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ASIAN (H)

Asia needs to put its clothes back on

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Author: Editorial Board, ANU

‘You see who has been swimming naked when the tide goes out’ warned legendary investor Warren Buffet. It’s an old saying, but it resonates with the situation facing many Asian economies today. With looser financial conditions and rising asset prices, many Asian economies are starting to strip-off. They would be wiser to keep their clothes on.

Windmills and a power plant can be seen in the distance as beachgoers watch the sunset in the city of Dongfang, Hainan, China (Photo: Reuters/John Ruwitch).

In 2018, tightening global financial conditions made for nervous policymakers in emerging economies. Argentina was the first victim, forced to seek a bailout from the IMF as an appreciating US dollar and worsening terms for borrowing triggered a full-blown currency crisis. Turkey looked set to be next, while Indonesia and other Asian economies rushed to get their houses in order.

How quickly times have changed. The tight financial conditions that plagued economies in 2018 have become a thing of the past. The US Federal Reserve has put interest rate rises on hold. Markets are all but certain the Fed will cut interest rates at the end of July and are pricing in four or more rate cuts by the end of 2020.

An increasingly flat yield curve suggests even more easy money may be on the way. The flattening yield curve — where short-term and long-term interest rates converge — is a reliable predictor of US recessions and presages a recession for 2020. The US Federal Reserve normally cuts interest rates by 5 percentage points during a downturn. It has less than half that space today. Faced with a recession, the Fed may resort to ultra-loose unconventional monetary policy sooner rather than later, meaning a further loosening of financial conditions for Asia and more money to finance much needed investment in the region.

The United States is not alone. Falling inflation expectations in Europe are putting more pressure on the European Central Bank to launch a fresh round of monetary stimulus. Weak exports and business confidence in Japan have prompted calls for a further loosening of macroeconomic policies there. The Bank of Korea has cut interest rates for the first time since 2016 and Australia, like others in Asia, has begun cutting interest rates to all-time lows.

The big financial stability challenge that has historically plagued Asia — inflation — is nowhere to be seen. A lack of inflation has given Asian governments much more room to manoeuvre in how they use fiscal and monetary policy to support growth. The trade and technology war between the US and China is similarly benefiting some economies in Asia such as Vietnam, at least in the short term, by redirecting investment and finance their way.

With all this easy finance, many Asian economies are breathing a sigh of relief. The tighter financial conditions of 2018 that sent countries scrambling to fix their houses or, worse, sent them to the IMF, is fading from memory. The pressures for governments to undertake difficult reforms, push for stronger regional integration and implement shrewd macroeconomic policies are similarly fading as a sense of complacency takes its place.

This is a mistake.

Celebrating the short-term benefits of the trade war is a bit like celebrating the weight loss that comes from a deadly disease. The benefits are temporary but the damage is permanent. Estimates that the trade war will cost less than 1 per cent of GDP are grossly optimistic, failing to account for the permanent increases in risk premia that freeze investment and destroy confidence. The more likely effect of full blown trade war on the global economy will be upwards of 5 per cent of GDP. Moreover, any US–China deal will only mean a world of managed trade, redirecting trade away from many economies in Asia and replacing it with confidence-sapping uncertainty as the rules-based order, relied upon for cross-border commerce, is dangerously diminished.

Loose financial conditions can, themselves, be a trap for short-sighted policymakers. If this money is not spent wisely, countries will be left with high inflation, asset price bubbles and appreciated exchange rates with nothing but higher debt levels to show for it. Asian economies have a history of allowing vulnerabilities to develop when global financial conditions loosen. Policymakers need to be vigilant in not allowing the currency, maturity and liquidity mismatches reminiscent of the 1990s to form within their financial systems. The balance sheets of banks, governments, households and corporates are already looking weak to differing degrees in different Asian economies. Preventing a further deterioration of balance sheets will be critical to keeping financial vulnerabilities in check.

Instead, Asian economies should fix the roof while the sun is shining. They need to use the current period of easy money to undertake difficult structural reforms, to repair balance sheets and strengthen their frameworks to lock in low interest rates for productivity-enhancing infrastructure investment.

Are they up to the task?

In our lead essay this week, David Dapice explores these issues in the context of Vietnam. In his essay ‘Is Vietnam swimming naked?’, he shows how Vietnam’s economy is momentarily benefiting substantially from a redirection of FDI from China due to a combination of rising wages in China, a shrinking domestic labour force in China and the US–China trade war. Around US$1.5 billion is entering Vietnam every month. Vietnam is at or near full employment, poverty is declining and growth sits at a very respectable 7 per cent.

Will Vietnam use this opportunity to undertake much needed reform?

Dapice warns that cross-currents are making deep reforms more difficult in Vietnam, despite its reform-oriented prime minister. One factor at play is the uncertain future of the strict anti-corruption campaign, given the health problems facing Communist Party Secretary and President Nguyen Phu Trong. A second factor is the current political economy of taxes and transfers within Vietnam and a third factor is the unease with which the Vietnam Communist Party views the domestic private sector, especially small and medium domestic firms.

In the parlance of Mr Buffet, Dapice notes that the tide is currently high in Vietnam, but the many problems in the Vietnamese economy and financial system cannot be ignored. Vietnam may well set an example for the region. Whether it will be an example of what to do, or what not to do, is very difficult to be confident about.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.



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ASIAN (H)

Is Vietnam swimming naked?

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Author: David Dapice, Harvard Kennedy School

Vietnam’s economy has benefitted from a redirection of FDI from China due to a combination of rising wages in China, a shrinking domestic labour force and trade tensions. With US$1.5 billion entering Vietnam every month, employment is full, poverty is declining and growth sits at a brisk 7 per cent. This could spark further reform aimed at addressing the low value-add still in many exporting industries and a weak domestic private sector. But cross-currents make deep reforms more difficult, in spite of a reform-oriented prime minister.

