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ISEAS Perspective

2024/35 “The Impacts of Supply Chain Reconfiguration on ASEAN Economies” by Aufa Doarest and Maria Monica Wihardja

 

Forcing ASEAN to choose sides – whether to be in the US or China supply chain system – will be impossible and disruptive, and ASEAN should continue to take the pragmatic approach and reject choosing sides. Picture: Facebook page of the ASEAN Secretariat.

EXECUTIVE SUMMARY

  • At the centre of the US-China trade war are the semiconductor chip and green industries.
  • ASEAN is clearly benefiting from the resultant reconfiguration of the global supply chains in these two industries in terms of trade, value addition and foreign direct investment, at least in the short run. However, these benefits can be more than offset by the greater disruption to the global supply chains should US-China tensions continue to escalate.
  • Its high trade reliance on China while having the US as its largest investor (by far) and key source of technology transfers puts ASEAN in an increasingly precarious situation should the US-China supply chain decoupling intensifies.
  • Forcing ASEAN to choose sides – whether to be in the US or China supply chain system – will be impossible and disruptive, and ASEAN should continue to take the pragmatic approach and reject choosing sides.

* Aufa Doarest is Private Sector Specialist at the World Bank Group’s Finance, Competitiveness and Innovation and Maria Monica Wihardja is Economist and Visiting Fellow at ISEAS – Yusof Ishak Institute and Adjunct Assistant Professor at the National University of Singapore.

ISEAS Perspective 2024/35, 17 May 2024

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INTRODUCTION

Interdependence within the global supply chain has been exacerbated by the growing dependence for intermediate inputs on only a few firms and a few countries (Pangestu, 2023). The semiconductor industry and the green technology industry are two examples of highly concentrated supply chains where firms from East Asia (e.g., China, Taiwan and South Korea) are now the dominant suppliers (Miller, 2022; Nguyen-Quoc, 2023).

The heightened dependence of the US on China has raised geopolitical rivalry between the two countries and driven the reconfiguration of supply chains. Countries and companies now seek to ‘decouple’, ‘diversify’ and ‘de-risk’ their supply chain configuration away from their adversaries. Consequently, supply chains in Asia are undergoing major changes.

At the country level, a number of strategies are being adopted, including re-routing trade flows through intermediary countries; home-shoring investment through investment subsidies and tax credits; and increasing self-reliance through import substitution and research and development (R&D). At the corporate level, multinational companies (MNCs) in Asia and worldwide are adapting by adopting the ‘China Plus One’ or ‘China Plus Two or Three’ model to broaden their supply base outside China while maintaining a presence in China (Nguyen-Quoc, 2023).

This essay reviews and analyses how ASEAN economies have been impacted by the changing dynamics in the global supply chain. We focus on two industries, namely the semiconductor industry and the electric vehicle (EV) industry,[1] and look at the impacts from three angles: trade, investment and R&D.

THE US INDUSTRIAL POLICY IN CHIP AND GREEN TECHNOLOGY

Since 2018, during the Trump administration, the US has been restricting the exports of “emerging and foundational technologies” to entities abroad whenever those technologies are “essential to the national security of the US” (Bradford, 2023). This started with the Export Control Reform Act of 2018 enforced through the maintenance of a Commerce Control List and a licensing system as well as a narrower export control instrument known as the Entity List. Although the idea was to restrict exports exclusively for advanced technologies that could endanger national strategic interest – dubbed as the ‘small yard, high fence’ strategy – these export restrictions were later expanded in terms of both technologies and entities. For example, in 2020, the 2018 export restrictions to ban Huawei’s access to semiconductors were extended to cover all foreign technology companies (instead of only US firms) that use US chipmaking equipment and software tools.

In August 2022, the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act allocated USD280 billion to catalyse investments in domestic semiconductor R&D and manufacturing capacity. In October 2022, a set of export restrictions were issued to cut off China’s access to advanced AI chips and choke point technologies[2] (Ing and Markus, 2023). Later, these export restrictions were expanded into restrictions on direct investment (Shalal and Freifeld, 2023) and financial investment (private equity and venture capitals) (Siqi, 2024), as well as on individuals who hold US passports to work for Chinese chip companies (Lin and Hao, 2022). 

In a spirit similar to the CHIPS and Science Act, in August 2022, the US also signed into law the Inflation Reduction Act (IRA) to catalyse investment in R&D and domestic manufacturing capacity in leading-edge green technologies, including carbon capture and storage as well as EV (Badlam et al, 2022b).[3] The law will direct USD400 billion into a mix of tax incentives, grants, and loan guarantees.

The concentration of green technology production and the critical minerals associated with it in China—and in a few Chinese firms—has sounded an alarm bell for the US. For example, China dominates 75 percent of Solar Photovoltaic technology and battery manufacturing compared to the small share the US has of only 5 percent in the production of both technologies (Li and Zhao, 2023). Similarly, China commands 55 percent of wind technology manufacturing.  

IRA is the US’ biggest and most significant national policy to combat climate change. However, it is unclear whether IRA will leave any room for collaboration in low-carbon technologies where China is a major player, or lead to race-to-the-bottom protectionist industrial policies and strategic competition similar to that now found in the chip industry (Li and Zhao, 2023). Given the high concentration of green technology in China, diversification of trade source is commendable. However, focusing on where the green technologies are built could risk slowing down the low-carbon transition in the US and globally.  

THE CHALLENGES OF SUPPLY CHAIN RECONFIGURATION

At the centre of the US-China trade war and supply chain reconfiguration are chip and green technologies. Chip production-related activities, including assembling, packaging and testing, account for a significant share of the GDP and/or exports of ASEAN countries such as Malaysia, Singapore, Thailand and the Philippines (EDB, 2022a; EDB, 2022b).[4]

Supply chain reconfiguration in this context refers to aspects of production being shifted to countries or firms which are not necessarily the most competitive and efficient, due to geopolitical and national security factors. The new countries and firms may even have siloed technologies and production processes that are disconnected from others in the supply chain.

The impacts of supply chain reconfiguration on ASEAN economies can be strongly noted in three areas, namely (1) trade diversion through several intermediary countries to avoid goods flowing directly from China to the US, (2) relocation of FDI, (3) Research and Development (R&D) activities. The following sections discuss these separately.

TRADE [5]

China’s dominance as the world’s manufacturing superpower (Baldwin, 2024) is partly reflected in a significant increase in China’s export of EV (including Completely Build-Up and Completely Knocked Down cars but not parts such as batteries) and chips between 2017 and 2022. Within that period, China’s export of chips almost doubled, from USD 72 billion to USD129 billion, while China’s export of EV increased by almost 13 times, from USD2 billion to USD25 billion (Figure 1 and Figure 2).

Figure 1: China’s export and import of chips (in million USD)

Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

Figure 2: China’s export and import of EVs (in million USD)

Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

The US-China tech war, especially the escalating restrictions on China’s access to US technologies that started in 2018, are reflected in the trade in chips between the two countries in 2022. After an increasing trend since 2017, China’s import value of chip from the US declined from USD15.1 billion in 2021 accounting for 10.2 percent share of China’s total import of chips, to USD11.6 billion in 2022 accounting for 8.0 percent share (Table 1). Mirroring China’s import value decline is US’ export value decline of chips to China.

Table 1: US’ export to China and China’s import from the US in chip

 US’ export to China in chipChina’s import from the US in chip
 Value (in USD billion)Share of US’ Chip Export (%)Value (in USD billion)Share of China’s Chip Import (%)
20173.513.59.911.2
20184.216.311.612.3
20196.725.513.412.0
20208.131.213.910.9
20219.632.215.110.2
20226.524.411.68.0

 Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

The US decision to diversify its trading partners and move away from China affects international trade in chips. First, China’s chip export destination pattern has slightly shifted. The share of China’s chips export to the US dropped from 19 percent in 2018 to 11 percent in 2022. At the same time, the share of China’s chips export to ASEAN countries increased slightly from 18 percent in 2018 to 20 percent in 2022 (Table 2). While the changes in the destination pattern may be due to lack of domestic demand in the US, the positive trend of US import of chips, increasing from USD79.7 billion in 2018 to USD87.2 billion in 2022, reveals that US domestic demand has actually gotten stronger. It is predicted that the demand for chips will continue to increase as AI, robots and EV become the new normal in people’s everyday lives.

Table 2: Chip export shares of China, ASEAN and Mexico (%)

 China’s Chip Export Share (%)ASEAN’s Chip Export Share (%)Mexico’s Chip Export Share (%)
 China to ASEANChina to MexicoChina to USAASEAN to USAMexico to USA
201717.41.317.912.069
201818.41.419.29.065
201919.51.316.69.858
202021.51.312.711.960
202120.21.410.411.565
202220.11.611.114.067

 Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

Second, this export diversion is reflected in the import pattern of chips. The US import share of chips has shown an increasing reliance on ASEAN and a decreasing reliance on China (Figure 3). Both ASEAN and China accounted for 34 percent of US chips import in 2017; but while ASEAN’s share increased to 48 percent in 2022, China’s share was halved to 17 percent. Meanwhile the share of Mexico in US chips imports has barely changed while the share held by other countries has increased by 4 percentage points in the same period. This shows that ASEAN is clearly benefiting from US’ import diversion away from China.     

Figure 3: US import of chip

Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations 

Unlike the chips trade, the trend of EV trade between the US and China continued to be robust in terms of value until 2022 but declined in terms of reliance (or share) (Table 3). The US used to account for 28.1 percent of China’s export in EVs but this fell to only 7.9 percent in 2022. At the same time, China had accounted for 52.5 percent of US’ import in EV but this declined to 12.8 percent in 2022.; ASEAN’s export of EVs has been increasingly going to the US (Table 4) while ASEAN’s import of EVs has been increasingly coming from China (Figure 4). The two-wheeler EV has been driving the increase in ASEAN’s export of EVs to the US. The main exporter before the COVID-19 pandemic was Vietnam.      

Table 3: US’ import from China and China’s export to the US of EVs

 China’s export of EVs to the USUS’ import from China of EVs
 Value (in USD billion)Share (%)Value (in USD billion)Share (%)
20170.316.60.123.9
20180.728.10.452.5
20190.721.40.420.7
20201.020.40.933.4
20211.812.61.015.3
20222.07.91.612.8

 Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

Table 4: EV export value (in USD million) and share (%)

 China to ASEANChina to MexicoChina to USAASEAN to USAMexico to USA
ValueShareValueShareValueShareValueShareValueShare
2017136.77.07.80.4326.016.60.11.1182.498.3
2018119.94.512.10.5746.328.14.79.143.364.5
2019202.36.321.70.7685.521.431.624.520.865.2
2020200.03.913.80.31,033.920.443.828.124.936.7
2021409.53.032.00.21,750.512.674.633.21,734.243.7
20221,073.64.280.10.32,017.47.9243.951.22,341.554.8
Note: Value in USD million. Share in %.

Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

Figure 4: Source countries for ASEAN’s import of EVs (%)

 Source: World Integrated Trade Solution (WITS, accessed February 2024), authors’ calculations

In short, while the US-China trade in chips shows signs of ‘decoupling’ (reduced trade values), the US-China trade in EVs shows signs of ‘diversifying’ (reduced trade shares) but not ‘decoupling’.

VALUE ADDITION

Looking at trade in total value or volume may not give the complete picture of trade diversion. China might divert its trade to the US through intermediary countries to avoid sanctions or higher tariffs placed on goods coming directly out of China and exports coming out these intermediary countries to the US may actually be high in Chinese content.

It is therefore important to also look at trade in value-added (TiVA) data of goods and services, which measure the value added by each country in the production of goods and services that are consumed worldwide (gross production minus the purchased intermediates). We use the OECD TiVA data used in Baldwin (2024) to analyse the changes in ASEAN participation in the global value added:

  • ‘Foreign Production Exposure: iMport side (FPEM)’: Share of imported input from a source country out of all industrial inputs (including domestically source inputs) used by a country on a scale of 0 to 100. Industrial inputs extend beyond the manufacturing sector and includes the agriculture and service sectors as well. The higher the index, the more reliant (and exposed) a country is to the source country on the production side.

  • ‘Foreign Production Exposure: eXport side (FPEX)’: Share of a country’s manufactured production from the manufacturing sector that is exported to a particular partner on a scale of 0 to 100. The higher the index, the more reliant (and exposed) a country is to the destination country on the sales side. 

Data for ASEAN are taken as the average of all ASEAN countries. Instead of looking at reliance of trade in value-added in the chip and EV industries, we look at realiance of trade in value-added in the whole economy. With a lag in the OECD TiVA data (the latest TiVA data is for 2020),[6] we may not be able to see the impacts of the more current policies such as the CHIPS and Science Act and the Inflation Reduction Act. However, we can observe a longer-term trend of trade in value-added, including China’s increasing dominance and ASEAN’s increasing participation in global value added.

The US reliance on China’s industrial inputs skyrocketed since the mid-1990s to decline since 2015, albeit with a slight up-tick in 2022 (Figure 5a). Despite this decline, in 2020, US’ reliance on China’s industrial inputs was still three times higher than China’s reliance on US industrial inputs. On the sales side, China’s reliance on the US was more than 17 times higher than US reliance on China in 1995, but the ratio declined since the early 2000s to two times in 2020 (Figure 5b).   

Figure 5a and 5b: US-China reliance on the production side, and US-China reliance on the sales side

Source: OECD TiVA (updated 2023, accessed February 2024), authors’ calculations

How has the participation of ASEAN economies in global value added changed?

China replaced the US as the dominant industrial input source for ASEAN countries in 2003 (Figure 6a). In 1995, ASEAN’s reliance on US industrial inputs was three times ASEAN’s reliance on China inputs. In 2020, ASEAN’s reliance on China’s industrial input was more than five times ASEAN’s reliance on that of the US. Similarly, China replaced the US as the dominant industrial output destination for ASEAN countries in 2011 (Figure 6c). In 1995, ASEAN’s reliance on the US market was more than eight times ASEAN’s reliance on that of China. In 2020, this flipped, with ASEAN’s reliance on China’s market coming close to 1.5 times ASEAN’s reliance on that of the US. Conversely, China’s reliance on ASEAN’s industrial inputs and market is increasing and is higher compared to US reliance on those of ASEAN (Figure 6b and Figure 6d). 

Intensification of ASEAN’s reliance on both China’s industrial inputs (production side) and the US market (sales side) since 2016 indicates ASEAN’s growing role as an intermediary region for Chinese goods to the US. This is supported by evidence at the country level with the correlation between Vietnam’s exports to the US and Vietnam’s imports from China doubling from 0.4 in 2020 to more than 0.8 in 2024, where 1 shows perfect correlation (The Economist, 2024).       

Source: OECD TiVA (updated 2023, accessed February 2024), authors’ calculations

FOREIGN DIRECT INVESTMENT

General FDI trends

Export-oriented FDI inflow positively correlates with the trade pattern. As the trade war intensifies, trade through intermediary countries and the investment inflow going to these intermediary countries surge, including investment to build new manufacturing factories. International investors have relocated or diversified their production locations away from China and sought other Asian economies as destination for FDI to de-risk their businesses from uncertainties arising from geopolitical tensions, pandemic-induced supply chain disruptions, and rising production costs in some countries while seeking potential gains from the new global value chain and emerging sectors such as chips and EVs.

The ASEAN region is a major beneficiary of this FDI relocation (ASEAN and UNCTAD, 2023). FDI inflow to ASEAN-6 (Malaysia, Singapore, Indonesia, Thailand, Vietnam, and the Philippines) reached an all-time high of USD227 billion in 2022 and surpassed the FDI inflow to China (Figure 7). Meanwhile, China’s FDI fell to its 30-year low in 2023.

Figure 7: FDI (in USD mn) in China and ASEAN-6

Source: CEIC (accessed February 2024); authors’ calculations.

Note: ASEAN-6 is used instead of ASEAN since other ASEAN countries’ investment data is not up to date.

Reconfiguration of supply chain-related FDI in ASEAN can be categorized into two groups:

  • Existing investors expanding their production capacities in the region.
  • New investors with/without plant/business presence in China establishing in the region while keeping their presence in China, including Chinese and Taiwanese firms (e.g., the ‘China Plus One’ strategy), or moving their plant and businesses out of China because of the intense US-China conflict.  

EVs, EV batteries, electronics and chips, data centres, and the digital economy received robust new and expanded investment in 2022 (ASEAN and UNCTAD, 2023). Manufacturing investment notably scored much stronger growth than in previous years with its share in total FDI in ASEAN rising more than three folds from just nine percent in 2020 to 28 percent in 2022.

FDI by Industry

The electronics and electrical industry accounted for more than 70 percent of new manufacturing investments at USD37 billion, with chips and electronic components alone making up 27 percent of the 70 percent (ASEAN and UNCTAD, 2023), reaching close to USD9.5 billion in 2022, six times the annual average between 2010 and 2019.

Besides chips and electronic components, the ASEAN region also attracted strong investment in EVs and EV battery production as well as charging stations. New investment in batteries rose by 656 percent in 2022 compared to 2021 to USD8.4 billion, accounting for 23 percent of new manufacturing investment (ASEAN and UNCTAD, 2023). Chips, electronic components and battery production combined accounted for half of new manufacturing investment in 2022. FDI in EV-related sectors shot up from USD2.1 billion in 2019 to USD18.1 billion in 2022 (ASEAN and UNCTAD, 2023).

FDI by source and host countries

It is predicted that FDI flows are being increasingly concentrated to countries that are geopolitically aligned with the investor (Ahn et al, 2023). The US, which recently upgraded its bilateral economic relationship with Singapore, Vietnam and Indonesia, was the largest investor in ASEAN with investment reaching USD37 billion in 2022.[7] It was also the largest investor by far in the manufacturing and financial sector. Japan was the third largest investor after intra-ASEAN investment. Japanese FDI in ASEAN was concentrated in the transportation and storage industry, accounted for 88 percent of investment in the industry, reflecting its interest in the automotive industry, including EVs. FDI from China fell by USD1 billion to USD16 billion in 2022, with investment predominantly being in infrastructure projects, EV-related activities and the digital economy.

How ASEAN countries benefit from the reconfiguration of the global supply chain depends on their specialized capabilities (Varas et al, 2021). For example, outsourced chip, assembly and testing (OSAT) firms have been diversifying their global footprints in Southeast Asia such as in Malaysia, Vietnam and the Philippines. Meanwhile, Singapore captured new investment in new chips factories and hosted one of the world’s leading global semiconductor research institutions, A*STAR, whose research goes beyond chip technology.

RESEARCH & DEVELOPMENT

The recent trade and technology war between the US and China has spurred R&D subsidies. The CHIPS and Science Act of 2022 directs USD200 billion of its total USD280 billion spending for scientific R&D and commercialization into chips (Badlam et al, 2022a). Similarly, the Inflation Reduction Act of 2022 increased and expanded tax credits for R&D activities including to jump-start R&D and commercialization of cutting-edge green technology such as EV (Badlam et al, 2022b). In the same year, China upgraded the country’s tax credits for investment in semiconductor R&D from existing chips subsidies worth at least USD150 billion. The R&D subsidies in chips and green technology spill over to other countries including the European Union and Japan. Although most R&D investment is made to unlock financial constraints in the upstream and midstream industries, it usually has a chain synergy effect that catalyses R&D in the downstream industry and the overall innovation ecosystem.

How does the R&D subsidy race affect ASEAN economies? First and foremost, most ASEAN countries do not have the capability (e.g., human capital, physical capital, and regulatory ecosystem) to do cutting-edge R&D. Second, not all ASEAN countries can afford to engage in a subsidy race. Third, technology has become synonymous with geopolitical alignment and trust is a prerequisite to technology transfers. The US as the largest investor in ASEAN is key to bringing new technology to ASEAN as investment often times comes with technology transfers.  At the same time, countries with a good reputation in patent and copyright law have an additional advantage in getting R&D investment.

ASEAN economies will not and should not rush into the R&D subsidy race and could instead promote an ASEAN R&D hub, perhaps located in Singapore, as a way to create a production ecosystem in the region.     

CONCLUSION

ASEAN’s high trade reliance on China while having the US (by far) as its largest investor and key source of technology transfers puts it in an increasingly precarious situation if US-China supply chain decoupling intensifies. Forcing ASEAN to choose sides – to be in the US or China supply chain system – will be impossible and disruptive, and ASEAN should continue to take the pragmatic approach and reject that option. In the short run, some ASEAN countries are benefiting from the relocation of global supply chains as shown by trade, value addition and FDI data, but the high level of interdependence of global supply chains and  the many hubs in China suggests that these benefits could be more than offset in the long term by the greater disruption to the global supply chains if the US-China tensions continue to escalate. 

REFERENCES

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The ASEAN Secretariat and United Nations Conference on Trade and Development (ASEAN and UNCTAD). 2023. A Special ASEAN Investment Report 2023. International Investment Trends: Key Issues and Policy Options. Jakarta: ASEAN Secretariat.

Badlam, Justin, S. Clark, S. Gajendragadkar, A. Kumar, S. O’Rourke, and D. Swartz. 2022a. ‘The CHIPS and Science Act: Here’s what’s in it’. McKinsey & Company Publication. Link: https://www.mckinsey.com/industries/public-sector/our-insights/the-chips-and-science-act-heres-whats-in-it#/

Badlam, Justin, J. Cox, A. Kumar, N. Mehta, S. O’Rourke, and J. Silvis. 2022b. ‘The Inflation Reduction Act: Here’s what’s in it’. Link: https://www.mckinsey.com/industries/public-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it

Baldwin, Richard. 2024. ‘China is the World’s Sole Manufacturing Superpower: A Line Sketch of the Rise’. CEPR Publication. Link: https://cepr.org/voxeu/columns/china-worlds-sole-manufacturing-superpower-line-sketch-rise

Bradford, Anu. 2023. Digital Empires: The Global Battle to Regulate Technology. Oxford University Press.

Curran, E., S. Donnan, M. Cousin, N.D. Tu Uyen, Q. Nguyen, M. Martewicz, M. Averbuch, B. Murray, A. Lee, G. Sihombing, and C. Jiao. ‘These Five Countries Are Key Economic ‘Connectors’ in a Fragmenting World’. Businessweek, Bloomberg New Economy.

