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Articles & Commentaries

“ASEAN Post-2025: Reimagining the ASEAN Economic Community” by Julia Tijaja, Simon Tay and Sanchita Basu Das

 

EXECUTIVE SUMMARY

• ASEAN Economic Community (AEC) building is a long journey. For continued relevance and impact, the AEC must remain dynamic while taking into consideration evolving contexts and emerging opportunities and challenges.

• Notable progress has been made under the two AEC Blueprints (2015 and 2025), particularly in laying down the frameworks for regional economic integration and community building. Nonetheless, gaps remain in implementation, calling for a more streamlined but result-oriented agenda and stronger institutional coordination.

• Today, the AEC is faced with a markedly different context and unprecedented challenges resulting from a poly-crisis, involving geo-economic fragmentation, supply chain restructuring, and climactic changes. Without adjustment, ASEAN’s pillar and sector-centric approach can be expected to fall short in effectively responding to these challenges.

• As AEC 2025 enters its final quarter, ASEAN needs to recalibrate its priorities. It also increasingly needs to take a whole-of-community approach to integration, as issues and their solutions are spread across multiple sectors. Furthermore, as it develops the AEC Post-2025 agenda, it needs to strike a balance between ambition and pragmatism, and to support substance with institutions and processes.

Trends in Southeast Asia 2024/7, March 2024

 

2024/21 “A Deep Dive into Malaysia’s People’s Justice Party (PKR)” by James Chai

 

Facebook Page of Parti Keadilan Rakyat (PKR), Malaysia. Accessed 18 March 2024.

EXECUTIVE SUMMARY

  • Born from a protest movement against Anwar Ibrahim’s unceremonious sacking by Mahathir Mohamad in 1998, the People’s Justice Party (PKR) was officially established from a merger between two parties. Founding members came from different segments of society, tied by a common bond to its twice-jailed leader, Anwar.
  • PKR has emerged as a definite force in mainstream Malaysian politics, winning an average of 35 seats (16% of total seats) and 2 million votes (18% of total vote share) over the past 15 years. The party has clearly grown stronger from its wobbly start in the 1999 and 2004 general elections.
  • PKR is the second largest party in Malaysia, behind only UMNO, with 1.16 million members. Its membership growth is attributable to a low barrier to entry, party election incentives, and anticipated federal power patronage.
  • Selangor is PKR’s strongest base, with the highest total membership (30 per cent of total) and highest cumulative parliamentary seats won. This is followed by the East Malaysian states, though with low electoral returns, and Perak, where it has established a strong grassroots presence and won a sizable share of parliamentary seats.
  • The centre of power lies in the hands of the president and the central leadership council, although the national congress is the highest authority. The state leadership is less powerful compared to the divisions in nomination and grassroots matters, partly due to the members’ loyalty to the division leaders elected through direct elections.
  • PKR holds the largest party elections in Malaysia via a one-person-one-vote (OPOV) direct election system. The logistical hassle creates long and chaotic party elections that typically ends in highly factionalised contests. The party has introduced online voting and a hybrid voting system as a corrective measure in recent years.
  • Most PKR MPs win mixed and Malay-majority seats in urban and semi-urban enclaves. This reflects PKR’s commitment to multiracialism and the party’s limited ability to win Malay votes. PKR has benefited from the split in Malay votes among several parties, and this puts its electoral successes at risk if Malay votes converge to a dominant Malay party again in future. 

*James Chai is Visiting Fellow at ISEAS – Yusof Ishak Institute and a columnist at MalaysiaKini and Sin Chew Daily.

ISEAS Perspective 2024/21, 20 March 2024

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INTRODUCTION

The earliest members of the People’s Justice Party (PKR) disagree on when the foundational political movement, Reformasi, started. Some say it was 2 September 1998 when the then deputy prime minister, Anwar Ibrahim, was unceremoniously sacked by then prime minister Mahathir Mohamad.[1] Some say it was 20 September 1998 when the largest protest was staged at Masjid Negara.[2] Some say it was 17 May 2004 when the Registrar of Societies approved the merger between Parti Keadilan Nasional and Parti Rakyat Malaysia.[3] In all versions, members agree that the party was tied by a common bond to its larger-than-life figurehead, who had gone to jail twice on controversial charges: Anwar Ibrahim.

The party consists of an ‘unusual collection of leaders’[4] from UMNO, PRM, student bodies, street activists, Islamic movements, and NGOs.

Despite being one of the youngest mainstream parties in the country (see Appendix 1), PKR has managed to reverse its electoral fortunes in the first decade to emerge as a key competitor in Malaysian politics.

Notwithstanding the party’s storied past and current prominence in Malaysia’s political landscape, research on PKR remains scant compared to that done on UMNO, PAS, and DAP. This limits public understanding of the party and how it works. This Perspective will first look at how PKR operates, particularly its entry criteria, membership, organisation structure, and finance. The second part examines the key differentiators of PKR, which are its unique direct election system and diverse membership. The paper concludes with reflections on the findings.

PKR’s political journey: A brief glimpse

Table 1: Seats won and vote share of PKR since its first election in 1999

Election CycleYearTotal Parliamentary SeatsSeats Contested by PKRSeats Won by PKR (per cent of total seats)Win RateTotal Votes (vote share)
GE101999193785 (2.6 per cent)6.41 per cent773,679 (11.7 per cent)
GE112004219801 (0.5 per cent)1.25 per cent617,518 (8.9 per cent)
GE1220082228431 (14.0 per cent)36.90 per cent1,509,080 (18.6 per cent)
GE1320132229930 (13.5 per cent)30.30 per cent2,254,211 (20.4 per cent)
GE1420182227148 (21.6 per cent)67.61 per cent2,046,484 (17.1 per cent)
GE15202222210031 (14.0 per cent)31.00 per cent2,442,038 (15.7 per cent)

NB: Win rate as seats won divided by seats contested; only considers parliamentary seats.

Chart 1: Total parliamentary seats won and total votes received by PKR (1999 to 2022)

Even though Reformasi created one of the largest ever protest movements in the country, it was surprisingly unable to convert the anti-government support into seats, winning only 5 seats in parliament in 1999 (2.6 per cent), and plummeting to its lowest point with only 1 seat in 2004 (Table 1 and Chart 1).[5] This was due to a limited swing from the non-Malay voters who preferred status quo stability, and the anti-corruption appeal of BN’s Abdullah Badawi.

Since 2008, however, the party has gained stable prominence by achieving an average 35 seats (16 per cent of total seats) and 2 million votes (18 per cent of total vote share). In 2018, PKR even became the largest party in parliament, carried through its victories in marginal seats in West Malaysia; it made further history by being the first multiracial party to do so. The succeeding two years were chaotic for the party, however, when it experienced the largest high-profile defection, led by the former deputy president Azmin Ali. This stemmed apparently from years of intra-party instability. After a large-scale purge in 2022, party president Anwar Ibrahim finally achieved his aspiration of becoming prime minister, Malaysia’s tenth.

Additionally, the party governed the states of Selangor and Negeri Sembilan, since 2008 and 2018 respectively, with a substantial majority.

MEMBERSHIP, STRUCTURE AND FINANCE

Entry Criteria

To be a PKR member, the applicant has to register at the party headquarters, located in Kelana Jaya, Selangor, either physically or online, and the selected division must ensure that this registration is made with the party secretary-general as the main person in charge.[6]

Table 2: Comparison of entry criteria between select mainstream parties

Entry criteriaPKRUMNOPASDAP
Types of membershipsOrdinary and lifetime members[7]Ordinary, allied (bergabung), associate (bersekutu), and lifetime membersOrdinary, associate, and lifetime membersOrdinary and lifetime members
Minimum age18 years old[8]16 years old[9]13-15 years old[10]17 years old
Fees (ordinary members, yearly)RM2.00[11]RM2.00RM10.00[12]RM10.00[13]
Fees (lifetime members, one-off)RM300.00[14]RM100.00RM102.00RM200.00

As seen in Table 2, the entry criteria of PKR are not substantially different from those of other mainstream parties. Unlike UMNO and PAS, PKR does not have membership types outside the standard ordinary members (RM2.00 yearly fee) and lifetime members (RM300.00 one-off fee). Surprisingly, PAS has the highest yearly fees among the mainstream political parties because it also exacts a mandatory purchase of a membership card and a registration fee which other parties do not do.

Importantly, the estimated compliance rate for payment of yearly fees seems low for PKR, either due to inefficient collection or members’ refusal.[15] Though PKR’s 18-year-old minimum age seemed progressive at the inception, the Undi-18 wave compelled parties such as UMNO to loosen their minimum age to 16; thus, PKR’s current minimum age is the most restrictive.

Interestingly, Article 4 of PKR’s constitution attached the measurements and colours for the flag and symbol of the party. The ‘eye’ on the flag is the ‘light that sees sacrifice for justice’, and the red represents courage and commitment to seek the truth.

PKR’s constitution is also differentiated for its details on policy commitments. Compared to the Malay parties, PAS and UMNO, which broadly highlight religion, Malay language, and national unity,[16] PKR’s purpose reads like a manifesto.

Table 3: Select articles of PKR party constitution relating to policy positions

Constitutional articlesDescription
5.8Distribution of powers with East Malaysia, in accordance with Malaysia Agreement 1963
5.10Special position of Malay and East Malaysian bumiputeras who are poor and abandoned, and fair protection for non-Malays and non-bumiputeras who are poor and abandoned
5.11Fair and dynamic economy, growth and fair distribution, free from oppression and wastage, overcome poverty and concentration of wealth
5.12High-quality infrastructure (education, health, housing, transport) with affordable rates
5.13Workers’ rights protected
5.14Women’s position empowered as the backbone of society, respect for women, committed to achieving 30 per cent participation in leadership and decision-making[17]
5.15Meaningful expansion of rights for youths
5.16Orang Asli (indigenous community)’s quality of life and respect for tradition, with development plans that protect their land rights
5.17Environmental protection
5.18New international system based on fairness and democracy, foreign policy that is free and ethical, facing globalisation by creating a knowledgeable society that can avoid national threats.

As observed in Table 3, PKR’s constitution includes a wide range of policy areas to represent its values, including the rights and protection of the indigenous community, workers, women, and East Malaysia. The only other party with a policy-oriented purpose in its constitution is DAP. However, even then, PKR’s constitution is more specific, even committing to 30 per cent female participation in leadership and decision-making, and recognising the Malaysia Agreement 1963.

Membership

As of 2022, PKR has approximately 1.16 million members, making it the second largest political party in Malaysia, only behind UMNO which has approximately 3.39 million (Chart 2). Having a membership number close to that of PAS, and their ranking would be interchanging, PKR will likely remain among the 3 largest parties for the foreseeable future.

Chart 2: Total membership of each mainstream political party

NB: Membership numbers based on latest available, including UMNO (2022)[18], PKR (2022),[19] PAS (2022),[20] Bersatu (2021),[21] Amanah (2019),[22] and DAP (2022)[23].

Chart 3: Total membership of PKR from 2003 to 2022 (select years only depending on available data)

Select available data since 2003 (Chart 3) show that before 2018, PKR received steady new members, averaging 26,000 yearly applications. In its early years, PKR’s new members were driven by youthful idealism; the party represented a strong anti-regime sentiment. From 2010 onwards, it was the low barrier to entry that played an important role; after all, the multiracial party accepts members of all backgrounds. The direct election system also meant that, compared to other parties, members could vote and run for party positions. Ambitious candidates would then recruit more new members before every election to strengthen their own positions.

Membership grew rapidly to ~89,000 per year from 2018 onwards,[24] the transformative year when PKR was part of the Pakatan Harapan government. Membership rose again in 2022 when Anwar became prime minister and it is predicted to rise again, with PKR now being the leading party in government. There may be higher expectation of patronage among new members after PKR won big in 2018 and 2022.[25] PKR has not adopted the model of past parties of relying on access to federal government resources for grassroots programmes.[26]

Understandably, the rate of growth was lower between 2020 to 2021 in the wake of the large-scale defection event called The Sheraton Move, led by former PKR deputy president, Azmin Ali. Though there were reports of pockets of hundreds of members leaving the party with Azmin, the figure is likely much lower than was headlined. For instance, in Johor, the figure of members sacked was estimated at less than 200,[27] and Kelantan PKR stated that only 300-500 left instead of the reported 10,000.[28]

Party leaders argue that the membership growth and low defection resulted from a ‘brotherhood’ and ‘idealistic’ bond in PKR,[29]and the pressure to win in the party’s direct election system.[30]

Table 4: Total membership, sub-divisions, and cumulative parliamentary seat won (since 2004) in PKR by states

No.StateTotal members (2021)Total members (2022)Sub-divisions (ranting)Cumulative parliamentary seats won since 2004
1Selangor282,179346,99152035
2Sabah173,191184,2511445
3Sarawak84,76087,334706
4Perak78,19485,23951013
5Kedah64,32169,1316316
6Penang60,36067,0715715
7Johor55,98865,96217715
8Kelantan55,97759,744103
9Negeri Sembilan47,79154,3271244
10Kuala Lumpur40,51146,0267018
11Pahang32,81036,123656
12Melaka29,04631,3501374
13Terengganu18,60920,464560
14Perlis9,17610,074151

Chart 4: Total membership, sub-divisions, and cumulative parliamentary seat won (since 2004) in PKR by states

The geographical concentration of PKR members and its successes is closely linked to the leaders and how they mobilise the ground.

Selangor was the birthplace of PKR’s activist and intellectual groups, including co-founder Syed Husin Ali, and was expectedly the first state that PKR governed. The state also has the largest PKR membership (Table 4 and Chart 4) by a huge margin, and it has won the most parliamentary seats for PKR since inception.

The East Malaysian states are ranked second and third largest despite PKR’s varied success there. In Sarawak’s case, this is due to the tireless efforts of environmental and human rights lawyers setting up base to fight the regime of former chief minister Taib Mahmud.

Although Perak only has a quarter of Selangor’s membership, it has almost as many sub-divisions, indicating a larger-than-expected grassroots strength, and sizable cumulative seats won. Leaders like Dr Lee Boon Chye were responsible over decades for setting up strong divisions like Gopeng.[31]

Kedah and Kuala Lumpur have been states that overperformed for PKR, i.e. delivering more seats with its comparatively smaller size. Kedah delivered the third-most seats cumulatively, but this plummeted to only one in the recent elections and the party was overtaken by its opponents. Terengganu is the only state where PKR has yet to win a parliamentary seat; it did win a state seat in 2013.

