Old Dominance and new dominoes in Southeast Asia


December 14, 2017

Old Dominance and new dominoes in Southeast Asia

by Dan Slater@www.eastasiaforum.org

Not since World War II has liberal democracy seemed so deeply endangered in so many places. If the flu of political and social illiberalism is circumnavigating the globe, Southeast Asia has precious little immunity with which to withstand it. This is a region where authoritarian regimes have always easily outnumbered democracies, and where liberalism and universalism have always struggled to gain traction.

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Since most of the region is enduringly authoritarian to begin with, Southeast Asia is and always has been well on its way to being a democratic abyss. It is useful to distinguish the cases of existing dominance that establish that dismal baseline from ‘the new dominos’, which find themselves either tumbling or looking increasingly wobbly.

None of the region’s long-dominant authoritarian regimes appear deeply endangered at the moment. Singapore’s People’s Action Party is riding high in the saddle after its electoral–authoritarian landslide in September 2017. In Malaysia, so long as the ruling Barisan Nasional party can compensate for its high-level corruption with high-level repression, it seems likely to get away with it.

Commentators commonly fret that Hun Sen killed the last remnants of democracy in Cambodia when he shuttered the Cambodia Daily and moved to ban the country’s only major opposition party. But what is really transpiring is a transition from multiparty authoritarianism to single-party authoritarianism, since Cambodia has not met even minimal democratic standards for the past 25 years.

Speaking of single-party dictatorships, Vietnam’s leaders have recently stepped up repression of dissidents. But it is not as if the Vietnamese Communist Party ever brooked serious dissent in the first place.

Not coincidentally, in all four cases, old dominance is rooted in old authoritarian ruling parties. Dictatorships ruled by parties have long tended to be more stable than those in which the military plays the leading role. So it stands to reason that the greatest action in the region over the past decade has been in countries where the military either still is, or in the past was, a leading power in political life.

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A militarised past means a high potential for a dominoing present. Just as we can identify four clear cases of old dominance rooted in authoritarian ruling parties, four cases fit more readily in the ‘new domino’ category: Indonesia, Myanmar, the Philippines and Thailand. In each case, there is a long history of parties failing to decisively supersede the power of the military, which left their democracies with relatively little institutional strength.

Could Myanmar soon follow Thailand’s recent path back to unchallenged military rule? Could the Philippines descend from its fragile status as an illiberal democracy to an outright one-man autocracy? And does the shocking imprisonment of Jakarta’s ethnic Chinese former governor on blasphemy charges portend the demise in Indonesia of the tolerant norms on which even a minimalist democracy depends?

There is a vital common theme. When procedural democracy arises in otherwise politically and socially illiberal and intolerant conditions, democracy’s own key features can easily undermine its own quality and even threaten its own survival.

Specifically, democratic procedures have a tendency to produce unbridled majoritarianism and unconstrained leadership unless there are powerful countervailing forces. In settings where liberal institutions and societal commitment to inclusive and cosmopolitan values are relatively weak, minorities exist at the mercy of domineering and abusive executives.

In Thailand, the rise of Thaksin Shinwatra did not lead to outright populist authoritarianism in part because the Thai military and monarchy saw fit to re-establish oligarchic authoritarianism. It is in the Philippines where a brazenly violent populist seems inclined to seize as many authoritarian-style powers as the system and public will allow. As abysmal as Rodrigo Duterte has been for human rights, his defenders quite plausibly support a highly popular president responding to actual social ills like the drug trade.

But democratisation does not deserve the brunt of the blame for an ongoing calamity like the forcible expulsion and state-sanctioned mass murder of the Rohingya. In Myanmar as in Indonesia, it is the ideological potency of ethnic and religious nationalism that explains why minorities get brutalised. Authoritarian legacies of militarisation in Myanmar and ethnic and ideological scapegoating in Indonesia best explain the severity of both countries’ nativist downturns.

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If one vivid lesson shines through the dim shadows of Southeast Asia’s democratic downslide, it is that democratisation and human rights are far from the same thing. Nationalists steeped in a lifetime of authoritarian state propaganda are analogously primed to see the world in terms of us (who belong) and them (who do not). Under such conditions, democratic rights may get extended — but no further than the ranks of the supposedly virtuous.

What all this suggests is that the global crisis of liberalism and democracy is first and foremost a crisis of education. Heroic histories of mass urban mobilisation predict that if civil society is to help forge democracy, it will be by ‘people power’.

This may still be largely true in Southeast Asia’s cases of old dominance, where dictatorship must somehow be dislodged before democracy can be defended. But in Southeast Asia’s new dominos, as in Western democracies where pluralism is under assault, a deeper educational imperative underlies the organisational challenge confronting us.

Remarkably, the world has reached a moment when its politics most urgently needs to be driven not by an exalted desire to maximise human freedom, but by the base need to minimise human cruelty. If educational institutions and mass media do not spread the message that even the lives of minorities and suspected criminals have value, who will?

Dan Slater is Professor of Political Science and incoming Director of the Weiser Center for Emerging Democracies at the University of Michigan. This article originally appeared at New Mandala as part of a series on the challenges facing democracy and civil society in Southeast Asia supported by the TIFA Foundation, Indonesia.