Dahlman, Abigail, and Mary E. Lovely. 2023. ‘US-led Effort to Diversity Indo-Pacific Supply Chains Away from China Runs Counter to Trends’. Peterson Institute for International Economics (PIIE) Publication. Link: https://www.piie.com/blogs/realtime-economics/us-led-effort-diversify-indo-pacific-supply-chains-away-china-runs-counter

Ebrahimi, Arrian. 2023. ‘China Boosts Semiconductor Subsidies as US Tightens Restrictions’. The Diplomat. Link: https://thediplomat.com/2023/09/china-boosts-semiconductor-subsidies-as-us-tightens-restrictions/

Economic Development Board Singapore (EDB). 2022a. ‘Southeast Asia’s Rising Semiconductor Fortunes’. Link: https://www.edb.gov.sg/en/business-insights/insights/southeast-asia-s-rising-semiconductor-fortunes.html

Economic Development Board Singapore (EDB). 2022b. ‘Diverse Capabilities, Infrastructure Help Drive Chips Industry in Singapore’. Link: https://www.edb.gov.sg/en/business-insights/insights/diverse-capabilities-infrastructure-help-drive-chips-industry-in-singapore.html

Ing, Lili Yan, and Ivana Markus. 2023. ‘ASEAN in the Global Semiconductor Race’. Fulcrum. ISEAS-Yusof Ishak Institute Publication. Link: https://fulcrum.sg/aseanfocus/asean-in-the-global-semiconductor-race/

Li, Cheng, and Xiuye Zhao. 2023. ‘Renewable energy should not be the next semiconductor in US-China competition.’ Brooking Institution Commentary. Link: https://www.brookings.edu/articles/renewable-energy-should-not-be-the-next-semiconductor-in-us-china-competition/

Lin, Liza, and Karen Hao. 2022. ‘American Executives in Limbo at Chinese Chip Companies After US Ban’. Wall Street Journal. Link: https://www.wsj.com/articles/american-executives-in-limbo-at-chinese-chip-companies-after-u-s-ban-11665912757

Miller, Chris. 2022. Chip War. The Fight for the World’s Most Critical Technology. Scribner Publication. 

Nguyen-Quoc, Thang. 2023. ‘The Deglobalization Myth: How Asia’s Supply Chains Are Changing’. Hinrich Foundation Publication. Link: https://www.hinrichfoundation.com/research/wp/trade-and-geopolitics/how-asia-supply-chains-are-changing/

Pangestu, Mari Elka. 2023. ‘Critical Minerals: Challenges for Diversification, Climate Change and Development’. Slide Presentation at Peterson Institute for International Economics Webinar, on 27 April 2023. Link: https://www.piie.com/sites/default/files/2023-04/2025-04-27pangestu-ppt.pdf

Ross, Laura. 2020. ‘Inside the iPhone: How Apple Sources from 43 Countries Nearly Seamlessly’. Link: https://www.thomasnet.com/insights/iphone-supply-chain/

Shalal, Andrea, and Karen Freifeld. 2023. ‘US starts process to restrict some investment in key tech in China’. Reuters. Link: https://www.reuters.com/technology/us-starts-process-restrict-some-investment-key-tech-china-2023-08-09/

Siqi, Ji. 2024. ‘US Congress considers new legislation to further restrict investment in Chinese tech sectors’. South China Morning Post. Link: https://www.scmp.com/news/china/article/3250360/us-congress-considers-new-legislation-further-restrict-investment-chinese-tech-sectors

The Economist. 2024. ‘How Trump and Biden have failed to cut ties with China’. The Economist. Link: https://www.economist.com/finance-and-economics/2024/02/27/how-trump-and-biden-have-failed-to-cut-ties-with-china

Varas, Antonio, Raj Varadarajan, Jimmy Goodrich, Falan Yinug. 2021. Strengthening the Global Semiconductor Supply Chain in an Uncertain Era. Boston Consulting Group (BCG) and Semiconductor Industry Association (SIA) Publication. Link: https://www.semiconductors.org/wp-content/uploads/2021/05/BCG-x-SIA-Strengthening-the-Global-Semiconductor-Value-Chain-April-2021_1.pdf

ENDNOTES


For endnotes, please refer to the original pdf document.

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2024/34 “Malaysia’s Out-of-Sync Federal and State Elections: The Good, the Bad, and the Untimely” by Francis E. Hutchinson

 

Prime Minister Anwar Ibrahim (centre) speaking at a press conference after the release of state election results at the World Trade Centre in Kuala Lumpur on 12 August 2023. Malaysians in six states went to the polls on 12 August to vote for state assembly members in elections widely seen as a barometer of support for Prime Minister Anwar Ibrahim’s unity government. (Photo by Mohd RASFAN / AFP).

EXECUTIVE SUMMARY

  • Elections in Malaysia are held at the national and state levels, and in holding these concurrently, disruptions and costs have been reduced.
  • As with the federal government, state governments can decide when to hold their elections. In the past, when Barisan Nasional (BN) was in power at the centre and in most states at the same time, this discretion was largely discounted.
  • Following BN’s fall from power in 2018 and the country’s political context becoming more fluid, state government elections have been increasingly held out of sync with federal elections. In the last four years, state polls have been held on six separate occasions.
  • Concerned about rising costs, prolonged campaigning as well as implications for the country’s political stability, some have proposed clustering state elections or ensuring that they are held alongside national polls.
  • There are pros and cons to such arrangements. Concurrent polls can be cheaper, encourage higher turnout rates, and reduce the length of campaign seasons. Conversely, state leaders would be forced to hold elections at times not of their choosing, and state-level issues could be overshadowed by national ones.
  • The challenges inherent in pursuing such a reform in Malaysia are considerable and would involve amending the federal constitution, as well as the various state constitutions.
  • Consequently, it is likely that the Unity Government will head into the next electoral season under the current arrangement. The Sabah and Sarawak state elections are due in 2025 and 2026 and can be held without much concern for the current coalition arrangements.
  • In contrast, the Melaka and Johor elections will be crucial barometers for the Unity Government. Due by late 2026 and mid-2027 respectively, they may expose internal weaknesses in the run-up to the general election due some 9-12 months later.

* Francis E. Hutchinson is Senior Fellow and Coordinator of the Malaysia Studies Programme at ISEAS – Yusof Ishak Institute. The author would like to thank Lee Hwok Aun, Ong Kian Ming and Sara Loo for their comments, feedback, and inputs.

ISEAS Perspective 2024/34, 15 May 2024

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INTRODUCTION

Malaysia has a multi-levelled political system, which is comprised of a federal government and 13 state counterparts – all of which hold their own elections.[1] Influenced by the British Westminster system, the federal government holds elections for parliament – and the state governments for their assemblies – at least once every five years. With the exception of Sarawak, which has run on its own electoral cycle since 1963, elections for the federal and state governments have traditionally been held simultaneously.[2]

This arrangement has been a tradition, rather than a result of any specific legislation. According to the Constitution, elections at the federal and state levels are called by the King or Sultans and Governors on the advice of the elected leadership in parliament or respective state assembly. Given this, state leaders have the prerogative to call for elections at any time, independently of the federal government.[3] Elections at both the national and state levels are organized and overseen by the Election Commission, whose establishment is stipulated by the Federal Constitution.[4]

What minimized dispersion in election dates in the past was the fact that, up until 2018, the Barisan Nasional (BN) coalition was in power at the federal level and also in most states. Consequently, elections were held at the behest of the BN leadership and taken with national interests at the forefront. While BN state leaders may or may not have been in agreement with the timing, internal party mechanisms served to ensure compliance. BN state leaders often aspired to subsequent national cabinet positions and were reluctant to defy orders from national leaders which could compromise their career trajectories. Furthermore, recalcitrant menteri besar or chief ministers could be toppled by votes of no confidence passed by BN assemblypersons.[5]

In recent years, this homogenizing influence has lost force. In 2008, Barisan Nasional was beaten unprecedentedly in five state governments. In 2018, BN was defeated at the national level and in most states for the first time. Following a two-year interlude, BN returned to federal power – but in a subordinate position in the Perikatan Nasional and then the Unity Government groupings. The relative decline in BN’s power at both federal and state levels allows more autonomy for state leaders to prioritize local considerations when calling for elections.

Out-of-cycle elections can occur for several reasons. First, state governments can rise and fall due to local-level machinations. Motions of confidence and no-confidence can be passed in state assemblies, and – similar to the Sheraton Move in February 2020 that led to the fall of the Pakatan Harapan administration – local coalitions can come undone. Thus, the precipitous Sabah election in 2020 arose due to a faction of the ruling coalition crossing the floor to join the opposition. Deprived of his majority, then-chief minister Shafie Apdal opted to call an election.[6] In a similar move, the 2021 Melaka election was held because a group of UMNO representatives withdrew their support for the sitting administration, thereby denying it a majority in the state assembly.[7] The Johor election in early 2022 was ostensibly called because the death of an assemblyperson meant the sitting coalition commanded only the slimmest of majorities.[8]

Second, elections can be held out-of-cycle when the federal government decides to hold its own polls early. National-level leaders often seek to hold elections in circumstances that are favourable to them, such as following budget launches or when economic tailwinds are particularly favourable. Of course, national-level political dynamics may also push for earlier polls. While the fifteenth general election could have been held as late as in September 2023, in October 2022 the Ismail Sabri-led administration ceded to pressure from the United Malays National Organisation (UMNO) to ride on the momentum generated by the Melaka and Johor state elections, maximize the political bounty from the October budget release, and avoid the worst of the monsoon season.[9]

However, the November 2022 date meant that state governments also holding their polls then would have effectively lost almost a full year of their terms. Despite the recommendation by the Prime Minister Ismail Sabri that all eligible state governments hold their elections along with the national government, only the BN-led state governments of Perlis, Pahang, and Perak opted to do so.[10]

Conversely, states led by the opposition grouping Pakatan Harapan (PH) and the Islamist party, Parti Islam Se-Malaysia (PAS) opted to go to their full terms.[11] Among other reasons, party leaders argued that they needed to prepare for the year-end flooding season.[12] Despite being led by different coalitions, the leaders of these six states were able to arrive upon a mutually-agreed schedule to dissolve their assemblies.[13] Following this, the Electoral Commission established 12 August as the common date for elections in Negri Sembilan, Selangor, Penang, Kedah, Kelantan and Terengganu.[14]

Faced with the cost of holding elections more frequently, as well as the potential for instability, there have been calls for measures to make the political system more structured.[15] There are arguments in favour of, and against simultaneous elections. While relatively few countries have mandated simultaneous polls and some actively discourage them, this reform is currently being debated in India, for example. This country’s constitutional similarities to Malaysia and the related discussions illustrate the complexities inherent in pursuing such a reform.

As Malaysia transitions towards a more dynamic and fluid political context, this issue will continue to simmer. This Perspective examines this issue in four sections. Following this introduction, the second will look at the costs and benefits of synchronous and asynchronous elections. The third section will look at the experience of other countries. The final section will look at how such a reform could work for Malaysia going forward.

COSTS AND BENEFITS

There are theoretical arguments for and against holding simultaneous elections.

The first argument in favour of simultaneous elections is cost. Holding national and state elections on the same day means that the election workers, physical infrastructure, and associated logistics are only used once. For example, the August 2023 state elections cost an estimated RM 420 million.[16] Had they been held alongside their national equivalent in November 2022, they would have added little to the RM 1.1 billion budget earmarked for those polls.[17] It is also important to note that the costs involved in organizing the elections are borne by the federal government. This means that state governments actually wield the discretion of when to hold elections but do not incur the associated costs.[18]

The second argument concerns political participation. National polls usually have higher rates of voter turnout than their state-level equivalents. Thus, holding elections simultaneously would increase the proportion of people voting for their respective state leaders.[19] This issue is of particular importance to outstation or overseas residents, who need to travel back to their constituencies to vote. Holding simultaneous elections would increase the probability of them voting for both levels of government, rather than requiring them to return more than once over a five-year cycle.

Analysts also argue that holding national and state elections simultaneously would concentrate political activity to one specific period, allowing life to return to normal soon after. Despite the Unity Government’s large parliamentary majority, many argued that the August 2023 state polls constituted a de facto referendum on the new administration. Consequently, much bandwidth and political capital were consumed in preparing for these polls, held a mere nine months after the November 2022 election. Furthermore, frequent elections, persistent campaigning, and prolonged periods of political uncertainty can undermine public trust in polls altogether.

Nonetheless, there are valid counterarguments to such an arrangement. First, it can be argued that forcing state governments to align their electoral cycles with national ones goes against the spirit of federalism, which seeks to incorporate different political, cultural, and social aspirations within one framework. Additionally, such a measure would deny autonomy and agency to state leaders. As with their national equivalents, states have their own political rhythms and dynamics, and a specific state administration may have valid reasons for holding polls at another time. Furthermore, holding elections simultaneously would reduce the salience of state-level political issues, as attention to national-level issues and debates would be prioritized.[20] Last, making politicians face more frequent electoral tests increases their accountability to voters.[21]

There is an additional argument that holding smaller subsets of elections makes the logistics more manageable. This is because the election machinery is not overly stretched and can focus on specific polls in different parts of the country.[22] This argument has more traction for demographically and geographically large polities, as large numbers of officials need to be mobilized and immense logistical challenges addressed all at once.[23]

Asynchronous elections can also provide crucial information for national leaders. Thus, state or provincial elections held in the run-up to national polls can yield crucial information for party leaders and strategists. Results can be used as a barometer for prevailing opinions and support for flagship policies. In addition, electoral weaknesses and swing voters can be identified to allow more focussed messaging during national campaigns. However, these elections can also create instability should support levels in key states drop or exacerbate existing electoral vulnerabilities.

INTERNATIONAL EXPERIENCES

Despite the theoretical advantages to holding concurrent elections, there are relatively few countries that currently have this electoral arrangement. South Africa and Sweden are two notable cases where national and subnational elections are held at the same time.

In South Africa, the electoral arrangements were the result of protracted negotiations between different ethnically-based parties that were concerned about issues such as voter turnout and representativity. The end result was an agreement that national and provincial elections would be held simultaneously in order to enable out-station voters to return to vote, but that voters would use different voting forms for each election in order to underline their different purpose.[24]

In Sweden, simultaneous elections have been credited with the country’s high turnout rates, particularly for subnational elections. That said, there have been calls to separate the elections in order for more media coverage of local issues. This is due to the perception that national-level issues tend to dominate elections.[25]

Most federal countries prefer to hold national and subnational elections on different dates and, in some cases, follow distinct electoral cycles. Australia and India are useful comparators for Malaysia, as they are both federal systems with a central government and state counterparts. Indeed, these two countries’ federal systems influenced the eventual structure adopted in Malaysia upon its independence. The Reid Commission, charged with designing Malaysia’s federal system, had constitutional experts from the United Kingdom, Australia, India, and Pakistan.[26]

Turning to Australia, its electoral system is specifically designed to ensure that federal and state elections do not coincide. Federal elections for the lower house are on a three-year cycle although, following the Westminster tradition, parliament can be dissolved and elections held earlier than this.[27] In contrast, most state elections have a fixed four-year cycle, with stipulated dates and days of the week when these elections must take place.[28]

While some states have held elections on the same day, federal elections have never been held concurrent with a state election.[29] There is, at present, no discussion about moving towards simultaneous elections in Australia, although extending federal government terms to four years is being debated.[30] Constitutional amendments are onerous to organize and require the bill to be passed in parliament and then decided via a national referendum.[31]

India offers another instructive comparator. Being a federal system like Malaysia, the Indian constitution provides state governments the authority to hold their own elections. During the first two decades following independence, the Congress party was in power at the centre and in most states and all shared the same electoral cycle. However, after 1967, elections began to be held out of sync, as first several state governments and then the central government dissolved early.[32] Today, with the federal government and 30 state and territory governments holding their elections, polls are a frequent event.

In a bid to promote national unity, reduce time and resources spent on campaigning, as well as lessen administrative costs, the Modi administration has been promoting ‘One Nation, One Election’. The arguments have focussed on cost efficiency, reducing the time spent on elections and campaigns, lessening demands on the armed forces who are mobilized to ensure safety and security, and reducing the salience of polarising discourse during campaigns.[33] The biggest pushback has come from state- or regionally-based political parties who argue that this measure would lessen the time and importance spent on local issues, and voters would be encouraged to vote the same way for national and state leaders. Others such as Congress leader Rahul Gandhi have argued that it goes against the country’s formation as a ‘Union of States’.[34]

Beyond the theoretical reasons for or against this reform, the practical challenges inherent in this reform are formidable. Homogenizing national and state elections would require curtailing the tenures of more recently elected state administrations and lengthening the terms of other administrations that had been elected earlier. However, while this could be done as a one-off exercise, unless the legislation bestowing autonomy to the state governments to call for their elections is amended, there is nothing to prevent them from reverting to their own cycles if they so wished.

Ensuring a more permanent arrangement would involve adding an elaborate framework of rules. These would govern how state administrations can be dissolved, as well as provide for the frequent use of President’s Rule or Emergency powers by the central government to run states for the intervening periods between when their assemblies are dissolved and when the next scheduled elections take place.[35] 

OPTIONS FOR MALAYSIA

How, then, does the scenario look for Malaysia?

In the short term, it is unlikely that the Unity Government administration will be able to persuade the leaders of the different states to adopt timings for elections that are against their interests. Internal party hierarchy can influence state administrations run by Pakatan Harapan, given that this coalition is at the core of the sitting government. However, given that it is not yet clear whether BN will remain a coalition partner with PH going into the next national election,[36] it is likely that BN will decide election dates for the states it controls based on its interests alone. This is even more likely for states run by the opposition coalition, Perikatan Nasional.

Consequently, the Unity Government has two options for addressing this issue. The first would be an ambitious structural reform along the lines being debated in India. This would require some amendment to the timing of a national election, perhaps along the lines of a fixed term. Such a reform would require a constitutional amendment. The Unity Government ostensibly has more than a two-thirds majority in parliament which could be used to pass this measure. However, this would only apply to the federal government. Amendments to provisions surrounding the dissolution of legislative assemblies are stipulated in the various states’ constitutions and changes would also require amendments to these foundational documents.[37] For any reform of this nature, it is likely that extensive preparation would be necessary, including studying electoral processes elsewhere.

In addition, discussion of political reform is currently more focussed on separating the offices of the attorney general and public prosecutor, as well as the extension of citizenship to children born overseas to Malaysian mothers.[38] Consequently, it is highly unlikely that substantial changes to the electoral system will be implemented ahead of the next round of elections.

This then leaves the more organic approach of having the state elections follow their current cycle. The table below has the dates of the most recent election for Malaysia and for the thirteen states, along with the latest date on which parliament or the respective state assemblies can dissolve. This date is five years from the day of the first parliamentary or assembly sitting. Following dissolution, elections need to be held within the subsequent 60 days.

State/nationalDate of last electionLatest date for dissolution
Sabah26 September 20208 October 2025
Melaka20 November 202127 December 2026
Sarawak18 December 202114 February 2027
Johor12 March 202221 April 2027
Malaysia19 November 202219 December 2027
Perlis19 November 202219 December 2027
Perak19 November 202219 December 2027
Pahang19 November 202219 December 2027
Negri Sembilan12 August 202326 September 2028
Selangor12 August 202319 September 2028
Penang12 August 202329 August 2028
Kedah12 August 202325 September 2028
Kelantan12 August 20235 September 2028
Terengganu12 August 202324 September 2028

Looking ahead, Sabah and Sarawak are among the earliest state elections to be held. The political configuration of these two states is quite different from the peninsula and the results of the elections are likely to be relatively self-contained. For Sabah, it is quite likely that the eventual ruling coalition at the state level will seek to align itself with the ruling coalition at the federal level. For Sarawak, past trends indicate that the coalition in power at the state level, Gabungan Parti Sarawak (GPS), is likely to remain in power. GPS is also a current member of the Unity Government and it is unlikely that there would be a reconfiguration of this relationship so far ahead of national polls.

This is not the case for Melaka and Johor, whose elections are due roughly one year and eight months ahead of the next general election. These two states are particularly important for UMNO, lying in the southern part of the peninsula, which is one of the last redoubts of Malaysia’s grand old party. Of the two, Johor is the most important, given the party’s founding in the state and traditional strong reputation of people from the state at the party’s apex.[39]

There will be several dynamics at the forefront when UMNO party strategists plot the ideal date for the various state elections. The first will be the popularity of UMNO party president Zahid Hamidi particularly among UMNO grassroots members. In Melaka and Johor, the party is exceptionally disciplined and able to mobilize contingents of supporters to turn up to vote. However, should Zahid’s leadership be contested or should there be signs of unrest within the party, the turnout levels could be affected. Indeed, party members could even use these polls as a way of signalling their discontent. An upset in one of these states would affect UMNO’s momentum in the run-up to the national election. 

Conversely, should the UMNO leadership feel confident, it could contemplate holding the Melaka, Johor, and even the Perak and Pahang state elections together. This would cost the latter states almost a year of their terms and would represent a huge gamble for the party. That said, solid wins across these states would put UMNO in a very solid position ahead, both of national polls and of inter-coalition bargaining in preparation for national polls.

Another option would be to delay elections in some of these states to cluster them. The way to do this would be to declare an Emergency in the states running on an earlier electoral cycle. This was done most recently in 2021, when the Sarawak state election was delayed from June to December 2021, due to the COVID pandemic.[40] That said, a plausible reason would need to be given, and consent obtained from both the King and the Prime Minister. This, in turn, would require delicate inter-coalition negotiation between PH and BN.

Relatedly, the other determining factor would be the relationship between PH and BN as they plan their electoral strategies for the next general election. Will they contest jointly or separately? From PH’s point of view, the Melaka and Johor elections would be held uncomfortably close to national polls if they were to run their full terms. However, any move to bring the national election forward to coincide with the elections in these states would entail sacrificing almost a year of the current term. This is unlikely.

