of subjects of Majapahit, was likely attacked by Japanese pirates when his ship was sailing near Korean territory. Although many members of his crew were either killed or captured, Chen along with 40 crew members managed to escape.
They were well-received in the Korean Court, which also provided them with a small ship for their return journey. Chen later expressed his gratitude to the Koreans in 1412 telling them in a letter that he would send his grandson to the Korean Court to convey the Majapahit Empire’s appreciation.
While these episodes of Korea-Indonesia interactions happened centuries ago, there have also been more modern examples.
During the Japanese Occupation, the Japanese would often employ ethnic Korean soldiers in their overseas campaigns. In 1942, a soldier named Yang Chil-Sung was stationed in Indonesia as a prison guard.
When Japan surrendered in 1945, the Indonesians and Koreans took this opportunity to declare their independence. However, the Dutch who were Indonesia’s colonial masters before the Occupation, refused to grant Indonesia its independence, and launched a brutal war of re-conquest.
Yang Chil-Sung who by then had become fond of the Indonesians, took on a local name, Komaruddin, and helped the Indonesians in guerrilla warfare until he was executed by the Dutch in 1949. He is remembered by both the governments of Indonesia and South Korea for his heroic sacrifice.
South Korean Investments In Indonesia
With the horrors of the Second World War over, South Korea could finally focus on industrialising and developing their country. The Miracle on the Han River transformed South Korea’s economy into one of the Asian Tigers.
Soon, South Korean companies began expanding into Indonesia. In 1973, Miwon Specialty Chemical Co., Ltd opened up a factory in East Java. Various other South Korean companies would follow suit during the 70s and 80s. These investments also brought with them the first wave of South Korean expatriates who would go on to settle in Indonesia.
It is not hard to see why South Korean companies would be especially interested in Indonesia. It is the largest economy in Southeast Asia, with more than USD 1 Trillion in nominal GDP, and it is forecast to join the top 5 economies in the world by 2030 as measured in PPP, with a GDP of USD 10 Trillion.
South Korea’s recent investments in Indonesia include the building of a Light-Rail Transit as well as cooperation in the transfer of technology to procure Chang Bogo-classsubmarines for the Indonesian navy. With South Korea’s recent focus on its “Southern Strategy” to engage more with its Southeast Asian neighbours, we can be sure to expect more cooperation with Indonesia.
Besides the economic aspect of South Korea-Indonesia relations, it is also important to take a look at the cultural aspects. Usually, the relationship is seen one way, where South Koreans export their K-Pop music and K-Dramas to other countries that gobble them up with enthusiasm.
However, it is interesting to note that Indonesians themselves seem to have captured the hearts of some South Koreans as well.
Many South Koreans study in Indonesian universities and many of them master the local language of Bahasa Indonesia. There are instances of both children of long-time South Korean expatriates as well as recent arrivals from South Korea who go to local universities and plan to stay after graduation.
Some South Koreans have found success by making YouTube channels and vlogging about Korean and Indonesian culture too. And there are even some rare instances of Koreans embracing Islam after spending some time in Indonesia. As a result of these exchanges, Korean expatriates are one of the most respected nationalities in Indonesia.
The South Korea-Indonesia relationship is certainly an interesting one. It has had humble beginnings, but it has now grown to be a mutually beneficial relationship. For now, Indonesia’s biggest investors are still Singapore, China, and Japan, but we can expect Korea’s contribution to become even bigger, especially as Korea seeks to edge out its traditional rival, Japan.
For investors in the region, it would be wise to pay attention on how this unique relationship will develop further in the future as Korean businesses and expatriates gain more influence in Indonesia.
