ASEAN at 50: Challenges and Opportunities for Cambodia


April 18, 2017

ASEAN at 50: Challenges and Opportunities for Cambodia

by Kimkong Heng

http://ippreview.com/index.php/Blog/single/id/406.html

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In August 2017, ASEAN (the Association of Southeast Asian Nations) will be 50 years old. ASEAN was established on August 8, 1967 in Bangkok by the five founding member countries, namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand. The major aims for the birth of ASEAN were to encourage economic cooperation, promote regional peace and stability, and create platforms for mutual assistance and collaboration in economic, social, cultural, technical, educational and administrative areas. The concepts of non-interference in one another’s internal affairs, and the peaceful settlement of interstate disputes are, among others, the fundamental principles to which ASEAN tries to adhere.

Throughout these 50 years, ASEAN has both faced challenges and at the same time enjoyed prosperity as it weathered many storms in its own region, the larger Asia-Pacific region, and the global arena. Cambodia, which will celebrate her eighteen years in ASEAN late this April, has had to confront the challenges and seize the available opportunities this regional group has had to offer. To informally commemorate the 50th anniversary of ASEAN and to toast Cambodia’s 18th birthday in ASEAN, this article will examine the potential challenges and opportunities Cambodia, a small state and the youngest ASEAN member, has experienced and will likely experience in the immediate and distant future.

Fifteen years ago, a Cambodian scholar predicted that Cambodia would face three categories of challenges while it was trying to secure its place in the regional association. In the short-term, during its preparation for ASEAN membership, Cambodia would face many obstacles including its lack of human and financial resources, poor legal framework, and weak institutional organization. In the medium- to long-term, Cambodia would have to address economic, diplomatic, and financial challenges, as well as tackle challenges related to national prestige, borders, sovereignty, legal and institutional framework reform, and lack of strategic thinking.

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Cambodia at Sunrise–Calm, Serene and Captivating

Over a decade later, many ASEAN observers and commentators also saw challenges which lay ahead for Cambodia as she prepared to join the ASEAN Economic Community (AEC). Sowath Rana and Alexandre Ardichvili, for example, listed six main human resource development (HRD) challenges Cambodia would face as it joined the AEC in 2015, including the education and employment mismatch, higher education challenges, technical and vocational education and training challenges, HRD challenges in the private sector, limited awareness and engagement in ASEAN and AEC processes, and technology infrastructure challenges.

Amongst all the challenges, however, this article argues that the strategic challenge — mediating ASEAN and China over the South China Sea issue — is Cambodia’s greatest challenge at present. Cambodia has been criticised twice for her decision to ally herself with China and block ASEAN from issuing joint communiqués which criticize China for her assertiveness and expansionist policy in the South China Sea. With the South China Sea dispute still on the horizon, Cambodia is likely to face this strategic challenge again because this small state cannot afford to lose China for ASEAN or vice versa.

Cambodia has taken advantage of her ASEAN membership to salvage her once non-existent relations with ASEAN member states and ASEAN Dialogue Partners.

Although Cambodia is not one of the claimant states involved in the South China Sea conflict, her membership in ASEAN puts her in a difficult position to help settle the disagreement between her ASEAN counterparts and her closet ally, China. Thus, it is a big challenge for Cambodia to strike a good balance in her endeavors to help mediate between the conflicting parties. As China is described and seen as Cambodia’s most trustworthy friend and largest provider of aid, loans, and grants, the possibility of seeing Cambodia jump on China’s bandwagon could not be higher.

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GDP Real Growth in Excess of 7.5 per cent p.a over the last 2 decades

Furthermore, to expect Cambodia to act against her own national interests in order to preserve ASEAN’s centrality is highly unlikely to happen, even though ASEAN remains the cornerstone of Cambodia’s foreign policy. In this regard, the next chapter of Cambodia’s foreign policy will definitely play out in favor of China despite peer pressure from the ASEAN states.

Opportunities for Cambodia

Despite these many challenges, there are enormous opportunities for Cambodia as an ASEAN member. From economic to social advantages, and from diplomatic to strategic benefits, Cambodia has enjoyed and will continue to enjoy tremendous opportunities as the country strives to keep up with its more developed ASEAN friends and exert its influence on the region.