Vinhomes Central Park and Landmark 81, Vietnam's tallest building are seen from the Saigon river in Ho Chi Minh city, Vietnam, 6 June 2019 (Photo: Reuters/Yen Duong).

One factor at play is the uncertain future of the strict anti-corruption campaign, given the health problems facing Communist Party Secretary and President Nguyen Phu Trong. He may not be able to prosecute corruption with the same energy and effectiveness as before. This would give space to those who prefer a more closed system in which privileged officials can convert power into substantial wealth.

Corruption is a chronic problem in any system but especially in one where the press and online discussion is heavily controlled and sanctioned. The recent Internet Law makes it more likely that only intra-party discipline will be used to control corrupt Party and government members, leaving the Party leadership itself with the discretion to decide internal discipline.

A second factor is the current political economy of taxes and transfers within Vietnam. Vietnam’s Central Committee is more like the US Senate — one state has two senators regardless of the size of its population. This makes redistribution from rich to poor provinces very popular — Ho Chi Minh City transfers 82 per cent of its tax collections to the central government. This is so that poor provinces will have more to spend, even though most of these provinces are exporting younger workers to thriving areas that need more infrastructure.

Binh Duong, a poor rural province not long ago, spent less per capita in 2016 than Thanh Hoa. Binh Duong’s population growth rate was eight times higher in the last decade. Binh Duong collected 21 million Vietnamese dong (US$897) per capita and spent only 6.5 million dong (US$277), while Thanh Hoa collected 5.8 million dong ($247) per capita and spent more than 9 million dong (US$384).

While some transfers are needed, the absence of meaningful mass transit in either HCMC or Hanoi is a bad sign for reform. Starving the healthy and feeding the slow is not a growth strategy.

The future of Vietnam’s growth will probably be in higher value-added activities, particularly services or highly-skilled manufacturing. These activities depend on individuals who are internationally mobile. If Vietnam’s cities offer pollution, congestion and flooding, they are not likely to attract or retain those who have the choice. Cities provide about four-fifths of the economic growth and virtually all of the population growth in Vietnam. If their development is starved of funding and available funds are ill-spent, the private sector will not grow and FDI will subside as wages rise.

Third is the unease with which the Communist Party views the domestic private sector, especially small and medium domestic firms. FDI is needed.Inefficient state enterprises are part of a system that provides funding for state priorities. Oligarch firms that rely on political connections are growing, resulting in a crop of billionaires that understand the need for good standing with the Communist Party. While acceptable to most, small and medium private firms may form interest groups to challenge the Community Party. Some at the top recognise the importance of these firms, but further down they are sometimesseen as a source of revenue.

The share of private, non-household output in GDP was less than 9 per cent in 2017, compared to 20 per cent for FDI and 29 per cent for the state sector. These small private firms would benefit from reforms in access to land, credit, contracts and a fairer legal system. Vietnam is ranked 69th out of 190 countries in terms of the World Bank’s Ease of Doing Business index but is in the bottom half for starting a business, paying taxes, trading across borders or resolving insolvency. Unless the private sector is given legal space to organise and present its concerns more effectively, reforms will not address these problems.

The questions posed by Party Secretary Nguyen Phu Trong to the recent Party Plenum suggest the elite are questioning current policies. He asked whether state enterprises were necessary, whether calls for political reform mean calls for regime change and whether there is a need for a change of Party regulations, its charter or rules.

The Party Secretary knows how much corruption and waste there has been in the state sector, adding weight to his question. It could presage a shift to greater reliance on private companies. But Vietnam always has to keep China’s stance in mind. It is unclear if China could oppose an outcome similar to Taiwan, where state enterprises’ share shrank and the private sector jumped ahead without much government oversight.

Warren Buffet famously said that ’you see who is swimming naked when the tide goes out’. In Vietnam, the tide is currently high and many problems in the economy can be ignored. If, or when, the influx of FDI slows down, the inefficiencies and private sector weaknesses will weigh heavily on the country’s economy. Debate continues about what needs changing and the outcomes of these conversations are still unclear. Reform will run into stiff opposition but if the Party can focus more of its resources on people and less on slower provinces, while at the same time allowing truly private firms to prosper, it will renew its legitimacy.

Dr David Dapice is a Senior Economist at the Ash Center for Democratic Governance and Innovation, John F. Kennedy School of Government, Harvard University.



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ASIAN (H)

Will Vietnam’s Trong loosen his grip on absolute power?

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Author: Hai Hong Nguyen, Queensland University of Technology

The Communist Party of Vietnam (CPV) is preparing for its 13th Congress scheduled to be held in early 2021. Surely it will elect someone else to take over from 75-year-old Nguyen Phu Trong as general secretary. Trong has served as the CPV chief for almost 10 years now. Last year, he also took power as head of the Vietnamese state following the sudden death of incumbent president Tran Dai Quang. He is the most powerful leader of the country in the post-Ho Chi Minh era.

Vietnam's Communist Party's Generel Secretary Nguyen Phu Trong is seen in Hanoi, Vietnam 2 April 2018. (Photo: Reuters/Kham).Among ordinary Vietnamese citizens, especially young people who care more about market capitalism and amassing wealth rather than following communist ideals, Trong is likely popular for his anti-corruption efforts and for his bringing down and punishing of high-ranking corrupt officials. For Trong, national interests are the most important and saving the Party from collapse — preventing the party-state from backsliding into decay and irrelevance — is key to this. He has been nicknamed ‘the great fireman’ after he compared the fight against corruption to a blazing furnace which would burn any piece of wood, representing a corrupt official, whether it be dry or green.