Another option would be for the current schedule to run its course, with the Sabah, Melaka, Sarawak and Johor elections taking place in that order. Then, if the Unity Government and particularly Pakatan Harapan is feeling confident, they can bring the Penang, Selangor, and Negri Sembilan elections forward and hold them alongside the federal election. This would allow them to accumulate political capital and begin the second term on the front foot. Given that Perikatan Nasional is solidly in power in Kedah, Kelantan, and Terengganu, there will be little that the Unity Government can do to influence the timing of their state elections. However, in reducing the number of states holding their elections just after national polls, the ‘mid-term’ effect on the sitting administration (should it be elected) would be reduced. Conversely, should Pakatan Harapan feel unsure about its chances at the federal level, it may seek to allow the elections in the states it currently controls to proceed to their full term, thus spreading the risk across two sets of polls. It is also possible that different PH component parties have different preferences regarding the timing of the polls in the states they control.[41]

The end of BN’s dominance in 2018 has had multiple effects on Malaysia’s political system. The reduction of the coalition’s influence at both the federal and state levels has uncovered the underlying autonomy of state governments. Given the challenges inherent in adding more structure and predictability to the timing of elections, the most likely scenario is that out-of-cycle polls will remain a characteristic of Malaysia’s political system for the foreseeable future. Political leaders will continue to cross the river by feeling the stones and seeking to determine the direction of the wind. Now, however, the wind blows from different directions.

ENDNOTES


For endnotes, please refer to the original pdf document.

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Comments are welcome and may be sent to the author(s).

 

2024/33 “A Study of the Emerging Electric Vehicle (EV) Supply Chain in Malaysia” by Tham Siew Yean and Neo Hui Yun Rebecca

 

The Malaysian Investment Development Authority (MIDA) has been tasked to promote and facilitate the investments needed to create the EV supply chain for the country. Screengrab of the Facebook Page of the Malaysian Industrial Development Authority at https://www.facebook.com/OfficialMIDA taken on 7 May 2024.

EXECUTIVE SUMMARY

  • Hybrids and Battery Electric Vehicles (BEVs) comprised a mere 4.9% of total four-wheeled vehicles sold in Malaysia in 2023. The government is, however, targeting to achieve at least 15% of Electric Vehicles (EVs) penetration in the country by 2030. This is in line with the Low Carbon Mobility Blueprint (LCMB 2021-2030), whose figures include hybrids and electric motorcycles. The basis for the target is unknown and therefore it is also unclear whether the target has been set at too high or too low a level.
  • The Malaysian Investment Development Authority (MIDA) has been tasked to promote and facilitate the investments needed to create the EV supply chain for the country.
  • EV investments in Malaysia over the last few years show a diverse and diffused pattern, covering different segments of the supply chain, and distributed across various states in the country.
  • While the emerging supply chain sees the entry of new automotive players spread across different states, the main foreign brands assembling in Malaysia, namely Toyota, Honda, and Mitsubishi, have yet to introduce battery electric vehicles (BEVs). These are instead still assembling at the Energy Efficient Vehicle (EEV) segments, which include hybrids.
  • The demand for EVs continues to be deterred by the unavailability of affordable BEVs and the slower than expected installation of charging infrastructure. The capital costs for the latter are relatively high, while EV adoption rates remain low.
  • This chicken-and-egg problem requires the government to intervene in the development of public charging infrastructure and to provide a clear roadmap for the transition from internal combustion engines (ICE) to BEVs, rather than just set aspirational targets alone.

ISEAS Perspective 2024/33, 9 May 2024

* Tham Siew Yean is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute and Emeritus Professor at Universiti Kebangsaan Malaysia. Neo Hui Yun Rebecca is Research Officer at ISEAS – Yusof Ishak Institute. Both authors would like to thank Manggi Habir, Siwage Dharma and Cassey Lee for their comments on an earlier draft.

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INTRODUCTION

Malaysia has announced an ambitious plan to boost Electric Vehicles (EVs) development within the country, proposing to achieve at least 15 percent EV usage of the country’s total industry volume (ITV)[1] by 2023, and 38 percent by 2040.[2] To facilitate this ambitious plan, the government formulated the National Automotive Policy (NAP) and the New Industrial Master Plan 2030 (NIMP 2030). The NIMP 2030 is an industrial policy document formulated to provide national strategic directions for industrial development. It mainly oversees all manufacturing and manufacturing-related service sectors, and facilitates collaboration between the government and the private sector.[3] The NAP, on the other hand, focuses more on the development of energy-efficient vehicles (EEVs) through specific strategies.[4] These include establishing a framework, roadmaps and blueprints for developing next-generation vehicles (NxGVs) or EEVs with some degree of automation, designed to make Malaysia a regional hub for NxGVs.[5] In that sense, the NAP’s primary aim is to develop various types of EEVs, while the NIMP specifically highlights the development of EVs as part of Malaysia’s industrial policy mission to push to net zero.

New investments are needed to create an EV ecosystem. This includes having multiple stakeholders who effectively cover the end-to-end value chain for EVs, such as power utilities providers, infrastructure developers, manufacturers (for example, original equipment manufacturers (OEMs), component suppliers etc), battery providers, policymakers, regulators, EV-related business associations, and researchers for research & development (R&D) purposes.[6] To facilitate investments in this new sector, the Malaysian Investment Development Authority (MIDA), which is the main government agency tasked to promote and facilitate investments in manufacturing and services in the country, has provided incentives such as Pioneer Status or Investment Tax Allowance for a list of promoted products in the EEV and NxGV supply chain. The products promoted include the critical components needed in the assembly of EEVs and NxGVs, such as electric motors, batteries, and battery management systems.[7]

According to MIDA, 58 projects worth RM26.2 billion were approved for EV and its related ecosystems from 2018 to March 2023.[8] This includes foreign marques establishing a presence to sell and distribute cars in Malaysia as in the case of Tesla, which has just established an office as well as an experience and service centre for the import of Tesla EVs that are assembled in Shanghai.[9] Tesla is also building a network of Supercharger fast-charging stations, with its latest installation in Pavilion Bukit Jalil, the sixth Supercharger deployment within six months of its debut in Malaysia.[10] These charging stations differ from the government’s network of charging stations, given that they are designed only for Tesla vehicles. That being said, the Malaysian government has stepped in to ensure that foreign investors like Tesla can contribute to the expansion of the EV ecosystem in the country. As part of the approval process for Tesla’s establishment, the company is required to set up at least 50 Superchargers within three years, with 30% of these being accessible to other EV brands.[11]

This article attempts to shed light on various little-known investments that are being made to support the entire EV supply chain, focusing on what and where these investments are located, as well as which parts of the supply chain these involve. This article will also elaborate on the key challenges faced in establishing an EV ecosystem in Malaysia.

EV SALES IN MALAYSIA

Four-wheel vehicle sales fell in 2019-2021 due to the Covid-19 pandemic, but recovered from 2021 onwards to grow to 774,600 units for passenger and commercial vehicles in 2023 (Figure 1). Sales of hybrids grew by 3.5 times while battery EVs (BEVs) grew from a low base of 278 to 10,159 from 2021 to 2023 (Figure 1). Demand picked up after the government provided various incentives, facilitated by the post pandemic economic recovery and the market entry of EV versions of popular premium cars like the BMW and Mercedes Benz as well as new and well-known EV marques like Tesla, BYD and GMW.[12] Be that as it may, in 2023, hybrids and EVs comprised a mere 4.9% of total vehicles sold in 2023. The government is targeting to achieve at least 15% by 2030, based on the Low Carbon Mobility Blueprint (LCMB 2021-2030), whose calculations include electric motorcycles. Although electric motorcycles were also provided purchase rebates[13] by the government, the uptake has been slow; these bikes have reportedly a market share of only 1.7%.[14]

The government has targeted to have 100,000 electric cars on the road, including 2,000 electric buses and 125,000 charging stations in the country by 2030. Achieving this depends on several factors including how fast the EV ecosystem evolves to meet the aspired demand.[15] Overcoming challenges such as EV’s affordability, and accessibility to charging infrastructure is important if the EV ecosystem is to advance.

Figure 1. Sales of Total Vehicles, Hybrids and BEVs, 2021-2023

Source: MAA and Chan 2024[16]

EMERGING EV SUPPLY CHAIN

The EV supply chain comprises several key components, starting with the sourcing and transportation of raw materials, followed by battery manufacturing, vehicle design and assembly, EV sales and dealership, and lastly EVs’ end-of-life management, such as battery recycling.[17] This differs from the supply chain of ICE, in having fewer mechanical parts, with the EV battery being the key component and representing over 40% of the total cost.[18] However, as the technology develops, the cost of EV batteries is also expected to fall over time.

Investments in Malaysia over the last few years show a diverse and diffused pattern. These cut across all segments of the supply chain, and are distributed across various states in the country (Figure 2). The following sections illustrate the various components of the EV supply chain, and the companies involved.

Figure 2. Manufacturing Plants for EVs in Peninsula Malaysia

No.Technology Partner(s)Local partner/companyName of companyProducts/Service
Kedah
1Stellantis (US)NoneStellantis (US)ICE, hybrids and EV Assembly plant
2Infineon and Siemens (Germany)NoneInfineon Technologies AG EV electronic chips
3Eve Energy (China)
*Unconfirmed site
NoneEve Energy Malaysia Sdn BhdBattery assembly
Penang
4Shenzhen Serious Technology Material Co. (China)n.a.INV New Material Technology (M) Sdn. BhdBattery separators
Enovix (US)NoneEnovixBattery for four-wheelers
5United E-motor (Indonesia)Antroniq (Malaysia)Antroniq Bhd. E-motorbikes
Selangor
6Volvo (Germany) Federal AutoVolvo MalaysiaAssembly of EVs
7China’s Sharkgulf Technologies Group Ltd, Blueshark (China)EP Manufactuing BerhadEP Manufactuing BerhadElectric motorcycles
8Tron Bradbury Energy (Taiwan)NoneTron Bradbury Energy (Malaysia) Sdn BhdCommercial EVs and energy storage systems (including Battery R&D)
9Thamlev (USA-based)NoneKulim Thamlev Mobility Sdn. Bhd (Malaysia)Electric motorbikes
10Graphene Synergy (Malaysia)Graphene Synergy R&D Berhad (Malaysia)Graphene Synergy R&D BerhadGraphene-based raw materials
Negeri Sembilan
11Samsung SDI Co Ltd (Korea)NoneSamsung SDI Energy Malaysia Sdn Bhd (SDIEM)Lithium-ion battery by 2025
12Chinese companies like Higer and Yu Tong and Hozon AutoJoint venture between Careplus Group Bhd and GoAuto Group Sdn Bhd with Chinese companies like Higer and Yu Tong and Hozon AutoNexV Manufacturing Sdn Bhd (NMSB)Assembly of Neta brand and other completely-knocked-down (CKD) operations
Melaka
13BAIC and Great Wall (China)EP Manufacturing Bhd (EPMB)EP Manufacturing Bhd (EPMB)Manufacture and assembly of four-wheel EEVs, EVs, and electric commercial vehicles
Johor
14United E-motor (Indonesia)
*Unconfirmed site
Antroniq (Malaysia)Antroniq Bhd. E-motorbikes
Pahang
15Mercedes Benz (Germany) DRB HicomMercedes Benz MalaysiaAssembly of EVs
16Graphjet Technology Sdn Bhd (Malaysia)Graphjet Technology Sdn Bhd(Malaysia)Graphjet Technology Sdn Bhd(Malaysia)Transform palm industry waste materials, palm kernels, into graphite and single-layer graphene.

Notes: n.a.: Not available

Source: Compiled by authors

COMPONENTS OF EV SUPPLY CHAIN

Minerals

Critical minerals like nickel, lithium, cobalt, manganese, rare earth, and graphite are needed for battery Electric Vehicles (BEVs). Indonesia, for example, has used its nickel reserves to develop an EV battery supply chain as well as the manufacture and assembly of EVs.[19]

Although Malaysia has some critical minerals such as rare earth elements (REE),[20] policies regarding its extraction, processing and usage are still being formulated. A Parliamentary Caucus for Critical Minerals was established in March 2024 to strengthen understanding of matters relating to critical minerals as well as advocate for a legal and regulatory framework to manage Malaysia’s critical mineral sectors.[21] Malaysia currently has domestic sources of nickel, cobalt, manganese, and graphite, which should ease the country’s efforts to develop its own EV supply chain.

Nevertheless, foreign investments in minerals have begun to emerge in Malaysia. From Figure 3, Sarawak in East Malaysia is venturing into graphite manufacturing, including synthetic graphite, in Bintulu, under a Memorandum of Understanding (MOU) between Sarawak Economic Development Corporation (SEDC), and Gallois New Energy Materials (M) Sdn Bhd.[22] The latter is a subsidiary company of the established Madagascar graphite miner, Gallios.[23] Although graphite is used for EV batteries, Sarawak has announced that it also intends to use it for the development of hydrogen fuel cells. The state is championing the use of such cells in public transportation.[24]

Figure 3. Manufacturing Plants for Mineral and Batteries in Sabah and Sarawak

No.Technology Partner(s)Local companyProducts/Service
1SK Nexilis (South Korea)KKIP (Kota Kinaablu Industrial Park) Sdn Bhd (Malaysia)Copper foil manufacturing for EV batteries
2Gallois New Energy (HK)SEDC Energy (Sarawak), Gallois New Energy Materials (M) Sd BhdGraphite plant

Source: Compiled by authors

Peninsular Malaysia is also pursuing the development of alternative mineral resources, namely graphene. In fact, a National Graphene Action Plan was launched in 2014, which focuses on the commercialisation of graphene, including for the use of lithium-ion battery anodes.[25] The most important development on this front is the emergence of an initially private local company, Graphjet Sdn. Bhd, in 2019. Graphjet has patented technology to produce graphene from recycled palm kernel shells, which can then be used for EV batteries, medical devices and home appliances.[26] The company was also identified as one of NIMP’s national mission-based projects or catalytic projects, at the launch of the plan in 2023.[27] It is building a factory at Malaysia-Kuantan Industrial Park (MCKIP) in Pahang, where it is expected to produce 10,000 tonnes of graphite and 60 tonnes of single-layer graphene annually.[28] In March 2024, the company went public on Nasdaq Global Market.[29] It also aims to be the leading source of graphite and graphene in the US market, thereby offering itself as an alternative source to China, which is the largest synthetic graphite manufacturer in the world.

Another local R&D company, Graphene Synergy R&D Sdn. Bhd, is also producing graphene and graphene-based materials at Teknologi Park Malaysia, in Selangor. It is exploring partnerships with producers and manufacturers.

EV Batteries

Malaysia also has investments in EV battery assembly for two and four wheelers as well as the manufacture of key components for EV batteries. The government has initiated various incentives to attract investors, including having tax break extensions for the production of various components in battery assembly.[30] For battery assembly, investments come from different countries such as China, the US, Taiwan, and South Korea. Their new manufacturing plants are primarily concentrated within Kedah, Negeri Sembilan, Penang and Sabah. Table 1 illustrates the investors involved in the development of EV battery components.

Table 1: List of Investors for EV batteries and its components

StateName of Investor(s)Details of investment
KedahEve EnergyManufacture lithium-ion batteries at a new factory in Kulim.[31]
PenangJoint-venture between Enovix Corporation (lithium-ion manufacturer listed in Nasdaq), and YBS International of MalaysiaManufacture silicon battery at Penang Science Park.[32]
INV New Material Technology (M) Sdn Bhd, which is a subsidiary of Shenzhen Senior Technology Material Co. LtdManufacture wet process and coated separators for lithium batteries, key components in ensuring battery safety
Negeri SembilanTron Energy Technology Corporation, in partnership with Bradbury Asset Management (Hong Kong) LtdPlanning to build a battery research and development facility at Malaysia Vision Valley
Samsung SDIBuilding a battery factory
SabahSouth Korea with SK NexilisProducing copper foil for EV battery materials manufacturer SKC

EV ELECTRONICS

Germany’s Infineon Technologies and Siemens will expand their facility in Kulim Hi-Tech Park to manufacture chips for different uses, including in EVs. These are crucial components in EVs and can affect their optimal and efficient performance.

Vehicle Assembly

Luxury cars with plants in Malaysia have already started assembling EV models locally. For example, Mercedes Benz in Pahang launched locally assembled CKDs in early 2023.[33] Volvo is also assembling EVs at its plant in Shah Alam and plans to export locally assembled EVs to other countries in ASEAN.[34]

There are also new vehicle players coming from new source countries. Stellantis from the US has acquired Naza Automotive Manufacturing Sdn. Bhd. and the latter’s manufacturing plant in Gurun, Kedah.[35] This company assembles various marques such as Peugeot, Alpha Romeo, and Citroen, and is reportedly planning to assemble ICEs, hybrids and BEVs for Malaysia and the regional market, using Malaysia as its ASEAN hub.[36] The targeted plan is to assemble the first EV in Malaysia by the second half of 2024, followed by the production of its BEV series (STLA medium vehicle) in 2025.[37] Tron Bradbury Energy (Taiwan) and Bradbury Asset Management (Hong Kong) Ltd, are also planning to assemble commercial vehicles at Port Klang.[38]

Locally assembled electric motorcycles are also emerging. The first is a partnership between Malaysia’s Antroniq, an investment holding company, and Indonesia’s United E-motor in Batu Kawan, Penang and Johor.[39] US-based Thamlev, which was started by a Malaysian, is assembling at Balakong in Kuala Lumpur.[40] A local parts and components manufacturer, EP Manufacturing Berhad is partnering with China’s Sharkgulf Technologies Group Ltd, to assemble, manufacture and distribute the latter’s Blueshark two-wheeler at Glenmarie in Shah Alam, Selangor.[41]

Two local companies have been given the license to assemble EVs with technology partners from China, in Melaka and Negeri Sembilan. While new players make an entry into the automotive market in different states, main foreign brands assembling in Malaysia, namely Toyota, Honda, and Mitsubishi,[42] have yet to introduce BEVs and are in fact still assembling at the EEV segments, including hybrids. According to Toyota, their stand remains at providing a broad range of engine options for their consumers, which includes petrol, diesel, hybrid, plug-in hybrid, and hydrogen. As much as electric cars can be a solution to carbon neutrality, Toyota believes that there is still value in investing in other fuel types such as hydrogen fuel cell, synthetic fuel etc.[43] This could account for their slow entry into the BEV markets, including in Malaysia.

CHALLENGES TO THE EMERGING SUPPLY CHAIN

Slow take-off of affordable EVs

EVs continue to remain out of reach for most Malaysians, primarily due to their high prices. According to MITI’s Franchise AP policy, the import of completely built-up (CBU) EVs is capped at the road price tag (OTR)[44] of RM100,000 to prevent dumping and to provide time for local car manufacturers, primarily Proton and Perodua, to develop their EVs for the local market. As much as the restriction aims to protect the interest of local players, it has nevertheless led to a slow introduction of affordable EVs in the market. This effectively means that the majority of EVs are priced much higher than petrol-powered vehicles (the cheapest EV in the market still costs around RM140,000[45]), a price unaffordable for most Malaysians. While Proton and Perodua have announced intentions to produce their own EVs by 2025,[46] no concrete plans have been released.

Difficulty in developing an EV supply chain that can support local assembly could be the reason for slowness in pushing out affordable EVs. Both Proton and Perodua will have to deal with the need to upgrade the capabilities of existing vendors or facilitate their exit since EVs use a smaller number of moving parts compared to ICE engines. Proton has reportedly 116 vendors[47] while Perodua has 120.[48] Handling the transition therefore requires careful planning to phase out existing suppliers and concurrently introduce new suppliers with the right capabilities. This is not such a simple matter in Malaysia since national car producers have to nurture localization, especially Bumiputera auto parts suppliers.[49] Moreover, there are also implications on the company’s approved permits (AP) if such localisation is not properly managed within their supply chain. A potential relaxation of Bumiputera equity requirement for AP qualification could hasten the development of a local EV supply chain.[50]

Apart from that, foreign suppliers for Proton will also have to shift their current capabilities to support EV assembly. To illustrate, Camel Power Battery (CPB) from China entered Malaysia and built a factory at Malaysia-Kuantan Industrial Park (MCKIP) in 2018. It is a key supplier of batteries for Proton.[51] To stay relevant in the transition and beyond, CPB will have to shift from traditional ICE batteries to EV batteries. The same goes for other suppliers. This could be difficult if the company is not equipped to manage the transition, given that moving into EV production means shifting from developing an electromechanical intensive vehicle (such as ICE) to an information intensive vehicle (such as EV).[52] This also entails demands such as software designing and supporting electronics, all of which require higher capital and technological advancement. High costs could deter companies from moving into this field, especially when the demand in Malaysia is still relatively low.

Nonetheless, both Proton and Perodua may be able to produce their own EVs in the coming years. Proton has been distributing the SMART EV for Malaysia and Thailand since 2023 and will be exploring the local assembly of this vehicle at its Tanjung Malim plant. Apart from that, Proton is planning to shift progressively to hybrid engines for existing models, while developing Range-Extender EVs (primarily driven by an electric motor but using a small combustion engine functioning as a battery generator) as a bridging technology before migrating to full BEVs from 2028 onwards (Figure 4).[53] Perodua is also reportedly planning to launch a new energy vehicle by end 2025, which may possibly be a hybrid rather than a full BEV.

Interestingly, two other local companies have also been given the license to manufacture EVs. Listed auto parts producer and distributor, EPMB, has ventured into EV assembly operations with technology from China’s BAIC and Great Wall. Another company, NexV has also announced local assembly of Neta cars produced by China’s Hozon Auto. While pricing is still not known at this juncture, the cars assembled by these two new EV assemblers with Chinese technology can pose serious competition to Proton and Perodua’s planned hybrid/EV cars.

Figure 4. Local companies planning to assemble BEVs, March 2024

Need for policy coordination

While Malaysia manoeuvres the shift in the supply chain, policy coordination is needed to shift the demand. Demand is largely affected by the slow uptake of charging infrastructure needed to reduce range anxiety, especially for intra-state travel. The government’s aim of having 10,000 EV charging infrastructure by 2025 may be quite challenging; by January 2024, only 1,500 have been installed.[54] Private investors are slow to invest as the capital costs are high; it is estimated that installing 10 rapid charging stations costs RM1.5-RM2 million. At the same time, demand is held back by the lack of affordable EVs.