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Angkor Wat in Siem Reap–Steadfast, Dependable and True Symbol of an Emerging Cambodia

Economically, Cambodia has greatly benefited from ASEAN as it joined the ASEAN Free Trade Area in 1999 and the World Trade Organization in 2004. It has also attracted foreign direct investment from ASEAN member states, particularly Thailand and Vietnam. While Thailand and Cambodia have agreed to strengthen cooperation in bilateral trade and investment, the two-way trade volume between Vietnam and Cambodia, according to Khmer Times, reached USD 3.37 billion in 2015 and USD 2.38 billion in 2016. These figures, however, were below the 2015 target of USD 5 billion both countries have pledged.

In terms of social prospects, Cambodia’s ASEAN membership has helped to increase opportunities for Cambodians through the mobility scheme for skilled labor, improved access to cheaper and a wider range of imported goods and services, and improved education and health services in the Kingdom. More importantly, by joining the ASEAN and later the AEC, people-to-people connectivity between Cambodia and the other ASEAN members has increased.

As for the diplomatic gains, Cambodia has taken advantage of her ASEAN membership to salvage her once non-existent relations with ASEAN member states and ASEAN Dialogue Partners, particularly Australia, China, Japan, and the United States. Until more recently, Cambodia’s foreign policy has significantly been strengthened and Cambodia has put in a great deal of effort to upgrade its diplomatic relations with its nearest neighbors, ASEAN members, and regional and global powers.

Noticeably, Cambodia-Russia bilateral relations have recently been restored and strengthened, with exchanges of high-level visits and greater mutual support and cooperation between the two countries. Likewise, Cambodia-China bilateral relations have reached a new historic high, with Xi Jinping’s first presidential visit to Cambodia last year, immediately following Cambodia’s refusal to partake in an ASEAN joint communiqué critical of China’s claims and policies in the disputed territory in the South China Sea.

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Phnom Penh –The Pulse of The Kingdom of Cambodia

Strategically, Cambodia’s geopolitical location and ASEAN status, together with current political developments in the region, have granted this small state a special privilege to assert its influence and exercise its power in the regional group and the wider Asia-Pacific region. If Cambodia were not an ASEAN member, she would have found it hard to capture Chinese attention and enjoy China’s financial aid — with its controversial no-strings-attached policy — arising from Cambodia’s intervention in the territorial dispute over the South China Sea.

Thus, in spite of the great challenges, Cambodia seems to be able to grasp considerable opportunities along its zigzag ASEAN path. In this respect, it might not be wise to weigh the challenges against the opportunities for Cambodia because it has been a mixed blessing for the country. It would be best, nevertheless, for Cambodia to continue to engage with countries in the region and regional initiatives like the Greater Mekong Subregion and ASEAN, or else it will run the risk of becoming too dependent on China.

Kimkong Heng is an Assistant Dean, School of Graduate Studies and a doctoral candidate in International Relations, Techo Sen School of Government and International Relations, The University of Cambodia, Phnom Penh, Cambodia.

Cambodia: Time for the United States to cancel its 1970 Dirty Debt


April 16, 2017

Cambodia: Time for the United States to cancel its 1970  Dirty Debt

by Kongkea Chhoeun@www.eastasiaforum,org

The Cambodian government has once again called on the United States to cancel its US$500 million debt. In the 1970s, the Cambodian government borrowed about US$270 million to purchase food supplies. This debt was never repaid and has now swollen to US$500 million. This is equivalent to 15 per cent of Cambodia’s 2016 national budget and about half the total aid the country has received from the United States since the peace settlement of 1991.

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Cambodia and the United States have been negotiating the debt since 1995 but have failed to come close to an agreement. The latest appeal by Cambodian Prime Minister Hun Sen likely stems from the Cambodian People’s Party’s (CPP) anxiety about its popular support ahead of the 2017 local government election. By exploiting public sentiment in support of debt cancellation, the CPP can position itself as the champion of the Cambodian people.

