2024/3 “Chinese Language Education in Southeast Asia: Towards Greater Significance” by Leo Suryadinata
EXECUTIVE SUMMARY
- Chinese migration to Southeast Asia (SEA) has a long history. Where the issue of Chinese education is concerned, it is analytically fruitful to separate the Contemporary Period stretching over the last three decades from the earlier Modern Period going back to the late 19th century.
- In the Contemporary Period, these schools have become localised to the individual states. A rising China has led to the proliferation of Confucius Institutes (CI) in the region. Aside from CIs, China has also begun to offer tertiary scholarships and collaborate with tertiary institutions in the region.
- These are largely welcomed in Southeast Asia, perhaps for two reasons. Firstly, the nation-building process has been largely successful and local states no longer perceive China as a serious threat as China has become more materialistic and less ideological. Secondly, the economic opportunities presented by a rising China have allowed for Chinese education to transcend beyond ethnicity concerns into economics and other profitable areas.
- Nevertheless, due to the earlier “nationalisation” of many Chinese schools in SEA, the standard of Chinese has declined among ethnic Chinese.
- While the reach of Chinese education – and thus, Chinese soft power – is growing in SEA, it is still limited. The growth of Chinese education is not without its challenges, with anti-Chinese rhetoric and the politicisation of China’s educational institutions being a deterrence to the uptake of the language.
* Leo Suryadinata is Visiting Senior Fellow at the Regional Social and Cultural Studies (RSCS) Programme, ISEAS – Yusof Ishak Institute. This is a revised and abridged version of a paper originally presented at the conference on “Chinese Culture and China’s Soft Power in Southeast Asia: Education, Language and Arts”, held in October 2022 at ISEAS – Yusof Ishak Institute. The author has benefitted from the comments of participants.
ISEAS Perspective 2024/3, 17 January 2024
INTRODUCTION
As China emerges as a world power, its soft power ambitions understandably extend to include Chinese education. This article examines the measures taken by Southeast Asian states to manage this development, and how these states, in modifying policies and attitudes on this front, have significantly affected the nature and significance of Chinese language education in the region.
Chinese migration to Southeast Asia (SEA) has a long history. Throughout this, the migrants had vehemently sought to preserve their language and culture. Education in their communities was therefore of vital importance to them. Before the rise of China as a world power in recent decades, Chinese education had often faced opposition from governments of the day, be they local or colonial. We term this as the Modern Period.
The measures undertaken differed from territory to territory, and from country to country, resulting in the emergence of different types of Chinese schools.
In the last three or four decades, however, as the influence of China grew, new processes can be identified which are different from those of the Modern era. This Contemporary Period, however, generated different political scenarios for the Southeast Asian states.
FROM MODERN TO CONTEMPORARY
The Modern Period
Chinese migrants in SEA had often organised themselves by clan and provincial associations generically called Zongxiang Huiguan （宗乡会馆, also called dialect group associations). These Huiguan were created to help new migrants survive and they would establish temples, funeral associations and Chinese schools. The last was of particular relevance in the twentieth century, when modern Chinese education began to flourish. Taking the cue from developments in China, colloquial Chinese, named Bai Hua Wen （白话文） was adopted in Chinese schools, and Classical Chinese Wen Yan Wen（文言文）faded from memory.
The majority of the Chinese migrants in SEA went to Chinese primary schools and, later on, to Chinese secondary schools once these were established. Those who graduated from the latter would seek tertiary education to China. Tan Kah Kee (陈嘉庚, 1874–1961), a wealthy businessmen and philanthropist specially built Chip Bee School （集美学校）in 1918 and Xiamen (Amoy) University in 1921, both in China, for overseas Chinese students to receive higher education.[1]
In the mid-1950s, the first and only Chinese-medium university in SEA was established. This was Nanyang University (Nanyang Daxue or 南洋大学). Initiated by the Chinese business community led by Tan Lark Sye (陈六使，1897–1972), leader of the Hokkien (Fujian or福建) Association. Nanyang University (1955–1980) marked the furthest development of Chinese education in SEA during the Modern Period. In the 25 years of its existence, it produced about 12,000 graduates, many of whom went on to serve as teachers in Chinese schools in Singapore and Malaysia, and beyond.
After the establishment of the People’s Republic of China (PRC) in 1949, the division of Chinese schools in SEA into pro-Taipei and pro-Beijing schools became more pronounced.
As local nationalism in SEA grew, all these schools came to be considered a national security and/or nation-building problem. Indonesia would allow only the children of foreigners to study in Chinese schools at first, but by 1966, it put a stop to these schools altogether. States like Thailand and the Philippines restricted the operation of pure Chinese schools and limited the number of hours for the teaching of the Chinese language. Singapore transformed all Chinese schools into national schools, where Chinese is taught as a ‘mother tongue’ (or second language). In Malaysia, Chinese primary schools were changed to national-type schools under the national school system, but remained Chinese-medium schools. At the secondary school level, however, all national-type schools use Malay as the medium of instruction. The so-called independent schools (独立中学) largely retain Chinese as the medium of instruction.[2] Some of the major Chinese schools in the Modern Period are listed in Table 1.
The nationalisation or localisation of Chinese medium schools took place in many SEA countries in the last century, coinciding with their nation-building processes. A decline in the standard of the Chinese language in these countries was inevitable.
If we examine the Chinese language and Chinese education in the contemporary scene, one can see that all of the Southeast Asian states, with the exception of Malaysia and possibly Laos, have introduced a national education system in which either English or the national language has become the medium of instruction, and the Chinese language is taught as either the ‘mother tongue’ or second language. Where private schools run by ethnic Chinese are allowed (except in Malaysia and possibly Laos), they tend to function as “tuition schools” that supplement national schools rather than as full-fledged schools.
Table 1: Major Chinese High Schools in Southeast Asia
| School | Location | Remarks |
| Pah Cheng Tsung Hsueh 巴城中学 （巴中） | Jakarta, Indonesia | Pro-Beijing. Closed down in 1966; Revived in 1990 mainly a primary school. |
| Chung Hwa Chung Hsueh 中华中学 （华中） | Jakarta， Indonesia | Pro-Beijing, Closed down in 1966 |
| Pa Hwa School 八华学校 | Jakarta, Indonesia | Neutral in orientation. Closed in 1966; Revived in 1998 as trilingual school. |
| Hwa Chiao Chung Hsueh 华侨中学（华中） | Singapore | Transformed into national-type school. |
| Chung Cheng Chung Hsueh 中正中学 | Singapore | Transformed into national-type school. |
| Foon Yew High School 宽柔中学 | Johor, Malaysia | Transformed into national-type school |
| Confucius School 尊孔中学 | Kuala Lumpur, Malaysia | Divided into national-type school and Private independent school |
| Chung Ling High School 钟灵中学 | Penang, Malaysia | Divided into national-type school and Private independent school |
| Tiong Se Academy 中西学院 | Manila, the Philippines | Transformed into language school |
| Philippine Cultural College 菲律賓侨中学院 | Manila, the Philippines | Transformed into language school |
| LiaoDu Zhongxue 寮都公学 | Vientiane, Laos | Transformed into bilingual school |
| Duanhua Zhongxue 端华中学 | Phnom Penh, Cambodia | Transformed into bilingual school. |
| Nanyang Zhongxue 南洋中学 | Bangkok, Thailand | Closed in 1948. No genuine Chinese school has existed in Thailand since then. |
The Contemporary Period
The Contemporary Period sees “Chinese schools” relying less on Beijing or Taipei for teaching materials. Instead, they are concerned with the national contents of the textbooks. Singapore and Malaysia, for instance, have developed Chinese-language textbooks reflecting their own national identity. The contents lean towards creating national identities rather than Chinese identities. According to some reports, Singaporean and Malaysian Chinese textbooks are used by private schools in other Southeast Asian countries, at least prior to the Covid-19 pandemic.
Table 2 illustrates the variety of Chinese schools that are now present in Southeast Asia. These schools are under government supervision and control but due to differing conditions, they possess different characteristics.
Table 2: Five Types of Chinese Schools
| Category | Names of Schools | Remarks | |
| 1 | Full-fledged Chinese Schools | Known as Duli Zhongxue (独立中学) or independent schools in Malaysia; Also LiaoDu Gongxue (寮都公学)in Laos | Chinese is the main language used in these schools. But in LiaoDu, Lao and English are taught in the afternoon. |
| 2 | Half-day Chinese Schools | TuanHoa (Duanhua) Xuexiao (端华学校) in Phnom Penh (Cambodia) | Only half a day. Chinese is the main medium of instruction. Certificate not recognised by the government. |
| 3 | Tuition Schools | Most of the Chinese schools in Thailand and the Philippines | Supplementary schools attended by Chinese children after school hours. |
| 4 | National-type Schools | Three Languages Schools (三语学校，Indonesia); Also, Chinese primary schools in Malaysia that study three languages | In Indonesia, they are mainly Indonesian-language schools, but Chinese and English are taught. In Malaysia, national-type schools at the primary level still use Mandarin as medium of instruction, but within the national school system. |
| 5 | English Schools with Chinese as mother tongue | Almost all Chinese schools in Singapore; Chinese schools in Brunei Darussalam | English is used as the main language; mother-tongue (Chinese) is taught as a second language. |
THE ENTRY OF CONFUCIUS INSTITUTES
Aside from the local Chinese schools which have grown to encompass different local characteristics, there is also an emerging trend of language export. This has to do with the Confucius Institutes (CI) from China. The organisation responsible for the spread of the Han language, or Hanyu, is called the Office of the Han Language, termed Hanban（汉办）. Hanban is located in the Chinese Premier’s Office and is tasked since 2005 with establishing CIs（Kongzi Xueyuan, 孔子学院）throughout the world. These CIs are usually established within foreign universities, with each CI paired with a university in China.
Since 2005, Hanban has set up 40 CIs in Southeast Asia, of which the largest number is in Thailand—16 altogether. Indonesia comes second with eight institutes. There are four established in the Philippines and the rest of the countries in SEA have only one or two each. There is no CI in Brunei Darussalam.[3]
These 40 CIs were established to teach the Chinese language to Southeast Asians, both ethnic Chinese and non-Chinese. At the same time, they aim to expose them to Chinese culture. According to some reports, many Southeast Asian government officials have been taking Chinese language lessons from CIs. The students at CIs are also given opportunities to further their studies in China.
CIs offer courses in Hanyu rather than Huayu, except in Singapore, where both Hanyu and Huayu are taught in the Institute. The students are made fully aware that Hanyu is the language used in China, while the official name for the Chinese language in Singapore is Huayu. Additionally, CIs offer scholarships for students to upgrade their Hanyu skills in China’s universities. Each Confucius Institute only offers about 20 scholarships each year, and the number of applicants has always exceeded the quota, indicating the great interest that Southeast Asian students have in the Chinese language.[4]
There are two reasons attributed to the high number of CIs in Southeast Asia. Firstly, the CIs are less ideological, focusing on cultural and social aspects in their teaching. As such, they do not present a threat to the local states. Secondly, the nation-building project in Southeast Asia has been largely successful, such that these states do not deem Chinese language learning to be a threat, as in the past. With the lack of resistance from local governments, and with the economic opportunities presented by China, Chinese education has begun to transcend beyond the ethnic Chinese community.
In the West, many suspect CIs to be spy organisations and channels for CCP propaganda, but such issues have not been raised in SEA to any significant degree. Southeast Asian governments feel able to control the situation and to benefit from the presence of these institutes. In Indonesia, however, major universities such as Universitas Indonesia (UI) and Universitas Gajah Mada (UGM) do not have CIs, as many staff members are still very critical of China.[5]
EXPANSION OF CHINA’S TERTIARY EDUCATION
In what can be seen as an attempt to spread and expand China’s soft power, Beijing has also established overseas university campuses in SEA. The first overseas China’s university was established in Vientiane, Laos in October 2012. It is called Lao Soochow University, or Soochow University in Laos.[6] This university focuses on international economics, finances and trade, and the major medium of instruction is Chinese (Mandarin).[7] In their mastering Chinese language rather than English or other foreign language, one may assume that they are meant to serve in China or in Laos-China joint companies
Xiamen University in Malaysia, however, follows a different model. Established in 2016, it is an international university; all of the courses, with the exception of Chinese Studies and Traditional Chinese Medicine (TCM), are taught in English. The university offers engineering, economics, sciences and so on. Half of its students are from China, and the other half are from Malaysia and elsewhere. When the university first opened its doors, 180 students were accepted. In 2019, it boasted 120 graduates. Currently, it caters for 4,000 students, and the university expects enrolment to reach 10,000 students in a decade.[8]
The establishment of the university has aided in spreading China’s soft power. The dominant party in Malaysia then—United Malays National Organization (UMNO) did not protest against its establishment.[9] After all, the project was supported by then-Prime Minister, Najib Razak.
While no major Chinese university has established a branch in Thailand, the Open University of Fujian recently began a joint venture with the Thai Wilailak University to set up an Overseas Chinese College in Bangkok,[10] suggesting that this college will strongly attract not just students from China, but also from Thailand.
The Chinese government and various Chinese universities and foundations often offer scholarships to Southeast Asian students. These are mainly for tertiary students to study at universities all over China. It is also worth noting that they study not only languages and social sciences but also technology, sciences, economics and business administration. According to 2018 data, the largest number of Southeast Asian students in China came from Thailand, followed by those from Indonesia, Laos, Vietnam and Malaysia (see Table 3 below).
Students from remaining five Southeast Asian countries are in low numbers; according to some reports, they range from several hundred (the Philippines) to a couple of thousand (Indonesia). Very few have come from Brunei Darussalam.
Table 3: SEA Students in China and Chinese Students in SEA
| Country | Number of SEA students in China | Number of Chinese students in SEA |
| Thailand | 28,608 | 10,000 |
| Indonesia | 15,050 | A few hundred |
| Laos | 14,645 | N.A |
| Vietnam | 11,299 | N.A. |
| Malaysia | 9,479 | 10,000 |
| Singapore | N.A. | 13,000-15,000 |
Source: 2018 China’s statistics and others; various sources
CONCLUSION
In the past, Chinese schools in Southeast Asia (SEA) were established by the local Chinese communities. The states, both China and the countries of SEA, were not involved in the establishment of these schools. However, after Southeast Asian countries came into being, and local nationalism began to grow, the majority of ethnic Chinese became local nationals/citizens. This also affected local the wellbeing and nature of Chinese schools and education. The Southeast Asian states began to intervene and Chinese school curriculum became localised. After 1949, the division between the Republic of China (ROC) and People’s Republic of China (PRC) educational systems impacted Chinese education in Southeast Asia; but gradually, the PRC language system became the dominant system.
Due to the “nationalisation” of Chinese schools by many Southeast Asian states, the standard of the Chinese language among ethnic Chinese have gradually declined. With the exception of Malaysia and Laos, most “Chinese schools” have been transformed into local schools that offer the Chinese language only as a subject taught for several hours a week. Many of their teachers are not well qualified and there is no conducive environment for ethnic Chinese children to learn the Chinese language. Anti-China and anti-ethnic Chinese attitudes in many countries in the region have also impacted Chinese language learning.
However, with the rise of China and its dramatic economic development, the Chinese language has become valuable again. A strong command of the Chinese language is often required to establish economic ties with the PRC or to find work in China’s overseas companies.
