ASEAN Economic Community: Shining light of the East


May 24, 2016

Ten countries in Southeast Asia are attempting to launch a single market for goods, services, capital, and labor, which has the potential to become one of the largest economies and markets in the world. Here are 12 things to know about the ASEAN Economic Community.

  1. The center of global economic gravity is shifting toward Asia. Within Asia, it is shifting toward the two giant economies of the People’s Republic of China and India. Their emergence as economic superpowers suggests that “economic size” bestows significant advantage in accelerating growth and fostering development.
    Source: ADBI. 2014. ASEAN 2030: Toward a Borderless Economic Community
  2. The Association of Southeast Asian Nations (ASEAN) is in the process of creating a single market and production base, called the ASEAN Economic Community, which will allow the free flow of goods, services, investments, and skilled labor, and the freer movement of capital across the region. This is envisioned to be in place by 31 December 2015.
    Source: 24th ASEAN Summit. 2014. Myanmar. Nay Pyi Taw Declaration
  3. If ASEAN were one economy, it would be seventh largest in the world with a combined gross domestic product of $2.4 trillion in 2013. It could be fourth largest by 2050 if growth trends continue.
    Source: Speech by ADB Vice-President Stephen Groff. 2014. Berlin, Federal Republic of Germany. ASEAN Integration and the Private Sector
  4. With over 600 million people, ASEAN’s potential market is larger than the European Union or North America. Next to the People’s Republic of China and India, ASEAN has the world’s third largest labor force that remains relatively young.
    Source: Speech by ADB Vice-President Stephen Groff. 2014. Berlin, Federal Republic of Germany. ASEAN Integration and the Private Sector
  5. ASEAN is one of the most open economic regions in the world, with total merchandise exports of over $1.2 trillion – nearly 54% of total ASEAN GDP and 7% of global exports.
    Source: ADBI. 2014. ASEAN 2030: Toward a Borderless Economic Community
  6. ASEAN is taking a more cautious approach to regional economic integration than Europe. In Asia, there is currently no serious consideration of a single currency.
    Source: ADB news release. 2015. An Increasingly Unified Asia Is Keeping an Eye on Greece
  7. The ASEAN Economic Community is founded on four basic initiatives: creating a single market and production base; increasing competitiveness; promoting equitable economic development; and further integrating ASEAN with the global economy.
    Source: ASEAN. 2007. Singapore. Declaration on the ASEAN Economic Community Blueprint
  8. ASEAN’s physical infrastructure is critical to the ASEAN Economic Community’s goal of establishing a single market and production base. Cross-border roads, power lines, railways and maritime development will help propel the community forward. This will boost existing and new value chains or production networks.
    Source: Speech by ADB President Takehiko Nakao. 2015. 19th ASEAN Finance Ministers’ Meeting. Kuala Lumpur, Malaysia 
  9. One of the challenges to the ASEAN Economic Community is bridging the perceived “development divide” between the older and economically more advanced members – Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand, known as the ASEAN-6, and the four newer members – Cambodia (1999), Lao People’s Democratic Republic (1997), Myanmar (1997), and Viet Nam (1995).
    Source: ADB. 2013. The ASEAN Economic Community: A Work in Progress
  10. Some analysts believe that the ASEAN Economic Community will miss its December 2015 deadline because of the challenging requirements of economic integration, including changes to domestic laws and in some cases constitutional changes.
    Source: ADB. 2015. Realizing an ASEAN Economic Community: Progress and Remaining Challenges
  11. The flexibility that characterizes ASEAN cooperation, the celebrated “ASEAN way,” may hand member states a convenient pretext for noncompliance, according to one ADB report. How to enforce the accords remains an issue. Currently, the economic integration commitments lack sufficient mechanisms to ensure compliance.
    Source: ADB. 2015. Realizing an ASEAN Economic Community: Progress and Remaining Challenges
  12. ASEAN needs a plan beyond the ASEAN Economic Community to achieve the long-term development aspirations of its 10 member countries, according to an ADB study. This includes introducing structural reforms nationally and taking bold actions regionally to further deepen economic integration.
    Source: ADBI. 2014. ASEAN 2030: Toward a Borderless Economic Community

ASEAN Economic Community: Shining light of the East

by Dr. Munir Majid

http://www.thestar.com.my

THE level of interest in the ASEAN Economic Community (AEC) among the business community in the world at large has increased tremendously since its pronouncement at the end of last year.

While not discounting its imperfections, foreigners are more focused on the opportunities and promise of the single market and production base.

With 90% of global economic growth coming from outside the advanced economies, one can understand why. But there are also ASEAN’s particular strengths which attract attention.

Many are becoming increasingly aware of the size of the ASEAN economy (US$2.7 trillion, the seventh largest market in the world with over 620 million people). Beyond that, they also realise that its growth potential is very capable of achievement with the demographic dividend ASEAN will reap from its young population (60% under 35 years of age).

 The latter means a high level of productivity from a work force when a lot of the world would see an ageing population not part of the work force increasingly dependent on the resources of the economy.