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Richard Nixon and Henry Kissinger : The Bombers of Cambodia–Time for the US to atone for their criminality

But the call also has merit. The Cambodian government has consistently argued that this is ‘dirty’ debt. It maintains that the Lon Nol government, which came to power in March 1970 through a US-backed coup, borrowed the funds to buy weapons that were used against the Khmer Rouge in the civil war of the early 1970s. The CPP also argues that Cambodia deserves debt forgiveness because of illegal bombing carried out by the United States from March 1969 until August 1973.

During this period, US warplanes dropped more than 500,000 tons of explosives on Cambodian villages along the Cambodia–Vietnam and Cambodia–Lao borders. Up to 500,000 lives were consequently lost. Moreover, the secret bombing campaigns and the US-supported coup created the conditions for the rise of the genocidal Khmer Rouge regime that killed almost 2 million Cambodians between 1975 and 1979.

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Former US Secretary of State John Kerry and US Ambassador to Cambodia William Heidt

The United States has consistently refused to completely cancel the debt but has long indicated that it is willing to negotiate a partial cancellation. US Ambassador to Cambodia William Heidt was recently quoted in local press as saying that the United States has, ‘never seriously discussed or considered cancelling the debt’ but is willing to ‘[work] out a deal that works for both sides’.

The deal that the United States has in mind is no doubt similar to the one it struck with Vietnam in 2000. That year, the United States enacted a repayment-for-assistance program after Vietnam signed a bilateral agreement in 1997 and resumed making scheduled payments of its debt. The US Congress created the Vietnam Education Foundation, into which is channelled about 40 per cent of Vietnam’s total debt payments to the United States. The Foundation provides opportunities for Vietnamese nationals to pursue graduate and post-graduate studies in the United States and for US citizens to teach in Vietnam.

It is certainly in US interests to settle the Cambodian debt as soon as possible. Cambodia has drawn closer and closer to China over the last two decades. As a small, poor and insecure state surrounded by two bigger, historical enemies, Cambodia needs China as insurance against Vietnam and Thailand. More importantly, Cambodia’s political regime increasingly depends on China for foreign capital to sustain the economic performance needed to maintain its political legitimacy. Foreign direct investment from China reached US$857 million in 2015 or roughly 61.1 per cent of total FDI. Chinese aid to Cambodia amounted to US$320 million in 2015 or roughly 30 per cent of total aid received.

Cambodia’s closer links with China benefit China’s strategic interests too. Cambodia closed Taiwan’s representative office in Phnom Penh in 1997. In 2010, Cambodia deported 20 Uyghur nationals and Chinese citizens to China. In July 2012, Cambodia prevented ASEAN from issuing a joint statement over the South China Sea issue. Once again in July 2016, Cambodia blocked any reference in an ASEAN statement to a UN-backed court’s ruling against Beijing’s claims to the South China Sea.

Data from the Council for the Development of Cambodia shows that the United States has granted US$1.13 billion to Cambodia since 1992. But no matter how much aid the United States has already generously given to improve the lives of Cambodians since the early 1990s, if the United States wants to regain influence in Cambodia, it needs to forgive the debt.

It is unclear why a compromise similar to the US–Vietnam deal has not been struck between the United States and Cambodia. In any case, Cambodia appears to bear little penalty for not repaying its debt. It can access the foreign capital it needs, mainly from China. It also borrows from the World Bank and the Asian Development Bank.

Given this, even partial repayment from Cambodia is unlikely. So the logical step forward is for the United States to write off the debt. But this is unlikely, especially under the Trump administration. The result will be to push Cambodia deeper into China’s orbit.

Kongkea Chhoeun is a PhD candidate at the Crawford School of Public Policy, The Australian National University.

 

Cambodia: Stability, Security and Economic Growth amidst Geo-Political Uncertainties remains top priority


March 22, 2017

Cambodia: Stability, Security and Economic Growth amidst Geo-Political Uncertainties remains top priority

by Dr. Sorpong Peou

http://www.newmandala.org

Cambodia’s ruling party is seeking to shore up its chances of electoral success with recent changes to the rules governing political parties, Sorpong Peou writes.

