Articles & Commentaries

2021/68 “An Early Election For Thailand? Will It Matter?” by Termsak Chalermpalanupap

 

Speculation is rife in Thailand that Prime Minister General Prayut Chan-ocha will dissolve the House of Representatives before the end of this year and call an early general election. In this picture, Prime Minister Prayut Chan-O-Cha speaking at a press conference at the Government House in Bangkok while cabinet ministers look on following a cabinet meeting on October 16, 2020.

EXECUTIVE SUMMARY

  • Speculation is rife in Thailand that Prime Minister General Prayut Chan-ocha will dissolve the House of Representatives before the end of this year and call an early general election.
  • The ongoing “third wave” of COVID-19 infections in the country has aggravated political insecurity and given rise to a vicious blame game inside the Prayut cabinet.
  • Bhumjaithai — the second largest party in the ruling coalition, led by Anutin Charnveerakul, who is also Public Health Minister — is bearing the brunt of public anger and heated criticism on social media.
  • Bhumjaithai and its two allies in the ruling coalition, the Democrat Party and the Chat Thai Phatthana Party, continue to be at odds with the Phalang Pracharat Party, the leading partner in the ruling coalition, over amendments to Thailand’s 2017 Constitution.
  • A new party set up at the end of March is reportedly an “option” for General Prayut, should he decide to lead his own party instead of continuing to rely on the Phalang Pracharat Party.
  • General Prayut has nothing to lose if he calls an early general election. He can count on support from most of the appointed senators.

*Termsak Chalermpalanupap is Visiting Fellow in the Thailand Studies Programme, ISEAS – Yusof Ishak Institute. Previously he was Lead Researcher on ASEAN political and security cooperation at the Institute’s ASEAN Studies Centre.

INTRODUCTION

Speculation is now rife in Thailand that Prime Minister General Prayut Chan-ocha will dissolve the House of Representatives before the end of this year and call an early general election.

Having reached the mid-point of their four-year term on 24 March 2021, members of parliament are now gearing up for what they believe will be a tough electoral fight. Major parties are revamping their leadership and updating their platforms, especially the sections on Thailand’s economic recovery in the post-COVID-19 world. Several new parties have sprung up and have started selling big new ideas and policy alternatives to the electorate.

How soon the House dissolution will happen depends on how much longer General Prayut is able to put up with unruly politicians in the ruling coalition. His hand is also being forced by the growing disunity and bickering between the Phalang Pracharat Party (PPP), the leading party in the coalition, and its three major partners, the Bhumjaithai (BJT), Democrat, and Chat Thai Phatthana Parties.

The PPP’s disagreement with its partners during the recent unsuccessful attempt to amend Thailand’s 2017 Constitution led to a serious rift in the coalition government. Worse still, the PPP has formulated its own plan for constitutional amendment without consulting its three main partners. It will try to push those plans through when the parliament reopens on 22 May. The three disgruntled parties will therefore work with some opposition parties to pursue more substantive amendments to the constitution.

The ongoing discord in the ruling coalition will undermine renewed attempts at amending the constitution. Another failure in such attempts will further erode the credibility of General Prayut, since improving the 2017 Constitution was one of the 12 “urgent policy issues” that he announced in his policy statement to the current parliament on 25 July 2019.

General Prayut and his cabinet are also taking a beating for their failure to prevent a “third wave” of COVID-19 infections, which began in early April.[1] The new crisis has given rise to a vicious blame game and intensified discord between General Prayut and the BJT. BJT leader Deputy Prime Minister and Minister of Health Anutin Charnveerakul has been widely blamed in social media for the current outbreak of the virus. An online petition calling for Anutin’s resignation collected more than 217,000 signatures in five days.[2]

Even more damaging to the BJT was the accusation that the BJT’s secretary-general, Transport Minister Saksiam Chidchob, was a coronavirus “super spreader” because of his alleged visits to two luxurious nightclubs in Bangkok’s Soi Thonglo. Saksiam did contract COVID-19 and was hospitalised in early April, but he denied going to any of the area’s infamous high-end nightclubs. Whatever the case, several club hostesses and 18 policemen in the Thonglo area have tested positive for a new and highly infectious variant of COVID-19.[3]

The alarming situation prompted the cabinet to approve on 27 April an emergency transfer of all administrative powers under 31 laws — including those relating to immigration, air transport, cyber security, emergency medical services, and public health — to the prime minister.[4] This measure was intended to empower General Prayut with complete control in mobilising government resources to cope with the “third wave” of the virus.

In addition to coping with that wave, the Prayut administration is also struggling to make efficient use of the 1.9 trillion baht emergency budget for social support and economic recovery. Disbursement for job creation and economic stimulus amounted to only 130 billion baht — or 26 per cent of the 500 billion baht set aside for soft loans to SMEs. Likewise, only 200 billion baht of the 400 billion baht earmarked for job creation have been spent. What the government was able to do with some speed was to hand out quick cash; almost all of the 600 billion baht allocated for cash subsidies have been depleted. Under-utilised emergency funds may soon be moved to pay for the purchase of vaccines, and if possible to be used in a new round of cash handouts for the poor.[5]

Public anger over tightening restrictions, including the closure of businesses and a night curfew in several provinces, is on the rise. Many Thai voters would now welcome an opportunity to vent their frustration in an early general election.

DISSOLVING THE HOUSE LATER

Most political parties in Thailand do not want to see an early House dissolution. They want, first of all, to pass the bill on a national referendum. The law is needed in order for a referendum to be held on whether a majority of Thai voters wants to amend the 2017 Constitution and, if so, whether a constitutional amendment assembly shall be elected to tackle the thankless task.

Parliamentarians failed to finish the second reading of the bill during the extraordinary parliamentary session held on 7-8 April. The exercise had to be suspended on 8 April when too few MPs and senators showed up to reach the minimum quorum, chiefly because of widespread concern among them about the “third wave” of COVID-19 infections.

Even when the law on the referendum is in place, General Prayut may not be keen to hold an early vote on amending the constitution. A recent public opinion survey had nearly 59 per cent of respondents wanting to amend the Constitution, and nearly 60 per cent wanting to elect a constitutional amendment assembly to do the job.[6] If a national referendum shows that a majority of Thai voters indeed favours amending the constitution by electing a constitutional amendment assembly, then those parties seeking a substantive constitutional amendment will gain momentum in parliament.

First and foremost, those parties want to amend the provision in the 2017 Constitution that gives the 250 appointed senators a role in the selection of the prime minister. To this end, they need to scrap Section 272 in the current charter’s chapter on transitory provisions. Such a drastic change requires the support of a majority of the current total number of 738 parliamentarians — 488 MPs and 250 senators — including support from at least one-third of the senators. There are enough MPs in the House supporting the change to exceed the minimum majority of the combined two houses, which would make a national referendum unnecessary. But securing the support of at least 84 senators appears an insurmountable obstacle. Most senators do not want to give up their power to vote for a prime minister, which Section 272 empowers them to do during their five-year term.

Another highly controversial part of the 2017 Constitution is in Chapter 15, on constitutional amendment, and particularly Section 256. Under this section, any change to rules on amendment under this same section shall require not only the support of a majority of parliamentarians, including at least one third of the senators, but also endorsement by a majority of Thai voters in a national referendum.

Again, it is difficult to persuade senators to give up their power to block attempts to ease the rules on constitutional amendment. Most senators consider themselves “defenders” of the 2017 Constitution. And that constitution, they believe, was designed to thwart corruption and abuse of power by unscrupulous politicians.

CHANGING THE ELECTION SYSTEM

The PPP’s constitutional amendment plan will be aimed only at picking low-hanging fruit that do not require a national referendum.[7] Neither will the PPP seek to reduce the role of senators. The party wants to maintain good working relations with members of the Senate, and needs their support to approve its modest constitutional amendment proposals.

The primary objective of the PPP is to change the election system – something that does not concern the senators – by reverting to the system in which a voter casts two ballots — one to vote for a candidate, and another for a party. The second-ballot votes collected by a party shall determine the proportion of how many party-list seats in the parliament it will hold. The two-ballot system tends to benefit large and well-known parties capable of mounting energetic nation-wide election campaigns. But it disadvantages small parties with fewer campaign resources.

The table below uses numbers based on the outcome of the 2019 general election, in which every voter cast only one ballot. It assumes that the number of votes collected by all candidates is the same as votes for the same party for party-list seats. If normal proportional allocation of party-list seats were to be used, each of the top two parties would each win more party-list seats than at present. The PPP would win 36 of the 150 seats, instead of the 19 that it holds in the current House; the Phuea Thai Party (PT) would win 33 seats instead of none.[8]

However, the main loser would be the third largest party, the now dissolved Future Forward, which would win only 27 party-list seats instead of 50 — the largest share of such seats won by any party in 2019.

Effects on medium-size parties such as the Democrats and the BJT would be mixed; the former would win 17 party-list seats, instead of 20 in 2019; the latter, 16 instead of 12.

Since the five top parties would have won 129 of the 150 party-list seats under the system of proportional allocation, there would be fewer party-list seats available for small and micro-parties. Consequently, there would be only seven micro-parties in the House, each with one party-list seat, instead of 12 at present.

Eleven of the 12 micro-parties[9] joined the ruling coalition and brought with them precious votes that helped the ruling coalition gain a slim majority in the House after the general election of March 2019. The Thai People Power Party was the only micro-party that joined the PT-led opposition grouping seven parties, which held a total of 246 votes in the 500-member[10] House.

In addition, the PPP also wants to increase the number of constituencies from 350 to 400, and to reduce the number of party-list seats from 150 to 100.[11] The PPP’s plan must have set off alarm bells in the micro-parties. Their survival in the next general election is at stake.


On the contrary, the PT must be quite pleased to support the PPP’s constitutional amendment plan. The two-ballot system can, along with the move to increase the number of constituencies, help the main opposition party win an even larger number of House seats in the next general election. However, if the 250 senators continue to take part in selecting the prime minister after the next general election, most of them would be unlikely to support any PT nominee for premier.[12] This possibility tends to dim the PT’s prospects and could tempt some PT MPs to defect to parties that will be in power after the next general election.

PARTIES TO REVAMP LEADERSHIP

The PT needs more vibrant leadership if it is to compete with the PPP. Its current leader, Sompong Amornvivat, a veteran MP from Chiang Mai, is seen as rather old-fashioned and uninspiring. So far, no challenger has emerged, however.

Two potential choices, the first- and second-choice PT nominees for the premiership in 2019,[13] have both left the party. Sudarat Keyuraphan left under acrimonious circumstances. Her Bangkok faction did not see eye to eye with a rival faction led by PT heavyweight Pol Capt Chalerm Yoobamrung. Her right-hand man, Group Captain Anudith Nakornthap, was removed from the post of secretary-general last September and kicked upstairs to become one of the relatively inactive deputy party leaders. Anudith was replaced by Prasert Chantararuangthong, a veteran politician from Nakhon Ratchasima who enjoys support from the PT’s Northeast faction. Sudarat, who is not an MP,[14] is now supporting a new party called Thai Sang Thai or “Thais build Thailand”.

The PT’s second-choice nominee for the premiership was Chadchart Sittipunt, the transport minister in the Yingluck administration during August 2011- May 2014. He has left the party to pursue his quest for the Bangkok governorship as an independent candidate. He was named in one recent public opinion survey as the frontrunner for that post.[15] Chadchart has clarified his lack of interest in returning to the PT. And neither will he accept the PT’s offer to endorse him in the Bangkok gubernatorial election[16] that is expected to take place in the last quarter of 2021.

Also in dire need of a leadership revamp is the PPP. Its secretary-general, Minister in the Prime Minister’s Office Anucha Nakasai, is weak and widely seen as merely a temporary stand-in. The de facto incoming secretary-general is Capt Thammanat Prompow, a deputy minister of agriculture whom party leader General Prawit Wongsuwan highly trusts.

Thammanat’s only weakness is his troubled past. In the mid-1990s, he was imprisoned in Sydney, Australia, in a drugs-related case. After his return to Thailand in 1997, he was expelled from the Thai Army, but somehow managed to rejoin the force and even received a promotion to the rank of captain.

On 5 May, the Constitutional Court held that there were no valid legal grounds for disqualifying Thammanat from holding public office.[17]  Its ruling asserted that his conviction by an Australian court and resultant imprisonment could not, under Thai law, affect his political status in Thailand.   Thammanat is therefore on his way to imminent promotion in the PPP’s hierarchy as well as in the Prayut cabinet.

Thammanat, whose political base is in the northern province of Phayao, has been responsible for looking after the micro-parties in the ruling coalition. Being the deputy party leader for operations, he is heading the PPP’s COVID-19 Coordination Centre, set up to mobilise resources to support relief operations in PPP-held constituencies hard-hit by the coronavirus.

Thammanat was also assigned by General Prawit to look after the PPP’s 13 MPs elected from constituencies in southern provinces. Thammanat led a remarkably successful campaign for the PPP’s candidate Aryasit Srisuwan to wrestle a House seat from the Democrat Party in a by-election in the southern province of Nakhon Si Thammarat, held on 7 March 2021.

The Democrat Party – Thailand’s oldest functioning party, established in 1946 – has been in decline since its 2019 election debacle, in which it did not win in any of Bangkok’s 30 constituencies. Its southern strongholds were badly breached by newcomers from PPP, BJT and Prachachat, a new party in the opposition.[18]

The selection of Jurin Laksanawisit, a low-profile politician from the southern province of Phang Nga, as party leader in May 2015 created new rifts in the Democrat Party. Korn Chatikavanij, who came third in the party leadership race,[19] left the Democrats in February 2020 to form the Kla Party or “Party of Courage”. Another veteran Democrat, Dr Warong Dechgitvigrom, has also left to start an ultra-royalist movement called “Thai Phakdi”. His movement was transformed into a political party on 11 March 2021.

NEW PARTIES, OLD MISSION

Seven new parties were registered in 2020. So far this year, six more have been registered. At the end of March 2021, there were 75 parties in operation, according to the Election Commission.[20]

The newest party to attract a great deal of media attention is Ruam Thai Sang Chat or “Uniting Thais for Nation-Building” Party, registered on 31 March. The party was reportedly intended as an “option” for General Prayut if and when he deems it necessary to have his own party, instead of relying on the PPP.

The prime mover in this party was reportedly Chatchai Promlerd, the permanent secretary of the Ministry of Interior.[21] Chatchai has held that post since 1 October 2017 and has gained the trust of Interior Minister General Anupong Paochinda. He is due for retirement at the end of September.

General Prayut has continued to play his cards close to his chest. Of late, however, he has tended to lose his temper more often. During a meeting on 27 April, he sternly warned an unnamed minister to shape up and stop criticising him behind his back. He even threatened to sack the minister and to strip the ministerial post from the minister’s party.[22]

General Prayut’s outburst indicated that he would no longer tolerate backbiting and other wayward behaviour among politicians in his cabinet. His display of disdain towards some ministers has further fanned speculation that he will soon dissolve the House and call an early general election.

CONCLUSION

General Prayut seems determined to accomplish his “life mission”, instead of calling it quits and fading away.

His main concern now is to stop the “third wave” of coronavirus in his own way, and to secure more vaccines — at least 150 million doses — to protect the Thai populace from the COVID-19.[23] Next on his “to do list” is to stimulate economic recovery by making better use of the remaining emergency funds.

Before long, it will be time to present to parliament a draft budget bill for the next fiscal year. The opposition will then mount a general debate in the House to grill the prime minister and members of his cabinet who are deemed vulnerable.

Fortunately, this year will see relatively few new appointments to top military posts. This means fewer headaches for General Prayut, who serves as defence minister as well as prime minister. Last year, the commanders of the Armed Forces, the Army, the Air Force, and the Navy were due for retirement at the end of September 2020 and had to be replaced by new appointees.

General Prayut will have nothing to lose if he dissolves the House and calls an early general election. If he wishes to return to power, he can certainly count on support from a large majority of the 250 senators.

However, if General Prayut really wants to find out how popular he really is, he can choose to lead a new party of his own to contest in the next general election.

ISEAS Perspective 2021/68, 14 May 2021


ENDNOTES

[1] The 27 April 2021 report of the Thai Government’s Coronavirus (COVID-19) Information Center showed 2,179 new infection cases, and 15 deaths – the highest death toll on a single day to date. Thailand’s accumulated number of infection cases reached 59,687, putting it sixth in ASEAN — after Indonesia (1.6 million cases), the Philippines (1.0 million cases), Malaysia (395,718 cases), Myanmar (142,722 cases), and Singapore (61,051 cases).  Because of the “third wave”, in the month of April alone there were 28,863 cases of infection and 94 deaths; from early 2020 until the end of March 2021, there had been only 36,290 cases of infection and 109 deaths;  data available at the Center’s Facebook page ( www.facebook.com/informationcovid19”). 

[2] The online petition was undertaken on change.org by a group calling itself “หมอไม่ทน” [Doctors won’t take it anymore]. Initially the group aimed at getting 150,000 signatures calling for the resignation of the health minister. By the morning of 29 April, there were more than 217,000 signatures. The group has set a new goal of 300,000 signatures.

[3] “ศาลสั่งคุก 2 เดือน ไม่รอลงอาญา ผู้จัดการ Krystal Club, Emerald Thonglor 13”[Court sentences managers of Krystal Club and Emerald Thonglor 13 to 2 months of imprisonment with immediate effect], Thai rat, 11 April 2021 (www.thairath.co.th/news/local/2067555, accessed 27 April 2021). The news report also says that the police would seek a court order to close down the two nightclubs for five years because they lacked proper operating permits, were involved in prostitution, and ignored public health regulations.

[4] “ด่วนที่สุด! ครม. โอนอำนาจให้นายกฯ คุมเบ็ดเสร็จแก้ไขสถานการณ์โควิด” [Most urgent! Cabinet transfers to prime minister powers to tackle COVID situation], Naew na, 27 April 2021 (www.naewna.com/politic/568930, accessed 27 April 2021).

[5] “1 ปี เงินกู้โควิด พลาดเป้า ‘ศิริกัญญา’ ชำแหละเสียโอกาสกู้วิกฤต” [One year of COVID loans, targets missed, “Sirikanya” dissects the lost opportunity to bring about recovery], Prachachat, 22 April 2021 (www.prachachat.net/politics/news-651204, accessed 29 April 2021). The “Sirikanya” in the news headline is Sirikanya Tansakul, a deputy leader for policy of the opposition Move Forward Party.

[6] See the outcome of the survey by the National Institute for Development Administration (NIDA) Poll conducted between 17-18 March 2021 at www.nidapoll.nida.ac.th/survey_detail9survey_id=498. The outcome included the following results: 58.40 per cent of respondents supported amending the 2017 Constitution; 25.13 per cent did not want to change the constitution; 59.86 per cent wanted an elected constitutional amendment assembly to work on the constitution; 21.86 per cent wanted the House to tackle constitutional amendment directly; and 17.75 per cent wanted a wholly appointed constitutional amendment assembly to undertake the task.

[7] “มัดมือชกพรรคร่วม พรรคพลังประชารัฐเล็งชงแก้รัฐธรรมนูญ รื้อ 13 มาตรา ไม่แตะ ส.ว.” [Tying hands of coalition parties, PPP eyes amending 13 sections of the constitution without touching the senators], Thai rat, 3 April 2021 (www.thairath.co.th/news/politic/2062456, accessed 28 April 2021).

[8] Under the existing electoral system, the total of votes collected by a party’s candidates calculated as a percentage of all votes cast for all candidates in a general election shall determine the total number of House seats that a party deserves to have. For example, if a party’s candidates collected altogether some 10 per cent of all votes cast, then the party would deserve to hold 10 per cent of House seats, or 50 seats in the 500-member House. If the party’s candidates won in 51 constituencies and thus would hold 51 House seats, the party would not get any share of the party-list seats. This was what happened to the Phuea Thai Party in 2019. The party’s candidates won in 136 constituencies. But their collective total votes of 7.881 million represented only 22.14 per cent of the total votes cast for all parties. The party therefore deserved to have only about 111 MPs in the House. Since its candidates had already won 136 House seats, the party was not given any party-list seats.

[9] Two of the 11 micro-parties in the ruling coalition have dissolved themselves and their two MPs have joined the PPP: Paiboon Nititawan of the People Reform Party, and Pol Gen Yongyuth Thepchamnong of the Prachaniyom Party. One of the micro-parties, the Thai Civilised Party, has left the ruling coalition, and its party leader Mongkolkit Suksintharanon now operates as an “independent opposition” MP.

[10] The House membership has decreased from 500 to 488 because of the dissolution of the Future Forward Party on 21 February 2020; the 11 MPs who were members of the party’s executive committee lost their House membership. Later, on 28 October 2020, Tanwarin Sukkhapisit of the Move Forward Party lost his House membership in a ruling of the Constitutional Court. These 12 vacant House seats will not be filled. The Move Forward Party is a successor to the dissolved Future Forward Party.

[11] “มัดมือชกพรรคร่วม พรรคพลังประชารัฐเล็งชงแก้รัฐธรรมนูญ”, op. cit.

[12] The Phuea Thai Party did win in 136 of the 350 constituencies in the 2019 general election. Though not receiving any share of the 150 party-list seats, its 136 MPs constituted the largest number from a single party in the House. But it failed to form a majority coalition; its group of seven parties had only 246 MPs in the 500-member House. It was the Phalang Pracharat Party, with 116 MPs — 97 elected from constituencies, and 19 holding party-list seats — that succeeded in forming a 19-party coalition with a slim majority of 254 MPs.

[13] Each party may nominate up to three candidates for the premiership. The third nominee of the Phuea Thai Party was Chaikasem Nitisiri, a former justice minister, who is now the chief strategist of the party.

[14] Sudarat, like many other Phuea Thai senior figures, was on the party-list. But, since the party was not given any share of the party-list seats after the general election on 24 March 2019, she dropped out from the race for the premiership. The Phuea Thai-led opposition coalition nominated Thanathorn Juangroongruangkit, leader of the Future Forward Party, to vie for the premiership. In the parliamentary voting on 5 June 2019, Thanathorn lost to General Prayut, getting only 244 votes, including none from senators, whereas General Prayut won with 500 votes — 251 from MPs and 249 from senators. On the ruling coalition’s side, two abstentions came from House Speaker Chuan Leekpai and the BJT’s Siripong Angkasakulkiat. The latter wanted his party’s leader Anutin Charnveerakul to be the premier. Following his resignation as leader of the Democrat Party, former Prime Minister Abhisit Vejjajiva also resigned his seat in parliament and thus did not vote in balloting for premier. One of the 250 senators, Senate President Pornpetch Wichitcholchai, abstained. On the opposition side, one Future Forward MP, Ms Jumpita Chankajorn from Nakhon Pathom, was absent because of illness, and Thanathorn could not vote because his House membership was suspended, pending an investigation.