The young population will also be a huge part of the growing middle class which, on the demand side, will drive the consumption of a multiplicity of goods and services.

The expectation that ASEAN will become the third largest economy in the world after China and India (or fourth if the European Union is counted as one economy before mid-century is therefore not seen as fanciful.

At the same time, the very disparity in economic development in Asean is also seen as an opportunity to bring up the less developed countries from a low base. Here, large infrastructure development needs are making a number of foreign businesses consider where they might be involved.

Estimates of annual ASEAN infrastructure development needs vary widely from US$ 60bil to US$ 600bil, depending on the definition of what is the base requirement, but the sectors most in need are quite clear: energy, transportation and telecommunications.

The countries farthest behind in infrastructure development are also obvious, with Indonesia requiring around US$ 500bil for the rest of the Jokowi administration and Myanmar estimated to need US$ 350bil into 2025.

Companies in countries not so fashionable in ASEAN economic thinking, such as Russia, are seriously examining the technology they can bring to ASEAN economic development, in areas such as renewable sources of energy, water treatment and modern construction materials.

One Russian company is looking at, in the first instance, developing business-to-business e-commerce with ASEAN to facilitate two-way trade.

On the soft side – particularly with ASEAN’s young population – the greatest infrastructural need is for education and training. The more traditional investors in ASEAN, such as Britain, are looking at how they can address this beyond the conventional schools and universities.

Training in and introduction of new technologies in ASEAN are being mulled by many countries, particularly in Britain but also Russia. Creation of Artificial Intelligence in ASEAN for other markets as well is being looked at by one Russian company.

While not all this new interest in the ASEAN economic space has arisen from pronouncement of the AEC, that historic event last year has no doubt concentrated business minds on its promise and potential.

The United States, China, Europe and Japan no doubt have a long and abiding interest, but new interest among businesses in countries such as Russia is noteworthy. In August last year, the Russian and ASEAN economic ministers identified 57 new projects to be pursued.

The Russians now do not want just a roadmap. They want projects to be materialised.Of course, Russia has geopolitical reasons for wanting to develop trade and investment with ASEAN. At the Sochi summit this week with Asean leaders, after 20 years the Russian relationship with the region was raised to the level of a strategic partnership.

At the same time the Russians are drawing in the Eurasian Economic Union on their side of the partnership. They are also urging ASEAN to relate with the Shanghai Cooperation Organisation.

All this reflects the geopolitical factors for Russia’s desire to develop the relationship with ASEAN – their deteriorated relations with the West and the sanctions against them.

Russia therefore needs to look East. ASEAN is a bright star. Whatever the geopolitical motive however, Russian businesses would not want to come to ASEAN if there were no opportunity.

Without taking sides or being drawn into any alliances, ASEAN  should get engaged with diversification of economic relationships for its own benefit. Russia, for instance, has got some very advanced technologies that could compete with the usual suspects to provide good terms and choice.

The ASEAN promise is not limited to the region. The foreign interests looking at and wanting to come to ASEAN also see how the market would expand, and how having ASEAN as their base makes good business sense.

It is to be hoped ASEAN companies see this too, and might want to engage with them for their own further expansion.

Beyond ASEAN there is the Regional Comprehensive Economic Partnership (RCEP). Comprising ASEAN and six other countries – China, India, Japan, Korea, Australia and New Zealand – the expanded free trade area would comprise three billion people and over a quarter of global Gross Domestic Product, and is growing. An ASEAN base, with its already large market, can be a springboard to an even larger one.

In addition, the Trans-Pacific Partnership (TPP), often seen as in opposition to the RCEP, could very well work to be complementary. With a market size of over 40% of global GDP, the TPP already has four Asean countries committed to join, with three more mulling over it.

Again, an ASEAN base would be a good platform from which to penetrate that already huge TPP market. An irony would be if, say, a Russian company in partnership with a Malaysian one were to produce goods or services in our country destined for America.

That prospect would be a test of US commitment to free trade. But that is another story.

The story now is about ASEAN and its AEC, which is engaging a lot of foreign business interest, whether driven by geopolitical or purely commercial considerations. The promise foreigners see in it is something we in ASEAN must also see. It is good to want to ensure an optimal AEC, but we must make business decisions now, as others are making.

Obama’s Vietnam “Legacy” Trip: A Reality


May 23, 2016

Obama’s Vietnam “Legacy” Trip: A Reality 

By Greg Rushford

Air Force One touched down yesterday evening in Hanoi. The White House and influential Washington think-tank scholars are spinning President Barack Obama’s three-day Vietnam visit as a “legacy” moment, validating the president’s “pivot” to Asia. Expect much warm talk of how America is forging ever-closer economic- and security ties with a modernizing Vietnam. Expect the usual heartwarming television images of happy people -including peasants toiling in lush rice fields, wearing their iconic conical hats.

Don’t expect any admissions from Vietnamese Communist leaders of the suffering they continue to inflict upon some of their country’s best citizens. As former prisoner of conscience Cu Huy Ha Vu rightly notes, today’s Vietnam is “a kleptocracy.” Intrepid pro-democracy advocates stand in the way.