Much has been written about the Cambodian culture of impunity as an obstacle to democratic development, but what is still least understood is the fact that the persisting culture driven by the fear of personal retribution (actual or perceived) has been a principal threat to democracy.–Dr. Peou

Is Cambodia heading towards a single party dictatorship? This is a legitimate question after the Cambodian government took a drastic but unsurprising step in February 2017 to amend the law on political parties – a step that its critics consider undermines liberal democracy. In my view, Cambodia has not resembled any form of liberal democracy since 1997, and the existing hegemonic party system is likely to remain.

If and when it comes into effect, the amended party law will allow the Supreme Court to dissolve any political party with leaders who have criminal records and to bar such party leaders from standing for political office for five years. Moreover, the new law requires that any party that loses its President find a replacement within 90 days of the King’s signature.

The amended law will also allow the Ministry of Interior to suspend indefinitely any political party that the government considers to be involved in activities resulting in an “incitement that would lead to national disintegration” and subversion of “liberal multi-party democracy.”

The amendments were designed to ensure that the Cambodian People’s Party (CPP) led by Prime Minister Hun Sen will remain politically dominant, but not to eliminate opposition parties. They were intended to further empower two CPP-dominated state institutions – the Supreme Court and the Ministry of Interior – to prevent opposition parties, especially the Cambodian National Rescue Party (CNRP), from winning enough seats to form a government.

The CPP does not want to see the 1992 or the 2013 national election repeated. It lost the UN-organised election in 1992, but forced the winning party (led by the Royalists) to share power, and then removed the royalist prime minister from power by force in July 1997.

The multi-party system has since weakened, giving rise to a hegemonic party system, with the CPP as the dominant power. However, the party was badly shaken by the 2013 election results: it won only 68 seats (compared to the 55 seats gained by the CNRP), leaving it with fewer seats than the previous elections.

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Attempts by Hun Sen to seek reconciliation with CNRP’s Sam Rainsy has not been successful

After the 2013 election, the CPP leadership did a lot of soul searching and took a number of steps to weaken the CNRP. Opposition politicians have been subject to intimidation and litigation. Sam Rainsy, ex-President of the CNRP and opposition leader (in exile since 2015), has been sentenced to a total of seven years in prison. CNRP Vice-President Kem Sokha had been subject to criminal prosecution and sentenced to five months in prison (for not showing up in court for a dubious lawsuit against him) before he received a pardon from the King at Hun Sen’s request.

All this goes to show that the CPP leadership was well aware of the fact that it would not do well in the upcoming commune election in June 2017 and the National Assembly election in 2018 – if the CNRP could have its way. After the July 2016 killing of Kem Ley, a popular political commentator known for his strong criticism of the government, the CPP has become increasingly unpopular with growing public anger directed toward them.

Government officials have confidentially indicated that the CPP is determined not to lose in the upcoming elections and that it would not transfer power to any winning party if it lost. The amendments to the party law were just another step the CPP has taken as part of its pre-emptive measures designed to avoid the repetition of the 1992 and 2013 elections.

Much has been written about the Cambodian culture of impunity as an obstacle to democratic development, but what is still least understood is the fact that the persisting culture driven by the fear of personal retribution (actual or perceived) has been a principal threat to democracy.

Top members of the CPP elite remain as insecure as ever. What else can explain the fact that the (CPP) Prime Minister has up to 6,000 personal bodyguards? Opposition members have called CPP leaders traitors and threatened to bring them to justice for their past human rights violations (perhaps including some of those committed under the murderous Pol Pot regime) and rampant corruption. CPP leaders, thus, appear to believe that their political fate would be sealed if they lost the elections.

It is reasonable to assume that the CPP is not interested in turning the country into a single-party dictatorship, as some commentators think. The ruling party would be happy if it could just maintain a party system that would allow it to remain dominant and secure.

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 Cambodia has enjoyed peace, stability and sustained economic growth since 1998

The CPP’s behaviour may s also help explain weak reactions from members of the international community, especially donors, some of whom seem to prefer political stability under a CPP leadership to chaotic democratic politics. Others may simply have come to the realisation that there is not much they can do to weaken the CPP’s grip on power.