Furthermore, the removal of general fuel subsidies which is to take place in 2024, is facing challenges due to lower than expected registration at the Central Database Hub (PADU), which is to provide information on who will be receiving subsequent targeted subsidies.[55] If the subsidies are given back as cash transfers to the targeted groups, as planned, it may not facilitate any shift towards the use of electric vehicles since these groups can still choose to use ICE, especially in view of the slow development of charging infrastructure and affordable EVs.[56]

There is essentially a chicken-and-egg situation; both supply and demand must move forward at the same time to accelerate EV adoption. Hence the government has to review the incentives for the private sector to participate in EV adoption, and increase public provision especially along the highways for inter-state travel.

The government should also reveal its EV policy for 2026 onwards. At present, it is not known what will happen to the import cap of RM100,000 after 2025. It appears likely that Proton and Perodua will be introducing hybrids as a transition to BEVs.[57] Should the government further extend the import cap, then the availability of affordable BEVs will be further delayed, and it will be difficult to overcome the chicken-and-egg problem.

CONCLUSION

Malaysia has planned to draw in foreign and domestic investments to build an EV supply chain in the country. The investment pattern that has emerged is diverse and diffused across different segments of the EV supply chain, stretching from minerals to the assembly of batteries and vehicles in the two-wheeler and four-wheeler markets.

Be that as it may, Malaysia still faces outstanding challenges for the EV market to take off. This can be attributed to the slow emergence of affordable EVs; the number of BEVs still remains small, though growing. The demand for EVs is also deterred by the slower than expected installation of charging infrastructure. This chicken-and-egg problem requires the government to intervene in developing public charging infrastructure and providing a clear roadmap for the transition from ICE to BEVs. Setting aspirational targets alone is not enough.

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).

 

2024/32 “Assessing Prabowo-Gibran’s Victory: An Exit-Poll Aftermath Analysis of the 2024 Presidential Election” by Burhanuddin Muhtadi and Kennedy Muslim

 

Indonesia’s president-elect Prabowo Subianto (Left) speaks to the media with vice president-elect Gibran Rakabuming Raka (Right) as they arrive at the plenary session of the General Elections Commission (KPU) after his main rivals’ challenges to his election victory were rejected at the KPU office in Jakarta, on 24 April 2024. (Photo by Yasuyoshi CHIBA/AFP).

EXECUTIVE SUMMARY

  • Prabowo-Gibran’s landslide victory in the 2024 presidential election can be explained by two major factors: Jokowi’s high approval rating, and support from young voters (Gen Z and millennials).
  • Ganjar Pranowo’s failure to develop a political brand and a narrative outside the influence of Jokowi, together with his chosen strategy of attacking Jokowi, led to election defeat. This left him with little appeal outside his own PDIP base.
  • In turn, Anies Baswedan’s strategy of offering change appealed to anti-Jokowi voters. But given Jokowi’s high approval rating, this did not boost support for him to any significant extent.
  • The social assistance (Bansos) programme indirectly boosted support for Prabowo-Gibran by way of maintaining Jokowi’s high approval due to the fact that the recipients of Bansos were generally spread across the camps of all the three candidates.

* Burhanuddin Muhtadi is Visiting Fellow of ISEAS – Yusof Ishak Institute and Professor of Politics at the State Islamic University, Jakarta; and Kennedy Muslim is Senior Researcher at Indikator Politik Indonesia.

ISEAS Perspective 2024/32, 6 May 2024

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INTRODUCTION

After a long and widely criticized vote recapitulation process, the General Election Commission (KPU) finally announced the results of the 2024 presidential and legislative elections on March 20, 2024. Prabowo Subianto-Gibran Rakabuming Raka were declared the winner with a landslide margin of 58.6%, beating rivals Anies Baswedan-Muhaimin Iskandar at 24.9% and Ganjar Pranowo-Mahfud MD at 16.5%.[1]

The KPU’s final vote tally surpassed the predictions of several leading Indonesian pollsters which had estimated Prabowo-Gibran’s victory in the range of 52-54%. How could someone with a track record of human rights violations, who had repeatedly lost elections, suddenly manage to defeat two strong rivals by such a large victory margin? Using exit poll data, this article investigates the factors that contributed to the overwhelming triumph of Prabowo-Gibran.

Survey trends ahead of the election had indicated a landslide victory for Prabowo.[2] Once Prabowo had picked Gibran as his vice-presidential candidate, his electability had continued to rise. Jokowi’s high approval rating throughout the election cycle favoured the candidates who promised to continue Jokowi’s programmes. Picking Gibran as running mate was a clear political cue from Prabowo to voters that he was the only candidate running in “Jokowi’s lane,” which he previously had had to share with Ganjar. From then on, support for Prabowo was accompanied by a sharp decline in Ganjar’s poll numbers. This trend continued until election day, February 14, 2024. Ganjar voters had migrated to Prabowo.

At the same time, Anies’ electability trend tended to stagnate. Even though he overtook Ganjar in mid-December 2023, Anies failed to increase support in Prabowo’s traditional electoral base, except in Aceh and West Sumatra. He also failed to attract Jokowi voters in Central Java, East Java and in the non-Muslim bases.

Prabowo also benefited from the presence of so-called ‘shy voters’. Almost all ‘shy voters’ who did not reveal their choice at the time of the survey gave their votes to Prabowo. One reason could be as predicted in the spiral of silence theory,[3] which asserts that when individuals notice that their opinion is shared by their like-minded community, for example, in social media like Twitter, they will in time become more confident and outward with their opinion. However, if the individual notices that his opinion is unpopular in the group, he will be more reserved (shy to reveal their opinion). People who backed Prabowo, especially middle-class people who knew Prabowo’s background and who were active on social media, especially Twitter, tended to hide their preferences before the election.

EXIT POLL ANALYSIS OF THE CANDIDATES

An exit poll conducted by Indikator Politik, a leading pollster, covering 2,975 respondents after they cast their votes across the country[4] helps us understand the demographic base of supporters of the three presidential candidates. In terms of gender, there is no significant difference between male and female voters who supported the three candidates. In terms of age, the younger voter group displayed greater support for Prabowo. On the other hand, the older voter group showed higher support for Ganjar. In contrast to previous trends where the participation of young voters tended to be lower than the national average, the findings of the Indikator exit poll showed that Generation Z and millennial voters’ participation rates were very high. This explains Prabowo’s convincing majority in the 2024 presidential election.

The Central Statistics Agency (BPS) recorded the proportion of Indonesian Zillennial (Gen-Z and millennial) voters at 53% whereas the exit poll recorded the turnout rate of the Zillennial voters at 58.7%.

Graph 1: Candidate support based on demographic variable (%)

In contrast to the widely held assumption that Gen Z voters tend to be progressive, recent studies show a tendency for them to be more conservative than expected in their political preference.[5] In this regard, Indonesian young voters seem to follow the global trend. Indonesia’s young generation, raised in an environment where democratic elections and the safeguarding of civil liberties are considered ‘normal’, may be taking for granted their democratic rights and are exhibiting reduced sensitivity towards the potential risks associated with anti-democratic and illiberal state policies.[6] Moreover, Prabowo’s smart campaign strategy, recasting him as a cute, cuddly—gemoy in Indonesian—grandpa and his signature gemoy dance, also connected well with the young.

Based on ethnic background, support for Prabowo was dominant in almost all ethnic groups, except for Minang voters, who tended to vote for Anies. Interestingly, Prabowo received huge support from both Muslims and non-Muslims. Meanwhile, Ganjar relied too much on non-Muslim voters, and was weak among Muslim voters. In contrast, Anies depended too much on Muslim voters and was very weak among non-Muslims.

Interestingly, the magnitude of support among NU members for Prabowo was much higher than among members of Muhammadiyah or other mass organizations. Prabowo’s prominence within NU circles is interesting because neither Prabowo nor Gibran has NU background. This was different from the cases of Muhaimin Iskandar and Mahfud MD who are closely associated with NU. Studies show that the mobilization of support by NU leaders, or Pengurus Besar Nadhlatul Ulama (PBNU)[7] and popular NU-affiliated figures such as the Governor of East Java Khofifah Indar Parawangsa, boosted NU support for Prabowo. Again, the Jokowi factor was at play here. Jokowi’s popularity and traditional support base at NU’s grassroots level and his patronage relationship with current NU Chairman, Gus Yahya, strongly influenced NU members to support Prabowo.

Regarding social class categories, Prabowo dominated all lower-, middle-, or upper-class segments based on education level or monthly income level. The assumption that Prabowo was only supported by lower educated groups, while Anies was supported by educated circles, proved to be incorrect. Overall, Prabowo supporters from educated circles were much more than those favouring Anies. This finding confirms that many from the educated middle class were not worried about Prabowo’s human rights record or the ethical controversies surrounding Gibran’s nomination process in the Constitutional Court. They were not especially concerned about dynastic politics either. The issue of political dynasty and democratic regression were voiced by intellectuals and civil society activists. Yet, these only resonated in a limited circle, even among the educated.

THE JOKOWI EFFECT AND THE IMPACT OF SOCIAL ASSISTANCE

The 2024 Presidential campaign narrative was overshadowed by the electoral referendum on Jokowi’s approval rating. The dominant campaign theme revolved around two messages, namely, continuity of and change in Jokowi’s programmes. In mid-2022, almost two years before election day, Ganjar was the frontrunner in the presidential race, ahead of Prabowo and Anies.  He was widely seen as Jokowi’s natural successor, given the President’s endorsement in public at the time. Along the way, voters eventually split between those satisfied with Jokowi’s rule and wanted continuity of his programmes, represented by Ganjar and Prabowo, and those dissatisfied with Jokowi’s rule, who gravitated toward a new oppositional camp symbolized by Anies. The opposition camp always faced a daunting challenge in enlarging their electoral base. This was due to the high popularity of Jokowi, who had approval ratings consistently above 75%.

Once Jokowi shifted his endorsement to Prabowo after his eldest son was chosen to be the latter’s running mate, Jokowi supporters shifted dramatically to support Prabowo. This situation suddenly left Ganjar and PDIP in a dilemma. They started attacking Jokowi for political betrayal and for intervening in the electoral process and sidelining democratic and ethical principles. Yet, their strategy was counterproductive. Ganjar’s poll number started to collapse as voters observed a growing rift between Jokowi and PDI-P. They then started to follow the electoral cue from Jokowi to support Prabowo; who had now suddenly become the sole candidate promising continuity of Jokowi’s programmes.

Graph 2: President Jokowi’s Approval Trend

Graph 3: Three-way Candidate Poll Trend

The strong reaction from Ganjar and PDIP against Jokowi also highlighted their failure to develop a political persona and narrative unique and apart from Jokowi.  Without Jokowi’s brand, Ganjar’s poll number crumbled as he was left without a clear campaign message or identity. In contrast, Jokowi and Prabowo had their own political identity and electoral support base. The latter had developed over the past two elections to transcend each their own political party, PDIP and Gerindra respectively. Ganjar failed to develop an independent political persona which could appeal to voters outside his own party base. Even Anies had managed to develop a clear political persona as a smart and religious figure, not to mention his reputation as the icon of opposition to Jokowi’s regime.

With more than 200 million voters spread across the archipelago, reaching those voters directly presented a daunting challenge for any candidate in any election. Each presidential candidate therefore had to have a public identity that stood out without the need for him to visit all constituencies physically. Prabowo positioned himself as Jokowi’s successor at a time when eight out of ten voters approved of Jokowi. Prabowo and Gibran were less active compared to Anies and Ganjar when campaigning. Instead, they spent more time as Minister of Defense and Mayor of Solo than campaign. This lack of footwork was more than compensated for by a solid coalition strategy and an effective social media campaign. Using TikTok, Prabowo’s campaign team managed to reach and win over many young voters. One of the turning points in Prabowo’s social media campaign came after one of the presidential debates, which showed Anies and Ganjar jointly attacking Prabowo’s track record. Prabowo’s poor performance during the debate was then effectively reframed by his social media campaign team to create a perception of nasty bullying by his opponents. This then garnered widespread sympathy among voters who watched the debate clip on social media.[8] An outpouring of support could be seen in the millions of new followers which Prabowo gained on his personal social media accounts, such as Instagram and Tiktok. This shows that political campaign are not always about appealing to rational voters; affective means are often very effective.

During the campaign period, Anies’ and Ganjar’s camps criticized Jokowi for initiating massive government social assistance or bansos programmes such as direct cash assistance (BLT) to influence the electorates.[9] To verify this, we asked respondents and their families if they had ever received government assistance (basic food assistance, cash social assistance (BST), direct business assistance (BLU), family hope programmes (PKH), and so on). Graph 3 shows that 45.6% of respondents reported that they had received social assistance, while 51.7% said ‘no’. For those who said ‘yes’, we asked if they continued getting help on a regular basis. On this question, 53.7% said ‘yes’, while 43.9% said ‘no’. Nonetheless, the exit poll results showed that the effect of social assistance was not directly visible since the recipients were spread quite evenly among the three candidate’s supporters (Graph 4).

Graph 4: Whether respondents have ever received bansos? (%)

Graph 5: The electoral effect of bansos (%)

This was also true for the ten kilogrammes of rice assistance programme.[10] 66% of respondents said that they were aware of the programme. Of those who knew, 45% admitted to receiving it. However, there was no significant difference between those who received and those who did not receive the assistance in terms of their choice of candidate (Graph 5). Kompas exit poll results also revealed similar findings, in which social assistance programmes did not significantly increase Prabowo’s electability.[11] Meanwhile, Prabowo’s electability was higher among those who did receive direct cash assistance (BLT)[12] compared to those who did not receive it (Graphs 6a and 6b). Overall, the majority of voters who did not receive BLT assistance still voted for Prabowo.

Graph 6a: The electoral impact of 10-KG rice assistance (%)

Graph 6b: The electoral impact of Direct Cash Assistance (BLT)

This does not mean that social assistance had no electoral impact at all. Graph 7 shows that the social assistance programs had direct effect in maintaining and even increasing Jokowi’s popularity as well as his approval rating. We found a significant positive correlation between bansos, 10Kg rice assistance and 3-month lump sum cash transfer (or BLT) and Jokowi’s approval rating. Similar significant positive correlations were also found between Jokowi’s approval rating and people’s support for Prabowo. Apparently, the effect of bansos for Prabowo’s electability poll happened indirectly, by way of Jokowi’s high approval rating. But it did happen.

Graph 7: President approval based on the recipients of bansos, 10KG rice, and BLT

CONCLUSION

From the beginning of the election cycle, the 2024 presidential election zeitgeist and narrative were set by Jokowi, who was seen as the most influential political actor on the Indonesian electoral scene. His constantly high approval rating, above 75%, throughout the election cycle benefited Prabowo-Gibran as the candidate-pair who claimed a continuity of Jokowi’s programmes and legacy. Another major factor contributing to Prabowo’s landslide victory over his two opponents also rested on his own effective electoral strategy in recasting his old strongman image in the last two elections into a more friendly image of a “cuddly grandpa”; this attracted many Gen-Z and millennial voters through social media platforms like TikTok. The exit-poll analysis clearly shows an overwhelming support  from young voters, which made up more than half the electorate, towards Prabowo-Gibran. The 2024 election also saw a high young voters turnout, unlike in  previous elections. This young voters turnout and their support for Prabowo-Gibran was evident in the exit-poll.

Despite some incidents of electoral irregularities, various exit-poll analyses show that Prabowo’s commanding lead and one-round victory were simply too convincing for any electoral fraud allegation. Controversies surrounding the mobilization of the state apparatus and the utilization of bansos to overturn the landslide election result are difficult to prove due to weak evidence. The most dominant factor in explaining Prabowo’s victory lies in Jokowi’s high approval rating. In this sense, we could argue that the 2024 presidential election was a “referendum” on whether Jokowi’s legacy should be continued or not.

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).

 

2024/31 “Islamist Figures and Their Limited Role in Indonesia’s 2024 Presidential Election” by A’an Suryana

 

Indonesia’s president-elect Prabowo Subianto (L) and vice president-elect Gibran Rakabuming Raka (R) wave to journalists after the plenary meeting of the general election commission (KPU) announcing the 2024 presidential election in Jakarta on 24 April 2024. Under the upcoming Prabowo Subianto government, which begins its term in October 2024, Islamists are expected to have greater room to manoeuvre. (Photo by ADEK BERRY / AFP).

EXECUTIVE SUMMARY

  • This article discusses the role of Indonesian Islamists in the 2024 Presidential Election. Their role merits discussion because they have been impactful during various episodes of Indonesia’s political history.
  • This article argues that unlike previous elections, the Islamists did not play a significant role in the run-up to the 2024 Presidential Election.
  • Their dwindling social and political influence can be attributed to state repression under President Joko Widodo’s regime and the shifting of political alliances among nationalists and religious elites.
  • However, under the upcoming Prabowo Subianto government, which begins its term in October 2024, the Islamists are expected to have greater room to manoeuvre.
  • Under Prabowo’s regime, they are expected to be under less social and political pressure, judging from Prabowo’s history of working together with Islamists.

ISEAS Perspective 2024/31, 29 April 2024

*A’an Suryana is a Visiting Fellow at ISEAS – Yusof Ishak Institute and is a lecturer at the Faculty of Social Sciences, Universitas Islam Internasional Indonesia.

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INTRODUCTION

This article discusses the role of Indonesian Islamists in the 2024 Presidential Election. Although Islamists are generally peripheral players in Indonesian politics, they have had significant influence on Indonesia’s social and political conditions, due to their religious legitimacy and their skills in mobilising the masses.

A case in point was their role in the anti-Ahok protests in the run-up to the Jakarta gubernatorial election in 2017. Despite being small in numbers, the Islamists rallied as the 212 Aksi Bela Islam Movement (Defending Islam Movement) and managed to mobilise Muslims from various backgrounds to stage a series of protests against Basuki Tjahaja Purnama (Ahok), former governor of Jakarta whom they accused of committing blasphemy against Islam. The protests, one of which was the biggest in Indonesian history, successfully prevented Ahok, who held a double minority status, a Christian and a Chinese Indonesian, from winning the election. At the same time, the protests also brought Habib Rizieq, the leader of the Islamic Defender’s Front (FPI) and a long-time fringe player in Indonesian politics, to the apex of his social and political status. The Islamists also played a significant role in instigating anti-Ahmadiyah and anti-Shia protests nationwide; these were rampant during the presidency of Susilo Bambang Yudhoyono (2004-2014).

“Islamists” in this article loosely refers to Islamic activists who operate outside the formal political structure. In other words, they do not occupy positions as leaders of political parties, councillors, legislators or state actors. Instead, they promote their ideas and interests through street protests and religious events. A substantial number of Islamists are leaders and members of FPI, Hizbut Tahrir Indonesia (HTI), and the Salafi movement.[1] According to scholar Greg Fealy, they aspire “to make Islamic law and values a central part of public life and the structure of the state.”[2] Unlike moderate Muslims, Islamists tend to support the establishment of Sharia law and reject the appointment of non-Muslim leaders in strategic leadership positions such as governorship or presidency (and vice-presidency). However, Islamists do not support acts of terror and, therefore, are distinct from extremist Muslims.

It is important to note that Indonesian Muslims are diverse in orientation. For the purpose of this research, the definition of Islamist used in this article excludes moderate Muslims of the modernist and traditionalist type (people who follow religious beliefs and practices of Muhammadiyah and Nadhlatul Ulama, respectively) as well as religious figures and organisations that support terrorism such as Jamaah Ansharut Daulah or other supporters of the Islamic State (ISIS).

Recent academic literature discusses Islamists resorting to populism or riding on blasphemy issues to gain religious legitimacy. Some scholars have argued that populism among Islamists arose due to deepening religious conservatism,[3] while others contend that this is instead due to experiences of social injustice.[4] Islamists have also used blasphemy to attain their objectives.[5]

This article seeks to expand the existing scholarship on the role of Islamists in Indonesian politics. This article will also discuss the future of Islamists in the post-Joko Widodo era as his term ends in October 2024. It argues that the Islamists’ loss in significance in the 2024 Presidential Election was mainly due to their social and political influence being weakened by state repression under Joko Widodo, and to shifts in political alliances among nationalists and religious elites.

REPRESSION OF ISLAMISTS UNDER JOKO WIDODO

The protests against Ahok in 2017 sharply increased Islamists’ political influence. The effective framing of the blasphemy case saw the National Movement to Safeguard the Indonesian Ulema Council’s Fatwa (GNPF-MUI) successfully mobilising thousands of Muslims to participate in the series of protests.

While the protests targeted Ahok, the ultimate aim of the Islamists was to undermine Joko Widodo’s popularity and power going into the 2019 Presidential Election.[6] Following the successful anti-Ahok protests, the Islamists formed the Persaudaraan Alumni 212 (the 212 Brotherhood Alumni) to sustain the momentum of the Aksi Bela Islam movement and uphold public support for them.

However, the political influence of the Islamists weakened when Joko Widodo began consolidating his power by controlling security apparatuses, building stronger ties with civil society, and expanding a coalition of parties to control seats in the parliament. Joko Widodo granted strategic security positions to at least two individuals with whom he had established relationships during his tenure as mayor of Solo between 2005 and 2012. Hadi Tjahjanto, the man Joko Widodo installed as the chief of the Indonesian military on 8 December 2017, was a military airport commander in Solo between 2010 and 2011, while Listyo Sigit Prabowo, chief of the Solo police between 2010 and 2012, was appointed as national chief of police on 27 January 2021.

Joko Widodo also obtained support from civil society by building partnerships with Nadhlatul Ulama, for example, by appointing Ma’ruf Amin, a senior NU cleric, as his vice-presidential candidate. Nadhlatul Ulama is Indonesia’s largest Muslim organisation whose moderate ideology stands in contrast to that of the Islamists. Good ties with NU is strategic as a vote-getter and the move proved hugely successful in the 2019 Presidential Election. Partnership with NU provided the government with an effective counterbalance to the power of the Islamists.