Party Structure

The PKR constitution specifies that the highest authority is the national congress (Kongres Nasional, KN), while the executive function is carried out by the central leadership council (Majlis Pimpinan Pusat, MPP)(Chart 5).[32] This hierarchy is followed by the separate wings (youth and women), state leadership council (Majlis Pimpinan Negeri, MPN),[33] and the basic unit of division (cabang), which requires a minimum 100 people to be set up.[34] [35] Other than that, the MPP has authority to create by-invitation political bureaus (biro politik) covering administrative and policy areas.[36]

This makes PKR’s structure quite similar to UMNO’s. In fact, before 2008, PKR’s Malay terminology of its bodies was similar to UMNO’s, calling divisions bahagian, its state leadership council Badan Perhubungan Negeri, and its central leadership council Majlis Tertinggi, and members anggota instead of ahli, as is the case today. However, these terminologies were changed to be closer to that of Indonesia, in order to be more democratic and to be devoid of phrases such as ‘tertinggi’ (highest), together with the ‘one person, one vote’ direct election system introduced at the same time.[37]

Chart 5: Organisation structure of PKR

(See Appendix 2 for PKR’s president and deputy presidents since 1999)

In practice, the KN is merely symbolic in passing resolutions on major directions that have been agreed to by the MPP, prior to the KN.[38] [39] Examples of these major directions include the merger with PRM,[40] the campaign to Free Anwar from prison, and the coalition with other parties to form Pakatan Rakyat and Pakatan Harapan. This is not unusual as the highest congress typically serves as a place to obtain legitimacy for a decision and boost members’ morale,[41] rather than functioning as a debating and negotiating forum.[42]

In the MPP, the most powerful decisionmaker is the president, followed by the deputy president, vice-presidents, heads of wings, and the 20 MPPs.[43] PKR is the first party to specify a three-term limit for its president; the only other party with a similar restriction is DAP.[44] Interestingly, PKR’s constitution does not describe the president’s powers, unlike other parties that describes the president or equivalent as ‘main leader’ or ‘head’.[45] This may mean that future PKR presidents may rely on precedents to determine the limits of their power.

Additionally, the MPN, like the sub-divisions (ranting), are not registered with the Registrar of Societies, thus they do not carry as much power as the division.[46] [47] MPN’s role is mainly to organise and coordinate state-level programmes. However, the separation between national and state elections means that the MPN has increasing negotiation power in deciding election and state minister candidates, as the president and election director will largely account for the MPN leaders’ views.[48]

A division’s strength comes down to how likely it can negotiate for a candidate to be nominated in an election.[49] The first criterion is whether the seat is considered a winnable seat,[50] and PKR’s strongholds have traditionally been in mixed urban or semi-urban seats, with Selangor as its core.

Second, divisions with large membership tend to have more power, as they hold the leverage of mobilisation.[51] Third is whether the leadership considers the seat strategic for training good outsider candidates, like Lembah Pantai,[52] Wangsa Maju and Bandar Tun Razak.[53] For division-level activities, its division leaders have complete authority; whereas for election nomination, their inputs are considered but not guaranteed anything more than that.

Over the years, the influence of divisions has waned. This is partly due to the introduction of an open system where members can submit nominations online, potentially bypassing a division’s preference. Anwar’s dual position as prime minister and PKR president also means that his increased influence creates greater centralisation in decision-making, giving lesser say to divisions.[54]

Finance

Although PKR is the second largest party in Malaysia, its main revenue source is donations from its elected representatives—a mandatory 20 per cent cut from their salaries[55]—accounting for 57.3 per cent of the total revenue of 2019.[56] The other sources of revenue are public donations (24.3 per cent), fundraising dinners (17.3 per cent), and membership fees (1.1 per cent).[57] The total revenue per year appears lower than for other parties; the party does not have assets or revenue-generating business activities like UMNO or MCA.

In the past, the only significant revenue-generating activity was the sale of the party newspaper, Suara Keadilan, which at its height sold 180,000 copies per week. Recently, PKR started a cooperative to generate revenue, called Koperasi KEADILAN Berhad (KIRA).[58] The party’s cost structure is lean, with minimal party headquarters upkeep, only requiring additional firepower during elections.[59] [60]

THE LARGEST PARTY ELECTION: ONE PERSON, ONE VOTE

At its inception, PKR had adopted the delegate system to elect its leaders like other parties. Every year, around 2,000 delegates voted for the highest leadership, including the president, at the KN (Table 5).

Table 5: PKR’s party election system since inception

PeriodPre-20102010-20212022-
Party election systemDelegate systemOne-person, one-vote systemHybrid system

This changed in 2009, when the KN passed a resolution to make PKR the first mainstream party to implement the one-person-one-vote (OPOV) direct election system. This is a comprehensive system to elect division leaders to the MPP, including the president, deputy president, and vice-presidents.[61] The premise for OPOV at that time was to stamp out ‘unhealthy practices’ of money politics[62] and ‘phantom divisions’ that happened in other parties.[63]

The OPOV system created the most expansive voting system among all parties, giving up to 122 votes to eligible members, including voting for the president (see Table 6).

Table 6: Eligibility to vote and maximum eligible votes before and after the amendment to introduce a hybrid election system (mix of direct election and delegate system)

LevelsType of positionsEligible to vote? (2010-2021)Eligible to vote? (from 2022)Total eligible votes (2010-2021)Total eligible votes (from 2022)
MPPTop Six (President, Deputy President, 4 Vice-Presidents)YesYes66
20 exco-level MPPsYesNo200
Youth (national) Top 5 (Chief, Deputy, 3 vice)YesYes55
Youth (national) 20 excosYesNo200
Women (national) Top 5 (Chief, Deputy, 3 vice)YesYes55
Women (national) 20 excosYesNo200
Division (cabang)Top Three (Head, Deputy, Vice)YesYes33
15 division-level excosYesYes1515
Youth (division) top 3 (Chief, Deputy, Vice)YesYes33
Youth (division) 15 excosYesYes1515
Women (division) top 3 (Chief, Deputy, Vice)YesYes33
Women (division) 7 excosYesYes77
Maximum eligible votes12262

NB: Voters are only eligible to vote according to their eligibility, i.e. a 20-something member could vote for the MPP and division for the highest excos and the youth leaders, but not vote for the women’s wing leaders. That means a young female member would have the highest maximum eligible votes.

When run efficiently and credibly, the OPOV system is a source of strength. The selection is more competitive—the VP contest is always crowded[64]—and PKR leaders’ strength is assessed in a ‘survival of the fittest’ contest,[65]creating winners who are likely to be in touch with the national electorate and could mobilise the masses for a common goal.[66] Direct election also creates a sense of ownership, making members more supportive of the party over time.

However, the logistics and labour overload lead to lengthy campaign and election periods, which may give rise to factionalism and intense rivalry.

Since the presidency, helmed by Anwar Ibrahim (or Wan Azizah in place of him when Anwar was in jail or disqualified), is never contested, the focus—and the factional battles—has always been on the deputy presidency, seen as the heir apparent to Anwar. Teams are formed around the deputy president candidate, and the faction that receives Anwar’s blessing, however indirectly, is seen to have the legitimacy to win.

Table 7: Total days taken to complete the party election process

Year of party electionTotal days taken
201041 days
2014135 days
201851 days
202298 days
Average81.3 days (or 3 months)

While all parties take at most 2-3 days to complete their leadership selections, PKR takes an average 81.3 days (or 3 months) (Table 7). In 2014, the vicious three-cornered rivalry between Azmin Ali, Saifuddin Nasution, and Khalid Ibrahim took 135 days (~4.5 months) to complete.

Though many party leaders concur that it should be shorter, the length is due to the logistical nightmare, where the party has to organise the way a national election commission would, with a formal body, procedures, rules, coordinators, counting and polling agents, and even police and auditors.[67] As PKR has presence in all states, with 222 divisions, it also needs to coordinate the voting by states so that the process is managed without instances of manipulation or fraud.[68]

Box 1: Sample briefing materials of PKR party election

Briefing for PKR Party Election (Sample, 2022)  
. Administration of voting
. Documents and equipment for voting
. Methods of voting
. Date of voting
. Voting manual
. Voting day physical plan
. Voting rules
. Voting procedure
. Campaign code of ethics  

Efforts have been made in recent years to ease this burden. First, PKR adopted a hybrid selection system for the first time in 2022,[69] where the executive committees at the national and division levels are chosen by delegates (see Table 6 above). This halves the maximum votes available to the members, which had proven to be too many for members in the first place (‘over-democracy’).[70] Two, introducing online voting (via the ‘ADIL’ application) that will minimise logistics and potential cheating. In 2022, more than half the eligible members voted online, and this method may prove vital in handling the volume in future elections.[71]

These recent innovations to the party election system may increase the turnout rate, which has hovered around 15-20 per cent since 2010.[72]At the minimum, they have helped PKR reduce the campaign and election period to merely 2 weeks, massively scaling down the effort required.

PKR leaders have suggested external assistance, including from the national election commission, to ease the burden of logistics, especially as most involved in the party elections are volunteers with varying experience and organising skills.[73]However, PKR needs to overcome the low turnout rate and persistent factionalism in party elections before it can derive the full benefits of party democracy.

ELECTORAL PERFORMANCE: DIVERSITY AS THE WINNING FORMULA

To date, PKR remains the only party to have won at least a parliamentary or state seat in every Malaysian state.[74] It is also the only party to have a division in every parliamentary seat in the country[75]—a feat not even the oldest party, UMNO, has achieved. This implies that PKR pursues diversity not in a ‘tokenistic’ sense, but as a meaningful factor.[76]

To an extent, this is by design. Not only was diversity an explicit aim of the party at its formation,[77] [78] it is also included in the constitution. Article 21.7 of the PKR constitution gives the president appointment powers of key positions, including the vice-presidents, secretary-general, treasurer, information chief and others. Among the vice-presidents, the constitution requires at least one leader to be from East Malaysia as an in-built diversity requirement. It is also common for the leadership to appoint any ethnic group underrepresented in the line-up.[79] Unlike Gerakan and DAP that started out as a more balanced multiracial party that reflected the national composition but eventually changed, PKR continued with its multiracial makeup at every level of its leadership, down to the divisions and political bureaus.[80]

PKR’s stronghold lies in mixed and Malay-majority seats in urban and semi-urban areas (Table 8). The ethnic background of its MPs largely mirrors the population (with the exception of East Malaysia) (Table 9), giving it flexibility to contest on a diverse spectrum.

Table 8: PKR stronghold demographics

PKR stronghold demographics 
Total stronghold seats40
Malay majority67.5 per cent
Mixed or non-Malay majority32.5 per cent
Urban62.5 per cent
Semi urban37.5 per cent
Rural0 per cent
Malay population mean (per cent)54.7 per cent
Chinese population mean (per cent)30.3 per cent
Indian population mean (per cent)11.0 per cent

NB: Stronghold as seats won at least twice by PKR

Table 9: Ethic profile between PKR elected MPs and Malaysia’s national population

Ethnic groupPKR MPs’ ethnic profile (2022)Malaysia’s national ethnic profile (2022)[81]
Malay58 per cent53.5 per cent
Chinese25 per cent21.0 per cent
Indian13 per cent6.1 per cent
Bumiputera Sabah and Sarawak3 per cent11.3 per cent

Nomination data in 2013 reveal that PKR was uniquely positioned to face the Malay, Indian, and Chinese parties of Barisan Nasional, showing that it was ‘walking the walk’ in its multiracial pursuit, extending to even East Malaysia.[82]

However, even among the Malay-majority seats that PKR contests in, the Malay population is barely over half, indicating that PKR has had limited success in courting Malay votes, and often relied heavily on strong non-Malay support to win. Furthermore, its strength in East Malaysia, especially Sarawak, has been eroded drastically after the Sheraton Move, as many key indigenous figures such as Baru Bian and See Chee How had gone on to form separate parties to fight for local causes. PKR’s partnership with the dominant GPS coalition with the present unity government will further dilute PKR’s strength in Sarawak.

Anwar’s approach has always been to merge and accommodate different beliefs under one roof. While party leaders are confident that PKR is unlikely to abandon its multiracial core to please Malay voters,[83] the recent erosion of influence at the 2023 state elections is cause for concern.[84]

It could be argued that PKR’s previous electoral successes have been largely due to voters’ anger towards corruption—most serious during the 1MDB crisis between 2016-2018—which coincided with the growth of Malay parties and multi-cornered fights that split the Malay votes. PKR has always benefited from fence-sitter swing votes, but that also makes it vulnerable when Malay votes converge to a dominant Malay party. PKR’s potential electoral upside can only be captured if it first defends its core and then manages to win enough Malay votes.[85]

REFLECTIONS

Since its inception, PKR has been a party unafraid of taking big bets on the shape of society in years to come. One of its biggest bets—the OPOV system—has both yielded positive (rapid membership growth) and negative (factionalism) outcomes. The lower barrier to entry and expectation of rewards increased membership rapidly, but they remain under-mobilised, as evident in the low membership fee collection and turnout rates. The long-drawn party election has also exacerbated factionalism, typically centred on the vicious battle for deputy presidency, a position seen as the one that an heir apparent would hold, below the uncontested position of president.

Its second biggest bet was to establish a multiracial party in a meaningful sense. Its leadership, candidates, and representatives consistently reflect a multiracial mix,[86] [87] and this has given PKR an electoral flexibility and edge to compete at mixed and Malay-majority seats. Gaps, however, still exist, especially in its dissipated East Malaysia influence, besides its youth and Chinese membership.

PKR’s mobilisation strength and multiracial depth will ultimately affect its electoral performance, beyond its leadership’s strength in setting the narrative. The challenge for the party is to stay on course long enough for teething problems, however extended, to be resolved so that it becomes a party that succeeds in practising what it preaches.