 

An Interview with Mu Sochua


December 11, 2017

An Interview with Mu Sochua

In Jakarta on 8 December, politicians, activists, and scholars dug deeper into the themes covered in New Mandala‘s ongoing series on Southeast Asia’s crisis of democracy at a special forum hosted by the TIFA Foundation. Among the speakers was Mu Sochua, a senior member of Cambodia’s Cambodian National Rescue Party, which was dissolved by a court order on 16 November 2017. A long time human rights advocate and former Minister for Womens Affairs, she has now joined other CNRP figures in exile after being threatened with imprisonment. New Mandala editor Liam Gammon met with her for a brief interview about how the opposition is adapting to the crackdown.

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CNRP’s Mu Sochua on Democracy in Cambodia–Interview New Mandala

Do you think that by shutting off institutional avenues for opposition to his rule, Hun Sen has raised the probably of some sort of popular uprising—some kind of “people power” movement?

They are waiting for the opposition leaders to give the signal. In 2013 when we contested the result of the elections, we were in the streets for over three or four months. Up to half a million people were with us; we were at park called Freedom Park, it was the most beautiful, beautiful moment for democracy in Cambodia and never had it happened before.

Our party is not just a political party. It comes from a movement, from civil society, that has been able to plant democracy’s seeds in Cambodia for quite some time—after the Paris peace accords. It is actually the UN program on human rights free and fair elections that brought the Cambodian people the principles of democracy, of free and fair elections.

So, after that moment, people and then on the fourth of January 2014 Hun Sen brought the tank, shot the workers—since then, we have not been able to bring the people back. But then after that moment, when they shut down Freedom Park, I myself led a group—there were just two or three of us and then it went on to thousands and thousands—for three months, then I was arrested. Put in jail. And now my colleagues are now in jail for 20 years.

If you look back on the long road leading up to the crackdown this year, are you and other opposition figures thinking about some of the strategic mistakes that the opposition may have made? If you had to identify some things that you would have done differently, what would they be?

There are always gaps and short-sighted decisions. For example, at that moment when the tanks were coming at us—and every day we had half a million people with us—we were fighting all the time about whether to take the crowd to the right, or the left, you know—to confront the parliament and the government, to cross over the bridge, or whatever. So I was always in the camp of the young people—hot-headed, but my leaders are more like “no, we can’t do that”. I come from civil society, you see.

So we have always been, and even today, accused of not having good leadership. But we had half a million people—why did we not take over parliament? And we went over that for so long, even today. But one thing was very clear: we do not want to have bloodshed. Because of our past genocide. At any time in the day when Sam Rainsy said “march”, people will come out and march. But we’re not doing that. And we went into parliament after a year of boycott. When we signed the agreement with Hun Sen, we were too quick to accept the agreements. He [Hun Sen] promised that there be reforms in the judiciary, he promised that the opposition minority would be recognised, he promised that we could have our own TV. We signed the agreement, but we didn’t look at the details, and he didn’t deliver on the details. We lost at that.

Do you think there was an element of complacency within the leadership about whether Hun Sen would actually follow through on those commitments?

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Not complacency, but I think we were too—we made an agreement on the basis of mutual trust. But Hun Sen is not a democrat. And our mistake it that we assumed that he is a democrat.

And this is a central question for outside observers. If we’re making this claim that Hun Sen has killed Cambodian democracy, by implication we’re saying that from 1993 until 2017 it was a functioning democracy. In hindsight do you think that in reality this is not really the fall of a democracy or the fall of a pretence of democracy?

Full democracy, no. A façade of democracy. He allowed us to function in that framework. And the donors—we all knew. But we kept on going for democratic change within elections. But when he saw, and he sees now, that he will never win a truly democratic—even half democratic—elections, that’s why he had to kill it. However, we have 25 years of grassroots—this is not just elitist democracy, but grassroots. So we refuse to say we give up. We are banned from politics for 5 years, but we’re still very active. And we have to reconnect with civil society and our structure inside [Cambodia].

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On the China question: there’s an idea that’s getting stronger that part of the reason why Hun Sen has been so confident in cracking down on the media, civil society, and opposition forces is because Beijing, as it were, will have his back. I guess the question is are we in danger of overstating the influence of China? Would he have done this anyway?

No. I think the international community has been complacent. They want to say “okay, we’re finished with Cambodia”.

They saw it coming! The last time they had a real donor meeting with Hun Sen was four or five years ago. They made no demands whatsoever. And on top of that, I think they forget that Hun Sen needs the legitimacy. Hun Sen has a lot of money. His children have a lot of money. His cronies have a lot of money—invested in Australia, in France, in the USA. So when the US has imposed vis sanctions, within a day, Hun Sen says: “will you reconsider”. It touches a nerve, because he wants China and he wants the west at the same time. But the west is not willing to use its leverage.

It’s interesting that you mention the donor meetings, because they have become infamous as a ritual whereby the donors make of Hun Sen, there are promises that are never fulfilled, and they come back next year and nothing’s changed. Hun Sen has always done terrible things to the opposition—1997 for instance—and gotten away with it. Do international donors have to share in some of the blame for the current situation?