Joko Widodo also successfully expanded a coalition of political parties to have a firmer grip on the House of Representatives. At the beginning of his administration in 2014, he controlled 207 seats out of the total 560 seats in the parliament.[7] In 2022, he added more parties to the pro-government coalition, increasing the number of seats under his control to 471 seats – equivalent to 81.9 percent of the total seats.[8] He consolidated his power through a carrot-and-stick approach. On one hand, he offered governmental positions, including ministerial positions, to parties in exchange for their support.[9] On the other hand, he ensured that none of these positions were offered to opposition parties, including the Prosperous Justice Party (PKS). 

As Joko Widodo’s power base grew, the Islamists faced contrasting fates including legal prosecution. Their frontman, Habib Rizieq Shihab, was jailed for spreading fake news while another prominent figure during the 212 protest, Mohammad Al Khaththath, was arrested on treason charges. In addition, seven FPI executives were arrested on various charges including terrorism. Islamist organisations also became a target of state repression. HTI was banned in 2018, followed by FPI two years later. The criminalisation and the banning of these organisations weakened the Islamists, and explains their limited influence during the 2024 presidential campaign.

SHIFTING POLITICAL ALLIANCES

Another factor that has weakened the Islamists is the shift in political alliances. In the 2014 and 2019 presidential elections, Islamists had rendered their support to Prabowo Subianto. However, Jokowi successfully convinced pro-Prabowo Islamist supporters to switch allegiance to his camp. In 2014, only one Islamic party supported Jokowi, but the number increased to three in the 2019 election: the Nation Awakening Party (PKB), the United Development Party (PPP) and the Crescent Star Party (PBB). Some politicians who had been known to support Islamist causes also left Prabowo in favour of Jokowi, including Ali Mochtar Ngabalin, Kapitra Ampera, Yusril Ihza Mahendra and Zainul Majdi.[10] Their departure not only weakened the Islamists, it also made them vulnerable.

A political bombshell was dropped when Prabowo accepted Jokowi’s offer to join his administration and cast aside his Islamist allies while seeking political support from moderate Muslim figures and organisations such as Nadhlatul Ulama.[11] Islamists felt that Prabowo abandoned them, and called him “a traitor.”[12]

Going into the 2024 Presidential Election, support for Islamic parties was fragmented. The Prabowo-Gibran pair obtained support from PBB and the National Mandate Party (PAN), whereas the Anies-Muhaimin and Ganjar-Mahfud pairs received support from PKS and PPP respectively. As a result of the three-way race and the fragmented support from Islamic parties, identity politics became a non-viable weapon. This resulted in little demand among candidates to engage with the Islamists to mobilise the masses.

Initially, none of the presidential and vice-presidential candidate pairs sought support from the 212 Brotherhood Alumni. Anies-Muhaimin ultimately did, and on 21 November 2023, they signed an integrity pact with 212 on 14 December 2023. 

THE RISE AND DECLINE OF THE ISLAMIST POLITICAL BASE

The following paragraphs examine the loss in stature of some prominent Islamist personalities in the face of state repression and shifting political alliances.

Mohammad Al Khaththath,also known as Gatot Saptono, the Secretary General of Forum Umat Islam (FUI),played a prominent role as GNPF MUI’s secretary general during the protests against Ahok. However, after his arrest on 31 March 2017 on treason charges, he remained inactive. He was released in July 2017 at the request of his wife and an influential ulema. Mohammad Al Khaththath only appeared once in public on 10 October 2023 when he normatively called for the public and government to promote a peaceful election.[13]

Islamists who played a more active role, albeit with limited influence, in the 2024 Presidential Election were Habib Rizieq Shihab, Novel Bamukmin, Bachtiar Nasir and Yusuf Muhammad Martak. All, except Bachtiar Nasir, remain active in the 212 Brotherhood Alumni movement.

The controversial firebrand cleric, Habib Rizieq Shihab, was rather muted throughout the election.This founder ofFPI in 1998, who then expanded it into a national-scale organisation,   was known for leading his men in street protests for a variety of causes. Rizieq, who is now the chairman of the 212 Brotherhood Alumni’s governing board, is known for his combative and divisive sermons publicised at various religious and community events nationwide. His social and political career has experienced several ups and downs. He was imprisoned for provoking violence in 2008 and for defamation in 2003, but he enjoyed the peak of his Islamic activism career after successfully inspiring and mobilising people for the anti-Ahok protests between 2016 and 2017. His role made him one of the nation’s prominent political players as well as influential ulema. In 2018, a survey found that he was among the five most influential ulema in Indonesia.[14] His political career suffered a setback in 2020 after he was found guilty of spreading fake news and lying about the results of his Covid-19 test. He was released on parole in July 2022 which is to end in June 2024. During the 2024 Presidential Election campaign, he often appeared at religious events both offline and online. He appeared most frequently on the Islamic Brotherhood Television, the official media of the Front Persaudaraan Islam (Islamic Brotherhood Front), the organisation that replaced FPI. Perhaps bound by parole regulations, Habib Rizieq appeared less critical of Joko Widodo’s regime and mostly addressed general topics relating to the presidential election. He eventually expressed his support for Anies-Muhaimin. Unlike in past elections, Habib Rizieq did not organise or participate in any movement to support his preferred candidates.

Novel Bamukmin is the 212 Brotherhood Alumni’s deputy secretary general. He was active at FPI’s Jakarta chapter, but was fired from his position and had his membership revoked in December 2017, for internal insubordination. He joined the 212 Brotherhood Alumni in 2018 where he has since served as one of the executives in the Islamist organisation. He remained outspoken and often created social controversies through comments in the mainstream media. In 2023, he opposed the organising of Coldplay concert in Jakarta, accusing the music group of promoting Lesbian, Gay, Bi-sexual and Trans-Sexual (LGBT) interests.[15] He also often participated in street protests that promote the interests of FPI, and later, PA 212. Recently, he made public comments regarding the 212 Brotherhood Alumni’s political position in the 2024 Presidential Election. The organisation eventually supported the candidacy of Anies Baswedan and Muhaimin Iskandar. However, as explained above, the organisation’s power had weakened to such an extent that the candidate pair took their support reluctantly.

Bachtiar Nasir, a Salafist, is a seasoned activist. He is an educator, ulema and the secretary general of the Council of Indonesian Intellectuals and Young Ulema (MIUMI). He became widely known after assuming the position of chairman and guarantor of GNPF MUI in 2016. He was mainly responsible for formulating the protest agenda, ensuring the protests received sufficient funding and making sure that the protests ran smoothly without major incidents. After stepping down in 2018, Bachtiar faced several charges including treason and money laundering. However, his cases have remained stagnant; the police has neither continued their investigation nor officially closed the matter. In the run-up to the 2024 Presidential Election, he attended some huge events such as Gontor Islamic boarding school alumni’s declaration of support for Anies and Muhaimin, and the biggest outdoor campaign for Anies-Muhaimin in Jakarta International Stadium in North Jakarta on 10 February 2024.[16] However, he did not partake in organising these events, in stark contrast to the central role he played in organising the anti-Ahok protests.

Unlike other Islamists, Yusuf Muhammad Martak, the chairman of the 212 Brotherhood Alumni’s advisory council, is quite new to Islamic activism. He comes from a family of businessmen who have an interest in politics. His uncle, Faradj Martak, donated his house to Soekarno, Indonesia’s independence fighter and the country’s first president.[17] He spent much of his career as a businessman. His social and political career began when he served as MUI’s treasurer in 2015. He later joined the 212 movement and remains active in it. Representing the movement, he demanded that the Indonesia Election Commission cancel Joko Widodo-Ma’ruf Amin’s victory in the 2019 Presidential Election for electoral fraud. In the recent presidential election, he was one of the executives in the campaign team for Anies-Muhaimin.

The above cases show that a majority of the Islamists, except for Yusuf Martak, are  ulema who are also capable of mobilising the masses. The Islamists had been able to collaborate militant or conservative causes, as demonstrated in the anti-Ahok and anti-Ahmadiyah protests. Such collaborations had boosted their political power. However, they played a limited role during the 2024 Presidential Election following state repression by the Joko Widodo regime and the shifting political alliances among political actors.

CONCLUSION

To conclude, this article has explained that Islamists failed to play a significant role in the 2024 Presidential Election due to repression under President Joko Widodo and the shifting of political alliances. This was further proven by the limited role some Islamist key figures played, such as Rizieq Shihab, Novel Bamukmin, Yusuf Martak and Bachtiar Nasir.

However, under President Prabowo Subianto, the Islamists are anticipated to have more room to manoeuvre. It is expected that they will no longer face stiff social and political pressure from the state given Prabowo’s history of working together with Islamists. It is unlikely that Prabowo will resort to social and political repression. Prabowo is a secular nationalist, and hence, uninterested in Islamic activism. He is nevertheless pragmatic, and working together with the Islamists to further his agenda remains on the table. Despite setbacks under President Joko Widodo, the Islamists will continue to have influence in Indonesian social and political spheres.

ENDNOTES


For endnotes, please refer to the original pdf document.

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2024/30 “The Power of a Vote in Malaysia: Malapportionment Under UNDI18, AVR, and MA63” by Kai Ostwald

 

A university student talks with her mobile in front of the United Malays National Organisation (UMNO) banner at a campaign rally on the eve of the 15th general elections in Bera, Malaysia’s Pahang state on 18 November 2022. (Photo by Mohd RASFAN / AFP).

EXECUTIVE SUMMARY

  • While often overlooked, electoral boundaries can strongly shape political competition and policy priorities. In Malaysia, the long-dominant United Malays National Organisation (UMNO) manipulated boundaries in ways that amplified the power of votes in its stronghold areas. This created significant discrepancies in the number of voters across electoral districts—known as malapportionment—and is strongly associated with distortions to governance and disillusionment with the political process.
  • The 2019 UNDI18 constitutional amendment lowered the voting age to 18 and introduced automatic voter registration. This increased the size of the electorate by a remarkable 40% between the 2018 and 2022 general elections. More recently, Anwar Ibrahim’s unity government has pledged to increase the parliamentary seat share of East Malaysia’s Sabah and Sarawak from the current 25% to 35%, despite the states already being significantly over-represented. Both these developments worsen the malapportionment in the country, potentially causing further political distortions.
  • Against the backdrop of already high levels of malapportionment, the impact of UNDI18 on malapportionment is more modest than most narratives suggest, though it is responsible for creating a number of problematic mega-districts. By contrast, implementing the proposed seat increase for Sabah and Sarawak would substantially worsen state and district level malapportionment. While this may be justified, given East Malaysia’s unique position in the federation—as well as a newfound political agency—there is little obvious justification for the ongoing discrepancies within Peninsular Malaysia, particularly the under-representation of Selangor.
  • A dominant narrative in Malaysia, voiced by numerous political elites in recent months, holds that reducing malapportionment is disadvantageous for ethnic Malays. This however reflects assumptions that are no longer valid following demographic developments and changes to Malaysia’s party system since 2013. To the contrary, in terms of electorate size, there are substantial similarities in the seats won by the Malay-majority Parti Islam se Malaysia (PAS) and their arch-rival Chinese-majority Democratic Action Party, while on average the largest seats were won by the Malay-majority Parti Keadilan Rakyat (PKR) and Amanah.
  • In short, there is no empirical basis for the ethnic-focused narrative. Recognizing this would facilitate constructive discussions around addressing malapportionment, particularly in light of the significant political reordering that a seat increase for East Malaysia would produce.

* Kai Ostwald is Associate Senior Fellow with the Malaysian Studies Programme at ISEAS – Yusof Ishak Institute. He is also Director of the Institute of Asian Research at the University of British Columbia, and Associate Professor in UBC’s School of Public Policy and Global Affairs.

ISEAS Perspective 2024/30, 25 April 2024

Download PDF Version

INTRODUCTION


The size and shape of electoral districts can profoundly impact political outcomes. Malaysia is a case in point: the strategic manipulation of district boundaries over decades played a key role in sustaining the electoral dominance of the United Malays National Organisation (UMNO) and its Barisan Nasional (BN) coalition partners prior to their 2018 defeat. This was achieved primarily through malapportionment—the unequal distribution of voters across electoral districts—which amplified the influence of voters in the BN’s stronghold areas, allowing the coalition to consistently secure parliamentary majorities well above their level of popular support.[1] 

While Malaysian politics have evolved dramatically since 2018, manipulated electoral districts continue to shape political representation and competition. Three key questions stand out. First, the UNDI18 constitutional amendment (in 2019) significantly increased the size of the electorate and appears to have exacerbated malapportionment, although to what extent and effect is yet unclear. Second, the BN’s defeat in 2018 decoupled East Malaysia’s party system from the Peninsula’s and catalyzed demands for greater East Malaysian influence in federal politics, including via an increase in parliamentary seats from the current 25% to 35% — which the manifesto of Prime Minister Anwar Ibrahim’s coalition pledged to do. If implemented, this move would further increase malapportionment, but it is likewise unclear to what extent. Finally, given the broader fragmentation of the party system, it is uncertain whether previous patterns of who benefits and who is disadvantaged from malapportionment still hold.  

This Perspective addresses those questions and reaches several conclusions. Malapportionment, which entails myriad costly distortions to politics and governance, remains high and would increase significantly through the introduction of new East Malaysian seats. While the unique position of East Malaysia may justify that, the extensive malapportionment in Peninsular Malaysia is less defensible. Importantly, constituency-level demographic changes and new coalition compositions mean dominant narratives around who benefits from malapportionment are now outdated and flawed. Updating the underlying assumptions provides an opportunity to address the most problematic boundary distortions.

THE POWER OF A VOTE

Malapportionment arises when there are disparities in the number of voters across electoral districts. The figure below illustrates the effect through two hypothetical districts: District A has one voter, while District B has eight voters. Since each district has one seat in parliament, District A’s voter has significantly more power to shape parliamentary outcomes than does a voter in District B. In short, malapportionment amplifies the influence of voters in districts with relatively few voters, while diluting the influence of voters in districts with relatively many voters. As a result, the preferences of District A’s voter are overrepresented, which contradicts the normatively important “one person, one vote” principle. By creating incentives for political leaders to focus resources and policy decisions on over-represented voters, this dynamic creates extensive political distortions and fosters clientelistic behaviours.[2] On the side of voters, perpetual under-representation is associated with political disengagement.

Malapportionment illustrated

During its decades in power, UMNO systematically reshaped Malaysia’s electoral process in ways that provided it and its coalition partners fundamental advantages (Lim 2002, Ostwald 2017). This included reducing the size of electoral districts in areas where the coalition enjoyed strong support, allowing it to inflate its parliamentary seat share relative to its vote share. The effect of this cannot be overstated: in the 2013 general election, for example, malapportionment allowed the BN to secure a 20% parliamentary seat advantage despite losing the popular vote by 4%. By 2018, decades of manipulating electoral boundaries left Malaysia with unusually high levels of malapportionment by global standards (Ong, Kasuya, and Mori 2017).[3]

The Pakatan Harapan (PH) government that took power in 2018 pledged extensive reforms, including of the electoral process (Ting and Horowitz 2023). Among its successes was the UNDI18 constitutional amendment that lowered the voting age from 21 to 18 and introduced Automatic Voter Registration (Weiss 2022). The measures were implemented prior to the 2022 general election, increasing the number of eligible voters by over 40%. A disproportionate number of these new voters were registered to districts that already had a relatively high number of voters, exacerbating the disparity in district sizes. The figure below illustrates this by arranging Malaysia’s 222 electoral districts from smallest to largest (in terms of registered voters) for both the 2018 (dark grey) and 2022 (light grey) elections. Several things are striking. First, the range in district-level electorate size has grown even larger: the largest district (303k) in 2022 had over ten times as many voters as the smallest (28k). Second, the disparities are significant even beyond the extremes: the 75th percentile district (117k) in 2022 is almost twice as large as the 25th percentile (62k). Finally, the largest increases in electorate size appear to be in districts that were already disproportionately large.

UMNO’s defeat in 2018 fundamentally altered the political dynamic between the peninsula and the East Malaysian states of Sabah and Sarawak. Specifically, major East Malaysian parties that once belonged to the BN left the coalition post-election and leveraged their seats to play a stronger role in federal-level politics. Since 2018, this has included more prominent cabinet positions, including the current Deputy Prime Minister from the Sarawak-based PBB. Notably, the manifestos from the three major coalitions contesting the 2022 election all outlined intentions to empower East Malaysia through such things as greater revenue sharing from petroleum exploitation and political empowerment (Lee 2022). 

The PH manifesto—from current Prime Minister Anwar Ibrahim’s coalition—went furthest in offering Sabah and Sarawak a 35% parliamentary seat share, a significant increase from the current 25%. This reflects demands from East Malaysian political leaders, who see the increase as integral to fulfilling the original terms of federation under the 1963 Malaysia Agreement (MA63), as well as critical to ensuring that the peninsula’s domination of politics is kept in check. It is unclear whether, how, and when this rebalance might occur, but there are signs of growing momentum in its favour.[4]

Given the political difficulty of removing seats from peninsular states, the path of least resistance is likely through adding new seats in East Malaysia. Procedurally, this can be done through a two-thirds majority parliamentary vote, which is theoretically attainable given the supermajority that Anwar’s unity government currently holds.

Assuming the number of peninsular seats remains unchanged, East Malaysia would require 33 additional seats to reach the 35% seat target. At present, the seat split between Sabah and Sarawak is 45% and 55% respectively; the electorate split is similar at 46.5% and 53.5% respectively. Assuming the new seats are divided at that proportion, Sabah and Sarawak would receive 15 and 18 new seats respectively. That would bring Sabah’s total to 40 and Sarawak’s to 49 seats. Given that existing seats in Sabah and Sarawak already tend to be smaller than their peninsular counterparts in terms of electorate size, the proposed seat additions would further elevate malapportionment.

There is real and growing urgency to this question, given the complex sequencing challenge that arises due to the redelineation exercise currently in motion for Sarawak and on the horizon for Sabah (in 2025).[5] The key question is how many seats the Electoral Commission is basing the exercise on. If it is the current number, then a resource intensive redelineation exercise would have to be re-conducted following any Parliamentary approval of new seats. If it is an expanded number (for example, the promised increase to 35% of the total), then the exercise assumes Parliamentary approval that has not yet been attained. This has further implications for redelineation of state-level seats, which are likewise highly malapportioned.[6] 

THE SIZE AND SCALE OF MALAPPORTIONMENT

Both the UNDI18 increase in electorate size and the proposed MA63-related seat increase impact malapportionment in ways that affect political competition and representation. We now turn attention to systematically measuring the magnitude of those changes, which provides insights into their effects.

The starting point is inter-state malapportionment, in other words, the unequal distribution of seats across Malaysia’s thirteen states and three federal territories. The figure below illustrates this, comparing inter-state malapportionment in the 2018 election (light grey), 2022 election (medium grey), and under the potential MA63 plan that increases East Malaysia’s seat share to 35% (dark grey). The figure shows how many seats above or below a state has relative to its share of the total electorate. For example, in the 2018 election, Terengganu had approximately 5% of Malaysia’s electorate but only 3.6% of seats, making its voters underrepresented in parliament: based on its electorate size, it had 3 seats too few, as indicated by the -3 value. In short, the figure captures how over- or underrepresented states are, relative to the size of their electorate.

Three states stand out. Sabah and Sarawak are already significantly overrepresented in parliament relative to their electorate size: Sabah had approximately 7 seats above what the size of its electorate called for in 2022, while Sarawak had 11 more. Should the MA63 proposal be implemented, that would increase to a surplus of 20 and 26 seats, respectively. To put that into concrete terms, the mean number of voters per district would fall from 67,575 (in 2022) to 42,235 for Sabah, and from 62,680 (in 2022) to 39,655 for Sarawak, relative to 106,040 for peninsular seats. That may be justifiable given their unique position in the federation and the many features that continue to make them distinct. There is little clear justification, however, for Selangor being so vastly underrepresented: it had 14 and 17 seats too few in 2018 and 2022 based on its number of voters; this would climb to a deficit of 22 seats should the MA63 proposal be implemented.[7] That amounts to a mean number of 167,175 voters per district in 2022. In short, the weight of one East Malaysian voter would be approximately four times that of a voter in Selangor.

There is substantial malapportionment of federal seats within the states as well. The figure below captures the number of voters in each district (left columns are from 2018, right columns are from 2022) for each state and federal territory. As is clear, the UNDI18 reforms and natural population growth increased the size of nearly all districts, but the effect—visible both as a general upward shift and the greater dispersion of seats—is more pronounced in some states than others. The growth of problematic mega districts is also evident. In 2018, only two districts—both in Selangor—had more than 150,000 voters. By 2022, twenty-five districts were above that threshold, now including Kedah, Perak, Negri Sembilan, Malacca, Johor, and a majority of Selangor’s districts.[8]

An international comparison helps contextualize the scale of malapportionment in Malaysia. The primary measure for malapportionment is the percentage of seats that need to be shifted from over-represented districts (with relatively small numbers of voters) to under-represented districts (with relatively large numbers of voters) in order to achieve an equal apportionment of voters across districts (Samuels and Snyder 2001). In short, higher values denote greater malapportionment. The figure below compares malapportionment in several high-income democracies—which Malaysia seeks to join—and regional counterparts to Malaysia in 2018, 2022, and under the MA63 35% proposal.[9]

As anticipated, the UNDI18 reforms did increase malapportionment between 2018 and 2022, but against the backdrop of already very pronounced levels, this increase is modest in scale. Implementing the MA63 proposal without addressing existing malapportionment would have a far more substantial effect. Regardless, the primary conclusion is that under all three conditions, malapportionment in Malaysia is considerably higher than in counterparts, with the exception of Myanmar (which based its electoral districts primarily on colonial-era administrative boundaries). This is significant, given the evidence from around the world that malapportionment has pernicious effects on a range of important matters including governance, economic development, conflict, and voter motivations.

POLITICAL CONSIDERATIONS

Malapportionment in Malaysia is fundamentally a political issue. The founding 1957 Constitution called for constituencies to contain a nearly equal number of voters, with some deviation—limited to no more than 15%—to account for differences in population density, means of communication, and community composition. That limit was relaxed in 1962 and repealed entirely in 1973, paving the way for the current significant disparities. Indeed, each redelineation before 2016 saw the addition of new seats, typically allocated disproportionately to areas under the BN’s control (Chacko 2019).