[15] “คน กทม. ยังไม่ตัดสินใจเลือกใครเป็นผู้ว่า ‘ชัชชาติ‘ — ‘จักรทิพย์‘ ติดโผมาแรง” [Bangkokians remained undecided who shall be the next Bangkok Governor; “Chadchart” and “Chakthip” strong frontrunners]. Thai Post, 4 April 2021 (www.thaipost.net/main/detail/98244, accessed 27 April 2021). Based on the NIDA Poll conducted between 31 March and 2 April 2021, 32.67 per cent of those polled were undecided; Chadchart came top among known potential candidates with 24.77 per cent, followed in a distant second place by ex-national police chief Pol Gen Chakthip Chaijinda, with 11.93 per cent; in the third place was incumbent Bangkok Governor Pol Gen Asawin Khwanmuang, with 8.66 per cent. See other details of the survey at www.nidapoll.nida.ac.th/survey_detail?survey_id=500 (accessed 27 April 2021).

[16] “ท่าที เพื่อไทย ต่อ ชัชชาติ สิทธิพันธุ์ อบอุ่น นุ่มนวล”[Phuea Thai’s stance towards Chadchart Sittipunt: warm and soft], Khaosod Online, 31 March 2021 ( www.khaosod.co.th/politics/analysis-today-politics/news_6239855, accessed 27 April 2021).

[17] “ ‘ธรรมนัส’ โล่ง  มติศาลรัฐธรรมนูญ 9:0 ชี้ไม่สิ้นสุดสมาชิกภาพ ส.ส. – รมต.  เหตุต้องโทษคำพิพากษาต่างประเทศ ไม่ใช่ศาลไทย” [Thammanat is relieved, Constitutional Court votes  9:0 in favour of his membership of the House and ministerial status, because his conviction overseas was not done by a Thai court], Matichon Online, 6 May 2021 (www.matichon.co.th/politic/news_2708763, accessed 11 May 2021).

[18] In the 3 July 2011 general election, in which there were 375 constituencies and 125 party-list seats at stake, the Democrat Party won the second-highest total of party votes from second ballots, with about 11.435 million votes. This compared to the Phuea Thai Party’s 15.752 million. The Democrat Party’s candidates won in 115 constituencies, and the party received 44 party-list seats to make a total of 159 MPs in the 500-member House. The Phuea Thai Party’s candidates won in 204 constituencies and received 61 party-list seats to make a total of 265 MPs. The Phuea Thai Party could quickly lead in forming a ruling coalition and chose Ms Yingluck Shinawatra to be the first female and, at the age of only 44, the youngest prime minister of Thailand. The Democrats won 50 of the 53 constituency seats in the 14 southern provinces, and 23 of Bangkok’s 33 constituencies. In the 24 March 2019 general election, the Democrat Party’s candidates failed to win in any of Bangkok’s 30 constituencies, and its candidates won only 22 of the 50 constituencies in the South.

[19] “ ‘จุรินทร์’ ชนะขาด! คว้าเก้าอี้หัวหน้าพรรคประชาธิปัตย์คนที่ 8 ” [ Jurin won decisively, becoming eighth leader of Democrat Party], Matichon Online, 15 May 2019 (www.matichon.co.th/politics/news_1495648, accessed 28 April 2021). Jurin, who is deputy prime minister and minister of commerce, won with 50.6 per cent of votes; Pirapan Salirathvipak came second with 37.2 per cent; Korn, a former finance minister in the Abhisit administration, came third with 8.5 per cent; and finishing fourth was former Bangkok governor Apirak Kosayothin, with 3.7 per cent.

[20] See the list of 75 existing political parties as of the end of March 2021 at the Election Commission’s website (www.ect.go.th/ect_th/download/article/article_20210420143700.pdf) .

[21] “สภากาแฟเสียงแตก ‘ปลัดฉิ่ง’ จะออกก่อนเกษียณไปตั้งพรรคให้ลุง หรือจะรอเกษียณก่อนกันแน่” [Observers differ on whether “Permanent Secretary Ching” will quit before retirement to set up a political party for the uncle … or wait until after retirement], Manager Online, 25 March 2021 (www.mgronline.com/politics/detail/9640000028456, accessed 28 April 2021). The nickname of Interior Permanent Secretary Chatchai Promlerd is “Ching”. And the “uncle” in the headline is understood to be Prime Minister General Prayut Chan-ocha, whose nickname is “Uncle Tu”.

[22] “รับไม่ได้นินทาลับหลัง! ‘บิ๊กตู่’ เดือดกลางวง ครม. ถ้าได้ยินอีก ‘เฉดหัว ริบโควต้า’ ”, [Unacceptable, criticising him behind his back! ‘Big Tu’ lost his cool in cabinet, threatening to sack the gossiping minister and stripping the ministerial post from the minister’s party if such criticism is heard again], Naew na, 27 April 2021 (www.naewna.com/politic/569035, accessed 28 April 2021).

[23] General Prayut announced his three-point plan to tackle the “third wave” on his Facebook page on 8 May; the plan included securing 150 million doses of vaccines, instead of the previous target of 100 million doses, as soon as possible.

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2021/67 “Crisis upon Crisis: Fighting Covid-19 Becomes a Political Struggle after Myanmar’s Military Coup” by Courtney T. Wittekind

 

EXECUTIVE SUMMARY

  • In the aftermath of Myanmar’s coup, a nationwide strike by civil servants and lack of trust in the military regime that staged the February 1 takeover has reversed the country’s hard-won progress in the fight against COVID-19.
  • While COVID-19 data have gone unreported since February, staff shortages, military violence against medical staff, and widespread distrust of authorities have weakened Myanmar’s historically under-resourced healthcare sector, rendering it less able to manage care and vaccination.
  • While foreign governments and donors may wish to help prop up the country’s faltering COVID-19 response, prevention and treatment of the disease have become a critical political arena for military officials and anti-coup protesters.
  • Neither COVID-19 prevention nor treatment are neutral avenues for humanitarian action in Myanmar. External actors need to carefully consider the potential political impact of medical aid before committing monetary or logistical support, especially if such assistance is to be channeled through the military government.

* The author is a Wang Gungwu Fellow at the ISEAS – Yusof Ishak Institute and a PhD candidate at Harvard University’s Department of Anthropology. 

INTRODUCTION

The last days of March marked one year since the arrival of the COVID-19 pandemic in Myanmar; the country’s first cases were discovered on March 23 and its first death on March 31 of 2020.[1] While neighbouring countries now celebrate the start of their vaccination campaigns, there is little reason for optimism in Myanmar. Senseless, random and premature deaths remain ever-present—not only because of the virus, which continues to spread, but also as a result of Myanmar’s military coup on February 1, 2021. In the three months that followed the military takeover, brutal crackdowns on peaceful protesters have killed over 700 unarmed civilians. In a social media post that went viral last month, Myanmar’s anti-coup netizens took stock of the two compounding crises they faced: “In the first 60 days of COVID-19 in Myanmar, there were just six fatalities, whereas, in the first 60 days of the military coup, 573 people were killed.”[2] The coup thus having caused 95 times the number of deaths compared to Covid-19, the post’s creator, The Insights, concluded that “greed for power is worse than a pandemic.”[3]

COVID-19 has receded into the background of Myanmar’s political landscape since Feb. 1, with the more immediate threat of state-sanctioned violence overshadowing the protracted damage of a global pandemic. But the fact that Myanmar’s military took power at a time when the pandemic continues to spread, largely unabated, has repercussions for the military and anti-coup protesters alike. The already-fragile health sector has seen immediate consequences, and the potential spread of the virus amongst protesters may accelerate its system-wide collapse. Reeling from the economic effects of the pandemic, striking workers face rising food and fuel prices, with little external support.[4] These concrete needs must be addressed, but foreign governments, international institutions, and well-meaning donors should remember that, in the context of Myanmar’s coup, COVID-19 and the broader public health response are not neutral avenues for humanitarian action. COVID-19 prevention has become a strategic pressure point for protesters and the military regime, meaning outside actors must tread carefully, meeting the most urgent needs without undercutting anti-coup activism that seeks to force the regime into changing its course.

MYANMAR’S UNEXPECTED COVID-19 SUCCESS

Experts had expected the pandemic to cripple the country’s long-neglected healthcare system, which, as recently as 2000, was ranked by the World Health Organization as the world’s worst.[5] While healthcare in Myanmar had improved under the National League for Democracy (NLD),[6] at the start of the pandemic, dire statistics underscored the healthcare system’s lack of the basic facilities, infrastructure, and resources needed to control even a minor outbreak of COVID-19.[7] On the last count before the pandemic, Myanmar had just 6.7 doctors per 10,000 people, and just 0.71 intensive care unit beds and 0.46 ventilators per 100,000 people.[8] Into late summer, despite these long odds, Myanmar appeared to have successfully contained the first wave of the virus, reporting just 374 total confirmed cases.[9] However, this changed in mid-August, when community transmission in Sittwe emerged as a turning point in the country’s COVID-19 battle.[10] Ushering in a second wave, by October 2020, the country logged record monthly highs in new cases, at 39,333, and in deaths, at 927.[11]

However, throughout the first and second COVID-19 waves, Myanmar mounted a more robust and comprehensive response than was anticipated, encompassing testing initiatives, the construction of quarantine facilities, food and cash assistance programmes, and strengthened public health policies.[12] Containment efforts were aggressive from the pandemics’ first days. Not only did Myanmar quickly ban flights from Wuhan in January, by Feb. 1, visas-on-arrival were also suspended altogether for travelers from China.[13] The government also quickly set up an inter-ministerial prevention and coordination committee, which was tasked with the government’s cross-sector emergency response.[14] Once testing was adequately scaled up, the Ministry of Health and Sports (MoHS) published regular situation reports and uploaded new caseload data to Facebook each evening. On the whole, international experts were generally impressed with the country’s COVID-19 containment and relief strategies.[15]

A local public health physician, who prefers to remain unnamed but has been assisting with the COVID-19 response since last March, shared that: “The programmes put in place were going quite well under the previous government. The officials tried their best to meet all the needs they could, even with their limited resources. That was the general impression, and not only on the health side. The inter-ministerial coordination across sectors was impressive, given that it was the first time the government had approached a problem like this.”[16]

This general agreement on the former government’s success is precisely why Myanmar’s COVID-19 response has emerged as a locus of activism and, equally, a focus of military attention in the aftermath of the coup. With the National League for Democracy (NLD)-led civilian government’s COVID-19 response viewed favourably, the military is keen to show that it, too, can manage the virus’s spread.  

CIVIL DISOBEDIENCE IN THE HEALTHCARE SECTOR

Defying the military regime that took control of the government on Feb. 1, Myanmar’s healthcare workers were among the first to join the fledging Civil Disobedience Movement (CDM). By Feb. 3, more than 70 hospitals and medical departments had joined the nationwide general strike of civil servants included within the CDM movement.[17] Those still working on an emergency basis signaled their rejection of the military regime, wearing ribbons on their scrubs and lab coats as part of a Red Ribbon Campaign.[18] After a month, by March, striking healthcare workers had forced almost a third of public hospitals to close, with more than 50,000 of the Ministry of Health and Sports’ 110,000 employees estimated to be joining the CDM movement.[19]

Myanmar’s COVID-19 response efforts featured prominently in anti-coup activism. Some of the first healthcare workers to join the general strike were posted at the Ayeyarwaddy Quarantine Center. Despite the country’s shortage of COVID-19 treatment and quarantine centres, physicians and nurses at other facilities, nationwide, soon joined.[20] Staff shortages at the MoHS resulted in a collapse of COVID-19 testing immediately following the coup. One week after, on Feb. 8, the total number of daily tests amounted to just 1,987, compared to more than 17,000 per day in the weeks before the military takeover.[21]

The regime has responded to striking medical staff with great force. In his first televised address, senior General Min Aung Hlaing vowed that the new military government would prioritise Myanmar’s COVID-19 response at any cost.[22] On Feb. 22, he declared that striking doctors were in breach of their professional oaths, and, to date, hundreds of striking medical professionals have been arrested.[23] Many have been charged under the Natural Disaster Management Law and section 188 of Myanmar’s Penal Code, which can carry up to two years in prison. Most disturbingly, medical workers have been subjected to outright violence, with a video showing the vicious assault of three volunteer medics, one of whom later died from resulting injuries.[24]

A recent analysis of military propaganda has underscored that state-run newspapers, radio, and television channels have also sought to try striking physicians in the court of public opinion, characterising their actions as dangerous and unprofessional.[25] Striking doctors, conversely, are adamant that they are not only fulfilling their professional responsibilities but abiding by the Hippocratic oath, if outside of military-run institutions. In a letter published in The Lancet, Myanmar’s healthcare professionals address this central predicament: “Our duty as doctors is to prioritize care for our patients—but how can we do this under an unlawful, undemocratic, and oppressive military system?”[26] Their answer is to funnel their energy, skills, and resources into other avenues for care, including private and charity hospitals, local clinics, and mobile ambulances dispatched to protest areas. Doctors have also returned to work when conditions demanded it, as was done amidst a brutal crackdown in North Okkalapa Township in early March.[27]

VACCINATION AS WEAPON?

The country’s COVID-19 vaccination campaign is the latest example of the political uses of the pandemic in post-coup Myanmar. The country received its first vaccine shipment from India, just over a week before Feb. 1.[28] While healthcare workers lined up to receive the vaccine at the end of January, they refused to receive their second doses following the coup.[29]

Recent reports estimate that Myanmar has now purchased 30 million doses of the COVID-19 vaccine, but the rollout continues to face challenges.[30] In late February, the director of the nation’s immunisation campaign, Dr. Htar Htar Lin, joined the nationwide strike and went into hiding, with many refusing vaccinations in solidarity with her.[31] The subject of corruption allegations from the regime, Dr. Htar Htar Lin has since leveled her own criticism in a leaked Signal message. She alleges that the military is using the vaccination drive to recruit civil servants to fill places left by striking staff.[32] This strategy exists, as she describes, “in stark contrast to our [the civilian government’s] well-planned COVID-19 immunization program.” Concluding, she declares, “Vaccination cannot be used as a weapon to keep our country under the boots of the military dictators.”[33]

At a minimum, the most recent reporting on Myanmar’s post-coup COVID-19 vaccination drive has characterised it as poorly organised and subject to extended delays.[34] Those who did choose to receive their vaccines following the coup—over 8,000 individuals—are awaiting their second shots, now more than one month overdue and yet to be rescheduled. While CDM strikers have left public sites too short-staffed to administer additional doses, the ministry also lacks the capacity to organise the private healthcare sector to assist in the programme, although private hospitals have stated they are ready to do so. According to Frontier, it is likely that the country’s current stock will expire before being fully utilised but, even if all doses are administered, the vaccination programme will still be “wildly off course.”[35]

Reports from Yangon indicate that, while the vaccine is now available to the general population, age 65 and over, information about and access to the vaccine have been erratic at best. While some townships were informed of the dates and locations for local vaccine drives through formal notices, other townships’ public health information systems amounted to pre-recorded messages played through speakers atop bicycles, ridden from street to street. While not unheard of, this public health messaging is a far cry from the regular COVID-19 updates posted on the MoHS Facebook page which received tens—if not hundreds—of thousands of shares and comments daily, just a few months before. Those who manage to receive correct information within their townships arrive to find vaccination sites overcrowded with no social-distancing protocols in place. Two eligible Yangon residents who sought vaccines on two different days in April told of lines over one thousand people long, requiring extended waits of approximately 4-6 hours.[36]

Perhaps more worrisome is the decision now facing much of Myanmar’s eligible population. For the sake of individual and community-wide health, as many people as possible should, ideally, be choosing to be vaccinated. However, the military regime’s politicisation of the vaccination drive has muddied what was previously a clear set of factors directing decision-making for individuals and households. Following the coup, many refuse to consider vaccination under a regime that would surely use the total numbers of citizens vaccinated as proof of their effective governance and ability to manage the ongoing health crisis. “I’m not able to get it yet, but wouldn’t even consider it,” explained one 25-year-old young woman, active in the anti-coup protest movement: “If I reject the government outright, and I reject its authority, how can I accept a vaccine?” Others reported rifts amongst their friends and even their families, with vaccination emerging as yet another red line some refuse to cross. For others, though, the decision to accept the regime’s vaccination programme remains relatively straightforward, with the elderly and others in high-risk categories eager to protect themselves against the life-threatening virus. While not all, many doctors, healthcare staff, and other essential workers are opting to get the vaccine given their higher exposure, even as others choose to refuse it in protest. The Yangon-based public health physician quoted above, for example, felt that he should be vaccinated, given both his profession and his intentions to travel in the coming months. But, even with the decision to pursue vaccination made, his worries were far from over: “I was quite concerned about the vaccine from the beginning,” he explained. “I wasn’t sure that the vaccinations would be kept at the required temperature, and I wasn’t confident in the management of the Ministry of Health and Sports since many staff has been on strike since the coup. I asked my contacts to see which centres were most likely to maintain the cold chain. That’s why I chose the centre I did.” But even after vaccination, he waited anxiously: “Even after having had the vaccination, it’s difficult to know whether it will be effective if we are exposed. One good thing happened to me with the vaccine, which is that I had a low-grade fever afterward, which made me feel more confident that I am now likely protected.”[37]

These decisions will become even more grave if case numbers begin to rise—a potential outcome of the protests, given that many participants wear masks sporadically and shouting or tear-gas-induced coughing is an avenue for extensive transmission. “While the number of COVID-19 cases doesn’t seem to have risen dramatically, we can’t know with any confidence,” explained a doctor who, currently on strike, requested anonymity.[38] “The data is non-existent, and so we can only assess based on rumours. Plus, even if we knew hospital admittance figures, it wouldn’t clarify the situation because so few people would consider going to the hospital under these conditions, even if they were sick. It’s much more likely they will die at home.” This doctor, who has been on strike for the past two months, confirmed that he would likely accept being vaccinated once it was safe for him to go out and do so, even if he roundly rejected the military and its authority over the campaign. “If the cases suddenly begin to rise, or if the variants arrive from abroad, I will need to treat COVID-19 patients outside the hospital, and most likely without much protective equipment.” In that case, “vaccination is the most basic decision I can make. It will allow me to save lives in the system-wide cracks that the military’s coup has created.”

Before February 1, Myanmar’s COVID-19 response had underscored the hard-won victories of Myanmar’s healthcare sector, where, as Dr. Htar Htar Lin writes, “we have worked day and night for the past five to ten years, to be able to stand shoulder to shoulder with other countries.”[39] The first 11 months of the COVID-19 pandemic showed this effort’s most immediate payoff in terms of advances in COVID-19 care, an expansive public health response, and transparency in the reporting of case statistics and plans for vaccination programming.

Unfortunately, the coup has upended the national COVID-19 response and, with it, the vaccination effort. While the effective prevention and treatment of COVID-19 is a necessity, this must be weighed against the immediate impact of intervening in a political landscape where healthcare has emerged as a significant pressure point. Foreign governments, international institutions, and donors who choose to assist Myanmar in its COVID-19 response must do so carefully, particularly since propping up government health programmes may weaken anti-coup activists’ positions.

ISEAS Perspective 2021/67, 11 May 2021


ENDNOTES

[1] Kham, Naung. “Myanmar Reports First COVID-19 Death; Man Had 4-day Layover in Singapore.” CNA. February 03, 2021. https://www.channelnewsasia.com/news/asia/myanmar-coronavirus-covid-19-first-death-singapore-transit-12592394.

[2] The Insights. “Greed for Power is Worse than a Pandemic.” Twitter. April 2, 2021. https://twitter.com/TheInsights_Ti/status/1377984584713973761/photo/1.

[3] See The Insights. Twitter. https://twitter.com/TheInsights_Ti

[4] Radcliffe, Rebecca. “Food and fuel prices soar in Myanmar as coup exacerbates Covid-19 crisis.” The Guardian. March 16, 2021. https://www.theguardian.com/world/2021/mar/16/myanmar-protests-bystanders-among-20-killed-by-security-forces

[5] “The World Health Report.” World Health Organization. 2000. https://www.who.int/whr/2000/en/whr00_en.pdf

[6] Brennan, Elliot. “Myanmar’s Public Health system and policy: Improving but inequality still looms large.” Tea Circle. August 30, 2017. https://teacircleoxford.com/2017/08/30/myanmars-public-health-system-and-policy-improving-but-inequality-still-looms-large-2

[7] Deshpandi, Ashwini et al. “Myanmar’s response to the COVID-19 pandemic.” The Brookings Institution. December 1, 2020. https://www.brookings.edu/blog/future-development/2020/12/01/myanmars-response-to-the-covid-19-pandemic

[8] Ibid.

[9] “Coronavirus Resource Center.” John Hopkins University. https://coronavirus.jhu.edu/region/myanmar

[10] Zomber, Peter. “Soaring Myanmar COVID-19 Cases Test Long-Neglected Health Care System” Voice of America. October 15, 2020. https://www.voanews.com/east-asia-pacific/soaring-myanmar-covid-19-cases-test-long-neglected-health-care-system

[11] “Coronavirus Resource Center.” John Hopkins University.

[12] Deshpandi, Ashwini et al. “Myanmar’s response to the COVID-19 pandemic.” The Brookings Institution.

[13] Mann, Zarni. “Wuhan Flights to Myanmar Stopped Amid Coronavirus Outbreak.” The Irrawaddy. January 24, 2020. https://www.irrawaddy.com/news/burma/wuhan-flights-myanmar-stopped-amid-coronavirus-outbreak.html; “Myanmar temporarily stops issuing visa on arrival to tourists from China.” February 2, 2020. https://elevenmyanmar.com/news/myanmar-temporarily-stops-issuing-visa-on-arrival-to-tourists-from-china

[14] Aye Nein Win. “Myanmar leader forms new anti-COVID-19 committee.” The Myanmar Times. March 31, 2020. https://www.mmtimes.com/news/myanmar-leader-forms-new-anti-covid-19-committee.html

[15] See https://www.mohs.gov.mm/Main/content/publication/2019-ncov.

[16] Interview by author (April 2021).