While Trong is certainly powerful and has gained respect for his anti-corruption efforts, Vietnam has been criticised internationally as it has become increasingly tough on pro-democracy voices and civil society activists. In the run up to the next Party Congress, there appears to be speculation about Trong’s continued grip on power. True, he could be re-elected as head of the state, but the condition of his health should prevent him from taking on the job. This year especially there have been rumours and concerns about the Party chief’s health.

When Trong was named the general secretary of the CPV in 2011, Nguyen Tan Dung had already been the prime minister for five years. During this period, Dung built up political patronage networks and consolidated his power. He and his cronies in several cases ignored the role of the Party and National Assembly and consequently caused the loss of billions of dollars in state assets. Corruption was rampant within the system and tolerated by Dung in his role as head of the government’s anti-corruption committee. Dung made himself the most powerful prime minister since the founding of the country and emphasised individualism over collectivism in decision-making.

Trong was fully aware of the weaknesses of the Party owing to pervasive corruption and lax Party discipline. Once in the top post of the Party, Trong launched attacks on both. From the beginning, he knew Dung would be his first target. Though Trong failed to discipline and remove Dung from office over his economic mismanagement in a plenary of the Party in 2012, he sent a clear message to Dung and his cronies about his determination to combat corruption and rein in Party officials through Party discipline. Since then, Trong has gradually consolidated his power and stepped up efforts in the cleaning up of the Party.

As of early 2019, according to the Central Commission for Internal Affairs, more than 53,000 government officials and Party members, of which 60 were under the direct oversight of the Central level, were disciplined. A total of 643 cases involving 1579 individuals were under investigation and prosecuted in relation to corruption and economic mismanagement. Notably, one incumbent Politburo member, two members of the Central Committee, one former deputy-prime minister, four former ministers, a dozen vice-ministers (including those from the defence and public security sectors), and Party secretaries, chairmen and vice-chairmen from the provinces were disciplined, expelled from the Party, or jailed.

Many of these corrupt officials had a close relationship with the former prime minister Nguyen Tan Dung. Never before in the history of the CPV had such a large number of high-ranking government and Party officials been disciplined and punished. At the moment, the public is watching to see how and what Trong will do with Le Thanh Hai, a long-time and now-retired Party boss nicknamed ‘the god father of Ho Chi Minh City’ who has been involved in large-scale property development.

Trong’s anti-corruption efforts were orchestrated as part of his attempt to clean up the Party. Ideological and lifestyle standards have been set to prevent overly ambitious princelings and officials from climbing up to higher offices. However, these standards have also been used to stamp out criticism. The last couple of years have seen an increased crackdown on academic freedom and intellectuals who were Party members but have made speeches and statements deemed not to be in line with the Party’s positions and policies. Freedom of speech has been further restricted in the country after the law on cyber security, passed in the Party member-dominated National Assembly last year, went into effect in January 2019.

Yet, Trong cannot be entirely blamed for the sweeping crackdown on political dissent. In effect, authoritarian regimes indiscriminately repress any opposition to stay in power. Political dissidents and civil society activists should not expect a relaxation of control from Trong, an old guard and aging communist apparatchik who believes in the CPV’s indispensable role in the country’s success.

Trong technically has absolute power now and holds the two most powerful positions in the state: CPV general secretary and state president. Also, being the Chairman of the Central Military Commission and sitting on the Central Standing Board of the Police Party Committee, Trong controls both the military and the security forces. Though he has occasionally dismissed the notion of having absolute power invested in one individual, Trong is now obviously the boss.

In 2017, Trong signed a document, known as Regulation No. 90, that sets criteria for the CPV general secretary and state president. Age and health are among these rules. Trong’s experience and integrity may help him bypass the rule of age since he can be nominated as ‘a special case’ again as he was in 2016. Trong has been the Party’s chief for two consecutive terms and, therefore, cannot be re-elected for a third term by the party statutes. He could, however, be re-installed as head of state.

But it appears the old guard’s health is not favouring him. Perhaps most importantly, Trong has always emphasised leadership that rejects the greed for power. Even if there is strong support within the Party, a retreat from politics at the next Party Congress would embody Trong’s self-professed model of political governance.

Dr Hai Hong Nguyen is a researcher at the Queensland University of Technology.



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ASIAN (H)

Imran Khan and Donald Trump search for common ground

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Author: Harrison Akins, University of Tennessee

The White House recently announced that Pakistani Prime Minister Imran Khan is making his first visit to the United States for meetings with President Donald Trump on 22 July. The United States and Pakistan have come a long way since Trump complained of Pakistan’s ‘lies and deceit’ last year due to its lack of cooperation on counterterrorism, subsequently suspending security assistance to its South Asian ally.Pakistani Prime Minister Imran Khan delivers a speech at the opening ceremony for the second Belt and Road Forum in Beijing, China, 26 April 2019. (Photo: Reuters/Florence Lo).

This key bilateral relationship has been fraught with difficulties in recent years, especially with Trump’s bullying rhetoric and the US tilt towards India. Pakistan, ever sensitive to its strategic position against its rival India, has sought closer relations with China as a balance against the perceived US–India bloc. China is poised to invest billions in Pakistan through the China–Pakistan Economic Corridor (CPEC), has increased arms sales to become Pakistan’s primary supplier of military hardware, and provided several loans over the past year to bolster the Pakistani economy.

Despite this, there are some within Pakistan that fear going fully into the Chinese camp, expressing concern over China’s political dominance, the militarisation of CPEC and the potential for expanding political violence within Pakistan. As a foil against solely relying on China, the Pakistani government is seeking to strengthen investments from other countries such as Saudi Arabia and the United Kingdom.