They put in five billion dollars and here it is. Look the judiciary. What reforms have taken place? Look at the scale of corruption. And even now, Australia, for example, still wants to engage Hun Sen, through this $50 million [sic] refugee deal that they made. What is this? So there is no way Australia can say “we didn’t know, we’re not part of it, we tried our best”. I just went to meet with your foreign minister, she still wants to engage Hun Sen. She doesn’t want to isolate Hun Sen. It’s because of the $50 million deal. This is really peeling [away] democracy. And this is how dictators survive. Even killers survive.

So if the threat of withholding western largesse hasn’t changed the regime’s behaviour before, why should we expect it to change now?

Before, Hun Sen didn’t have a lot of money. Now he has a lot of money. “He” meaning all his cronies, his generals. So they have to protect their territory. Before they fought to survive, now they fight to keep the money. To keep the prestige that they have, to keep the comfort that they have. But all of this could crumble very quickly, because he doesn’t fight on principle or anything, he fights just for his own power, so he’s very vulnerable.

This seems almost a silly question to ask, but do you see any role for Southeast Asian governments in disciplining Hun Sen?

Surely. Surely. We have to take measures to prevent another tragedy in Cambodia. If you study the ruling party structure, it has not changed from the communist structure. They had cells, groups, from a group of five, a group of ten, that spy on each other. Now, Hun Sen is doing the same thing. The parents are spying on the children because the youth are not voting for Hun Sen. But they are buying the parents, to force their children to vote for Hun Sen. And the children say no! in the past it was the children that spied on their parents—to see who is communist and who is not, to see who is Khmer Rouge and who is not. It’s the same type of control.

I assume you and your opposition colleagues are still communicating frequently?

There’s a lot of difficulty.

At what point do opposition leaders countenance trying, from abroad, to encourage street mobilisation?

Right now if we were to do it, I don’t know. We haven’t been able to meet in the same room to strategise. So it’s like dealing with this crisis one thing at a time, and that’s why we’re now saying we need to meet.

Within a party there are always differences. So we can fight within the party, and come up with a concrete game plan. Some people say “why don’t we go in. Why don’t we mobilise the people and march again?” Then some people say: “Are you crazy?” Some people are saying “how about a government in exile?”. But definitely, we are—

—strictly speaking, you haven’t won an election yet, so a government in exile might seem a little bit premature…

A shadow government. Although we knew that in 2013 we won, so we are capable of getting the votes. But we don’t want to think that way [about a government in exile], because that means long term outside, in exile. That would kill the hope of the people inside. We have to keep the hope alive.

So you envision a situation in which you and your colleagues could return to Cambodia?

Yeah. Any day. It could be any day. That’s why the role of ASEAN, the role of southeast Asian leaders—it may only take one person, to talk to Hun Sen and say, “what about a dignified exit strategy”.

Who do you think has that kind of clout in Southeast Asia?

Japan.

Do you see any movement there? Have they been sympathetic?

In the past, yes, it’s always been Japan who talked to Hun Sen.

The United States?

They are great at taking actions, but it antagonises. It’s good they deliver. But Hun Sen can say, “oh, it’s the United States”. And all the donors can say “that’s the US.”

It’s interesting that there’s this impulse to talk about the external influences, because one of the criticisms of the opposition, and of Sam Rainsy in particular, was that he was better at cultivating support and networks in Washington or Paris than he was in Phnom Penh.

No, no, no. Totally wrong. Of course, high ranking officials talk to him. But his popularity is in the country. Sam Rainsy can go anywhere in the country, the crowd around him. He’s a symbol. Like Khem Sokha. Even me, when I go to my country, I don’t need anything, I walk around and people get me a motorcycle.

We represent the hope of the people. He is educated, he speaks the language of an educated person. But if he were so close to France, to the Élysée, France would be working with us today. France is not working. We were saying, “France? Where are you?”

You have to live a life on the move now. Living in exile is expensive, isolating, stressful—do you feel safe in exile? Do you expect to be, or have you been, contacted by representatives of the regime?

In Thailand. When I go to Thailand, I don’t feel safe. Now that I talk a lot, that I am the face of the opposition—I’m on BBC, I’m on Aljazeera—I worry. You never know; you don’t want to touch these nerves. And I always go alone. The expenses are always covered somehow. And the loneliness, I have to deal with that. My children want me home, my grandchild wants me home. Of course, I just went through the passing away of my husband. So it’s been a long, difficult two years. However, serving democracy keeps me alive. And I refuse to slow down, although I wish I could, but that’s not a choice. And I have the choice of staying home in Cambodia, but staying behind in a cell. Being captured.

Now there are some CNRP figures left in Cambodia, are they able to engage in any political activity, or are they laying low?

No, they are laying low. Even in communicating with them, we try to not endanger them. We have many in Thailand as well, so even speaking to them—I’m going to go through Thailand, they come to meet me at the airport. I don’t go to visit where they are. And their places have been raided by the local police in Thailand.

So to put it in simple terms, you see the Thai regime as unfriendly to the opposition?