Courageous men like Dang Xuan Dieu, Ho Duc Hoa, and Tran Vu Anh Binh, three of Vietnam’s 100-plus current political prisoners. They languish behind bars, while some Washington insiders have averted their eyes.

Some of those insiders are Southeast Asian analysts who work inside the gleaming $100 million headquarters of the Center for Strategic and International Studies, just a few minutes from the White House – and who have undisclosed sidelines as business consultants. They know that to speak forthrightly on Vietnam’s shameful human rights record would threaten their easy access to senior communist officials. Their corporate benefactors who depend upon that political access to win lucrative business contracts in Vietnam could lose the big bucks.

Ernest Z. Bower President & CEO, Bower  Asia Group,  is widely recognized as one of the strongest proponents for close ties between the United States and Asia. In recognition of his work, the King of Malaysia has awarded him the Darjah Panglima Jasa Negara (PJN), pronouncing him holder of the title Datuk in Malaysia.  The president of the Philippines also awarded him the rank of Lakan, or Commander, for his service to the Philippines.  Ernie is currently the United States Chair of the Advisory Council on Competitiveness for the Vietnamese Prime Minister and serves on the boards of the Special Olympics, American Australian Education & Leadership Foundation, the Institute for Religion & Public Policy, the United States-New Zealand Council and the Board of Advisors of the United States-Indonesia Society.

Moreover, Vietnam’s Ambassador to the United States has a team of $30,000-a-month Washington lobbyists on his payroll. Their assignment is basically not to let awkward questions about political prisoners interfere with enhanced U.S.-Vietnamese commercial- and security ties, especially the sale of lethal weapons to fend off Chinese maritime intimidation.

One wonders what Dieu, Hoa, and Binh, locked away in their cells, would have to say – if they were free to speak. Dieu, a devout Catholic citizen journalist, has been imprisoned since 2011. He committed the “crime” of exercising free speech. Dieu has been living “in hell” – beaten, humiliated, and treated like a “slave” for refusing to wear a uniform with the word “criminal” – his brother has told Radio Free Asia. Hoa, also a blogger whose crime was his free speech, has been incarcerated since 2011. Binh, a songwriter, lost his liberty in 2012. His crime was writing music that offended the Communist Party. While Binh’s term is scheduled to end next year, Dieu and Hoa could languish behind bars until 2024.

All three men are associated with the Viet Tan, a U.S.-based political party that is highly effective in using the social media to advocate democratic freedoms of speech and assembly. The Viet Tan reaches a wide audience, both inside Vietnam and in the Vietnamese diaspora. For its skilled high-tech advocacy, the Hanoi’s feared Ministry of Public Security brands Viet Tan as a “terrorist” organization.

Binh, Hoa and Dieu were amongst a group of 17 political prisoners who have been represented by Stanford law professor Allen Weiner, a former high-powered U.S. State Department official. Weiner won a United Nations panel determination that his clients – all either Viet Tan members, supporters or friends – had been unjustly imprisoned. While 14 of Weiner’s clients have been released, that’s unfortunately not quite a happy ending. “Some of those who have been released, however, continue to suffer severe harassment and intimidation at the hands of the Vietnamese security services,” Weiner reports. “They continue to pay a heavy price.”

That’s the sort of glaring injustice that no credible analyst of today’s Vietnam would want to downplay. Meet CSIS Asia analyst Murray Hiebert (pic  above)- a man who doesn’t deny that Vietnam has human rights issues, yet is careful never to use clear language that would anger senior Vietnamese officials.

Nine months ago, I brought Allen Weiner’s brave clients to Hiebert’s attention, asking if perhaps this would be an opportunity to highlight the injustice by holding a public forum. The CSIS analyst brushed off the inquiry – at the time I had not realized that CSIS has never held such an event. He also declined to say whether he agreed with Hanoi’s characterization of the Viet Tan as a “terrorist” organization.

(The White House and State Department are better informed than CSIS. Not only do they respect the Viet Tan for its peaceable advocacy, but Obama’s national security officials have maintained close ties with the Viet Tan leadership. Radio Free Asia reported that on May 17 representatives of the Viet Tan, along with other respected Vietnamese pro-democracy advocates including Boat People SOS and Vietnam for Progress, were briefed on Obama’s upcoming Vietnam trip in the White House on May 17.)

A few weeks ago, Hiebert once again did not respond to a request to be interviewed on the imprisoned Viet Tan supporters. I then tried to register for a May 17 press briefing that Hiebert and two other CSIS scholars held on the Obama visit. I had hoped to ask about Binh, Hoa and Dieu. But CSIS spokesman Andrew Schwartz – who also had not responded to a recent e-mail inquiry – denied me admission, asserting that the event was “oversubscribed.”

While the briefing room was indeed rather crowded, even full, according to people who were present, Schwartz found room for Vietnam Television. VTV is a Hanoi-controlled media tool that the Communist Party finds useful for spreading the party line. These days, VTV’s best “scoop” has been in warning Vietnamese independent journalists – and specifically the Viet Tan – to stay away from linking corrupt communist officials to a Taiwanese steel mill that somehow obtained environmental clearance to discharge toxic wastes into the sea, which has resulted in a massive fish kill.