The July meeting between Trump and Khan represents an opportunity to reset US–Pakistan relations and to find common ground on a range of strategic issues. With the shifting political landscape of South Asia as a backdrop, what can we expect from Imran Khan’s visit? The White House released a statement that the purpose of this meeting is to ‘discuss a range of issues, including counterterrorism, defense, energy, and trade, with the goal of creating the conditions for a peaceful South Asia and an enduring partnership between our two countries’.

But the key issue looming over Khan’s visit is the ongoing US peace negotiations with the Taliban in Afghanistan as Trump seeks to withdraw US troops from the nearly 18-year-old war zone. The political dynamics of Pakistan’s western neighbour have always been of great concern to Islamabad. Pakistani leaders have long sought to promote a Pakistan-friendly government in Kabul — including supporting the Taliban government in the 1990s, fearing the influence of their long-standing rival India in Afghanistan.

Pakistan has also played a key role in supporting peace talks. Earlier this month, the governments of the United States, Russian, Pakistan, and China released a joint statement welcoming progress made in the negotiations and recognised Pakistan’s ‘important role in facilitating peace in Afghanistan’, a position made clear when Trump sent a letter in December 2018 to Imran Khan requesting Pakistan’s support in the Afghan peace process.

While there are fears among Pakistanis that their country could be used as a US ‘scapegoat’ if the negotiations fail, there are further concerns that Pakistan’s disengagement from the peace process could undermine its strategic position if the Afghan political landscape is shaped without Pakistani input. To this end, a working relationship with the United States is necessary.

To ease the way towards finding common ground with the Trump administration, Pakistan is making efforts to demonstrate its cooperation on counterterrorism in the lead up to Khan’s meeting in Washington. For instance, Pakistani authorities arrested Hafiz Saeed, the head of the US-designated terrorist group Lashkar-e-Taiba responsible for the 2008 Mumbai attack and long suspected of receiving illicit support from Pakistan’s Inter-Services Intelligence agency. The arrest, praised by Trump, comes in the wake of criticisms that the government has not done enough to address the Financial Action Task Force’s decision to list Pakistan as non-compliant with regulations to target terrorist financing.

While the United States continues to press Pakistan on counterterrorism and negotiations in Afghanistan — issues that will receive great attention during Khan’s visit — it is also likely that Pakistani authorities will seek to expand the relationship beyond a narrow security focus. Faced with a struggling economy, a stronger economic relationship with the United States will help to bolster Khan’s PTI government, which campaigned on reversing the economic policies of his predecessor.

This meeting is taking place in the midst of cooling relations between the United States and India, with the Trump administration rescinding India’s preferential trading status as a response to Indian Prime Minister Narendra Modi’s protectionist economic policies. This could be seen as an opportunity for Pakistan to grow its own economic relationship with the United States.

With the shifting political landscape of South Asia, the meeting between Trump and Khan represents a chance for the two countries to renegotiate the terms of what has long been a troubled relationship. Even with the growing alliance between China and Pakistan, there are many Pakistanis who reject the notion of a zero-sum game between China and the United States and wish to pursue working relationships with both countries. This meeting could be the first step toward such a goal.

It is now left to the Trump administration, understanding the important role Pakistan plays in the Afghanistan negotiations, to decide whether they will walk in step with Pakistan to expand and strengthen US–Pakistan relations.

Harrison Akins is a Graduate Research Fellow at the Howard H. Baker, Jr. Center for Public Policy, the University of Tennessee, Knoxville.



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ASIAN (H)

China Wine Competition

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Dates: 
Nov 03, 2019Nov 04, 2019

Opening hours: 
10 am 4 pm

Venue: 
The Place

Location address: 
Unit 407, Bridge 8, 457 Jumen Road Phase IV, Huangpu District, Shanghai

Country: 
China

Organizer: 
Beverage Trade Network

Show URL: 
chinawinecompetition.com

Major exhibits: 

Wine importers, distributors, consumers,retailers,producers.

Show banner: 

The China Wine Competition looks to recognize, reward and help promote wine brands that have successfully been created to identify with and target a specific wine drinker. For any wine brand to earn its place on a retailer’s shelf or a restaurant’s wine list – and then vitally stay there – they need to be marketable and consumer driven and not just produced in the general hope it can find enough people willing to sell and buy it.

That is why the China Wine Competition is different. It will single out and shine the spotlight on those wine brands that consumers really want to buy and have a clear market value for trade buyers.

A competition that will judge wines in three key areas:
• Their quality.
• Their value for money.
• What they look like.

To be an award winner you will need to have a top quality wine, that offers both the trade and the consumer great value for money, and you will need to look good and truly stand out on the shelf and on the back bar.

Show Contact
Title: 

Project Coordinator

Name: 
Denise Smith

Telephone: 

(+44 (0)) 330 097 0138

E-mail: 

denise@chinawinecompetition.com

Country: 
UK



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ASIAN (H)

Fixing ASEAN’s partnership with civil society

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Author: Ruji Auethavornpipat, ANU

In June 2019, Thailand wrapped up the 34th ASEAN Summit. In its role as ASEAN Chair this year, Thailand pushed for an ASEAN that increases partnership with and between the peoples of the region — one that helps build a stronger regional community. But in order for regional initiatives to have a meaningful impact for the peoples, both ASEAN leaders and civil society need to work out exactly what this ‘partnership’ is.

Thai Prime Minister Prayuth Chan-o-cha, chairman of 34th ASEAN Summit, speaks in Bangkok, Thailand, 23 June 2019 (Photo: Reuters/Athit Perawongmetha).