So far they have not kicked us out, but they have given us the message: don’t do anything political. But with Khun Kasit [Piromya], who is the go-between between us and the military, we have been able to stay in Bangkok.

Although you say you have the hope of going back to Cambodia, in the back of your mind do you think about a life outside of Cambodia forever?

[Smiles]. I don’t want to think about it. Because my husband’s ashes are at home. I had less than 24 hours to pack my bags. We had a beautiful home, and a beautiful life. My people are beautiful people. It pains me to stay away from them. It pains me to hear them crying, going back to the farm, going back to being motor taxi drivers, are used to living in exile, are used to hiding [sic], it’s very painful.

The clock is ticking; there’s going to be some kind of election in Cambodia next year, do you think there’s a possibility that Hun Sen could climb down from his current strategy and there could be some kind of free and fair contest? And if not, are you planning towards subsequent elections as a next goal?

At this point we want to be optimistic, so we are focused on lobbying ASEAN. We have done a lot of work in Europe and the US, now it’s ASEAN.

Do you have realistic hopes of being able to contest in 2018?

Yep. We only need six months. Because we are so sure of our strategy.

So in the short term, what do you define as success?

Free[ing] Kem Sokha on 10 December. And for us to go home.

Why 1997 Asian Crisis Lessons Lost


December 7, 2017

Why 1997 Asian Crisis Lessons Lost

by Jomo Kwame Sundaran

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Various different, and sometimes contradictory lessons have been drawn from the 1997-1998 East Asian crises. Rapid or V-shaped recoveries and renewed growth in most developing countries in the new century also served to postpone the urgency of far-reaching reforms. The crises’ complex ideological, political and policy implications have also made it difficult to draw lessons from the crises.

Conventional wisdom

The conventional wisdom was to blame the crisis on bad economic policies pursued by the governments concerned. Of course, the vested interests favouring the international financial status quo or further liberalization also impede implementing needed reforms. Such interests continue to be supported by the media.

Citing currency crisis theory, the initial response to the crises was to blame poor macroeconomic, especially fiscal policies, although most East Asian economies had been maintaining budgetary surpluses for some years. Nevertheless, the IMF and others, including the international business media, urged spending cuts and other pro-cyclical policies (e.g., raising interest rates) which worsened the downturns.

Such policies were adopted in much of the region from late 1997, precipitating sharper economic collapses. By the second quarter of 1998, however, it was increasingly recognized that these policies had worsened, rather than reversed the economic deterioration, transforming currency and financial crises into crises of the real economy.

By early 1998, however, as macroeconomic orthodoxy lost credibility, the blame shifted to political economy, condemning ‘cronyism’ as the cause. US Federal Reserve Bank chair Alan Greenspan, US Treasury Deputy Secretary Lawrence Summers and IMF Managing Director Michel Camdessus formed a chorus criticizing Asian corporate governance in quick sequence over a month from late January.

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Paul Krugman, Joseph Stiglitz and Jeffery Sachs supported Keynesian counter-cyclical policies.

The dubious conventional explanations of the Asian crises were not shared by more independently minded mainstream economists with less ideological prejudices. The World Bank’s chief economist Joseph Stiglitz and other prominent Western economists such as Paul Krugman and Jeffrey Sachs supported Keynesian counter-cyclical policies.

Regional contagion and response

The transformation of the region’s financial systems from the late 1980s had made their economies much more vulnerable and fragile. Rapid economic growth and financial liberalization attracted massive, but easily reversible, footloose capital inflows.

New regulations encouraged short-term lending, typically ‘rolled over’ in good times. Much of these came from Japanese and continental European banks as UK and US banks continued to recover from the 1980s’ sovereign debt crises. But these gradual inflows suddenly became massive outflows when the crisis began.

Significant inflows were also attracted by stock market and other asset price bubbles. The herd behaviour characteristic of capital markets exacerbated pro-cyclical market behaviour, heightening panic during downturns. Fickle market behaviour also exacerbated contagion, worsening regional neighbourhood effects.

Japan’s offer of US$100 billion to manage the crisis in the third quarter of 1997 was quickly stymied by the US and the IMF. Instead, a more modest amount was made available under the Miyazawa Plan to finance more modest facilities, institutions and instruments.

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Much later, in Chiang Mai, Thailand, the region’s Finance Ministers approved a series of bilateral credit lines or swap facilities, conditional on IMF approval. Many years later, the finance ministers of Japan, China and South Korea ensured that these arrangements were regionalized, and no longer simply the aggregation of bilateral commitments, while increasing the size of the credit facility.

New International Financial Architecture

A year after the crisis began in July 1997, US President Bill Clinton called for a new international financial architecture. The apparent spread of the Asian crisis to Brazil and Russia underscored that contagion could be more than regional.

The collapse of Long-Term Capital Management (LTCM) following the Russian crisis led the US Federal Reserve to intervene in the market to coordinate a private sector bailout. This legitimized government interventions to ensure functioning financial systems and sufficient liquidity to finance economic recovery.