[17] Khine Lin Kyaw and Phillip Heijmans. “Myanmar’s Doctors Vow to Shut Hospitals in Anti-Coup Protests.” Bloomberg. February 3, 2020. https://www.bloomberg.com/news/articles/2021-02-03/myanmar-anti-coup-protesters-call-to-shut-hospitals-bang-pots

[18] “Medical Staff in Yangon Readies for Patients during CDM.” The Myanmar Times. February 16, 2021. https://www.mmtimes.com/news/medical-staff-yangon-readies-patients-during-cdm.html

[19] “Striking health staff boycott COVID-19 jabs as the CDM grows.” Frontier. March 9, 2021. https://www.frontiermyanmar.net/en/striking-health-staff-boycott-covid-19-jabs-as-the-cdm-grows

[20] Shoon Naing and Zaw Naing Oo. “Myanmar races to build field hospital as coronavirus surge stretches health system.” Reuters. September 16, 2020. https://www.reuters.com/article/us-health-coronavirus-myanmar-idUSKBN2671HO

[21] “COVID-19 testing collapses in Myanmar after coup.” CNA. February 9, 2021. https://www.channelnewsasia.com/news/world/covid-19-testing-collapses-in-myanmar-after-coup-14144504

[22] Yuichi, Nitta. “Myanmar junta chief Min Aung Hlaing says this coup is ‘different.’“ Nikkei Asia. February 8, 2021. https://asia.nikkei.com/Spotlight/Myanmar-Coup/Myanmar-junta-chief-Min-Aung-Hlaing-says-this-coup-is-different

[23] “Striking health staff boycott COVID-19 jabs as the CDM grows.” Frontier. March 9, 2021. https://www.frontiermyanmar.net/en/striking-health-staff-boycott-covid-19-jabs-as-the-cdm-grows

[24] “Medics, Aid Volunteers Become Latest Targets of Myanmar Junta’s Brutality.” Radio Free Asia. March 4, 2021. https://www.rfa.org/english/news/myanmar/emergency-care-workers-03042021172046.html

[25] “A Preliminary Analysis of the Myanmar Military Junta’s Media Propaganda.” Tea Circle. March 9, 2021. https://teacircleoxford.com/2021/03/09/a-preliminary-analysis-of-the-myanmar-military-juntas-media-propaganda

[26] Zaw Wai Soe et al. “Myanmar’s health leaders stand against military rule.” The Lancet. February 19, 2021. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(21)00457-8/fulltext

[27] “Security forces stage deadly crackdown, leaving at least 16 people dead.” Frontier. March 3, 2021. https://www.frontiermyanmar.net/en/security-forces-stage-deadly-crackdown-leaving-at-least-16-people-dead.

[28] Shoon Naing. “Myanmar receives first batch of COVID-19 vaccines from India.” Reuters. January 22, 2021. https://www.reuters.com/article/us-health-coronavirus-myanmar-vaccine-idUSKBN29R0ZS

[29] Zaw Zaw Htwe. “Myanmar Starts Vaccinating Medics Nationwide Against COVID-19.” The Irrawaddy. January 27, 2021. https://www.irrawaddy.com/specials/myanmar-covid-19/myanmar-starts-vaccinating-medics-nationwide-covid-19.html; “Striking health staff boycott COVID-19 jabs as the CDM grows.” March 9, 2021. Frontier. https://www.frontiermyanmar.net/en/striking-health-staff-boycott-covid-19-jabs-as-the-cdm-grows

[30] Hmue Angel. “More than 380,000 in Myanmar receive COVID-19 vaccine.” The Myanmar Times. https://www.mmtimes.com/news/more-380000-myanmar-receive-covid-19-vaccine.html

[31] “‘More dangerous than COVID-19’: Anti-military fury leaves SAC pandemic response in shambles.” Frontier. March 25, 2021. https://www.frontiermyanmar.net/en/more-dangerous-than-covid-19-anti-military-fury-leaves-sac-pandemic-response-in-shambles

[32] See https://mrattkthu.com/blogs/doctor-who-led-covid-vaccine-programme-hides

[33] Ibid.

[34] “Anti-military defiance slows COVID-19 vaccination to a trickle” Frontier. April 7, 2021. https://www.frontiermyanmar.net/en/anti-military-defiance-slows-covid-19-vaccination-to-a-trickle

[35] “Anti-military defiance slows COVID-19 vaccination to a trickle.” Frontier. April 7, 2021. https://www.frontiermyanmar.net/en/anti-military-defiance-slows-covid-19-vaccination-to-a-trickle

[36] Interview by author (April 2021).

[37] Interview by the author (April 2021)

[38] Interview by the author (April 2021).

[39] See https://mrattkthu.com/blogs/doctor-who-led-covid-vaccine-programme-hides

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2021/66 “Fighting COVID-19: China’s Soft Power Opportunities in Mainland Southeast Asia” by Chheang Vannarith

 

China has transformed the COVID-19 crisis into a window of opportunity to boost its soft power through sharing information and knowledge, providing medical supplies, deploying medical teams, and providing vaccines. In this picture, a staff member working in Beijing to produce a COVID-19 coronavirus vaccine at Sinovac, one of 11 Chinese companies approved to carry out clinical trials of potential coronavirus vaccines, on September 24, 2020. Photo: WANG ZHAO, AFP.

EXECUTIVE SUMMARY

  • The COVID-19 pandemic provides a window of opportunity for China to exert its international leadership and influence. It has managed to turn the crisis into a diplomatic and strategic opportunity in mainland Southeast Asia and elsewhere.
  • Public health diplomacy has become one of the key sources of China’s soft power projection, enhancing China’s image and influence.
  • In mainland Southeast Asia, the Chinese government’s effective measures to curb the pandemic outbreak at home and the provision of COVID-19 assistance to regional countries have enhanced China’s soft power.
  • This is even though it is clear that China’s intentions are not completely altruistic, and it has other strategic intentions with regards to these measures.
  • Cambodia and Laos have been most receptive to China’s public health diplomacy, including its vaccine diplomacy, while Thailand and Myanmar also have welcomed Chinese assistance. Vietnam has been reluctant to endorse China’s COVID-19 assistance, including Chinese vaccines.

* Chheang Vannarith is Visiting Fellow at ISEAS – Yusof Ishak Institute, and President of the Asian Vision Institute (AVI), an independent think tank based in Phnom Penh, Cambodia.

INTRODUCTION

The COVID-19 pandemic is the defining crisis of the century. It acutely affects human lives and livelihoods, exacerbates inequalities, pushing millions more into poverty, and accentuates geopolitical competition. In addition, the politicisation of the pandemic in the form of a blame game ramped up especially in the first half of 2020. China was criticised, mainly in the US and Europe, for lack of transparency in handling the pandemic. In the Southeast Asian region, China received positive reactions for the decisive, swift and effective response to the pandemic. Southeast Asian countries were among the first to offer political, diplomatic, and humanitarian aid to China. Remarkably, Cambodia Prime Minister Hun Sen visited Beijing on February 5, 2020 to show spiritual and diplomatic support to the Chinese government and people in the fight against the pandemic.

To restore its international image, rigorous public diplomacy and concrete actions on the ground have been implemented by China. After stabilising the situation at home, Beijing started providing COVID-19 assistance to other countries and regions. This article assesses the implications of its COVID-19 assistance on China’s soft power projection in Mainland Southeast Asia. It argues that the pandemic created a strategic opportunity for China to exert soft power in Mainland Southeast Asia through health diplomacy. In general, China’s soft power received a needed leg-up in the region. 

COVID-19 AND CHINA’S SOFT POWER

According to a survey carried out by Pew Research Centre in October 2020, unfavourable views of China’s handling of the COVID-19 pandemic was increasing. Across the 14 countries surveyed (Australia, Canada, Japan, South Korea, the United States, and other European countries), a median of 61% expressed dissatisfaction with China’s way of dealing with the outbreak.[1] Information operations, especially by the US, were carried out to challenge the legitimacy of the Communist Party of China. To counteract this offensive, China launched a communication initiative, mainly in the realm of public health diplomacy.

Southeast Asia has become the most fertile ground for China in crafting narratives to support its image building and its handling of the pandemic.[2] China has a strong basis for its soft power projection in Southeast Asia, given that these countries are attracted to China’s material resources.[3] Economic resources, cultural assets and technological innovations are the main sources of China’s soft power. Southeast Asian countries have high economic stakes in their relationship with China, which explains why they have stood firmly with China in combating the pandemic. Southeast Asian leaders protested against the politicisation of the pandemic and called for international cooperation and solidarity in which the World Health Organisation (WHO) plays a key role. At the special foreign ministers’ meeting on 14 February 2020, ASEAN expressed “full confidence in China’s abilities to succeed in overcoming the epidemic”.[4] According to the survey on ASEAN perception carried out by ISEAS – Yusof Ishak Institute, China is seen as having provided the most assistance to the region during the pandemic.[5]

China designed a humanitarian plan to gain a geopolitical advantage,[6] and has managed to transform the COVID-19 pandemic into a strategic opportunity to assert its leadership role and expand its geopolitical influence. Health diplomacy has become an important tool to project China’s image as a responsible and benign global power.[7] This could of course only be implemented after China had successfully curbed the outbreak at home. Obviously, China’s global influence through soft power projection will be more dynamic in the post-COVID-19 era,[8] but more resources and efforts are needed to better communicate and tell China’s story.[9] China’s overall image in Southeast Asia, according to the survey by ISEAS – Yusof Ishak Institute, declined slightly in 2020.[10] It means that although China did well in public health diplomacy, its assertive behaviour in the South China Sea, and the perceived risks stemming from overreliance on China, affected China’s soft power status.

MAINLAND SOUTHEAST ASIA FACING THE PANDEMIC

Mainland Southeast Asian countries (Cambodia, Lao PDR, Myanmar, Thailand and Vietnam), which were believed to be the most vulnerable to the viral outbreak due to its geopolitical proximity to, and intensive people-to-people contacts with China, have managed the COVID-19 pandemic rather well, measured in terms of number of infections and mortality rate. The economic impact of the pandemic has been monumental. The overall economic performance in 2020 was at its lowest in decades. Thailand was badly hit, with a contraction of 6.1 percent, followed by Cambodia at 3.1 percent, and Lao PDR at 2.5 percent. Myanmar and Vietnam manage positive growth at 1.8 percent and 2.3 percent respectively. 

Thailand was the first country in Mainland Southeast Asia to declare its first infection case on January 13 (a Chinese woman from Wuhan), followed by a confirmed case in Vietnam on January 23 (a Vietnamese woman returning from Wuhan). Cambodia was next, with its first case recorded on January 27 – a Chinese man from Wuhan. Myanmar and Lao PDR were surprisingly spared from pandemic infections until March. Lao reported its first two cases, two Laotians working in the travel and tourism industry, on March 14, while Myanmar reported its first two confirmed cases on March 23 – two  Burmese men, one returning from the United States, and the other from the United Kingdom

Across the region, there have been several waves or spikes of infections. In Cambodia, there were three small infection spikes in 2020 and one big surge from the third wave of community transmission on 20 February. Lao PDR had only an infection spike, which was on November 23 with 14 new cases. Myanmar experienced an abrupt high rate of infections with 100 new cases on September 6, to an average of more than 1,000 daily new cases from October 4 to December 22. Thailand experienced two big spikes from late March to early April with the highest rate of new cases at 143 being on March 29, and from late December 2020 to January 2021 with the resurgence with 809 cases on 21 December. Vietnam had four small spikes in late March with 15 new cases on March 30, 17 cases on May 7, 49 cases on 31 July, and 16 cases on November 15.

The measures adopted by the five governments in Mainland Southeast Asia include restrictions on the movement of people, surveyance and contact tracing, targeted testing (testing individuals with signs or symptoms and asymptomatic individuals with recent known or suspected exposure). A whole-of-society approach, effective crisis leadership, inter-agency coordination, enhancement of healthcare systems, and evidence-based decision making with technical support and cooperation from the World Health Organisation and international organisations have contributed to effective response mechanism. Across the region, the approval rate (approve and strongly approve) of the government’s response to the pandemic is quite high with about 80 percent in Cambodia, about 55 percent in Laos, about 42 percent in Myanmar, about 45 percent in Thailand, and about 97 per cent in Vietnam.[11]

CHINA’S COVID-19 ASSISTANCE

China has played a critical role in offering medical information and supplies such as PPE (Personal Protective Equipment), facemasks, and test kits. and deploying medical teams to Southeast Asian countries to combat the pandemic; some have called this assistance “face mask diplomacy” or “COVID-19 diplomacy”. Overall, China has harvested significant political leverage from this in the region. Its image in Cambodia has definitely improved.[12]

China sent its first anti-epidemic medical team and medical supplies including test kits to Cambodia on 23 March. It was the first international COVID-19 assistance it offered. Then on March 13 and 25, China donated medical supplies and masks and PPE to Vietnam and Thailand respectively. On April 8 and 9, a Chinese medical team arrived in Myanmar and Lao PDR respectively, together with other medical supplies. There were a few more rounds of Chinese assistance after that, particularly to Cambodia, Lao PDR and Myanmar.

China’s COVID-19 assistance has been integrated into the narrative on the country’s grand vision of building a community with a shared future. For instance, on March 22, the Communist Party of China sent a congratulatory message to the Lao People’s Revolutionary Party on the occasion of the 65th anniversary of its establishment. The message read, “following the outbreak of the COVID-19 in China, the Lao party, government and all sectors of Lao society lost no time in expressing sympathy and solicitude to China for providing financial and material assistance, well embodying the spirit of the China-Laos community with a shared future.”[13]

Chinese companies also donated financial assistance to the region. The Alibaba Foundation, Jack Ma Foundation, and Huawei launched global campaigns to provide medical assistance. At the national level, Chinese companies which had invested in Mainland Southeast Asia also donated resources to support national governments. In Myanmar, for instance, China’s State Power Investment, Pengxin, Hengyi, CITIC Group, and China Communication Constructions donated medical supplies worth about USD2 million.[14] Chinese NGOs also joined China’s mission in offering humanitarian assistance to regional countries. On May 4,  Blue Sky Rescue Team, one of the non-governmental organizations (NGO) in China, sent a team of 10 volunteers and donated medical supplies to Cambodia to help fight the pandemic.[15]

China’s health diplomacy has been boosted by its information and communication strategy. The Chinese embassies, state-owned media, and think tanks have coordinated in structurally advancing China’s COVID-19 diplomacy. The Chinese embassies were unprecedentedly very active in sharing information concerning China’s responses to the pandemic, assistance to other countries, and the call for international solidarity in the fight against the pandemic. China Daily created a special section on “Fighting the COVID-19 the Chinese Way”, People’s Daily has a similar section called “Fight the Novel Coronavirus”, and China Global Television Network created a section on “COVID-19 Frontline”.

REACTIONS FROM MAINLAND SOUTHEAST ASIA

In terms of strategic trust and partnership, from the Chinese perspective, Cambodia and Lao PDR are in the first tier, Myanmar and Thailand in the second, and Vietnam in the third. Cambodia and Lao PDR are staunch supporters of China’s regional initiatives such as the Belt and Road Initiative (BRI) and Lancang-Mekong Cooperation (LMC), while Myanmar and Thailand are somewhat more cautious towards China. Vietnam is very cautious of China’s intentions in the region, and has, for instance, shown a degree of resistance to the BRI[16] and opposed China’s proposal to form a regional secretariat for the LMC.

In the wake of the pandemic outbreak in early 2020, Cambodia did not impose any restrictions on travellers from China. Prime Minister Hun Sen even planned to visit Wuhan, the epicentre of the pandemic; but due to high health risk, he could only visit Beijing on February 5. During that visit, he met President Xi Jinping to show support to the Chinese government and people in the fight against the pandemic. This was regarded as a vote of confidence in the Chinese leadership, which was then under strong international criticism.[17] During the visit, he said Cambodia would stand with China in all circumstances and work together to combat against the pandemic.[18]

The Lao government highly appreciated China’s COVID-19 assistance such as information sharing, capacity building, and the provision of medical supplies.[19] Bounnhang Vorachith, General Secretary of the Lao People’s Revolutionary Party (LPRP) Central Committee and President of Laos said China’s assistance truly reflected the “time-honoured close friendship and the brotherly and comradely relationship of cooperation and mutual assistance between the two parties, countries and peoples, and vividly demonstrates the spirit of the Laos-China community with a shared future”.[20]

Myanmar President U Win Myint also expressed his appreciation of China’s assistance in the fight against the pandemic, and articulated his confidence in the leadership of the Chinese government in controlling the pandemic.[21] He pledged to advance and deepen the China-Myanmar Comprehensive Strategic Cooperative Partnership,[22] and build a community with a shared future.[23]At the reception of the fourth batch of medical supplies from China on June 9, Union Minister for Health and Sports Myint Htwe said China’s assistance significantly helped Myanmar in the prevention, treatment and control of the COVID-19 pandemic.[24]

While government leaders praise China’s assistance, some local analysts, however, raised concern over the increasing influence of China in the country. U Maw Htun Aung, Myanmar country manager of the Natural Resource Governance Institute, said Chinese humanitarian assistance aimed to foster China’s influence in the country, while Chinese companies tried to assure political support and enhance their public image. “China is seeking both political and economic gain by promising economic support and delivering aid to Myanmar in a time of crisis. They know that Myanmar needs both”, he added. Another analyst Khin Khin Kyaw Kyee, the head of the China desk at the Institute for Strategy and Policy, argued that Chinese aids serve to project China as a benign power and a responsible member of the global community. “This aid to some extent can help China expand its political influence in the recipient countries,” she added.[25]

Thailand-China bilateral relations emerged stronger during the pandemic. During a phone conversation with a Chinese diplomat in Bangkok on 17 March 2020, Thai Prime Minister Prayut Chan-o-cha said that “bilateral ties will emerge even stronger in this joint campaign against the virus”. Meanwhile, Deputy Prime Minister Anutin said that China’s assistance exemplified the special friendship of “Thai and China as one family”. He shared the view that the bilateral relationship would be more consolidated.[26] In addition, at the reception of medical supplies donated by China in June 2020, Thai Prime Minister Prayut Chan-o-cha said the long-standing relationship with China would continue in all aspects, including social, cultural and economic ties.[27] At the meeting with Chinese foreign minister Wang Yi on October 15, Prayut appreciated China for making the COVID-19 vaccine a “global public good” and pledged to build the Silk Road of Health and support the synergies and connectivity between the “Eastern Economic Corridor” with the Guangdong-Hong Kong-Macao Greater Bay Area.[28] In April 2020, Chuan Leekpai, President of the National Assembly of Thailand, thanked China for helping Thailand and looked forward to welcoming Chinese tourists as soon as the pandemic situation improved.[29]

In January 2021, Vietnamese Prime Minister Nguyen Xuan Phuc praised China’s fight against the pandemic at home and abroad. He said that learning from its experience in handling Severe Acute Respiratory Syndrome (SARS), China would secure an early victory against the epidemic.[30] Although Vietnam and China have forged cooperation on the COVID-19, deep distrust remains.[31] A Vietnamese government official reportedly said that “the Chinese government won’t give out accurate numbers, so we can’t simply accept what they tell us.”[32] The pandemic crisis accentuates the competition between Vietnam and China, from sovereignty disagreements in the South China Sea to economic disputes.[33]

China’s vaccine diplomacy in promoting vaccine multilateralism since late 2020 and making vaccine a global public good, has been applauded. To some analysts, China’s vaccine diplomacy aims to “increase China’s global influence and iron out…geopolitical issues” or “advance its regional agenda, particularly on sensitive issues such as its claims in the South China Sea”.[34]Addressing the Lancang-Mekong Cooperation summit in August 2020, Chinese Premier Li Keqiang pledged that China would prioritise providing COVID-19 vaccines to Mainland Southeast Asian countries.[35] The regional countries have responded positively, except for Vietnam which seeks other sources of vaccine.

In January 2021, Thailand announced plans to purchase two million doses of Sinovac vaccine. There are three phases of delivery: 200,000 doses to arrive by February 2021, another 800,000 doses to arrive by March, and 1 million in April. In January, China promised Myanmar 300,000 doses of vaccines. In February, Lao PDR received 300,000 doses of vaccines developed by China National Pharmaceutical Group (Sinopharm). Cambodia has received 1.3 million doses of vaccine from China (which arrived in March and April) and is going to receive another 1 million doses in 2021. Vietnam is reluctant to administer Chinese vaccines, with some leaders raising concerns over transparency and legitimacy relating to China’s vaccine diplomacy in the region,[36] while others remain sceptical of China’s intentions.[37]

CONCLUSION

China has transformed the COVID-19 crisis into a window of opportunity to boost its soft power through sharing information and knowledge, providing medical supplies, deploying medical teams, and providing vaccines. China’s soft power has been slightly enhanced, based on the perception of policy makers or ruling elites, and its geopolitical influence has increased in Mainland Southeast Asia. The regional countries have applauded and appreciated China for successfully curbing the pandemic outbreak, for the provision of COVID-19 assistance, and for the promotion of vaccine diplomacy. Nevertheless, there are some concerns with regard to China’s strategic intentions.

Cambodia and Lao PDR are the most receptive to China’s assistance, without much questioning of China’s strategic intention. Thailand and Myanmar are also positive towards China, while Vietnam remains the most sceptical towards China’s regional intention, due to the lingering tensions in the South China Sea and relatively high anti-China national sentiments in Vietnam. The prospect of China’s soft power in the region will continue to rise thanks to its economic resources and to its coalition building on international issues such as the COVID-19 pandemic. But there are remaining concerns over China’s strategic intentions. Although China is generally regarded as the most influential economic power in the region, its growing assertive or even dominant behaviour will produce a backflow to its goodwill diplomacy and soft power projection.

ISEAS Perspective 2021/66, 10 May 2021


ENDNOTES

[1] Silver, Laura; Devlin, Kat; and Huang, Christine (2020) Unfavourable views of China reach historic highs in many countries. Pew Research Center, https://www.pewresearch.org/global/2020/10/06/unfavorable-views-of-china-reach-historic-highs-in-many-countries

[2] Lye, Liang Fook (2020) The fight against COVID-19: China’s shifting narrative and Southeast Asia. ISEAS Perspective No. 26. Singapore: ISEAS-Yusof Ishak Institute.

[3] Xi, Jinrui and Primiano, Christopher (2020) China’s influence in Asia: How do individual perceptions matter? East Asia (Piscataway) June 2, 1-22.

[4] ASEAN Secretariat, https://asean.org/storage/2020/02/ASEAN-China-SFMM-Statement-on-COVID-19-20-Feb-2020-Final.pdf

[5] ISEAS-Yusof Ishak Institute (2021) The state of Southeast Asia, /wp-content/uploads/2021/01/The-State-of-SEA-2021-v2.pdf

[6] Dorman, David (2020) China’s global COVID-19 assistance is humanitarian and geopolitical. That’s why people are worried. Security Nexus, April 2020. The Daniel K. Inouye Asia-Pacific Center for Security Studies, p.4.

[7] Gauttam, Priya; Singh, Bawa; and Kaur, Jaspal (2020) COVID-19 and Chinese Global Health Diplomacy: Geopolitical Opportunity for China’s Hegemony. Millennial Asia 11 (3), 318-340.

[8] Soft power here refers to positive image development and the persuasive influence on the perception and decision making of others.

[9] Gill, Bates (2020) China’s global influence: Post-COVID prospects for soft power. The Washington Quarterly 43 (2), 97-115.

[10] ISEAS – Yusof Ishak Institute (2021) The state of Southeast Asia, /wp-content/uploads/2021/01/The-State-of-SEA-2021-v2.pdf

[11] ISEAS – Yusof Ishak Institute (2021) The state of Southeast Asia, /wp-content/uploads/2021/01/The-State-of-SEA-2021-v2.pdf

[12] Luo, Jing Jing and Un, Kheang (2020) Cambodia: Hard landing for China’s soft power? ISEAS Perspective No. 111, Singapore: ISEAS-Yusof Ishak Institute.