APPENDIX 1

PartyFounding year
United Malay National Organisation (UMNO)11 May 1946[88]
Pan-Malaysian Islamic Party (PAS)24 November 1951
Democratic Action Party (DAP)11 October 1965
People’s Justice Party (PKR)10 December 1998
National Trust Party (Amanah)16 September 2015
Malay United Indigenous Party (PPBM or Bersatu)8 September 2016

APPENDIX 2

YearPresidentYearDeputy President
1999 – 2018Wan Azizah Wan Ismail1999 – 2001Chandra Muzaffar
2001 – 2007Abdul Rahman Othman
2007 – 2010Syed Husin Ali
2018 – presentAnwar Ibrahim2010 – 2020Mohamed Azmin Ali
2020 – 2022Vacant
2022 – presentRafizi Ramli

ENDNOTES


For endnotes, please refer to the original pdf document.

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Editorial Chairman: Choi Shing Kwok  
Editorial Advisor: Tan Chin Tiong
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha  
Managing Editor: Ooi Kee Beng   Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

2024/20 “Indonesia’s Export-Proceeds Holding Policy: A Preliminary Assessment” by Manggi Habir

 

Containers are being loaded and unloaded at Tanjung Priuk Port in Jakarta, Indonesia, on 12 February 2024. Photo by Darryl Ramadhan/NurPhoto/NurPhoto via AFP.

EXECUTIVE SUMMARY

  • To ensure that sufficient export payments are kept within Indonesia’s banking system for a longer period, the government introduced a Natural Resource Export Proceeds (Devisa Hasil Ekspor or DHE) policy, effective from 1 August 2023.
  • Implementation of this policy is currently limited to natural resource exporters in mining, plantation, forestry and fisheries. This approach is driven by two key objectives. First, it aims to bolster the country’s financial reserves in order to support the Rupiah and improve USD liquidity in the local money markets. Second, it is to steer natural resource exporters towards more downstream value-added activities within their respective supply chains.
  • Preliminary results have been favourable, showing a high level of compliance and sizeable collection of export funds.  But the affected exporters have voiced concern over their cashflow challenges and are calling for more flexible and lenient policy terms. Since exporters already suffer cashflow problems in a favourable commodity price market, there is concern that the policy will not be sustainable during a commodity down cycle.
  • Acceding to the exporters’ appeal for flexible and lenient terms would imply a reduction of the export earnings to be held within designated Indonesian banks. One alternative option is to reduce the amount and tenure of holdings, but extend this policy to all exporters, with follow-up provisions for sufficiently attractive yields and tax arrangements to incentivise the collection of sufficient volume and longer term holding of export funds. This alternative does not address the government’s goal of promoting downstream activities, but this might be better addressed in a separate and more pertinent policy.

* Manggi Habir is Visiting Fellow at ISEAS – Yusof Ishak Institute and Independent Commissioner of PT ADIRA Finance.

ISEAS Perspective 2024/20, 18 March 2024

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INTRODUCTION

Prolonged high global interest rates, driven as they are by the US Federal Reserve’s tight money policy for cooling down inflation, are causing many central banks to follow suit. As investors shift into higher-yielding USDs, central banks are struggling to stabilise their own currencies. Aside from raising their own interest rates, monetary authorities are also sparingly dipping into their reserves to support their currencies. In addition to geopolitical tensions in Ukraine, Gaza and the Taiwan Straits as well as rising political uncertainty due to the numerous elections being held this year, the high global interest rate environment is forcing governments to scale down their 2024 economic outlook.

In Indonesia, the Bank Indonesia (BI) has already raised its benchmark Rupiah interest rate several times from 3.75% in July 2022 to a high 6% in October 2023.[1] A month before the country’s presidential election in February this year, BI decided to maintain this rate.

Graph 1: Bank Indonesia Benchmark Interest Rate 2022-2023

Source: https://www.bi.go.id/en/statistik/indikator/bi-rate.aspx

BI has also struggled to stabilize the Rupiah. The currency began in 2023 at the Rp 15,000 per USD level, then momentarily strengthened to Rp 14,750 in April, before continuously weakening and nearly touching Rp 16,000 in October.[2] That month, the country’s reserves dipped to USD 132 billion from a USD 145 billion peak in March, and USD 135 billion in September. This led BI to move up its Rp benchmark rate by another 25 basis point to its current 6.0 per cent; this helped the currency recover for the remaining months and close the year at Rp 15,400 per USD, while reserves correspondingly rose to USD 146.4 billion.[3]

Graph 2: 2023 IDR/USD and Reserves Trend

Source: https://www.bi.go.id/en/statistik/indikator/indikator-moneter.aspx

On August 1, 2023, in order to help stabilize its reserves the government made effective its “Export Proceeds” (Devisa Hasil Ekspor or DHE) policy. The policy requires natural resource exporters to hold a portion of their export proceeds at a designated bank in Indonesia for 3 months. This policy is still only six months old, so a proper assessment is premature. But the government has recently announced preliminary policy results and impacted exporters have also provided some meaningful feedback. This Perspective briefly reviews the background and details of this policy. It will then assess its effectiveness, highlight exporters feedback and conclude with a look at policy options ahead. 

POLICY BACKGROUND AND DETAILS

An earlier 2019 version of the DHE policy came out just before the Covid pandemic and as a result was not strictly enforced. The current updated version, which is formally known as Government Regulation No. 36 of 2023 on natural resources export proceeds,[4] carries more detailed terms and became effective August 1, 2023.

In line with the post-pandemic 2022 recovery, Indonesia’s export commodity prices rose to an all-time high that year, especially its mineral exports. In 2023, coinciding with the DHE policy, commodity prices have slightly retreated from its peak, but remain above their long-term average prices. It seems that natural resource exporters are still enjoying profit margins sufficient enough for them to bear the compliance cost of this policy.

The DHE policy has roughly two unrelated objectives. One is to collect a portion of exporter proceeds, including those still parked overseas, and place these funds within the local banking system for a longer period, thus helping strengthen the country’s reserves. This would also improve USD liquidity in the local money markets, and keep export proceeds parked at banks overseas to a minimum.

The second objective is to deter interested local and foreign investors who are merely seeking to extract raw natural resource, and to encourage them to expand and invest in downstream activities as well. This ties in with the government’s longer-term downstreaming programme and explains the policy’s fixation with natural resource exporters operating in mining, plantations, forestry and fisheries.

To achieve the above objectives, a few key DHE policy terms have been decided, and are as follows:

  • The policy currently applies only to natural resource exporters in mining, plantation, forestry and fisheries sectors. Those exporters that have downstream exported products are exempted.
  • The value of exports impacted are those above USD 250,000, thus exempting smaller natural resource exporters.
  • The funds held must amount to at least 30% of total export proceeds and must be kept for a minimum 3 months in special accounts with OJK-designated banks in Indonesia, or invested in financial instruments issued by these banks, the state-owned Export-Import Bank and/or Bank Indonesia.
  • Exporters are given some flexibility in using the 30% funds held in banks for imports, capital investments, loan repayments, export duties and other levies.
  • Loan repayments being made through escrow accounts must now use designated banks in Indonesia. Bank escrow accounts are set up by borrowers to collect their revenue proceeds and ensure priority for loan servicing and repayments, before funds can be used for operations. Those repaying their loans through escrow accounts at banks overseas must now open and use escrow accounts with designated banks in Indonesia. This is to ensure repatriation of export proceeds placed overseas.
  • Incentives for impacted exporters in the form of tax facilities on income generated from export proceeds have yet to be announced[5].

A PRELIMINARY ASSESSMENT

In December 2023, the government’s preliminary review noted that preliminary DHE policy results show a significant level of compliance (non-compliance of just 1%) among impacted exporters and the collection of a sizable level of DHE funds held in designated banks.

Table 1: Export Proceeds Collected and Held with Indonesian Banks under the new DHE policy

 Natural Resource ExportsAmount Collected and Held in Designated Banks
August 2023USD 10.5 bnUSD 2.7 bn
September 2023USD 9.0 bnUSD 2.3 bn
October 2023USD 10.2 bnUSD 2.9 bn

Source: https://kumparan.com/kumparanbisnis/evaluasi-kebijakan-devisa-hasil-ekspor-sda-diperpanjang-hingga-februari-2024-21i2yweUjTl

The next government review will be made in early 2024.[6] Based just on the two top natural resource exports, coal and crude palm oil (CPO), which for 2022 totalled USD 74.5 bn,[7] the 30% amount collected and held at designated banks for 3 months could annually reach a sizable USD 22.4 bn. Clearly, the potential volume of export proceeds locked in Indonesia for a longer term will be substantial.

Although BI’s decision to raise its benchmark rate to 6.0% in October last year was perhaps more critical in reversing the Rupiah’s weakening trend from a low Rp 15,911 per USD level to then close the year at a stronger Rp 15,400 per USD level, the export proceeds collected and held during this period should have added to the country’s reserves, thus allowing BI access to sufficient reserves for supporting the Rupiah, whenever needed.

The objective of repatriating export proceeds by requiring exporters to move their loan repayment escrow accounts to banks in Indonesia might be less impactful, though. This is because global and regional banks have already been moving away from lending to natural resource companies that do not meet stringent ESG (Environment, Social and Governance) requirements. For example, coal and CPO plantation financing are increasingly being done by local banks and therefore most loan repayment escrow accounts are already with Indonesian banks.

So far, impacted exporters have mostly complied with the new DHE policy, but they have voiced their concern about cashflow problems stemming from this policy.[8] Setting aside 30% of export revenue for 3 months has become a major challenge for them. The policy has a provision that exporters can still use the 30% bank-held funds for their operations, but to do so, they need to arrange back-to-back loans secured by these funds, which carries an added charge ranging from 50 to 100bp.[9]

Further complicating exporters’ cashflow management has been the government’s royalty and levy charges, which are paid upfront or on shipment before export proceeds are received. Furthermore, the rates of these charges have increased along with the rise in commodity prices. For coal exporters, the royalties paid upfront on coal export shipments are in the 14-28% range.[10] These coal royalties are administered and collected by the Ministry of Energy and Mineral Resources (ESDM), while for CPO exporters, the export levy is fixed and has recently risen to USD 74.0 per tonne.[11] Having to pay upfront export royalties and levies and tie-up 30% of their export revenue for 3 months has been a major problem for exporters. If natural resource exporters are already struggling with DHE cashflow problems in the current favourable commodity price environment, how they would cope in a downward cycle, raises concerns about this policy’s long-term sustainability.

POLICY OPTIONS AHEAD

Impacted exporters are already suggesting more flexible terms under the current DHE policy. One idea is to raise the threshold to above USD 500,000, up from the current USD 250,000. Another is to reduce the portion held from the current 30% of export proceeds and to shorten the current minimum 3-month tenor to either 1 or 2 months, during tight cashflow conditions.[12] The third point regards making the yields on the special accounts or security instruments sufficiently attractive to lure back these funds. Discussions on these are currently still ongoing. The only problem with the above proposals is that they would reduce the amount and tenure of natural resource export proceeds held, thus making the policy less effective.

It might be advisable to promote the government’s downstream policy with a separate more detailed policy; the DHE policy alone may not be sufficient to encourage natural resource players to go downstream. An effective downstreaming programme would require not just the right scarce natural resource, but also the appropriate human capital and institutional set up, which requires time to develop. Only then would this programme have the desired impact of creating jobs and providing growth opportunities.

By limiting the DHE policy’s focus to its reserve-stabilizing objective, the emphasis is more to the collecting and holding of a sizable amount in Indonesia’s banking system for a longer period. One potential option to this is a more lenient DHE policy that is applied to all exporters. Taking into account the impacted exporters’ feedback, and in order to make the policy more sustainable and palatable to all exporters, the portion of export proceeds held needs to be sufficiently low for exporters to bear, including for commodity exporters during a downturn. But conversely it should also be high enough to meet the government’s reserve stabilization needs.

Then, to incentivize exporters to hold more of their export proceeds for a longer period, the interest yields on the special DHE accounts, or the securities offered, should be competitive and set progressively higher the longer the funds are placed. In other words, the longer the tenor, the higher the yields. Since the government wishes to attract exporter funds parked overseas, the yields should at least reflect the country’s risk premium or its interest differential. For instance, the interest differential between the BI benchmark rate and the US Fed Fund rate during the 2019-2022 period was around 3.0-4.0%. But since 2023, the interest differential has narrowed to 1.0-0.5%, which explains the downward pressure on the Rupiah.

The government has yet to come out with their yield scheme on security instruments that would be part of the DHE policy. Setting yields that compare favourably with those provided by international financial centres, and taking into account the country’s sovereign risk premium would more effectively attract not only Indonesian exporter funds but also funds from global portfolio investors.

In the current election year, and before a new government cabinet is formed, adjusting the BI benchmark rate upward to widen the current IDR and USD interest rate differential in line with Indonesia’s sovereign risk premium, would be politically difficult. So far, export trends and commodity prices still remain favourable, and the government’s latest January 2024 reserve position stands at USD 145.3 billion. This is sufficient to cover 6.4 months of imports and the government’s debt servicing payments.[13] It will be interesting to see what incentives the government eventually comes out with and whether these will be attractive enough to exporters without BI having to raise its benchmark rate.

ENDNOTES


For endnotes, please refer to the original pdf document.

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: /support/get-involved-with-iseas/
ISEAS – 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
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha  
Managing Editor: Ooi Kee Beng   Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

2024/19 “Like, Subscribe and Vote: The Role of Political Influencers in the 2022 Philippine Elections and Beyond” by Fatima Gaw and Aries A. Arugay

 

Twitter Page of one political blogger and influencer R J Nieto (Thinking Pinoy) at https://twitter.com/thinkingpinoyph?lang=en. Accessed on 11 March 2023.

EXECUTIVE SUMMARY

  • Social media influencers are emerging political operators in Philippine elections, but unlike high-level strategists and low-level trolls, they occupy a ‘grey area’ in the political economy of influence operations.
  • There are approximately 1,425 influencer accounts across YouTube, TikTok, Facebook, and Twitter identified to be part of influence operations in the 2022 Philippine elections, based on 18 multidimensional indicators.
  • Influencers are hired based on their social capital, historical performance, and political notoriety. Premiums are provided to influencers who are open to switching camps and to those who double down during peak campaign periods.
  • Influencers carry out varied functions in the post-election period, either to defend the policies of the candidates they electorally supported, conduct disinformation campaigns against political adversaries, or clash with previously allied influencers given the clashes between their politician-clients.
  • At present, there is a clear and wide policy regulation gap with regard to dealing with political influencers and the disinformation they generate for political purposes.