Online manipulation in Southeast Asia is set to become a serious and widespread problem due to a convergence of factors – the rapid growth of the region’s online populations, its importance to US-China strategic competition, and its still-evolving political systems
To guard against manipulation, Southeast Asian nations must invest more heavily in independent and non-partisan education efforts to inform citizens of the threat
But to maintain trust in these efforts, a firewall between public education and fact-checking bodies must be established
Regulation of social media platforms – the common policy prescription for governments – will become less effective over time as information networks will become more diffused and private and hence, more challenging to regulate
Ever since the ills of online manipulation were put on full display three years ago in the United States, policymakers around the world have eagerly sought solutions against the dangers of fake news and influence campaigns that rely on the spread of online fabrications. In the past year, governments across Southeast Asia have introduced various measures aimed at tackling the problem.
Because the present threat of online manipulation is not equal across the region, responses to it have also been mixed. In states with historically strong central control – such as Myanmar, Vietnam, and Singapore – new laws have arrogated more powers to the authorities to control content hosted on social media platforms since there already existed national security regulations that dealt with persons spreading malicious content.
As a result, these states now had a justification for expanding historic investments in the control of communication channels to corporate entities on top of individuals.
In Southeast Asian states where public communicative spaces are relatively open and competitive, aggressive legislation against online manipulation have brought additional legal liability to individuals. Naturally, there were vigorous objections from activists fearful that any new laws could also be aimed at quelling rights to speech and expression. A fake news law was even scrapped in Malaysia.
No consensus has been reached on the threat of online manipulation in Southeast Asia given the variety of state responses. This is despite countries in the region possessing common features that render online manipulation a serious problem for all of them.
One feature is the growth of internet usage in the region. With more than 400 million Internet users and growing, Southeast Asia is the fastest expanding digital population in the world and has already the “most engaged mobile internet users in the world.”
This growth has been supported by rapid urbanisation, internal migration to city centres, and the development of telecommunications infrastructure. Southeast Asia’s digital population includes not only young “digital natives” familiar with the Internet, but also older “digital immigrants” who have had to adapt as delivery of essential services come increasingly online.
Second, as the US and China compete more vigorously in the coming years, Southeast Asia (and by extension ASEAN) will become a centrepiece for mass influence campaigns, public opinion shaping, and agitprop. Online manipulation will continue to remain a low cost method for achieving these goals since it rides on long-term consumer trends that lend themselves to exploitation.
Third, many Southeast Asian nations do not yet have long and matured political systems by virtue of their colonial legacies, ongoing domestic conflicts, and military or semi-military rule. As these states experience the disruptiveness expected in maturing polities, there is a high latent risk that existing fault lines could be used to stir up populations against each other – particularly during elections – further handicapping political development. In this regard, ethnic and religious fault lines are most perilous and therefore easily agitated, even in considerably more stable and peaceful societies such as Singapore and Malaysia.
These common features represent a problem that is set to grow widespread in the foreseeable given that the vast majority of Southeast Asian countries have not invested in the defensive capabilities necessary in addressing online manipulation.
The usual policy program against online manipulation that involves tough regulation of media firms and increased penalties for fake news peddling will become less effective over time, not just because the appeal of mass social media platforms is in decline, but because regulating private networks (such as Whatsapp group conversations and Telegram channels) presents great challenges to even the most authoritarian of states.
As communication networks become more diffused and private, the most effective means of tackling online manipulation in the long-term is the establishment of independent and non-partisan education efforts to inform citizens of the threat and to illuminate them on how to identify false messaging.
However, for education initiatives to be trusted they must function separately from fact-checking bodies run by the government or by the news media in order to avoid the politicisation that is inherent in the exercise of judgments of fact.
This separation of roles is also necessary as online manipulation is increasingly perpetrated by domestic actors – sometimes by governments themselves – that will call into question any fact-checking process managed by the authorities.
As Southeast Asia attempts a large-scale economic integration over the next few decades, domestic pressures will begin to bear a large influence on this endeavour.
Online manipulation that affects individual countries will also impact the stability of the region as a whole as more of the region’s prosperity will depend on managing nationalist tides that so often cause barriers to doing business together.
For policymakers this will mean treating the issue not merely as a nuisance to governance but more importantly as a real danger to social stability. Addressing it will require the gradual building of trust between government and people through the judicious and appropriate use of a new generation of laws against fake news.