China’s Hanban introduced Confucius Institutes in all Southeast Asian states but one. These not only offer ethnic Chinese but also non-Chinese Southeast Asians the opportunity to study Chinese. The Chinese language has become rather popular among non-Chinese.
Given China-US rivalry, some anti-China elements use ideological arguments to stop the further development of Chinese education. Although China itself has deemphasised the ideological contents in its overseas education, and many countries also see Chinese language and education as purely economic and technological tools, the politicisation of China’s educational institutions may present a problem in Southeast Asian states that are based on Western or religious preferences.
ENDNOTES
For endnotes, please refer to the original pdf document.
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2024/2 “The Twin Axis in Indonesian Politics: Elite Personal Ambition and the Alienation of Civil Society” by Max Lane
EXECUTIVE SUMMARY
- Two axis of tension were revealed in 2023 during the lead into the Presidential election campaign. The first relates to the political dynamics of personal ambition reaching a peak; the second relates to a dilemma faced by civil society in its relation to the political establishment.
- A 20-year process of consolidation of a homogeneous political outlook among the parties controlling the Indonesian electoral scene has facilitated a political life that is dominated by personal rivalry and ambitions, and which has opened the way for dynasty building.
- The moves by President Joko Widodo, following his 2019 rapprochement with rival Prabowo Subianto, has provoked resistance from sections of his supporters, which may in turn provoke new differentiations within Indonesian politics.
- To date, the most obvious beneficiary in the Presidential race from these developments has been Anies Baswedan.
- Meanwhile, the quandary for civil society – whether to build towards an outright opposition to the whole political elite or to try to intervene within it – is reflected in the slowness of the Workers Party (PB) to announce a clear position on who, if any, of the Presidential candidates, it will support.
*Max Lane is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute. He is the author of “An Introduction to the Politics of the Indonesian Union Movement” (ISEAS 2019) and the editor of “Continuity and Change after Indonesia’s Reforms: Contributions to an Ongoing Assessment” (ISEAS 2019). His newest book is “Indonesia Out of Exile: How Pramoedya’s Buru Quartet Killed a Dictatorship”, (Penguin Random House, 2022).
ISEAS Perspective 2024/2, 8 January 2024
INTRODUCTION
The election campaign for the February 2024 elections is well under way. Most attention at the moment is focused on the Presidential elections, overshadowing the equally important elections for the national and local parliaments. The Presidential elections have been attracting the most attention over the last 20 years. After all, considerable executive power is vested in that position, even if majority support in the parliament for government legislation and policy is also crucial.
This time, however, even more attention is focussed on the Presidential elections because of the emergence of the issue of political-dynasty building caused by the manoeuvres[1] of incumbent President Joko Widodo to secure the Vice-Presidential candidacy alongside Prabowo Subianto for his son Gibran Rakabuming Raka, and Chairpersonship of the Indonesian Solidarity Party (PSI) for his other son, Kaesang Pangarep. These manoeuvres,[2] which are being perceived as utilising state institutions such as the Constitutional Court, the National Police and the Elections Commission (KPU), have provoked accusations[3] of Widodo returning to the method of the New Order and especially to political nepotism.[4]
The emergence of this political dynasty phenomenon is the culmination of a dynamic that has been working its way through mainstream politics for two decades. Between 1998 and 2002, there was a brief political scuffle over the political character of Indonesian political life following the forced resignation of President Suharto. First, President B.J. Habibie and then President Abdurrahman Wahid introduced or discussed a number of reforms that have significantly liberalised political life. These reforms included the recognition of trade union rights and decentralisation. President Wahid also raised the possibility of ending the ban on “spreading Marxism-Leninism”, arguing for a system of the “free market of ideas”. While trade union rights and decentralisation were accepted by the majority of the political elite, Wahid’s reforms were not and the majority of the parties in parliament moved to remove him.
Since that time, all of electoral politics has been in the hands of that parliamentary majority, even as its precise composition evolved. As this parliamentary majority consolidated, so did a shared perspective on economic, social and political developments. This perspective is characterised by satisfaction with the current political status quo and the state-assisted and corruption-lubricated support for the existing private sector, dominated by national and local oligarchies. For almost 20 years, parliament exhibited no major divisions, controversies or polarising debates,[5] not even those that had provoked controversy in society.
With the consolidation of this homogeneity of outlook, the dynamic among the parties became increasingly dominated by personal rivalries and ambitions. Indeed, the first wave of evolutions in the political party world directly reflected this. Figures such as Prabowo Subianto and Susilo Bambang Yudhoyono left their Golkar or New Order military original habitat to establish parties as their personal vehicles. PDIP immediately after 1998 was the vehicle for Megawati Sukarnoputri. Later, the PDIP was used to promote Megawati’s daughter, Puan Maharani, as a political figure. The split in the PKB, ousting Wahid, was to make the PKB the vehicle for Muhaimin.
It was into this dynamic that Joko Widodo inserted himself back in 2005. It was a political arena where ideology and programme were insignificant and personal image-making was everything. Widodo was able to take advantage of a major weakness in the PDIP’s situation in relation to the dominant politics of personal ambition. Megawati’s Presidency was not a great success and when she stood against one of her own Ministers, who even had to establish a new party to compete against her, she lost. After Megawati lost against Susilo Bambang Yudhoyono, she tried again in 2009 with former general Prabowo Subianto as her VP running mate and lost again, gaining only 27% against Yudhoyono. Ever since her first defeat in 2005, the PDIP, although very much dominated by Megawati, no longer had a credible Presidential candidate.
Joko Widodo joined the PDIP in 2004 in order to stand for election as the Mayor of Surakarta (or Solo, as it is commonly called). He had not previously been involved in the PDIP, but from the beginning, that party was just a vehicle for his personal ambitions, even if he was just a new figure in the party with no real influence. As a mayoral candidate and then as Mayor, he built his image as a distinct personality quite separate from any campaign or image style of the PDIP. He did attend PDIP events wearing PDIP uniforms on occasion; however even in the matter of dress, he cultivated his own image. When he later stood for the Governorship of Jakarta, his uniform was a chequered shirt, and not the red uniform of the PDIP.
The cultivation of a personal image included, at least while in Solo through till a short while after becoming president, the practice of “blusukan”.[6] Although a millionaire businessman, with close ties to some New Order business figures including former Generals, who had schooled his children overseas, the well-publicised practice of surprise visits to marketplaces and other symbols of the common people, helped make him very popular in Surakarta. This use of a down-to-earth close-to-the-common-people political style was buttressed by one major policy initiative. For the 500,000 residents of Solo, the vast majority of whom were poor and in a precarious economic situation, he provided free health clinics and hospital care, funded from the city budget. On his second time standing for election as Mayor in 2010, he scored over 90% of the vote,[7] catapulting himself to become a national figure. The PDIP, devoid of anybody else with that kind of profile, nominated him for the position of Governor of Jakarta in 2012, and then for president in 2014. Throughout this process,[8] obviously aware of the tenuous relationship between Widodo and the PDIP, Megawati herself repeatedly reminded him publicly that he should always act as a “petugas partai”,[9] “carrying out a party task” – a reminder that he never seriously heeded. During both his presidencies, he did not work to strengthen the position of the PDIP vis-à-vis other parties, but only worked to strengthen his own position. Although elected as a figure nominated by the PDIP, the PDIP has never held any major economic policy ministries[10] in his cabinets. Key positions – for example, Cabinet Secretary, Coordinating Minister for Maritime Affairs and Investments – have been held by his close friends and long-term collaborators, such as Luhut Panjaitan and Pratikno, and not by PDIP cadres. Jokowi’s Chief of Staff for most of his time as President has been a former New Order general, Moeldoko. Other positions have gone to figures from the other parties, and this has weakened the overall position of the PDIP in the government.
Since 2015,[11] there has been common public commentary on worsening relations between Megawati and Widodo. This has now reached a peak.[12] Prabowo and Yudhoyono used their financial resources to establish political parties of their own, as did media tycoon Surya Paloh. Widodo, less resourced, hitched a ride on an established party whose weakness was its inability to produce a credible leadership personality of its own.
There are two underlying processes that need to be noted. First, the emergence of a dynasty-building President is a reflection of the basic features of Indonesian mainstream politics. Prabowo, Yudhoyono, Surya Paloh, Megawati and even the lesser personalities of the smaller parties have paved the way for Widodo and his sons. None of the current controversy centres on ideology or programme, only on the dangers of dynasty building itself.[xiii] Facilitating the specific Widodo manifestation of this personal ambition has been the PDIP’s inability to produce a home-grown leader. The PDIP’s weakness in this respect was what led to Megawati rehabilitating Prabowo in 2009 in an attempt to shore up her candidacy, and then to her raising up Joko Widodo. The PDIP is now facing off against a phenomenon that it had a part in creating.
Second, the extreme manifestation of this politics of personal ambition constituted by Widodo’s series of manoeuvres[14] has, ironically, introduced the first real potential for political differentiation. The key manoeuvres[15] were: the sudden rapprochement with rival Prabowo Subianto, getting Gibran nominated for and elected as Mayor of Surakarta, the Constitutional Court changing the rules to allow Gibran to be eligible to run for VP, and, flowing out of the above, having Gibran become Prabowo’s VP running mate. The final manoeuvre required Widodo to play out a slow betrayal of his party, PDIP, with both he and Gibran proclaiming repeatedly that they were not doing so.[16] There were even a few days when it looked like the Elections Commission had done away with the Vice-Presidential Candidate debate, meaning that Gibran would avoid having to debate with his far more politically experienced competitors.[17] Widodo’s other son, Kaesang’s, sudden selection as Chairman of the fanatically pro-Widodo PSI, making him a possible ministerial candidate, adds to the sense of an undisguised dynastic move.[18] The appointment of Luhut Panjaitan’s son-in-law as Chief of Staff of the Army further added to the atmosphere of political nepotism.[19] President Widodo has also moved to appoint several senior officers who became close to him while he was Mayor of Solo to key military positions.[20] All these manoeuvres have provoked a public reaction against what is being called New-Order style dynasty building.
A political differentiation Is starting to emerge over whether or not Widodo has gone too far. Sections of the middle class who campaigned for Widodo in 2014 have turned against him, as symbolised by the statement of Goenawan Mohammad, a famous public figure, journalist and writer. In the reformasi activist milieu, militant campaigns are developing, albeit focussed on Prabowo in the first instance.[21] In the artistic community, prominent figures such as Butet Kartaredjasa, have turned against Widodo – and been told by the police that he must not introduce politics into his performances.[22] Butet’s response was to state from the stage: “Welcome back, New Order!”[23] President Widodo has had to come out publicly to defend himself against these mounting criticisms.[24]
The main impact of Widodo’s manoeuvres has been felt by the PDIP. Hitting back, Megawati has now also used the comparison of the New Order to criticise “those newly in power”.[25] On social media, this criticism has been met with howls of cynicism, with netizens commenting that it was Megawati that elevated Prabowo, Widodo and Gibran in the first instance. Kaeseng himself replied with the comment that there have been no arrests for anybody “insulting the head of state” under Widodo.[26] During Megawati’s short presidency, there were several activists arrested, tried and sentenced to up to 2.5 years in prison for this.[27]
IS ANIES BASWEDAN THE MAIN BENEFICIARY?
If Widodo’s dynastic ambitions and Prabowo’s accommodation of them alienate some voters, where can they turn? Such voters may also be alienated from the PDIP as the situation is at least partly of PDIP’s own creation. Additionally, the PDIP’s candidate, Ganjar Pranowo, has not yet established a charisma or authority that stands out against the combination of Prabowo and Widodo, who are now also backed by former President Yudhoyono. Some polling indicates that Anies Baswedan, originally the candidate scoring the lowest in the polls, is now gaining, even after the first presidential and vice-presidential television debates.[28] Some pollsters[29] even see Anies overtaking Ganjar and that the predicted second round of voting will see Anies running against Prabowo. Anies also, although in a more roundabout way, has also started to paint the Prabowo-Gibran-Widodo camp as being tainted by New Order style tactics.[30]
A very ironical situation now prevails. Anies Baswedan may face off against the Prabowo-Gibran camp by taking advantage of any backlash against Widodo’s excessive dynastic manoeuvres. Anies himself, in his own way, exemplifies the politics of personal ambition, freed from the ideological ties that have defined Indonesian politics for 20 years.[31] Anies’s first attempt at the Presidency was to put himself forward as a candidate for Yudhoyono’s Democratic Party (PD). When the PD decided not to nominate anybody, Anies shifted to the Widodo camp and became one of Widodo’s central campaign spokespersons; as reward, Widodo appointed him Minister of Education. Then after a falling out with Widodo, Anies stood for Governor of Jakarta in 2017, nominated by a combination of Prabowo’s Gerindra and the Islamist PKS. Running against Ahok, who was supported by Widodo, Anies also flirted with the right-wing fundamentalist Alumni 212 who campaigned on a sectarian and racist stance. In 2023-24, Anies is backed by both the PKS and the more pro-pluralist PKB, connected to the NU, as well as the secular NASDEM party.
It has been previously asked whether the greater presence of Anies Baswedan on the central political stage will bring with it, for the first time in 20 years, greater policy discussion.[32] As a competition between personalities rather than ideologies or programmes, Anies does have a different background from both Prabowo and Ganjar. He is an academic and technocrat. Prabowo has been a military officer and, for the last quarter of a century, a full-time politician. Widodo has been a middle-level businessman and a politician who boasted he preferred reading comic books to politics.[33] Baswedan’s first major hit jab at Prabowo-Jokowi has been a critique of the plans for a new national capital and that he would use the budget for the development of already existing small towns throughout the country and for the education and health sectors. He also argued that the new capital would exacerbate social inequality.[34] At one level, this is also an attack on Widodo the person, as this project has become closely identified with Widodo. On another level, Anies is using his technocratic perspective to outline alternative uses for the budget. It is yet to be seen how serious this particular differentiation, based more on skill sets and style than ideology or programme, will become the longer Anies campaigns.
WHO WILL LABOUR AND THE NGOS SUPPORT?
The connection between elite politics and the social opposition,[35] embodied in the activities of Masyarakat Sipil (“civil society”) – NGOs, and issue groups, trade unions and the non-conglomerate media – is complex. Two key elements of this relationship in the election process have been reflected in the ambiguities of the new Labour Party (PB)[36] and in discussions among social activists as to whether to boycott the elections totally or to urge people to vote “anybody but Prabowo” or “Don’t vote for a kidnapper.”[37]
The situation faced by the PB as regards the Presidential election in many ways sums up the dilemmas of the sector. The PB leadership throughout 2023 and up until October stated that they would not support any candidate who had ever supported the Job Creation (Omnibus) Law.[38] This stance eliminated all the candidates. While Anies Baswedan had, perhaps, been unclear on the issue, all three of the parties backing him supported the Omnibus Law in the parliament when it was introduced and passed. In any case, the PB has announced that it would not support Baswedan, accusing him of trying to interfere in internal union affairs.[39] The PB had indicated that it would hold a special convention to make a decision on this issue. To date, however, no such convention has been held. Sources inside and connected to PB have explained that some forces inside the PB do not want a convention, arguing that there is no need to support any Presidential candidate. They argue that the PB should abstain from supporting any of the three pro-Omnibus Law candidates and concentrate on electing their candidates for the parliament.