(At the May 17 CSIS briefing, a Television Vietnam correspondent asked if the next American president would continue Obama’s “pivot” to Asia – which at least drew laughter. It is perhaps also worth noting that while “journalists” from Vietnam Television are welcome to peddle their propaganda in the United States, authorities in Hanoi continue to jam Radio Free Asia’s Vietnamese language service. And while the BBC is free to broadcast its English-language programs in Vietnam, the BBC’s celebrated Vietnamese Language Service frequently has run into problems.)

As it turns out, CSIS has a history of making life uncomfortable for guests at the think tank’s public events who might pose awkward questions. On May 24, 2015, former political prisoner Ha Vu angered the Vietnamese Ambassador to the U.S., Pham Quang Vinh, by asking how Vietnam justified persecuting its political prisoners. Vinh, visibly upset, retorted that Vietnam has no political prisoners – which was pretty rich, considering that at that moment, the ambassador was busy trying to avoid making eye contact with one of Vietnam’s most famous political prisoners.

Moreover, CSIS analyst Hiebert, who chaired the panel, did not challenge the ambassador’s absurd claim. (The CSIS event discussed a study on U.S.-Vietnamese relations that Hiebert had co-authored; that study had not disclosed that the Vietnamese government had secretly financed it, Hiebert subsequently admitted to me.)

And last July, Hiebert went to extraordinary lengths to accommodate Vietnamese security officials when Communist Party Secretary General Nguyen Phu Trong spoke at CSIS. Hiebert summoned a guard, escorting Dr. Binh Nguyen, a prominent Vietnamese-American physician, from the premises. Hiebert apologized to Binh, who had been invited, but said that the communist security officials insisted that she be ejected (for details see: How Hanoi Buys Influence in Washington, D.C., www.rushfordreport.com).

Turns out that there are other reasons to doubt Hiebert’s independence. While his official CSIS bio does not disclose it, Hiebert is also a senior advisor to a prominent business consultancy, the Bower Group Asia.

Conflicted interests

Hiebert’s boss at CSIS, Ernie Bower, runs the Bower Group Asia. “Our clients include the world’s best global enterprises,” the BGA website proclaims. “We understand the nexus between politics and economics.” Bower has more than 60 employees in his Washington, D.C. headquarters and in 21 Asian countries (including Vietnam). Another CSIS analyst, Chris Johnson, is a BGA managing director for China. Like Hiebert, Johnson does not disclose his business affiliations on his CSIS website.

Bower, who formerly chaired the CSIS Southeast Studies chair, responded angrily last year when I asked him which was his real day job: CSIS or his business consultancy. He said he was “saddened” that I had suggested he appeared to have conflicts of interest. But perhaps aware that others might also wonder, Bower now identifies himself on the CSIS website as a “non-resident” advisor. The chair remains vacant. CSIS spokesman Schwartz and John Hamre, the think tank’s CEO and one of Washington’s most acclaimed fundraisers, have not responded to persistent inquiries to explain the apparent conflicts.

Here’s how the conflict works:

At CSIS Hiebert has advocated the TPP trade deal. The Bower Group is actively seeking TPP business.

Hiebert has strongly contended that the U.S. lethal arms embargo on Vietnam has outlived its usefulness, and should be lifted. Lockheed, which wants to sell Hanoi its P-3 Orion and C-130 Hercules surveillance planes, has a seat on Hiebert’s CSIS board. So does Boeing, which has been peddling its P-8 Poseidon military surveillance aircraft in Hanoi. Imagine how the giant defense contractors would feel if the money they dole out to CSIS would be used to shine a spotlight on issues involving corruption and human-rights abuses in Vietnam.

Coca-Cola, a Bower Group client, got into Laos a few years ago, thanks to Ernie Bower’s understanding of “the nexus” between business and politics. Coke also has a seat on the CSIS Southeast Asia Board.

Chevron, another major CSIS benefactor, also has a representative on CSIS’s Southeast Asia board. Hiebert authored a November 2014 column for the Wall Street Journal defending Chevron in bitter litigation the oil giant had in Indonesia. In his column, Hiebert identified himself only as a CSIS analyst. Then Ernie Bower got busy on the Bower Group’s Facebook page, touting the Journal piece: “BGA’s Murray Hiebert provides much-needed analysis of the court case against Chevron in Indonesia” in the Wall Street Journal. [Full disclosure: I have been an occasional contributor to the Wall Street Journal’s Asian edition for more than two decades.]

In recent months, Hiebert has been quoted widely by major news outlets including CNN, Reuters, the Associated Press, Forbes, Politico, the Financial Times, the Washington Times, and the Voice of America – always only identified as a CSIS analyst. Readers would not know that Hiebert also works for a business consultancy. They would not know that corporations that fund Hiebert’s CSIS programs have serious financial interests at stake.