After the US Fed lowered interest rates, capital flowed to East Asia once again. The Malaysian government’s establishment of bailout institutions and mechanisms in mid-1998 and its capital controls on outflows from September 1998 also warned that other countries might go their own way.

Ironically, the economic recoveries in the region from late 1998 weakened the resolve to reform the international financial system. Talk of a new international financial architecture began to fade as recovery was presented as proof of international financial system resilience.

Coping with Foreign Direct Investment


December 6, 2017

Coping with Foreign Direct Investment

by Jomo Kwame Sundaram and Anis Chowdhury

http://www.networkideas.org/news-analysis/2017/11/coping-with-foreign-direct-investment/

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Malaysia has been named by Forbes as one of the top recipients of foreign direct investment, followed by Singapore, Vietnam, Indonesia and India.

Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it “is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented”.

FDI flows

UNCTAD’s 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally weak’ economies remain low and volatile.

FDI inflows add to funds for investment, while providing foreign exchange for importing machinery and other needed inputs. FDI can enhance growth and structural transformation through various channels, notably via technological spill-overs, linkages and competition. Transnational corporations (TNCs) may also provide access to export markets and specialized expertise.

However, none of these beneficial growth-enhancing effects can be taken for granted as much depends on type of FDI. For instance, mergers and acquisitions (M&As) do not add new capacities or capabilities while typically concentrating market power, whereas green-field investments tend to be more beneficial. FDI in capital-intensive mining has limited linkage or employment effects.

Technological Capacities and Capabilities

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The National Bank of Cambodia’s decision in March, 2017 to raise the minimum capital requirements of financial institutions in order to strengthen and stabilise the financial sector has led to an increase in foreign capital flowing into the banking sector, according to industry experts. Underpinned by political stability  and business friendly policies, Cambodia is expected to register robust real economic growth in 2017 in excess of 7 per cent per annum.

Technological spill-overs occur when host country firms learn superior technology or management practices from TNCs. But intellectual property rights and other restrictions may effectively impede technology transfer.

Or the quality of human resources in the host country may be too poor to effectively use, let alone transfer technology introduced by foreign firms. Learning effects can be constrained by limited linkages or interactions between local suppliers and foreign affiliates.

Linkages between TNCs and local firms are also more likely in countries with strict local content requirements. But purely export oriented TNCs, especially in export processing zones (EPZs), are likely to have fewer and weaker linkages with local industry.

Foreign entry may reduce firm concentration in a national market, thereby increasing competition, which may force local firms to reduce organizational inefficiencies to stay competitive. But if host country firms are not yet internationally competitive, FDI may decimate local firms, giving market power and lucrative rents to foreign firms.

Contrasting Experiences

The South Korean government has long been cautious towards FDI. The share of FDI in gross capital formation was less than 2% during 1965-1984. The government did not depend on FDI for technology transfer, and preferred to ‘purchase and unbundle’ technology, encouraging ‘reverse engineering’. It favoured strict local content requirements, licensing, technical cooperation and joint ventures over wholly-owned FDI.

In contrast, post-colonial Malaysia has never been hostile to any kind of FDI. After FDI-led import-substituting industrialization petered out by the mid-1960s, export-orientation from the early 1970s generated hundreds of thousands of jobs for women. Electronics in Malaysia has been more than 80% FDI since the 1970s, with little scope for knowledge spill-overs and interactions with local firms. Although lacking many mature industries, Malaysia has been experiencing premature deindustrialization since the 1997-1998 Asian financial crises.

China and India

From the 1980s, China has been pro-active in encouraging both import-substituting and export-oriented FDI. However, it soon imposed strict requirements regarding local content, foreign exchange earnings, technology transfer as well as research and development, besides favouring joint ventures and cooperatives.

Solely foreign-owned enterprises were not permitted unless they brought advanced technology or exported most of their output. China only relaxed these restrictions in 2001 to comply with WTO entrance requirements. Nevertheless, it still prefers TNCs that bring advanced technology and boost exports, and green-field FDI over M&As.

Thus, more than 80% of FDI in China involves green-field investments, mostly in manufacturing, constituting 70% of total FDI in 2001. China has strictly controlled FDI inflows into services, only allowing FDI in real estate recently.

Although long cautious of FDI, India has recently changed its policies, seeking FDI to boost Indian manufacturing and create jobs. Thus, the current government has promised to “put more and more FDI proposals on automatic route instead of government route”.

Despite sharp rising FDI inflows, the share of FDI in manufacturing declined from 48% to 29% between October 2014 and September 2016, with few green-field investments. Newly incorporated companies’ share of inflows was 2.7% overall, and 1.6% for manufacturing, with the bulk of FDI going to M&As.

Policy Lessons

FDI policies need to be well complemented by effective industrial policies including efforts to enhance human resource development and technological capabilities through public investments in education, training and R&D.

Thus, South Korea industrialized rapidly without much FDI thanks to its well-educated workforce and efforts to enhance technological capabilities from 1966. Korean manufacturing developed with protection and other official support (e.g., subsidized credit from state-owned banks and government-guaranteed private firm borrowings from abroad) subject to strict performance criteria (e.g., export targets).