To date, the PB has not made a clear statement on this question. In one statement, Said Iqbal, PB President, stated that the Party’s communications with Presidential candidates were not in their roles of representatives of their parties but as individuals, perhaps leaving open the possibility of an individual candidate distancing himself from his supporting party’s past positions.[40] On December 5, Iqbal stated at a meeting organised by the National Workers Union (SPN) supporting the PB, that the SPN would follow the PB’s decision on Presidential candidates, indicating that the PB was still planning such an announcement.[41] Meanwhile, the PB is supporting the ongoing campaign for a 15% increase in wages which it no doubt hopes will help its campaign. While Prabowo at one meeting declared support for workers struggles,[42] at another he called for workers not to demand excessive wage increases from business.[43] This may push PB towards Ganjar, although Iqbal has also admitted that at the local level, individual union officials may have their own inclinations.[44]
This sums up the whole dilemma for the civil society sector: should they build and become a full-blooded political opposition, presenting themselves as an alternative, or be a pressure group intervening within the elite, and seeking positions of influence. It will not be until well into January or February that both the question of any new differentiation growing among the existing parties, and of how civil society will respond becomes significantly clearer.
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). |
2024/1 “China’s Digital Silk Road (DSR) in Southeast Asia: Progress and Challenges” by Wang Zheng
EXECUTIVE SUMMARY
- The Digital Silk Road (DSR) has become a key pillar of China’s Belt and Road Initiative (BRI) and involves the prevalent participation of Chinese private tech companies.
- Overall, the DSR’s elevation of status in China’s global strategy is primarily shaped by two factors. The push factor is the rapid growth of China’s digital economy in recent years. The pull factor is China’s perception of a “digital gap” in many developing countries that restricts their digital economy growth.
- To facilitate the DSR’s development in Southeast Asia, China has sought to institutionalise the DSR through various channels, including establishing DSR-specific mechanisms and institutions, organising DSR-related events, and providing technology-training sessions.
- An analysis of the IISS’s China Connects dataset shows that: 1) all Southeast Asian countries received China’s DSR investments between 2017 and 2020; 2) China’s DSR investments in Southeast Asia are clustered in five areas: Telecoms, 5G, Data Centres, Fintech, and E-commerce; and 3) Huawei, Alibaba, and ZTE are the major investors of China’s DSR projects in the region. Chinese tech companies have also made decent progress in investing in 5G, fibre optic cables, and cross-border e-commerce in Southeast Asia between 2020 and 2023.
- Notwithstanding the DSR investments’ progress in Southeast Asia, China faces multiple challenges in pushing the DSR forward, including the growing tensions between the state and private tech companies domestically as well as intensifying US-China technological rivalry and risks of tech bifurcation. The DSR’s future in Southeast Asia will be determined by China’s ability to secure dominant positions in frontier technologies and in growing its share of the region’s digital market.
* Wang Zheng is Associate Fellow with the ISEAS – Yusof Ishak Institute and a Ph.D. candidate in political science at the University at Albany, State University of New York.
ISEAS Perspective 2024/1, 5 January 2024
INTRODUCTION
This year marks the 10th anniversary of the launch of China’s Belt and Road Initiative (BRI). Proposed by President Xi Jinping in 2013, the BRI has become China’s flagship foreign policy to realise the Chinese vision of a “global community of shared future.”[1] At the third BRI Forum in Beijing in October 2023, President Xi announced that China has signed BRI-related memoranda with over 150 countries and 30 international organisations and established more than 20 multilateral platforms to facilitate the development of the BRI projects worldwide.[2] The BRI’s coverage has also expanded from traditional physical infrastructure to health, clean energy, digital economy, and people-to-people exchanges.[3]
Among the BRI’s new development trends, the Digital Silk Road (DSR) has become a key pillar of the initiative, especially against the backdrop of the intensifying U.S.-China technological rivalry. Given the geographic proximity and close economic ties between China and Southeast Asia, regional states have been major recipients of China’s DSR investments in recent years. However, systematic DSR development analysis in Southeast Asia is still rare. To fill this gap, this report evaluates the DSR’s progress in Southeast Asia between 2017 and 2023 and analyses the major challenges China faces in pushing the DSR forward in the region, with data collected from various sources including Chinese government reports and state media releases, the IISS’s China Connects dataset, the Submarine Cable Almanac, and the websites of Huawei and ZTE.
THE DSR: WHAT’S IN A NAME?
The DSR, initially launched as the digital aspect of the BRI in 2015, was officiated by President Xi at the BRI Forum in 2017.[4] Later, at the fourth World Internet Conference in 2017, China, Laos, Saudi Arabia, Serbia, Turkey, Thailand, and the United Arab Emirates jointly signed the BRI Digital Economy International Cooperation Initiative, marking a new chapter of the DSR’s development.[5] The DSR was promoted as a stand-alone initiative at the second BRI Forum in 2019 and has since become a critical part of China’s foreign policy agenda.[6] Amid the global COVID-19 pandemic, the DSR’s vital role was further enhanced since it allowed China to transcend the physical barriers of national boundaries and maintain the steady growth of the BRI projects overseas without suffering significant losses of investments.[7] According to the White Paper on the BRI released recently, by the end of 2022, China had inked 17 DSR-specific cooperation agreements and 30 e-commerce memorandums globally and signed the Memorandum of Understanding on Strengthening Investment Cooperation in the Digital Economy with 18 countries and regions.[8]
Overall, the DSR’s status elevation in China’s global strategy is primarily shaped by two factors. The push factor is the rapid growth of China’s digital economy in recent years, driving its tech companies to explore overseas markets. According to the BRI Digital Trade Development Index Report 2022 released by Huaxin Institute, a state-affiliated think tank, the scale of China’s digital economy has reached 45.5 trillion yuan (US$6.37 trillion) by 2022, accounting for 49.8 per cent of China’s GDP, with a year-on-year increase rate of 16.2 per cent.[9] The pull factor is China’s perception of a “digital gap” in developing countries that impedes the growth of the digital economy in these countries. China recognises that underdeveloped digital infrastructure in many developing countries has hindered them from participating in the global wave of digital transformation.[10] Thus, the DSR represents China’s systematic efforts to fill the “digital gap” by building and upgrading recipient countries’ digital infrastructure.
The concept of the DSR is somewhat ambiguous due to the lack of an official definition. A major consensus among China scholars is to treat the DSR as an “umbrella branding effort and a narrative for Beijing to promote its global vision across a range of technology areas and projects.”[11] Thus, the DSR involves normative components beyond the export of digital infrastructure. One example is the “China Solution” to global cyber governance that Beijing has actively promoted recently.[12] The core component of the solution is “cyber sovereignty”, which means that “all countries have their rights to choose their own path of network development and governance model and to equally participate in international governance in cyberspace.”[13] The “China Solution” triggers Western concerns over the export of “digital authoritarianism” through big data and surveillance technologies.[14] However, research shows that “the demand for these technologies and how they are used depend more on local political conditions than Chinese grand strategy.”[15] In addition, China has also made headways in global technological standard-setting through international and regional standard-setting organisations and overseas digital infrastructure investments,[16] owing to its advantages in advanced technologies such as 5G and AI.
It is worth noting that while the DSR emerged as a part of the BRI, it differs from the BRI in that state-owned companies are major BRI stakeholders whereas the DSR’s main stakeholders are private tech companies such as Huawei, Tencent, Alibaba, and ZTE, which often gain policy support to expand their overseas business.[17] Moreover, Chinese tech companies’ entry into overseas markets has long predated the DSR’s emergence.[18] Thus, the geopolitical impulse behind the DSR should not be exaggerated as it signifies more of a continuation and expansion of China’s ongoing strategy to broaden the global market for its tech companies and reinforce China’s technological global leadership.[19] This nuanced perspective contrasts with the portrayal often made by Western observers, who depict the DSR as China’s concerted state-led efforts to reshape the global digital order.[20]
INSTITUTIONALISING DSR COOPERATION IN SOUTHEAST ASIA
Southeast Asian countries have long been the major recipients of Chinese tech companies’ investments branded under the DSR banner. To facilitate the DSR’s development in the region, China has sought to institutionalise the DSR through various channels, including establishing DSR-specific mechanisms and institutions, organising DSR-related events, and providing technology-training sessions. These efforts are mainly led by local governments, universities and private companies. The central government in Beijing plays a supportive role by providing inter-governmental frameworks on various aspects of digital economy cooperation, especially through ASEAN-China mechanisms.
Thus far, China has established multiple mechanisms and institutions to facilitate regional DSR investments. Key mechanisms in this regard include the ASEAN-China Initiative on Enhancing Cooperation on E-Commerce (2023),[21] Action Plan on Implementing the ASEAN-China Partnership on Digital Economy Cooperation (2021-2025) (2022),[22] China-ASEAN Digital Economy Partnership Initiative (2020),[23] ASEAN-China Cyber Dialogue Mechanism (2020 and 2022)[24] and ASEAN-China Smart City Cooperation Initiative (2019).[25] Besides, China is negotiating with ASEAN countries to upgrade the ASEAN-China Free Trade Agreement (ACFTA 3.0), which will focus on three emerging domains: digital economy, green economy, and supply chain industries.[26]
As for institutions, a key example is the China-ASEAN Information Harbor (CAIH) established by China’s Guangxi autonomous region in 2016 to transform Guangxi into a “digital hub” connecting China and ASEAN.[27] More recently, multiple companies and NGOs from China and ASEAN jointly launched the ASEAN-oriented “Digital Silk Road” Think Tank Alliance in September 2022 to enhance ASEAN-China cooperation on digital transformation.[28] In April 2023, the Malaysia-based venture capital firm Kairous Capital announced the launch of the Malaysian-China Digital Cooperation Council, which aims to “facilitate long-term cross-border collaboration between Malaysian and Chinese companies in the areas of technology and innovation.” [29]
Additionally, China has organised multiple seminars and forums to support the DSR’s development in Southeast Asia. In June 2020, Zhejiang University hosted the “Digital Silk Road” Online Seminar attended by government officials, scholars, and business elites from 16 countries, including Indonesia, Singapore, Malaysia and Thailand.[30] In November 2020, the CAIH co-hosted the China-ASEAN Information Harbor Forum themed “Digital Silk Road, The Road Ahead,” which aimed to “build a mutually beneficial and win-win cooperation platform and promote the ASEAN-China digital economy industry cooperation.”[31] In December 2022, China Daily and the ASEAN-China Center co-hosted a seminar themed “Digital Economy Ties, A New Chapter in Smart City,” where representatives from China and ASEAN exchanged views on promoting cooperation on digital economy and smart cities.[32]
Western scholars have recently attributed Chinese tech companies’ success in Indonesia to their localisation strategies, which include providing cybersecurity training sessions to local government officials, professionals and college students.[33] For instance, in 2021, Huawei launched a five-year digital literacy training course for 100,000 government officials and a digital talent training programme for over 30 universities in Indonesia.[34] More broadly, through its “Seeds for the Future” programme initiated in 2011, Huawei has trained over 3,000 university students from more than 108 countries (including Southeast Asian ones).[35]
TRACKING THE DSR’S PROGRESS IN SOUTHEAST ASIA (2017-2023)
This section tracks the DSR’s progress in Southeast Asia from 2017 to 2023. It first provides an overview of the DSR’s development in Southeast Asia as of 2020 with data from the China Connects dataset. Then, it analyses the DSR’s progress in building digital infrastructure and platforms in the region since 2020, using data from the websites of Huawei and ZTE, the Submarine Cable Almanac, and relevant media releases.
DSR’s Progress in Southeast Asia (2017-2020)
Constructed by the International Institute for Strategic Studies (IISS), the China Connects dataset contains a list of the DSR projects across 173 countries up to December 2020, which fall under the following categories: 5G, academic programs, data center, e-commerce, e-governance, fibre optic network technology, fintech, people-to-people exchange programmes, satellite technology, security information system, smart city, submarine and overland fibre optic cables, telecom, and transfer of knowledge/technology.[36] This section extracts data for all Southeast Asian countries, including 176 projects, to analyse the DSR’s progress in the region by 2020.
The analysis indicates that all Southeast Asian countries received China’s DSR investments between 2017 and 2020. Figure 1 shows the geographical distribution of the DSR projects in the region. Indonesia, Singapore and Malaysia remain the top three destinations of China’s DSR investments in Southeast Asia, collectively securing 52.3 per cent of all DSR projects. China’s DSR investments in Laos and Brunei are comparably marginal. Figure 2 shows the distribution of the DSR projects by type. It indicates that China’s DSR investments in Southeast Asia are clustered in five areas: Telecom, 5G, Data Centre, Fintech, and E-commerce.
Figure 1: Distribution of DSR Projects in Southeast Asia by Country
Figure 2: Distribution of DSR Projects in Southeast Asia by Type
Table 1 shows the parent entities of China’s DSR projects in Southeast Asia by 2020, which can be classified into four categories: private company, state-owned company, government agency, and state-affiliated institute/association. As shown in Table 1, Huawei, Alibaba, and ZTE are the major entities spearheading China’s DSR projects in the region. Figure 3 shows the distribution of these entities by type: private companies (79%), state-owned companies (17%), government agencies (3%), and state-affiliated institute/associations (1%). The prevalent participation of Chinese private companies in the DSR stands in contrast to the predominant role of Chinese state-owned companies in the BRI in general.
Table 1: Parent Entities of China’s DSR Projects in Southeast Asia
Figure 3: Parent Entities of China’s DSR Projects in Southeast Asia by Type
Recent Development of the DSR in Southeast Asia (2020-2023)
This section provides an update on the progress of China’s DSR investments in Southeast Asia in 5G, fibre optic cables, and cross-border e-commerce between 2020 and 2023. Huawei and ZTE have made decent strides in expanding their business in Southeast Asia’s fast-growing 5G market since 2020. Huawei’s key achievements include 1) building ASEAN’s first 5G smart hospital in Thailand;[37] 2) providing Smart Railway Solutions for the China-Laos Railway;[38] 3) signing multiple MoUs with local telecommunication service providers in Indonesia;[39] 4) launching its first “3AZ” data centre in Indonesia;[40] and 5) planning to build a cybersecurity centre in Malaysia.[41] Similarly, ZTE has signed multiple 5G-related MoUs with local 5G service providers in Malaysia[42] and Indonesia[43]and launched a new data centre in Indonesia.[44] In addition, China Mobile, the world’s largest telecommunication service provider, and GDS, China’s leading data centre operator, have also set foot in Southeast Asia’s 5G market.[45] Table 2 shows the distribution of 43 data centres built by Chinese tech companies in Southeast Asia based on latest available data. It indicates that most data centres are hosted by Singapore (32.5%), Indonesia (25.6%), Malaysia (16.3%), and Thailand (14.0%).
Table 2: Distribution of Data Centres Built by Chinese Tech Companies in Southeast Asia
(Data Source: Official websites of DYXnet, GDS, Huawei Cloud, ZTE, Alibaba Cloud, and Tencent Cloud and news reports from sciencechina.com, caixingglobal.com, thetechcapital.com, South China Morning Post, sina.com, and chinadevelopment.com)
Fibre optic cables play a crucial role in ensuring the smooth transfer of telecommunication signals; thus, Chinese tech companies such as HMN Tech and China Unicom have invested vastly in building cross-land and submarine cables globally. China reportedly has constructed 34 land cables and multiple submarine cables with neighbouring countries.[46] In May 2022, the SEA-H2X Submarine Cable, a project initiated by China Unicom, started construction and is expected to operate in 2024. China Unicom also invested in the Asia Direct Cable (ADC), which began construction in 2020. Once completed, these cables will help integrate Southeast Asian countries into the Asia-Pacific cable network.[47] HMN Tech, formerly owned by Huawei, has also been actively involved in submarine cable construction in Southeast Asia. Table 3 lists selected HMN-involved submarine cable projects in Southeast Asia, which are either at the planned stage or in service now, including domestic and cross-border submarine cable projects within or through the region. HMN’s role in these projects also varies – as system supplier, system installer, or both.