This pattern of redelineation contributed to the BN’s dominance and supported a (generally unspoken) view that malapportionment provides additional assurance of Malay-Muslim political dominance. Consequently, reforms that mitigate malapportionment are sometimes cast as ploys to empower ethnic Chinese, particularly the DAP. For example, in mid-2019, UMNO’s president Zahid Hamidi suggested the DAP’s interests in redelineation were driven by a desire to gain more seats, which would be unfavourable to Malays.[10] More recently, former Selangor UMNO chief Noh Omar warned while campaigning for the PN that redelineation would be favourable to the DAP, would reduce the number of Malay-majority seats, and might even lead to a DAP prime minister.[11]

The narrative that the DAP would be the sole beneficiary of more equal apportionment is not reflected in more systematic analyses. That is because today’s malapportionment reflects not current party strengths and alignments, but rather party strengths and alignments at the time of previous redelineations, which were conducted under BN domination. The main implication is that parties that were historically associated with the BN tended to win smaller seats in 2022, while parties historically opposed to the BN tended to win larger seats. Given the comprehensive fragmentation of Malaysia’s party system relative to the era of BN dominance, that no longer cleanly aligns with current coalition structures.

The figure below shows the electorate size of districts won by major parties (or coalitions in East Malaysia) in 2022. The middle line of each box indicates the median district, while the upper and lower bounds of the box indicate the 25th and 75th quartiles, and the dots indicate outliers. For example, the median district won by UMNO had approximately 68k voters (54k and 79k respectively for the 25th and 75th percentiles), while its largest seat has 133k voters.

The distribution is striking. On the peninsula, small seats were won primarily by UMNO and Bersatu, despite them being bitter rivals in 2022 campaigning. This reflects Bersatu’s status as essentially an UMNO-clone party, at least initially comprised primarily of former UMNO elites with existing ties in over-represented areas. By contrast, PAS’s median district had 106k voters (83k and 116k at 25th/75th percentiles), significantly larger than their bumiputera rivals and reflective of their historical position as an opposition party. In fact, excluding a small number of outlier mega districts, PAS and DAP districts are quite similar in terms of size, especially in comparison to the smaller UMNO, Bersatu, or East Malaysian districts. On the high end of the distribution are PKR and Amanah districts, both of which are not only historically oppositional to the BN, but also primarily Malay-oriented. This underscores a related key point: (typically large) urban districts are now often more diverse—and more Malay—than in earlier decades, further undermining the narrative that malapportionment is primarily an ethnic issue. In fact, when controlling for party and geographic factors, an OLS regression analysis finds no evidence for an independent effect of ethnic composition on district size.[12]

Two overarching conclusions emerge from this brief study. Malapportionment in Malaysia, which was already high from a comparative perspective, increased modestly through the 2019 UNDI18 constitutional amendment and would grow significantly greater if a proposed seat increase for East Malaysia is implemented. Given the many pernicious distortions associated with malapportionment, this is a concern for issues ranging from governance to development and political polarization. Even if the unique relationship between West and East Malaysia justifies the aforementioned increase, there is no clear justification for the considerable inter- and intra-state malapportionment on the peninsula. That leads to the second conclusion: given the fragmentation of Malaysia’s party system, the simple race-based narratives around malapportionment and redistricting are no longer empirically substantiated. On the contrary, a Malay-Muslim party such as PAS has potentially as much to gain from reducing malapportionment as does its Chinese-majority rival DAP. Given that the obstacles to reducing malapportionment are ultimately political rather than technical, updating assumptions about the potential effects of reform could generate the cross-party support to see it through.

REFERENCES

Bhavnani, Rikhil. 2021. “The effects of malapportionment on economic development”. PLoS ONE, 16(12): e0259150.

Chacko, Danesh Prakash. 2019. “Winning Elections by Rigging Borders? Barisan Nasional’s Brazen, and Failed, Attempt”. In Hutchinson and Lee (eds), The Defeat of Barisan Nasional: Missed Signs or Late Surge? Singapore: ISEAS – Yusof Ishak Institute.

Chai, James. 2022. “Bigger Constituencies, Lesser Political Clout”. ISEAS Fulcrum, no. 175.

Daxecker, Ursula. 2020. “Unequal votes, unequal violence: Malapportionment and election violence in India”. Journal of Peace Research, 57(1): 156-170.

Lee Hwok Aun. 2022. “Malaysia’s GE-15 Manifestos: Wading Through a Flood of Offerings”, ISEAS Perspective, no. 113.

Lee Hwok Aun. 2023. “Will UMNO’s Mutant Electoral Map Bite Pakatan Harapan?” ISEAS Fulcrum, no. 177.

Lim Hong Hai. 2002. “Electoral Politics in Malaysia: ‘Managing’ Elections in a Plural Society”. In Croissant, Bruns and John (eds), Electoral Politics in Southeast and East Asia, Singapore: Friedrich Ebert Stiftung.

Ong Kian Ming, Yuko Kasuya, and Kora Mori. 2017. “Malapportionment and Democracy: A Curvilinear Relationship”. Electoral Studies, 49: 118-127.

Ostwald, Kai. 2017. “Malaysia’s Electoral Process: The Methods and Costs of Perpetuating UMNO Rule”. ISEAS Trends, no. 19.

Ostwald, Kai. 2023. “The Politics of Malapportionment and Electoral Reform in a Dominant-Party Regime”. In Ting and Horowitz (eds) Electoral Reform and Democracy in Malaysia, Copenhagen: NIAS Press.

Ostwald, Kai, and Constant Courtin. 2020. “Malapportionment in Myanmar’s Elections: A Slumbering Menace”. Contemporary Southeast Asia, 42(2): 145-173.

Samuels, David, and Richard Snyder. 2001. “The Value of a Vote: Malapportionment in Comparative Perspective”. British Journal of Political Science, 31(4): 651-671.

Tindak Malaysia. 2023. “Persempadanan untuk Sarawak”, available at: https://www.tindakmalaysia.org/persempadanan/sarawak_redelineation

Ting, Helen, and Donald Horowitz (eds). 2023. Electoral Reform and Democracy in Malaysia, NIAS Press.

Washida, Hidekuni. 2019. Distributive Politics in Malaysia: Maintaining Authoritarian Party Dominance. Routledge.

Weiss, Meredith. 2022. “Can Youth Save Malaysia’s Democracy?” RSIS Working Paper, no. 337.

Wong Chin Huat. 2018. “Constituency Delimitation and Electoral Authoritarianism in Malaysia”. The Round Table, 107(1): 67-80.

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).

 

2024/29 “Indonesian Mainstream Media in the Digital Age: Corporate Convergence, Low-quality News and Staff Exploitation” by Sofie Syarief

 

News as a business, especially in its most traditional press and broadcast models, has been suffering from shrinking readership and viewership, and thus becoming less profitable. Photo of man reading a newspaper taken in Jakarta on 19 December 2022 by ADEK BERRY / AFP.

EXECUTIVE SUMMARY

  • News as a business, especially in its most traditional press and broadcast models, is suffering from shrinking readership and viewership, and thus becoming less profitable. The digital revolution has ushered significant changes into Indonesia’s mainstream media landscape.
  • In response to the rise of digital media, mainstream outlets have implemented various strategies to remain relevant and competitive. Corporate mergers in the already highly oligopolistic media industry have created a less hospitable environment for smaller players. The bigger players are better able to create multi-media platforms to reach their audiences.
  • Faced with diminishing advertising revenues, the media conglomerates have been forced to cut costs in the creation of news content, such as in their consolidation of production facilities and pooling of resources, to be shared across their respective array of multiple platforms for distribution. One significant consequence of such consolidation efforts has been the cutting of jobs for journalists.
  • These changes have raised questions about a likely decline in the quality of journalism and news content. There seems to be a trend towards acquisition of news from common sources, with less scope for independent investigation or in-depth analysis and commentary. Responsible and good quality journalism is a matter of public interest, but it would be an uphill journey to muster the political will or funding to deliver the desired policy interventions.

* Sofie Syarief is a former Visiting Fellow at the Media, Technology and Society at ISEAS –Yusof Ishak Institute Singapore and a PhD student at Goldsmiths, University of London, UK.

ISEAS Perspective 2024/29, 18 April 2024

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INTRODUCTION

Indonesia’s mainstream media landscape has always been oligopolistic and capital-intensive. The diversity of content needed to cater to its diverse citizenry has never been satisfactory due to the fact that the industry is controlled by a few powerful conglomerates (Nugroho, Putri and Laksmi, 2012). Contrary to earlier expectations that the growth of the internet would threaten the power of media moguls (Couldry and Curran, 2003), Indonesia’s digitalisation in the early 2000s enabled a select number of conglomerates to further consolidate the industry into a small number of multi-platform companies (Tapsell, 2017). The country’s media industry is currently controlled by eight politically-connected individuals – viz., Perindo Party chairman Hary Tanoesoedibjo’s MNC Group, Nasdem Party chairman Surya Paloh’s Media Group, Golkar Party politician Aburizal Bakrie’s Visi Media Asia, Minister of State Owned Enterprises Erick Thohir’s Mahaka Media, ex-minister Chairul Tanjung’s Trans Corp, Jakob Oetama and PK Ojong’s KG Media, EMTEK founder Edy Sariaatmadja’s SCMA Group, and Lippo Group heir James Riady’s B Universe (previously Berita Satu) (Syarief, 2022). But even these powerful conglomerates have had to adapt to more powerful trends disrupting the industry. This paper discusses how Indonesia’s media conglomerates have had to make significant adjustments to their business models in order to meet disruptive challenges from the digitalisation of media consumption and the rise of Big Tech social media platforms. 

Traditional media is no longer the primary source of regular daily news for digitally adept Indonesians.[1] According to the Reuters Institute 2022 Digital News Report,[2] roughly 88 per cent of surveyed respondents regard online media—including social media—as their news source. In addition, social media platforms are the news source of choice for 68 per cent of the population. At the same time, the percentage of respondents who indicated television and print media as their preferred news sources were 57 per cent and 17 per cent, respectively. Juxtapose these numbers with the estimation that 70 per cent of Indonesia’s online population is under the age of 35, most of whom are using social media platforms daily (Sinpeng and Tapsell, 2020), and we see an ageing population of traditional media consumers.

The rise of the digital has disrupted the traditional revenue model of the mainstream media industry. In 2021,[3] television—the most popular medium in the country—held the top spot as the preferred platform for advertising. Meanwhile, other forms of traditional media, such as print media and radio, only accounted for 5.5 per cent and 0.4 per cent of all advertisement spending, respectively. Moreover, the challenges for print media have been even more significant; as subscriptions and paywalls became increasingly important for these media outlets to generate revenue, they had largely not been successful in making the transition to online due to their inability to garner enough subscriptions—only 19 per cent of Indonesians are willing to pay for online news.[4]

This overall decline in consumer and advertising in traditional media happened mainly due to digitalisation. The grip of Google and Meta in the digital world was apparent by 2017 when both companies accounted for 84 per cent of global digital media investments.[5] This number was naturally followed by both receiving large shares of digital advertising, driving down the significance of the advertising middlemen, including the media. It also shifted the economic value of news from production to distribution almost entirely. While convergence enabled elements of the Indonesian mainstream media, such as news producers, to also become news distributors in the early wave of digitalisation, a massive reallocation of revenue from news/content creators to platform owners started to occur. Digitalisation saw search engines and social media becoming the go-to places to find news (Whittaker, 2020). Increasingly, mainstream media outlets in Indonesia have felt compelled to align themselves with the playbook of these giant digital platforms.

The challenges of digitalisation for Indonesia’s media conglomerates led to a significant shift within journalism, and financial rewards moved from the producer to the distributor. Given shrinking advertising dollars and the growing preference among the younger generation to consume their news via social media sites, Indonesia’s media conglomerates were compelled to transition from the production of longer, in-depth journalism to shorter-form content that could be more easily digested online. 

MEDIA CONVERGENCE

In addition, digitalisation paved the way for platform convergence. In responding to the fragmentation of advertising revenue from solely traditional media to traditional and online media, large media corporations have shifted their businesses into multi-platform companies by buying up smaller online outlets or creating new ones (Tapsell, 2017). This enabled them to disseminate their news publications via multiple content platforms, each usually containing similar information. In most cases, these common outlets are merged into one large newsroom for editorial, content or business purposes.

One of the most significant examples is MNC Media, Indonesia’s largest television network, which is a part of a multinational conglomerate known as the MNC Group. It is owned by tycoon and chairman of the Perindo Party Hary Tanoesoedibjo. MNC Media has been integrating its newsrooms since 2016, essentially merging the news-gathering divisions of their four television channels (RCTI, MNCTV, GTV, and iNews) into one large division. The news gathered by this division is then supplied to all MNC television channels, including their digital platforms (e.g. Okezone.com, Sindonews.com, and iNews.id). On one hand, this approach can be seen as efficient. But on the other hand, this practice essentially removes a significant number of media-related jobs. This creates a single low-cost news-gathering pipeline that produces news which then can be aired—and, by extension, sold to advertisers in various media outlets, be it national, local, or digital.

By creating an umbrella company for these various channels, deciding what news to cover and what needs to be aired or published becomes easier and more efficient as only one director of news is needed for all of these media channels. Other than having an integrated newsroom for all video-format channels, MNC created a one-for-all newsroom for their online text-based outlets, called MPI (MNC Portal Indonesia). In contrast, the Kompas Gramedia Group, owned by late journalists Jacob Oetama and PK Ojong, has been approaching the idea of convergence differently and is creating a system of content sharing among all media outlets under their corporation without actually merging the newsrooms.

Regardless of the means to achieve convergence, at the end of the day, when large corporations with large numbers of outlets streamline their news gathering and production processes, there is always the possibility that this comes at the expense of a diversity of content and perspectives. Newsroom integration decreases the diversity of perspectives that the different outlets used to have. One prevalent example of this is the practice of deploying one journalist to cover a particular event and then asking said journalist to send brief articles to the company’s online media sub-team, longer articles to their print media sub-team, as well as requiring them to do live reports for their radio or television broadcast media, sometimes without adequate training or preparation.[6]

In Indonesia, media convergence has also paved the way for mainstream media corporations to penetrate other businesses outside the media industry, such as acquiring communications and network infrastructure. Many among the eight key players in the Indonesian media landscape (Syarief, 2022) now possess their own television companies, online streaming services, internet service providers, telecommunications companies, other communication infrastructures, or all of the above.[7]

Such convergence of the media industry and the imperative to cut costs has led to massive lay-offs and the closing down of outlets. Within the past three years, several media companies have resorted to either of the two approaches. Koran Sindo (the only print newspaper of Hary Tanoesoedibjo’s MNC Group) ceased their operations on 15 April 2023, while Republika (owned by the current Minister of State-Owned Enterprises, Erick Thohir), Suara Pembaruan (owned by Lippo’s Berita Satu), Koran Tempo (part of the TEMPO Media Group), and Indopos (part of the Jawa Pos Group) closed down their print division to go fully digital.[8] Meanwhile, mass lay-offs have been carried out by various outlets such as Net TV (owned by the Indika Energy Group, a conglomerate focusing on mining), Berita Satu TV (part of the Lippo Group), and Kumparan (supported by venture capital investments from Djarum’s GDP and Go-Jek’s Argor). AJI, the Alliance of Independent Journalists, estimated that there were nearly 1,000 journalists, mainly from mainstream media, who were laid off in 2023 alone.[9] While the COVID-19 pandemic has had significant impact on the overall health of the media industry,[10] it has also been used as a cover for lay-offs due to business restructuring.[11]

Another common way of cutting costs within the media industry is to get rid of expensive news, especially if it is deemed as not bringing in enough of an additional audience. Indonesian news consumers are now seeing less and less investigative journalism and local news. Specifically for television channels, documentary programmes have generally been slashed. For example, Kompas TV and Trans 7 are currently the only two outlets with specific documentary programmes, and even so, the quantity of such documentaries has been reduced significantly over the past decade. Within the larger television industry, the common practice is to replace expensive programmes with non-news features, social media trends, as well as commentary programmes (especially talk shows designed to be heated debates) that are largely cheaper to produce and that attract more emotional responses from the audience. This approach is useful in boosting viewership and social media engagement, including clicks from clips that get uploaded on other platforms after the shows conclude on television.

THE DUMBING DOWN OF CONTENT: THE USE OF CLICKBAITS

One notable shift in Indonesia’s journalism landscape has been the prioritising of news that is more likely to generate clicks and engagement, even if it deviates from traditionally important news topics. This includes the rampant production of clickbait and sensationalist news articles—from which the traffic is then used as part of the sales pitch by these media companies to advertisers. A dataset of clickbait in the Indonesian language (William and Sari, 2020)[12] actually shows how this is used among 12 online media websites—eight of which are mainstream media outlets, the focus of this paper. As shown in figure 1, all outlets are not immune to the use of clickbait, but some utilise it more than others.

Source: Adapted from William and Sari (2020)

While clickbait is used to simply attract more traffic for most media, it is worth noting that for Kompas Gramedia, the largest media conglomerate in Indonesia and owner of Kompas.com and Tribunnews.com, clickbait may also be used to offset the cost of their ‘good’ journalism such as lengthy investigative pieces[13] and expedition features[14] in Kompas, or Kompas TV’s documentary programmes. While Kompas Gramedia is generally seen as one of the most trustworthy media groups in Indonesia,[15] one of their subsidiaries, Tribunnews.com—consistently in the top three of most visited media websites in Indonesia,[16] has been heavily criticised for their tendency to publish low-quality clickbait articles. According to the media studies and monitoring institute Remotivi, it would seem that Tribunnews.com has been tasked by their parent company (Kompas Gramedia) with “stealing” as many clicks as possible while the rest of the members of the group are instructed to practice responsible journalism.[17] What Tribunnews.com is essentially doing is producing sensationalist news with bombastic titles and headlines, from celebrity gossip to coverage of government policies. The consequences of this can be unexpected. Remotivi observed that during a series of terror attacks in Indonesia in the first half of 2018, Tribunnews.com’s publications ended up glorifying terror to muster clicks.

As views and clicks have become the new currency for online news media, TikTok has also become a platform of choice for the dissemination of news content. As of 2022, 90 per cent of Indonesia’s top news media publishers have routinely been uploading news content on TikTok, placing the country’s media on the top list of TikTok adoption followed by Australia (89 per cent), Spain (86 per cent), France (86 per cent), the UK (81 per cent), and the US (77 per cent).[18]

However, this trend has mainly put an emphasis on virality rather than quality. The general belief is that young people are more interested in entertaining news, or news stories that are packaged in more entertaining ways.[19] This comes from the industry’s own analysis of their broad social media reach/view reports, essentially showing that entertaining news and news packaged in a more accessible and entertaining manner are generally seen by more people without any further information on the consumers of the content. By combining the need of online media outlets to muster clicks and the tendency of reformatting news for social media, we now have the propensity of trivialising important stories.[20]

OTHER TUSSLES WITH BIG TECH

The latitude for Indonesian media conglomerates to produce independent content is further crimped by the powerful influence of Big Tech companies. The most notable policy from Alphabet’s Google to make sure they always have a say in the content that flows over news platforms is the creation of the Google News Initiative (GNI).[21] Funding from GNI is often worded as “no strings attached”.[22] However, what these programmes generally do is assist news media in developing digital skills, offering them various resources such as training, tools, as well as funding and sponsorship, allowing Google to act as a media patron (Fanta and Dachwitz, 2020). While these partnerships have helped many local media outlets develop digital business models and increase their revenue or even combat disinformation, the initiative essentially pushes news media outlets to produce content tailored for specific platforms, such as YouTube, using technical and content practices aimed at aligning headlines with Google’s search ranking algorithms. This makes it difficult to “sell” news that does not conform to these specifics.

Furthermore, as Google’s power over the media industry strengthens, digital media outlets in Indonesia are now facing harsh realities in trying to defy their playbook. In an attempt to protect digital news outlets from losing advertising revenue to online aggregators, the Indonesian government, as well as Indonesia’s Press Council and media associations, had been drafting a regulation, initially called the Publishers’ Rights, aimed at providing a level playing field between domestic news industries and digital platforms. In this draft, tech giants are deemed to be benefitting from using and displaying news content without providing proper compensation to publishers.[23] This move has been rejected by Google on the grounds that the regulation is unworkable because it will give power to non-governmental agencies to determine what content is allowed to appear online and which publisher is allowed to earn revenue from advertising, without seriously addressing the initial complaints from the news outlets.[24] Meta shared the same sentiment, threatening to block news content from Indonesia on all their platforms, such as Facebook and Instagram.[25] The draft was finally passed on 20 February 2024 as a presidential decree titled “Responsibility of Digital Platform Companies to Support Quality Journalism”. It necessitates the establishment of an independent committee to ensure the fulfilment of digital platform companies’ obligations to “give (their) best effort” in facilitating and commercialising news by press companies, providing fair treatment to press companies, and designing news distribution algorithms that support quality journalism. However, as much as it forces the cooperation and profit sharing between digital platforms and press companies, the decree does not spell out how and in what proportion these cooperation and profit-sharing arrangements will occur.[26] Moreover, a mere one day after the decree was signed, Meta said that it had no obligation to pay for news content posted by Indonesian publishers voluntarily.[27] While more details may emerge in the next six months during the formation of derivative regulations, it is quite apparent that everyone involved in the drafting of the decree are opting to be very cautious, so as not to offend these companies.

CONCLUSION

What needs to be addressed, then, is the urgency of finding new economic models that will allow mainstream media to thrive without compromising their journalistic quality. As it stands currently, large media companies might no longer serve the best interests of both the public and the media industry. Moreover, the Indonesian media’s dependency on advertising needs to be revisited, while other schemes such as public funding warrants serious consideration. Although public funding for journalism organised by the state might be a long shot—as Indonesia’s power structure might skew the outcome of it (Tapsell, 2020), limited public funding such as subscriptions or memberships needs to be promoted and woven into the media industry in order to ensure the media’s commitment to the public interest and, at the same time, create an avenue for media diversification by allowing small, independent media companies—with no chance of competing in the capitalistic media landscape—to flourish.