Indeed, FDI can make important contributions “to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Government policies can strengthen positive spillovers …, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local enterprises… into regional and global value chains”.

(This article was originally published in Inter Press service (IPS) news on November 21, 2017)

ASEAN needs to move to minilateralism


December 6, 2017

ASEAN needs to move to minilateralism

by Richard Javad Heydarian*

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RSIS Commentary is a platform to provide timely and where appropriate, policy-relevant commentary and analysis of topical and contemporary issues. The authors’ views are their own and do not represent the official position of the S. Rajaratnam School of International Studies, NTU. These commentaries may be reproduced electronically or in print  with prior permission from RSIS and due recognition to the author(s) and RSIS. Please email your feedback to Mr Yang Razali Kassim, Editor RSIS Commentary at RSIS Publications@ntu.edu.sg.

Synopsis

To save the principle of ASEAN centrality, the regional body should transcend its consensus-based decision-making and embrace minilateral arrangements on divisive issues.

For four decades, ASEAN commendably established the foundations of a nascent security community in Southeast Asia, where the threat of war among neighbouring states has teetered on the verge of impossibility. In the past two decades, the regional body has tirelessly sought to create a broadly peaceful, rules-based and inclusive regional security architecture.

The regional body is increasingly suffering from a ‘middle institutional trap’. The type of decision-making arrangements that enabled it to reach its current stage of institutional maturity are insufficient to meet its newer challenges. In particular, the rise of China and its growing assertiveness are not only disturbing the regional security architecture but also undermining ASEAN’s internal cohesion and its quest for centrality in East Asian affairs.

Limitations of ASEAN Way

The ‘ASEAN way’, where consensus and consultation undergird decision-making regimes, is no longer up to the task. The regional body’s unanimity-based decision-making mechanism has unwittingly handed a de facto veto power to weaker links that are under the influence of external powers.

Moving forward, the body has two choices. It can modify its institutional configuration by adopting an ‘ASEAN–X’ or ‘qualified majority’ voting modality on politico-security affairs, or it can fall into irrelevance.

This is poignantly evidenced by the South China Sea disputes. After it failed to embrace wholesale institutional innovation, the only way forward is a constructive form of ‘ASEAN minilateralism’, where like-minded and influential countries in the region coordinate their diplomatic and strategic calculations vis-a-vis South China Sea disputes.

End of ASEAN Centrality?

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In 2016, the leaders of ASEAN displayed encouraging unity — or at least a semblance of it — during the Sunnylands Summit with former US President Barack Obama. At the end of the meeting, the two sides released a joint statement that called for shared ‘commitment to peaceful resolution of disputes, including full respect for legal and diplomatic processes, without resorting to threat or use of force, in accordance with universally recognised principles of international law and the 1982 United Nations Convention of the Law of the Sea’.

So both sides agreed that not only should the United Nations Convention on the Law of the Sea (UNCLOS) be a basis for resolution of disputes, but also mentioned ‘legal processes’, which could be interpreted as an implicit statement of support for the Philippines’ decision to resort to compulsory arbitration against China in accordance with Article 287, Annex VII of UNCLOS.

Both sides also emphasised the necessity of ‘non-militarisation and self-restraint’. This was particularly salient given China’s worrying deployment of surface-to-air missile systems, high-frequency radars and fighter jets to contested land features in the Paracel Islands as well as newly built facilities across artificial islands in the Spratlys.

But as the Philippines’ arbitration case reached its final stages, ASEAN suddenly began to lose steam. Things came to a head during the special foreign ministers meeting between ASEAN and China in Kunming when the Southeast Asian countries failed to release a joint statement, which forced frustrated officials in the Malaysian Foreign Minister’s Office (which initiated the high-level meeting) to release a draft joint statement.

A Minilateralist Solution

It did not take long for some ASEAN countries to shut down any hope of ASEAN centrality on the South China Sea disputes. Cambodian Prime Minister Hun Sen openly criticised the Philippines’ compulsory arbitration against China, dismissing it as a provocative act that is ‘not about laws’ and instead a ‘political conspiracy between some countries and the court’.

More disappointing, when it became clear that the Philippines scored a clean sweep victory against China (with the court nullifying China’s historic rights doctrine and much of its nine-dashed line) most ASEAN countries immediately called for patience and calm rather than compliance by claimant states to a binding decision.

 

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In a strange twist of events, the Philippine government under President Rodrigo Duterte has soft-pedalled on the issue, refusing to raise it in multilateral fora. During its 2017 chairmanship of ASEAN, the Philippines oversaw a joint statement that was ironically even less critical of China than in previous years.

It is highly unlikely that ASEAN will ever find a consensus or adopt a robust statement on South China Sea disputes. The much-vaunted code of conduct (COC) framework looks like a repackaged Declaration on the Conduct of Parties in the South China Sea, since dispute settlement mechanisms or any reference to relevant UNCLOS provisions (and Philippine arbitration) are excluded.

COC: New Hope or Mirage?

Looking at the outline of the COC framework, the ‘objectives’ of the document are ‘to establish a rules-based framework containing a set of norms to guide the conduct of parties and promote maritime cooperation in the South China Sea’. The operative term is ‘norms’, which denotes the absence of a legally binding nature. In the section on ‘principles’, this is quite clear: the document states that the final COC will not be ‘an instrument to settle territorial disputes or maritime delimitation issues’.