Table 3: Selected HMN-Involved Submarine Cable Projects in Southeast Asia
（Data source: Compiled from Submarine Cable Almanac May 2023[48]）
Aside from building digital infrastructure, Chinese companies have stepped up their efforts to engage in Southeast Asia’s e-commerce market. In July 2023, Alibaba, China’s largest e-commerce company, invested US$845 million into Lazada, a Singapore-based online retailer firm.[49] TikTok, a short-video app owned by ByteDance, announced its plan to invest in its online shopping app TikTok Shop in Indonesia.[50] However, TikTok faced a major setback after the Indonesian government banned sales on social media platforms.[51] To secure its business in Indonesia, Tiktok recently revealed that it will invest US$1.5 billion to acquire Tokopedia, Indonesia’s largest e-commerce owned by PT GoTo Gojek Tokopedia.[52] Temu, a Chinese shopping app owned by PDD, entered the Philippines’ digital market in August 2023.[53]
CONCLUSION
Notwithstanding the DSR investments’ progress in Southeast Asia, China faces multiple challenges in pushing the DSR forward. Domestically, China must reconcile the growing tensions between the state and private tech companies, which stem from Beijing’s tightening restrictions over the private tech sector[54] and private tech companies’ quest for profits while complying with and taking advantage of state policies. Such inconsistencies are more pronounced in the context of the DSR, given its involvement in the cross-border flow of capital and technology.[55] For Southeast Asian countries hosting Chinese tech companies, their concerns may be aggravated when Chinese companies “support, assist and cooperate with the state intelligence work” in compliance with China’s National Intelligence Law,[56] which could involve the transfer of critical data back to China and potentially undermine the cybersecurity of host countries. While Beijing has recently lifted some of the restrictions to revive the tech sector, the practical effects of such policy support remain to be seen.[57]
Regionally, China needs to recognise the agency Southeast Asian countries exercise in navigating its DSR engagements. In practice, Southeast Asian countries have adopted different approaches to handle China’s increasing digital engagements in the region,[58] and such decisions are shaped more by domestic economic and security concerns than external geopolitical factors.[59] Indonesia’s recent legal pushback against social media’s interference with e-commerce is a good example. This means that when China’s digital presence is perceived as a major threat rather than a powerful supplement to local economic growth, regional states have the levers to restrict China’s digital engagements through legal and political channels.
Internationally, the DSR’s future in Southeast Asia will be determined by China’s ability to secure dominant positions in frontier technologies such as 5G and AI, and growing shares in the region’s digital market amid the intensifying U.S.-China tech rivalry. Despite China’s increasing representation in certain international standard-setting bodies including the 3rd Generation Partnership Project (5G)[60] and ISO/IEC JTC 1/SC 41(AI),[61] Western countries still generally dominate the standardisation of frontier technologies.[62] Moreover, Chinese tech companies must continue to compete with their U.S. counterparts, whose collective market share accounts for roughly 70% of the region’s digital market.[63] The DSR’s prospects in Southeast Asia is further complicated by the US’ escalating blockage of key technologies to China[64] in the face of Huawei’s recent chip breakthrough.[65] The growing US-China strategic competition heightens the risks of tech-bifurcation and the dilemmas Southeast Asian countries face in their strategic technological choices.
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). |
The Debate on the Ba‘Alawi Lineage in Indonesia: Highlighting Weaknesses in the Genealogical Records by Ahmad Muhajir and Afra Alatas
Managing China-Singapore Relations Amid US-China Rivalry by Ma Bo
2023/101 “Reviewing China’s Elite-Centric Approach in its Relations with Cambodia” by Chhay Lim
EXECUTIVE SUMMARY
- In engaging Cambodia, China puts a strong emphasis on fostering ties with the ruling elites of the Cambodian People’s Party (CPP) and backs their regime legitimacy while having limited interactions with grassroots communities or the local population.
- This elite-centric approach is manifested in Beijing’s efforts to forge political trust and to support the CPP’s political and economic development goals. Its financing focus is on hard infrastructure instead of basic social needs and human development, and its diplomacy targets government institutions and CPP youth leagues.
- This elite-centric approach has incentivised the Cambodian government to support China’s foreign policy agendas, promote China’s discourse power and embrace China’s new concepts/initiatives on global governance.
- However, this approach has yet to generate the same level of favourability and trust towards China among the general population in Cambodia. Establishing credibility and trust among local communities is crucial for China to project its soft power and foster a more meaningful and enduring relationship with Cambodia.
* Chhay Lim is currently a Japanese Government-MEXT’s Master Scholar at Graduate School of International Relations at Ritsumeikan University in Japan.
ISEAS Perspective 2023/101, 22 December 2023
INTRODUCTION
This year, China and Cambodia celebrate the 65th anniversary of their bilateral diplomatic relations, something acclaimed by both sides as an “ironclad friendship”. China-Cambodia ties are built upon deep political trust between their leadership and a strong convergence of geopolitical and economic interests. China exerts predominant influence in the Cambodian economy via trade, foreign direct investment (FDI), official development aid (ODA) and infrastructure financing. Apart from inter-governmental coordination, the Cambodia-China relationship is undergirded by the close ties that exist between the Chinese Communist Party (CCP) and the ruling Cambodian People’s Party (CPP).[1]
China has adopted an elite-centric approach that invests heavily in abetting the regime security and bolstering the legitimacy of the CPP-led government through aid, investment and finance, and rendering political support to the CPP in the face of Western criticisms. In return, the Cambodian government has supported China’s key foreign policy agendas and embraced China’s concepts and initiatives on global governance. This Perspective examines how China’s elite-centric approach in its relations with Cambodia is prominent in three aspects: (i) forging political trust and bolstering the CPP’s legitimacy; (ii) prioritising hard infrastructure over soft infrastructure; and (iii) elite-focused youth engagement. The article argues that the elite-centric approach has helped Beijing advance its strategic interests with Phnom Penh, but its neglect of meaningful engagement at the grassroots level has dented its credibility among ordinary Cambodians.
STRONG TIES AMONG LEADERS
Forging political trust and bolstering the CPP’s legitimacy
China’s elite-centric approach in its diplomacy is characterised by heavy investment in cultivating good ties with the ruling elites of foreign countries while having limited emphasis on engaging grassroots stakeholders. Arguably embedded in China’s statist political system and political economy, the elite-centric focus is a longstanding tradition in China’s foreign relations, not least with Cambodia. The Chinese side often recalls the deep friendship between China’s elder-generation leaders, i.e., Mao Zedong and Zhou Enlai, with Cambodia’s King Father Norodom Sihanouk, who called China his “second home”.[2]
Today, cementing political trust with the CCP-led government is the top priority in China’s engagement with Cambodia. Of note, since Xi Jinping became President, the party has been at the frontline of China’s foreign policy apparatus, and CCP bodies which are in charge of external affairs have been empowered. These include the International Liaison Department (ILD), the Propaganda Department and the United Front Work Department (UFWD).[3] Party-to-party diplomacy has accordingly assumed greater prominence in China’s foreign policy, with the ILD actively fostering ties with politically like-minded nations such as Cambodia, Vietnam, and Laos.[4] Party-to-party channels have been instrumental in facilitating China’s engagement with the political elites of these countries and nurturing personal rapport and mutual trust.[5]
Cambodia-China ties feature a high level of reciprocated political support. By cultivating ties with the Cambodian ruling elites, lending support to their regime legitimacy and emphasising the principle of non-interference, China has tapped on their shared grudges against the West’s liberal democracy agenda. The US and Western countries have often expressed their concerns over Cambodia’s democratic backsliding in the past decade. Washington described the 2023 elections in Cambodia with the CPP’s landslide victory as “neither free nor fair” and even imposed visa restrictions on some individuals and suspended certain foreign assistance programmes.[6] In contrast, China promptly conveyed its congratulatory message in which Xi praised “the correct leadership of the royal government of the country headed by CPP President Hun Sen”, and pledged China’s continued support for Cambodia “in pursuing a development path suited to its national conditions.”[7] In return, Hun Sen conveyed that the incoming government would maintain its existing foreign policy stance towards China.[8]
Cambodia and China have the most frequent high-level visit exchanges, compared to other Southeast Asian states. Between 2014 and 2019, there were 24 high-level visits of the CCP’s leaders and the Chinese cabinet members to Cambodia. During the same period, there were 26 visits to China by Cambodian government leaders and royal family members.[9] Notably, Hun Sen made a surprise visit to Beijing in March 2020 to show support for China amid the Wuhan Covid-19 outbreak. During this visit, he introduced his son, Hun Manet, the current Cambodian prime minister, to Xi Jinping, paving the way for the next generation of the CPP leadership to continue close cooperation with China.[10] According to the Lowy Institute Asia Power Index 2023, China is also the foreign country that has the most diplomatic dialogues with Cambodia.[11]
China plays a crucial role in bolstering the legitimacy of the Cambodian regime. China’s economic success and poverty reduction have especially inspired the CPP leadership and incentivised them to support the China Model.[12] The Hun Sen government has been seeking Beijing’s guidance not only on economic development but also on matters of political legitimacy and control.[13] In 2017, Hun Sen expressed admiration for Xi Jinping’s leadership during the launch of the book Xi Jinping: The Governance of China, stating that it offered valuable lessons on good governance for Cambodia.[14]
Most importantly, strong ties with China have contributed to Cambodia’s sustained economic growth, which has in turn enabled the CPP to boost its legitimacy and consolidate power. The imperative for performance-based legitimacy has led Cambodian elites to welcome Chinese influence, viewing China as a vital source of economic resources and support.[15] Since 2007, China has surpassed Japan as the largest source of ODA and FDI to Cambodia. 24.8% of Cambodia’s foreign trade is with China and 24.4% of foreign investment stock in Cambodia comes from China.[16] Construction of major China-funded infrastructure projects under the ambit of the Belt and Road Initiative (BRI) was in progress despite the Covid-19 pandemic in 2020 and 2021, including the New Phnom Penh International Airport (US$1.1 billion), New Siem Reap International Airport (US$880 million), Phnom Penh-Sihanoukville expressway (US$2 billion)[17] and Phnom Penh-Bavet expressway under the Build-Operate-Transfer-BOT-framework (US$1.3 billion).[18]
Notably, China played a crucial role in enabling Cambodia’s successful containment of the Covid-19 pandemic between 2020 and 2022, by providing vaccines, essential medical equipment and financial aid in a timely manner.[19] As a result, 2022 was the prime year of China’s popularity in Cambodia. In the 2022 elite-opinion State of Southeast Asia (SSEA) survey, 84% of Cambodian respondents saw China as the most economically influential, with 70.6% welcoming this influence. Additionally, 75.3% perceived China as the most politically and strategically influential, with 54.1% expressing approval.[20]
Another important aspect to note is that the Cambodian government appreciates Chinese financing for meeting Cambodia’s developmental needs without conditionalities on political and economic reforms, unlike Western development partners.[21] Furthermore, the lack of transparency and accountability surrounding China-funded infrastructure projects and investment deals provides avenues for Cambodian leaders and CPP’s well-connected individuals to engage in lucrative business.[22] This has in turn allowed the Cambodian ruling elites to bolster their political and economic power base.[23] Numerous reports suggest that those who support Hun Sen’s leadership have been rewarded with access to the country’s resources such as land, forests, fisheries, mining concessions, air routes, and public construction.[24] This distribution of benefits primarily favours a selected group of Cambodian and Sino-Khmer tycoons, whose fortunes have grown in parallel with Hun Sen’s political tenure.[25] For example, state-land privatisation orders in 2022 revealed that Canadia Bank (sister company of Overseas Chinese Investment Corporation-OCIC) was granted 10 hectares of land in Preah Sihanouk province’s Prey Nob district, while Premier Land, a company owned by the daughter and son-in-law of the ruling-party Senator Oknha Ly Yong Phat obtained 130 hectares of land from the Sihanoukville Autonomous Port at an unrevealed price.[26]
Prioritising hard over soft infrastructure
China’s elite-centric approach is also expressed in its development financing’s primary focus on hard infrastructure, with comparatively less emphasis on soft infrastructure that involves grassroots community, local governance, human resources development and basic social services such as healthcare, education, water and sanitation. According to the Lowy Institute, traditional development partners for Southeast Asia – namely the multilateral development banks, Japan, Europe, South Korea, the US and Australia – assigned 24% of their total funding in 2015-2021 for governance and civil society and 30% for infrastructure whereas non-traditional partners (led by China) spent only 3% on governance and over 70% for infrastructure. In Cambodia, China funded only 7 projects in the governance and civil society sector in 2015-2021, compared to Japan’s 420 projects and the US’ 432 projects (Table 1).[27]
Table 1. Hard and Soft Infrastructure Projects in Cambodia (2015-2021), Funded by China, United States and Japan
Source: Lowy Institute Southeast Asia Aid Map database, complied by the author.[28]
China’s Elite-focused Youth and Educational Exchanges
In this author’s own experience, China’s youth engagement in Cambodia tends to prioritise the elite over the general public; nominations of Cambodian participants are limited to certain targeted institutions, which raises concerns regarding transparency and fairness in the selection process.[29] This approach may hinder meaningful youth dialogues between the two countries. Ensuring transparency and extending opportunities to Cambodian non-elite youths in youth exchanges with China is advisable for enabling mutual understanding and improving perceptions of China among young Cambodians.[30]
China-supported youth groups in Cambodia also tend to be elite-centric. One example is the Youth House for Cambodia-China Friendship launched in January 2023, with the attendance of Minister Liu Jianchao, head of the CCP’s International Department, and Hun Manet, then head of the CPP’s Central Youth Wing. The Youth House aims to foster youth dialogue between the CCP and CPP. Hun Manet expressed at the inauguration event that “Cambodian youth, particularly CPP youth, is ready to work with their Chinese counterparts to foster and further promote ties between the two countries to a new high.”[31]
On educational exchanges, according to the Cambodian Students Association in China, there are more than 2,000 Cambodian students currently studying in China, and at least 300 of them graduate every year.[32] Chinese scholarship opportunities have been expanded to include Cambodian government officials, including “online PhD programs” for officials in the Ministry of Foreign Affairs.[33] In terms of Chinese language training, with the re-establishment of Chinese schools operated by the Chinese-Cambodian Federation, the Teochew Association, and other Chinese clan associations since 1992, a renewed interest in learning the Chinese language has emerged in Cambodia. Chinese language training has a strong focus on Chinese-speaking community and government officials.[34] There are two Confucius Institutes in Cambodia situated at the Royal Academy of Cambodia (CIRAC) and the University of Battambang, as well as 23 Confucius Classrooms across the country.[35] Of note, the website of CIRAC only features the Chinese version.[36] These Confucius Institutes have worked with Cambodian government agencies to provide Chinese language training programmes to Ministry of Interior, Ministry of National Defence, Ministry of Foreign Affairs, Ministry of Justice, Ministry of Culture and Fine Arts, Ministry of Tourism, and the Ministry of National Assembly-Senate Relations and Inspections.[37] The Cambodian Ministry of Education recently signed a memorandum of understanding with its Chinese counterpart to establish a coordinating committee for Chinese language education and include Mandarin in the pilot curriculum in 20 public schools in Cambodia.[38]
REWARDS AND SETBACKS OF CHINA’S approach
China-Cambodia Community of Shared Future
Years of cultivating a mutually beneficial relationship with the CPP-led government have brought significant strategic rewards for Beijing. Both countries closely coordinate with each other in developing common narratives on international issues and aligning their foreign policy objectives.[39] The annual SSEA survey carried out since 2019 consistently indicates that Cambodian elites – together with Laos – are the most cognisant and supportive of Chinese influence in the region. China uses the term “ironclad friendship” to refer to its very close partners such as Pakistan and Cambodia. Phnom Penh has earned that distinction by its strategic choice to be a solid friend to China on key issues of strategic significance for Beijing.[40] For example, all Southeast Asian countries adopt the “One-China policy” and recognise the People’s Republic of China (PRC) as the sole representative of China, but many are ambivalent on the question of China taking back Taiwan by force. Cambodia’s position on this matter is by far the most unequivocally pro-PRC with Hun Sen’s declaration that Phnom Penh “resolutely supports China’s every effort to achieve national re-unification”, which implicitly does not rule out the option of using force.[41] Another stark example is Cambodia’s consistent support for China on the South China Sea disputes, so much so that Phnom Penh has been labelled as Beijing’s client-state within ASEAN, even at the expense of ASEAN credibility.[42]
Amidst intensifying US-China strategic rivalry, China has increasingly leveraged its economic statecraft and discourse power in its relations with other countries – especially in the Global South–by offering alternative concepts and paradigms of international relations.[43] Cambodia has provided unwavering support for all Chinese initiatives which are intended to enhance its normative and discourse power abroad. During his visit to Beijing in February 2023, Hun Sen said that Cambodia will “actively support and participate” in China’s Global Development Initiative (GDI) and Global Security Initiative (GSI), which he considers to be “of great significance to maintain world peace and promote common development”.[44] The joint statement of the visit says that “Cambodia supports China’s proposal of GSI and stands ready to work with China on global security governance towards common, comprehensive, cooperative and sustainable security.” This makes Cambodia the first Southeast Asian country to officially endorse the GSI, while neighbouring Vietnam and other maritime Southeast Asian states remain ambivalent.[45]
China’s discourse power projection also promotes terms such as “ironclad friendship” and “community of shared destiny/future”, among others. It is China’s common practice to insert these terms in joint documents with other countries to serve its propaganda and strategic communications. Beijing has found Phnom Penh a very receptive partner in endorsing Chinese ‘slogan politics’[46] with little hesitation. Cambodia is among the first foreign countries embracing the Chinese concept of “community of shared destiny/future’ with the signing of the Action Plan on Building China-Cambodia Community of Shared Future (2019-2023).[47] The new action plan for the 2023-2028 period will be signed by this year-end. In the latest 2023 Joint Statement on Building a China-Cambodia Community with a Shared Future in the New Era, the term “community with a shared future” was mentioned eight times and Chinese slogans such as “the Chinese path to modernization”, “the second centenary goal” and “the great national rejuvenation” are also peppered across the document.[48]
The China-Cambodia Community of Shared Future has now rhetorically evolved into a “diamond hexagon cooperation” (钻石六边合作), a new concept coined during Hun Sen’s visit to Beijing in February 2023. It represents six priority areas of political cooperation, production capacity and quality, agriculture, energy, security, and people-to-people exchanges.[49] In Chinese literary tradition, it connotes prestige, value, and durability. In 2023, Japan and Cambodia also celebrate the 70th anniversary of bilateral ties with the decision to upgrade the relationship to a Comprehensive Strategic Partnership. Against this backdrop, one may conclude that China wishes to project its ties with Cambodia as being more “prestigious and unbreakable” than Cambodia-Japan relations.