[13] Lintner, Bertil (2020, April 10) China comes to the Covid-19 rescue in Laos. Asia Times, https://asiatimes.com/2020/04/china-comes-to-the-covid-19-rescue-in-laos

[14] Tower, Jason (2020, May 27) China using pandemic aid to push Myanmar economic corridor. United Sates Institute of Peace (USIP). https://www.usip.org/publications/2020/05/china-using-pandemic-aid-push-myanmar-economic-corridor

[15] Xinhua News (2020, May 4) China’s humanitarian NGO sent volunteers and donates medical supplies for COVID-19 fight, http://www.xinhuanet.com/english/2020-05/04/c_139029746.htm

[16] Vu, Van-Hoa, Soong Jenn-Jaw, and Nguyen, Khac-Nghia (2020) Vietnam’s perceptions and strategies toward China’s Belt and Road Initiative expansion: Hedging with resisting. The Chinese Economy. DOI: 10.1080/10971475.2020.1809818

[17] Lye Liang Fook (2020, February 10) “Hun Sen’s China visit: Love in the time of Coronavirus”, ISEAS Commentary  /media/commentaries/hun-sens-china-visit-love-in-the-time-of-coronavirus-by-lye-liang-fook

[18] People’s Daily (2020, February 4) World leaders speak highly of support China’s efforts in fighting novel coronavirus, http://en.people.cn/n3/2020/0205/c90000-9654214.html

[19] Xinhua (2020, April 20)  https://www.globaltimes.cn/content/1185340.shtml

[20] CGTN (2020, June 15)  https://news.cgtn.com/news/2020-06-15/Xi-China-ready-to-strengthen-anti-pandemic-cooperation-with-the-Laos-Rlwjdoai2I/index.html

[21] People’s Daily (2020, February 4) World leaders speak highly of, support China’s efforts in fighting novel coronavirus, http://en.people.cn/n3/2020/0205/c90000-9654214.html

[22] Chan, Mya Htwe (2020, May 21) China assures Myanmar of support in Covid-19 fight. Myanmar Times. https://www.mmtimes.com/news/china-assures-myanmar-support-covid-19-fight.html

[23] Ministry of Foreign Affairs of the People’s Republic of China (2020, June 8) https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1787364.shtml

[24] Xinhua (2020, June 9) China donates more medical supplies to Myanmar to fight against COVID-19,  http://en.people.cn/n3/2020/0609/c90000-9698996.html

[25] Nan, Lwin (2020, April 24) In Myanmar, Concerns that China’s help on Covid-19 comes with strings attached. The Irrawaddy. https://www.irrawaddy.com/opinion/analysis/myanmar-concerns-chinas-help-covid-19-comes-strings-attached.html

[26] Embassy of the People’s Republic of China to Thailand, http://www.chinaembassy.or.th/eng/sgxw/t1757986.htm

[27] Xinhua (2020, June 29) China donates medical equipment to Thailand to stem Covid-19. http://www.xinhuanet.com/english/2020-06/29/c_139175892.htm

[28] Ministry of Foreign Affairs of the People’s Republic of China, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1824958.shtml

[29] CGTN (2020, April 24) https://news.cgtn.com/news/2020-04-24/COVID-19-Frontline-Doctors-from-China-and-Thailand-share-experience-PWZFIVwxQk/index.html

[30] People’s Daily (2020, January 31) World leaders positively evaluate, support China’s fight against virus outbreak, http://en.people.cn/n3/2020/0131/c90000-9652933.html

[31] Pham, Bac and Murray, Bennett (2020, May 14) Behind Vietnam’s Covid-19 response, deep distrust of China. The Diplomat. https://thediplomat.com/2020/05/behind-vietnams-covid-19-response-deep-distrust-of-china

[32] Yoichi, Funabashi (2020, August 3) ‘China Literacy’: Vietnam’s key to combatting Covid-19. The Japan Times. https://www.japantimes.co.jp/opinion/2020/08/10/commentary/china-literacy-vietnam-coronavirus

[33] Marjani, Niranjan (2020, August 7) Covid-19 drives economic, strategic competition between China and Vietnam. ASEAN Today. https://www.aseantoday.com/2020/05/covid-19-drives-economic-strategic-competition-between-china-and-vietnam

[34] Straits Times (2020, December 10) China’s vaccine diplomacy: A global charm offensive. https://www.straitstimes.com/asia/east-asia/chinas-vaccine-diplomacy-a-global-charm-offensive

[35] Xinhua News (2020, August 24) China to prioritize Mekong countries for COVID-19 vaccine. http://www.xinhuanet.com/english/2020-08/24/c_139313619.htm 

[36] Khairulanwar Zaini (2021) Chinese vaccine diplomacy in Southeast Asia seeds goodwill but has limited strategic gains. Chanel News Asia, 21 March 2021, https://www.channelnewsasia.com/news/commentary/chinese-vaccine-diplomacy-sinovac-sinopharm-southeast-asia-14443682

[37] Yang, Lizhong and Chen, Dingding (2021) Is China’s Covid-19 diplomacy working in Southeast Asia? The Diplomat, 20 February 2021, https://thediplomat.com/2021/02/is-chinas-covid-19-diplomacy-working-in-southeast-asia

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2021/65 “Borderland without Business: The Economic Impact of Covid-19 on Peninsular Malaysia’s Southernmost State of Johor” by Serina Rahman

 


Groups dependent on fishing and agriculture reported an immediate loss of incomes due to a lack of Singaporean buyers and also due to local travel limits. In this picture, Johor’s artisanal fishermen checking their catch just under the now-empty Second Link bridge. Photo: Serina Rahman, ISEAS – Yusof Ishak Institute.

EXECUTIVE SUMMARY

  • Covid-19 has had an exceptionally harsh impact on the Johor economy due to the combined factors of border closure (and loss of Singaporean visitors), local movement restrictions and economic slowdown, as well as unemployment amongst former Malaysian workers in Singapore. 
  • The combination of these difficulties has resulted in (amongst others) a 70 percent drop in the retail economy, hotel occupancy rates falling to 27 percent and the closure of 14 hotels in Johor.
  • The bottom 40 percent (B40) were some of the most affected by these Covid-induced consequences, especially as micro-businesses were also not allowed to open during the first Movement Control Order (MCO). Johor’s poverty rate rose from 3.9 percent in 2019 to almost 8 percent in 2020, while hardcore poverty rose to 2.5 percent in 2020 from 0.2 percent in 2019.
  • Mental health issues have also been on the rise, with Johor recording the highest number of suicides in the country between 18 March and 30 October 2020.
  • In its 2021 budget announcement, the Johor state government introduced a number of initiatives focused on a quick economic recovery once the border with Singapore opens. These include the opening of the Johor Economic Tourism and Cultural Office (JETCO) in Singapore and the reskilling of retrenched workers through the Iskandar Malaysia Smart City initiative.
  • New long-term plans to become both an alternative data hub and an agricultural food bank for the region are meant to strengthen the state’s economic resilience and food security given the possibility of future pandemics and other global disruptions.

*Serina Rahman is Visiting Fellow at the Malaysia Programme, ISEAS – Yusof Ishak Institute. She is a conservation scientist and environmental anthropologist by training and is interested in various facets of Malaysia’s rural livelihoods and issues of economic development.

INTRODUCTION

Just over a year after Malaysia’s borders closed, the Johor Bahru city centre is now beginning to show signs of life. Throughout the many iterations of the Covid-19 induced Movement Control Orders (MCO), Johor Bahru lost the throngs of Singaporean weekend visitors who used to ply its shopping malls, restaurants, car workshops and beauty salons. While all of Malaysia fell silent to travel restrictions and enforced business shutdowns, the border closures had especially severe consequences on Johor, given the state’s extensive economic ties with its southern neighbour.[1]

This paper examines the overall economic impact of Covid-19 on Johor, as well as the state and federal governments’ efforts to improve conditions amidst continued uncertainty and subsequent waves of the pandemic. It then looks at the possibility of recovery with the arrival of vaccines and ongoing discussions to reopen the border.

JOHOR’S WOES

In addition to the loss of Singaporean visitors to Malaysia’s southern-most state, the stranding of more than 250,000 commuters who used to live in Johor and work in Singapore was an added blow. The deep traditional economic ties between Singapore and Johor meant that the border closure had an immediate impact on Singapore’s Malaysian workforce, and on the companies that depended on them.[2] With the borders closed, some Malaysians opted to stay in Singapore (if they still had jobs and accommodation), while others returned to Malaysia.

Many believed that the border closures and the first round of MCO would only last two weeks. Instead, it stretched on for many months (from 18 March to 4 May 2020 as the initial MCO, then through various iterations of Recovery MCO, Conditional MCO and a return to a slightly more relaxed MCO 2.0). Limited opportunities to travel between the two countries opened up with the Periodic Commuting Arrangement (PCA) and Reciprocal Green Lane (RGL) travel bubbles in August 2020, but these were suspended on 1 Feb 2021 given rising Covid-19 infection numbers in Malaysia.

This situation left many families separated, with dire consequences at times of illness or death. But it also led to unemployment for some in Singapore when the country’s Covid-19’ circuit breaker’ controls kicked in. With the PCA, many with jobs in Singapore, but were required to stay in the country for three months at a time, struggled to meet the costs of accommodation and food.[3]

With Malaysia’s economy put on hold due to Covid-19, and even small and micro-businesses not being allowed to operate during the first MCO, there was little avenue for former commuters to find work in Malaysia. Many held out the hope that they would eventually be able to get back into Singapore, and opted for part-time work such as food delivery riders.  Some who expected the closure to be a temporary measure eventually lost their jobs as they were unable to return to Singapore. Many had jobs that could not be done remotely, such as in factories or in the service industry; working from home was not an option for them.

Figure 1 below outlines the framework of the problems affecting Johor, illustrating the causes and consequences of the economic issues that arose as a result of the Covid-19 pandemic.

ECONOMIC IMPACT

Malaysia’s Ministry of Finance reported that the first MCO period resulted in estimated national economic losses of RM2 billion per day and a GDP contraction of 8.3 percent over the first half of 2020.[4] In his state budget announcement on 26 November 2020, Johor Chief Minister Hasni Mohammad noted that Johor’s economy was expected to contract by 5 percent, half a percentage point worse than the national decline. Given the state’s dependence on cross-border activity and international business, Johor was also being negatively affected by Singapore’s weak growth figures.[5]

By the end of 2020, there were 760,700 unemployed people on record, nation-wide (4.8 percent unemployment rate), with 15,700 losing their jobs in the fourth quarter when nearly all economic sectors were allowed to reopen.[6] Of the total unemployed, 15,346 were Malaysians who had been working in Singapore, most of whom were residing in or originally from Johor.[7] Even after the borders had reopened for the PCA and RGL schemes, only about half of the former Malaysian commuters had returned to Singapore to work.[8] The Second Link and Causeway bridges and the roads leading up to them had been eerily quiet for a year.

The RGL travel bubble arrangement was a boon to higher-level professionals travelling for business or official purposes. They were given two weeks in Singapore and were able to move within a controlled itinerary after isolation in non-residential accommodation until their swab test results are shown to be negative.

The PCA enabled blue-collar workers to return to mostly service and factory jobs in Singapore, but many struggled with the costs of remaining in Singapore for an extended period of time. Daily commuters were the most affected as their incomes were insufficient to cover comparatively high costs of food and accommodation, let alone the hotel quarantine and Covid-19 swab test costs.[9]

Johor depends substantially on land and property transactions for its state income. However, as with everything else, Covid-19 left the property market in decline. Johor’s high-end condominiums and landed property[10] were thus in even less demand, and the situation has been made worse with some Singaporean home-owners trying to sell their Johor properties given the difficulties of crossing the border.[11] 

The Covid-19 period, with the myriad restrictions on retailers and service providers, registered as the worst in Johor since the 1987 financial crisis. Many retailers were said to have experienced a decrease in income of at least 70 percent, compared to the same period the previous year.[12] This was the combined result of domestic movement restrictions and the lack of Singaporean visitors. Suffering cash flow problems, 5 to 10 percent of SMEs in Johor were forced to close.[13]

Singaporeans made up almost 50 percent of Malaysia’s inbound arrivals prior to Covid-19, with many entering the country through Johor’s land borders.[14] The border closures resulted in a sharp fall in tourist arrivals from Singapore by 66.1 percent in the second quarter of 2020 (compared to the same period the year before).[15] This reflected the immediate aftermath of the border closure.

By the end of the fourth quarter of 2020, 14 hotels in Johor had closed for good, with hotel occupancy at an unprecedented low of 27 percent.[16] One of Johor’s most iconic hotels, Mutiara Johor Bahru recently announced its expected closure on 1 June 2021, after 39 years of operation.[17]

The lack of Singaporean visitors not only had an impact on the main tourist centres in Johor Bahru, but also suburban and rural areas on the outskirts of Johor Bahru district that were also popular with Singaporean tourists, such as Iskandar Puteri, Bukit Indah and Gelang Patah.

Rural economies such as those dependent on fishing and agriculture also reported an immediate loss of incomes as a result of the lack of Singaporean buyers and local travel limits. Food supply chains were affected as produce and harvests were not collected or delivered, due to travel limits and the closing of markets. This situation eased once local restrictions were removed.[18]

Malaysia’s bottom 40 percent (B40), known to have on average, only RM76 (SGD25) in post-expenses disposable income every month,[19] suffered the most. The inability to open pop-up stalls during this period deprived them of a daily income, however small that might have been, as well as a source of cheaper food and other products. Johor’s poverty incidence rose to between 6 to 8 percent in 2020, compared to 3.9 percent in 2019. Hardcore poverty in the state rose to 2.5 percent from 0.2 percent in 2019.[20]

Some of those who had worked in Singapore for many years were in the middle-income bracket with hefty debts to service. Their loss of employment resulted in a shattering of their lifestyles as well as the inability to pay off mortgages and loans. Observations of areas popular with these former Singaporean employees revealed an increase in houses for sale.[21] Anecdotal reports indicate that some had to give up rental units in Johor Bahru and return to their hometowns and villages beyond Johor Bahru or in other states.

A 21-fold increase in patients at health clinics for mental issues occurred between June and August 2020,[22] while other nationwide studies reported negative levels of mental-wellbeing and substantial depression and anxiety.[23] A report by the Malaysian police (at Bukit Aman) noted that 266 people had committed suicide between 18 March to 30 October 2020, with Johor having the most cases, at 47.[24]   

IMMEDIATE SOLUTIONS AND THEIR EFFECTIVENESS

In response to the myriad problems faced in Johor, there have been several initiatives by state and federal governments, as well as civil society organisations to ease the socio-economic fallout of Covid-19.

Civil society groups, non-governmental organisations and state welfare departments scrambled to meet the needs of those left unemployed, and those unable to pay rent or buy food for their families.[25] While there was a surplus of unbought marine harvests and agricultural produce in rural areas, urban areas had a food shortage due to delivery disruptions. The aforementioned lack of savings and disposable income, as well as an inability to buy affordable food due to the closure of street vendors and soup kitchens, added to food insecurity. School closures also meant that poor families lost free meals for their children from school food aid.[26]

Over the first MCO period, at least RM6,614,062 (SGD2,179,361) was spent by 30 civil society groups in aid of the rural and urban poor in Johor Bahru.[27] This was in addition to efforts by agencies such as the Malaysian Red Crescent Society and the state government to find safe shelter and to provide other support for the homeless and others in need.

The official Laksana disbursement reports[28] on the federal stimulus packages featured impressive numbers and proclaimed great success, but voices on the ground, especially amongst the rural and urban poor, murmured a different reality.

Federal aid distribution is through existing employment-related systems such as the Social Security Organisation (PERKESO), the Employment Provident Fund (KWSP), and the Inland Revenue Board of Malaysia (LHDN). However, many amongst the rural and urban poor are own-account or blue-collar workers, and are not registered with these agencies; many have never earned enough to be on tax registers.[29] Johor residents who had worked in Singapore for a long time may also not have previously registered with these agencies.

Ethnographic observation of rural residents reveal that many of these schemes are not available or accessible to the average person, and many struggle to find out how to apply. Other assistance schemes require online applications; a struggle for rural folks who are tech-illiterate or lack smartphones and internet access.[30] The distribution of aid has often been arbitrary and less than transparent.[31] Appointed community leaders have been observed to be less than helpful when approached for help with these procedures.

A survey of 500 low-income households in Kuala Lumpur during the first MCO period showed that 74 percent had no access to unemployment protection and were suffering from reduced food security.[32] Given the above issues, it is highly possible that the situation is worse for former commuters who cannot get Malaysian aid for job losses in Singapore. 

The urban and rural poor tend to have a lower level of education, with many being employed in the informal sector or as own account workers. During the first three months of the pandemic, 46.6 percent of own-account workers and 21.9 percent and 33 percent of agriculture and fisheries workers respectively (in rural areas) lost their jobs.[33] Many of these would be from Johor’s vast rural areas.

On the bright side, after the initial MCO, Johor’s agricultural and manufacturing workers experienced less difficulty than those in the services, tourism and food and beverage sectors, as their industries were able to restart to meet dammed up demand.

SHORT-TERM RECOVERY PLANS AT THE STATE LEVEL

Aside from aid at the federal level, Johor state also announced several direct assistance schemes and one-off disbursements. These included grants for those starting on agricultural or food-related businesses or were already in the agricultural supply chain (under the Johor Tani initiative).[34]

In line with a national shift towards developing domestic tourism—focusing on nature and experiential, cultural and village tourism,[35] Johor Tourism is working on boosting its rural tourism offerings. Local homestay, food & beverage operators in Pontian district, for example, are actively mobilising to establish a tourism committee to collaborate with Johor Tourism and other advisors to better package their rural and cultural tourism offerings.[36]

In an ongoing effort to improve digital platforms so that Johor residents can effectively participate in the gig economy, Iskandar Puteri has a growing co-working space community involved in myriad aspects of technology, innovation and the digital economy. Information-sharing platforms enable access to grants, training and other opportunities for those in the know. These initiatives have broadened over the pandemic period, given the necessity to work and engage online. However, this is a field that is rarely ventured into by the rural and urban poor.

The Iskandar Regional Development Authority (IRDA) has already begun reskilling programmes for retrenched workers for innovative positions, and grooming technopreneurs under the Iskandar Malaysia Smart City initiative.[37]

LONG-TERM RECOVERY PLANS AT THE STATE LEVEL

Even though it is uncertain when borders will reopen, Johor plans to facilitate swift recovery through a number of cross-border initiatives. These include efforts to alleviate traffic congestion at Johor’s two land-crossings and immigration complexes and myriad ongoing discussions on the holistic marketing of Iskandar Puteri as a complete tourism destination located only minutes away from the Second Link.

The much-awaited Singapore-Johor Rapid Transit System (RTS) Link had its ground-breaking ceremony on 22 November 2020. While this joint project will not be complete and ready for operation until end-2026, there is much hope that this can quickly revive Johor’s economy and enable smoother commuting for Singaporean weekend visitors and other tourists to the state. Should border-crossing return to pre-Covid practices, it will also facilitate travel for weekly or daily working commuters.

The launch of the Johor Economic Tourism and Cultural Office (JETCO) in Singapore by mid-2021 is slated to increase investor confidence, in addition to other economic initiatives such as the establishment of the Ibrahim Johor Economic Council and the revival of the Singapore-Johor-Riau Growth Triangle Development (SIJO-Kepri).[38] Johor also has plans to enhance its agricultural sector with a view to becoming a food bank for Singapore and the surrounding region.[39] Johor aims to be a key food exporter to Singapore, and by the same token improve its own food security.

In line with the Malaysia Digital Economy Blueprint, Johor is also planning to reinvent itself as an alternative data hub for Singapore and Southeast Asia. The Kulai Iskandar Data Exchange (KIDEX), has announced with the Johor state budget, is set to attract international investments and create many future job opportunities.[40] 

HOPE ON THE HORIZON

With the launch of Malaysia’s vaccination programme, there seems to be more than a flicker of hope on the horizon. While shopping malls remain quiet, there is a visible increase in patrons at restaurants, cafes and markets across the state.[41] However, with much of Johor’s retail and leisure attractions dependent on Singaporean clientele, local customers may continue to stick to lower-cost activities, dining options and leisure destinations, given widespread financial difficulties.

For Johor to return to its pre-Covid-19 economic level of activity, the borders need to reopen. With the vaccination rollout, Johor’s Chief Minister Hasni Mohammad has stepped up calls to reinstate new travel bubbles with Singapore. Prime Minister Lee Hsien Loong’s comment that Singapore is willing to discuss vaccine certification to resume travel was met eagerly by myriad business representatives across Malaysia.[42] There has also been talk of vaccinated Singaporeans being allowed to enter Malaysia. Vaccination passports appear to be the key to future cross-border travel.

However, this excitement could be stifled if there is a fourth wave of Covid-19 infections, especially given recent discoveries of yet more virulent variants of the virus.[43] Recent reports indicate that infection numbers are on the rise, with some warning of a ‘fourth wave’, especially given the reopening of Ramadhan bazaars and schools. The Ministry of Health has since disputed the onset of this fourth wave,[44] but new clusters are announced daily, with several in educational institutions, and new MCO or EMCO sites announced or extended weekly.[45]  

Even though vaccinations have been rolled out, take-up percentages are low and there are myriad reports of insufficient vaccine doses.[46] Vaccination is also not an absolute guarantee that Covid will not be contracted, given the time required for the vaccine to be effective, and how some vaccines are said to be weaker than others, or may require yearly injections.[47] It is unclear how soon the population will be fully vaccinated or reach a level of ‘herd immunity’.

Given the Malaysian government’s fragile status and uncertain hold on power, the possibility of upcoming elections looms large. This could then end in yet another wave of infections and clusters (as was the case after the Sabah State elections), or weaken efforts to find a balance between the national economy and citizen health.

CONCLUSION

The state of Johor suffered disproportionately among Malaysian states given the impact of Covid-induced border closures. Increasing poverty and unemployment are compounded by decreasing mental health and well-being. While several initiatives and immediate salves have been launched to alleviate difficulties, the state will not fully recover until borders reopen. Johor’s high dependence on international investments and its deep connections with Singapore for business, investment and employment compound these problems.

There may be a glimmer of hope for Johor and its residents given nationwide vaccinations and the hope of borders reopening, but dark clouds of ambiguity lurk just beyond.

ISEAS Perspective 2021/65, 7 May 2021


ENDNOTES

[1] Hutchinson, F.E. & Bhattacharya, P. 2019. “Singapore-Malaysia Economic Relations: Deep Interdependence.” Perspective 2019/2. ISEAS – Yusof Ishak Institute, Singapore.

[2] Hutchinson, F.E. and Bhattacharya, P. 30 March 2020. “Singapore-Malaysia Border Shutdown: Counting the Costs.” Fulcrum Commentary. https://fulcrum.sg/singapore-malaysia-border-shutdown-counting-the-costs/ 

[3] Benjamin, N. 17 April 2021. “Long border closure with Singapore straining family ties, says group,” The Star Online. https://www.thestar.com.my/news/nation/2021/04/17/long-border-closure-with-singapore-straining-family-ties-says-group

[4] Ministry of Finance, Malaysia. 2020. Economic Outlook 2021. Putrajaya, Malaysia.