Key ASEAN countries like the Philippines, Vietnam, Singapore, Malaysia and Indonesia can bilaterally and individually release statements that communicate their disappointment with China’s activities in the area and relay their willingness to step up their ‘minilateral’ cooperation in the South China Sea.

ASEAN claimant states can also negotiate a parallel legally binding COC grounded in international law that can then serve as a framework for maritime delimitation. It can be more substantive and maximalist. It should call for an immediate freeze on reclamation activities, construction of military facilities, deployment of military assets and expansive illegal fishing in the area.

If ASEAN cannot embrace this minilateral approach, it runs the risk of complete irrelevance in shaping and managing potentially the most combustible conflict in the 21st century.

*Richard Javad Heydarian is a Manila-based academic, columnist and author who contributed this to RSIS Commentary. The article is partly based on a conference organised by Stratbase-ADR Institute (July 2016), and a joint workshop of the S.Rajaratnam School of International Studies (RSIS) of Nanyang Technological  University, Australian National University, and Stanford University at the Asia-Pacific Centre For Security Studies (APCSS) in October 2017.

 

https://www.rsis.edu.sg/wp-content/uploads/2017/11/CO17210.pdf

http://www.eastasiaforum.org/2017/12/05/asean-needs-to-move-to-minilateralism/

A South China Sea Code of Conduct: Is Real Progress Possible?


November 24, 2017

A South China Sea Code of Conduct: Is Real Progress Possible?

Image result for code of conduct for south china seaThe COC was never meant to solve the sovereignty disputes in the South China Sea.

 

At the recently concluded 31st ASEAN Summit Meetings in Manila, the leaders of ASEAN and China formally announced the start of negotiations on the fine print of the Code of Conduct (COC) in the South China Sea. The agreement comes just three months after the foreign ministers from both sides endorsed the framework on the COC earlier in August.

Recent progress made on the COC is seen by many as a milestone development, in light of the aggressive brinkmanship in the lead-up to the arbitral tribunal ruling in July 2016. Tension certainly appears to have calmed down significantly since, and discussions for the COC have been actively on-going since the meeting of the 19th ASEAN-China Joint Working Group on Implementation of the Declaration of Conduct in the South China Sea in February. Compared with the history of strenuous negotiations, the relatively fast pace of recent developments does appear encouraging.

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Land reclamation of Mischief Reef in the Spratly Islands in the South China Sea. AP File Photo

However, with the 2002 ASEAN-China Declaration on the Conduct of Parties in the South China Sea (DOC) yet to be fully implemented more than a decade after its adoption, one can’t help but wonder how much real progress is achievable with the upcoming negotiations. How different would the COC be from the DOC? Is this another tactic by China to buy time? How united would ASEAN be in negotiating its position vis-à-vis China?

The concept for a COC first emerged in the 1990s, but disagreements over whether it should be a legally binding document appeared soon after. In particular, China was strongly against any form of legally binding agreement, which would restrict its activities in the South China Sea. ASEAN and China agreed on the non-binding DOC in 2002 as a compromise and interim agreement with the goal to work “towards the eventual attainment of [the COC].”  Little substantial progress has been made since then.

COC Unlikely to Be Significantly Different From the DOC

So, just how significant is the agreement in Manila? Despite the undeniable diplomatic advancement, the hard truth is that the possibility for any real progress toward an effective and comprehensive agreement remains elusive. ASEAN claimant countries together with the United States hoping for a legally binding final COC are almost certain to face disappointment. China has on various occasions stated its preference for a voluntary, non-binding, or at least non legally binding COC. There also seem to be changing sentiments on this point within some ASEAN countries, notably the Philippines. In an interview in May this year, newly appointed Philippine Foreign Secretary Alan Peter Cayetano expressed wariness toward a legally binding COC, saying that he prefers the COC to first be a non-legally binding “gentleman’s agreement” among claimant countries. He stressed that the COC should be binding, just not legally binding.

At this point it appears that COC will likely be heavily based on the provisions already in the current DOC. This means an exclusion of any provisions for enforcement mechanisms in cases of violation. While the exclusion is understandable due to practical considerations including financial concerns, as with the lack of enforcement clauses in most ASEAN agreements, the effectiveness of the final COC would be highly compromised.

China’s Strategic Calculations

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Chinese Foreign Minister Wang Yi at the 50th ASEAN Foreign Ministers’ Meeting. Manila, the Philippines, August 6, 2017. (Aaron Favila/Associated Press). China is calling the shots on the South China Sea. It is never going to stop its island-building and militarization activities, despite agreeing to negotiate on the COC.

https://theglobalobservatory.org/2017/08/south-china-sea-code-of-conduct-asean/

China’s agreement to restart negotiations for the COC should be viewed with a pinch of salt. The timing of Beijing’s decision to re-engage is in fact very telling. The July 2016 arbitration ruling and Beijing’s refusal to abide by it had eroded China’s image as a good neighbor to its smaller ASEAN counterparts — an image that Beijing worked so hard to instill since the policy of good neighborliness was introduced by then-President Jiang Zemin in the 1990s. It also called into question China’s self-proclaimed commitment to the rules-based international order, and the pronounced benign intentions behind Xi Jinping’s Belt and Road Initiative.