Over the past several years, CPP leaders have worked harder to deepen their relations with two powerful authoritarian states – Russia and China. China has emerged as Cambodia’s largest donor. Sino-Cambodian relations have grown much tighter in recent years. The harsh reality is that the CPP leadership remains suspicious of Western democracies’ regime-change agendas and wary of any criticisms directed at the human rights situation in Cambodia.

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The current global political environment also does not allow democracy in Cambodia to thrive. The looming return of fraught geopolitics (the rise of China, the escalating tension in the South China Sea, the ongoing confrontation between Russia and the West over Crimea and Ukraine), the rise of right-wing forces in Europe and the United States, and the persistence of authoritarianism in Southeast Asia – have all produced negative effects on Cambodian politics.

Dr. Sorpong Peou is Full Professor in the Department of Politics and Public Administration at Ryerson University, Canada, and a member of the Yeates School of Graduate Studies.

This article is a collaboration with Policy Forum — Asia and the Pacific’s leading platform for policy analysis and debate.

Hoping for the Best Against Trump


January 30, 2017

Hoping for the Best Against Trump

By Ian Buruma

https://www.project-syndicate.org/commentary/hoping-against-trump-by-ian-buruma-2017-01

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Is there any reason for liberals to feel optimistic after a year of political disasters? Is there even a shred of silver lining to be found in the tatters of Brexit, Donald Trump’s election, and European disunity? Christians believe that despair is a mortal sin, so one might as well try to find a glimmer of hope.

In the United States, many liberals console themselves with the belief that the obvious dangers of being governed by an ignorant, narcissistic, authoritarian loudmouth backed by billionaires, ex-generals, peddlers of malicious fake news, and neophytes with extreme views will help to galvanize a strong political opposition. Trump, it is hoped, will concentrate the minds of all who still believe in liberal democracy, be they left or even right of center.

In this scenario, civil-rights groups, NGOs, students, human-rights activists, Democratic members of Congress, and even some Republicans, will do everything in their power to push back against Trump’s worst impulses. Long-dormant political activism will erupt into mass protest, with resurgent liberal idealism breaking the wave of right-wing populism. Well, perhaps.

Others seek comfort in the expectation that Trump’s wildly contradictory plans – lower taxes, while raising infrastructure spending; helping the neglected working class, while slashing welfare and repealing the Affordable Care Act – will suck his administration into a swamp of infighting, incoherence, and incompetence.

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All these things might happen. But protest alone won’t be of much help. Anti-Trump demonstrations in big cities will no doubt annoy the self-loving new president, and the moral glow of joining the resistance will warm the protesters. But without real political organization, mere protest will go the way of Occupy Wall Street in 2011; it will peter out into ineffectual gestures.

One of the most dangerous ideas of contemporary populism is that political parties are obsolete, and should be replaced by movements led by charismatic leaders who act as the voice of “the people.” By implication, all dissenters are enemies of the people. That way lies dictatorship.

Liberal democracy can be saved only if mainstream parties can regain voters’ trust. The Democratic Party must get its act together. “Feeling the Bern” (the mantra of Bernie Sanders’ leftist campaign) will not suffice to stop Trump from inflicting great harm to institutions that were carefully constructed more than two centuries ago to protect American democracy from demagogues like him.

The same thing is true of international arrangements and institutions, whose survival depends on the willingness to defend them. Trump has expressed his indifference to NATO, and US security commitments in East Asia. His election will further erode Pax Americana, already battered by a succession of foolish wars. Without the US guarantee to protect its democratic allies, institutions built after World War II to provide that protection would not survive for very long.

Perhaps there is a tiny ray of hope in this gloomy prospect. Europe and Japan, not to mention South Korea, have become too dependent on US military protection. The Japanese have fairly large armed forces, but are hampered by a pacifist constitution written by Americans in 1946. Europeans are completely unprepared to defend themselves, owing to inertia, complacency, and lassitude.