One wire-service report that quoted Hiebert about Vietnam’s new top leadership was picked up by the New York Times in April. This gave Ernie Bower another opportunity to twitter to his clients about how “BGA Senior Advisor Murray Hiebert” had made the pages of the Times.

And earlier today, CNN quoted Hiebert’s approving views of enhanced U.S. weapons sales to Vietnam, identifying him only as a CSIS scholar. Viewers were not aware that this “scholar” is funded at CSIS by major U.S. defense contractors, and has taken money from the Vietnamese government for co-authoring a study that called for the lifting of the U.S. weapons embargo to that country. Nor would viewers know that Hiebert also works for the Bower Group, which also touts its interest in facilitating arms deals.

A little digging illustrates how Bower mixes his CSIS affiliations with business. In 2014, for example, Bower opened some important doors in Washington to a Manila wheeler-dealer named Antonio “Tony Boy” Cojuangco. Tony Boy also sits on CSIS’s Southeast Asia board. Bower brought him to town as the head of an “eminent persons” group – such flattery can go a long way in certain Asian circles.

CSIS arranged appointments for the Filipino eminences in the White House, the Export-Import Bank, on Capitol Hill and of course at CSIS headquarters, where they had a scheduled appointment with the think tank’s president, John Hamre. That was during the day. That night, the Bower Group hosted a lavish dinner for Tony Boy and his associates at the posh Jefferson Hotel. Bower, Hiebert, Chris Johnson, and other CSIS/Bower Group operatives were present. To judge from photos I’ve seen, it was a good night all around, lubricated by bottles of Pomerol. (Hamre has not responded to repeated requests to comment. On the CSIS website, the CSIS head asserts that some unnamed journalists who have questioned CSIS ethical practices have ignored evidence to the contrary that he has provided.)

Agents of Influence

Speaking of influence peddling, if one looks closely, the Washington lobbyists on that $30,000-a-month retainer from Vietnamese Ambassador Vinh unwittingly illustrate how the official spin surrounding the Obama visit to Vietnam doesn’t tell the whole story.

The most recent foreign agent’s disclosure form that the Podesta Group has filed with the U.S. Department of Justice lists some of what the firm did to earn its $180,000 for the last six months of 2015. One is left wondering exactly what the lobbyists did to earn their keep.

The lobbyists disclosed only seven meetings, mostly with congressional aides. The only elected representative who met with Podesta representatives was Matt Salmon, an Arizona Republican who is retiring from Congress at the end of this year.

Rep. Salmon had already met with Vietnamese Ambassador Vinh earlier in the year and had been to Vietnam in May. The congressman already had supported an enhanced U.S.-Vietnam trade relationship.

Do the math: $180,000 for seven meetings. That’s about $25,000 a meeting, throwing in about 50 e-mails and five phone calls that the Podesta lobbying form mentions. David Adams, the Podesta lobbyist who has been working to facilitate the Obama visit to Vietnam this week, is a former close aide to Hillary Clinton when she was secretary of state. Asked what he had really done to each the money, Adams declined to comment.

This week, when the television screens show images of happy Vietnamese peasants with their conical hats, toiling in their rice paddies, think of David Adams. The average Vietnamese citizen would have to work 13 years to earn enough money to pay for just one $25,000 Podesta Group meeting with congressional aides.

From the days of French colonialism to the present Communist kleptocracy, the Vietnamese central government has always stolen from its poorest people.

Ambassador Vinh’s lobbyist Adams proudly styles himself as a part-time “gentleman farmer” in Virginia’s wine country. Wonder what those Vietnamese peasants would say, if they knew that their stooped labor is helping subsidize such a lifestyle?

ASEAN: Laos–What’s Next?


May 21, 2016

ASEAN: Laos–What’s Next?

by Oliver Tappe

From transforming urban landscapes to high-speed rail and Chinese investment, in Laos development can be a double-edged sword.

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In November 2015, the people of Vientiane and countless visitors celebrated the annual That Luang Festival, the largest religious festival in Laos.On the third day, the traditional game of tikhi, a kind of hockey (see Simon Creak’s excellent historical analysis of the ‘national game’ in his book Embodied Nation), was held between teams of government officials and local people.

According to a Vientiane Times article, the result of the match indicated the city’s fate in the year to come. A victory by the local people’s team would foretell 12 months of happiness and well-being for the citizenry. A win by the officials “was seen as an indication that the townsfolk would be fairly governed for the coming year, thus ensuring contentment whatever the outcome.”

 

It was a series of matches, and I did not follow all the results. That left me wondering what 2016 will bring for Laos: good governance, and/or prosperity?

In his speech on the occasion of National Day, only a few days later on 2 December, President Choummaly Sayasone made it clear that both would be the case. Forty years of rule by the Lao People’s Revolutionary Party allegedly witnessed social and economic development – though with the goal of leaving the ranks of Least Developed Countries by 2020 yet to be achieved. “The people’s democratic political system has been improved and strengthened consistently,” said the President.

For Choummaly and the Party-State leadership, the last four decades appear a success story, a win-win situation for government and people, as represented by the auspicious tikhi game.