[5] Johor State Government. 2020. “Ucapan belanjawan Johor 2021 (rasmi)” (Johor official state budget speech 2021). Johor Government Official Web Portal, Iskandar Puteri. https://www.johor.gov.my/kerajaan/bajet-johor/tahun-2021/ucapan-belanjawan-johor-2021-rasmi

[6] Soo, W.J. 8 February 2021. “Govt data shows 15,700 more people became jobless in Malaysia between Oct-Dec 2020,” Malay Mail. https://www.malaymail.com/news/malaysia/2021/02/08/govt-data-shows-15700-more-people-became-jobless-in-malaysia-between-oct-de/1948035

[7] The Edge Markets. 15 December 2020. “Estimated 15,346 Malaysians working in Singapore laid off so far – Saravanan.”  https://www.theedgemarkets.com/article/estimated-15346-malaysians-working-singapore-laid-so-far-%E2%80%94-saravanan

[8] Lim, J. 24 January 2021. “Only 50% of Malaysian workers have returned since border reopening,” Straits Times. https://www.straitstimes.com/business/economy/only-50-of-malaysian-workers-have-returned-since-border-reopening

[9] Noh, M.F. and Ahmad, O. 22 November 2020. “Homeless Malaysians in Singapore,” New Straits Times. https://www.nst.com.my/news/nation/2020/11/643343/homeless-malaysians-singapore

[10] Lim, G. and Ng K.K. 2020. Housing Policy in Johor: Trends and Prospects. In Hutchinson, F.E. and Rahman, S. (Eds.) Johor – Abode of Development. ISEAS – Yusof Ishak Institute Singapore: pp424-446.

[11] Ariffin A. 25 February 2021. “Singaporeans with properties in Malaysia stuck in limbo due to Covid-19 travel restrictions,” Channel News Asia. https://www.channelnewsasia.com/news/asia/singaporeans-with-properties-in-malaysia-stuck-in-limbo-due-to-14273562

[12] Butcher, H. 2 March 2021. “Johor – Pining for turnaround in 2021,” New Straits Times. https://www.nst.com.my/property/2021/03/670296/johor-pining-turnaround-2021

[13] Johor State Government. 2020. “Ucapan belanjawan Johor 2021 (rasmi)” (Johor official state budget speech 2021). Johor Government Official Web Portal, Iskandar Puteri. https://www.johor.gov.my/kerajaan/bajet-johor/tahun-2021/ucapan-belanjawan-johor-2021-rasmi

[14] Rahman, S. and Goh, H.C. 2020. Tourism in Johor and its potential. In Hutchinson, F.E. and Rahman, S. (eds.) Johor – Abode of Development? ISEAS-Yusof Ishak Institute, Singapore: pp183-202.

[15] Azman, N.H. 18 August 2020. “Greater economic challenges await Johor,” The Malaysian Reserve. https://themalaysianreserve.com/2020/08/18/greater-economic-challenges-await-johor/

[16] The Straits Times. 2 December 2020. “13 hotels in Johor forced to shut down as Covid-19 takes toll on tourism.” https://www.straitstimes.com/asia/se-asia/13-hotels-in-johor-forced-to-shut-down-as-covid-19-takes-toll-on-tourism

[17] New Straits Times. 30 March 2021. “Mutiara Johor Bahru to bid adieu.” https://www.nst.com.my/news/nation/2021/03/678212/mutiara-johor-baru-bid-adieu

[18] 11 Sept 2020. The Straits Times. “Businesses in Johor Baru carrying on despite absence of Singapore visitors due to Covid.” https://www.straitstimes.com/asia/se-asia/businesses-in-johor-baru-carrying-on-despite-absence-of-singapore-visitors-due-to-covid

[19] Khazanah Research Institute. 2018. “The State of Households 2018: Different Realities”. http://www.krinstitute.org/assets/contentMS/img/template/editor/20181127_Full%20Report%20KRI%20SOH2018.pdf

[20] Johor State Government. 2020. “Ucapan belanjawan Johor 2021 (rasmi)” (Johor official state budget speech 2021). Johor Government Official Web Portal, Iskandar Puteri. https://www.johor.gov.my/kerajaan/bajet-johor/tahun-2021/ucapan-belanjawan-johor-2021-rasmi

[21] This was apparent from numerous property agent signage on empty homes (ethnographic observation by the writer while in lockdown in Malaysia during the Covid-19 pandemic).

[22] The Straits Times. 2 December 2020. “13 hotels in Johor forced to shut down as Covid-19 takes toll on tourism.” https://www.straitstimes.com/asia/se-asia/13-hotels-in-johor-forced-to-shut-down-as-covid-19-takes-toll-on-tourism

[23] Azuddin, A. and Zakaria, I. 2020. “MCO and Mental Well-Being: Home Sweet Home? Part 1: Housing and crowding during the MCO” The Centre. Kuala Lumpur, Malaysia. https://www.centre.my/post/mco-and-mental-health-living

[24] Tan, B. 24 November 2020. “Johor Pakatan urges govt to address rise in suicide rate nationwide,” Malay Mail. https://www.malaymail.com/news/malaysia/2020/11/24/johor-pakatan-urges-govt-to-address-rise-in-suicide-rate-nationwide/1925590

[25] Rahman, S. 2020. “Overcoming the odds and filling the gaps: Malaysian civil society responses to Covid-19.” ISEAS – Yusof Ishak Perspective 2020/44.

[26] Ya, S.W. and Kan, G. 2020. “Social Protection for the Poor and Vulnerable Malaysians during Covid-19”. Ideas Policy No. 69. Institute for Democracy and Economic Affairs (IDEAS), Kuala Lumpur, Malaysia.

[27] Social Hero Foundation. 2020. “NGOs/NGIs Aid During COVID-19 IMSHA Winners Network Awareness Report (Full).” https://socialheroawards.com/news/wp-content/uploads/2021/01/IMSHA-_COVID-19-MCO-PERIOD-Winners-Network-Awareness-Report.pdf

[28] Refer to the Malaysian government’s Prihatin website: Laksana Reports (https://pre2020.treasury.gov.my/index_en.html)

[29] The minimum annual income that necessitates the paying of income taxes in Malaysia is RM25,501 (after EPF deductions). This works out to a monthly salary of about RM2125 (SGD703). Many in the B40 do not earn this amount. (Refer to: Inland Revenue Board (LHDN) website: Tax Chargeability: http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=2&bt_unit=5000&bt_sequ=2&bt_lgv=2

[30] While Malaysia’s populated (urban) areas have high smartphone penetration and internet access, rural areas suffer from poor connectivity and at times a lack of smartphone usage and tech-illiteracy. Refer to: Jacobs, J. and Subramaniam, P. 19 Oct 2020. “Cover Story: The digital divide and disconnection,” The Edge Malaysia.

[31] In-situ ethnographic research by the writer under lockdown in Mukim Tanjung Kupang, Gelang Patah, Johor throughout the Covid-19 period.

[32] UNICEF, UNFPA and DM Analytics. 2020. Families on the Edge, Issue 2: The Status of Households post-MCO. UNICEF Malaysia, Kuala Lumpur, Malaysia. https://www.unicef.org/malaysia/reports/families-edge-issue-2

[33] Department of Statistics, Malaysia. 2020. “Report of Special Survey on Effects of Covid-19 on Economy & Individual, Round 1.” Department of Statistics, Putrajaya, Malaysia.

[34] Johor State Government. 2020. “Ucapan belanjawan Johor 2021 (rasmi)” (Johor official state budget speech 2021). Johor Government Official Web Portal, Iskandar Puteri. https://www.johor.gov.my/kerajaan/bajet-johor/tahun-2021/ucapan-belanjawan-johor-2021-rasmi

[35] Refer to: Wan, C. 4th August 2020. “Malaysia puts bet on domestic tourism, nature attractions tipped to do well,” WIT. https://www.webintravel.com/malaysias-focus-on-domestic-tourism-will-pave-the-way-for-travel-recovery/, the Tourism Malaysia website, “Recommendations: A truly Malaysian homestay experience.” https://www.malaysia.travel/peek-into-malaysia/wander-your-way/a-truly-malaysian-homestay-experience (accessed 19th April 2021) and Bernama. 28 Feb 2021. “MOTAC terus beri perhatian kepada kawasan tarikan pelancongan, kebudayan,” (MOTAC pays immediate attention to areas of tourism interest and culture). https://www.astroawani.com/berita-malaysia/motac-terus-beri-perhatian-kepada-kawasan-tarikan-pelancongan-kebudayaan-285144.

[36] On-going personal communication with the writer over the Covid-19 pandemic period – based on discussions with the Pontian Tourism advisors and tourism players.

[37] The Edge Markets. 22 January 2021. “Iskandar Malaysia outlines high-impact initiatives to spur economic recovery, says PM.” https://www.theedgemarkets.com/article/iskandar-malaysia-outlines-highimpact-initiatives-spur-economic-recovery-says-pm

[38] Tan, B. 21 October 2020. “MB: Putrajaya approves formation of Johor Economic Tourism and Cultural Office in Singapore,” Malay Mail. https://www.malaymail.com/news/malaysia/2020/10/21/mb-putrajaya-approves-formation-of-johor-economic-tourism-and-cultural-offi/1914984

[39] Yusof, A. & Ariffin, A. 22 November 2020. “Johor to develop agriculture, export more food to Singapore, says Chief Minister on COVID-19 economic pivot,” Channel News Asia. https://www.channelnewsasia.com/news/asia/johor-chief-minister-hasni-agriculture-food-export-singapore-rts-13602122

[40] Butcher, H. 2 March 2021. “Johor – Pining for turnaround in 2021,” New Straits Times. https://www.nst.com.my/property/2021/03/670296/johor-pining-turnaround-2021

[41] Malaysiakini. 13 April 2021. “Handphone data shows people venturing out at nearly pre-pandemic levels.” https://www.malaysiakini.com/news/570481

[42] The Straits Times. 27 February 2021. “Businesses in Johor support reopening of border with Singapore.” https://www.straitstimes.com/asia/se-asia/businesses-in-johor-support-reopening-of-border-with-spore

[43] The Edge Markets. 5 March 2021. “Two cases of Nigerian B1525 Covid-19 variant found in Malaysia.” https://www.theedgemarkets.com/article/two-cases-nigerian-b1525-covid19-variant-found-malaysia

[44] Refer to: Tang, A. 15 Apr 2021. “Signs of a fourth wave upon us,” Star Online: https://www.thestar.com.my/news/nation/2021/04/15/signs-of-a-fourth-wave-upon-us. Malaysia’s Defence Mnister Ismail Sabri Yaakob, also announced the possibility of a fourth wave: Today Online. 12 Apr 2021. “Fourth wave of Covid-19 a real possibility, warns senior minister Ismail Sabri.” https://www.todayonline.com/world/covid-19-fourth-wave-malaysia-real-possibility-warns-senior-minister-ismail-sabri. However this was then disputed by the Ministry of Health: The Malay Mail. 17 April 2021. “Health Minister: Malaysia has not entered Covid-19 fourth wave.” https://www.malaymail.com/news/malaysia/2021/04/17/health-minister-malaysia-has-not-entered-covid-19-fourth-wave/1967269 

[45] Ministry of Health Website: Situasi Terkini Covid-19 di Malaysia… (the latest Covid-19 situation in Malaysia – daily updates): http://covid-19.moh.gov.my/terkini

[46] Ismail, A. 4 Apr 2021. “Health Ministry to study low Covid-19 vaccine registration,” New Straits Times: https://www.nst.com.my/news/nation/2021/04/679602/health-ministry-study-low-covid-19-vaccine-registration. There have also been myriad questions raised about the egality and transparency of vaccine administration and purchases. Refer to: Berthelsen, J. 16 April 2021. “Malaysia fades in Covid fight,” Asia Sentinel. https://www.asiasentinel.com/p/malaysia-fades-in-covid-fight and Free Malaysia Today. 21 December 2020. “No, we are not paying 20 times more, says Khairy.” https://www.freemalaysiatoday.com/category/nation/2020/12/21/no-we-are-not-paying-20-times-more-says-khairy/ 

[47] Refer to: Mohamed Radhi, N.A. 17 April 2021. “40 healthcare workers contract Covid-19 after completing vaccine shots,” New Straits Times. https://www.nst.com.my/news/nation/2021/04/683036/40-healthcare-workers-contract-covid-19-after-completing-vaccine-shots; Al Jazeera. 11 Apr 2021. “Chinese vaccines’ effectiveness low, official admits.” https://www.aljazeera.com/news/2021/4/11/chinese-vaccines-effectiveness-low-official-admits; and Asgari, N. and Stacey, K. 16 Apr 2021. “Pfizer chief says people will probably require yearly Covid booster shot,” Financial Times. https://www.ft.com/content/74fb0052-c627-4160-82e6-825d9f2ffec7

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2021/64 “Facilitating Investment in Southeast Asia: ASEAN and WTO Initiatives” by Tham Siew Yean

 

The Association of Southeast Asia Nations (ASEAN) is proposing an ASEAN Framework Agreement on Investment Facilitation (AFAIF) as part of its regional economic recovery plan. In this picture, the ASEAN secretariat building in Jakarta, Indonesia, taken on April 20, 2021. Picture by BAY ISMOYO, AFP.

EXECUTIVE SUMMARY 

  • While investment facilitation is part and parcel of investment treaties and trade agreements, current WTO Investment Facilitation for Development (WTO IFD) negotiations include far more dimensions than those in existing ASEAN agreements.
  • ASEAN is proposing an ASEAN Framework Agreement on Investment Facilitation (AFAIF) as part of its regional economic recovery plan.
  • Although ASEAN has included investment facilitation in its internal and external agreements for more than a decade, the associated action plans indicate that implementation is left at the unilateral level.  
  • Measurements of investment facilitation show that ASEAN member states lag behind their Plus partners in the domestic adoption of investment facilitation measures.
  • Therefore, ASEAN should consider a regional investment facilitation action plan besides pushing for an AFAIF.
  • Such an action plan would allow ASEAN member states that are participating in an AFAIF and a WTO IFD to avail of the WTO IFD’s development provisions to meet overlapping commitments in both agreements.

* Tham Siew Yean is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute and Professor Emeritus, Universiti Kebangsaan Malaysia.

INTRODUCTION

Globally, the volume of foreign direct investment (FDI) has been on a downward slide since 2015. The Covid-19 pandemic’s negative impact on the 2020 earnings of multinationals (MNCs) will worsen the decline, especially since more than 50 percent of global FDI are reportedly financed by reinvested earnings. Based on UNCTAD,[1] global FDI fell by 42 percent from USD1.5 trillion in 2019 to an estimated USD859 billion in 2020. This is 30 percent lower than the investment after the global financial crisis in 2008. Inflows of FDI into the Association of Southeast Asian Nations (ASEAN) are likewise affected, shrinking by 31 percent to USD107 billion. The effects of the pandemic on global FDI are expected to persist as investors continue to adopt a cautious attitude towards committing to new investments overseas. Enhancing investment facilitation to improve investment retention and re-investment are key strategies for countering the slowdown in global FDI as it plays an important complementary role to investment promotion.

According to the World Trade Organisation (WTO),[2] investment facilitation aims to ease the conduct of business and investments of domestic and foreign investors by making the business climate more transparent, efficient and predictable. Essentially, investment facilitation strives to remove investment impediments that arise from unnecessary red tape, bureaucratic overlap or out-of-date procedures. Similar to trade flows, simplifying, speeding up and coordinating processes in investment approvals can potentially lead to an expansion of investment flows, ceteris paribus. Empirically, the World Bank’s Global Investment Competitiveness (GIC) Survey of 2,400 companies in 2019, from ten countries, support extant empirical literature which indicates that a transparent and predictable regulatory environment is crucial for attracting new investments and retaining existing ones.[3] Not surprisingly, investment facilitation is an important component of investment treaties and agreements, be it at the bilateral, regional and multilateral level. These commitments, being binding and irreversible, provides stability and predictability in terms of future policy directions valued by investors, especially as uncertainty in the global economic climate increases.[4]

This paper maps the items in the proposed WTO Investment Facilitation for Development (IFD) with existing initiatives in ASEAN to explore possible synergies between the two.

WTO: PROPOSED INVESTMENT FACILITATION FOR DEVELOPMENT (IFD)

In 2017, encouraged by the entry into force of the WTO Trade Facilitation Agreement (TFA), some WTO members proposed for a multilateral initiative on investment facilitation, leading to a call for “structured discussions with the aim of developing a multilateral framework on investment facilitation”.[5] Subsequently, formal negotiations on a multilateral framework on Investment Facilitation for Development (IFD) started in September 25, 2020 with 106 members, with the aim of achieving a concrete outcome by the 12th WTO Ministerial Conference (MC12) in November 2021.[6] Out of the 106 participants in the WTO negotiations for IFD, seven are AMS[7], and all the Plus partners in RCEP-15 are involved as well. The goal of the negotiations is to agree to a framework of rules that will promote transparency and predictability by requiring participating members to publish investment laws and regulations, and provide information about their investment authorisation procedures; introduce certain minimum standards in countries’ administrative procedures and requirements; and encourage international cooperation, information sharing, and exchange of best practices.

Despite not having an agreed definition on investment facilitation, different WTO members have submitted various proposals for a multilateral initiative, with differing elements.[8] These include definitions of investment facilitation, regulatory transparency and predictability, streamlining and simplifying the administrative process, non-discrimination, single-window processing, e-application, protection of confidential information, facilitation of outward investment, appeals and reviews of administrative decisions, national institution arrangements, multilateral institution arrangements, institutional cooperation, special and differential treatment, technical assistance, corporate social responsibility, dispute prevention and/or dispute settlement, as well as future disciplines on market access and treatment.[9] Subsequent additional proposals include authorisation fees in the financial sector; “firewall provisions”, which aim to insulate the future investment framework from international investment agreements; and revised proposals for a single portal, domestic supplier databases and investment facilitator.[10]

Importantly, three key disciplines on investment are excluded from the current negotiations, namely market access, investment protection and Investor-State dispute settlement (ISDS), which allow companies to seek damages from governments.[11] Investment promotion is also deemed as separate from IFD in these negotiations, with the former linked to image building and marketing of a country/region as an investment destination.

The measures under current negotiations are summarised in Table 1. They cover seven key dimensions: transparency, streamlining and speeding up administrative processes and requirements, contact point, development, sustainable development, cross cutting issues, institutional and final provisions as well as “firewall” provisions, based on the list of proposed measures from different WTO members.[12]

However, investment facilitation is not a new issue in trade and investment agreements as it is covered in numerous international investment agreements (IIAs) as well as ASEAN’s trade and investment agreements.

ASEAN AGREEMENTS

The idea of investment facilitation in ASEAN has a long history. It was first mooted in the 1998 Framework Agreement on the ASEAN Investment Area (AIA) as one of the objectives. The agreement aimed to progressively reduce or eliminate investment regulations and conditions which may impede investment flows and the operation of investment projects in ASEAN.[13] Schedule 1 of the Framework Agreement has a cooperation and facilitation programme whereby individual member countries intend to: (i) increase transparency of Member State’s investment rules, regulations, policies and procedures through the publication of such information on a regular basis and making such information widely available; (ii) simplify and expedite procedures for applications and approvals of investment projects at all levels; and (iii) expand the number of bilateral Double Taxation Avoidance Agreements among ASEAN Member States.

In the subsequent ASEAN Comprehensive Investment Agreement (ACIA)[14] that replaced the earlier AIA Framework as well as the Investment Guarantee Agreement (IGA) signed in 2009 and ratified in 2012, investment facilitation is explicitly included as an article in the agreement. Five other elements in the discussions in the WTO IFD are also found in the ACIA. These are: transparency; development, as in the provision of Special and Differential Treatment (SDT) for newer ASEAN members which includes technical assistance; cross-cutting such as the facilitation of entry and stay of business persons for investment purposes; and dispute settlement, as shown in Table 2. Since the exact provisions in the proposed WTO IFD are still under negotiation, Table 2 is merely illustrative and not comprehensive in coverage.

ASEAN-Plus agreements such as ASEAN-Japan Comprehensive Economic Partnership (AJCEP) agreement, ASEAN-Korea Investment Agreement and ASEAN-Australia-New Zealand Free Trade Agreement, which were signed prior to the signing of the ACIA in 2009 do not have provisions on investment facilitation. However, they may include some of the other provisions in the ACIA. Although the ASEAN-China Investment agreement included investment facilitation, there are no provisions for SDT for the newer ASEAN member states. In contrast, the ASEAN-Plus agreements signed and ratified after the ACIA tend to follow the provisions of the ACIA.

It should be noted that while some of the provisions may not be in the investment chapter, they can be included in other parts of an agreement with partner countries. Notably, the entry and stay of business persons for investment purposes may be included in a trade in services agreement under Mode 4 or a separate agreement on the movement of natural persons (MNP). The Regional Comprehensive Economic Partnership (RCEP) which has been signed but not ratified at the time of writing, is an example. While specific provisions are made for investment facilitation, the other provisions are not in the investment chapter, but there are related dimensions in other chapters (Table 2).

Compiled by Author [15]

COMPARING THE PROPOSED WTO TFA AND ASEAN AGREEMENTS

When comparing the provisions in ASEAN (Table 2) with the proposed elements under discussions  at the WTO (Table 1), one sees that the four common provisions for investment facilitation in ASEAN agreements (Appendix 1) do cover some aspects in the proposed provisions for a WTO IFD. These are streamlining and simplifying procedures for investment applications and approvals and contact/focal point as in the establishment of one-stop centres. The RCEP also contains additional provisions for the focal point such as addressing investor aftercare by providing assistance in the resolution of conflicts and grievances, which is in fact another aspect covered in the on-going WTO negotiations.

In the ACIA, investment facilitation is expanded to cover three additional elements, namely: (i) strengthening databases on all forms of investments for policy formulation to improve ASEAN’s investment environment, (ii) undertaking consultation with business community on investment matters; and (iii) providing advisory services to the business community of the other member states. These correspond with the proposed elements of the WTO on transparency requirements and contact point (Table 1).

As can be observed from Chart 1, there are overlaps between ASEAN and some of the ASEAN Plus agreements, and the proposed WTO IFD. These pertain to the elements on transparency, streamlining, contact point, development and cross-cutting issues. However, the discussions at the WTO include additional aspects within these elements, which exceed those in the existing ASEAN and ASEAN Plus agreements. Importantly, ASEAN’s commitments in investment facilitation are especially lacking in terms of  provisions for sustainable investments as well as “firewall” provisions.