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It is just possible that Trump’s blustering “America first” rhetoric will galvanize Europeans and East Asians into changing the status quo and doing more for their own security. Ideally, European countries should build an integrated defense force that would be less dependent on the US. And the countries of Southeast and East Asia could construct a Japanese-led variant of NATO to balance the domineering might of China.

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But even if these arrangements came to pass (a huge if), it would not happen soon. Europeans are unwilling to pay higher taxes for their own defense. Germany has neither the wherewithal, nor the will to lead a military alliance. And most Asians, including many Japanese, would not trust Japan to lead such a coalition in Asia. The current Japanese government, under Prime Minister Shinzo Abe, would like to revise the pacifist constitution, as a necessary first step toward weaning the country off its total dependence on the US. But Abe’s revisionism is rooted in a nationalist ideology, which is prone to justifying historical atrocities instead of drawing lessons from them. This alone disqualifies Japan from leading others in a military pact.

So, while it might be time to rethink the world order built by the US on the ruins of WWII, the Trump presidency is unlikely to bring this about in a careful and orderly manner. His election is more like an earthquake, unleashing forces no one can control. Instead of encouraging the Japanese to think about collective security in a responsible way, Trump’s indifference is more likely to play to the worst instincts of panicky Japanese nationalists.

Europe is in no shape to rise to the challenge of Pax Americana’s erosion, either. Without a greater sense of pan-national European solidarity, European institutions will soon become hollow, and perhaps even cease to exist. But this sense is precisely what the demagogues are now undermining with such conspicuous success.

If there is reason for confidence, it is not in the liberal democratic world, but in the capitals of its most powerful adversaries: Moscow and Beijing. Trump, at least in the short term, seems to be good news for Russian President Vladimir Putin and his Chinese counterpart Xi Jinping. Without credible American leadership, or a strong alliance of democracies, there won’t be much left to restrain Russian or Chinese ambitions.

This might not lead to catastrophe in the next few years. Russia and China are more likely to test the limits of their power slowly, bit by bit: Ukraine today, perhaps the Baltics tomorrow; the South China Sea islands now, Taiwan later. They will push, and push, until they push too far. Then anything may happen. Great powers often blunder into great wars. This is no reason for despair, as we begin the New Year, but no reason to be optimistic, either.

ASEAN to-do List in 2017


January 30, 2017

ASEAN to-do List in 2017

by Dr. Munir Majid@www.thestar.com.my

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IT is not business as usual. As ASEAN’s array of official and private sector meetings roll out for the year, urgent thought must be given to dramatically new challenges beyond the stubborn issues that continue to arrest the region’s meaningful integration.

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The Alternative to Donald Trump’s Rejection of TPP–China’s Gain, America’s Loss

The advent of Donald Trump as President of the United States has overturned many regional assumptions and threatens to cause economic as well as political turmoil. These developments should make ASEAN think crisis management – even if, in the end, the worst does not happen.

There are a number of “what ifs” which should be addressed. What if Trump causes a trade war to break out between America and China by imposing the punitive import duties on Chinese goods that he has threatened?

It will then not be a simple outcome of relocation of manufacturing centres from China to low-cost Vietnam, for instance, as some have rather sanguinely suggested. The supply chains to which many ASEAN exports are linked for the finished Chinese product would be broken. There will be export disruption – not just for China.

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There are countries in ASEAN, apart from Vietnam (90%), like Singapore (176%), Thailand (69%) and Malaysia (71%) whose exports amount to a substantial proportion of their GDP.

On top of exports through China, their own direct exports to the US will also be affected, as will any relocated exports from Vietnam.

There will be no winners in a trade war, no benefits to be derived from China’s apparently singular predicament. The knock-on effect will be widespread. In time, as excess capacity looks for export sales, dumping will become a problem, as will protection against it.

Motor cars that cannot get into America will have to go somewhere. Steel turned away from the US as Trump seeks to protect mills and jobs in the mid-west will have to be shipped somewhere else. Even the textile industry will be spinning in different directions as Trump has promised to revive it in America.

The whole global free trade ecosystem will go topsy-turvy. How will free trade within the ASEAN Economic Community, such as it is, be maintained? Can ASEAN+6 move on to the Regional Comprehensive Economic Partnership (RCEP) as the fallout from Trump’s America First trade policy hits the world?