Negotiation strategy suggests that whichever side in Hong Kong (SAR government or protesters) de-escalates periodically could come out stronger
“Simply escalating” strategies tend to be counterproductive in the long run as it compels the opposing party to embrace escalation too, leading to either attrition or worse, uncontrollable violence
Violence in Hong Kong has reached fever pitch since protests began nearly
half a year ago. Throughout the conflict, there have been periods of calm and periods
of high intensity riots corresponding to the weekday work routines and the
weekend breaks respectively. Yet there has been a general trend towards
escalation of violence since the beginning.
This week, protesters and HK police raised force levels still further,
with protesters throwing petrol bombs and bricks, firing arrows, and creating makeshift
catapults while garrisoning themselves in college campuses around the city.
Police officers have also shot protesters with live rounds for the
second time since riots began, and some experts believe that the more regular
warnings from the Chinese central government mean that the HK authorities are
likely to increase pressure over the coming weeks.
These actions are moving both sides ever so closely to a situation of armed
struggle – in which parties perceive that their only viable strategy is to
overwhelm their opponent completely lest a few groups that remain drag the
conflict out by a punishing insurgency.
Once all-out armed struggle occurs, it is difficult and dangerous for any party to back down, negotiation becomes risky, and signalling across lines – the act of conveying information to the other party – breaks down due to lack of trust.
But such a situation has not yet arrived in Hong Kong and there is still
a way for each party – the HK SAR government and the protesters – to make some
progress in preserving their interests while reducing violence at the same
time.
Negotiation strategy suggests that periodic de-escalation could be advantageous for whichever party moves first. First, it is only periodic in order to create regular opportunities for the other side to express or signal an intention to compromise or to reduce force levels without the fear of embarrassment. As it allows both parties to return to the status quo if they choose, it is not a show of defeat.
Second, it is de-escalatory so as not to provoke the other party to repel the action with an even greater force.
If a party adopts a period of de-escalation, it is worth voicing the
intention and aim of the draw down before it takes effect so that the opposing
party is invited to react positively – by also de-escalating or by agreeing to
certain demands – or negatively – by taking advantage of the opening to regroup
or to escalate.
Either way, the party which first proposes and commits to a temporary rollback benefits from issuing a credible signal to the other, the potential for reduced conflict, and favorable public perception from the act of self-restraint.
These benefits are increasingly valuable amidst such visible confrontations between the HK authorities and protesters in this era of live-streamed news and continuous reportage of every move by all sides.
As a result of how news tends to spread online, single isolated acts of extreme violence by one or a few persons may be perceived as new consensus tactics by the entire group, raising perceptions of danger unnecessarily in a vicious circle.
Communicating good faith intent by conflict parties is problematic not just in Hong Kong, but in any prolonged conflict characterised by frequent acts of unorganised and egregious violence; these are eventualities that occur when deadlock is imminent and when morale on both sides are rapidly weakening.
For the HK government and for the protesters, “simply escalating” strategies that call for overwhelming force to demonstrate strength or to deter violence are in fact counterproductive in the long run as it compels the opposing party to embrace escalation too, leading to either attrition or worse, uncontrollable violence.
Regardless of which side acts, a mixed strategy of escalation and periodic de-escalation is a far more cost effective method of using limited resources, communicating goals and demands, and winning the moral high ground that is essential for durable victories and for the eventual consolidation of the public trust when conflict ends.
The simple answer to that complex question of what politics is, is the competition of interests and values between peoples
Politics is a reflexive activity because the end result of a political process depends on the beliefs and feelings of people which themselves can change as a result of political action
Regardless of the issue at hand, we can think politically by looking for the underlying interests or values at play and who stands to gain or lose if things turn out one way or the other
Everyday we are consumed by new information about things near and far. We read the news and we listen to people’s reaction about the news, which in turn becomes new news these days. What does it all mean and why should it matter to any of us what goes on outside the boundaries of our voting authority?