Thai Prime Minister Prayut Chan-o-cha, 2014 military coup leader turned head of the now civilian government, has the privilege of hosting ASEAN meetings in 2019. The latest summit saw the adoption of many key deliverables, including the ASEAN Leaders’ Vision Statement on Partnership for Sustainability.

The Vision Statement reinforces Thailand’s priority of ‘advancing partnership for sustainability’. It urges ASEAN members to deepen cooperation with stakeholders both within and outside the ASEAN region to promote regional peace and stability. Among the long and ambitious list of objectives are addressing tensions in the South China Sea, cyber-security, economic growth, environmental protection and transnational crimes such as human and drug trafficking.

Explaining the annual priority further, Prayut specifically indicates it reflects the ‘dreams of creating a people-centred ASEAN Community that leaves no one behind’. He repeatedly refers to the ‘people-centred’ underpinning of the ASEAN Community at the opening ceremony of the 34th ASEAN Summit.

Prayut’s remarks are at odds with the ‘people-oriented’ references to the ASEAN Community which have appeared in earlier ASEAN documents. A ‘people-oriented’ community implies that ASEAN leaders get to decide what is best for the peoples of Southeast Asia, peoples who are only passive recipients of regional initiatives. In contrast, the idea of a ‘people-centred’ community depicts ASEAN citizens as playing an active and integral role in shaping regional policy.

The ‘people-centred’ emphasis is thus significant for civil society organisations (CSOs). It potentially enables CSO participation in ASEAN decision-making. For example, grassroots demands for a legally-binding agreement on migrant worker protection could not just be heard but accepted. Such an agreement with enforceable rules would benefit the 6.5 million intra-regional migrant workers much more effectively than the non-binding document adopted by ASEAN in 2017.

The ‘people-centred’ rhetoric has long been a fixture of the ASEAN Community blueprint but it has always been attached to the ‘people-oriented’ notion. The coupling of these two terms watered-down ASEAN’s commitment to its peoples and downplayed ASEAN citizens’ role in decision-making.

Prayut’s opening ceremony speech therefore seems refreshing given that Thailand was ruled by the military junta from 2014 until a ‘change’ in regime that only came with the March 2019 election. His speech signals to CSOs that they may be given a greater voice in regional affairs. Thailand is also making efforts to publicise ASEAN, broadcasting live ASEAN-related events on the Internet. It even released a public campaign urging ‘all Thais’ to be good ASEAN hosts. All of this suggests Thailand’s intention of bringing regionalism closer to the peoples.

Despite these seemingly positive developments, regional CSOs remain excluded from decision-making processes.

The ASEAN Civil Society Conference and the ASEAN Peoples’ Forum, for example, were denied an interface meeting with ASEAN leaders during the June 2019 summit. These organisations usually hold a meeting parallel to the summit and seek to influence various ASEAN policies on issues such as human rights protection, development, trade, environment, youth and culture.

When Thailand was ASEAN Chair in 2009, CSOs were granted a 30-minute meeting despite ongoing domestic political turmoil. The last CSO interface meeting occurred in 2015 during Malaysia’s Chairmanship. With the refusal in 2019, CSOs have been unable to secure a dialogue with ASEAN leaders for four consecutive years.

The refusal thus suggests the extension of Thailand’s domestic practice of suppressing local activism, dismissing the importance of a ‘people-centred’ ASEAN.

Following the rejection, officials said that ‘the door has not completely shut’ for members of civil society. They suggested CSOs request a meeting during the next summit in November 2019. Sceptics view this response as an empty promise, while others question whether the protection of Southeast Asian citizens may be more effective if CSOs bypass ASEAN bodies altogether.

As CSO preferences for engagement with ASEAN vary, activists need to collectively rethink whether they want to continue using the existing space that ASEAN has limitedly carved out for them — a type of participation CSO representatives call ‘controlled partnership’.

CSOs can seek alternative platforms outside of ASEAN in order to present a united front in pursuing their goals. Having a single, concerted voice can potentially have a stronger impact on shaping regional policies for the benefit of the peoples. CSOs can also strategise by leveraging the use of both spaces.

ASEAN itself needs to rethink what partnership means in order to stay relevant. Engaging with civil society cannot just be about co-opting diverse or dissenting voices. Realising the ambition of a people-centred ASEAN Community requires widening peoples’ participation in decision-making. Otherwise, regional community building will remain, as described by the current ASEAN host, simply a ‘dream’.

Ruji Auethavornpipat is a Sessional Lecturer in the Department of International Relations, Coral Bell School of Asia Pacific Affairs, The Australian National University.



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Denuclearising North Korea: what must happen next

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Author: Graham Ong-Webb, RSIS

It would be unfair to deny US President Donald Trump and his administration credit for the inventiveness and can-do spirit in their approach towards engaging North Korea and its leader Kim Jong-un. This approach jump-started diplomatic talks after Trump and Kim met at the Demilitarized Zone (DMZ) in late June 2019. The challenge now for the Trump administration is translating this renewed contact into a process that leads to some degree of denuclearisation that would be difficult to reverse.

US President Donald Trump meets with North Korean leader Kim Jong-un at the demilitarized zone (DMZ) separating the two Koreas, Panmunjom, South Korea, 30 June 2019 (Photo: Reuters/Kevin Lamarque).

Letters between Kim and Trump over the course of June kept a semblance of an open communication channel. Russian President Vladimir Putin and Chinese President Xi Jinping also relayed to Trump the North Korean leader’s desire for further dialogue.

Yet, there has effectively been a six-month freeze in working-level and summit-level talks between Washington and Pyongyang since the breakdown in negotiations during the second Trump–Kim summit in February in Hanoi, Vietnam. During the summit, Trump humiliated Kim by refusing his request to trade activities toward denuclearisation for immediate sanctions relief.