* Fatima Gaw is a Media, Technology & Society PhD student at Northwestern University, USA. Aries A. Arugay is Visiting Senior Fellow and Coordinator of the Philippine Studies Programme, ISEAS – Yusof Ishak Institute and Professor of Political Science, University of the Philippines-Diliman.

ISEAS Perspective 2024/19, 13 March 2024

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INTRODUCTION

Social media influencers have become mainstays in Philippine electoral politics. The 2016 campaign of Rodrigo Duterte was bolstered by political bloggers[1] such as Mocha Uson (Mocha Uson blog), RJ Nieto (Thinking Pinoy), and Carlos Munda (MindaNation), who were later appointed to government positions under the administration.[2] The Duterte government also legitimized influencers with presidential press accreditations, providing them the same access as professional journalists and media to events and personalities.[3] In the 2022 electoral cycle, Ferdinand “Bongbong” Marcos Jr. followed the same playbook for his presidential bid. Networks of digital influencers seeded authoritarian nostalgia emanating from the false legacy[4] of the dictator Marcos Sr. to prime voters for the promise of prosperity under another Marcos presidency.[5] Influencers also operated as political brokers of the Marcos agenda within social media communities, almost as impactfully as traditional political and media actors at certain points during the campaign period.[6]

In the Philippines, influencers are part of emerging and larger political influence operations that systematically promote propaganda to advance the interests of entrepreneurial political elites.[7] They are instructed by high-level strategists on the political message they need to promote, and the political posts they produce are then amplified by low-level trolls and fake accounts.[8] Unlike these other operators, influencers are hypervisible as they maintain public-facing accounts, engage broader audiences and interests, and monetize this visibility. More importantly, their political capital is not due to their expertise, position, or experience but to their cultural relevance in spaces outside and beyond politics.[9] This makes them both a critical entry point to uncover the political economy of influence operations and difficult operators to detect, given the greyness of their political interlocution.[10]

This article discusses the political economy of covert influence operations focused on influencers commissioned to partake in political campaigns during the 2022 Philippine Elections.[11] It maps the entanglement of social media influencers in electoral politics by (1) identifying the influencers engaged in covert influence campaigns within socio-technical networks using computational methods, (2) characterizing the political-economic relations between influencers and clients through qualitative field research, and (3) estimating the cost of commissioning them for political campaigns through economic modelling. We argue that the political influencers as contemporary but covert campaigners operate behind the veneer of political participation only to undermine it, given the political-economic system in which they function, that incentivises obscurity and manipulation. This article concludes by examining the post-electoral role of these influencers and the absence of clear policies to regulate their activities in social media and politics in the Philippines.

MAPPING THE FIELD OF POLITICAL INFLUENCERS

Political influencers sit between two worlds—in politics and their role in bridging candidates and the voters, and in promotional culture with their commercial and brand engagements. This hybridity of political influencers informs not only our research approach but also our analysis of our empirical data.

Around 44,530 influencers took part in the 2022 Philippine elections since the filing of the certificate of candidates in October 2021. Using 18 multidimensional indicators that examine manipulative network, behavioural, and content characteristics of these influencers, a recent study[12] identified 1,425 influencer accounts across YouTube, TikTok, Facebook, and Twitter which reveal evidence of engaging in covert influence operations. These accounts scored high in multiple indicators, such as belonging to the same co-share network and repeatedly sharing from the same sources, having post-recurrence with high semantic similarity among posts within a given period, or containing references to conspiracy and manipulation based on a dictionary derived from fact-checked stories. Many of these influencers are on YouTube and TikTok, with 584 and 544 influencer accounts respectively. Not only are these platforms creator-friendly with their institutional partner programmes and monetization schemes, they are also platforms with less stringent content moderation policies and public oversight, given their algorithmic content feed.

The influencers identified to be covert political campaigners are not limited to the political field, or those known to cover topics related to politics and socio-economic issues, but also include influencers in other areas of interest. Most are ‘amateur’ commentator and curator accounts who share their take as ‘ordinary people’ on political issues and topics, with only subtle partisan leaning. Hyper-partisan influencers are accounts that explicitly promote a partisan camp by circulating the unofficial party line and responding to criticisms against their preferred candidates. Specific to TikTok are two types of influencers: the ‘stan’ accounts who portray politicians as ‘idols’ and their supporters as ‘fans’, glorifying candidates as larger-than-life spectacles, and the ‘trending’ influencers who stylize the politicians in accordance with the cultural ‘trends’ and vernacular taste of the platform. Like fake news operators in the alt-news and entertainment media, which unlike those that only ‘mimic’ professional news media, these influencers identify themselves as alternative media sources through repackaging of partisan content as newsworthy. Mainstream influencers are those who have gained broad popularity on social media and now position partisan posts as ‘personal’ endorsements. The final type of complicit influencers is polarizing influencers; these mobilize absolute support for their candidate of choice, and launch uncivil attacks against opposing candidates and their supporters.

Figure 1. Covert political Influencer types exemplified as social media profiles, based on K-means clustering of 18 indicators (Gaw et al., 2022).

In the 2022 general elections, influencers were enlisted to campaign for candidates by intermediaries who may or may not have been directly involved in the above-board campaign operations. This ambiguity gives the political clients the plausible deniability of engaging in political influence operations. There is also no documentation of the transactions between the influencers and the intermediaries: no written contracts, non-disclosure agreements, or any documentary stipulation of the obligations of the parties. Communication is either in private messages on social media, which is inaccessible to media or researchers, or through discrete face-to-face meetings. The lack of concrete or traceable evidence not only emphasizes the underhanded nature of covert political influence work but also that there is a mutual understanding about the gains and risks of such engagement.[13]

Unlike its commercial counterparts, influencers in the business of political campaigns do not follow a standard rate card. There is no set pricing for influencers at different tiers of popularity, and most of the time, it is the influencers who set the amount for the work they render for their clients. While different factors influence these rates, social capital, political notoriety, and their ability to promote their clients’ agenda emerge to be the consistent criteria that affect the pricing of influencer work. In some cases, premium is offered for influencers who are willing to switch camps or double down their campaigning during the peak of the campaign season. The length and scope of engagement also work differently for influencers who have established their footing in social media, and those considered micro-influencers who only have small followings. Big-name influencers often are employed under politicians’ payroll and are committed to doing the politicians’ bidding in an unspecified number of posts. Those who have a modest following are contracted on a per-trial basis. If their campaign posts ‘click’ with the intended voter segment, they are likely to continue to be commissioned for a longer period.[14]

These quantitative and qualitative data are the building blocks of political-economic assumptions about the political influencers and their involvement in political campaigns in the 2022 Philippine Elections. The extent to which the rates of political influencers are paid more or less than the commercial influencers across the board is unclear. It is estimated that the political spending on influencers for political campaigns ranges from PhP 600M to 1.5B (USD 10.9M to 27M). This first estimate assumes that most influencers are compensated per post, except for a few influencers who exceed a follower threshold (> 500,000 followers) and are assumed to be on a retainer contract. These estimates do not include the income earned by influencers from platform monetization. It has also not been possible to factor in other variables such as political ideology, reputational risk, and campaign roles, among others.[15]

INFLUENCERS AS POLITICAL BROKERS

Politicians spend billions in advertising to reach mass audiences, but they ultimately rely on political brokers on the ground in local towns and barangays (villages) to convert this reach into possible votes.[16] These brokers tend to have strong social ties in the community, the cultural familiarity to appeal to the voters’ sensibilities, and strategic skills to navigate local political relations.[17]

Influencers operate as contemporary political brokers in a hyper-mediatized political ecosystem. Their authentic performance as ‘ordinary’ people, their community-building skills, and their vernacular expertise of the platforms make them perfect intermediaries between politicians and voters in digital communities,[18] many of which are explicitly rooted in their locales. While candidates can directly engage with voters through their digital accounts, vlogs and live videos, influencers’ non-elite position allows them to translate political messages into cultural narratives that resonate with the public. At the same time, influencers tend to have cultivated enough cultural status for them to exercise political capital in political discourses online to bridge the relations between national political figures and ordinary Filipino voters. For instance, earlier research documented YouTubers such as Banat By and Maharlika performing a brokerage role in promoting the anti-media agenda of the Duterte administration.[19] They were able to do this by establishing communities with hundreds of thousands of viewers not only through their ‘amateur’ political commentary but also through their anti-establishment cultural brand. Their relatability as ‘one of the people’ transmuted into credibility in opining both about day-to-day news stories and high-stakes political events, even for unpopular political positions such as in the case of the franchise renewal issue of major broadcasting network ABS-CBN in 2020.

Traditional political brokers are known to work for politicians,[20] but influencers as emerging political brokers are more ambiguous about their political-economic relationship with candidates. Many influencers align themselves with politicians that advance the issues and policies that matter to them,[21] but a significant number are also involved in covert political influence operations.[22] This has been the case in the Philippines since the 2016 Duterte campaign, and these influencers have proven to be effective in performing brokerage for Duterte and helping him maintain his popularity throughout his administration. [23]

CONCLUSION: POLICY ISSUES AND CHALLENGES

It was not a surprise that political influencers carried over their operations beyond electoral purposes. Under the Marcos Jr. administration, his own influencers have shifted gears toward promoting the vision and programmes of their client as president and chief executive of the country. However, unlike during the Duterte administration when influencers were allowed to be autonomous and flexible in their messages, the incumbent government has only retained a few influencers; many have not even been given official media access to President Marcos Jr.[24] Apart from this, the current political squabbles between the Marcos and Duterte dynasties have also translated to even nastier fights between their respective influencers. Previously united during the electoral campaign, these influencers are presently engaged in political combat that has further contributed to the toxicity of social media space in the Philippines.[25]

While the current “influencer wars” figure prominently in social media, clear and glaring policy gaps in social media regulation still exist. To the surprise of many, the Marcos Jr. administration is mulling possible policy interventions to combat disinformation.[26] Beyond social media literacy, it remains to be seen whether this includes addressing the political economy of the “influencer industry” in the country. There is little time though. If clear policy regulations are not put in place within this year, it is certain that influence operations will shape the midterm elections next year.

Side by side with policy action is the need for more research. Critical to this research agenda is emphasizing that influence operations through brokerage is work, and brokers are expected to gain from their mediation, which in the case of the 2022 elections, amounts to millions and billions of pesos, based on estimates. The culture of political patronage in the Philippines also historically shows that these exchanges are not only or always financial but also come in the form of political appointments and favours,[27] exemplified in both recent and early histories. Future research needs to trace these strings of relations and transactions by regarding influencers as (potential) political brokers. Influencers should be examined beyond the veneer of participatory culture and the obscurity of influence operations, if mechanisms are to be developed to govern these complicit political operators.

ENDNOTES


Note: This article primarily draws from the research report “Political Economy of Covert Influence Operations in the 2022 Philippine Elections” by Fatima Gaw, Jon Benedik A. Bunquin, Samuel I. Cabbuag, Jose Mari H. Lanuza, Noreen H. Sapalo, and Al-Habbyel B. Yusoph, in partnership with Internews.

For endnotes, please refer to the original pdf document.

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: /support/get-involved-with-iseas/
ISEAS – 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
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha  
Managing Editor: Ooi Kee Beng   Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

“Prosperity or Predicament? Decoding Certification Challenges in Malaysia’s Palm Oil Industry” by Serina Rahman and Lee Poh Onn

 

EXECUTIVE SUMMARY

• Oil palm was brought to Malaysia from West Africa as part of British colonial agricultural development initiatives, but the refining of crude palm oil only began in the 1970s as part of the move by the Malaysian government to industrialize the country’s agrarian economy.

• Malaysia is the world’s second-largest producer of palm oil, after Indonesia. Both countries account for about 85 per cent of total exports. Incidentally, smallholders produce about 40 per cent of the total output of palm oil in Malaysia.

• The palm oil industry is mired in controversy. Global campaigns originating in Europe and the US have branded the crop the biggest cause of deforestation, with proposed bans to follow in December 2024.

• Certification has been proposed as the solution to address gaps in sustainability. Sabah is used as an illustrative case study of an effective approach for statewide certification using both the Malaysian Sustainable Palm Oil (MSPO) and Roundtable for Sustainable Palm Oil (RSPO) schemes.

Trends in Southeast Asia 2024/6, March 2024

 

2024/18 “Assessing Vietnam’s Challenges in Fighting IUU Fishing” by Nguyen Khac Giang

 

Boats belonging to Vietnamese fishermen anchored together after the crew was detained in Thai waters for illegal fishing by the Royal Marine Police in Thailand’s southern province of Narathiwat on 1 August 2016. (Photo by MADAREE TOHLALA/ AFP).

EXECUTIVE SUMMARY

  • Illegal, unreported and unregulated (IUU) fishing has been a significant problem for Vietnam’s booming fishing industry. This issue escalated into a major policy concern for Vietnam when the European Commission (EC) issued the country a “yellow card” warning in October 2017.
  • In addition to causing economic losses, IUU fishing raises concerns about the legitimacy of Vietnam’s maritime claims in the South China Sea.
  • Vietnam has taken significant steps to address the issue of IUU fishing, motivated not only by the desire to have the yellow card lifted, but also to transition towards a more sustainable fishing industry, enhance its international reputation, and affirm its commitment to a rules-based international order.
  • Despite making considerable progress, Vietnam continues to face multifaceted challenges. These include the lack of an effective surveillance system, inadequate enforcement capabilities, and the need to maintain a robust fishing fleet to counteract China’s “grey zone” tactics in the South China Sea.
  • Addressing the issue of IUU fishing will contribute to a more sustainable fishing industry, improve the livelihoods of millions of fishermen, drive economic growth, and strengthen Vietnam’s efforts in protecting its maritime sovereignty.

*Nguyen Khac Giang is Visiting Fellow in the Vietnam Studies Programme at ISEAS – Yusof Ishak Institute. He was previously Research Fellow at the Vietnam Center for Economic and Strategic Studies.