Asia – and ASEAN – will have to stick together and carry on with the open, albeit reduced, global free trade and investment system. Will that happen? Some ASEAN states with larger domestic economies are less dependent on international trade than others. Already, now, they take a different position on opening up their market. Will it get worse in the situation of stress, should it come about?

ASEAN must talk about these possibilities now, before they happen. Someone must take the lead. Too often this does not happen in ASEAN. Can the officials, or the secretariat, or the private sector do this scenario-setting for the ministers, for the leaders? Or is Asean going to carry on as if everything is not changing around it?

I am reminded of what George Orwell has been said to have remarked: In a time of universal deceit, telling the truth is a revolutionary act. The tendency to take to the Asean level what routinely happens in many ASEAN domestic systems should be snapped. Some functionary in ASEAN must warn the regional grouping of the dire threat facing it.

The other challenge facing Asia and ASEAN is the risk Trump poses to regional peace and stability.

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This comes from the challenge again thrown at China, this time in respect of its claim to the South China Sea. As China’s predominance in the disputed expanse of territory is by no means ideal, its exposure to a more counter-assertive and belligerent American stance under Trump – no Chinese access to islands artificial or militarised that do not belong to China “under international law” – may encourage claimant ASEAN states to be less compliant with the China-set path of dispute management.

Since the law of the sea tribunal decision last July, there has been a lowering of temperature in the South China Sea dispute, even if at the cost of not highlighting the baselessness of China’s claims under international law. The return has been a commitment by China in the diplomatic channeling with ASEAN to having a code of conduct (COC) finally in place this year – although only in framework form.

It has been a long-term ASEAN objective to have this COC for peaceful conduct in the South China Sea. China has hitherto been dragging its feet on this. With a more assertive American policy against China, would there be among ASEAN states a disposition to push with the US to get a better deal on the South China Sea?

This kind of geopolitical arbitrage may be attractive, but it would come at a longer-term cost to regional cooperation, which has become critical because of Trump’s foreign economic and trade policies. This is a dilemma ASEAN states would do well to address together.

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India flirting with Trump’s USA?

Already, beyond ASEAN, India appears attracted to taking advantage of the predicament China might be in with Trump. India, of course, has long-standing border disputes with China, which Beijing has been happy to keep unresolved. At the same time, there is strategic competition between the two over their regional place in Asia.

Another could be Japan which, again, has many unresolved disputes and issues with China. As usual, India, in particular, appears to want to flirt with Trump even at the cost of frustrating conclusion of the RCEP. The cost to India, however, could be isolation from the Asia-Pacific region for an uncertain alliance with Trump’s America.

You cannot do strategy with a counter-party whose leitmotif is transactional. With Trump it is not going to be win-win. It is going to be win-win-win for America, given his America First posturing.

ASEAN states should want to address these profound issues. Even dissuade member and partner countries from wanting to sup with the devil, as it were.

China, of course, has not been the ideal big country partner beyond platitudinous statements and suffocation of ASEAN with money. Its actions in the South China Sea are not indicative of a great power that will not grind your face in the dirt if you did not do its bidding.

Will China become the good big brother it claims it wants to be, even as America becomes the bad and ugly one? It looks like ASEAN might be caught between a rock and a hard place. Individual member states no doubt will be doing their calculation with the hope to position themselves in a better than survival mode.

However they will all be better off if they also worked together among themselves and partnered Asia-Pacific countries to achieve better economic integration, whose benefit will discourage them from playing dangerous geopolitical games.

So, as ASEAN under Philippines leadership looks at themes such as inclusive growth, an excellent focus, and addresses the many stubborn issues that are barriers to better integration, it must prepare also for the very difficult economic and political environment which will be fashioned by the Trump administration.

Tan Sri  Dr. Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

 

Cambodia: Sustaining high economic growth


January 1, 2017

Cambodia: Sustaining  high economic growth 

by  Heng Pheakdey, Enrich Institute

http://www.eastasiaforum.org/2017/01/01/keeping-cambodia-competitive-beyond-2016/

Here Comes Cambodia: Asia’s New Tiger Economy

After decades of conflict and poverty that captured the world’s attention, Cambodia has enjoyed five years of high economic growth that is moving it toward becoming one of the new tiger economies of Asia, according to forecasts in the Asian Development Bank’s Asian Development Outlook 2016.