In the months following, purges were reported — North Korea was reported to have executed its nuclear envoy to the United States, Kim Hyok-chol, and dispatched Kim Yong-chol, the counterpart of US Secretary of State Mike Pompeo, to hard labour in a re-education camp. While the accuracy of these reports has been questioned, they underscore the high stakes for the Kim regime. Even South Korean President Moon Jae-in could not break the US–North Korea impasse despite his country’s detente with North Korea that seemed to bear fruit in 2018.

Though Pyongyang has yet to violate its self-declared moratorium on nuclear and intercontinental ballistic missile (ICBM) tests since November 2017, it has renewed pressure on the United States by launching several short-range missiles. In effect, Pyongyang did break the suspension of missile testing of any kind under prevailing UN resolutions.

Yet Trump, in his unorthodox style, pulled off a ‘mini summit’ with a slighted and increasingly bellicose Kim. This was a gamble since there was a chance the North Korean leader would not show up. By established standards of summitry, this was essentially impromptu.

Trump counted on Kim’s impulse that any face-to-face with a US president would generate some meaningful political dividends, rather than any dispassionate calculus focusing on another potential humiliation.

With the mutual agreement to restart working-level discussions regarding North Korea’s denuclearisation, the United States and North Korea are back to where they were between the first and second summits. Washington and Pyongyang are caught in between two frames — the need to get the optics and tone of the relationship that characterised the first summit right and the imperative to close a deal that constituted the second summit.

There are several facets to the Korean Peninsula crisis that put North Korea’s standing with the ‘six parties’ — the United States, South Korea, China, Japan and Russia — at stake. Bilateral and multilateral discussions are required to address the interests of all parties if there is going to be long-term stability in Northeast Asia. Yet, what matters to the Trump administration is the core threat posed by North Korea’s nuclear-tipped ICBMs to the US homeland.

As such, most parties recognise that further progress toward long-term stability on the peninsula is dependent on headway in US–North Korean relations. As one Chinese academic put it bluntly, ‘No third party can be a meaningful mediator in this case. Whether North Korea will eventually proceed with denuclearisation depends entirely on its bilateral negotiations with the United States. The two alone decide outcomes, and neither Beijing nor Seoul can make significant differences’.

While Trump is ‘not looking for speed’ but rather ‘looking to get it right’ in future negotiations, there is an inherent limit on the number of times either side can restart dialogues should there be more breakdowns.

Both sides must start conceding some ground of their own as the trust between Washington and Pyongyang is brittle. This renewed diplomatic exchange may be the final opportunity to produce a denuclearisation agreement that is acceptable to both leaders.

It is increasingly untenable for the Trump administration to want to reward North Korea only after it has achieved denuclearisation, which can be a long and drawn-out process difficult to verify. Similarly, it is untenable for the Kim regime not to dismantle the Yongbyon Nuclear Scientific Research Centre as a significant milestone towards further denuclearisation after offering to do so in prior meetings. Kim has to eventually remove, at least, the ICBM layer of its overall nuclear capabilities that have threatened the US mainland since late 2017.

Back to optics and gestures, President Trump set foot from the DMZ into North Korean territory because he expects Kim to reciprocate by seeing him in the White House. This is a game of quid pro quo, and the waypoints for further progress have now been set for the rest of this year and perhaps the first half of 2020 before the next presidential election.

By that time, it should be clear whether the US–North Korean negotiations will have succeeded in abating the nuclear threat. If no progress is achieved, Trump could well revert to the ‘fire and fury’ brinkmanship of the early days of his administration.

Graham Ong-Webb is an Adjunct Fellow at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

An earlier version of the article first appeared here on AsiaGlobal Online.



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ASIAN (H)

Abe’s fragile success at the G20

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Author: Kazuhiko Togo, Kyoto Sangyo University

The Osaka G20 summit was an opportunity for Japan to demonstrate its leadership to the world. Prime Minister Shinzo Abe successfully navigated competing interests and tension at the summit, achieving fragile compromises between states. But this may not be enough to contain the rivalry among major global powers.

Japan's Prime Minister Shinzo Abe speaks during the G20 summit in Osaka, Japan, June 29, 2019. (Photo: Reuters/ Kazuhiro Nogi/Pool)

On trade, investment and global economic order, little room for compromise was present in the leaders’ declaration ‘to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment and to keep markets open’. All participants agreed to the declaration, with China also emphasising non-discrimination and the United States emphasising fairness. On the World Trade Organization (WTO), all the participants agreed to ‘necessary reform of the WTO’ and necessary action ‘regarding the functioning of the dispute settlement system’.

A special session on the digital economy was held at the beginning of the summit to address the issue of technology. Despite controversy between US President Donald Trump and Chinese President Xi Jinping, Abe successfully launched the ‘Osaka Track’ framework to encourage multilateral discussion on digital economy rulemaking and cross-border data sharing.

On the environment, the ‘Osaka Blue Ocean Vision’ to reduce additional pollution in the oceans to zero by 2050 was set as a shared objective.

But Abe’s major achievement was to avoid any explosion over security and foreign policy issues. He did this through a series of careful bilateral meetings which took place outside the summit itself.

The real preparations for the Osaka G20 summit started with President Trump’s visit to Japan on 25 May as the first state guest of the new Reiwa era. It is likely that critical issues directly related to the G20, bilateral trade and security — such as those involving China, North Korea, South Korea, Russia and Iran — were discussed then. This preparation allowed Abe to focus on strengthening cooperation in Osaka and showing willingness to even engage in dialogue with Iran.