Limited Chinese soft power among the Cambodian public
China plays a crucial role in Cambodia’s contemporary political and economic development; Massive Chinese investments, especially in hard infrastructure, real estate and low-end manufacturing, have transformed Cambodia’s landscape, contributed to the country’s sustained economic growth, and provided jobs for many Cambodians. However, China’s pre-eminent influence over the Cambodian economy and its leverage over the CPP government have not yet been translated into prevalent soft power in Cambodian society, especially at the grassroots level.
The rapid pace of Chinese large-scale investment projects without proper impact studies on local people and cultural understanding has undermined Chinese soft power in Cambodia. Many of these projects are undertaken by Chinese private companies but their unsustainable business activities stem in part from the lack of rigorous oversight from the Chinese government; this is compounded and abetted by Cambodia’s poor governance capacity. As a result, problems of environmental degradation, land grabbing and associated loss of livelihoods are widely reported with regard to Chinese-funded projects.[50] The most salient example is the early-phase Chinese development in Sihanoukville, which garnered widespread criticism among the local people due to the influx of gambling industries and associated crimes, disregard of local regulations and customs, and the crowding-out of local businesses.[51] Massive Chinese demand for construction also led to land conflicts, with politically well-connected and wealthy Cambodians engaging in land-grabbing. In addition, few employment and business opportunities arise for local people due to the Chinese approach of importing their own labour and inputs. The ‘Blue Bay’ Chinese-invested real estate project is an illustrative case; It acquired land from locals, subcontracted work to Chinese companies, imported construction materials and brought labour over from China, despite Cambodia possessing a substantial labour force.[52]
Of note, while a majority of Cambodian elites recognise and welcome Chinese economic and strategic-political influence, they prefer Australia, the US, Europe and, to a lesser extent, Japan for their own or their children’s tertiary education, according to the annual SSEA survey.[53] In another survey of Cambodian university students in 2017, 81.7% of the respondents recognised that China currently has closer relations with Cambodia compared to the US. However, 72.6% preferred that Cambodia developed closer ties with the US in the future.[54] In terms of online search, the countries that Cambodians are most interested in are Japan (32%), followed by Thailand (19.3%) and Vietnam (16.4%), and China (11.8%).[55]
Cambodian youth’s perception of the “New Chinese”, who arrived in Cambodia since the 1990s, also sheds light on how Chinese influence is by the Cambodian public. In a survey conducted in 2022 with 75.2% of the respondents being under 40 years of age, 64% acknowledged that Chinese economic influence in Cambodia is “high” and 17% perceived it as “very high”. On Chinese political influence, 38% considered it “high,” and 15% regarded it as “very high,” indicating their awareness of China’s influence in Cambodian economy and politics.[56] Yet, while acknowledging Chinese predominant influence, a majority rated social tensions between Cambodians and the New Chinese as “high” (45%) and “very high” (14%), which the survey author attributed to “lack of mutual understanding and respect, language barrier and miscommunication, and the bad behaviour of some New Chinese”.[57] The survey also indicates reservations concerning the integration of Chinese nationals into Cambodian society.
CONCLUSION
China-Cambodia ties have fast developed since the 2010s, coinciding with the rise of authoritarianism in China under Xi Jinping and the democratic backsliding in Cambodia that led to the monopolisation of power by the CPP under Hun Sen’s leadership. China has consistently adopted an elite-centric approach that invests heavily in abetting the regime security and bolstering the legitimacy of the CPP government; this is done through aid, investment, finance and political support in the face of Western criticism and sanctions. This elite-centric approach has brought significant strategic rewards for Beijing, including the rapid expansion of Chinese economic influence in Cambodia and Phnom Penh’s strong support for Chinese discourse power, and key foreign policy goals on issues such as Taiwan and the South China Sea disputes. However, there remain negative perceptions towards China and its expanding influence among Cambodians, especially at the grassroots level and among the young. This is partly due to China’s lack of meaningful grassroots engagement in its public diplomacy and development assistance as well as the ignoring of social, economic, and environmental impacts for local communities in the implementation of China-funded investment projects. These challenges highlight the need for China to place greater emphasis on addressing public perceptions, engaging with local communities, and fostering meaningful connections with the Cambodian people at various levels. Towards this end, China can harness its resources in supporting cultural exchange projects through existing clan associations to promote its soft power and alleviate misunderstandings among the Cambodia public.[58] In addition, China’s shift towards “small yet smart” approach in its BRI, encompassing 1,000 small-scale livelihood assistance projects and vocational training opportunities,[59] also enhance its credibility in improving the wellbeing of Cambodians.
ENDNOTES
For endnotes, please refer to the original pdf document.
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2023/100 “Managing the Debts of State-Owned Enterprises: Case Studies of Indonesia’s BUMN Karya” by Siwage Dharma Negara & Agustinus Prasetyantoko
EXECUTIVE SUMMARY
- Infrastructure development plays a pivotal role in enhancing Indonesia’s economic competitiveness and supporting the country’s ambition to become one of the biggest economies in the world by 2045.
- Over US$400 billion is needed to meet Indonesia’s infrastructure financing needs until 2024. State funds can only contribute around 30% of the total figure. To close the gap, the government has been inviting private sector investments and encouraging public-private partnerships (PPP) for a number of infrastructure projects.
- In practice, getting private sector investments into such projects can be challenging. To expedite the construction process, the government assigned some State-owned enterprises (SOEs), known as BUMN Karya, to lead the construction and operation of various infrastructure projects that are deemed ‘strategic’.
- These SOEs have seen their financial condition deteriorating since the COVID-19 pandemic, and there is an increasing likelihood that they need more state capital injections to remain viable. It is important to reduce the burden on SOEs through restructuring or asset selling and to improve their corporate governance. Allowing international investors or construction and operating companies to become shareholders may help to reduce these SOEs’ over-reliance on the government’s budget.
- Moreover, the government also needs to be mindful of the risks of SOEs’ debts to Indonesia’s economy, credit standing and investors’ confidence.
* Siwage Dharma Negara is Senior Fellow at ISEAS – Yusof Ishak Institute. Agustinus Prasetyantoko is Senior Fellow at Atma Jaya Institute of Public Policy, Jakarta. Both authors would like to thank Manggi Habir, Tham Siew Yean and Cassey Lee for their comments on an earlier draft.
ISEAS Perspective 2023/100, 20 December 2023
INTRODUCTION
Since the beginning of his presidency, President Joko “Jokowi” Widodo has been intensively building infrastructure in various parts of Indonesia. This infrastructure development aims to accelerate growth, create jobs, and promote more balanced development, especially in the outer islands.
Over Rp 3,000 trillion (approximately US$192 billion) has been spent on infrastructure projects since President Jokowi took office in 2014 (Figure 1). This state fund has been used to construct roads and toll roads, dams, airports and seaports, and power plants across the country. The Ministry of National Development Planning (Bappenas) estimates that Indonesia needs Rp 6,445 trillion to meet its infrastructure financing needs until 2024.[1] Based on the National Medium-Term Development Plan (RPJMN) 2020-2024, the government can only come up with Rp 2,385 trillion or 37% of the total needed, and the rest will need to come from private investors.[2]
The government has been encouraging public-private partnerships (PPP) and inviting domestic or foreign private investors for a number of infrastructure projects. Yet, in practice, most infrastructure projects are built and managed by State-owned enterprises (SOEs), often with government financial support. For the government, the fastest strategy to accelerate infrastructure development has been to assign it to SOEs. To invite foreign investors or to look for aid from foreign partners requires longer time and procedures, which delay government plans. Projects funded under PPP schemes are still limited, mostly in the energy sector, which is more attractive for the private sector. The biggest challenges for private participation in specific projects proposed by the government are reliability and profitability. Some projects have been making very slow progress due to specific issues, such as land acquisition or unclear regulations.
Figure 1: Infrastructure spending increased significantly during Jokowi’s era
Note: The 2023 figure is the budget allocation.
Source: Directorate General of Budget, Ministry of Finance
The state assignment for SOEs to build various infrastructure projects has some implications for SOEs’ cash flow and government fiscal space. The implications are often not well understood, and this essay seeks to shed some light on the matter by looking at three case studies of Indonesia’s major SOEs which are in charge of developing infrastructure nationwide. They are PT Hutama Karya (Persero), PT Waskita Karya (Persero) Tbk, and PT Wijaya Karya ( Persero) Tbk (the three SOE companies are often called BUMN Karya).[3] PT Hutama Karya (Persero) and PT Waskita Karya (Persero) Tbk are the main contractors for many toll road projects in Indonesia. PT Wijaya Karya ( Persero) Tbk, on the other hand, is the main contractor for dam projects. Waskita Karya and Wijaya Karya are listed on the Indonesia Stock Exchange, which means these SOEs are only partially owned by the government. Hutama Karya, however, is fully owned by the government. Finally, we want to examine their financial liabilities and the potential risks these pose to the fiscal and financial sectors.
STATE ASSIGNMENTS AND INCREASED BURDENS
To expedite infrastructure development throughout the country, President Jokowi through the Ministry of State-owned enterprises, assigned some state companies to “lead” the construction of a number of “strategic projects”.[4]
There are usually two types of infrastructure projects involving the BUMN Karya. First is that BUMN Karya is contracted to build the infrastructure and is then paid by the government once they have completed the project and met specifications. Second is what is known as Build, Operate and Transfer (BOT) after a couple of years. The first type of project (just build) is more straightforward. During the COVID-19 pandemic, many of these projects were delayed, so the companies could not receive payment from the government. Yet, even when the companies finally completed the project, government payments were often late in coming. Moreover, the pandemic has also caused cost overruns, which hurt the companies’ profitability. The BOT arrangement is more complex as it requires operating the project and getting paid from the revenue generated by the project operation. These arrangements are mostly related to toll roads. In practice, the profitable toll road projects (with significant traffic volumes) are often given to the state toll road company PT Jasa Marga, leaving the BUMN Karya with the less attractive toll projects.[5]
For instance, Waskita is assigned to build Trans-Java and Sumatra toll roads. Mostly, it takes over private toll road projects that have stalled, and that are no longer profitable as seen from the point of view of private investors. In total, Waskita acquired 12 stalled toll roads from the private sector from 2015 to 2017.
Likewise, Hutama Karya received special assignments to construct sections of the Trans-Sumatra toll road. As a result, the company’s liabilities have increased rapidly. Unlike Waskita Karya, Hutama Karya receives state capital injections, or PMN (Penyertaan Modal Negara).
Figure 2: Government assignment increased BUMN Karya’s liabilities
Source: Companies annual reports
It is important to note that not all SOEs undertaking infrastructure projects receive state equity participation (PMN). PMN is an additional capital injection given for a specific project or purpose. The allocation of PMN is proposed by the government and requires parliament’s approval. Thus, deciding which SOEs can receive PMN is the political discretion of the government and the parliament. The SOEs Minister and Finance Minister, in consultation with the parliament, reach joint agreements on which SOEs should be given PMN.
Those strategic SOEs that have too high a debt burden and whose ratings get downgraded to non-sustainable levels are the ones that get PMN, or capital injections, through the budget. The healthier ones typically do not get PMN. Those SOEs which do not receive PMN must use their own finances, often by going into debt; the latter are vulnerable to changes in interest rates. Rising interest rates increase the cost of servicing existing debt or obtaining new loans. Also, an SOE’s credit rating can influence its access to debt markets and the cost of borrowing. A lower credit rating may result in higher interest rates on debt.