ISEAS Perspective 2024/18, 8 March 2024

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INTRODUCTION

Illegal, unreported and unregulated (IUU) fishing poses a significant threat to Vietnam’s thriving fishing industry, which recorded an export value of US$9.2 billion in 2023,[1] ranking as the world’s third-largest. Since 2017, the European Commission (EC) has issued a “yellow card” warning against the country’s fishing industry for its failure to comply with EC regulations on IUU fishing. Given that the European Union (EU) is the world’s largest market for seafood products globally, the EC’s warning has placed a considerable burden on Vietnam’s seafood exports.[2] Furthermore, the yellow card has caused reputational damage to Vietnam’s seafood in other markets and hampered Vietnam’s efforts to legitimise its maritime claims in the South China Sea.

The Vietnamese government has made significant efforts to implement the recommendations of the EC in order to combat IUU fishing. Despite these efforts, the EC has not yet withdrawn its warning. This article analyses the economic and political impact of IUU fishing on Vietnam, assesses the challenges faced by the country in addressing the issue, and proposes steps that the Vietnamese government should take to expedite the resolution process.

THE EC’S YELLOW CARD

Vietnamese fishing vessels have been notorious for illegally trespassing into other countries’ maritime territories, sometimes venturing as far as the South Pacific. For instance, between 2013 and 2017, 20 Vietnamese vessels were apprehended and prosecuted for illegally fishing within Australia’s Exclusive Economic Zone (EEZ).[3] According to statistics from Vietnam’s Directorate of Fisheries, from December 2013 to the end of 2016, 726 fishing boats and 5,752 fishers were arrested by foreign authorities for engaging in IUU fishing activities.[4]

Before 2017, Hanoi had not taken strong measures to combat IUU fishing. This was partly due to a limited surveillance capacity, but also because the government was focused on strengthening its fishing fleet as a tool to counteract China’s “grey zone” tactics in the South China Sea. It only became a policy priority in 2017 when the EC issued a “yellow card” against the country.

As the EU is the largest seafood market globally, accounting for 34 percent of total market imports, it wields the market power to unilaterally impose sanctions on violators.[5] In 2008, the European Commission established a legal framework (Decision No. 1005/2008) to prevent, deter, and eliminate the trade of IUU seafood products into the EU.[6] This framework allows the EU to issue formal warnings (yellow cards) to non-EU countries with inadequate measures in place to combat IUU fishing activities. Failure to improve can result in a ban on their fish from the EU market (red card), among other penalties. By 2023, the EU had issued warnings to a total of 27 countries, with six countries receiving a red card. In Southeast Asia, four countries were warned: Thailand and the Philippines had their warnings lifted, Cambodia was red-carded, and Vietnam remains yellow-carded.

Despite strong political determination, tackling IUU fishing and removing the EC warning remains a daunting task for Vietnam. Its domestic waters have seen a sharp decline in fish stock due to overfishing.[7] Additionally, escalating tensions in the South China Sea, a traditional fishing ground for Vietnamese fishermen, have made fishing a perilous and challenging endeavour. Similar to their counterparts in the Philippines, Vietnamese vessels are frequently harassed and even attacked by China’s maritime militia and law enforcement vessels.[8] As a result, many Vietnamese fishermen have turned to the waters of other countries, contributing to the issue of IUU fishing.

ECONOMIC AND POLITICAL TOLLS

While IUU fishing may offer short-term benefits to a small group of fishermen, it inflicts substantial damage on the wider fishing industry. In Southeast Asia, Vietnam bears the second-highest economic loss from the issue, estimated at US$1.6 billion annually.[9] More alarmingly, in the long term, IUU fishing exacerbates the depletion of seafood resources. In the period 2016-20, Vietnam had a fish stock of approximately 3.95 million tonnes, with a total allowable catch of 1.67 million tonnes per year.[10] However, the total catch of Vietnam is estimated to be as huge as around 3.8 million tonnes per year, making it impossible for fish stocks to recover.[11]

In an era of growing consumer awareness about environmental sustainability, IUU fishing also profoundly impacts Vietnam’s trade with key markets, particularly the EU. Traditionally one of the top destinations for Vietnam’s seafood products, the EU has become less accessible due to the EC’s yellow card. This warning subjects all Vietnamese seafood exports to the EU to pre-checks, leading to increased costs and longer delivery times, not to mention the reputational damage that renders Vietnamese seafood less attractive to EU consumers. Consequently, while the EU used to account for up to 35 per cent of Vietnam’s seafood export value in 2017, this figure dropped to just 12 per cent in 2022.[12]

Moreover, there is a looming threat of an escalation to a “red card,” which would result in a total ban on Vietnam’s seafood products, which could potentially cause a loss of US$500 million per year in Vietnam’s export revenue. The seafood harvesting and processing sectors, projected to decline by as much as 30 per cent in capacity, would be among the hardest hit, jeopardising millions of jobs.[13] Additionally, if other high-value markets such as Japan and the United States also adopt EU standards, Vietnam’s seafood exports might face even greater challenges. The yellow card and the possibility of a red card also undermine the preferential tariff treatment Vietnam enjoys under the EU-Vietnam Free Trade Agreement.[14]

Politically, the IUU fishing issue also weakens Vietnam’s position in the South China Sea. This is because China could exploit the issue to undermine Vietnam’s maritime claims and drive a wedge between Vietnam and other regional countries.[15] Vietnam’s IUU fishing has also led to diplomatic tensions with other Southeast Asian nations, undermining the solidarity of ASEAN on South China Sea issues. Furthermore, in the event of a “red card” from the EC and similar sanctions from the United States and Japan, Vietnam’s fishing industry would suffer greatly. Without access to key markets, the income of Vietnamese fishermen would further decline, potentially leading to a lack of motivation for them to continue fishing. This could severely impact Hanoi’s strategy of encouraging fishermen to “hold fast to the sea” in order to defend the country’s maritime claims.[16]

VIETNAM’S UPHILL BATTLE AGAINST IUU FISHING

The Vietnamese government has prioritised fighting IUU fishing since 2017. For example, it has achieved notable progress in revamping the legal framework against IUU fishing in line with the EC’s recommendations. This includes the formulation, finalisation and promulgation of a fisheries law, two decrees, and 10 guiding circulars and legal documents.[17] Additionally, a National Steering Committee on IUU Fishing Prevention has been established in Hanoi, led by a deputy prime minister, and extensive awareness campaigns have been conducted in 28 coastal provinces. Significant resources have also been allocated towards enhancing surveillance capabilities.[18]

Vietnam has also been proactively cooperating with other countries and transnational organisations to tackle IUU fishing, particularly with nations where Vietnamese IUU fishing violations occur frequently. It has signed memoranda of understanding to prevent IUU fishing with Australia and the United States, established a hotline with the Philippines, and is in the process of negotiating similar hotlines with Indonesia, Malaysia, Thailand and Cambodia.[19] Vietnam became a signatory of the United Nations Fish Stocks Agreement in 2018 and the Agreement on Port State Measures in 2019. Currently, Vietnam is a cooperating non-member of the Western and Central Pacific Fisheries Commission (WCPFC) and participates in the Ocean and Fisheries Working Group of the Asia-Pacific Economic Cooperation.[20]

The EC has recognised Vietnam’s significant improvements in the monitoring, control and surveillance of fishing vessels, as well as its efforts to install monitoring systems, provide regulations and implement gear marking for fishing vessels.[21] Since the initial nine recommendations in 2017, the EC’s most recent inspection in October 2023 revealed that only two key issues remain unresolved: IUU fishing outside of Vietnam’s EEZ and the traceability of fishery products.[22]

Despite a robust regulatory framework, Vietnam has struggled to prevent its fishermen from engaging in IUU fishing in other countries’ waters. In the first eight months of 2023, a total of 36 vessels with 202 fishermen were detained by foreign countries, including Malaysia, Indonesia, Thailand and Cambodia. Although the number of violations has drastically declined by 84.35 per cent compared to 2016,[23] the EC has made it clear that it will not lift the yellow card warning if this issue is not completely resolved.[24] According to the IUU Fishing Risk Index, which assesses countries’ vulnerabilities and responses to IUU fishing activities (with a ranking of 1 being the best and 5 being the worst), Vietnam’s score for 2023 is 2.57. Although this marks a significant improvement from the 2019 score of 3.16, Vietnam remains in the bottom 17 of 152 countries and territories included in the index.[25]

There are four main reasons why the problem of Vietnamese fishing violations in foreign waters persists.

First, implementing comprehensive governance and surveillance systems across 28 coastal provinces is difficult, particularly given Vietnam’s decentralised administrative system. While the central government considers resolving the IUU fishing issue a priority, some provincial authorities have not taken it seriously enough, leading to inconsistent fisheries management and sanctioning of violations across the provinces. For instance, six out of 28 provinces still have not established a local Fisheries Surveillance force (Kiểm ngư), making it difficult to effectively manage fishing activities.[26] During the October 2023 session of the National Assembly, Minister of Agriculture and Rural Development Le Minh Hoan expressed his frustration that nearly 60 per cent of violations in various provinces have not been properly addressed. He even threatened to escalate the issue to the prime minister for disciplinary measures against officials who have been negligent.[27]

Second, unlike neighbouring countries such as Thailand and the Philippines, Vietnam has struggled to build a comprehensive fishery production chain linking fishermen, port authorities, fisheries management authorities, and businesses. This makes it challenging to ensure sufficient and accurate traceability mechanisms in fishery processing plants. The fragmented fishing ecosystem explains why Vietnam has not completed the process of registering fishing boats and of issuing fisheries exploitation permits. It also has not finished updating the data on fishing vessels into the national fisheries database (VNFishbase). As of 29 August 2023, only 71,658 out of 86,820 fishing boats measuring six meters or longer (82.5 per cent) have been registered and updated in the database. Meanwhile, the number of boats that have been newly granted valid permits is only about 70 per cent.[28]

Third, Vietnam still struggles with the issue of enforcement. The problem of fishing boats operating without fully meeting all the necessary conditions persists. Despite the installation of vessel monitoring systems (VMS) on almost all boats (28,753 out of 29,381 boats with a length of 15 meters or more),[29] many still turn off or remove the VMS in order to install it on other boats and fish in prohibited areas, evading supervision from authorities in the process, and engaging in illegal fishing in foreign waters. Although such actions may result in hefty administrative fines if caught, these measures have not been strong enough to deter fishermen effectively.

Fourth, the goal of combating IUU fishing is occasionally compromised by Vietnam’s effort to protect its maritime claims in the South China Sea. For Hanoi, fishermen play a crucial role in exerting its maritime sovereignty, highlighted by the slogan “Each fishing boat is a living landmark, each fisherman is a soldier protecting the sovereignty of the sea and islands.”[30] For example, while anti-IUU fishing recommendations emphasise the need to reduce fisheries subsidies, the Vietnamese government has increased fishing subsidies in various forms since 2014.[31] These fisheries support policies, without adequate supervision and management, might perpetuate IUU fishing practices.[32]

CONCLUSION

In order to effectively address the issue of IUU fishing and remove the EC yellow card, Vietnam must strengthen law enforcement, including considering the criminalisation of IUU fishing and stricter sanctions against violations.[33] For various reasons,[34] Vietnam has not criminalised IUU fishing although this issue has been widely discussed. Vietnam also needs to establish a sustainable production chain to ensure traceability and better governance for the fishing industry. Minister of Agriculture and Rural Development Lê Minh Hoan has stated that creating a comprehensive ecosystem for the fishing industry, similar to that of the Philippines or Thailand, is essential to make Vietnam’s fishing industry sustainable and to combat IUU fishing.[35]

Relatedly, the Vietnamese government must take appropriate actions to ensure the livelihoods of fishermen and workers in the supporting industry. Due to efforts to combat overfishing and prevent IUU fishing, the number of Vietnamese fishing vessels has significantly decreased from 110,950 in 2017 to 86,800 in 2023, with a projected continued decrease to 83,600 by 2030.[36] Consequently, the number of individuals employed in the marine fishing industry is expected to decrease from 730,000 to 600,000 by 2030. As such, it is crucial that the authorities provide adequate support and training for those who may lose their jobs as a result of these changes.

Vietnam also needs to enhance international cooperation with Regional Fisheries Management Organizations (RFMOs) and neighbouring countries for good practices in fishing governance. For this purpose, Vietnam can learn from regional countries, particularly South Korea, Thailand and the Philippines, who have successfully worked with RFMOs to have their yellow cards lifted.[37] In the masterplan to combat IUU fishing by 2025, which was approved by the government in 2022, Vietnam has made a commitment to become an official member of WCPFC, ratify the International Labour Organization’s Work in Fishing Convention (C188), and accelerate negotiations with neighbouring countries and several Pacific Island nations for Vietnamese fishing vessels to legally operate in their waters.[38]

To balance the risk of IUU fishing and the need to maintain maritime sovereignty, Vietnam has taken steps to develop a more professionalised maritime militia force instead of relying on fishermen to protect its maritime claims. Since 2019, Vietnam has established “standing maritime squadrons” to support law enforcement agencies under the management of provincial military commands.[39] Empowering this force – in accordance with international law – will alleviate the burden on Vietnam’s maritime law enforcement in dealing with China’s grey zone tactics.[40] This approach will also help reduce risks for fishermen and make it politically feasible to decrease the number of fishing vessels as recommended by the EC.

The EC has carried out four inspections over the past six years to evaluate Vietnam’s improvements in fisheries governance. Another round of inspections is scheduled for May 2024. The Vietnamese government aims to get the “yellow card” lifted by then. Whether Hanoi will be successful in this effort remains to be seen, but it is safe to say that the process of getting the yellow card removed has greatly benefited Vietnam in several ways. It presents an opportunity to rethink the sustainability of the fishing industry, a situation that is particularly important given Vietnam’s rapidly depleting fish stocks. The process has also encouraged Vietnam to actively engage with international partners and neighbouring countries, and to participate in various forums and international conventions to combat IUU fishing. As an emerging middle power, Vietnam’s interest lies in upholding a rules-based international order, and following the anti-IUU fishing framework is a vital part of this commitment. Moreover, as more resources are channelled into making the fishing industry more sustainable, Vietnam now has the financial, technical, and political capability to become a “maritime economy” by 2030.[41] This not only promises to improve the livelihood of millions of fishermen, thus contributing to economic growth, but also strengthen Vietnam’s ability to safeguard its maritime sovereignty.