Against the background of increasing hegemonic rivalry between the United States and China, bilateral Abe–Xi talks in Osaka were marked by a mutual willingness to improve their relationship. This included a new definition of the relationship as ‘eternal neighbours’ and Xi’s agreement to accept a state visit invitation to Japan in the spring of 2020. The sensitive situation in Hong Kong was apparently not taken up in G20 discussions.

With regards to Russia, despite strong anti-Putinism in the United States and in major European countries, Abe did not waver in holding his 26th meeting with Putin. Abe even took care to issue a written press statement where ‘the leaders welcomed that peace treaty negotiations are proceeding energetically based on the 1956 joint declaration’. While prospects for the negotiations are vague, it would be premature to conclude that opportunities for progress are closed under Abe and Putin.

With regards to Iran, Abe’s official visit on 12 June suggests he is working to encourage a more peaceful Iran–US relationship. Despite this, his meetings with the Supreme Leader Khamenei and President Rouhani did not foster any movement towards a rapprochement.

The G20 provided an opportunity for Trump and Xi to agree to postpone their avalanching trade and digital wars and continue their negotiations in search for a solution. Abe, together with the overwhelming majority of world political and economic leaders, welcomed this development.

What was even more surprising was Trump’s sudden meeting on 30 June at Panmunjom with Kim Jong-un. For Abe, whose policy is to seek ‘dialogue with Kim without preconditions’, the resumption of dialogue is welcomed.

Almost all of what happened in Osaka seems to be at least ‘temporal success’ for Abe’s foreign and security policy.

South Korea was the exception. The ‘enforced labour’ issue has paralysed the bilateral relationship — at the G20 Abe did not have even casual talks with President Moon Jae-in. On 1 July the Japanese government announced that three chemicals vital to South Korea’s manufacturing of high-tech products would be put under tighter export control with some possible extension measures to be taken in August. The Korean media was filled with anger directed towards Japan.

Hopefully this will not mark the beginning of the end of Abe’s balanced and well-coordinated foreign and security policy.

Kazuhiko Togo is Professor and Director of the Institute for World Affairs at Kyoto Sangyo University.



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Trump risks pushing Iran into China’s orbit

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Author: Simon Theobald, ANU

A downed drone, attacks on oil tankers, and calls for oblivion by US President Donald Trump — Iran and the United States are closer to war than at any other time since the inception of the Islamic Republic. But it is China that looks set to benefit as Iran searches for more regional partners in response.

Chinese Foreign Minister Wang Yi meets Iranian Foreign Minister Mohammad Javad Zarif at Diaoyutai State Guesthouse in Beijing, China, 17 May 2019. (Photo: Reuters/Thomas Peter).Attempts to mitigate conflict are being spearheaded by European signatories to the Iran nuclear deal (the Joint Comprehensive Plan of Action or JCPOA), who remain desperate to keep Iran in the deal even as they struggle to find routes around US sanctions. Russia promises moral support to Iran, if little in the way of material backing. The other signatory, China, has remained relatively quiet over the past few weeks, but the question remains: what does the growing risk of conflagration between the United States and Iran mean for China, and what — if anything — can Beijing do about it?

Iran lies at the heart of Beijing’s geostrategic vision for the 21st century. The Belt and Road Initiative, as it is currently planned, runs through a nearly 2000 kilometre stretch of Iranian territory, linking Central Asia, West Asia, and Eastern China. Chinese infrastructure projects are dotted across Iran, from major programs like the development of the South Pars gas field to more minor projects like public transport schemes in regional cities. Iranian bazaars are awash with Chinese goods.

And even as restrictive US sanctions are reducing Iran’s capacity to sell petrochemical resources, China quietly continues to buy Iranian oil, albeit in reduced quantities and with little public fanfare.

And yet, despite the relative importance of Iran in China’s grand plans for West Asia, Beijing has limited room to manoeuvre. The relationship with the United States — for all its problems including the ongoing trade war — is simply far too important to sacrifice on the altar of a relatively small player in China’s economy like Iran. China is also deepening trade ties with other regional powers — notably Israel and Saudi Arabia, two of Iran’s local arch nemeses and staunch US allies.

It is not surprising then that the extent of Beijing’s response to the shooting down of the Global Hawk drone was to call for ‘restraint’, reiterating China’s ongoing commitment to the JCPOA and to fret about the danger of ‘opening Pandora’s box’.

If the unthinkable did happen, what would it look like and what could Beijing do? At this stage, the most likely pattern of any hostilities between Iran and the United States would be a surgical strike on Iranian defence capabilities — a move that was apparently confirmed before being abruptly called off at the last minute. Despite the presence of hawks like John Bolton in his administration, Trump seems to have little interest in putting boots on the ground. Nor does the US public have any appetite for a major conflagration.

Of course, Iran would strike back — whether directly or through proxies — and there is always the risk of a conflict spiralling out of control. Iran has threatened to close the Strait of Hormuz, a move with negative consequences for all countries shipping oil out of the Persian Gulf — although strangling such a vital route would probably result in a swift response from the United States.

That said, it is unlikely that the regime in Iran will be overthrown. Its system of theocratic governance is deeply entrenched and commands a level of popular support that, while certainly not universal, is more significant than the advocates of regime change in Washington imagine.

So what could Beijing do? As with the last few weeks, its role will likely to be to call for peace from the sidelines. Little more can be done. And yet, if anything, a strike on Iran is likely to push the wounded country ever further into the arms of China. Constricted by US sanctions, hurting from a potential air attack, and with limited effective help from Europe, the appetite for conciliation with the United States favoured by reformists in Tehran is like to evaporate — if it hasn’t already.