BIBLIOGRAPHY

Couldry, N. and Curran, J. (eds) (2003) Contesting media power: alternative media in a networked world. Lanham, Md: Rowman & Littlefield (Critical media studies).

Dwyer, T. (2010) Media convergence. Maidenhead: McGraw Hill/Open University Press.

Fanta, A. and Dachwitz, I. (2020) ‘Google, the media patron: How the digital giant ensnares journalism’. Otto Brenner Foundation. Available at: https://www.otto-brenner-stiftung.de/fileadmin/user_data/stiftung/02_Wissenschaftsportal/03_Publikationen/AH103_Google_EN.pdf.

Nugroho, Y., Putri, D.A. and Laksmi, S. (2012) Mapping the landscape of the media industry in contemporary Indonesia. Jakarta: CIPG and Hivos. Available at: https://cipg.or.id/wp-content/uploads/2015/06/MEDIA-2-Media-Industry-2012.pdf.

Singer, J.B. (2004) ‘Strange bedfellows? The diffusion of convergence in four news organizations’, Journalism Studies, 5(1), pp. 3–18. Available at: https://doi.org/10.1080/1461670032000174701.

Sinpeng, A. and Tapsell, R. (2020) ‘Sinpeng, Aim, and Ross Tapsell. “From Grassroots Activism to Disinformation: Social Media Trends in Southeast Asia.”’, in A. Sinpeng and R. Tapsell (eds) From Grassroots Activism to Disinformation: Social Media in Southeast Asia. Singapore: ISEAS Yusof Ishak Institute, pp. 1–18.

Souisa, H.Y. (2017) ‘Regulating Convergence: Challenges for Contemporary Media in Indonesia’, Asian Journal of Media and Communication, 1(1), pp. 35–50. Available at: https://doi.org/10.20885/asjmc.vol1.iss1.art3.

Syarief, S. (2022) ‘The Media Landscape in Indonesia: The More Things Change, the More They Stay the Same’. ISEAS, Perspective No. 2022/77. Available at: /articles-commentaries/iseas-perspective/2022-77-the-media-landscape-in-indonesia-the-more-things-change-the-more-they-stay-the-same-by-sofie-syarief/.

Tapsell, R. (2017) Media power in Indonesia: oligarchs, citizens and the digital revolution. London: Rowman & Littlefield International, Ltd (Media, culture and communication in Asia-Pacific societies).

Tapsell, R. (2020) ‘The media and democratic decline’, in T. Power and E. Warburton (eds) Democracy in Indonesia: from stagnation to regression? Singapore: ISEAS Yusof Ishak Institute (Indonesia update series), pp. 210–227.

Whittaker, J.P. (2020) Tech Giants, Artificial Intelligence, and the Future of Journalism. S.l.: Routledge.

William, A. and Sari, Y. (2020) ‘CLICK-ID: A novel dataset for Indonesian clickbait headlines’, Data in Brief, 32, p. 106231. Available at: https://doi.org/10.1016/j.dib.2020.106231.

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).

 

2024/28 “Thailand’s Ageing Society and Young Thais’ Changing Views and Expectations” by Panarat Anamwathana

 

Patients taking part in a group exercise while waiting to see doctors at Siriraj Hospital’s clinic for the elderly. Bangkok Post Photo/SEKSAN ROJJANAMETAKUL (Photo by Seksan Rojjanametakul/POST TODAY/Bangkok Post via AFP).

EXECUTIVE SUMMARY

  • Thailand is facing a historically low birthrate which could negatively impact the country’s economy in the near future.
  • According to recent surveys, the main causes of low fertility are people’s aversion to the high costs of care and pessimistic outlook on Thailand’s economic and political future.
  • Traditional cultural values also encourage adults and children to take care of their parents, making the working population even less likely to start families to add to their current care responsibilities. At the same time, young people are expecting that the responsibility of care will be shifting from private citizens to state-funded social welfare.
  • The government’s proposed solution is to increase access to fertility services. These measures are unlikely to fully reverse the trend of falling birthrates, as they do not address the root causes of the problem, namely the burden of care, and economic and political uncertainty.

* Panarat Anamwathana is Visiting Fellow at the Regional Social and Cultural Studies Programme at ISEAS – Yusof Ishak Institute.

ISEAS Perspective 2024/28, 15 April 2024

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INTRODUCTION

One of the most imminent problems facing Thailand today is its rapidly ageing population. Depending on measurements, Thailand is either the oldest or second oldest country in Southeast Asia, with Singapore being the other contender.[1] Thailand’s birthrate has been steadily dropping for decades, hitting a record low at 1.16 children per woman in 2023.[2] According to the World Bank, Thailand is currently experiencing its highest age dependency ratio since 2000 at 44%.[3] That same year, the Thai labour force shrank for the first time, showing a higher number of retirees (aged 60-64) than new entrants (aged 20-24).[4] Indeed, demographer Prof. Dr. Kuea Wongboonsin estimates that if the current trend persists, Thailand’s population will be halved within the next 60 years. In 2083, the projected number of children will have fallen from 10 million to 1 million, the working population will decrease from 46 million to 14 million, and the number of elderly rise from 8 million to 18 million.[5]

This would have profound negative effects on Thailand’s economic outlook, from labour shortages, rising healthcare and pension costs, and falling productivity and aggregate demand. Thai scholars and economists have identified demographics as one of the factors affecting the country’s slow growth.[6] Similarly, the World Bank has forecasted that Thailand’s economy will only grow 3% over the next two decades, the lowest in ASEAN, due to low levels of private investment and the ageing population.[7]

The new government under Prime Minister Sretta Thavisin has described this demographic change as a “crisis,” and is proposing various health-related policies to increase fertility rates. This paper argues that these measures are insufficient to alleviate the crisis, and do not adequately address the main causes of the problem. According to surveys from 2023, major concerns behind people opting to be childless are the pessimistic outlook for Thailand’s economic and political future, coupled with the high costs of care driven by cultural expectations of filial obligations. At the same time, younger generations of Thais seem to worry less than their predecessors about who would take care of them in old age, reflecting a shifting perception of familial obligations and expectations of state support. A more effective means to increase fertility rates would be for the Thai state to meet young people’s higher expectations of government assistance, expand social welfare, as well as work to improve their perception of Thailand’s economic and political prospects.

WHY IS FERTILITY DECLINING?

People of child-rearing age in Thailand currently are the older Gen-Z (aged 18-27) and Gen-Y or millennials (aged 28-43).

Their decision to refrain from having children is primarily driven by political and economic concerns and is closely related to their pessimistic outlook on Thailand’s future.

These sentiments are clearly presented in opinion polls from late 2023. In a September survey conducted by the National Institute of Development Administration (NIDA), only 44% of childless adults in Thailand indicated that they want children someday. Among the 334 respondents who do not want children, the primary reasons cited by 38.32% were the reluctance to incur child-rearing expenses, and concerns about the social and political environment’s negative impact on their children. The second most common reason (37.72%) is that they do not want the burden of childcare, while 33.23% indicate a preference for maintaining their current lifestyle and personal freedom. Other respondents cite concerns about their own parenting abilities (17.66%), prioritisation of careers (13.77%), and health issues (5.39%) as contributing factors.[8] Other scholarly studies offer similar findings: the additional costs of having a child are the main reasons young people do not want children, coupled with poor economic outlook, demanding jobs, unemployment, and the spread of COVID-19.[9]

Childcare expenses stand out as one of the most important deterrents, which is unsurprising given the extremely high cost of raising a child in Thailand. In 2022, a Bank of Thailand study showed that the cost of raising a child from birth to finishing an undergraduate degree in Thailand was roughly 1.6 million baht per person, roughly 6.3 times higher than GDP per capita.[10] Furthermore, the “child penalty” on wages is significant, especially for women. While the gender wage gap in Thailand has been decreasing over the past few decades, workers with children experience salary setbacks. A 2019 study from the University of the Thai Chamber of Commerce found that, on average, men and women with children respectively earn 17% and 22% less than their childless counterparts. The main reason for this is the time constraints associated with raising young children.[11] It is thus understandable that many young people choose not to have children, as doing so would not only increase their expenses but also negatively affect their earnings.

The other main deterrent to having a child is people’s pessimism towards Thailand’s future. This sentiment is reflected in a separate poll from December 2023 from NIDA, which surveyed Thai people on their expectations of quality of life and political landscape. Regarding political stability, 45.65% of respondents anticipate that the situation would “still be chaotic,” 28.40% predict “things to be more chaotic,” and only 14.34% responded that it would be “less chaotic.” Thai people’s outlooks on the country’s economic future are mixed, with 35.65% anticipating improvement in 2024 and 31.22% responding that the economy will “remain bad.” Similarly, while 31.98% of respondents believe that their quality of life will improve in 2024, 31.76% feel that it will “remain bad.”[12] If young people perceive bleak economic and political prospects for themselves and the nation, they will likely refrain from having children. While these data offer meaningful insights into why Thai fertility is declining, they do not paint a complete picture. There is an additional cultural factor to this demographic change.

“WHO WILL TAKE CARE OF YOU IN YOUR OLD AGE?”: A CULTURAL SHIFT

When young people say that they will remain childless, they are often asked, “Who will take care of you in your old age if you do not have children?” However, Thai youths do not seem to be concerned about this question, which signifies a shift in young people’s perception of their duties and relationship to their families, as well as their changing expectations of the state.

This question is asked with the assumption that children would take care of their parents when they grow old. It is rooted in the Asian concept of filial piety. The traditional Thai value of katanyu katavedi has no direct translation in English but it conveys a deeper meaning of gratitude towards parents for their sacrifice and hard work, and implies an obligation to reciprocate. It is thus a reasonable expectation of the older generation that their children be katanyu katavedi and care for them financially, physically, and emotionally in their old age.

It has been remarked that Thailand “got old before it got rich”; the country’s GDP per capita is far lower than that of other ageing societies in Asia like Japan and South Korea.[13] Without readily available social security that requires a high GDP and the expectation of katanyu katavedi, parts of Thailand’s rapidly ageing society might not have thought about how to take care of themselves in their old age. The elderly’s plan after retirement was simply to rely on their children or the young people in their families. It is estimated that in Thailand, one working person is responsible for the care of 6 elderly people.[14] This has put further financial strain on the working population and offers further insights into the findings of NIDA’s surveys. Adding expenses for children on top of these financial obligations has been almost unthinkable, making many people less likely to have children.

Furthermore, many young Thai people have started to move away from this traditional expectation. Some young people have begun questioning katanyu katavedi. For instance, they argue that as it was their parents’ decision to have children, they should not be obligated to repay them, causing much alarm and confusion among the older population, who in turn label such questioning as “ungrateful.”[15] Furthermore, due to economic demands and competitive labour markets, many parents have had to leave their children in the care of grandparents in the countryside or babysitters in urban areas, further weakening katanyu katavedi. However, this does not mean that young people intend to abandon caring for their parents. Rather, much of the working population do not have the same anticipation to be cared for in their old age, lifting the obligation of katanyu katavedi from the children they may or may not have. This can be interpreted as the import of the Western conceptualisation of family and parental relationships, in which parents tend to encourage children to be independent, sometimes as soon as they are of legal age. Young Thais have begun to plan for their childless retirement, with options for retirement and pension plans, care homes, and elderly communities becoming more available.[16] This independent retirement plan aligns with young people’s mixed outlook for Thailand’s economic and political future. They do not need to incur the financial costs of children or worry about the negative impact of society on their children, while making arrangements to take care of themselves in their old age.

Yet, the issue of katanyu katavedi bears more social weight than just a generational shift away about familial relationships, but also informs us of what young people expect of their societies and governments. Some have argued that katanyu katavedi was a means for the state or society to push the responsibility of social care to private citizens. In an ideal world, katanyu katavedi would not be obligated as there would be an adequate system of social care and safety net for the old, sick, and vulnerable. Indeed, while no government policy can be a substitute for loving familial relationships, it can alleviate some of the burden on the working population and perhaps encourage them to have children if they environment was emotionally less obligatory and financially less stressful.[17]

STRATEGIES FOR INCREASING BIRTHRATES

The best approach to Thailand’s ageing demographic is for the Srettha government to alleviate care expenses, and enhance public confidence in the nation’s economic and political future. The Thai state is however promoting measures that do not engage with the root causes of the problem and which are likely to be insufficient.

The Ministry of Public Health (MOPH) has announced that increasing Thailand’s fertility rate as one of its top 12 priorities and one of the “national agendas.” Dr. Cholnan Srikaew of Pheu Thai Party, the Minister of Public Health, has stated that the government aims to increase the birthrate to 2.1.[18]

To assist in this national agenda, the government’s 13th National Economic and Social Development Plan[19] (2023-2027) includes three slightly vague measures to assist in this national agenda: First, to create an “enabling environment” to have children by offering financial assistance to raise and care for children. Second, to change the attitude and values of people to recognise that “all births are important,” as well as to support diverse forms of family. Third, to give comprehensive support to those who decide to have children, such as fertility services and offering assistance to promote the growth and development of children.[20]

The Thai state appears to be making progress in the latter two measures. The MOPH launched a “Give Birth, Great World” campaign and announced that it is setting up fertility clinics at public hospitals to promote having children, and offer consultancy services and infertility treatment.[21] There are currently 800 fertility clinics in Thailand, but most are concentrated in urban areas. The MOPH aims to expand this number and establish at least one state-funded fertility clinic in every province.[22] It has announced that it will provide cheaper and easier access to reproductive technology for single people who want to be parents, or couples who have trouble conceiving, such as intrauterine insemination (IUI) and in-vitro fertilisation (IVF). The government is also working on legislation to make these services available to members of the LGBTQIA+ community.[23] Thailand is on track to pass a marriage equality bill within the year, expanding the definition of “family” and making it easier for people of diverse sexualities to have children.[24]

While these efforts are commendable, especially to make fertility services more accessible to a wider range of people, they are unlikely to reverse the trend of falling fertility rates. It is true that these services might be beneficial to certain subsets of the population, such as older individuals or those who are struggling to conceive, but the main concerns for people who decide against having children are not health related, and thus these measures do not address the causes of the fertility crisis. The government should instead focus on the first strategy of its development plan to create an “enabling environment” by alleviating some of the burden of care and improving the country’s economic and political stability.

This argument has been echoed by academics. For instance, Assoc. Prof. Napaphorn Atiwanichayapong argue that “social factors in all aspects” that have accumulated for many years are now the causes for declining fertility, including political instability and a highly competitive capitalist environment that has produced a poor economic outlook. To make young people more optimistic about society and their futures, the government will need to make “comprehensive” changes to Thailand and many of its systems.[25]

Expanding social welfare programmes and state-mandated benefits for both child and elderly care would directly address many of the deterrents to having children. In March 2024, the Thai parliament accepted a proposal to expand maternity leave to 180 days and paternity leave to 90 days. In the same session, however, it rejected a labour protection bill that would limit working hours to 40 per week, increase minimum wage to match inflation, allow for 15 days of leave per year for familial care, and mandate that workplaces accommodate breastfeeding mothers.[26]  Increasing the minimum wage could have been the first step towards alleviating the financial strain on the working population, as well as improve their outlook for their own well-being. Similarly, the 15-day leave especially could have helped the Thai labour force care for their aging parents and family members. After the vote, many Thai netizens expressed their frustration with the Thai state for campaigning for people to have more children but remain unwilling to expand social welfare or assist working mothers. Some even say sarcastically that “extinction” seemed like a good option if the state failed to provide necessary benefits, while others imply that not having children is an appropriate punishment for a state that cannot protect or help its people.[27] Thai parliament’s actions are seemingly out of step with young people’s changing perception that the state should expand social welfare to support vulnerable members of society, rather than relying on personal obligations such as katanyu katavedi.

Another possible avenue would be to enhance public’s confidence in Thailand’s economic and political future. As it is, the Sretta government has inherited a stagnant economy due to the COVID-19 crisis, low exports, diminished private investment, and tourism spending below initial projections.[28] The government is still struggling to overcome legal and political hurdles  to deliver its flagship stimulus policy of giving certain Thai citizens 10,000 baht (roughly 280USD) in digital wallets.[29] At the same time, political tension in Thailand escalated after the coalition government was formed under Sretta.[30] More charges are being brought against activists and academics.[31] Move Forward Party, the main opposition party that won the most votes in the 2023 general election, faces dissolution by the constitutional court.[32] Expanding medical access is largely insufficient to increase birth rates in the face of such low levels of confidence in the economy and  political instability.

CONCLUSION

Without a doubt, Thailand will face an economic crisis if the trend of falling birthrates is left unchecked. However, the Sretta government does not seem to fully grasp the root causes of this problem. Their proposed policies of making fertility care more accessible, while commendable and could make a difference to the lives of poor or LGBTQIA+ people, are largely going to be ineffective in increasing fertility to meet its current goals. The majority of people are not deciding to be childless because they have no access to fertility treatment, but because they cannot afford the additional expenses of childcare and because they feel pessimistic about their future.

Understanding the cultural context and changes in expectations towards familial relationships and the state’s obligations towards its citizens is a good first step. Poll data and academic studies all concur that expanding social welfare to assist in the costs of caring for both infants and the elderly would alleviate some of the burden borne by Thailand’s working population. The state should also work to convince young people that it can improve the Thai economy and political stability, and create a good environment for future children. Without these measures, Thailand can expect the falling fertility rate to only worsen.

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).

 

2024/27 “Something Old, Something New: The Philippines’ Transparency Initiative in the South China Sea” by Edcel John A. Ibarra & Aries A. Arugay

 

Philippine President Ferdinand Marcos Jr. delivering a speech during the navy’s capability demonstration aboard the Philippine navy ship BRP Davao del Sur, a Tarlac-class landing platform dock, off Zambales, facing the South China Sea on 19 May 2023. (Photo by ALI VICOY/POOL/AFP).

EXECUTIVE SUMMARY

  • Since February 2023, the Marcos Jr. administration has embarked on a transparency initiative for exposing China’s grey zone tactics within Philippine maritime zones in the South China Sea.
  • Officially dubbed as a policy of “measured transparency”, the Philippine government has received a modicum of support from like-minded states as well as severe reactions from China.
  • Exposing China’s unlawful activities in the South China Sea goes as far as the Aquino III administration after the Scarborough Shoal standoff in April 2012.
  • At present, public opinion agrees with this approach, further contributing to the political legitimacy of the Marcos Jr. administration. At the international level, Marcos Jr. has attracted the attention, support, and solidarity of major regional powers.
  • This measured transparency approach carries with it risks and challenges but it is not sufficient to protect and promote Philippines interests in the SCS. Apart from sustaining this approach, the Marcos Jr. administration must develop and articulate a clear maritime strategy adhered to by the security sector and the civilian bureaucracy.

* Edcel John A. Ibarra is Assistant Professor, Department of Political Science, University of the Philippines-Diliman. Aries A. Arugay is Visiting Senior Fellow and Coordinator of the Philippine Studies Programme, ISEAS – Yusof Ishak Institute and Professor of Political Science, University of the Philippines-Diliman.

ISEAS Perspective 2024/27, 12 April 2024

INTRODUCTION

After a China Coast Guard vessel aimed its laser weapon at a Philippine Coast Guard (PCG) ship on a resupply mission to Second Thomas (Ayungin) Shoal in February 2023,[1] the Philippines embarked on a markedly different approach to counter Chinese assertiveness in the South China Sea (SCS). The government under President Ferdinand Marcos Jr. began exposing China’s coercive grey-zone tactics: attempts short of war to deny the Philippines access to its own waters, such as by bullying or blocking ships in transit or by “swarming”—staking out reefs with large numbers of military and paramilitary vessels.

The transparency initiative is not limited to Second Thomas Shoal. Since it began, the Philippines seemed to have become more proactive in defending its maritime rights in the SCS as affirmed by the arbitral tribunal’s ruling in 2016. This is a refreshing contrast to the country’s seeming inactivity under former president Rodrigo Duterte (2016-2022), whose foreign and security policies appeared chaotic, ad hoc, and transactional rather than structured, deliberate, and strategic.[2] Yet although the Marcos government’s new approach is welcome, evidence so far suggests it to be a policy that lacks the qualities of a properly constituted strategy.

This article discusses the main tenets of the new approach of the Marcos administration in the SCS. We argue that some of the principles and motivations behind the transparency initiative are continuations of the approach under former president Benigno Aquino III (2010-2016). So far, this approach has yielded some strategic benefits at home and abroad. These include garnering international solidarity and support from major regional powers as well as cultivating strong domestic public approval for the government’s efforts to defend the country’s national interest. However, this article argues that merely exposing China’s grey-zone tactics is insufficient, given the risks associated with such an approach. There have been many pendulum swings in the country’s foreign policy in the recent past and sustaining this approach is the main challenge, particularly amidst potential domestic distractions as well as external developments beyond the control of the Philippines.

WHAT’S IN A NAME?

The Philippines’ transparency initiative exposes China’s coercive and unlawful actions against an SCS littoral state, effectively debunking Beijing’s narrative portraying itself as a benevolent and responsible great power, and the SCS as a peaceful and calm waterway where territorial and maritime disputes can be managed among directly concerned parties. Philippine officials have assigned various names to the new approach. Assistant Director-General Jonathan Malaya, the communications chief of the National Security Council, referred to it as “measured transparency”,[3] whereas a spokesperson of the PCG described it as “assertive transparency”.[4] Analysts also called it “radical transparency” and “strategic transparency”.[5] Everyone agrees on the need for transparency, but the degree to which the government wants to be transparent is an open question. “Measured” and “strategic” suggest selectiveness on information to be disclosed, while “assertive” and “radical” hint at a determination to expose just about everything.[6] Unfortunately, bickering over the name and confusion over meanings may indicate bureaucratic in-fighting and the tentative nature of the policy, rather than demonstrate a united resolve and adherence to a whole-of-government approach.

In a webinar hosted by the ISEAS – Yusof Ishak Institute in February 2024, Malaya identified National Security Adviser Eduardo Año as the architect of “measured transparency”. Malaya also claimed that “measured transparency” was inspired by the military’s information operations during the siege of Marawi in Mindanao in 2017, during which Año was chief of staff of the Armed Forces of Philippines (AFP). In the battle to reclaim the city from Islamic militants, the AFP successfully deployed counter-messaging, promoted civil-military cooperation (such as by bringing the media along in humanitarian operations), and projected an image of transparency in their community engagements (such as by regularly holding press conferences).[7] Malaya argued that this experience of “measured transparency” in Marawi brought valuable lessons for the Philippines in the SCS context.