ENDNOTES


For endnotes, please refer to the original pdf document.

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2024/17 “Can Bersatu Go It Alone?” by Azmil Tayeb

 

Facebook Page of the Parti Pribumi Bersatu Malaysia at https://www.facebook.com/pribumibersatuofficial/photos. Accessed 3 March 2024.

EXECUTIVE SUMMARY

  • It is the aim of this article to assess Bersatu’s chances of going it alone in the event that Perikatan Nasional (PN) implodes. 
  • Unlike its current coalition partner Parti Islam Se-Malaysia (PAS), Bersatu has yet to compete on its own and therefore does not have a track record to which it can refer.
  • At the moment, Bersatu is dependent on PAS’s grassroots machinery to mobilize its supporters, a privilege it will have to do without if it goes solo.
  • The competition for Malay voters, who are Bersatu’s natural constituency, will be stiff due to a crowded playing field comprising other Malay parties such as UMNO, PAS and Amanah.
  • Bersatu’s best chance lies in winning seats that used to be UMNO strongholds but are now under PN; many Malays voted for PN because of their disgust with UMNO, not because they are ideologically-committed PAS supporters.
  • For this to happen, Bersatu must distinguish itself from UMNO by showing that it is a better guardian of Malay and Islamic interests, developing a strong and extensive grassroots network, and promoting a young crop of leaders within the party.

* Azmil Tayeb was a Visiting Senior Fellow at ISEAS – Yusof Ishak Institute. He is Associate Professor at the School of Social Sciences, Universiti Sains Malaysia.

ISEAS Perspective 2024/17, 6 March 2024

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INTRODUCTION

In the 2022 general election, the Perikatan Nasional (PN), which comprised of Parti Islam Se-Malaysia (PAS), Bersatu and Gerakan, posted a strong showing by winning 74 seats nationwide, placing it in a prime position to form the government. The uneasy partnership formed between other coalitions, mainly Pakatan Harapan (PH) and Barisan Nasional (BN), eventually denied PN the opportunity.

However, PN did grow from strength to strength, sweeping 146 of 162 Malay-majority seats (90 percent) in the 2023 six state elections. Its stellar electoral performance came at great expense to UMNO, which saw many of its long-time supporters voting for PN. New and young Malay voters also flocked to PN in droves, mainly inspired by PN’s effective messaging on TikTok. Simply put, the majority of Malay voters are presently with PN.

PAS came out as the biggest winner in the recent elections, now having 43 seats in parliament, with 31 seats being held by its partner, Bersatu. The seat haul has made PAS the largest party in parliament. In the 2023 state elections held in six states, 105 of the 146 seats (72 percent) won by PN went to PAS.

In other words, the balance of power within PN strongly tilts towards PAS. There is a strong perception that PAS is playing the role of a big brother in PN with Bersatu being its sidekick (Gerakan is negligible as the token non-Malay-Muslim representative in PN holding a single state seat).[1] The power imbalance has certainly emboldened PAS to become more assertive within PN, primarily by allocating most state government positions in PN-governed states to PAS state assemblypersons, much to the consternation of its partner, Bersatu (see Table 1).[2] The defection of several Bersatu MPs who have publicly expressed support for Anwar Ibrahim’s government has further driven a wedge into the opening rift within PN.[3]

Though PN is in no danger of collapsing anytime soon, it does beg the question of what is the way forward for the coalition and its component parties? In the case of PAS, the party has contested on its own for much of its existence and as such its past electoral record as a solo contender is readily available for analysis. The same cannot be said for Bersatu. Since its founding in 2016, it has always competed as part of a coalition and never on its own. Before the infamous Sheraton Move in late February 2020, Bersatu was part of the PH coalition, and afterwards it joined the PN coalition. Not even a full year into being part of the PH government, Bersatu was already having serious discussions about leaving the coalition, which it did less than a year later.[4] Should tensions within PN escalate beyond repair and Bersatu decides to leave PN to go it alone, what are its chances of being electorally competitive? The overarching aim of this article is to assess Bersatu’s electoral prospect as a solo party should PN break up, a situation that remains in the realm of possibility.

Table 1: Composition of state exco in PN-governed states (share of total in brackets)

 State assembly seatsExecutive council
 PASBersatuGerakanPASBersatuGerakan
Kelantan430010 (91%)1 (9%) 
Terengganu275010 (91%)1 (9%) 
Kedah211117 (64%)3 (27%)1 (9%)
Perlis9505 (63%)3 (37%) 

ASSESSING PAS’S ELECTORAL STRENGTH OUTSIDE ITS STRONGHOLDS

To have a clear idea of Bersatu’s current electoral viability as a solo contender, we should first look at its dominant partner in PN, namely PAS. Historically PAS has not been successful when contesting on its own outside its north and northeast bastions. PAS’s appeal to voters from other parts of peninsular Malaysia primarily comes from association with coalition partners.

Being in a coalition with the Chinese-dominated DAP and the urban-based PKR helped to soften PAS’s image in the eyes of non-Muslim and moderate Malay voters. After Pakatan Rakyat broke up in 2015, however, PAS turned away from the path of moderation and inclusivity to take a rigid ethnoreligious stance, which it still maintains today. Its current president, Hadi Awang, has since consolidated his control of the party, stamping out internal dissent and steering the party to the far-right.[5]

In the 2018 general election, PAS was technically part of a nominal coalition, Gagasan Sejahtera, but contested mainly on its own to win 18 seats in Kelantan, Terengganu, and Kedah (it also managed to wrest Terengganu state government away from BN). Simply put, there is a limit to how much PAS can achieve as a solo competitor. In the 2022 general election, PAS surprised everyone by winning 43 parliamentary seats, more than doubling its gain in 2018. Many Malays who had not supported PAS in the past voted for PAS candidates competing under the PN logo; this propelled PAS to overachieve.

In the 2022 general election, PN campaigned using two logos: in the PAS strongholds of Kelantan, Terengganu and Kedah, it used PAS’s logo during the two-week campaign and on the ballot paper; in other parts of peninsular Malaysia, PN used its own logo. Using PAS’s logo in those three states makes sense since it is well recognized by voters due to the party’s deep roots there.

Interestingly, many PAS candidates outside of these three states who competed under PN’s logo, also won their seats, most interestingly in areas where PAS had not done well in the past such as Tangga Batu and Jasin in Melaka. Why did these PAS candidates perform well in constituencies traditionally not known to be friendly to PAS? Was it because voters were not aware that these PN candidates were from PAS due to them using PN’s logo? Or did voters see PAS, by way of PN, as a more viable choice than UMNO? PAS, we must remember, has always benefitted electorally whenever there is a crisis within UMNO, such as during the 1999 general election (Anwar Ibrahim’s sacking and imprisonment) and the 2018 general election (Najib Razak’s 1MDB financial scandal). Even so, PAS still struggled to expand beyond its north and northeast strongholds on its own. Only when it teamed up with DAP and PKR as part of the Pakatan Rakyat coalition (2008-2015) did PAS finally gain a foothold in states such as Selangor, Penang, and Perak. When it contested on its own in 2018, PAS went back to being a regional party despite winning a respectable number of seats.     

One of PN’s assets in GE15 was the deployment of PAS’s formidable grassroots machinery, for which the party is well known. PAS provided the manpower that drove PN’s campaign, from volunteers at ceramah venues, to its Unit Amal manning security and traffic, and to canvassers who knocked on every door and called every registered voter to vote. Bersatu being a young party was unable to match PAS’s decades-long experience of grassroots work and therefore was completely dependent on PAS for support. This was evident in the GE15 and the six state elections; programmes by Bersatu candidates were observably handled mostly by PAS members. If PN implodes, Bersatu will no longer be able to lean on PAS’s grassroots machinery. This is perhaps the biggest challenge that Bersatu faces if it opts to go it alone.

Being a much younger party, Bersatu is simply unable to match PAS’s well-oiled political machinery, ideologically-committed members and deep-rootedness in society as a seven decade-old movement. Now that Bersatu is part of the opposition, it has become difficult for it to grow the war chest needed to mobilize its grassroots machinery. Adding insult to injury, its bank accounts have been frozen and seized by the Malaysian Anti-Corruption Commission (MACC) for investigative purposes.[6] PAS winning seats beyond its usual strongholds in GE15 has further widened the gap between the two parties. Having 43 seats has made it the biggest party in parliament, emboldening the party to exert a more muscular role within the PN coalition.

Bersatu has denied that there is friction between the party and PAS by reiterating that its secretary general, Hamzah Zainuddin, remains the opposition leader.[7] This is a response to rumours that PAS wants its rising political star, Ahmad Samsuri Mokhtar, the current Chief Minister of Terengganu and newly elected MP of Kemaman, to lead PN instead. For now, PAS has not aggressively lobbied for Ahmad Samsuri to replace Hamzah Zainuddin as the leader of PN, but if PAS makes such a move, it might lead to an irreparable rupture within PN. The possibility that PN will break up and its component parties will go their separate ways looms on the horizon. This is an eventuality that Bersatu needs to brace itself for.       

LESSONS FROM HISTORY

Malaysia’s post-independence history is replete with instances of Malay-Islamic splinter parties joining other coalitions or competing alone. PAS was established by ulama (religious scholars) in 1952, who broke with UMNO for the latter not being Islamic enough for them. Soon after, another split in UMNO took place in 1953 when its founder, Onn Jaafar, was unhappy with the party’s increasingly racial orientation and left to form the multi-ethnic Independence of Malaya Party (IMP), which was supplanted a year later by Parti Negara.[8]

In 1987, intense leadership rivalry between Tengku Razaleigh Hamzah and Mahathir Mohamad led to the creation of Semangat 46, founded by the former and his supporters. Semangat 46 won 8 parliamentary seats in the 1990 general elections when it joined forces with two politically disparate coalitions at the same time: Gagasan Rakyat with DAP and labour-based Parti Rakyat Malaysia (PRM); and Angkatan Perpaduan Ummah with PAS. The crown of its 1990 electoral achievement was winning the Kelantan state government with PAS. Semangat 46 soon became stridently Malay-centric as it competed with UMNO for Malay support, at the expense of severing its relationship with DAP and PRM. Semangat 46’s support base was primarily limited to Kelantan, which led to uneasy and oftentimes tense power-sharing with the more dominant PAS. By 1996, Semangat 46 had lost steam and ultimately collapsed.[9]

Two decades later, in 2016, Bersatu was created by former UMNO leaders who did not agree with the direction the party was taking amid Najib Razak’s 1MDB scandal. Bersatu realized early on that for it to have any chance of being electorally competitive it had to team up with the then-opposition PH, instead of running solo. The strategy was to engage UMNO in Malay-majority areas in a straight contest. Bersatu competed in 52 seats but only managed to win 13 of them, a subpar performance and a testament that UMNO was still a formidable force despite a discernible shift of Malay votes to PH.[10] 

Amanah, which split from PAS in 2015 as PAS turned more hardline, has found mixed success competing as a component party of Pakatan Harapan. Amanah has not been able to siphon away PAS supporters and has negligible presence in Kelantan, Terengganu, and Kedah. However, being part of PH has provided Amanah with the opportunity to compete and win in Malay-majority constituencies in other regions of peninsular Malaysia. Riding on the popularity of PH in 2018, Amanah managed to gain 11 parliamentary seats, which led to 10 cabinet positions in the PH government (2018-2020). In the 2022 general election, Amanah’s share of parliamentary seats dropped to 8, despite contesting in more constituencies.   

ELECTORAL PROSPECTS OF BERSATU GOING IT ALONE

Bersatu was founded, among others, by the former Prime Minister, Mahathir Mohamad, his son Mukhriz Mahathir and the former Deputy Prime Minister, Muhyiddin Yassin, all known stalwarts of Malay nationalism. All but one of Bersatu founding members were from UMNO, this being Syed Saddiq Syed Abdul Rahman, currently the MP of Muar and one of the founders of the party MUDA. As such, Bersatu is naturally competitive in areas where Malays comprise more than two-third majority, areas where UMNO had long been dominant.

Unfortunately for Bersatu, the political field in these Malay-majority areas are crowded with other parties. Bersatu’s former PN partner PAS also contests in these areas. From the Unity Government side, Bersatu will have to face either UMNO, Amanah or to a lesser extent, PKR. In other words, the contests in GE16 will most likely be three-way cases if Bersatu decides to leave PN (see Table 2).

Similar three-way dynamics in Malay majority areas were evident in GE14 where Bersatu, which contested under PH logo, faced off with BN-UMNO and PAS. Bersatu benefitted from the defections of UMNO supporters disgusted by the 1MDB scandal, and the party went on to win 13 parliamentary seats albeit some of them by a slim margin, such as Sungai Besar in Selangor (714 votes), Kuala Pilah (200 votes), and Tanjung Piai (524 votes).

As Bersatu transitioned into an opposition party after GE15, the face of its leadership also changed (see Table 2). Hamzah Zainuddin, the party’s secretary general and MP for Larut, became the PN leader in parliament, replacing Muhyiddin Yassin.[11] Home Minister during the 33-month PN government, Hamzah was formerly an UMNO MP who switched to Bersatu after the 2018 general election.[12] Alongside Hamzah in the Bersatu leadership line-up is Azmin Ali, his co-plotter in the Sheraton Move that brought down the then-PH government. Azmin, who was the former deputy president of PKR and Chief Minister of Selangor, was tasked to head PN’s efforts to take over Selangor in the 2023 state elections. PN did surprisingly well in Selangor by gaining 22 of 56 seats with several surprise wins in urban seats such as Taman Medan, Gombak Setia and Azmin’s own Hulu Kelang. PN’s achievement in Selangor might inject Bersatu with optimism that it can be competitive in urban and semi-urban Malay-majority seats.   

Table 2: Bersatu and its competitors in the 2018 general election

PAS40
BN-UMNO46
BN-MIC1
BN-MCA4
Gerakan1
DAP1
Total seats contested52
Total seats won13

Malay voters might find Bersatu attractive in areas where BN-UMNO had always done well historically and had deep roots. These are not as ideologically committed as PAS voters and the main reason they support PN has been unhappiness with UMNO’s corruption-charged president, Ahmad Zahid Hamidi.[13] They do not subscribe to PAS’s rigid interpretation of Islam but nevertheless are strongly pro-Malay-Islam and will not go back to UMNO until the party undergoes a major overhaul, something that does not seem likely anytime soon.  