OPPORTUNITIES AND CHALLENGES

Despite ASEAN’s long-standing interest in investment facilitation, the Investment Facilitation Index, developed by The German Development Institute indicates relative shortfalls for ASEAN member states. The Investment Facilitation Index aims to measure the scope of investment facilitation measures used domestically.[16] It is a weighted average of measures taken along six policy areas: transparency and predictability, electronic governance, cooperation, application process, outward investment and focal point review. The index can range from a minimum score of 0 to a maximum of 2, with 0 denoting no implementation, 1 for planned or partial implementation and 2 for full implementation. As shown in Chart 2, there is a clear difference between ASEAN member states, including Singapore which has the highest score for ASEAN, and most of its Plus partners, namely Australia, New Zealand, Korea, Japan, and China. The index therefore shows that AMS have fewer investment facilitation measures in place compared with these Plus partners.

The results are not surprising since investment facilitation in ASEAN has focused on improving transparency through largely unilateral actions, despite the commitments in existing agreements. It can be clearly seen in ASEAN’s Consolidated Strategic Action Plan 2025,[17] where the main focus is on investment peer review, policy dialogues, databases, sharing of knowledge and best practices, with no substantive ASEAN-wide Action Plans for investment facilitation. This is very different from ASEAN’s trade facilitation initiatives which have several ASEAN-wide action plans to reduce trade costs such as the ASEAN Trade Repository, ASEAN Single Window and ASEAN Customs Transit System as well as the development of a databank of non-tariff measures (NTMs) at the ASEAN level. Hence, even though ASEAN has negotiated and listed investment facilitation in ASEAN’s internal and external agreements, it lacks concrete initiatives in terms of ASEAN-wide action plans.

Nevertheless, the Implementation Plan for the ASEAN Comprehensive Recovery Framework, 2021 has proposed a new ASEAN Framework Agreement for Investment Facilitation (AFAIF). It is part of ASEAN’s initiatives for maximising the potential for an intra-ASEAN market and broader economic integration, including attracting more FDI to the region to support economic recovery from the Covid-19 pandemic.[18]

POLICY IMPLICATIONS FOR ASEAN

A meaningful AFAIF will enhance ASEAN’s relevance in this important issue. The AFAIF should therefore go beyond the existing provisions in the ACIA and other ASEAN external agreements. Chart 1 indicates there is room for extending and deepening provisions in the five existing overlapping elements with the proposed WTO IFD, namely, Transparency, Streamlining, Contact Point, Development, and Cross-cutting issues. However, since not all AMS are parties to the current negotiations on a WTO IFD, it is unlikely that the provisions in an AFAIF will match all the proposed provisions in the WTO IFD, especially for non-overlapping elements such as sustainable development.

AMS that commit to both an AFAIF and a WTO IFD can potentially utilise both agreements synergistically, especially in the development dimension. This dimension is based on the WTO Trade Facilitation Agreement (TFA) which is the first WTO agreement to allow members to determine their own implementation schedule, with technical and financial support linked to the implementation of the core provisions. AMS that are also members of the WTO TFA are able to draw upon technical and financial support from the WTO TFA for the implementation of their ASEAN commitments in trade facilitation,[19] thereby killing two birds with one stone. ASEAN’s trade facilitation has specific ASEAN-wide initiatives to reduce trade costs such as the ASEAN Single Window, ASEAN Trade Repository which links the National Trade Depositories in one web-site, and ASEAN Customs Transit System. Since all AMS are also members of the WTO TFA, AMS can tap on technical support from the WTO TFA to fulfil ASEAN’s action plans in some of these areas.

The development dimension in the proposed WTO IFA indicates the possibility of using the SDT provisions in the agreement for implementing reforms to meet the commitments of such an agreement. If these commitments overlap with those in an AFAIF, ASEAN can potentially benefit from committing to a plurilateral agreement and an ASEAN-wide agreement on investment facilitation. For this to be possible, drawing on the example of the WTO TFA and ASEAN’s initiatives on trade facilitation, ASEAN will need to embark on a regional action plan for facilitating investment.

CONCLUSION

While investment facilitation is part and parcel of investment treaties and trade agreements, current negotiations for a WTO IFD have included in it far more dimensions than found in existing ASEAN agreements. In particular, the current negotiations have included sustainable investment, which is not part of any of ASEAN’s internal and external commitments in investment facilitation. Advancing towards an AFAIF that extends and deepens provisions beyond that found in current ASEAN agreements will nurture economic cooperation to further strengthen the region’s attractiveness for FDI. This will facilitate regional economic recovery from the Covid-19 pandemic.

Although ASEAN has included investment facilitation in its internal and external agreements for more than a decade, the action plans indicate that the implementation of investment facilitation has been left at the unilateral level. It is  therefore not surprising to find that recent measures of investment facilitation in AMS show scores that are lower than the Plus partners.

Having a regional action plan in investment facilitation means that AMS that are participating in an AFAIF and a WTO IFD will be able to tap on the proposed development provisions of the WTO IFD to meet overlapping commitments in both agreements. ASEAN should therefore consider including a regional action plan in investment facilitation besides pushing for an AFAIF. The lack of region-wide action plans in investment facilitation in ASEAN means that ASEAN will not be able to obtain mutual gains from regional and multilateral/plurilateral commitments, as in the case of trade facilitation.


ISEAS Perspective 2021/64, 7 May 2021


ENDNOTES

[1] UNCTAD, 2021. “Global foreign direct investment fell by 42% in 2020, outlook remains weak”. https://unctad.org/news/global-foreign-direct-investment-fell-42-2020-outlook-remains-weak <Accessed 1 April 2021>.

[2] See WTO, 2020. “Negotiations on an investment facilitation agreement show high level of engagement”. https://www.wto.org/english/news_e/news20_e/infac_09oct20_e.htm <Accessed 1 April 2021>.

[3] See World Bank, 2020. Global Competitiveness Report 2019/20. https://pubdocs.worldbank.org/en/314571591134463825/211536-Chapter-1.pdf  <Accessed 1 April 2021>. The ten countries covered in the survey are Brazil, China, India, Indonesia, Malaysia, Mexico, Nigeria, Thailand, Turkey, and Vietnam.

[4] See World Bank, 2020. Op cit. p. 43.

[5] See Zhang, Joe, 2018. Investment Facilitation: Making sense of concepts, discussions and processes. https://blogs.die-gdi.de/longform/investment-facilitation-for-sustainable-development <Accessed 2 April 2021>.

[6] See WTO 2020. “Structured discussions on investment facilitation for development move into negotiation mode”. https://www.wto.org/english/news_e/news20_e/infac_25sep20_e.htm <Accessed 2 April 2021>.

[7] Brunei, Thailand and Vietnam are not part of the current negotiations.

[8] These are proposals submitted by Russia (30 March 2017), MIKTA (4 April 2017), China (21 April 2017), Friends for Investment Facilitation (FIFD) (21 April 2017), Argentina and Brazil (April 24 2017) and Brazil (13 December 2017).

[9] Zhang, op cit. p.6.

[10] See WTO structured discussions on investment facilitation for development negotiating meeting held on 7 and 8 December 2020, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/INF/IFD/R19.pdf&Open=True <Accessed 15 April 2021>

[11] Locatelli, Claudia, 2021. “Negotiations on Investment Facilitation for Development (IFD) at the WTO.” https://www.unescap.org/sites/default/d8files/event-documents/Session%203_Claudia%20L_IF%20for%20Development_1.pdf  <Accessed 2 April 2021>.

[12] This is to prevent spillover effects from similar provisions in the proposed WTO IFA with existing international investment agreements (IIAs). For more details, see Chi, M., 2020. Insulating a WTO investment facilitation framework for development from international investment agreements. International Trade Centre, Geneva, Switzerland. https://www.intracen.org/uploadedFiles/intracenorg/Content/Redesign/Events/Insulating%20an%20IFF4D%20from%20IIAs%20(Final)_as%20of%20Dec%2023%20FV%20.pdf <Accessed 2 April 2021>.

[13] See https://cil.nus.edu.sg/wp-content/uploads/2019/08/2.5-1998-Framework-Agreement-on-the-ASEAN-Investment-Area.pdf  <Accessed 1 April 2021>. The other three objectives are: (i) substantially increase the flow of investments into ASEAN from both ASEAN and non-ASEAN sources; (ii) jointly promote ASEAN as the most attractive investment area, and (iii) strengthen and increase the competitiveness of ASEAN’s economic sectors.

[14] See ACIA at http://investasean.asean.org/index.php/page/view/asean-comprehensive-investment-agreement-acia—section-a/view/799/newsid/834/article-25–facilitation-of-investment.html <Accessed 2 April 2021>.

[15] I would like to thank Ms. Aidonna Jan Ayub, Deputy Director, Research at Khazanah Research Institute for her useful comments on improving this table.

[16] For more details, see https://blogs.die-gdi.de/longform/investment-facilitation-for-sustainable-development <Accessed 2 April 2021>.

[17] See ASEAN Economic Community 2025 Consolidated Strategic Action Plan. https://asean.org/storage/2012/05/Updated-AEC-2025-CSAP-14-Aug-2018-final.pdf <Accessed 2 April 2021>.

[18] See Implementation Plan for ASEAN Comprehensive Recovery Framework at https://asean.org/storage/ACRF-Implementation-Plan_Pub-2020.pdf <Accessed 6 April 2021>. Page 31.

[19 See Tham Siew Yean, 2017. “Trade Facilitation: Exploring Synergies between WTO and ASEAN initiatives”, Perspective 2017, No. 4. /wp-content/uploads/2015/07/ISEAS_Perspective_2017_47.pdf <Accessed 6 April 2021>.

ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute   30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735   Get Involved with ISEAS. Please click here: /supportISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed.   Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission.  
© Copyright is held by the author or authors of each article.
Editorial Chairman: Choi Shing Kwok  
Editorial Advisor: Tan Chin Tiong  
Managing Editor: Ooi Kee Beng  
Editors: William Choong, Malcolm Cook, Lee Poh Onn, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

2021/63 “Indonesia’s First Sovereign Wealth Fund (INA): Opportunities and Challenges” by Manggi Taruna Habir

 

The Indonesia Investment Authority (INA) will initially focus on attracting private investment into key infrastructure sectors such as toll roads, seaports and airports. In this picture, this aerial picture shows a light rail transit (LRT) station (L) undergoing construction in Jakarta on March 25, 2021. Picture: ADEK BERRY, AFP.

EXECUTIVE SUMMARY

  • The Indonesian government is stepping up its efforts to kickstart its economic recovery by attracting more direct investment into the country. The 2019 Omnibus Law and the recent launch of the Indonesia Investment Authority (INA), the country’s first sovereign wealth fund, are deliberate steps in that direction.
  • INA is largely modelled after India’s SWF. It is primarily a government-owned fund for attracting external co-investors into Indonesian entities and projects.
  • INA will initially focus on attracting private investment into key infrastructure sectors such as toll roads, seaports and airports.
  • If INA succeeds in its initial co-investor role of luring investment into expanding Jokowi’s infrastructure projects, the government should consider broadening its role to become a more traditional SWF.
  • The original objective of creating a holding company to protect SOE’s from political influence, through increased transparency and accountability, is critical to the improvement of strategic SOE’s operating performance and competitiveness.

* Manggi Habir is Visiting Fellow with ISEAS – Yusof Ishak Institute. The author would like to thank the three presenters from the ISEAS webinar on 10 March 2021 – Mr Anton Gunawan, Dr Reza Y. Siregar, and Dr Darwin Cyril Noerhadi, – for sharing their ideas and for permission to use their presentation materials for this essay. The usual caveat applies.

INTRODUCTION

On 19 April 2021, Indonesia’s State-Owned Enterprise (SOE) Minister, Erik Thohir, announced regulations that would determine the criteria and process for the sale of SOE assets to the country’s newly established sovereign wealth fund (SWF), the Indonesia Investment Authority (INA). Such asset sales effectively pave the way for SOEs to alleviate their debt burdens. Large state-owned construction companies are expected to sell some of their toll road projects to INA and its co-investors. The latter include Hutama Karya (Trans-Sumatera project), Jasa Marga (North Sumatera, Java, East Kalimantan, North Sulawesi and Bali projects) and Waskita Karya (West, Central and East Java projects).[1] The announcement also brought some clarity to the future operations of INA.[2]

This essay seeks to explain the origins, goals, organisation and operational challenges of INA. It traces the events leading up to its establishment, and follows that up with a discussion of INA’s objectives, organisation, and governance structure. The final section will examine some challenges involved in the implementation of the Omnibus Law as well as INA’s ability to attract much-needed investments amid an evolving Covid-19 pandemic.

INDONESIA’S MUCH-DELAYED SWF PLAN

The idea to set up a sovereign wealth fund in Indonesia is not new. An early initiative was undertaken during the last years of the Suharto government when, on 16 March 1998, a new SOE Ministry was established with Tanri Abeng as its first minister.[3] That ministry was given oversight over all SOEs. Tanri, who had been a senior executive for Union Carbide’s Indonesian operations and was later CEO of the Bakrie Group, was one of the first professionals from the private sector appointed to a cabinet minister position. The plan was to classify SOEs into groupings, each with its own holding company. A super holding company would then be formed to oversee all these holding companies.[4] However, the plans never materialised in the aftermath of the 1997/98 Asian Financial Crisis or after the Reformation Era.

With subsequent governments, from the Habibie to Yudhoyono administrations, the SOE structure remained largely the same, except for the formation of a few sectoral holding companies and the privatisation of several commercially-oriented SOEs through Indonesia’s stock market.[5] This relative absence of SOE reforms could have been due to strong opposition from various stakeholders. SOE workers have been worried about layoffs due to such reforms. SOE management and supervisory bodies are concerned about their positions in a potential rationalising and merger exercise. Suppliers and distributors who are part of the SOE ecosystem also do not want reforms that affect their role in the SOE supply chain. Bureaucrats are also protective of their turf, especially the technical ministries that oversee each their related SOEs. Finally, elected politicians are also concerned that SOE reforms will reduce the benefits enjoyed by their constituencies under the current arrangement.

Despite the opposition to SOE reforms, Rini Soemarno – the SOE Minister during President Joko Widodo’s (Jokowi) first term (2014-2019), began to revisit the earlier idea of a SOE super-holding company, and began forming more sectoral holding companies. By the end of Jokowi’s first term, six sectoral holding companies had been formed and there were plans for seven more.

The plan to form a super holding company was however subsequently abandoned by Erik Thohir, who replaced Rini Soemarno as the SOE Minister in Jokowi’s second term. Instead, the minister decided to just focus on completing the formation of sectoral holding companies.

An important factor influencing the trajectory of SOE reforms is infrastructure investment. During Jokowi’s first term, the government spent heavily on building infrastructure by recapitalising the construction SOEs and having them raise funds for infrastructure construction. The President realized that to attract private investments, he needed to improve the country’s much neglected infrastructure. For example, Anton Gunawan (2021) showed that although the nominal value of capital stock increased over time, infrastructure stock as a percentage of GDP has been declining since 1999 (Figure 1). He also argued that much of the spending on infrastructure were primarily undertaken by the SOEs (Figure 2) and funded primarily through debt. Furthermore, the debt-to-equity position of many of these companies has risen significantly between 2014 and 2019 (Table 1).

The rising trend in SOE debts, which began in Jokowi’s first term, has clearly become a major concern in the second term, with the SOEs’ debt-to-equity ratios having reached potentially unsustainable levels. More recently, this problem was further exacerbated by the impact of the Covid-19 pandemic on the Indonesian government’s fiscal space. The government has reoriented fiscal expenditures to deal with the pandemic. It will also need to reduce its budget deficit going forward. Under these circumstances, and with SOEs involved in infrastructure projects having reached their debt limits, there is an urgent need to attract private investments (both local and foreign) to fund the country’s neglected infrastructure in the future.

In this regard, Indonesia had before the pandemic already implemented some reforms to increase private investment. Reza Siregar (2021) notes that during Jokowi’s first term, the government launched 16 policy reform packages to attract private sector investment. Even though this was done piecemeal, Indonesia was able to climb up the World Bank’s “Ease of Doing Business” rankings by 30 positions to 73rd position last year. The packages were followed by a landmark fuel subsidy reform in 2015. Overall, these reforms were designed to streamline regulations, support private investment, and make wage setting more flexible.

During Jokowi’s second term, the government began to realise that the piecemeal approach adopted in the past to attract private investment was inadequate. Thus, it embarked on designing and issuing a major bill that would consolidate, harmonise and simplify the country’s unwieldy, and often conflicting and overlapping, investment laws. This bill, with an all-encompassing coverage, was called the Omnibus Law which was passed by parliament on October 8, 2020. The new legislation consists of 79 laws and 1,245 articles. It focuses on four essential areas: (i) ease of doing business, (ii) simplification of investment requirements, (iii) strengthening the labour market’s competitiveness, and (iv) boosting micro, small and medium enterprises. These four areas are further divided into 11 clusters.[6] One of the clusters – the Investment and Government Project cluster – includes the plan to set up the Indonesia Investment Authority.

INVESTOR-FRIENDLY AND FLEXIBLE

The main goal of the Indonesia Investment Authority (INA) is to attract private investment into the country. In the early phase, INA’s priority is to attract private investments into the government’s infrastructure projects. In a sense, the role envisaged for INA is more limited compared to the earlier idea of establishing a super-holding company for SOEs in the country.

Dr Darwin Cyril Noerhadi (2021), a member of INA’s Board of Supervisor, explained that INA is modeled more closely to India’s National Investment and Infrastructure Fund (NIIF). This makes it different from SWFs from countries such as Singapore and Norway (Table 2).

In general, SWFs invest their country’s surplus funds or reserves overseas to diversify and grow their assets. INA, in contrast, is more inward-looking, and builds on the government co-investing with private investors (local and foreign) in Indonesia-based projects or entities.

Funding for SWFs in general comes from internal surpluses or from the country’s reserves, while INA’s funds, as with NIIF, may come from government surpluses, but also from foreign co-investments into local companies and projects.

The investment objectives of SWFs are similar when it comes to financial or commercial returns. However, the focus can be different across SWFs. For the usual SWF, the emphasis is on wealth creation done through investing in a diversified portfolio of assets, both domestic and overseas. In contrast, INA and NIIF focus on attracting external funds for domestic infrastructure projects.

As a result, INA’s features are designed to be investor-friendly and flexible, with a focus on commercial returns. Similar to private companies in Indonesia, INA has a two-tier board governance structure, comprising the Board of Directors (Management), which is overseen by the Board of Supervisors. This Board of Supervisors reports directly to the President. The five-person Supervisory Board consists of the Minister of Finance and the Minister of State-Owned Enterprise (SOE), and three professionals from the private sector. The current Board of Directors consists of five independent professionals selected and vetted by the Supervisory Board to run the SWF.[7]

Under the 2020 state budget, a total of IDR15 trillion has been allocated as INA’s capital. Another IDR 15 trillion will come from the 2021 state budget. The plan is to boost INA’s total capital to IDR 75 trillion by 2021 year-end. This is expected to come from various sources, ranging from cash funds, state property to government shares in SOEs.

Noerhadi (2021) has noted that the initial co-investment activity will focus on infrastructure projects such as toll roads, airports, and seaports. One possible investment participation structure involves the creation of an INA-managed master fund that is further split into designated thematic funds for co-investment with interested participating investors (Figure 3). Investors wanting control over their investments would take a majority share, with INA taking a minority stake. To ensure flexibility, the location and jurisdiction of these co-invested funds could reside in Indonesia or abroad, depending on the investors’ preference.

CHALLENGES AHEAD

The Omnibus Law has thus far attracted more street protests than investments, however: Labour unions have opposed this new bill especially on the reduction of severance pay terms; environmental groups are not happy with the less stringent environmental protection; and provincial governments are questioning the shift of authority on investment licenses to the central government. The implementation of the law will remain a challenge since it is opposed by the above three important constituents.

INA’s ability to attract investments into toll roads, seaports and airports will indeed be tested in the second half of this year. Only after INA has delivered on what it set out to do in this area will consideration be given to broadening its role to a holding company of strategic SOEs. Some will consider it a pity if this does not materialise, given the country’s long and arduous 20-year journey to set up the SWF.

However, INA can become unwieldy and costly if it becomes a super holding company of all SOEs (through their sectoral holding companies). It might be preferable for INA to be a more focused holding company for selected strategic SOEs, especially those that would benefit from heightened transparency and accountability, similar to the existing 28 publicly-listed SOEs.

A public listing would improve transparency and accountability, allowing managers to better focus on operating efficiency and performance with less political interference.The government’s perennial concern over control, could be addressed by the maintaining of majority ownership and through special voting-right shares.

In a recent interview, Tanri Abeng opined that a holding company is essential to protect the SOE from political influence.[8] The current SOE Deputy Minister, Pahala Mansury, has mentioned that, in addition to the toll roads being sold by the state-owned construction companies, several SOE subsidiaries are being planned for sale to INA before or during an IPO public listing. These include PT Pertamina Geothermal Energy (a subsidiary of PT Pertamina) and a sub-holding company covering marine logistics.[9] It would be interesting if INA can also help bring about the public listing of PT Pertamina (Persero).

ISEAS Perspective 2021/63, 5 May 2021

References

Gunawan, Anton. (2021). “Tapping Private Investment with SWF: Indonesian Investment Authority”, presentation at ISEAS – Yusof Ishak Institute, 10 March.

Noerhadi, Cyril. (2021). “Envisioning Indonesia Investment Authority (INA): Game Changer for Indonesia’s Investment”, presentation at ISEAS – Yusof Ishak Institute, 10 March.

Siregar, Reza. (2021). “Reform Roads to Finance Growth”, presentation at ISEAS – Yusof Ishak Institute, 10 March.


ENDNOTES

[1] “Ini Dia! Erik Thohir Keluarkan Aturan Jual Aset BUMN ke SWF”, Emir Yanwardhana, CBNBC Indonesia, Market, 19 April 2021

[2] Earlier, at an ISEAS webinar on 10 March 2021, Cyril Noerhadi, an INA Supervisory Board member, together with two senior economists, Anton Gunawan and Reza Siregar, discussed INA’s set up and dismissed a few misconceptions on Indonesia’s first sovereign wealth fund. This misconceptions were partly due to Indonesia’s longstanding plan to establish a SWF, which goes back to the last years of President Suharto’s term. The initial plan was to establish a holding company for its SOEs modeled after Singapore’s Temasek and Malaysia’s Khazanah, which many thought the new INA would resemble.

[3] Kompaspedia.kompas.id, Kementerian Badan Usaha Milik Negara (BUMN), by Topan Yunarto, 3 February 2021

[4] Sejarah Super Holding: Usul Tanri Abeng ke Soeharto, by Achmad Dwi Afriyadi, detikFinance, 15 April 2019

[5] A recent ADB review of Indonesia’s SOEs noted that there are 118 SOEs spread across 13 sectors. Most are in manufacturing, transport, and financial services, with the largest employers being in agriculture, forestry, and fisheries. Some 28 SOEs are listed on Indonesia’s Stock Exchange (IDX), accounting for just 4% of listed companies but for a sizable 25% of IDX’s total market capitalization. For more details, see Yougesh Khatri and Mohamad Ikhsan’s chapter 3 on Indonesian SOEs in Edimon Ginting and Kaukab Naqvi (eds), Reforms, Opportunities, and Challenges for State-Owned Enterprises, July 2020, Asian Development Bank, Manila. (https://www.adb.org/publications/reforms-opportunities-challenges-state-owned-enterprises).