For the last two decades Cambodia has been one of the fastest growing countries in Asia with an average annual GDP growth rate of 8.1 per cent.

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Cambodia has been highly successful in embracing the ‘factory Asia’ model of growth, supplying its low-cost labour to export-oriented industries. Economic progress in recent years has allowed Cambodia to invest in physical and social infrastructure, attract foreign direct investment, create jobs and lift millions of its people out of poverty. The Asian Development Bank called Cambodia Asia’s new ‘tiger economy’.

Cambodia’s economic performance in 2016 remained robust, with growth continuing at 7 per cent. Strong garment sector exports and foreign investment in construction drove this economic performance. Exports in the garment and footwear industries rose by 9.4 per cent in the first half of the year, almost double the pace in the same period of 2015 thanks to improved production processes and high demand from the European market. As of September 2016, the value of approved commercial projects in the construction sector more than doubled to US$7.2 billion. Imports of construction equipment and materials also increased to support the construction boom.

But solid growth in the industrial sector has been offset by a slowdown in agriculture and tourism. Unfavourable weather conditions and falling commodity prices have resulted in agriculture’s sluggish performance, which grew at a rate of only 0.2 per cent in 2014–2016. Tourism also underperformed in early 2016 due to a decline in tourist arrivals from Vietnam, Laos and South Korea. 1.3 million tourists visited Cambodia in the first quarter of the year, a mere 2.6 per cent increase compared to the same period in 2015.

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The World Bank reclassified Cambodia in July 2016 as a lower middle-income country after its gross national income per capita reached US$1070 in 2015, surpassing the minimum threshold of a lower middle-income nation of US$1026. While this sign of progress should be welcomed, it comes with its own set of challenges. Analysts fear that this new classification will reduce Cambodia’s benefits from international foreign aid and preferential trade agreements that the country enjoyed while still a ‘least developed country’.

To prepare for the anticipated reduction in international assistance and trade privileges, Cambodia needs to strengthen its competitiveness, diversify its economy and upgrade its industries.

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Although garment exports have held up well so far, the sector remains narrowly based and concentrated on a few markets, making it vulnerable to external shocks. To preserve Cambodia’s attractiveness relative to its regional competitors such as Vietnam and Bangladesh, it must diversify into higher value products and services and strengthen labour productivity to reflect the rise of the minimum wage.

The modernisation of agriculture would also help to sustain productivity in the long run. Employing more than half of Cambodia’s labour force, agriculture has contributed significantly to poverty reduction. But high reliance on rain-dependent rice production, slow adoption of quality seeds and inadequate agricultural extension services and irrigation facilities remain key constraints in the sector. Diversifying to less water intensive crops, developing the agribusiness and agro-processing industry, promoting a modernised value chain and cost effective logistics are crucial to put agriculture back on a higher growth path.

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Efforts have been made so far to support economic diversification. The Cambodia Industrial Development Policy was launched in March 2015 to transform and modernise Cambodia’s industrial structure from a labour-intensive industry to a skill-driven industry by 2025. This implies increasing the GDP share of the industrial sector, diversifying goods exports including non-textiles and processed agricultural products and modernising the registration of enterprises. The policy also supports stronger regulations and enforcement and helps create a more favourable business environment.

Domestic investors also have an important role to play in the diversification process. Experts believe that the success of Cambodia’s economy will be driven by local entrepreneurs and the private sector, not by international donor assistance. Providing support to domestic investors in trade facilitation, logistics, infrastructure and human capital is just as important.

Cambodia faces many challenges to stay competitive. To realise its vision of becoming an upper middle-income country by 2030 requires strong commitments to address infrastructure bottlenecks, build a high-quality human capital base, strengthen natural resource management, enhance governance and improve financial services and the business environment.

Heng Pheakdey is the founder and chairman of Enrich Institute.