At present, ‘development’ manifests itself as a rapid transformation of Vientiane’s urban landscape and its rural outskirts. Construction sites for new roads and massive buildings dominate the municipality.

Chinese and Vietnamese investors have joined the current land run in Laos, one scandalous example being the grounds of the old National Museum, which will have to make way for a Chinese hotel complex (as will the National Library across Nam Phu Square). Thousands of Vietnamese labour migrants flock to the project sites, operating in a legal grey zone with the usual 30-day visa (and various additional “fees” for local authorities and police). They keep the border checkpoint at the Friendship Bridge busy with their frequent visa runs.

Visitors are struck by huge buildings suddenly appearing where there were rice fields before. The That Luang Marshes – traded with Chinese investors for a stadium on the occasion of the 2009 Southeast Asian Games – provide a surreal impression with their apparently over-scaled building projects.

 

Another “special achievement” (according to Choummaly) will be the new railroad crossing the country from Vientiane to the Chinese border as part of China’s ambitious Kunming-Singapore railway project.

The groundbreaking ceremony was held on National Day, of all days, with Somsavat Lengsavad – also responsible for the notorious Golden Triangle special economic zone in northwest Laos – acting as the real strongman of Lao PDR.

The scale of the project is stunning: 427 kilometres of rails, including 72 tunnels a totalling 183km; an estimated workforce of 100,000 (hardly to be recruited among the Lao population); and 150 hectares of land in Vientiane reserved for the new train station (for more detail see here and here).

All this will suffice to raise concerns among the Lao population, not least because of previous ‘development’ projects that often entailed land appropriation with only meagre and belated compensation.

Increasing state debt is another reason for scepticism. From the estimated costs of the railway project of US $6 billion, Laos will take a share of 480 million, which in 2013 would have made up more than 20 per cent of the country’s Gross Domestic Income!

China will provide an equivalent loan, to be covered by five potassium concessions. Potassium is in great demand as fertiliser for the Chinese agricultural sector. However, world market prices plummeted recently, so that Chinese companies will have to dig over quite a lot of soil to cover their costs.

Since large potassium reserves are located in the Vientiane Plain – densely populated and critical for wet-rice production – we can expect further dispossession and problems with wastewater and salinisation. The impending devastation of fertile soil in Laos for the export of Chinese fertiliser will be a sad irony.

Moreover, infrastructure and mining projects are important drivers of deforestation in Laos. It is no coincidence that the huge amount of illegal timber exported in recent years corresponded with an increase in Chinese and Vietnamese investments in mining, agriculture, forestry and hydropower in Laos.

In October 2015, a leaked, unofficial World Wildlife Fund report caused some commotion when calling attention to the rampant illegal logging going on in Laos – not uncommonly related to concessions where the respective companies extend their assigned logging areas far beyond the concession borders and into natural preservation areas.

In some cases, more than 90 per cent of the logging happened illegally. According to the WWF’s estimates, ten times more timber crossed the Lao-Vietnamese border than the official harvest in Laos.

Despite a logging ban issued in August 2015 by the Lao government, reports of trucks transporting timber across the border to Vietnam continue to raise concerns about ongoing deforestation. Logging in Laos – with 96 per cent of the total harvest exported to Vietnam and China – is largely uncontrolled, and includes protected species.

The Food and Agriculture Organization’s recent estimation of a 69.9 per cent forest cover – by taking a generous >10 per cent canopy density as vantage point – is certainly not very helpful for raising awareness of deforestation. Official data from Laos (>20 per cent canopy density) suggest a forest cover of about 40 per cent only.

All these data have to be taken with a pinch of salt, anyway, since they include tree plantations (like rubber) and regenerated (and even yet-to-be regenerated) woodland. Yet, it is evident that well-stocked forests with canopy closure of more than 70 per cent are rapidly disappearing, especially in southern Laos. Forest quality, in general, has also deteriorated in the last couple of decades, with dense forest having declined from 29 per cent in 1992 to 8.2 per cent in 2002.

It is hard to believe that illegal logging on such a scale could be possible without the collusion of Lao authorities. And it is very likely that the forest along the planned railroad track from Luang Namtha to Vientiane will disappear in a flash.

Who will benefit from these first results of the huge railway project? Probably not the local population in the Lao uplands. Some 3,058 hectares of land will be reserved for the project, with 50 meters on each side of the track fenced for security reasons – and deforested for sure. Somsavad’s  statement that the railroad will yield economic growth of 32 per cent, and be used by 4 million Lao passengers sounds bizarre (remember: Laos’ population is around 7 million).

Rather, the railroad will serve Chinese economic and geopolitical interests, not least given the immense corresponding Chinese investment in Thailand for the connection from Nongkhai to Bangkok (and further south towards Kuala Lumpur, Malaysia, and Singapore).

Land grabbing, deforestation, and pollution will continue to disquiet the population of Laos. However, open criticism of the Lao government is rare, the disappearance of Sombath Somphone three years ago remaining a constant warning for any civil society actor. Not surprisingly, the Lao government refused to include the ASEAN People’s Forum (APF) in the ASEAN summit to be held in November 2016.