[6] see Ringkasan UU Cipta Kerja 7 Oktober 2020 www.ekon.go.id

[7] https://fulcrum.sg/indonesias-new-sovereign-wealth-fund-professionals-provide-some-comfort-but-challenges-remain

[8] Sejarah Super Holding: Usul Tanri Abeng ke Soeharto, by Achmad Dwi Afriyadi, detikFinance, 15 April 2019

[9] “Sebelum IPO, Perusahaan BUMN Incar Kerja Sama dengan SWF INA” dan “Wamen Pahala Beberkan BUMN yang Siap Ditawarkan ke SWF”, CNBC Indonesia, Market, 14 April 2021

ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute   30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735   Get Involved with ISEAS. Please click here: /supportISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed.   Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission.  
© Copyright is held by the author or authors of each article.
Editorial Chairman: Choi Shing Kwok  
Editorial Advisor: Tan Chin Tiong  
Managing Editor: Ooi Kee Beng  
Editors: William Choong, Malcolm Cook, Lee Poh Onn, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

“How Generation Z Galvanized a Revolutionary Movement against Myanmar’s 2021 Military Coup” by Ingrid Jordt, Tharaphi Than and Sue Ye Lin

 

 

2021/62 “Vietnam and the Great Powers: Agency Amid Amity and Enmity” by William Choong

 

Vietnam’s favoured choice of “not taking sides” between China and the US has been portrayed as a decision not to choose a certain outcome, yet retaining the freedom to manoeuvre amid complexity and multipolarity. In this picture, Vietnam’s Prime Minister Nguyen Xuan Phuc addresses counterparts at the ASEAN-US summit of the Association of Southeast Asian Nations (ASEAN), on a live video conference held online due to the Covid-19 coronavirus pandemic, in Hanoi on November 14, 2020. Photo: Nhac NGUYEN, AFP.

EXECUTIVE SUMMARY

  • Vietnam’s domestic and foreign policy structures held up well in 2020 in the face of significant challenges involving Covid-19, chairing ASEAN, and relations with China and the United States.
  • At home, it managed the Covid-19 pandemic commendably and kept economic growth going at a steady clip. As ASEAN chair, it steered the grouping through a difficult year of the pandemic and great power rivalry.
  • Externally, Vietnam continued to maintain a delicate balance between China and the US, while at the same time retaining a strategic option to pursue deeper defence and military relations with the US.
  • Vietnam’s ability to maintain and enhance agency, in particular in its relations with Beijing, offers lessons for other Southeast Asian countries facing the same dilemma.

* William Choong is Senior Fellow at the ISEAS -Yusof Ishak Institute, and the Managing Editor of Fulcrum, the Institute’s commentary and analysis website.

INTRODUCTION

As Sino-US rivalry escalated in recent years, the mantra of “not choosing sides” between China and the United States (US) has become the favoured choice for many states in Southeast Asia. The same applies to Vietnam, a frontline state in the dispute with China over the South China Sea. In 2020, Vietnam faced a slew of challenges, ranging from the Covid-19 pandemic, managing Chinese power, disputes in the South China Sea and maintaining ASEAN cohesion as chair of the 10-member organisation.

Remarkably, Vietnam held up well. At home, it managed the Covid-19 pandemic commendably and kept economic growth going at a steady clip. As ASEAN chairman, it steered the grouping through a difficult year of the pandemic and great power rivalry. Externally, Vietnam continued to maintain a delicate balance between China and the US, while at the same time retaining a strategic option to pursue deeper defence and military relations with the US.

Vietnam also subscribes to not choosing sides between China and the US, but for Hanoi, the level of complexity is higher. The Sino-Vietnam relationship is troubled by historical baggage and the dispute over the South China Sea. The same complexity applies to Hanoi’s relationship with the US. While bilateral relations have progressed substantially in recent years, a vestigial mistrust of Washington, in particular of the latter’s rhetoric on human rights and democracy, continues. Yet, Vietnam still provides a model for how Southeast Asian countries can respond to China in a time of great geopolitical flux.

If agency in this context is defined as the ability to maximise benefits from both powers while adopting hedging strategies to keep them at arm’s length, Vietnam is a classic showcase of that art, which can be useful for other Southeast Asian nations to replicate.

FIERCE STREAK OF INDEPENDENCE

Vietnam is no strategic lightweight among ASEAN’s 10-member states. In 2020, it overtook Singapore and Malaysia to be the grouping’s fourth largest economy (after Indonesia, Thailand and the Philippines),[1] ranked fourth in defence spending in 2020 (at US$5.7 billion) and boasts the region’s largest active standing military, at 482,000 in personnel size.[2] That said, Vietnam lives in a tough neighbourhood. Historically, the natural geographical separation of its northern and southern cores exacerbated the two regions’ political and social divide, leaving the country vulnerable to invasion by foreign powers Chinese, French or American.[3] In particular, Vietnam has always been exposed to China’s expansionary tendencies and what one analyst terms the “tyranny of geography” an old joke puts that the country’s S-shaped bend resembles an “old woman straining under China’s weight”.[4] Yet, Vietnam has always retained a fierce streak of independence, repelling repeated Chinese invasions throughout history. Significantly, between 1954 and 1979, Vietnam defeated three big powers – the French (by the Viet Minh), the Americans and the Chinese.

Vietnam has always maintained a fierce streak of independence. In this picture, two Viet Cong and a North Vietnamese Army officer with still and motion picture cameras that they will use to photograph the exchange of prisoners of war. Picture: The US National Archives.

 The determination to safeguard Vietnam’s independence through policy flexibility and effective execution continues to this day. This implacable streak of independence is reflected in comments by Ho Chi Minh. In the 1950 and 1960s, when the Sino-Vietnam relationship was termed as close as “lips and teeth”, Ho Chi Minh described the relationship as being “one hundred favours, a thousand loyal affections and ten thousand loves”. Yet when Chinese (Nationalist) forces arrived in northern Vietnam in 1945, Ho said he would rather put up with French rule than endure another Chinese occupation. He reportedly said: “I prefer to sniff French s*** for five years than eat Chinese s*** for the rest of my life.”[5]

MANAGING EXTERNAL RELATIONS

As the Indonesian dictum goes, national resilience breeds regional resilience, and regional resilience enhances national resilience. Vietnam’s ability to keep the number of Covid-19 cases low augurs well for the country.[6] Its successful management of the pandemic has had knock-on effects on its economy. It has been reported as likely to have been Asia’s top-performing economy in 2020 – a feat achieved without a single quarter of contraction.[7] Vietnam reported 2020 GDP growth at 2.9 per cent, thanks to robust exports of electronics and other consumer products.[8] In recent decades, GDP growth averaged 7 per cent, thus doubling GDP to US$262 billion in the decade ending 2019.[9] Vietnam was already benefiting from the Sino-US trade war, as China-based foreign firms moved to the country.

Since 1986, when Vietnam embarked on its doi moi policy, four themes have shaped its diplomacy: diversification and multilateralisation of external relations; defending the national interest through cooperation and struggle; active international integration, and; the maintenance of independence, sovereignty and strategic autonomy.[10] Through the three decades from 1986 and 2016,[11] one way Hanoi did this was by sustaining “strategic” and “comprehensive” partnerships with middle powers, such as Australia, India, Japan and South Korea – a move that Beijing tends to be less sensitive to compared to Hanoi’s relations with the US.[12] Despite the growing number of such relationships, Vietnam remains non-aligned and stays clear of formal alliances, in part to avoid provoking Beijing.[13] Like other Southeast Asian states, Vietnam has sought to avoid making stark choices between China and the US – and enjoying the “blessedness of not making choices.”[14]

In recent years, Vietnam has seen significant upgrades in its relationships with other powers. In 2014, the Japan-Vietnam relationship was upgraded from a “strategic partnership” to an “extensive strategic partnership”. In 2016, the India-Vietnam relationship was upgraded from a “strategic partnership” to a “comprehensive strategic partnership”.[15] In November 2020, Australia expressed a desire for bilateral ties with Vietnam to be upgraded from a strategic partnership to a “comprehensive strategic partnership”.[16] It is worth noting that Australia, Japan and India are part of the Quadrilateral Security Grouping, or “Quad” together with the US. This is an informal grouping of democracies seeking to uphold a regional, rules-based order premised on principles such as freedom of navigation, free and open societies and the importance of international law.


The biggest challenge for Vietnam, however, remains the triangle involving itself, China and the US. Thus far, Vietnam has been able to maintain a delicate balance in the triangle. With China, the relationship is multi-faceted. Vietnam’s economy has become increasingly interlinked with China, and the two countries’ Marxist-Leninist political systems are similar. Beijing also has the rare accolade of being the only country which is a “comprehensive strategic cooperative partner” of Vietnam.[17] Still, historical animosity to Chinese domination and the lingering dispute with China over the South China Sea has constrained the China-Vietnam relationship. In the eyes of a senior Vietnamese diplomat, Vietnam’s most serious problems lie with China, given Beijing’s attempt to gain control of the South China Sea, its growing strength and its “more aggressive” behaviour.[18] As such, Vietnam’s sophisticated management of the bilateral relationship cautiously avoids provoking of Beijing.[19] Hanoi’s highest foreign policy priority is to insulate the two countries’ economic (and overall) relationship from the dispute, while at the same time building as many security ties with as many powers as possible.[20]

Similarly, the Vietnam-US relationship has also developed apace. Relations between the two erstwhile enemies have come a long way since diplomatic normalisation in 1995, such that they are reportedly considering upgrading their “comprehensive relationship” to a “strategic partnership”.[21] The relationship has been buoyed by a shared perception of the China threat, and coincides with Vietnam’s generally supportive view of US-led regional and global orders, such as the Trump administration’s “free and open Indo-Pacific” (FOIP) strategy. [22] In 2018, Vietnam participated for the first time in the US-led Rim of the Pacific (RIMPAC) exercise, the world’s biggest multilateral naval exercise; the US has also provided the Vietnamese Coast Guard with patrol boats and training facilities.[23] Two US Navy Nimitz-class carriers visited Vietnam in 2018 and 2020 – marking a historic advance in the relationship. However, the relationship is also constrained by multiple factors – Vietnam officials’ suspicions about Washington’s long-term goal of “peaceful evolution” to depose the Vietnamese Communist Party; American concerns about Hanoi’s human rights record, and more importantly, the implications of an improved bilateral relationship on China.[24]

AGENCY IN THE MIDST OF ENMITY

In the face of China’s growing assertiveness, Vietnam has demonstrated much agency by employing several avenues: contributing to regional and global security; internationalising the South China Sea issue, threatening legal action against Beijing; and participating in regional mechanisms such as the Quad to counteract Chinese assertiveness.

Contributing to Regional Peace and Security

Since the late 1980s, Vietnam has maintained the principle that it will be a “friend and reliable partner of all countries”, such that it will actively participate in “international and regional cooperation processes.”[25] In 2020, Vietnam enjoyed a successful year as a non-permanent member of the United Nations Security Council (UNSC). It also served as the president of the UNSC, which conducted an open debate on upholding the UN Charter. The debate saw a record 111 speakers from 106 states, and the adoption of the first UNSC President statement calling for compliance to the Charter.[26] Hanoi is also planning to expand its UN peacekeeping operations, which has helped promote cooperation between Vietnam and its partners, and enhanced its position in the regional and global arena. Between June 2014 and December 2020, Vietnam sent 179 officers and soldiers to peacekeeping missions in South Sudan, the Central Africa Republic and the UN Peace Operation Department at UN Headquarters.[27]

Vietnam was chosen as the venue for the second Trump-Kim summit in 2019 for various reasons, such as its relatively close relations with the three involved powers in the Korean nuclear issue (the US, North Korea and South Korea) and Vietnam’s relative proximity to North Korea. By far, however, the most important benefit for Hanoi was the chance to showcase its diplomatic skill of handling such a crucial event on a global stage.[28] The same applied to Hanoi’s successful hosting of the 2017 Asia Pacific Economic Cooperation (APEC) meeting. The meeting demonstrated its diplomatic finesse at balancing between China and the United States. During the meeting, Vietnam issued two important joint statements. The one with Washington affirmed their Comprehensive Partnership and sought to promote trade and investment and deepen security cooperation. In its joint statement with China, Vietnam welcomed and supported China’s Belt and Road Initiative. Both sides agreed to enhance cooperation on economy and trade, industrial capacity, investment and infrastructure.[29]

Internationalising the South China Sea Issue

Vietnam has displayed ingenuity and boldness in championing its interests on the South China Sea issue each time it played the role of ASEAN chair. In 2010, when Vietnam was ASEAN chair, then-US Secretary of State Hillary Clinton – reportedly with Vietnamese instigation – stressed at an ASEAN security forum in Hanoi that the US had an interest in freedom of navigation in the disputed South China Sea. This helped to internationalise the issue, and understandably riled China.[30]

In 2020, Vietnam, as ASEAN chair again, strengthened the group’s discourse on the South China Sea issue, focusing on the primacy of international law. Its chairman’s statement at the 36th ASEAN Summit in June 2020 affirmed UNCLOS as the basis for “determining maritime entitlements, sovereign rights, jurisdiction and legitimate interests over maritime zones”. The same statement had six mentions of “UNCLOS” – three times more than the 35th ASEAN Summit’s chairman’s statement. Vietnam’s chairman’s statement had five mentions of “international law” compared to three in the 2019 chairman’s statement.[31] Using its prerogative as ASEAN chair, Vietnam used similar language in chairman statements of ASEAN’s ministerial meetings with Canada, Japan, New Zealand, the US and the European Union.[32] Again, this helped to internationalise the issue, by striking resonance with countries that place an emphasis on the value of international law in the controversial dispute. Intriguingly, Vietnam’s use of strong language saw no adverse public reaction from China.

Deterring China and the Threat of Legal Action

Vietnam has become quite adroit at sending deterrent messages to Beijing not to cross redlines in its interactions with its smaller neighbour. In the 2014 oil-rig standoff between China and Vietnam in the Paracels, China withdrew the rig after about two months. Vietnam’s successful defence of its interests was due to a slew of factors,[33] including Hanoi’s threat of legal action against Beijing. While on a visit to Manila, Vietnam’s then-prime minister Nguyen Tan Dung said that Hanoi was considering “various defense options”. This would include legal actions in accordance with international law to defend its South China Sea claims.[34] At the 2014 Shangri-La Dialogue, then-defence minister Phung Quang Thanh said that Hanoi was prepared for “other solutions”, including taking China to court. The minister said that the solutions must be “peaceful” should bilateral means fail.[35] While Beijing stressed that the withdrawal had “nothing to do with any external factor”. Vietnamese leaders hailed the retreat as a victory.[36] The incident has been called the “clearest case of major coercive failure” for China.[37]

In 2019, the two countries were embroiled in another standoff near Vanguard Bank in the South China Sea. China took tougher action to disrupt Vietnam’s new oil and gas mining operations, but Vietnam showed no signs of backing down. At the 52nd ASEAN Foreign Ministers’ Meeting (AMM) in 2019, Vietnam secured, in an AMM Joint Communique, tougher language in an indirect reference to Chinese actions.[38] It also secured support from extra-regional parties such as Australia, the European Union and the US. While there was no official declaration that Hanoi would consider taking China to arbitration, there have been suggestions for Vietnam to take the dispute to an arbitral tribunal – the same approach taken by The Philippines against China in 2013.[39]

Extra-regional Dialogue Mechanisms

The ace in the deck which exemplifies Vietnam’s agency is the refining of its defence posture in its 2019 defence white paper. Traditionally, this posture has been premised on “three no’s” – that is, no military alliances, no alignment with one country against another, and no using of Vietnam’s territory to carry out military activities against another country. The 2019 paper introduced a new “no” (no use or threat of force) and a “depend” – that Vietnam will consider developing “necessary, appropriate defence and military relations with other countries” in the Indo-Pacific region.[40] The new language is indicative of Vietnam’s increasing receptiveness of the US-led FOIP strategy, in particular, the emphasis on freedom of navigation and the upholding of international law, particularly as applied to China’s nine-dashed line claim in the South China Sea.

In addition, by using the “Indo-Pacific” term, Hanoi is suggesting that it might contemplate, as a last resort, an upgrade in relations with the US and potentially other countries in the Indo-Pacific.[41] In effect, this serves as a deterrent signal to China as it affords Vietnam room to step up its ties with not only individual members of the Quad but also with the four-nation grouping as a whole. Most recently, Vietnam participated in a Quad-Plus meeting involving the four members of the Quad, New Zealand and South Korea. Although the 2020 meeting discussed joint responses to the common scourge of Covid-19, the message would not be lost on China that Hanoi might consider cooperating with the Quad on defence and military-related topics should it feel a need to do so.

Lending credibility to the desire of other like-minded partners to exercise agency, Mike Pompeo, the former US Secretary of State, welcomed the institutionalisation of the Quad and for other countries to be part of this arrangement at some future point. The Biden administration appears to have placed equal, if not more emphasis on this front with its hosting of the first Quad Summit in March 2021. Furthermore, in its interim national security strategic guidance issued in the same month, the administration said it was open to working with “Vietnam, and other Association of Southeast Asian Nations (ASEAN) member states” to advance shared objectives.[42] In toto, this gives Hanoi more leverage in its pursuit of options vis-à-vis China.

CONCLUSION

Vietnam has pursued both diplomatic and defensive options to pre-empt further pressure from Beijing. It has taken part in three major multilateral trade agreements of note – the 11-member Comprehensive and Progressive Partnership for Trans-Pacific Partnership, the 15-nation Regional Comprehensive Economic Partnership, and the European Union-Vietnam Free Trade Agreement. Such FTAs internationalise Vietnam’s economy and reduce its reliance on any particular country. In the South China Sea, Vietnam is making “modest improvements” to the features it occupies in the Spratlys, including anti-air and coastal defences on Vietnam-occupied features such as Spratly Island, Pearson Reef and Sand Cay.[43] This in itself suggests Vietnam’s development of an anti-access, area denial strategy (A2AD) that replicates China’s own A2AD strategy in the area.[44] This would serve to blunt, but not eradicate, Chinese advantages if conflict arises in the area.

Vietnam’s favoured choice of “not taking sides” between China and the US has been portrayed as a decision not to choose a certain outcome, yet retaining the freedom to manoeuvre amid complexity and multipolarity. This involves a country knowing its own interests, taking a position accordingly so as not to allow others to define its national interests.[45] As David Shambaugh argues, ASEAN states still retain agency and can mitigate the region’s tilt towards China, based on America’s strategic weight in the region, Chinese diplomatic missteps and the help of other middle powers.[46] As Vietnam has shown, they can still navigate and waltz among the duelling pachyderms if they employ some creative thinking.

ISEAS Perspective 2021/62, 4 May 2021


ENDNOTES

[1] Statista, “Gross Domestic Product (GDP) of the ASEAN Countries from 2010 to 2020”, https://www.statista.com/statistics/796245/gdp-of-the-asean-countries

[2] International Institute for Strategic Studies, The Military Balance, (Abingdon: Routledge for the IISS, 2021), pp 518 – 519

[3] Stratfor, “Vietnam’s Geographic Challenge”, 18 September 2014, https://worldview.stratfor.com/region/asia-pacific/vietnam

[4] Sebastian Strangio, In the Dragon’s Shadow: Southeast Asia in the Chinese Century (New Haven and London: Yale University Press, 2020), pp 90 – 91

[5] Strangio, In the Dragon’s Shadow, p. 97

[6] Nguyen Guy, “Vietnam Exits Top 10 in Resilience Ranking Due to New Outbreak,” VN Express, 2 March 2021, https://e.vnexpress.net/news/news/vietnam-exits-top-10-in-covid-19-resilience-ranking-due-to-new-outbreak-4241777.html

[7] Yen Nee Lee, “This is Asia’s Top-Performing Economy in the Covid Pandemic – It’s Not China,” CNBC, 27 January 2021, https://www.cnbc.com/2021/01/28/vietnam-is-asias-top-performing-economy-in-2020-amid-covid-pandemic.html

[8] Kentaro Iwamoto, “ASEAN’s 2021 GDP Forecasts Show Cautious Optimism in COVID Shadow”, Nikkei Asia, 15 February 2021, https://asia.nikkei.com/Economy/ASEAN-s-2021-GDP-forecasts-show-cautious-optimism-in-COVID-shadow

[9] Huong Le Thu, “Vietnam’s Coming Leadership Change”, The Diplomat, 1 January 2021, https://magazine.thediplomat.com/#/issues/-MP3bG9zf0K8NVsEkcVl/preview/-MP3bGyD6VDM7gKWXETv

[10]Thayer, “The Evolution of Vietnamese Diplomacy” p. 40

[11] Ibid, p. 23

[12] Le Hong Hiep, “Vietnam’s Strategic Trajectory”, ASPI Strategic Insights, June 2021, https://www.openbriefing.org/docs/vietnamtrajectory.pdf, p. 11

[13] Tim Huxley and William Choong (eds), “Vietnam’s Major Power Diplomacy”, Asia-Pacific Regional Security Assessment 2016 (London: the International Institute for Strategic Studies, 2016), p. 75

[14] William Choong, “China-US Relations: Singapore’s Elusive Sweet Spot”, ISEAS Perspective No. 80, 23 July 2020, /wp-content/uploads/2020/07/ISEAS_Perspective_2020_80.pdf, pp 5 – 6

[15] Devirupa Mitra, “India and Vietnam Upgrade to Comprehensive Strategic Partnership”, The Wire, 4 September 2016, https://thewire.in/external-affairs/india-and-vietnam-upgrade-to-comprehensive-strategic-partnership, Vo Xuan Vinh, “India-Vietnam Relations Under Modi 2.0: Prospects and Challenges”, ISEAS Perspective 2019 No. 82, /images/pdf/ISEAS_Perspective_2019_82.pdf, p.2

[16] Vietnam News Agency, “Australia Wants to Set Up Comprehensive Strategic Partnership with Vietnam: FM”, 5 November 2020, https://en.vietnamplus.vn/australia-wants-to-set-up-comprehensive-strategic-partnership-with-vietnam-fm/189882.vnp

[17] Derek Grossman, “Reviewing Vietnam’s ‘Struggle’ Options in the South China Sea”, The RAND Blog, 4 May 2020, https://www.rand.org/blog/2020/05/reviewing-vietnams-struggle-options-in-the-south-china.html

[18] David Shambaugh, Where Great Powers Meet: America & China in Southeast Asia (New York: Oxford University Press, 2021), p. 95, 210

[19] ibid

[20] Strangio, In the Dragon’s Shadow, pp 106 – 107

[21] Le Hong Hiep, “The Vietnam-US Partnership and the Rules-Based International Order in the Age of Trump”, Trends in Southeast Asia, 2020, p. 1, 20-21, /wp-content/uploads/pdfs/TRS1_20.pdf

[22] ibid, p 2, 27

[23] Maria Siow, “US-Vietnam Defence Ties Expected to Strengthen with New Governments in Place and China Looming: Analyst”, South China Morning Post, 30 January 2021, https://www.scmp.com/week-asia/politics/article/3119865/us-vietnam-defence-ties-expected-strengthen-new-governments

[24] Congressional Research Service, “US-Vietnam Relations”, 16 February 2021, https://fas.org/sgp/crs/row/IF10209.pdf

[25] Viet Phuong Nguyen, “Why Vietnam Should Host the Second Trump-Kim Summit”, The Diplomat, 16 January 2019, https://thediplomat.com/2019/01/why-vietnam-should-host-the-second-trump-kim-summit

[26] Huong Le Thu, “Vietnam Steps Up to Take Vietnam Leadership Role”, ASPI Strategist, 5 August 2020, https://vietnamnet.vn/en/politics/vietnam-gains-breakthrough-diplomatic-success-as-unsc-member-official-708187.html

[27] Nhan Dan, “Vietnam Expects to Expand Engagement in UN Peacekeeping Operations”, 7 January 2021, https://en.nhandan.org.vn/politics/item/9477902-vietnam-expects-to-expand-engagement-in-un-peacekeeping-operations.html

[28] Straits Times, “Trump-Kim Summit: Why is Vietnam Chosen?” 12 February 2019, https://www.straitstimes.com/asia/se-asia/trump-kim-summit-why-was-vietnam-chosen

[29] Nguyen, “Why Vietnam Should Host the Second Trump-Kim Summit”

[30] William Choong, “Coping with China’s Rapid Rise”, The Straits Times, 2 September 2011, p. A37

[31] See ASEAN, “Chairman’s Statement of the 36th ASEAN Summit”, 26 June 2020, https://asean.org/storage/2020/06/Chairman-Statement-of-the-36th-ASEAN-Summit-FINAL.pdf, ASEAN “Chairman’s Statement of the 35th ASEAN Summit”, 3 November 2019, https://asean.org/storage/2019/11/Chairs-Statement-of-the-35th-ASEAN-Summit-FINAL.pdf

[32] Hoang Thi Ha, “ASEAN and the South China Sea Code of Conduct: Raising the Aegis of International Law”, ISEAS Commentaries, 21 September 2020, /media/commentaries/asean-and-the-south-china-sea-code-of-conduct-raising-the-aegis-of-international-law

[33] Such as the US condemnation of the Chinese deployment; Vietnam’s deployment of dozens of ships around the Chinese oil-rig; and popular resistance among ordinary Vietnamese to China’s actions.