Thus, the key to Bersatu’s competitiveness as a solo contender hinges on its ability to attract the former UMNO supporters who had been shifting their allegiance to PN since GE15. As mentioned above, these voters are not ideologically bound to PN like dyed-in-wool PAS members who had gone through a rigorous indoctrination process. These former UMNO voters support a party they believe is the most dependable when it comes to safeguarding the interests of Malays and Islam, a position held by UMNO for the longest time. Now the vanguard role has gone to PN, due to its exclusive ethnoreligious focus, and that coalition is seen as a more reliable defender of Malay and Islamic interests in Malaysia. These voters are not likely to return to UMNO’s fold for the simple fact that DAP is part of the Unity Government. The challenge for Bersatu now is how it is to bring these Malay voters into its fold.

It may be illuminative at this point to take a closer look at two long-held UMNO parliamentary seats which were snatched by PAS candidates contesting under PN in GE15 (see Table 3 and 4).

Table 3: Election results in Jasin (P139), Melaka (source: https://undi.info/)

 GE14GE15
BN-UMNO26,56027,571
PH26,341 (Amanah)21,674
PAS / PN8,860 (PAS)27,893 (PN)
Number of voters61,76177,598
Voters’ turnout84 percent81 percent

Table 4: Election results in Kuala Krau (P87), Pahang (source: https://undi.info/)

 Total votes in GE14Total votes in GE15
BN-UMNO18,05821,481
PH5,071 (Bersatu)3,593
PAS / PN15,182 (PAS)22,505 (PN)
Number of voters38,31147,753
Voters’ turnout81 percent79 percent

One common characteristic of these two seats is that UMNO managed to increase their total votes in GE15 despite losing, bucking the trend observed in other Malay-majority constituencies. UMNO candidates lost by a razor-thin margin: 322 votes for Jasin and 1,024 votes for Kuala Krau. These are the type of seats that might provide Bersatu with a fighting chance should it decide to contest alone. Kuala Krau, for instance, contains numerous Felda settlements, which for the longest time had been a vote bank for UMNO. Jasin too was a long-time UMNO-BN fortress until PAS-PN took over in 2022. There are at least 20 seats akin to Jasin such as Kepala Batas and Tasik Gelugor in Penang, Lumut in Perak, Rompin in Pahang, and Pagoh in Johor that can be amenable to Bersatu. Bersatu can be electorally viable if it can convince enough UMNO voters and non-PAS PN voters in these areas to come over to its side. There are many UMNO voters who are not happy with the party joining the Unity Government and their resistance was apparent during the six state elections last year when there was a low vote transferability from UMNO to the Unity Government.[14] Bersatu can capitalize on the Unity Government’s inability to attract support from UMNO supporters who prefer to sit on the fence or support PN.

What can Bersatu do to attract these Malay voters to the party? One way is for Bersatu to rebrand itself as a new much-improved UMNO – something the current UMNO has miserably failed to do.[15] In the GE15 and the six state elections in 2023, Malay voters who felt that Malay and Islamic interests needed to be protected did not have any other choice besides PN, which ran an effective campaign to discredit UMNO and project itself as the only credible alternative.

If PN breaks up, Bersatu can show that it is in a better position to safeguard Malay and Islamic interests than PAS. It can chart its own way of doing so without being burdened by elements of religious zealotry found in PN now. Bersatu does to a degree emulate BN’s concept of “primus inter pares” (first among equals) when it comes to cooperation with other ethnic groups, which for decades had formed the bedrock of the BN-led government, and established a non-Malay wing that fielded candidates. Perhaps by actively courting non-Malay support, particularly those not happy with the direction PH is heading in, Bersatu may gain a competitive edge over UMNO and PAS. 

National surveys have also shown that Bersatu leader Muhyiddin Yassin still retains popular support especially among Malays, compared to other leading Malay figures such as Anwar Ibrahim, Zahid Hamidi and Ismail Sabri.[16] This is primarily due to his decisive action during the onset of the COVID19 pandemic and the paternalistic image of Abah (father) he projected during the time of crisis. Bersatu can still bank on Muhyiddin’s respectable approval rating to siphon support from UMNO and PN voters.

The biggest challenge for Bersatu remains its weak grassroots machinery, which will be exposed once it separates from PAS. As a relatively young party, Bersatu does not have time to set down roots at the communal level. It is also a party that is primarily driven in a top-down fashion, founded as it was by political elites. To become electorally viable, Bersatu must develop its own grassroots network of volunteers and party cadres to rival UMNO and PAS, especially if it aims to compete in rural and semi-rural areas. Even to be competitive in Malay-majority seats in urban areas such as Gombak Setia, Hulu Kelang and Taman Medan – seats won by Bersatu in the 2023 state election with significant help from PAS volunteers – requires Bersatu to run a well-oiled political machine that can cater to the needs of urban dwellers.[17] Without political mobilization at the grassroots level, particularly in the Malay heartlands, Bersatu’s chances of success at going it alone is slim to none. The failure of Amanah to make an impact in Kelantan despite splintering from PAS is a perfect case in point.

Finally, Bersatu needs to showcase a new crop of young and fresh leaders to inspire voters.  Old leadership is what Malay voters associate with UMNO, and for Bersatu to supplant UMNO as the new vanguard for Malay and Islamic interests, it needs to groom and promote a leadership cohort that is professional, reform-minded, policy-oriented and unburdened by political baggage. One that comes to mind is the current state assemblyperson of Seberang Jaya in Penang, Izhar Shah Arif Shah, who won the seat formerly held by PKR in 2023 on his first try. Right now, the next line of leaders in Bersatu such as Azmin Ali and Ahmad Faizal Azumu (the former Chief Minister of Perak and Minister of Youth and Sports) are keeping a low profile as the opposition voice against the Unity Government. Azmin perhaps is the more controversial and polarizing of the two but his experience in managing Selangor, the richest state in the federation, can be an asset to Bersatu in moving forward.

Bersatu’s current partner PAS has started to shift gradually to non-ulama leadership by giving more prominent roles to leaders with a professional background such as Ahmad Samsuri Mokhtar and Syahir Sulaiman.[18] It is high time that Bersatu follow suit.

ENDNOTES


For endnotes, please refer to the original pdf document.

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: /support/get-involved-with-iseas/
ISEAS – 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
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha  
Managing Editor: Ooi Kee Beng   Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

2024/16 “Does Derisking or Decoupling Signal the Death Knell for the Export-led Model in Southeast Asia?” by Jayant Menon

 

Trucks passing by during the loading and unloading of containers at Tanjung Priuk Port in Jakarta, Indonesia, on 12 February 2024. Photo by Darryl Ramadhan/NurPhoto/NurPhoto via AFP.

EXECUTIVE SUMMARY

  • The death of the export-led model has been predicted many times. Most recently, it has come from the rise in anti-globalisation-driven protectionism and calls for derisking or decoupling, but again the rumours of its demise may be greatly exaggerated.
  • If the export-led model of old is dead or dying, then it is being superseded by one in which the composition and the pattern of trade may change, but not at the cost of its importance. The composition is shifting from goods to services while the pattern of trade is being driven more by geopolitics than by efficiency.
  • Trade statistics may have underestimated the true significance of digital trade and exaggerated the trade slowdown, given the measurement problems involved. Digital goods and services are likely to make up most of future trade growth, with digitalisation facilitating future services trade growth.
  • The export-led model is likely to survive. Southeast Asia’s long-standing commitment to free and open trade has facilitated massive economic transformation and brought much social progress. Furthermore, the growth and spread of supply chains in the region have underpinned its economic success, and this is largely irreversible.

* Jayant Menon is Senior Fellow at ISEAS – Yusof Ishak Institute. He thanks Cassey Lee and Maria Monica Wihardja for useful comments, without implicating them in any way.

ISEAS Perspective 2024/16, 4 March 2024

INTRODUCTION

While the rise in anti-globalisation sentiments can be traced back to at least the 2008 Global Financial Crisis (GFC), the COVID-19 pandemic reinforced it, leading to an increase in protectionism throughout East Asia and around the world. Many of the barriers to labour mobility introduced during the pandemic have been slow to come down and, in some countries, these have still not been completely reversed. Meanwhile, industrial policy has enjoyed a major return to popularity, especially in the United States (US).

These developments have been facilitated by, and ironically contributed to, an increasingly ineffectual World Trade Organisation (WTO). To some, the rules-based multilateral trading system is under threat, and may even signal the end of the export-led model in spearheading growth in the region. 

In essence, the export-led model involves a country pursuing economic growth and development mainly by opening itself up to international trade, where most of the increase in employment and per capita incomes derives from the successful export of goods and services. This is in contrast to the import substitution model where countries strive to become self-sufficient by developing their own industries under protectionist and industrial policies.

The objective of this article is to examine whether the increasing moves to derisk or decouple signifies the death knell for the export-led model, particularly for the Southeast Asian region. In other words, will the region’s long-standing commitment to openness be able to withstand the rise in anti-globalisation sentiments and the return to popularity of industrial policy? If the export-led model is indeed dead or dying, what will replace it and in what form? Or is the export-led model evolving rather than dying, and what shape is it likely to take, going forward? These are the questions that we will try to answer.

To set the stage, we begin by examining the trend in the reemergence of industry policy and protectionism, focussing on the US, before asking if the recent distinction being drawn between derisking and decoupling is real or rhetorical. We then consider the key question of whether the export-led model is dead, dying, or evolving.

THE US EMBRACE OF INDUSTRIAL POLICY AND SECURITY-DRIVEN TRADE POLICY

Industrial policy, in one form or the other, is not new to the US. More recently, it started gathering momentum with the Export Control Reform Act of 2018, which preceded the Inflation Reduction Act (IRA) and the CHIPS and Science Act in August 2022. The return of industrial policy is driven by a combination of the need to address climate change challenges through clean energy transitions as well as geostrategic concerns that focus on reducing dependence on China. In less than a year, the 2022 IRA and CHIPS Acts have already had significant direct and indirect effects on the East Asian region, especially on China and Southeast Asia. The subsidies linked to domestic content requirements in these statutes have shifted sourcing patterns, while restrictions on the exports of advanced microchips to Chinese firms have directly affected trade. World Bank (2023) shows how these laws have reduced exports to the US from China by about 10 percent since they came into effect and by almost 5 percent for ASEAN countries, while imports from the United States-–Mexico–Canada Agreement (USMCA) countries have increased. With the nexus between trade and investment, global FDI flows have also slowed since the GFC to a decade-low just before the pandemic hit (United Nations 2017), making them fall even further.

These are worrying trends, but it is important to look beyond the numbers to determine whether or not rumours of the death of the export-led model are exaggerated. Underlying drivers of the current trend favouring industrial policy and other forms of protectionism may represent either transitory forces or a more permanent shift in direction. And there are questions about how accurately the statistics capture the rapidly changing nature of globalisation and the associated changes in international production, trade and investment flows.

The direct impact of US industrial policy extends beyond its borders through the provision of preferential treatment to FTA partners and thereby discrimination against others. It may also have spill-over effects by contributing to an already growing appetite for similar policies in the East Asian region and around the world, especially Europe. This tit-for-tat policy game is not confined to tariffs but also applies to subsidies and other instruments of protection as countries try to compensate for and compete on a playing field that is growing increasingly uneven.

Since it is having both direct and indirect effects on trade in the region, as well as on policy setting, it is important to look more closely at what is driving the interest in industrial policy in the US. For decades, US trade policy was run by the US Trade Representative’s (USTR) office. The USTR negotiated all key trade agreements and was strongly pro-trade and pro-liberalisation. Under the Biden administration, the power on setting the trade agenda appears to have shifted to the Commerce Department. This shift in power has already had a profound influence on US trade policy.

Unlike the USTR, whose mission is to promote trade and investment through advancing liberalisation and maintaining a rules-based order, the Commerce Department is focussed on the defence and promotion of US companies and the protection of US technologies. Although the zeal with which the USTR has been pursuing its mission has weakened under the Biden administration, it is the shift in power to the Commerce Department that has markedly changed the nature and direction of US trade policy. This shift favouring the Commerce Department itself reflects the underlying ‘securitisation’ of US trade policy and the rise in US nationalism in technology and other associated forms.

It is the Commerce Department that has been overseeing the rollout of the massive subsidies being offered to re-shore, near-shore or friend-shore semiconductor manufacturing, restricting sales of advanced US technologies to various Chinese companies and other protectionist policies. This led some commentators like Alden (2023) to conclude that the US shift to a more nationalist trade policy, driven by domestic industrial interests and national security concerns, will be durable.

The question we need to ask is whether this shift will also permanently change Asia’s commitment to open and free trade and investment.

DECOUPLING AND DERISKING: REAL OR RHETORICAL?

At the G7 Summit in Tokyo in May 2023, US President Joe Biden tried to clarify that the objective of US economic relations with China was not to decouple[1] from it but to derisk and diversify. Biden has repeated the ‘derisk, not decouple’ mantra several times since, most recently at the United Nations General Assembly in September 2023.

These statements should be welcomed by East Asian countries whose manufacturing supply chains are intricately linked to China. Given the highly interdependent nature of production through supply chain networks, policies that directly impact China will reverberate throughout the region. But this rhetorical shift may not translate directly into substantive change. The United States may stall punitive measures initially, to be followed by a reversal or reduction. On the other hand, Biden’s statements may turn out to be simply a play on words. If it is mostly a rhetorical rather than substantive change, as many fear, then the real risk of further escalation in tensions, and increased supply chain disruption, will remain.

Elon Musk recently described the economic relationship between China and the global economy as akin to conjoined twins,[2] implying that the two were inseparable. This expressed position also reflects the growing chasm between private sector interests and government policy, even when the latter claims to reflect and serve the former. If Musk is correct about China and the global economy, then the interdependence between China and ASEAN is greater still. ASEAN’s supply chains remain China-centred and the idea that they can decouple from China is both impractical and imprudent.[3] There may be room, however, for diversification. Over-reliance on one or a few countries, or indeed firms, carries obvious risks.[4] ASEAN’s economic prospects are heavily dependent not just on China, but also the US. Reducing dependence on both countries through diversification would also reduce risk.