Among the official justifications given for not organising a meeting of Southeast Asia civil society organisations were the lack of preparation time and insufficient funding. In addition, a Lao spokesperson asserted that “foreigners would like to use the ASEAN Peoples Forum to criticise ASEAN governments, and ASEAN governments do not agree”, and that Laos could not guarantee the safety of “extremist” activists. This is alarming news for any civil society actor within Laos and beyond.

The first thing in 2016, though, is the next Party Congress where – as usual – little shifts in the central committee will fuel speculations about rifts within the Lao political elite. Certainly tensions between influential families exist, mainly related to their respective business interests – everyday staple for gossip among citizens and expats in Vientiane.

Yet it can be expected that the ruling Party will maintain its disciplining function and be careful to negotiate individual economic claims to uphold the illusion of a strong, united leadership. Again emphasis will be put on the solidarity between Party-State and the and the “Lao multiethnic people” for the goal of future prosperity.

As President Choummaly puts it: “The trust of our people in the new regime and future of the nation has been lifted to new heights.”

Oliver Tappe is a senior researcher at the Global South Studies Center at the University of Cologne, Germany.

Forty years of Lao PDR: what’s next?

David Cameron is playing coy with Najib’s Corruption for Business


May 17, 2016

Conservative Party’s David Cameron is playing coy with Najib’s Corruption for Business

What can we expect from him? After all, David Cameron is just another politician who happened to be re-elected Prime Minister. His job is to take care of British interests. He will even entertain the most corrupt Prime Minister of Malaysia ever if  British businessmen can be benefit from deals out of Malaysia, be these be in Britain or in our country.–Din Merican

Don’t miss the ASEAN bus


May 14, 2016

Don’t miss the ASEAN bus Comment | The Star Online

by Dr. Munir Majid

Phnom Penh: Cambodia is now an emerging ASEAN Tiger with opportunities for investment in hotels, infrastructure, industrial estates, agriculture and tourism  and related services. Don’t miss the boat.–Din Merican

BREADTALK, a Singapore bakery, will open its first outlet in Myanmar in early 2017, in a franchise agreement with that country’s real estate giant the Shwe Taung Group. Breadtalk has spread to nearly 800 locations in primarily ASEAN countries.

A leading Singapore logistics group is looking to extend its trucking reach to Vientiane and as far as Kunming while driving also for the expansion of e-commerce across the region. Thai retail and real estate companies, such as the Central Group, have large footprints, particularly in continental South-East Asia, as they prepare and seek to tap demand and consumption from the growing and young middle classes in ASEAN.

VietJet, a low-cost Vietnamese airline, is fast spreading its wings and wants to fly all over ASEAN, using colors of bold red, albeit with a touch of yellow, made all too familiar by AirAsia.

China has a huge infrastructure development agenda in ASEAN, through the AIIB and One-belt, One-road initiatives, and through financing commitments in more focused areas such as the Mekong sub-region, the most recent, in March, being US$11.5bil in loans and credit for infrastructure under the Mekong-Lancang Co-operation framework.

American investment in ASEAN (total capital stock US$226bil) is larger than that in Japan, China and India put together (capital stock US$202bil), even if the European Union is still the largest foreign investor in ASEAN.

Japanese companies are all over the region, Toyota’s and Honda’s automobile hubs in Thailand being quite impressively well placed to take advantage of the free movement of the supply of parts under the ASEAN Economic Community (AEC), of the growing market of 630 million (the third largest in the world), and of the single market and production base to export worldwide.

This is ASEAN. That frequently cited combined GDP of US$2.6 trillion, seventh largest economy in the world, poised to become the third largest, after only China and India, in 2030 or just after.

Across the region, proactive companies from within and outside ASEAN, from a range of businesses, traditional and conventional, digital and new world economy, are on the move to realise value from its growth and potential.

There are gaps and gaping holes in the integration process, including in the AEC and in socio-economic and political development, but a company or business would be left behind if it just dwelt on them.

Many Malaysian companies are of course in ASEAN and trading with ASEAN countries, in the financial services sector, in legal services, oil and gas, power, manufacturing and other businesses. However, there are also others who are not engaged and only have many complaints about the AEC’s imperfections.

Many of these complaints are not misplaced. However, in business you cannot wait for the perfect circumstances before you move. You wait and you lose all the first mover advantages. You wait and you don’t develop relationships, and it will be too late and take too long to cultivate them when the time is ripe. You take risks, calculated against potential benefits.

A bakery venturing into a rice-eating country, only just now coming out of the economic dark ages, is not something without risk. But a calculation that the mostly young people in the population of 52 million will form the basis of a growing future sophisticated demand counterbalances it.

Political change is taking place in Myanmar. It is early days. There is no clear succession plan after Aung San Suu Kyi. But is the change not irreversible? Will economic empowerment and the spread of its benefit not act as a check against any reversal?