[34] Reuters, “Vietnam PM Says Considering Legal Action Against China Over Disputed Waters”, 22 May 2014, https://www.reuters.com/article/us-vietnam-china-idUSBREA4K1AK20140522

[35] Chua Chin Hon, “Vietnam Mulling Legal Option to Resolve Maritime Spat with China,” The Straits Times, 31 May 2014, https://www.straitstimes.com/singapore/vietnam-mulling-legal-option-to-resolve-maritime-spat-with-china

[36] Michael Green, Kathleen Hicks, Zack Cooper, John Schaus and Jake Douglas, “Counter-coercion Series: China-Vietnam Oil Rig Standoff,” Asia Maritime Transparency Initiative, 12 June 2017, https://amti.csis.org/counter-co-oil-rig-standoff

[37] ibid

[38] Lye Liang Fook and Ha Hoang Hop, “The Vanguard Bank Incident: Developments and What Next?” ISEAS Perspective, 4 September 2019, p. 4, /images/pdf/ISEAS_Perspective_2019_69.pdf

[39] ibid

[40] Ministry of Defence (Vietnam), “2019 Viet Nam National Defence”, http://www.mod.gov.vn/wps/wcm/connect/08963129-c9cf-4c86-9b5c-81a9e2b14455/2019VietnamNationalDefence.pdf, pp 23 – 24, 29

[41] Derek Grossman, “What Does Vietnam Think About America’s Indo-Pacific Strategy?” The RAND Blog, 5 August 2020, https://www.rand.org/blog/2020/08/what-does-vietnam-think-about-americas-indo-pacific.html

[42] Joseph R. Biden Jr., “Interim National Security Strategic Guidance”, March 2021, p. 10, https://www.whitehouse.gov/wp-content/uploads/2021/03/NSC-1v2.pdf

[43] Asia Maritime Transparency Initiative, “Vietnam Shores up its Spratlys Defenses”, 19 February 2021, https://amti.csis.org/vietnam-shores-up-its-spratly-defenses/

[44] S. Rajaratnam School of International Studies, “Countering Anti-Access/ Areal Denial Challenges: Strategies and Capabilities (Event Report)”, 1 December 2017 https://www.rsis.edu.sg/wp-content/uploads/2018/04/ER180424_Countering-Anti-Access.pdf, p. 10

[45] Bilahari Kausikan, “ASEAN’s Agency in the Midst of Great Power Competition”, Australian Institute of International Affairs, 30 October 2020, https://www.internationalaffairs.org.au/australianoutlook/aseans-agency-in-the-midst-of-great-power-competition/ [46] Shambaugh, Where Great Powers Meet, pp 12 – 15

[46] Shambaugh, Where Great Powers Meet, pp 12-15

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2021/61 “Is the East Asia Summit Suffering Erosion?” by Hoang Thi Ha and Malcolm Cook

 

Vietnam’s Prime Minister Nguyen Xuan Phuc (top 2nd R) addresses his counterparts at the ASEAN-East Asia (EAS) Summit of the Association of Southeast Asian Nations (ASEAN) summit being held online in Hanoi on 14 November 2020. Photo: Nhac NGUYEN, AFP

EXECUTIVE SUMMARY

  • Over the last decade, the East Asia Summit has established itself at the peak of the ASEAN-led regional architecture and key to ASEAN’s broader centrality aspirations.
  • ASEAN has however had difficulties improving the institutional efficacy of the EAS and lifting it out of its default ‘talk shop’ mode.
  • ASEAN dialogue partner developments also pose an EAS erosion threat. These include the deterioration in China’s relations with the Quad members, and the recent elevation of the Quadrilateral Security Dialogue to a regular leaders-level forum.
  • Leveraging the EAS to address the aftermath of the Myanmar coup and to engage with the Quad Vaccine Partnership could help the EAS bolster its ability to deliver concrete results on pressing Southeast Asian issues.

* Hoang Thi Ha is ISEAS Fellow and Lead Researcher for Political-Security Affairs in the ASEAN Studies Centre, and Malcolm Cook is ISEAS Visiting Senior Fellow at ISEAS – Yusof Ishak Institute.

INTRODUCTION

All inter-state organisations are shaped and challenged by the changing engagement of their major stakeholders, the difficulties associated with consensus-based reform and consolidation, the inevitable gap between expectations and feasible delivery, and the evolving strategic environment within which they exist.

Where ASEAN is concerned, the mutually reinforcing effects of such challenges will test the East Asia Summit (EAS) and threaten its peak position in the ASEAN-led regional architecture in the coming years. How ASEAN member states and ASEAN itself respond will help determine the EAS’ future status.

Three developments illuminate these more challenging times. On 12 March, the Quadrilateral Security Dialogue (the Quad) was elevated from an informal discussion forum among the US, Japan, India and Australia to the inaugural Quad leaders’ summit; this presents a direct challenge to the EAS’ peak position. If the second Quad leaders’ summit that is to be held in-person by the end of 2021 takes place, likely before the EAS, this challenge will become clearer.[1]

Second, the 1 February military coup in Myanmar and its bloody aftermath are being viewed by many as an “existential crisis” for ASEAN intramurally and for ASEAN’s broader agenda.[2] ASEAN-led mechanisms that include Myanmar junta representatives could lead to some dialogue partners choosing to stay away or to use their presence to call for an immediate return to democracy in Myanmar.

Finally, the Covid-19 pandemic that continues to spread in many ASEAN member states has shown the EAS’ functional limitations. The smaller, more established and more functionally-oriented ASEAN+3 mechanism has been much more active and effective in addressing the pandemic in Southeast Asia.[3] The Quad may achieve the same with the launch of the Quad Vaccine Partnership at its inaugural summit.[4] Over the last decade, the EAS, by default and by ASEAN’s design, has been the peak mechanism in the ASEAN-led regional architecture. Keeping it so will not be easy.

EAS IDENTITY ISSUES

For all the acclaim of its premier status in the ASEAN-led regional architecture, the EAS has not yet settled on its own identity. It has its genesis in the ASEAN+3 process and the latter’s goal of building an East Asian community for East Asians. In its 2002 report assessing the establishing an EAS, the East Asia Study Group emphasised the “need for clarity of objectives and issues which the EAS should pursue.”[5] Yet, much of the diplomatic wrangling leading to the EAS’ inaugural meeting in 2005 was about which ASEAN dialogue partners to invite, and not.[6] The EAS did not become an “ASEAN+3 transformed”. The EAS’ broader original membership and subsequent addition of the US and Russia in 2011 give it a more “open, outward-looking and inclusive”[7] character. Neither were its objectives or its path forward clearly defined, making it “unclear to most what exactly the raison d’être for the inaugural meeting of the EAS was.”[8]

This continuing lack of a clear purpose is reflected in the mismatch between the broad strategic agenda at the leaders-level and the evolving seven priority areas of EAS cooperation involving multiple government ministries, namely energy, education, finance, global health including pandemics, environment and disaster management, ASEAN Connectivity and maritime cooperation. On the one hand, this Janus-faced identity allows for flexibility. China and its like-minded EAS partners can promote functional and development cooperation, while the US and its partners can raise traditional security issues including the South China Sea disputes and the Korean Peninsula. Individual EAS leaders have the prerogative to raise any issue of specific interest or concern to them.

On the other hand, it creates the dilemma of preserving the broad, free-flowing and informal nature of the leaders’ dialogue while enhancing the EAS’ institutional capacity to deliver concrete results. Last year, the EAS was almost invisible in initiating any specific collective action to tackle the COVID-19 pandemic, despite “global health including pandemics” being a priority area for cooperation.

The EAS Leaders issued their Statement on Strengthening Collective Capacity in Epidemics Prevention and Response only in November 2020,[9] and no concrete action to implement the statement under the EAS framework has been reported since then. Instead, the region is witnessing vaccine nationalism and competitive vaccine diplomacy among the major powers who are EAS members. This is not unexpected, as Southeast Asia is a frontline region for China’s vaccine diplomacy,[10] and the focus for the Quad Vaccine Partnership.[11] However, it shows that while the EAS assembles the main characters, the real action is elsewhere.

There has been no shortage of effort to strengthen the EAS’ efficacy and efficiency over the past 15 years, especially around milestone anniversaries. During the EAS’ tenth anniversary year in 2015, there was a major stock-taking and review of the EAS with active participation. Of innovative inputs coming from the EAS’ dialogue partner members, only a few of have been implemented, such as the establishment of the EAS Unit within the ASEAN Secretariat[12] and the EAS Ambassadors Meeting in Jakarta (EAMJ)[13] to facilitate coordination within the EAS on a regular basis. Other efforts to strengthen the EAS’ institutional capacity include the setting up of the EAS Foreign Ministers Meeting and EAS ministerial mechanisms in the economic, finance, energy, environment and education sectors.

However, these institutional reinforcements have had little impact in lifting the EAS out of its default leader-level ‘talk shop’ mode. So far, there has been no serious attempt to overhaul the EAS structure to preserve its “Leaders-led” nature and to manage overlaps with other ASEAN-led mechanisms in functional cooperation, including the ASEAN+3, ASEAN Regional Forum (ARF) and ASEAN Defence Ministers Meeting-Plus (ADMM-Plus).

As the only multilateral platform that brings together the leaders of Southeast Asian countries and other major powers to discuss issues of strategic significance to the region, the EAS’ leaders-led nature is highly prized by all of its members. However, while EAS leaders’ discussions can be frank and heated at times, it is also true that the leaders often read their set-piece talking points and hardly engage in interactive dialogue. Related to this is the persistent concern on a yearly basis over the attendance of the US president at the EAS. Washington’s presence adds critical strategic weight to the forum, but US presidents’ sporadic engagement has time and again raised legitimate questions about US commitment to ASEAN multilateralism and doubts about the relevance and credibility of the EAS itself.

DIALOGUE PARTNER DEVELOPMENTS

President Donald Trump’s decision not to attend any EAS plenary session deepened these latter concerns over the last four years. White House confirmation that President Joe Biden will attend the 2021 EAS would be most welcome. The almost complete absence of Russia’s and China’s top leaders[14] from the EAS has not triggered such criticism and concern, suggesting either the paramount importance of the US to the EAS or what increasingly looks like a double standard on the part of ASEAN with regard to these major powers.

Under President Vladimir Putin and President Xi Jinping, political power in Russia and China has become increasingly personalised, and each leader looks likely to remain in their current positions for the foreseeable future. Hence, the Russian prime minister/foreign minister and Chinese premier are increasingly less suitable representatives at the “leaders-level” EAS. Putin and Xi’s continued absence, combined with their regular participation in APEC Economic Leaders Meetings and G-20 Summits, threatens to erode ASEAN centrality claims and the EAS’ peak position in the regional strategic architecture.

The changing nature of relations between ASEAN dialogue partners in the EAS pose two more concerns that challenge both faces of the EAS’ identity. Relations between the US, Russia and China are increasingly defined by contestation and confrontation, not cooperation, as are China’s relations with Japan, India, and Australia. At the same time, relations between Russia and China have become more defined by cooperation in their overlapping rivalries with the US specifically, and with “the West” more generally.[15]

This greater Russia-China cooperation and China’s more confrontational relations with the US, Japan, India and Australia are already undermining the ASEAN-led architecture with the EAS at the peak along with its constituent units. In 2015, the ASEAN Defence Ministers’ Plus, a ministerial-level structure in the ASEAN-led regional architecture with the same membership as the EAS, failed to release its planned joint statement due to US-China disagreements over the mention of South China Sea disputes.[16] In 2020, Russia and China’s opposition to the term “Indo-Pacific” – including even reference to the ASEAN Outlook on the Indo-Pacific (AOIP) – was a key stumbling block in the drafting of the Hanoi Declaration on the 15th Anniversary of the EAS.

Putin and Xi’s respective hold on political power in Russia and China, and deepening public concern in the US, Japan, India and Australia with regard to China’s international behaviour make this unpeaceful strategic environment likely to persist. ASEAN’s commitment to open inclusive regionalism and “neutrality” in the deepening and more active rivalries among ASEAN dialogue partners in the EAS risk the EAS leaders-level meetings becoming more adversarial, and therefore less interactive and cooperative. This would further undermine the EAS’ ability to provide concrete outcomes for shared concerns.

These same growing major power rivalries make smaller, more exclusive leaders-level and ministerial-level arrangements among like-minded or like-threatened states more attractive. The revival of the Quad at the senior officials’ level in 2017, its elevation to a meeting of foreign ministers in 2019, and its further elevation to the same leaders’ summit level as the EAS in 2021 provide the best but not only example of the less inclusive but more responsive diplomatic architecture that is being built and retrofitted outside of the ASEAN-led multilateral one.

Other structures in this alternative architecture include the elevation and broadening of the Five Eyes intelligence sharing network between the US, Great Britain, Canada, Australia and New Zealand,[17] and discussions on expanding the Group of Seven (G7) leaders-level forum to include India, Australia and South Korea. The threat posed by Russia and China’s more aggressive international behaviour clearly provides many of the building blocks for this emerging architecture that does not include any ASEAN member state. The growing strategic partnership between Russia and China illuminated by the growing interaction between Putin and Xi is another, and the Shanghai Cooperation Organization that includes Cambodia as a dialogue partner could become one as well.[18] Russia and China’s growing rivalries with the US specifically and “the West” more generally provide many of the building blocks for these latter two.

LEADERS-LED TO WHERE?

As the architect and the driver of the EAS, ASEAN needs to face up to the erosion challenges facing this Leaders-led forum position “at the apex of the ASEAN-centred regional architecture”.[19] Simply repeating this tired mantra barely helps the EAS respond to the sharpening and broadening geopolitical rivalries among its dialogue partner members and address human security challenges such as the COVID-19 pandemic. To maintain the EAS’ relevance going forward, the EAS’ capacity to deliver results through concrete actions needs strengthening. It needs to go beyond being simply “Leaders-led” in order to answer the central question that has dogged it since inception: “Leaders-led to where?”.

For this, ASEAN’s comprehensive approach to security is instructive. The distinction between political-security and economic-development issues has become less clear-cut as all issues from health security to supply chain resilience, infrastructure development and energy security now affect both political power at home and geopolitical influence abroad. This provides a fitting vista for ASEAN – as the agenda setter – to present a more focused and action-oriented EAS agenda that corresponds to prevailing regional and global challenges. Instead of drafting multiple statements with only aspirational objectives and general prescriptions, ASEAN’s diplomatic capital should be better invested in mobilising collective action that delivers regional public goods. One recent example of this capability was the launch of the Regional Comprehensive Economic Partnership (RCEP) negotiations at the 7th EAS in November 2012 (although the RCEP is not an EAS process per se, given the absence of the US and Russia, and India at its later stage).

ASEAN should send a strong message to its dialogue partner members – especially the US, China and Russia – that they must live up to their statements of supporting ASEAN’s centrality with actions, not simply words. These actions include not only their participation in the annual EAS at the highest level but also their active support for ASEAN initiatives.

The EAS needs to function as an arena where the major powers compete when they must and collaborate when they should and could, especially on shared human security concerns. As such, the next critical test is for ASEAN to leverage the EAS – which comprises all the major powers that have influence on Myanmar, namely China, Russia, India and Japan – to persuade the Tatmadaw (Myanmar’s armed forces) to stop violence and resolve the country’s political crisis through dialogue and peaceful means.

More ambitiously, ASEAN should engage with the emerging alternative architecture, rather than consider the ASEAN-led architecture in exclusive and solely defensive terms. In 2005, the ASEAN Secretariat signed a memorandum of understanding with the Secretariat of the Shanghai Cooperation Organisation despite this body’s clearly anti-US potential. ASEAN could likewise engage with the Quad Vaccine Partnership and its strategic perception of Southeast Asia. If ASEAN fails to do so collectively, individual Southeast Asian states should not miss this opportunity to increase their access to badly needed Covid-19 vaccines. This splintering would not bode well for ASEAN centrality and the EAS.

ISEAS Perspective 2021/61, 3 May 2021


ENDNOTES

[1] Quad Leaders’ Joint Statement: ‘The Spirit of the Quad’, 13 March 2021, https://www.pm.gov.au/media/quad-leaders-joint-statement-spirit-quad

[2] Thitinan Pongsudhirak, “Asean’s Myanmar crisis out of control”, Bangkok Post, 26 March 2021, https://www.bangkokpost.com/opinion/opinion/2089727/aseans-myanmar-crisis-out-of-control

[3] Jusuf Wanandi, “ASEAN-China cooperation in time of COVID-19 pandemic”, Jakarta Post, 16 March 2020, https://www.thejakartapost.com/academia/2020/03/16/asean-china-cooperation-in-time-of-covid-19-pandemic.html

[4] Quad Summit fact Sheet, 12 March 2021, https://www.pm.gov.au/sites/default/files/files/quad-summit-fact%20Sheet.pdf

[5] Final Report of the East Asia Study Group at the ASEAN+3 Summit, 4 November 2002, https://www.mofa.go.jp/region/asia-paci/asean/pmv0211/report.pdf

[6] Rodolfo C. Severion, Southeast Asia in Search of an ASEAN Community: Insights from the former ASEAN Secretary-General, 2006 Institute of Southeast Asian Studies, Singapore, pp. 269-273

[7] Kuala Lumpur Declaration on the East Asia Summit, 14 December 2005, https://www.mofa.go.jp/region/asia-paci/eas/joint0512.html

[8] Ralf Emmers, Joseph Chinyong Liow and See Seng Tan, The East Asia Summit and the Regional Security Architecture, Maryland Series in Contemporary Asian Studies, Number 3 – 2010 (202), https://digitalcommons.law.umaryland.edu/mscas/vol2010/iss3/1

[9] East Asia Summit Leaders’ Statement on Strengthening Collective Capacity in Epidemics Prevention and Response, 14 November 2020, https://asean.org/storage/2020/11/32-EAS-Leaders-Statement-on-Strengthening-Collective-Capacity-in-Epidemics-Prevention-and-Response-FINAL.pdf

[10] Koya Jibiki and Tsukasa Hadano, “China pushes ‘vaccine diplomacy’ in Southeast Asia”, Nikkei Asia Review, 16 January 2021, https://asia.nikkei.com/Spotlight/Coronavirus/China-pushes-vaccine-diplomacy-in-Southeast-Asia

[11] US Embassy in Malaysia, Fact Sheet: The Quad Vaccine Partnership, 12 March 2021, https://my.usembassy.gov/fact-sheet-the-quad-vaccine-partnership

[12] This EAS Unit comprises one Assistant Director (who covers also the ASEAN Plus Three and ASEAN’s dialogue relations with the Plus Three countries), two Senior Officers and one Technical Officer, all of whom must be Southeast Asian nationals.

[13] Kuala Lumpur Declaration on the 10th Anniversary of the East Asia Summit, 22 November 2015, http://eastasiasummit.asean.org/wp-content/uploads/2018/02/Kuala-Lumpur-Declaration-on-The-Tenth-Anniversary-of-The-East-Asia-Summit.pdf

[14] The division of labour of Chinese leadership in foreign relations portfolio has the President attend the APEC Economic Leaders’ Meeting, and the Premier attend ASEAN-related summits. Except in 2018, Russia has never been represented at the EAS at the highest presidential level.

[15] Andrea Kendall-Taylor and David Shullman, “Navigating the deepening Russia-China partnership” CNAS, January 2021, https://s3.us-east-1.amazonaws.com/files.cnas.org/documents/CNAS-Report-Russia-China-Alignment-final-v2.pdf; “China-Russia cooperation has no upper limits”, Global Times , 22 March 2021, https://www.globaltimes.cn/page/202103/1219115.shtml  

[16]  “No joint statement as US, China clash over wording on South China Sea”, Today, 5 November 2015, https://www.todayonline.com/world/no-signing-joint-declaration-asean-defense-forum 

[17] Ben Scott, “Five Eyes: Blurring the lines between intelligence and policy”, 27 July 2020, Lowy Interpreter, https://www.lowyinstitute.org/the-interpreter/five-eyes-blurring-lines-between-intelligence-and-policy

[18] Alexander Lukin, “Shanghai Cooperation Organization: looking for a new role, Valdai Papers, 9 June 2015, https://valdaiclub.com/a/valdai-papers/valdai_paper_special_issue_shanghai_cooperation_organization_looking_for_a_new_role

[19] Ha Noi Declaration on the 15th Anniversary of the East Asia Summit, 15 November 2020, https://asean.org/storage/2020/11/29-Ha-Noi-Declaration-on-the-15th-Anniversary-of-the-EAS-FINAL.pdf

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