Figure 2 shows the three largest infrastructure SOEs that face increasing liabilities due to the government’s assignment to construct various infrastructure projects. So what could be the financial implications of growing SOE liabilities?
FINANCIAL IMPLICATIONS
In response to the worsening financial health of BUMN Karya, the government, through the Ministry of Finance, allocated Rp 28.16 trillion in the state budget 2024 to support these SOEs with state equity participation (PMN). This policy indicates the government’s commitment to continue infrastructure development during the transition to the next leadership in October 2024.
For infrastructure projects, state equity funds will be allocated to PT Hutama Karya (Persero), amounting to Rp 18.6 trillion, and to PT Wijaya Karya Tbk, amounting to Rp 6 trillion. However, PT Waskita Karya (Persero) Tbk will not receive PMN due to internal issues related to fraud allegations and some bad management practices.[6]
Among the three BUMN Karya, i.e., PT Waskita Karya (WSKT), PT Wijaya Karya (WIKA) and PT Hutama Karya (HK), HK has the largest asset, at Rp 156 trillion, followed by Waskita, which has a total asset of Rp 98 trillion, and WIKA, with a total asset of Rp 75 trillion (Figure 3). The asset values of the BUMN karya have increased significantly alongside the country’s massive infrastructure development.
Figure 3: BUMN Karya’s Total Asset Values
Source: Companies annual reports
Interestingly, Waskita’s asset values have been declining since 2019. In 2019, Waskita’s assets (Rp 122 trillion) were bigger than HK’s (Rp 93 trillion). But in 2022, HK’s assets surpassed Waskita’s. Based on its financial statement, Waskita’s revenue had started to decline in 2019. In 2019, Waskita booked losses of Rp 2.8 trillion, which by 2020 had increased to Rp 9.2 trillion. The company’s equity has also decreased since 2019 (Figure 4). According to Waskita’s management, the losses were caused by decreasing revenues due to the COVID-19 pandemic and exchange rate costs on their liabilities.[7]
Figure 4: PT Waskita Karya (Persero) Tbk Financial Situation
Source: PT Waskita Karya (Persero) Tbk annual reports
More recently, Waskita faced some complicated issues ranging from high debt and increased loss to internal corruption and the cancellation of PMN. Waskita’s stock trading was suspended in May 2023 after the company failed to make timely coupon payments on its corporate bonds. The Indonesia Stock Exchange Authority is now considering delisting the companies’ stock from the market due to the subsequent lack of significant improvement.[8] Several companies have also sued Waskita over delays in debt payments.[9]
The Vice-minister of SOEs, Kartika Wirjoatmodjo, in a public statement in September 2021, stated that Waskita’s increased liabilities were due to assignments from the government to lead several infrastructure projects.[10] The high debt burden reached its peak in 2019 after Waskita acquired several toll roads from private parties from 2015 to 2017 (Figure 4). That year, Waskita’s debt reached Rp 70.9 trillion; these were comprised of bank loans and bonds, and a debt of around Rp 20 trillion to its vendors. Moreover, the COVID-19 pandemic had worsened the company’s financial condition due to a decline in revenue, many projects being delayed and cost overruns incurred.
Based on Waskita’s case, one may conclude that several internal and external factors have been affecting the financial soundness of SOEs. Waskita’s financial problems have been exacerbated by poor governance within the company. The former CEO of Waskita was named a suspect in corruption allegations regarding misappropriation in the use of a subsidiary company (PT Waskita Beton Precas) in 2016-2020.[11] This case saw the company’s share price fall drastically (Figure 4) by around 6%, forcing the market authority to suspend trading to protect its shareholders.[12]
Figure 5: PT Wijaya Karya (Persero) Tbk Financial Situation
Source: PT Wijaya Karya (Persero) Tbk annual reports
In fact, all the BUMN karya experienced decreasing revenue due to the COVID-19 pandemic. Their profits have dropped significantly due to project construction delays. WIKA, whose core business is in real estate and properties, has been suffering financial losses since the pandemic (Figure 5). It is currently applying for postponement of payment of principal and interest obligations to its creditors. This company will be receiving Rp 6 trillion of PMN to overcome its financial difficulties. This state equity injection is related to cost overrun in the Jakarta Bandung High-Speed Train project or KCJB (Kereta Cepat Jakarta Bandung), in which WIKA participated.[13] So far, this state support may suffice for WIKA to maintain its capital structure.
Together with three other BUMN Karya, WIKA has become the major player in the construction of the new capital (IKN) Nusantara in East Kalimantan province.[14] WIKA is responsible for two main constructions, namely residences for the workers and offices for the coordinating ministry for maritime and investment affairs. The total project is valued at around Rp 1.3 trillion.
The financial condition of HK has also been worsening, though not as badly as Waskita’s. Starting in 2020, HK has experienced massive losses. These continued until 2022 (Figure 6). The main cause of its losses was the low revenue from its Trans Sumatra toll road project. This project was initiated by the government as a strategic project, and therefore, revenue has not been a key consideration for its construction. The traffic volumes in Trans Sumatra are very low, drawing no private sector interest to the project. [15] Be that as it may, the government pushed for the project to promote connectivity and people mobility, and to stimulate economic activities across the island. Increased economic activities would in turn lead to higher traffic volumes which would eventually attract private investments.
Figure 6: PT Hutama Karya (Persero) Tbk Financial Situation
Source: PT Hutama Karya (Persero) Tbk annual report
The revenue from the Trans Sumatra project has been insufficient to cover HK’s operational costs. This happened alongside other unprofitable projects that the company has been involved in. As a result, HK had to raise its finances by proposing more debt. This condition is reflected in its financial performance, where HK booked a significant loss of around Rp 1.4 trillion. To save HK, the government decided to increase its state capital injection (PMN) in the company.
HK is also involved in several IKN projects valued at around Rp 4.3 trillion, covering toll roads, ministerial offices, as well as residentials for state civil servants and the presidential security forces.[16]
POTENTIAL RISKS TO THE ECONOMY
SOEs play a significant part in the Indonesian economy. So, excessive debts on their part pose risks to the overall economic health. For instance, if SOEs are unable to service their debt, the government must step in to bail them out. This can strain government finances, lead to budget deficits, and potentially result in increased public debt.
The financial difficulties of heavily indebted SOEs can also distort prices, as the government provides subsidies or state equity to keep these companies afloat. This can lead to market imbalances and resource misallocation. Moreover, during Jokowi’s administration, we have seen how SOEs absorb a large portion of available credit, stifling private investment and economic growth, and crowding out private sector borrowing.[17]
Indonesia’s sovereign credit rating can potentially be affected if SOE debt becomes a serious liability for the government. A lower credit rating can result in higher borrowing costs for the government and the private sector. Also, if a large SOE like Waskita defaults on its debt, it can spill over to other SOEs and to the country’s financial system. This can lead to systemic risks and financial instability. In turn, a large SOE default that leads to financial distress can erode investor confidence in the country and cause capital flight and reduce foreign direct investment.
Therefore, SOE debt should be carefully managed. If it becomes excessive, it may adversely affect financial stability and hamper the country’s long-term economic growth. Too many state assignments given to SOEs will certainly strain limited fiscal resources, thus reducing the government’s ability to invest in other important programmes. The government needs to be more prudent when investing in infrastructure projects.
From the government’s perspective, assigning SOEs to participate in infrastructure projects like toll roads, airports, dams, power plants, and railways has advantages in the short run. Expecting the private sector to lead infrastructure development projects is not realistic, especially if the project is meant to promote development in less populated and less lucrative areas. Therefore, for strategic development, SOEs play a leading role. However, in the long run, it is important to develop a roadmap and define which sectors should involve SOEs and which ones should include private sector, national and/or international partners. Assigning SOEs does not mean ignoring risk management and prudential governance. In fact, good governance is critical in minimising fraud and corrupt behaviour related to infrastructure projects.
CONCLUSION
Managing SOE debt can be a contentious political issue. It is alarming that SOEs mandated to focus on infrastructure projects suffer serious financing issues hindering their competitiveness and sustainability. The government needs to avoid high levels of SOE debt to fund politically motivated and non-productive projects, with unclear benefits. In fact, one of the Presidential candidates has highlighted that massive infrastructure development without careful thought under the current administration has put BUMN Karya in a critical financial condition.[18] He further said that the main factor that caused the BUMN Karya to ‘close its books’ was poor governance.[19]
The lack of independence on the part of BUMN Karya managements to accept or decline a project, and to determine what criteria need to be met before constructing the project is another reason for their current financial difficulties. The management has little say on such matters, and must follow government orders. One solution to this is to invite international investors or construction and operating companies into the projects as shareholders.[20]
We see from the three BUMN Karya cases that a lack of transparency in SOE debt can be a risk in itself. There is a need to provide clear information on the extent and terms of SOE borrowing; this is critical for assessing and managing risks effectively. To stop further deterioration of SOE debt, the government needs to establish robust oversight and governance mechanisms and adopt prudent fiscal and monetary policies.
To address growing SOE debt, there is a need for a combination of financial restructuring, operational improvements, and perhaps privatisation or asset sales (the case of INA). It is important to balance the strategic role of SOEs and their financial sustainability so as to minimise risks to the country’s overall fiscal health.
The role of the Indonesia Investment Authority (INA) can be further enhanced by its participation in strategic projects. Waskita has released two toll roads and prepared four others for INA to take over. This will make its financial condition healthier.[21] Another initiative is better use of Government Non-Budget Infrastructure Financing or PINA (Pembiayaan Infrastruktur Non-Anggaran Pemerintah). PINA was initiated by Bappenas for strategic and priority projects, especially in the infrastructure sector. PINA financing may come from capital markets, managed funds, insurance, banking and other legitimate financing. Several projects have been using the PINA scheme, such as the North Sumatra toll road and Yogyakarta International Airport in Kulan Progo.[22] Basically, PINA offers creative financing by matching the needs of specific investors with particular financing schemes, through hybrid instruments, limited participation funds and customised supply chain financing. These schemes can be developed and expanded for future infrastructure projects.
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). |
2023/99 “Collaboration Between Pheu Thai and Move Forward Parties on Their Core Issues Will Determine Thailand’s Future” by Termsak Chalermpalanupap
EXECUTIVE SUMMARY
- Thailand’s Pheu Thai-led coalition government is struggling to amend the Constitution of 2017, or to draft a totally new replacement for it.
- Not much progress can be made on that front, however, unless and until the Move Forward Party provides support. It is capable of blocking any move to change the Constitution in any substantial manner.
- At the same time, Move Forward wishes to push a bill on general amnesty to absolve all those persons charged with or convicted for their political protests since 2006. To succeed, it needs the support of Pheu Thai to pass the ambitious bill into law, and to facilitate a process of national reconciliation.
- A quid pro quo on these two issues between Thailand’s two largest parties seated on opposite ends in the House of Representatives will determine the country’s political future.
* Termsak Chalermpalanupap is Visiting Fellow and Acting-Coordinator of the Thailand Studies Programme, ISEAS – Yusof Ishak Institute.
ISEAS Perspective 2023/99, 19 December 2023
INTRODUCTION
Presenting the Thai people with a new and genuinely democratic Constitution seems like a “slam dunk” for the Pheu Thai (PT) party that leads the 11-party coalition government under Prime Minister Srettha Thavisin.
But increasingly, putting into place a new “Constitution of the People” appears to be a more complicated project than previously assumed. More questions have arisen to which the PT has no good quick answers.
This apparent indecisiveness has created suspicions about the PT’s ulterior motives. Is the PT playing safe to protect its fragile coalition, and does it really want a new Constitution to replace the existing one promulgated on 6 April 2017 during the authoritarian rule of coup leader General Prayut Chan-o-cha?
When it became the largest opposition party after the general election in 2019, the PT was adamant that the Constitution of 2017 was “undemocratic”, calling it a despicable “vestige of authoritarianism” that should be replaced by a new Constitution of, by, and for the people. Most other parties tended to agree with the PT. Move Forward Party (MFP), then the second largest in the opposition, went so far as to call for the formation of a wholly-elected national assembly to draft a new Constitution. But their repeated attempts proved unsuccessful.[1]
Most of the appointed 250 senators opposed any move to change the Constitution in any substantial manner. Every constitutional amendment requires the support of a majority of the parliamentarians (more than half of the 500 MPs and 250 senators combined), and the majority vote must include at least one-third of the senators (83 senators).[2]
Eventually, MPs and senators could only agree—in September 2021—to some amendments involving the electoral system and the composition of the 500 elected MPs,[3] changes which do not affect the senators.
SENATORS’ TERM DRAWING TO AN END
The five-year term of the existing 250 senators ends on 11 May 2024.[4] After that the Senate will have a new batch of 200 members chosen from various occupations.[5] But unlike the existing 250 senators, the new senators will not have the right to join MPs in voting for a new prime minister.
Lest we forget, a large majority of the 250 senators were instrumental in blocking MFP leader Pita Limjaroenrat from winning the premiership last July. On 14 July, Pita’s candidacy for the premiership failed to gain the support of a majority of parliamentarians: only 311 MPs and 13 senators voted for him; that was 52 votes short of the minimum majority of 376 votes needed. Subsequently, on 19 July, as many as 210 senators joined 185 MPs in blocking Pita’s renomination for the premiership, and therefore ended his quest for the premiership.
Assuming that the new 200 senators who will succeed the existing 250 senators are more pro-democracy, the Senate will no more be an obstacle standing in the way of any constitutional amendment. Section 256 of the Constitution can then be easily amended to open the door for the establishment of a new constitutional drafting national assembly. The drafting should not take longer than six months since it will be the 21st constitution of the country. Many good provisions in previous Constitutions can be conveniently lifted and pasted into a new draft.
NEW CONSTITUTION OF THE PEOPLE
Undoubtedly there is strong and widespread popular support for a new constitution. The victory of the MFP and the PT, coming first and second respectively in the May 2023 general election,[6] provided clear evidence that a majority of Thai voters wanted changes – including a new Constitution.
A movement organised by iLaw on 13 to 20 August 2023 to collect 50,000 signatures calling for a national referendum on a new Constitution to be drafted by the people – and not by politicians and government experts – ended up with more than 205,000 signatures.[7] On 30 August, the remarkable outcome was submitted to the Election Commission for verification. The PT has also been informed and been requested to follow up on the matter in the Cabinet.
According to the NIDA Poll held in early September, among the top 10 policy priorities of the PT, drafting a new “Constitution of the People” came fifth in popularity. About 78.70% of respondents wanted it. However, 59% of respondents doubted that the PT would be able to deliver it.[8]
The emerging doubt came from the fact that Prime Minister Srettha has hardly made any comment on this issue. On 3 October, he had simply ordered the formation of a national committee to consider ways of organising national referendums on the Constitution.[9] The new entity is headed by Deputy Prime Minister Phumtham Wechayachai, who is also the commerce minister, and a deputy leader of the PT.
Minister Phumtham, who is the PT’s chief ideologue with close ties to former prime minister Thaksin Shinawatra, has set up two subcommittees: one on soliciting public opinions, and another on ways and means of holding national referendums. The former is headed by MP Nikorn Chamnong, a veteran politician of the Chatthai Pattana Party; the latter is headed by Vudhisarn Tanchai, a former secretary-general of the King Pradhipok’s Institute.