For most of us, not much is the honest truth. Our concerns extend out in increasingly diminished concentric circles centred on ourselves and wherever the last circle is drawn is the point in which the issues do not matter.
To talk about politics is to talk about what operates prior to that last drawn circle. Politics is what occurs in the spaces that matter to us. Of course what matters to each individual is unique, but what does matter will always be part of the political domain because it is our interests and values that determine what matter to us and it is the competition of these interests and values that define what is political, even among those that consider themselves “non-political”.
The ordinary course of a person’s life ensures that she or he will move in and out of diverse political spaces as their interests and values evolve. But somewhere along each of our lifetimes, we will consider healthcare issues, just as we will of housing and education and many other cornerstone institutions. As we consider these issues we may possess certain interests about how we wish to be treated which we may subsequently abandon when we progress to a different stage of life.
Do you spend hours grousing about the congested roads on your morning commute but never spend a second thinking about the pollution generated by all those vehicles? If you do, then transport is a genuinely political issue to you while environmental concerns aren’t quite. If tomorrow a bill is passed taxing owners of older and more pollutive cars at a higher rate, it will probably invoke an emotional response from you if you drive an old car. An environmental issue that previously wasn’t a concern to you has now become a political one.
To remove all the complexity and variety of how politics is defined is to strip it down to the basics of how human life unfolds in groups. It isn’t merely what governments do and it certainly isn’t what politicians do. It also isn’t policy and it isn’t polls; even if these do happen from time to time in politics.
It is more than these and it encompasses activities – scientific endeavours, corporate work, family life, and others – that we might have assumed functioned independently but which in fact occur within the political arena.
Because very little about human life isn’t political, we must each of us develop the nous for understanding how to navigate in political space. Looking for the underlying interests or values at play, and who stands to gain or lose if things turn out one way or the other is the most practical way for the average person to “think politically”.
Thinking politically also requires us to be aware of how actions occur in political space. This is where things begin to differ from other domains of human life.
In economics for example, we know that holding all else equal, when demand for a good increases, its price also increases; likewise when supply for a good increases, price decreases. These are logical relationships that exists between different factors in an economic model. Similar relationships exist in scientific models with greater degrees of certainty. Highly certain relationships such as the law of gravity are also highly deterministic and allow us to model behaviour with little risk of error.
In politics, the relationships between different factors are highly uncertain, unpredictive, and non-deterministic. We simply have few, if any, rules and laws that explain political behaviour and therefore what explanations we have for past political events and trends are ill suited to make predictions about the future.
The reason for this can be traced back to our earlier definition of what politics is, and that is the competition of interests and values between peoples. But those interests and values do not emerge separate from the political domain. On the contrary, they emerge out of or are at least informed by other political processes. They may also be subsumed, converted, or defeated by the political process into other interest or value groups.
Hence the very act of politics, indeed political life itself, not only sets the ground for the competition of interests and values but is also a participant of that competition.
To say then that politicians and others who execute political action are managing groups of people is to be slightly erroneous. And surely for a politician to say that that is what their job entails is to be completely disingenuous.
A great part of political action is to define the interests and values that are at play. That remains the principal job of politicians and other political actors that sets them apart from those who may have to implement political decisions, such as civil servants and administrators, but who do not otherwise shape political spaces per se.
Effective political actors walk a fine balance between their role as definers of interests and values, with their responsibilities to facilitate healthy competition among peoples with differing interests and values, and finally with their obligation to compete as parties to that very competition.
The most successful political actors are those who exert the maximum effort in whichever capacity has the least cost to themselves and the minimum effort in areas that are likely to incur a high price to their credibility among the groups they lead. Usually, this means that in decreasing order, political actors ought to invest heavily in defining what interests and values are at stake, facilitating competition, and then competing.
Analysing political competition requires us to look at whether the right balance of a political action is struck, and if not what would be the optimum formula.
Beginning with a structured methodology for thinking and acting politically allows us to conduct our debates coherently and improves both the professionalism of those of us in the business of political analysis and the acumen of those who are not.
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