And, coming back to the region as a whole, will not the imperfections and weaknesses of the AEC be addressed over time? Indeed they are being addressed. As ASEAN Business Advisory Council (ASEAN-BAC) chair last year, we worked very hard to obtain explicit recognition of the private sector role in the ASEAN integration process, and a hard-wiring of the collaboration in that process, rather than just top-end picture opportunity dialogues with leaders and ministers.

As a result, the AEC 2025 Blueprint made extensive mention of the role ASEAN-BAC is expected to play, in association with other ASEAN and non-ASEAN private sector councils, representatives and interested sectoral expert bodies. There are actually 19 such councils and at least 66 sectoral expert bodies.

ASEAN-BAC is already working to ensure effective representation of views in a coordinated manner to the leaders, ministers and officials. Perhaps, more importantly, ASEAN-BAC is identifying expert resources who can make their contribution in official ASEAN committees and working groups in sectors and areas of concern. This bottom-up work is perhaps more important than the big-ticket dialogues whose outcomes are often diffused and dissipated.

Therefore, working both top-down and bottom-up, ASEAN-BAC and all associated private sector groups will achieve better outcomes to address AEC shortcomings and imperfections.For example, in the vexed area of non-tariff barriers (NTBs) there is an understanding with officials to prioritise their removal in four sectors: agri-food, healthcare, logistics and retail (including e-commerce). The ASEAN Co-ordinating Committee on NTBs has to set up the four working groups to get cracking.

As another example, the proposal by the ASEAN Business Club to have a private sector Financial Services and Capital Markets expert group work with the ASEAN Secretariat could be adapted to have the experts work in the relevant committee or working group for faster financial sector integration.

All this takes painstaking work not always compensated by desired progress. There will be frustrations, even recriminations. But it has to be done. The private sector must be committed and involved, even as they complain about the many shortfalls of the AEC.

Having said all this, it does not mean companies should sit on their hands and just wait and see. Those who have not made their ASEAN move should really ponder on what they would be missing and on why those who have, have done so.Everyone is operating in the same ASEAN, warts and all. Those who are still waiting could very well miss out.

Indeed their very business will be threatened as markets become more open and competitive with a more integrated AEC – something which, ironically, they are waiting for.

Tan Sri 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.

Malaysia’s economy contracts–Bad News


May 13, 2016

Malaysia’s economy contracts–Bad News

http://www.thestar.com.my

Malaysia’s economy grew at a slower pace of 4.2% in the first quarter of 2016, due to slower growth in the manufacturing and services sectors, but the overall growth was still above economists’ forecast of a subdued 4% growth.

The Statistics Department said on Friday the growth of 4.2% was slower when compared with the 5.7% growth a year ago. It was also slower than the 4.5% expansion in the fourth quarter ended Decembe 31, 2015.

“On a quarter-on-quarter seasonally adjusted, the GDP for first quarter of 2016 grew 1.0%,” it said. In the Q1, 2016, all sectors on the production side posted a positive growth except for agriculture. The continuous expansion in the dervices, manufacturing and construction has led the growth and remained as the main catalyst.

2016 is going to be a difficult year–Get Real

In a separate statement, Bank Negara Malaysia (BNM) said the services sector grew 5.1% in Q1, 2016 from 6.4% a year ago, manufacturing expanded 4.5% from 5.6% a year ago also. As for mining, it shrunk to grow at 0.3% only from 9&.Construction expanded at a slower pace of 7.9% from 9.6% while agriculture’s contribution was -3.8% from -4.1% a year ago. The Statistics Department said on the expenditure side, the economy was spearheaded by private final consumption expenditure and government final consumption expenditure.

“The expansion in both consumptions has offset the sluggish performance in external demand,” the department said. Malaysia’s value of GDP in current terms for Q1, 2016 amounted to RM291bil.

Q1 2016 GDP versus Q4 2015

The services sector expanded at 5.1% (Q4, 2015: 5.0%) supported by the wholesale & retail trade (5.2%) and information & communication (8.5%).

The manufacturing sector grew 4.5% (Q4, 2015: 5.0%) supported by the electrical, electronic & optical products (5.7%), mainly in semiconductors, computers and peripheral equipment.

The department said this sector performance’s was further supported by petroleum, chemical, rubber & plastic products that grew 2.7% (Q4, 2015: 1.4%) following a turnaround in refined petroleum products and expansion in chemical and plastic products.

Construction sector rose at a faster rate of 7.9% (Q4, 2015: 7.4%). Civil Engineering sustained its double-digit momentum bgrowth of 17.5% though slower from the preceeding quarter (Q4 2015: 20.4%) and continued to support the construction sector.

In terms of expenditure, the department said private final consumption expenditure rose to 5.3% (Q4, 2015: 4.9%) underpinned by consumption of food & beverages, housing & utilities, communication and transportation.

But gross fixed capital formation (GFCF) eased to 0.1% (Q4 2015: 2.7%) due to the deceleration in machinery & equipment (-7.1%) as well as other asset (-3.3%). While the public sector (share: 30.1%) contracted 4.5% which has influenced towards the moderation of GFCF in this quarter, the private sector posted a growth of 2.2% (Q4 2015: 4.9%).