While diversifying trade patterns will increase the resilience of trade flows, and thereby the sustainability of the export-led model, will it be sufficient to counter the long-term trend decline in trade growth? Trade growth has been slowing in East Asia for some decades. While it averaged over 8 per cent in the years leading up to the 2008 GFC, it slowed to around 5.2 per cent after 2010 and is expected to fall to 4.4 per cent in the post-pandemic years (Pacific Economic Cooperation Council 2023). When normalised by GDP, the slowdown is less pronounced but it still remains significant.

The slowdown in trade growth has led some to suggest yet again that the export-led model is dead. Similar predictions were made soon after the 2008 GFC when current account imbalances came to dominate the global economy. The focus then was to rebalance sources of economic growth by shifting them from the external sector to domestic demand. Though much attention had focused on China, other Asian countries with sizeable current account surpluses also proposed rebalancing. The International Monetary Fund (IMF) was prominent in calling for China to rebalance in the early 2010s (Singh 2011; Arora and Carderelli 2011). The fact that it is still calling for it in 2023 suggests that the expected rebalancing has not happened (Bloomberg 2023).

The two-decade steady decline in the region’s trade growth rate is a cause for concern but a lot will depend on what is driving it. While supply chains are shortening (Antras 2020), and some policy-induced reshoring has taken place (Nguyen 2024), the slowdown has mainly affected goods rather than services trade (McKinsey 2016). The potential for growth in trade in services, especially intermediate services, is huge, and technological change related to digitalisation will further reduce barriers to trade in services (Baldwin 2022).

EVOLVING, NOT DYING

This has led some commentators like Baldwin (2023) to assert that globalisation is not dead but is simply transforming. Similarly, if the export-led model of old is dead or dying, then it may be superseded by one in which the composition and the pattern of trade change, without affecting its role or importance. The composition will shift away from goods towards services while the pattern of trade will be determined less by efficiency and more by geopolitical factors.

Recent research by the World Bank (2021) and the IMF (2018) warn that the trend of premature deindustrialisation and the spread of automation and digital technologies has made the traditional development model of export-led manufacturing seen in East Asia less viable for developing countries to replicate in the future. The World Bank study goes so far as to suggest that a services-led export model is the only alternative for developing countries. While debate continues (see Hauge 2018) on the respective roles that services and manufacturing play in different developing economies, there is growing agreement that diversification must increase within, not just between, these sectors.

Rapid growth in digital trade is related to this compositional shift towards services. Digital trade did not exist when the trade slowdown started two decades ago. In fact, trade has now rapidly evolved to include trade in digital goods and services, digitally ordered goods and services and digitally delivered services. Digitalisation increases the scale, scope and speed[5] of trade. And this will affect assessment of the viability of the export-led model in at least three ways.

First, digital goods and services are likely to make up most future trade growth, while digitalisation will facilitate future services trade growth.

Second, reported statistics on trade may underestimate the true volume of digital trade, given a host of measurement difficulties (see, for instance, IMF 2023). As the most rapidly growing component of trade, some of which is in place of conventional trade flows, the underestimation of digital trade volume may have significantly exaggerated the extent of the trade growth slowdown.

Third, many of the barriers that inhibit goods trade in developed countries do not apply to services trade (Baldwin 2022), accounting for its rapid growth, while the increasing use of the digital medium enhances the ability of traders to circumvent existing barriers, reducing the effectiveness of protectionist policies. New technologies and business models are challenging the way that international trade and investment policy is made. As far as the performance of the export-led model is concerned, the above factors suggest that trade may be growing a lot faster than statistics suggest, and further, that this trend is only likely to increase.

There are several reasons why the export-led model is unlikely to die anytime soon. Though the shift towards embracing industrial policy may represent more than a transitory phenomenon in the US, the fact that its security-driven trade policy has favoured friend-shoring and near-shoring more than reshoring implies a change in the pattern rather than the volume of trade. Such policies have so far favoured countries which have FTAs with the US, especially USMCA countries and trusted allies like India and Viet Nam, at the expense of China and ASEAN. This could change if members of the Indo-Pacific Economic Framework for Prosperity succeed with efforts to improve market access provisions, which seems increasingly unlikely (see Menon 2023a), or if attempts by ASEAN countries like Indonesia[6] and the Philippines to sign limited FTAs for critical minerals materialise (see Moriyasu 2023).

Japan’s recent foray into industrial policy is also aimed at reducing reliance on imports from China, by offering incentives to its firms to relocate their imports to ASEAN countries though with relatively limited impact so far. Again, this will mainly change the pattern rather than the significance of trade. Similarly, the rapid growth in digital trade is altering the product composition of trade, as new digital goods and services are traded and as modes of delivery change. To the extent that these changes affect volumes of trade, the trade statistics probably underestimate its true significance given that measurement difficulties lead to under-reporting (Menon 2023b).

CONCLUSION

The recent rise in protectionism and the return to popularity of industrial policy around the world have led some to conclude that the export-led model is dead, yet again. Similar predictions were made soon after the 2008 GFC but these were proven to be wrong then, as they might be again. The main reason why the export-led model is likely to survive this time, in one form or the other, is the region’s long-standing commitment to free and open trade, which has facilitated massive economic transformation and social progress. This experience cannot be denied, overlooked, or forgotten. The growth and spread of supply chains in the region have underpinned its economic success and is largely irreversible.

There is evidence that this commitment is still present. Recently, Malaysia decided to remove price controls and subsidies[7] on sensitive agricultural products, while reiterating its commitment to openness. The country also questioned the need to return to pre-pandemic levels of dependence on foreign workers deemed critical to retaining the competitiveness of its tradable goods sector. But pragmatism has trumped nationalism and the policy of openness to such flows has been reinstated. The Philippines has removed[8] the long-standing and controversial foreign equity limitation on public services, allowing 100 per cent foreign ownership in all public service sectors outside of public utilities, but including railways and airports.

These are indicators of the region’s commitment to openness, reaffirming its liberalisation credentials even during uncertain times when the temptation to turn inward is at its highest. The ASEAN-led Regional Comprehensive Economic Partnership initiative with its open rules of origin at a time of global pressures against liberalisation is an example, as is the recent launch of negotiations for the ASEAN Digital Economy Framework Agreement.

If there is a risk to the export-led model, then it is likely to come from outside rather than from within the region. But whether the region’s long-standing commitment to openness will be sufficient to withstand the disruption from a sharp escalation in geopolitical tensions that leads to more fragmentation remains the primary concern.

REFERENCES

Alden, E. 2023. Why the U.S. Trade Office No Longer Runs Trade. Foreign Policy. 7 March. https://foreignpolicy.com/2023/03/07/ustr-tai-trade-biden-america-first-china-decoupling/

Antras, P. 2020. De-Globalization? Global Value Chains in the Post-Covid-19 Age. ECB Forum on Central Banking, Portugal. https://www.ecb.europa.eu/pub/conferences/shared/pdf/20201111_ECB_Forum/academic_paper_Antras.pdf

Arora, V. and R. Carderelli. 2011. Rebalancing Growth in Asia: Economic Dimensions for China. Washington, DC: IMF. https://www.elibrary.imf.org/display/book/9781616350567/9781616350567.xml

Baldwin, R. 2023. Globalisation isn’t dead, it’s transforming. Strategy. 26 June.https://www.imd.org/ibyimd/videos/globalization-isnt-dead-its-transforming-and-that-will-change-how-we-do-business/

Baldwin, R. 2022. The peak globalisation myth: Part 4 – Services trade did not peak. VoxEU, 3 September. https://cepr.org/voxeu/columns/peak-globalisation-myth-part-4-services-trade-did-not-peak

Bloomberg. 2023. IMF Chief Urges China to Rebalance Economy Toward Consumption. 26 March. Bloomberg News. https://www.bloomberg.com/news/articles/2023-03-26/imf-chief-urges-china-to-rebalance-economy-toward-consumption

Gill, I. 2022. The Green Great Game: Techno-nationalism, climate critical minerals and low-carbon technologies, PIIE-LKY School of Public Policy STEP Conference, Singapore, November 10-11.

Hauge, J. 2018. Manufacturing still matters: five reasons why the IMF is wrong. The Conversation, 19 June. https://theconversation.com/manufacturing-still-matters-five-reasons-why-the-imf-is-wrong-96163

IMF. 2023. Handbook on Measuring Digital Trade: Second edition, Washington, DC: IMF. https://www.imf.org/en/Publications/Books/Issues/2023/08/17/Handbook-on-Measuring-Digital-Trade-Second-edition-537466

IMF. 2018. World Economic Outlook. Washington, DC: IMF. https://www.imf.org/en/Publications/WEO/Issues/2018/03/20/world-economic-outlook-april 2018

McKinsey. 2016. Digital Globalization: The New Era of Global Flows. 24 Fenruary.https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/digital-globalization-the-new-era-of-global-flows

Menon, J. 2023a. What Can Malaysia Expect from IPEF? Perspective 2023/64, Singapore: ISEAS-Yusof Ishak Institute. /articles-commentaries/iseas-perspective/2023-64-what-can-malaysia-expect-from-ipef-by-jayant-menon/

Menon, J. 2023b. The export-led model is evolving, not dying. East Asia Forum Quarterly 15(4), pp. 40-3. East Asia Forum Quarterly: Volume 15, Number 4, 2023 (anu.edu.au)

Menon, J. and A. Melendez. 2019. Upgrading the ASEAN–China Free Trade Agreement, East Asia Forum, 14 August. https://eastasiaforum.org/2019/08/14/upgrading-the-asean-china-free-trade-agreement/

Moriyasu, K. 2023. US and Indonesia upgrade ties with eye on critical minerals pact. Asia Nikkei Review, 13 November. https://asia.nikkei.com/Politics/International-relations/Indo-Pacific/U.S.-and-Indonesia-upgrade-ties-with-eye-on-critical-minerals-pact

Nguyen, Q-C. 2024. The Deglobalization Myth: How Asia’s supply chains are changing.Singapore: Hinrich Foundation. https://research.hinrichfoundation.com/hubfs/White%20Paper%20PDFs/STI%202023%20Deep%20Dive%20-%20How%20Asia%20supply%20chains%20are%20changing%20-%20Hinrich%20Foundation%20-%20January%202024.pdf?__hstc=251652889.dfdf1fb5caa00cfca72bc5c2e17970eb.1705164831972.1705164831972.1705164831972.1&__hssc=251652889.2.1705164831973&__hsfp=3748387669

Pacific Economic Cooperation Council. 2023. The State of the Region. Singapore: Pacific Economic Cooperation Council. https://www.pecc.org/pecc/208-publications/949-state-of-the-region-2023-2024

Pangestu, M. 2022. Critical Minerals: challenges for diversification, climate change and development. Peterson Institute for International Economics Webinar, 27 April. https://www.piie.com/sites/default/files/2023-04/2025-04-27pangestu-ppt.pdf

Singh, A. 2011. Tipping the Scales—Rebalancing Growth in Asia. IMF Blog, 29 April. Washington, DC: IMF. https://www.imf.org/en/Blogs/Articles/2011/04/29/rebalancing-growth-in-asia

United Nations. 2017. Investment Trends Monitor, Geneva: United Nations Conference on Trade and Development. https://unctad.org/system/files/official-document/diaeiainf2019d1_en.pdf

World Bank. 2021. At Your Service: The Promise of Services-Led Development. Washington, DC: World Bank. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/155731631771398616/main-report

World Bank. 2023. East Asia and Pacific October 2023 Economic Update. Washington, DC: World Bank. https://www.worldbank.org/en/publication/east-asia-and-pacific-economic-update

ENDNOTES


For endnotes, please refer to the original pdf document.

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: /support/get-involved-with-iseas/
ISEAS – 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
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha  
Managing Editor: Ooi Kee Beng   Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng  
Comments are welcome and may be sent to the author(s).

 

“How Thailand’s Move Forward Party’s Fandom Strategy Shaped the 2023 General Election” by Alexandra Colombier

 

EXECUTIVE SUMMARY

• The concept of political fandom, the state of being fans of a politician or of a political party, played a crucial role during Thailand’s General Election in 2023. Fandom contributed to the popularity on social media of politicians, such as Pita Limjaroenrat, the Move Forward Party’s leader and prime ministerial candidate.

• The strategies involved in achieving celebrity status for politicians are varied. This paper provides a case study of the factors behind the success of Pita and the Move Forward Party and contrasts these with reasons why Pita’s key political opponents were less effective.

• It argues that the digital age and the transcendence of politics into pop culture, where celebrity status and fandom can drive electoral outcomes, signify a profound shift in democratic participation, political engagement and the very fabric of Thai politics.

• While fandom has become a stream in participatory democracy, it also highlights the polarized and temperamental nature of Thailand’s contemporary hyper-partisan political scene.

Trends in Southeast Asia 2024/5, March 2024

 

“China’s Cultural Diplomacy in Indonesia: The Case of a Transnational Singing Contest” by Chang-Yau Hoon and Ardhitya Eduard Yeremia

 

EXECUTIVE SUMMARY

• The emphasis on cultural connectivity in China’s growing presence and involvement in Southeast Asia highlights the importance China places on people-to-people exchanges as part of its global engagement strategy.

• The remarkable ascension of China over the recent decades has precipitated a proliferation of anti-China sentiments, particularly galvanized within the crucible of a “discourse war” with Western powers, as expressed in the latter’s “China threat” narrative.

• In response to such challenges, China has made substantial investments in cultural diplomacy, to augment its soft power through orchestrated global outreach initiatives.

• This article examines Chinese cultural diplomacy in the realm of entertainment, specifically “The Melody of Spring: Transnational Spring Festival Gala” hosted in Nanning, Guangxi, and disseminated globally each Chinese New Year.

• Against the legacy of China-Indonesia bilateral relations as well as Indonesia’s treatment of its Chinese minority, this study explores China’s cultural diplomacy and soft power in contemporary Indonesia.

• Through the case study of the “Transnational Spring Festival Gala”, this article posits that China’s cultural dissemination as an instrument of soft power has yielded little influence on the Indonesian public and has limited impact on the formation of a transnational imagined community.

Trends in Southeast Asia 2024/4, February 2024