Apparent progress on the COC made this year can thus be viewed as Beijing’s attempt to calm discontent and suspicion in the region. Since the arbitration ruling, Beijing has been active in trying to rebuild its image in the region. Not long after the July 2016 ruling, Beijing announced the end of a fishing blockade around the disputed Scarborough Shoal, granting access to Filipino fisherman. By going back to the negotiating table, Beijing is extending an olive branch to its ASEAN neighbors.

Beijing’s extension of goodwill, however, is seen by many observers as a delaying tactic. It is of no doubt that China is never going to stop its island-building and militarization activities, despite agreeing to negotiate on the COC. The veil of cooperation and mutual trust created by re-starting COC negotiations will in fact buy China time to complete its ambitions in the South China without constant harsh criticism from ASEAN.

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Acceding to ASEAN’s long time request for COC negotiations will also help keep at bay any unwanted U.S. interference in the region. Chinese Foreign Minister Wang Yi made it clear in an interview in August that any substantive negotiations on the COC can only occur in the absence of outside disturbances, clearly alluding to moves by the United States. Despite President Donald Trump’s offer to mediate the conflict in Vietnam, it is unlikely that any ASEAN country would want to undermine the goodwill offered by Beijing by bringing Washington into the COC negotiations.

ASEAN’s Pivot to China

Progress made in the COC must be seen as part of Beijing’s charm offensive since the July 2016 ruling. Beijing’s extension of olive branches toward individual ASEAN countries has been more than successful. Since coming into power, Philippine President Rodrigo Duterte has opted to shelve the arbitration ruling, which almost entirely found in his country’s favor, in exchange for stronger economic cooperation with China. The decision was immediately rewarded with huge tangible benefit in terms of trade deals amounting to $13.5 billion during Duterte’s visit to China in October 2016.

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Prime Minister Najib Razak shakes hands with China’s Premier Li Keqiang: China is buying up strategic assets in Malaysia.

Duterte’s visit triggered a domino effect across Southeast Asia. Malaysia has also shown signs of leaning closer to China, as both sides agreed on the flagship East Coast Rail Link (ECRL) project aimed at linking Port Klang to Kuantan Port. In his recent visit to Vietnam, Xi offered his Vietnamese counterpart 12 cooperation pacts across wide ranging areas, in addition to the $1.94 billion worth of deals signed before Xi’s trip. At the same meeting, both countries reached a consensus on peacefully handling their maritime disputes in the South China Sea.

China’s economic might is a fact every country in Southeast has to come to terms with. There are huge economic benefits to be reaped from the Belt and Road and ASEAN countries cannot risk being left out. Beijing knows this well and is a master of pitting ASEAN countries against one another.  Singapore was the only ASEAN state to openly call for China to respect the tribunal ruling, and this was faced with strong backlash from China. Some analysts have argued that China’s decision to invest in Malaysia’s ECRL project is a strategic consideration, as the railway linking the east to west coast of peninsula Malaysia will slash 30 hours of travel time for cargo shipping through the Port of Singapore. The ECRL, together with Chinese investments in a deep-sea port in Malaysia are cause for concerns for Singapore, a country highly dependent on sea-borne trade for its economic prosperity. Other “stick” measures from China include the detention of Singapore’s Terrex vehicles in Hong Kong and the non-invitation of Singapore’s Prime Minister Lee Hsien Loong to the inaugural Belt and Road Summit.

What Can a Limited COC Achieve?

Although Singapore continues to maintain its position on respect for international law and freedom of navigation in the South China Sea, it has nonetheless been less vocal on the issue in recent months. With growing economic dependency on China among ASEAN countries, it is not difficult to image a situation similar to the 2012 ASEAN Summit in Phnom Penh, Cambodia repeating itself in upcoming negotiations for the COC.

China is in a position to use its economic prowess to pressure for provisions beneficial to Beijing, as well as divide ASEAN on key issues such as whether the COC should be legally binding. Ultimately, it is likely that the final COC would be based off a lowest common denominator, meaning it is unlikely to make any real progress in halting Chinese advancements in the South China Sea.

That being said, the COC was never meant to solve the sovereignty disputes in the South China Sea. Although it also seems unlikely that it will help freeze Chinese island building in wake of any settlement, a COC is still useful as a confidence-building mechanism to help improve trust and mutual understanding to help facilitate cooperation.

In addition, it might also work as a crisis-management and prevention mechanism in the region. According to Ian Storey, senior fellow at the ISEAS-Yusof Ishak Institute, the COC is likely to include new provisions for the prevention and management of incidents at sea. If true, the COC could join the Code for Unplanned Encounters at Sea (CUES) in making the South China Sea safer for all seafarers.

Lee YingHui is Senior Analyst with the Maritime Security Program at the S. Rajaratnam School of International Studies, Nanyang Technological University.