Forging the path ahead would then be handed over to the regime’s own conservatives and more hawkish factions who — always distrustful of the nuclear deal — will likely issue an ‘I told you so’ rebuke to reformists. With few alternatives, closer engagement with Iran’s more ‘reliable’ authoritarian partners like Russia and China is likely. Perhaps then the ultimate beneficiary of Trump’s hard-line stance against Iran will be China.

Simon Theobald is a PhD Candidate at the School of Archaeology and Anthropology, the Australian National University.



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Is there a crisis of Japanese democracy?

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Author: Aurelia George Mulgan, UNSW

Japan’s Upper House elections have traditionally offered an opportunity for a protest vote against incumbent governments, but there is little chance of such a vote unseating the Liberal Democratic Party (LDP) and Komeito coalition on 21 July 2019. A record of voter apathy and low voter turnout at national elections since the LDP returned to power in December 2012 suggests that Japanese voters have lost faith in the opposition parties and in the possibility of a change of government.

Japanese Prime Minister Shinzo Abe answers a question at the upper house's budget committee session at the National Diet in Tokyo, Japan, 27 March 2019 (Photo: Yoshio Tsunoda/AFLO/Reuters).

This is despite polls showing that most Japanese voters are uncomfortable with the LDP’s dominance in the Diet and over the government. The main opposition, the Constitutional Democratic Party of Japan (CDPJ), is actually making the state of Japanese democracy and the concentration of power in the Prime Minister’s Office election issues. This strategy is driven by the odour of corruption that hangs over Japanese Prime Minister Shinzo Abe, his office, several past and serving ministers, and elements of the bureaucracy. The Abe administration has refused to be held accountable in numerous cases of malfeasance and incompetence on its part.

Added to this is the government’s high-handedness in managing the Diet. On occasions, Abe and other cabinet members such as Deputy Prime Minister Taro Aso have treated the Diet with nothing short of contempt. Abe feigned slumber when CDPJ leader Yukio Edano and other opposition politicians demanded answers on particular issues and attempted to hold him to account in Diet debates. Successive election victories have only fed this arrogance.

During the Abe years, Japan has shown itself to be a complacent democracy that tolerates behaviour that challenges fundamental norms of democratic accountability. The only hope for the opposition is holding the ruling coalition to a majority of Upper House seats, not a supermajority of two-thirds. But both Abe and Komeito party leader Natsuo Yamaguchi are running a negative campaign in stressing the need for ‘stability’ in politics and the ‘disarray’ that an opposition government would inevitably bring by revisiting the supposed ‘chaos’ of the Democratic Party of Japan years (2009–2012). This tactic cleverly plays on voter fears of political instability associated with anything less than a stable majority for the LDP-led coalition and is an indirect way of encouraging independent voters not to vote.

At this juncture, the crisis of Japanese democracy is the inability of the opposition parties to offer any serious alternatives to the LDP, furthering Japan’s transition to an ‘authoritarian leadership with weak opposition’. The big question facing Japanese politics now is whether Japan’s fractured opposition can realistically aspire to take power from the LDP in the foreseeable future. With history on the LDP’s side, it is difficult to be optimistic.

The opposition has stopped splintering for the time being, but fluidity could return at any time as politicians calculate whether or not their political fortunes might improve by moving to another party. When parties change members at regular intervals and are still constructing a solid and distinctive policy identity, it is difficult for them to project themselves as clear and viable alternatives to the electorate.

Some opposition parties in Japan have been temporary alliances of political convenience among individual politicians without strong party attachments and founded on naked political opportunism — ideals, principles and political philosophies have taken second place. This is both the cause and effect of weak party identification by voters. Yet, the opposition’s current tactic of jointly endorsing individual candidates in single-member districts has been judged a necessary evil. While it blurs policy differences, it helps to avoid splitting the anti-government vote.

Ironically, being a ‘catch-all party’ has been key to the LDP’s enduring political predominance. Continuing electoral success and a shared desire to remain in power holds the party together by acting as a strong uniting force and a deterrent to breakaway movements. If the LDP began to shed Diet members to other political groupings, it could mark a transition to decline and defeat.

Compounding the opposition’s electoral woes is the absence of any strong opposition to Abe from within his own party. It appears internally stable for his current term as LDP president until September 2021. Not only has Abe led the party to successive electoral victories, but his factional support profile is rock solid. He leads an ‘all mainstream’ factional government. In the 2018 LDP leadership election, he secured the support of all the party’s factions — except for the small Ishiba faction — despite not polling so well amongst party rank-and-file.

An ‘all mainstream’ factional government provides a much more secure base for a prime minister than the mixed profiles common in past decades of LDP rule. Added to this is Abe’s success in weathering scandals without permanent or fatal damage. For LDP candidates, riding on Abe’s coat-tails remains a positive experience despite clear evidence that he is personally disliked by many voters. For the time being, there is little chance of the party itself challenging Abe’s leadership. Only a poor LDP performance in the Upper House election would make this a possibility.

A possible bright spot for the opposition is the ‘female factor’ encouraged by a 2018 law mandating parties to make efforts to run more women candidates. This may help increase support for the opposition in this election as a clear conservative–progressive divide has emerged around the issue of female candidacies.

The vast majority of female candidates are running for opposition parties. A good proportion of them are running in the prefectural electoral districts where face-to-face campaigning is important. By contrast, the LDP is not even paying lip service to the law. The proportion of female LDP candidates is even lower than in the 2016 Upper House election.

The future of Japanese democracy is at risk. Japan’s opposition parties will need to do much more if they are to offer voters a serious alternative to the LDP–Komeito coalition in future elections.

Aurelia George Mulgan is Professor at the School of Humanities and Social Sciences, the University of New South Wales, Canberra.



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