Minister Phumtham and Nikorn, who is also spokesman for the national committee, have done most of the talking. Prime Minister Srettha, meanwhile, has concentrated on pushing the implementation of the troubled “digital wallet” programme.[10]
HOW MANY NATIONAL REFERENDUMS?
In March 2021, the Constitution Court issued a ruling that Thai voters shall be consulted twice: first, in a national referendum on whether they want a new Constitution; and second, in another national referendum on whether they accept a new draft Constitution when its drafting has been completed.[11]
Now, some constitutional law experts have pointed out that the existing Constitution has no provisions for the establishment of any group to draft a new Constitution. In order to properly empower the proposed elected drafting national assembly to do its crucial job, the Constitution must first be amended to include necessary provisions on this matter. Such a substantial amendment would require approval in yet another national referendum.
Holding up to three national referendums will cost the government nearly 10,000 million baht (US$286 million). This is bad news for the Srettha Administration, which is desperately struggling to pay for the “digital wallet” programme. As things stand now, the programme to hand out 10,000 baht worth of purchasing credit to every Thai adult 16 years and older (whose salary is below 70,000 baht a month and whose bank account contains less than 500,000 baht) will cost about 500 billion baht (US$14.28 billion).
The sub-committee headed by Vudhisarn is consulting the Election Commission on how to reduce the number of national referendums. Perhaps, the first national referendum can be postponed until after the Constitution has been amended to include provisions for the formation of a new national assembly to draft a new Constitution. Then voters can be requested in a national referendum to reaffirm the idea of having a new Constitution, and to approve the constitutional amendments on this matter.
DOUBLE MAJORITY NEEDED
One unforeseen complication in the law on national referendum, which went into effect on 12 September 2021, has been identified in Section 13 of the new law. Here, it is stated that in order to approve anything in a national referendum, more than half of all the eligible voters must participate, and the approval receives the endorsement of more than half of the eligible voters who participate.
Nikorn, head of the sub-committee to solicit public opinions, has sounded the alarm, and voiced his “serious concern” about what he called “double deadlocks”.[12] He believes the national referendum law must be revised to remove the first majority of voter turnout, and to let only the majority of voters who participate decide, regardless of their number. This can pre-empt a boycott of the MFP, whose supporters number more than 14 million.
In the May 2023 general election, Thailand had about 52.19 million voters. Only about 39.51 million showed up to vote, a turnout of about 75.71%. Assuming that the population of Thai voters increases by 2% a year, by next May, there will be about 53.23 million voters. In order to approve anything, at least 26.62 million of them must show up to vote in a national referendum, and the approval must be backed by at least 13.31 million votes.
The first requisite majority of voter turnout will be difficult to achieve because there may not be enough incentives to attract nearly 27 million voters to participate. On 7 August 2016, when General Prayut’s regime held the referendum to endorse its draft constitution, only about 59.40% of 50.07 million voters participated. The draft was endorsed with only about 16.82 million votes, and became the Constitution of 2017.[13]
Moreover, the voter turnout could be too low to pass anything should the MFP mobilise its 14 million supporters to boycott all national referendums. The MFP strongly disagrees with the PT in the latter’s stated preconditions on not “touching” or “revising” Chapter I: General Provisions,[14] and Chapter II: The King.
Because of the above disagreement, the MFP has opted out of sending anyone to join the Phumtham-led national committee. As far as the MFP is concerned, the drafting of a new Constitution should start without any preconditions. MFP leader Chaithawat Tulathon has reiterated that the MFP would not support any partial and conditional amendments to the Constitution.[15]
Nevertheless, the MFP is open to consultation with the Phumtham committee. The reformist party is keen to press for the direct election of independent representatives to form a new Constitution-drafting national assembly. The MFP dislikes the PT’s idea of including unelected “experts” on such an assembly. The MFP says “experts” may join technical sub-committees to advise the elected drafters – but they need not be drafters themselves.
MOVE FORWARD HAS A TRUMP CARD
The MFP won the May general election, winning in 112 of 350 constituencies, and getting 39 of 100 party-list House seats with 14.438 million votes, compared with the PT’s winning in 112 constituencies, getting 29 party-list House seats with 10.962 million votes. Obviously, by virtue of such a clear popular mandate, the MFP – not the PT – should be leading a new government.[16]
Many MFP supporters are upset with what they perceive as a betrayal by the PT for its own political gain. Their grievances are real and plain to see.[17]
Now as the core opposition party, the MFP holds a trump card to frustrate the PT by blocking constitutional amendments.
Under Section 256 of the Constitution, a constitutional amendment needs the support of not only a majority of parliamentarians, and at least one-third of senators in the majority vote; but the majority vote must also include 20% of MPs of parties that do not have ministerial posts, or parliamentary posts (House Speaker, and Deputy House Speakers). Parties in this category are mostly in the opposition, notably the MFP with 148 MPs,[18] Democrat Party with 25 MPs, and Thai Sang Thai with 6 MPs.
Without the cooperation of the MFP, there will be no 20% of the opposition MPs (at least 37 MPs) to endorse any constitutional amendment, as required in Paragraph 6 of the Section 256.
The big hot question now is what will the MFP do with its trump card.
First and foremost, the MFP would want to continue to press for a nation-wide election of independent representatives to form a national assembly and to work on a completely new draft Constitution. It opposes the PT’s idea of trying to amend the existing Constitution without touching the hyper-sensitive Chapters I and II. Provisions in the second chapter concern the revered position and prerogatives of the King, which are also protected under the controversial Section 112 of the Criminal Code, the so-called “lese-majeste law”.
One of the MFP’s election issues concerned amending the Section 112 to reduce its penalties, and to limit to only the Royal Household Bureau the right to file a police report accusing anyone of violating the law. At present, anyone encountering an alleged violation can notify the police. And if convicted, a violator faces a jail term of 3 to 15 years.[19]
Unfortunately, the MFP’s use of the law as an election issue has landed it in hot water. The Constitutional Court has been deliberating on a complaint from one critic who accused the party of undermining the monarchy and attempting to abolish the constitutional monarchy. If found guilty, the MFP will be dissolved and its executive committee members banned from politics for up to 10 years. A ruling on this case is expected by next January.
In the meantime, the MFP is trying to score more political points and turn undecided voters into its supporters. One hot issue in this regard is a general amnesty bill submitted by the MFP to the House of Representatives. The MFP wants a law to absolve all protestors arrested and/or convicted in political gatherings and demonstrations since 2006. The House Speaker has promised to bring up the MFP’s bill for consideration within the next parliamentary session (lasting 120 days), which started on 12 December.
Under its proposed bill, the MFP leaves open the possibility of including for amnesty those who have been charged or jailed under Section 112.[20] They include at least three MPs of the MFP, who were pro-democracy activists before they joined the MFP.[21] But the PT as well as Bhumjaithai, the second largest government party, is still reluctant to let those who have violated the lese-majeste law to go scot-free.
Obviously, there are emerging opportunities for the MFP to negotiate with the PT on a quid pro quo basis. The MFP needs the support of the PT to pass the amnesty bill into law as soon as possible. At the same time, the PT needs support from the MFP in amending the Constitution instead of drafting a new one.
If the two largest parties can work together, then anything can happen once the existing 250 senators leave the Senate on 11 May 2024. After they leave, the selection of a new prime minister will be done entirely by MPs. With reconciliation, and a reunion of the MFP and the PT in a new “pro-democracy” alliance, the formation of a new governing coalition cannot be completely ruled out.
As stated by Thanathorn Juangroongruengkit, founder and leader of the dissolved Future Forward Party, the political future of Thailand depends on the MFP and the PT. He recently admitted that he went to meet Thaksin in Hong Kong in early July while the MFP and the PT were trying to win the premiership for Pita. Thanathorn believes an alliance between these two parties will be best for Thailand’s development and for its return to democracy.[22]
The MFP is a successor party of the Future Forward Party; the latter was dissolved in February 2020. Thanathorn has turned to lead the Progressive Movement, a civil society organisation to promote democracy and the development of local government. Although he has been barred from politics for 10 years, Thanathorn has significant influence over the MFP – very much like Thaksin’s clout over the PT, where his youngest daughter, Paetongtarn, is now party leader.
CONCLUSION
Indeed, Thailand’s political future depends on how far and how much the MFP and the PT can work together on the Constitution issue as well as on the general amnesty bill.
A constructive approach by the MFP can win the party political points, and turn undecided voters into supporters of the reformist party. This will help ensure victory for the MFP in the next general election, which can be held soon after a new Constitution, or an amended Constitution of 2017, enters into force.
A positive breakthrough, even if done through secret wheeling and dealing between the MFP and the PT, will put Thailand back of track towards national reconciliation and democratisation.
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). |
“Chinese Investments in Malaysia: Synthesizing the Evidence Ten Years into the BRI” by Tham Siew Yean
2023/98 “Insufficient States: Revisiting the Roles and Resources of Malaysia’s Subnational Governments” by Lee Hwok Aun
EXECUTIVE SUMMARY
- Malaysia’s state governments may appear to be more autonomous and empowered with their elections taking place outside of the general election cycle. Only three states held elections concurrently with the November 2022 general election; six Peninsular states went to the polls in August 2023.
- However, the sentimental resonance and political consequence of these elections outweigh the designated roles and material resources of state governments. In 2022, state governments received revenue of RM926 per capita, one-tenth of the federal government’s RM8,969.
- The constitution vests important roles in land management, social welfare and local government supervision to state governments, but heavily circumscribes them nevertheless. In practice, the states are restricted — notably in the overwhelming role the federal government plays in social welfare and public health, despite these being under joint federal-state jurisdiction.
- All state governments rely heavily on land-based revenue which arguably induces over-exploitation and commercial ventures that lack transparency. Only Sabah and Sarawak are mandated to collect sales tax. Local governments collect property-based revenue to deliver local services, in a logical structure of functions and circulation of funds.
- More federal functions should be devolved to the states, particularly in social welfare and public health, and state capacities should be bolstered by statutory expansion of revenue collection, especially through consumption taxes. Reforms are required to empower state governments to be responsive and for subnational governance to be effective.
* Lee Hwok Aun is Senior Fellow and Co-coordinator of the Malaysia Studies Programme at ISEAS – Yusof Ishak Institute. The author thanks Francis Hutchinson, Tricia Yeoh and Kai Ostwald for their incisive comments on an earlier version of this paper. The usual disclaimer applies.
ISEAS Perspective 2023/98, 14 December 2023
INTRODUCTION
The 13 state governments in the federation of Malaysia inhabit a paradox. While the office of the Chief Minister carries prestige and state assembly persons are generally well regarded for supervising public services and solving local problems, they operate within a narrow scope of responsibility and with steep financial constraints due to exceeding reliance on land-based revenue — i.e. taxes, premiums and fees collected from residential and commercial land, forestry, and mining.
The standing of state governments has recently been bolstered by chief ministers, especially Kedah’s popular and provocative Muhammad Sanusi Md Nor, as well as the conduct of state government elections independently of the general election, which encourage efforts to showcase government performance in the country’s increasingly competitive political landscape. However, these developments do not alter the reality that Malaysia’s federal structure is among the most centralised in the world (Ostwald 2017). For decades, state governments have also negotiated the dilemma of conserving forests and sustainably managing land while heavily relying on land-based revenue. Potentially overzealous expansion into prospective finite resources, such as rare earth mining, is induced by state governments’ lack of funds.
It is timely and vital for Malaysia to revisit its federal-state balance and to expand the functions of subnational governments and their revenue bases, for three key reasons. First, state governments are well-poised to effectively provide a wider range of services that should be more systematically executed and adequately funded. Second, the over-reliance of state governments on nonrenewable land-based revenue and federal grants grossly limiting their capacity, militate against conservation and sustainable land management, including food production. Furthermore, these have induced entry into commerce in ways that are less than transparent and accountable. Third, the federal centralisation of power is intertwined with the legacy of the dominant Barisan Nasional coalition that Malaysians definitively jettisoned at the 2022 general election.
This Perspective proceeds with a brief overview of the constitutional framing of federal and state jurisdictions, and a discussion of the subject in practice and the theoretical arguments for expanding the roles and resources of state governments. This is followed by an assessment of state government budgets and land-based revenue dependency, and plausible scenarios of consumption tax collection. The closing portions offer some policy reforms for consideration.
STATE GOVERNMENT ROLES AND RESOURCES BY CONSTITUTION AND IN PRACTICE
Malaysia’s constitution, through its demarcation of the functions and resources of federal and state government, lays the foundations for a highly centralised system. The Ninth Schedule’s Federal, State and Concurrent Lists of jurisdictions designate the vast proportion to the federal government, including education, health, defence, utilities, transport, justice system, national currency and public finance, and external relations and international diplomacy (Appendix Table 1). State governments are confined to cultural and religious affairs, land matters and oversight of local government. On the Concurrent List granting authority to both federal and state governments are matters such as social welfare, public health, wildlife protection, and town and country planning.
The formation of a highly centralised bureaucracy traces back to the colonial era, particularly the post-War and pre-Independence period (Hutchinson 2014a). The capacity of governments to collect revenue aligns with federal-dominant authorisations. As outlined in the Tenth Schedule of revenue sources, the federal government alone collects all forms of tax — whether direct taxes on income, profit, etc., or indirectly on trade, sales, services, etc. — and has access to a host of non-tax revenue sources. State governments are funded by revenue from forest, land and mines, and various licenses and fees (Appendix Table 2). The embeddedness of these terms in the constitution has direct and permanent consequences on the power balance, albeit that these are also subject to precedent and convention.
In practice, the federal government has been exceeding the constitutional mandate it has over the states. The items on the Concurrent List have been preponderantly delivered by federal authorities rather than being meaningfully shared. Undoubtedly, the ambiguity of various Concurrent List matters, in contrast to specificity on the Federal List, creates a pro-federal bias where overlaps occur. For instance, “social welfare” and “public health and sanitation”1 stand in marked contrast to the clear and specific stipulations for federal authority with regard to hospitals, clinics, and social insurance. However, the lopsided pro-federal application of the Concurrent List led it to acquire an inertia over many decades.
Political interest also motivated federal government dominance. The process has been characterised in scholarly work as “UMNO’s power consolidation” to maintain hegemony nationally — by bypassing opposition-held states and offering patronage to government-held states — and to secure popularity within the party through dispensing largesse. This has been achieved through various mechanisms, notably the exceeding concentration of powers and resources in the Prime Minister’s Department, which in addition to the amassing of power in general, also serve to keep state governments on a tight leash (Hutchinson 2014b). Another manifestation of the utilisation of federal resources to supersede the state is the establishment or expansion of agencies that duplicate state operations, and which through their superior access to resources, consequently supersede the state-level counterparts.
State governments have made some forays beyond the constitutional confines, for example, Selangor’s establishment of private higher education institution, Universiti Selangor, despite universities being exclusively in the federal list. State governments have also established commercial entities that engage in land development and various commercial ventures, to generate revenues. Notably, subsidiaries of Selangor’s Menteri Besar Inc. administer the state’s social assistance programmes. Such provisions are arguably approved, as “social welfare” is in the Concurrent List, but the constitutionally mandated revenue sources evidently generate insufficient funds to meet the government’s commitments. In some ways, state governments are distinctly poised to deliver services, due their proximity to local constituents and responsiveness to demands on the ground. Covid-19 measures by state governments alongside the federal machinery, in providing aid and administering vaccines, demonstrated their ability, and in some ways their advantage, in effectively addressing public health needs (Yeoh forthcoming). The expansion of social protection over the past decade and a half, and the pandemic experience have shown that the scope for state governments in public health and social welfare can assuredly be expanded.
The states have complained. Heavy reliance on land-based revenue directly constrains their capacity, while providing windfalls to those with oil reserves, as starkly shown in the next section. Capitation grants, which are scaled to population with some in-built progressive distribution, technically transfer funds from federal to state, but have tended to operate in an opaque manner, with grouses volubly raised from time to time.2 In June 2022, members of parliament critiqued the lack of benefits to the most populous and advanced state of Selangor despite its large contributions to the national economy and its high administrative and infrastructure expenses.3 In March 2023, Kedah’s former Chief Minister Mukhriz Mahathir bemoaned the lack of federal support, both in capitation grants and development investment, for less advanced states.4 Amid the recurring queries, Deputy Finance Minister Steven Sim explained in parliament that federal-to-state transfers are not driven by political affiliation, and that development projects for less advanced states, along with ecological fiscal transfers, have continually been rolled out.5
However, the implementation of capitation grants — a basic question of whether the Finance Ministry abides by the clear and simple, if outdated, calculation formula — has not been publicly accounted. State government debt to the federal government, which hovered at a hefty RM17 billion throughout 2015-18, underscores the inadequacy of their internal funding and compounds the federal-state hierarchy (Yeoh 2021). Selangor’s declaration, as part of the state’s 2024 budget, that the state would fully settle its debt to the federal government resonates with a salutary notion that state governments should be freed from such financial yokes.6
The consequences of state government’s land use decisions, including issuance of logging and mining concessions or conversion of farmed or agriculturally designated land to industrial status, are immense. Malaysia’s state governments have overseen extensive logging and deforestation, largely for oil palm plantations.7 The option to convert land use to more financially profitable purposes, which entails land premium collection by the state government, sometimes works to the detriment of existing or potential food agriculture.8 The underlying causes are not reducible to a single factor; award of logging concessions or land conversions are vulnerable to rent-seeking activity and it is unclear if the ensuing deals contribute substantially to state coffers. Measures to enhance the efficacy and integrity of logging licenses, such as through open tenders, have been proposed, for example in Kedah (2014) and Sarawak (2017).9 The availability of more non-land-based sources of revenue will not eliminate rent-seeking proclivities, but would arguably reduce pressure on extracting revenue and also confound the lack of state revenue being used as a pretext for land conversion. It would also enhance state governments’ ability to stake performance legitimacy by delivering more social welfare and public services.
Other sources that state governments generate or receive have emerged in recent decades. State economic development corporations (SEDCs), in operation since the 1960s, have continually been involved in commercial or residential land development and promotion of Bumiputera enterprise. From the 1990s, Chief Minister offices established commercial entities venturing into broader fields, including higher education and technological sectors. New federal grants have also emerged, notably the ecological fiscal transfers (EFTs) introduced in 2019, emulating the practice in other countries of national governments financially supporting subnational governments in conservation matters. In principle, EFTs compensate state governments for foregoing proceeds that converting forests to commercial uses could bring them.
Beyond the quantity of government revenue, a further issue in the federal, state and local government structure concerns the coherence of their respective sources of income with governmental functions and the returns to taxpayers. Federal collection of the vast bulk of direct and indirect taxation and numerous fees and charges concurs with the breadth of functions that in turn enable economic and social life. Importantly, tax on income and profit justifiably flows to federal coffers, in light of the central government’s provision of law and public administration, infrastructure, external relations, basic education and a public health system, which all undergird the generation of income and profit in society as a whole. Likewise, assessment rates that finance local governments allow the latter to render to constituents essential local services such as waste disposal and public amenity maintenance.
This circular flow, however, has become disjointed for Malaysia’s state governments, particularly since their expansion into areas that are on the Concurrent List, such as social welfare. But while broadening their range of services – which state governments are eminently poised to deliver – they remain incapacitated by dependency on the finite resource of land.
Taxation on consumption stands out as a revenue source that can fill the gap, and also help state finances ride out business cycles and maintain stability through economic crises.
STATE GOVERNMENT FINANCES: SMALL BUDGETS AND PERSISTING CONSTRAINTS
The fiscal balance of Malaysia’s state governments emphatically shows their meagre collections. State governments’ revenue in 2023 averaged RM926 per capita, just 10.3 per cent of per capita federal government revenue of RM28,153 (Table 1). There are wide disparities across states, with Sarawak generating RM4,414 for each resident, and Terengganu and Sabah also enjoying sizable revenue in excess of RM1,500. Oil royalties account for these three states’ stark advantage over the rest, with Sarawak and Sabah also reaping petrol sales tax. Relatively land- and forest-abundant Kelantan, Perlis and Pahang evidently can tap into resources to register among the higher per capita state government revenue on the Peninsula, after Terengganu. At the lower end, the more industrialised and urbanised Selangor and Penang earn the lowest revenue per capita. State versus federal government annual expenditures display a similar pattern, except that the disparity is higher due to the greater capacity of the federal government to borrow and run deficits; hence, federal expenditures exceed state expenditures by a wider margin (Appendix Table 3).
Table 1. Revenue of state governments* (highest to lowest GDP per capita)
Source: Author’s compilations from DOSM (2023) and news reports.
Notes: * 13 states exclude the Federal Territories (Kuala Lumpur, Labuan, Putrajaya). ** Projected revenue.
The dependency on land-based revenue manifests all around, including in the more advanced states which enjoy wider options for generating revenue. Selangor’s signature Inisiatif Peduli Rakyat (caring for the people) family of social assistance programmes are parked under the Menteri Besar Incorporated holding company that manages the state government’s assets. However, Selangor’s 2022 revenue still comprises mainly land premiums (RM849 million, or 46 per cent of the total revenue), followed by land tax amounting to RM562 million (30 per cent), while major land, forest, or mining taxes, fees, or other payments amounted to RM112 (6 per cent). In total, these land-based sources contributed up to 82 percent of total revenue; receipts from the federal government amounted to RM215 million (11 per cent). Perak’s revenue for 2021, the most recent reported year, consisted of 70 per cent from land-based sources, and 15 per cent from federal government transfers.10
The contribution of forest-based revenue warrants specific attention, as both an economic and ecological concern. The Forestry Department of Peninsular Malaysia’s annual reports tabulate data on forest-based revenue and forested area, which enable us to juxtapose some snapshots across time, at least until the most recent disclosure in 2019. Pahang and Kelantan, abundantly endowed with forest and with relatively higher forest area, also extract the most from forests — with 18-20 per cent of annual revenue derived from these (Table 2). Simultaneously, Kelantan has registered the highest loss of forest, and a steady increase in forest-based revenue in the decade prior to 2018 (Figure 1). These numbers must be handled with care in general; the relatively lesser loss of Pahang’s official forest cover, for example, warrants further investigation.11
Notwithstanding the data gaps, Malaysia must break a vicious cycle of over-reliance on land-based revenue and over-exploitation of natural resources. We should also note that Johor’s high forest loss has transpired despite the state’s low dependency on forest-based revenue. Sustainable forest management entails addressing a complex of factors, one of which is decidedly state government reliance on forest-based revenues. On this note, the brewing zeal to tap into potential rare earth mining bonanzas could also be tempered by the availability of non-land-based revenue sources.
Ecological Fiscal Transfers have swung into motion as a conservation instrument, with the federal government continually raising this budget line item from RM70 million in 2022 to RM150 million in 2023 and RM200 million for budget 2024. The mechanism and outcome of distribution – regarding which states would receive EFTs and how much – remain unclear. However, this is a development that deserves to proceed and be evaluated. At the same time, the allocations are in the grand scheme of state finances, and may struggle to be robustly increased within the federal budget bargaining process. EFTs should be viewed as a reinforcement, not a replacement, for increasing state revenue and enhancing state governments’ role and accountability as custodians of the land.
Table 2. Peninsular Malaysia States: Forest-based revenue and forest area (2009-2019)
Sources: Author’s calculations from Forestry Department Peninsular Malaysia(2010, 2020) and news reports.
Notes: * Forest-based revenues are derived from royalties, premiums, cess, forest offence fines, compensations and other charges or fees; ** “Forest area” includes permanent reserved forest (which may be approved for logging and forest plantations), wildlife forest parks, state parks, and state land forest.
Figure 1. Peninsular Malaysia states: Annual forest-based revenue (RM million), 2008-2018 (three-year moving average)
Source: Official data compiled by Macaranga Media.
The constitution gives prominence to capitation grants, and specifies a simple population-based formula for calculating the quantum. However, lawmakers and state government leaders have questioned the supply of these grants, suggesting incomplete adherence to the rule, or opacity in general even if the grant is being administered. Full compliance, which translates into the payment schedule in Table 3, can go some ways toward addressing the critiques of the economically-leading states that contribute extensively to federal government revenue — and are also relatively less land-endowed — but receive disproportionately less from Putrajaya. Selangor and Perak budget documents disclose that the state received capitation grant of RM77.2 million and RM36.0 million, respectively, in 2022 (differences in population data might account for the discrepancy between this amount and the figure in Table 3).12 Complaints that the federal government ignores states may be induced by the derisory amount of these mandated transfers. Even if the constitutional terms are fully honoured, the quantity — mostly in the range of RM12-16 per capita — is ultimately far less consequential than that which broader reforms can deliver.
Table 3. Estimated capitation grants from federal to state governments
Source: Author’s calculations based on the Federal Constitution13
Federal development grants flow more voluminously to states. The amounts can be sizable, but are also ad hoc and contingent on projects. Costly and cross-border projects unquestionably require pooling of funds and coordination, which are the province of the federal authorities. Nonetheless, more state government revenue will empower them to undertake development, possibly in more responsive and nimble ways than the complex federal bureaucracy do.
EXPANDING ROLES AND RESOURCES
The preceding discussion has elucidated Malaysia’s sub-optimal federal system, in terms of both design and practice. What alternatives can the country consider? Where and how might Malaysia probe room for expansion?
This weighty subject entails a broader discussion, and possibly some proposition of constitutional amendment, but two starting points stand out. Considering the advantages of the state-level of government in proximity and responsiveness to the people, and the foreseeable political intractability of constitutional amendments to the Ninth Schedule of federal and state responsibilities, items on the Concurrent List present a more feasible path forward for states to play a larger role — specifically in social welfare and public health.
On the revenue side, a bold and constructive debate must be opened on elements of the tax regime currently monopolised by the federal government. Aside from Sarawak and Sabah’s petrol sales tax, the federal government collects all consumption tax, encompassing sales, services, and excise. For reference, Malaysia’s last goods and services tax (GST) collection of 2018 amassed RM41 billion, or 2.8 per cent of nominal GDP (RM1,447 billion). State governments could be the recipients, either through a constitutional reform that allows for sales tax collection, akin to the provision for Sabah and Sarawak, or a statutory requirement for consumption tax to be apportioned between the federal and state governments. The rate of taxation or breakdown between federal and state shares must be debated critically and transparently, but can refer to prospective returns to the state.14 Various federal-structured countries’ collection of national and subnational consumption taxes — notably Australia, Brazil, Canada, and India — are worth considering (Appendix Table 4).
Table 4 presents hypothetical consumption tax revenue, based on share of GDP, and the resulting boost to state government capacity. Consumption tax amounting to 1% of GDP would generate for the 13 states a total of RM14.3 billion in 2022, with RM4.2 billion to Selangor, RM2.0 billion to Sarawak, RM1.2 billion to Sabah, and substantial amounts to all others. Such financial gains, accompanied by an express mandate for states to expand social welfare and public health programmes, could help make the reform more electorally palatable. For instance, a national consensus could task state governments with providing universal pension for senior residents. A constitutional amendment to permit Peninsular Malaysia states to collect sales tax would require a momentous mustering of political will, but considering the economic, social and sustainability benefits involved, the endeavour would be a meaningful and productive channelling of national energy.
Table 4. Consumption tax revenue to state governments: hypothetical scenarios
Source: DOSM (2023); author’s compilations from news reports; author’s computations.
CONCLUDING NOTE
Malaysia’s state governments have been gaining political prominence but remain functionally constrained. Their dependency on land-based revenue militates against sustainable development. Expanding both the roles and resources of state governments makes eminent sense logically and practically. However, this may involve considerable, but not insurmountable, constitutional navigation.
Delegating more roles and resources to the subnational levels would also resonate with sound democratic ideals and the principle that self-sufficient state governments can provide more for their constituents and are less beholden to federal masters. Progress, of course, must surmount political barriers, and tendencies within the central government to keep the states beholden, to dispense patronage, and thus to maintain power. Such structures look increasingly like relics of Barisan Nasional’s “stable” rule. With coalitions now loosely formed and with power dispersed, and with East Malaysia continually asserting autonomy, resolving the insufficient state of Malaysia’s subnational governments may well enhance political stability.
REFERENCES
DOSM. 2023. Gross Domestic Product (GDP) by State, 2022. Putrajaya: Department of Statistics Malaysia.
Forestry Department Peninsular Malaysia. 2010. Annual Report. Kuala Lumpur: Forestry Department Peninsular Malaysia.
Forestry Department Peninsular Malaysia. 2020. Annual Report. Kuala Lumpur: Forestry Department Peninsular Malaysia.
Hutchinson, Francis E. 2014a. “Malaysia’s Independence Leaders and the Legacies of State Formation under British Rule”. Journal of the Royal Asiatic Society 25: 123-151
Hutchinson, Francis E. 2014b. “Malaysia’s Federal System: Overt and Covert Centralisation”. Journal of Contemporary Asia 44, no. 3: 422-442.
Ostwald, Kai. 2017. “Federalism without Decentralization Power Consolidation in Malaysia”. Journal of Southeast Asian Economies 34, no. 3: 488–506.
Yeoh, Tricia. 2020. “Federal-State Relations Under the Pakatan Harapan Government”. Trends in Southeast Asia 2020 No. 12. Singapore: ISEAS.
Yeoh, Tricia. 2021. “Will Pakatan Harapan’s Hold on Selangor Continue?” Trends in Southeast Asia 2021 No. 3. Singapore: ISEAS.
Yeoh, Tricia. forthcoming. “Conflict and Cooperation: COVID-19 Policy Coordination in Malaysia”. In Covid-19 in Southeast Asia, 2020-2022: Restriction, Relief, Recovery, edited by Lee Hwok Aun, Siwage Dharma Negara and Jayant Menon. Singapore: ISEAS.
APPENDICES
Appendix Table 1. Division of Responsibilities between the Federal and State Governments
Source: Federal Constitution, Ninth Schedule (compiled and tabulated in Yeoh 2020).
Appendix Table 2: Revenue Sources to Federal and State Governments
Source: Federal Constitution, Tenth Schedule (compiled and tabulated in Yeoh 2020).
Appendix Table 3. Expenditure of state governments (highest to lowest GDP per capita)
Source: Author’s compilations from DOSM (2023) and news reports.
Note: 13 states exclude the Federal Territories (Kuala Lumpur, Labuan, Putrajaya).
Appendix Table 4. Notable countries with subnational-national consumption tax structure
Source: Author’s compilations from https://taxsummaries.pwc.com/.
ENDNOTES
For endnotes, please refer to the original pdf document.
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