In fact, the strategy of “naming and shaming” was a hallmark of former president Benigno Aquino III’s foreign policy, culminating in the historic filing of an arbitration case against China in 2013—probably the Philippines’ most dramatic effort to expose China’s behaviour in the SCS before an international arbitral tribunal and the global community. History shows that the challenge the Philippines is now facing at Second Thomas Shoal is not new, and Manila’s resort to transparency is also not new. Among those that the Philippines exposed and formally complained about during the arbitration was China’s attempt to block a resupply mission to Second Thomas almost a decade ago, in March 2014. The Philippines withdrew its ship at the time and held a press conference afterward to publicise the incident. The Philippines attempted another resupply a few weeks later, this time bringing journalists on board to witness China’s harassment.[8] The second attempt succeeded, and no public record exists of another incident at Second Thomas under Aquino. Still, in the months and years that followed, China was able to dredge and transform nearby Mischief Reef into a de facto military base, allowing Chinese ships to conduct sustained patrols around Second Thomas and harass incoming Philippine boats more frequently and for longer periods.[9]

PAY-OFFS & TRADE-OFFS OF THE SCS TRANSPARENCY INITIATIVE

Evaluating the effectiveness of the transparency initiative may not offer a straightforward answer because it depends on the objectives set for maritime transparency. If the objective is to facilitate the Philippines’ resupply missions to its SCS outposts, then the approach appears successful. The PCG reported that China had deployed smaller and fewer ships in Philippine waters,[10] and the National Task Force for the West Philippine Sea said that it had accomplished nearly all of its humanitarian missions to Philippine-occupied reefs.[11] With regard to Second Thomas Shoal, however, the approach appears less successful. Ship tracking data collected by the Center for Strategic and International Studies from 2021 to 2023 shows that Chinese ships have increased their presence around the shoal, and they have increasingly engaged in physical encounters with Philippine vessels. The US-based think tank also noted that since the Philippines pursued the transparency initiative in February 2023, major incidents substantially increased over Second Thomas.[12] Worryingly, incidents this March included not only damages to Philippine vessels but also injuries to crew.[13]

If the objective is to rally international sympathy and domestic support amid Chinese maritime coercion, then the approach also appears successful. One advantage of the new approach is the strong diplomatic support extended by major powers such as the US, Japan, and Australia. Even countries that used to be muted in Chinese intrusions in the Philippines’ part of the SCS have voiced their fear and calls for sobriety.[14] The list includes Vietnam, South Korea, India, and several European Union states, which were previously ambivalent about supporting the Philippines after the arbitral tribunal’s ruling but are now explicitly siding with Manila.[15] Still, there is the question of audience: whose support must be courted? The Philippines may be preaching to the choir. Although several major powers and Western countries have shown support for the Philippines, other ASEAN states, including fellow SCS claimants, except Vietnam, have been more careful. ASEAN issued a statement of concern with the SCS situation in December 2023,[16] but the veneer of an ASEAN consensus was soon dismantled when Malaysian Prime Minister Anwar Ibrahim echoed Beijing’s narrative of China’s peaceful rise earlier this year, seemingly unmoved by the evidence produced by the Philippines’ transparency initiative.[17]

The overall increase in international support for the Philippines is also reflected in domestic public opinion. Surveys have shown that Filipinos strongly approve of the Marcos administration’s approach in the SCS disputes, which includes the transparency initiative.[18] As domestic public opinion solidifies, even the country’s political elites, notably senators, have had no choice but to rally behind the government’s policy.[19] Some of these now-vocal senators included former allies of Duterte, who had previously either defended the ex-president’s soft stance on China or stayed silent amid news of Chinese maritime coercion.[20]

But if the objective is to dissuade China from pushing ahead with its coercive grey-zone tactics, then the approach has not succeeded. China persists in conducting blockades and swarming in the SCS. Although China has so far refrained from inflicting economic punishments,[21] the Philippine Foreign Affairs Department is not discounting the possibility in the future.[22] Additionally, in recent weeks, Chinese hackers have repeatedly attempted to breach Philippine government websites and email servers, including the PCG’s.[23] Disinformation has also increased, targeting academics, journalists, and the general public through social media.[24] Pro-Beijing narratives are also being echoed in the public discourse by Filipino influencers and groups seen as proxies for China.[25]

If the objective is to ease maritime tensions between the Philippines and China, then the approach has clearly had the opposite effect. Rhetoric from both sides has heated up, and China has also made veiled threats of force.[26] These are raising worries about escalating prospects of armed conflict in the region.

China, of course, bears much of the responsibility for the situation. Not only is China the prime mover of coercive grey-zone tactics, it is also an outlaw. The arbitral tribunal already ruled in 2016 that China has no right to prevent Filipinos from accessing waters 200 nautical miles west of the Philippine archipelago in the SCS. The panel also ruled that China has no right to claim, much less commandeer, mid-ocean reefs that submerge at high tide, like Second Thomas Shoal. At best, China, like the rest of the world, enjoys freedom of navigation in the Philippines’ exclusive economic zone—but not freedom to swarm.

China also categorises any action in the SCS that falls short of acquiescing to its demands as provocation. Other than inaction or appeasement, the Philippines finds itself with little meaningful leeway to defend its maritime rights without “provoking” China. In any case, none of the Philippines’ actions so far have matched China’s seizure of Scarborough Shoal, construction of militarised artificial islands, use of coercive grey-zone tactics, and undermining of the rule of international law. The Philippines has too few and too small ships to effectively challenge the much larger fleets and vessels of the People’s Liberation Army–Navy and even the China Coast Guard. The Philippines also has too tiny and too underdeveloped installations in the SCS to support advanced military operations. The installation on Second Thomas, the decommissioned World War II warship BRP Sierra Madre, is the poorest in condition among the Philippines’ SCS outposts. The ship is so besieged by leaks and rust and so exposed to the elements that no soldier would survive there for long without regular resupplies.[27] China objects that Philippine resupply missions include construction materials, but these are necessary to provide decent living conditions for Philippine soldiers.[28] The materials being sent are also too rudimentary compared to the coastal defence and ground-based missile systems that China has built on its illegally occupied reefs in the SCS. China’s anger towards the Philippines is simply too disproportional to its own maritime activities.

DOMESTIC FOUNDATION OF MARCOS JR.’S SCS POLICY

Although the transparency initiative is not new, the current policy differs in two important respects from previous ones. First, the Marcos administration seems more assertive than the Aquino government. The increased confidence is a function of the legal clarity that the arbitration win now affords the Philippines. The Aquino government, while tough on rhetoric, was much softer on the ground because they were trying to avoid incidents that may jeopardise the Philippines’ case. This confidence is further bolstered by the US’ explicit endorsement of the arbitral tribunal ruling and Washington’s unambiguous security reassurances that their mutual defense treaty applies to “armed attacks on either nation’s armed forces or public vessels anywhere in the South China Sea”.[29]

Second, Marcos himself so far appears more tamed in his rhetoric than his officials are. He refrained from mentioning the disputes, much less calling out China, in all his previous state of the nation addresses. Although happy to paint himself as a defender of the Philippines’ maritime entitlements, Marcos often balances his public statements with declarations of openness to continued dialogue with China. This messaging affords Manila room to remain cooperative with Beijing. Indeed, unlike under Aquino, no dialogue mechanisms are being cancelled, and the other aspects of Philippines-China relations remain largely business as usual. Marcos probably wants to keep it that way. Fortunately, it seems that China is balking at being the first to cut off bilateral ties with the Philippines despite reacting that way before towards the Aquino government.

The transparency initiative conveniently aligns with Marcos’s regime legitimacy considerations. Surveys since the Duterte administration have consistently shown that Filipinos support a more assertive approach to the SCS disputes. The transparency initiative satisfies this yearning and is a popular policy for Marcos to champion. Indeed, public opinion polls in 2023 show that Marcos’s approval rating for handling the SCS disputes increased to 58 percent.[30] Marcos also seems to base his legitimacy on economic performance and, counterintuitively, adherence to democratic rules—even if only at face value, for performativity’s sake. He is aware of the baggage associated with Chinese developmental assistance and has pulled the Philippines out of some China-funded infrastructure projects.[31] He is also aware of his association with authoritarian politics, not only through his father but also through his electoral alliance with Duterte and his daughter Sara. By explicitly aligning with the West, Marcos is simultaneously able to court higher quality sources of developmental funds and boost his democratic credentials, allowing him to claim membership in the free world.

Moreover, toning down reliance on China and painting himself as a democratic leader also allow Marcos to implicitly criticise Duterte and, in the process, distance himself from his autocratic predecessor. Rifts with the Dutertes are an unavoidable consequence of Marcos’s legitimation strategies.

CONCLUSION & PROSPECTS

Going forward, sustaining the transparency initiative depends on external factors such as how committed the US will be in supporting the Philippines and how long China’s patience will remain. It will also depend on the Philippine government’s ability to weather domestic political disturbances that rifts in the Marcos-Duterte alliance could unleash. Yet the first step is for the Marcos administration to clarify the objectives it wants to achieve with transparency. Of course, the new approach can be used as leverage to request for more concrete support from major powers, but towards what end should the Philippines garner support for? Isolating China diplomatically, rallying regional states and major powers, enhancing Philippine maritime domain awareness, modernising the AFP and the PCG, establishing new security partnerships, or all? The government will need to think strategically about this.

Some red lines must be drawn, however. We believe that transparency should not be a bargaining chip that the Philippines can dial down in exchange for concessions from China. Manila must remain steadfast in exposing Beijing’s coercive grey-zone tactics. Relying solely on quiet diplomacy could be dangerous. Left behind closed doors, Philippine leaders may promise deals that are unconstitutional, or China may make up accounts of Philippine promises. Indeed, China keeps referring to various supposed deals on Second Thomas Shoal, and previous Philippine leaders are avoiding public scrutiny of whether these promises were indeed made. Quiet diplomacy must be conducted alongside transparency operations to keep China in check that its reassurances in meetings matches its behaviour at sea. The Philippines must make it clear that the transparency initiative is reactive to breaches of international law, peace, and stability in the SCS. As long as China behaves in line with these norms, there would be nothing to expose.

Although the maritime transparency initiative is a necessary step forward, it alone does not transform the Philippines into a rational strategic actor in world affairs under Marcos Jr. Ultimately, the government must have strategic hindsight to recognise what worked in the past and what did not, and apply those lessons accordingly. It must also have strategic foresight to forge ahead towards a more comprehensive strategy on the SCS.

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).

 

2024/26 “The China-Philippines Bilateral Consultation Mechanism on the South China Sea: Has it Worked for China?” by Lye Liang Fook

 

The first meeting of the China-Philippines bilateral consultation mechanism on the South China Sea was held in Guiyang, the capital of southwest China’s Guizhou Province, on 19 May 2017. (Xinhua/Liu Xu) (Photo by Liu Xu/XINHUA/Xinhua via AFP).

EXECUTIVE SUMMARY

  • The China-Philippines Bilateral Consultation Mechanism (BCM) was established in May 2017 for discussing issues of mutual concern in the South China Sea and exploring possible areas of cooperation, especially in oil and gas development. It was intended as a confidence-building measure and to show how China can cooperate with Southeast Asian claimant states.
  • However, after eight rounds of meetings, the BCM has yet to embark on any oil and gas joint development. Despite some initial progress, cooperation in this area has stalled, due primarily to constitutional and legal constraints on both sides.
  • The 2023 ruling by the Philippine Supreme Court, which declared that the 2005-2008 Joint Marine Seismic Undertaking involving companies from China, the Philippines and Vietnam was unconstitutional, has made it more challenging for Beijing and Manila to achieve a breakthrough in joint oil and gas development.
  • China’s actions to prevent the Philippines from conducting oil and gas activities in the Philippines’ EEZ and Continental Shelf have led Manila to impose a ban on such activities in the West Philippine Sea, thereby complicating efforts to explore joint oil and gas development with China.
  • The working groups on fisheries, oil and gas, marine scientific research and environmental protection, and political security, formed under the BCM framework, function more like discussion groups, without producing any concrete results.
  • Rising tensions in the SCS between China and the Philippines, compounded by the Taiwan issue, have further hindered the BCM’s ability to fulfil its original objectives. Nevertheless, Beijing is likely to press ahead with the BCM, in line with its position that the SCS disputes must be left to the directly concerned parties.

* Lye Liang Fook is Senior Fellow in the Regional Strategic and Political Studies Programme at ISEAS – Yusof Ishak Institute.

ISEAS Perspective 2024/26, 9 April 2024

Download PDF Version

INTRODUCTION

Almost seven years have passed since the China-Philippines Bilateral Consultation Mechanism (BCM) was established in May 2017 to discuss mutual issues of concern and work towards practical cooperation in the South China Sea (SCS). But at their last 8th BCM in January 2024, the two countries failed to reach agreement on any concrete projects, particularly on oil and gas cooperation, despite some initial progress made in the earlier years.

In fact, the 8th BCM reflected growing differences between the two countries, with China calling on the Philippines to properly manage maritime emergencies related to Ren’ai Jiao (or Second Thomas Shoal), where Beijing had interdicted Manila’s resupply missions to the Sierra Madre, a marooned ship on the shoal. More significantly, China demanded that the Philippines abide by the one-China principle on the Taiwan issue.

How did the BCM, meant to foster trust and confidence between the two countries, end up amplifying their differences? To shed light on this issue, this paper examines China’s rationale for establishing the BCM, the state of progress of the BCM, the challenges faced by the BCM and China’s expectations of the BCM going forward.

BCM’S ORIGINS AND PURPOSES

Beijing is against the internationalisation of and involvement of third parties on the SCS issue. However, its expansive claims in the SCS came under international spotlight when the 2016 arbitral tribunal ruled that its claims based on its self-proclaimed historic rights had no legal basis.[1] Before the ruling, Beijing had been criticised for building artificial islands in the SCS. After the ruling, Beijing insisted that it would complete the building of these islands and outfit them with military structures and facilities.[2] It even took punitive action against the Philippines for initiating the ruling,[3] and other countries for siding with the United States on this issue. [4]

To improve its image and regain the initiative on the SCS issue, Beijing devised the idea of a BCM to discuss and cooperate on mutual issues of interest in the SCS with the Philippines. If the BCM made progress, it would bolster Beijing’s call for the SCS issue to be left to the directly concerned parties, i.e., the claimant states themselves. By extension, argued Beijing, extra-regional powers like the United States would have no grounds to interfere.

Beijing was provided the opportunity to showcase its preferred approach when Philippine President Rodrigo Duterte assumed office in June 2016 and ended his predecessor’s policy of confronting China on the SCS issue. During Duterte’s visit to Beijing in October 2016, the two countries agreed to establish a BCM that would meet regularly to address mutual issues of concern, and explore areas of cooperation in the SCS.[5]

The BCM convened its first meeting in Guiyang, China, in May 2017,[6] just after the ASEAN-China Senior Officials Meeting (SOM), to discuss the implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC).[7] By hosting the BCM back-to-back with the ASEAN-China SOM, China sought to reinforce the message that the directly concerned parties were taking proactive measures and were capable of handling the SCS issue themselves.

The BCM underpins Beijing’s “dual track” approach on the SCS issue. One track involves China and ASEAN working together on the DOC and a prospective code of conduct of parties in the SCS (COC) to address wider issues related to peace and stability in the SCS. The other track, encompassing the BCM, involves the directly concerned parties working bilaterally to address their differences and finding a way forward on the SCS issue. The BCM was further meant to be a confidence-building measure to build trust and strengthen China-Philippines relations through practical cooperation. If successful, it could be a reference for China to collaborate with other Southeast Asian claimant states in the SCS.[8]

BCM’S LIMITED OUTCOMES

So far, eight BCMs have been held (see Annex). At the 1st BCM in May 2017, China organised a ceremonial launch, with the Chinese and Philippine co-chairs jointly sounding a gong, followed by an exchange of gifts and a photo-taking session, to get the meeting off on a positive footing. It saw the launch as an indication of the “great importance” the two countries attached to consultations, and their commitment to properly manage the SCS issue with a “positive and constructive attitude”.[9]

Some progress was made in the initial years. The first BCM agreed on its terms of reference, the composition of its members and the frequency of its meetings. The 2nd BCM in February 2018 agreed to convene technical working groups in the specific areas of fisheries, oil and gas, marine scientific research and environmental protection, and political security.[10] These working groups were convened in subsequent BCMs although there is scant information to date on what was achieved. It appears that the working group discussions were largely confined to exchanging views and fostering understanding of each other’s positions. By the 7th and 8th BCMs in 2023 and 2024 respectively, there was no further mention of the convening of these working groups.

The only area where there was initially some progress was in the oil and gas sector. At the 3rd BCM in October 2018, China and the Philippines discussed the possibility of joint exploration and development in oil and gas. They subsequently signed a Memorandum of Understanding (MOU) on Cooperation on Oil and Gas Development during Chinese President Xi Jinping’s visit to the Philippines in November 2018.[11]

China regarded the MOU as a “new step forward” and expressed its wish to comprehensively advance practical cooperation with the Philippines in various maritime areas. It even looked forward to strengthening communication with the other SCS littoral states to cooperate in similar areas to make the SCS a sea of ​​peace, friendship and cooperation.[12] Beijing had expected the BCM to be a model for its cooperation with other Southeast Asian claimant states.

The MOU called for the setting up of an inter-governmental joint steering committee to negotiate and agree to the cooperation arrangements and the maritime areas to which they will apply.[13] The two countries committed themselves to agree on the cooperation arrangements 12 months from the MOU signing, i.e., by November 2019.[14] However, the inter-governmental joint steering committee only convened in October 2019, around the same time as the 5th BCM,[15] with no specific agreement reached.

The Covid-19 pandemic further disrupted progress with the 6th BCM held online 19 months later in May 2021. In June 2022, the Philippines initiated the termination of joint oil and gas negotiations with China.[16] At the 8th BCM in January 2024, there was no more talk about oil and gas cooperation. Instead, China called on the Philippines to properly manage emergencies related particularly to the Second Thomas Shoal. It further brought up the Taiwan issue which was beyond the scope of the BCM.

OBSTACLES IN OIL AND GAS COOPERATION

Intractable Constitutional and Legal Constraints

The foremost reason for the lack of progress on the China-Philippines oil and gas cooperation are the intractable constitutional and legal constraints, which both sides could not overcome. China’s preference was for both countries to temporarily set aside sovereignty-related issues while pursuing joint development in a disputed area.[17] However, setting aside sovereignty-related issues is unacceptable to the Philippines because Manila views this oil and gas cooperation as taking place within its own exclusive economic zone (EEZ), thus falling under the Philippines’ sovereign rights. For example, according to the 2016 arbitral tribunal ruling, the gas-rich Reed Bank is a fully submerged feature within 200 nautical miles from the archipelagic baselines of the Philippines, and is hence part of the Philippines’ EEZ.

Meanwhile, China sees the Reed Bank as a disputed feature and does not accept that the Philippines has exclusive sovereign rights to resources in this area. Doing so would contravene China’s own domestic laws.[18] Article 2, Chapter 1 of China’s “Regulation on Foreign Cooperation in the Exploitation of Offshore Petroleum Resources” states that “all petroleum resources in the internal waters, territorial sea and continental shelf of the People’s Republic of China and in all sea areas within the maritime jurisdiction of the People’s Republic of China belong to the People’s Republic of China”. The same article further states that in the sea areas mentioned above, “all buildings and structures set up and vessels operating to exploit petroleum, as well as the corresponding onshore oil (gas) terminals and bases, shall be under the jurisdiction of the People’s Republic of China.”[19]

Two earlier failed attempts underscore the difficulties of overcoming existing constitutional and legal constraints. The first is the Joint Marine Seismic Undertaking (JMSU)[20] between China, the Philippines and Vietnam from 2005-2008 in Block SC-72 on the Reed Bank, which lapsed as Manila considered it a violation of the Philippine Constitution. In 2012, a second attempt was made by China National Offshore Oil Company (CNOOC) and Philex Petroleum (now PXP Energy) to collaborate in SC-72. However, just before the two companies were about to sign an agreement, the Philippine government wanted to include additional wording to clarify the roles of both parties in terms of the owner and developer. This would require China to recognise the Philippines as having sovereign rights over SC-72, which was unacceptable to Beijing. Hence, the deal fell through.[21]

The 2016 arbitral tribunal award, which reaffirmed the Philippines’ sovereign rights in its EEZ and Continental Shelf, has become central to Manila’s diplomatic positions in the BCM discussions with China.[22] Even President Duterte, who advocated closer China ties, affirmed the award as part of international law and rejected attempts to undermine it in 2020.[23] Furthermore, the 2023 Philippine Supreme Court’s ruling that the JMSU was unconstitutional has made it imperative for the Philippines to adhere to the safeguards provided in Section 2, Article 12 of its Constitution in joint oil and gas development with China.[24] This article states that “The exploration, development, and utilisation of natural resources shall be under the full control and supervision of the State.”[25]

According to Antonio Carpio, former Supreme Court associate justice, the 2023 Supreme Court’s ruling upholds the four modes in the Philippine Constitution for joint oil and gas development, namely, direct undertaking, co-production, joint venture, and production-sharing agreements. Only companies that are 60% owned by Filipinos can participate under the last three modes; foreign majority-owned companies can only participate in a direct undertaking by the State by becoming a service contractor of the State. Under this arrangement, the Philippine government has full control and supervision over all activities.[26]

China’s Opposition to the Philippines’ Unilateral Oil and Gas Activities

China’s maritime vessels have prevented Philippine vessels and other foreign vessels from working with Manila to conduct research and seabed exploration activities in the Philippine EEZ and Continental Shelf disputed by China.[27] These actions appear to be aimed at pressuring the Philippines to conclude an oil and gas deal with Beijing via the BCM framework. Beijing is cognizant that the Philippines urgently needs alternative oil and gas resources to replace the existing Malampaya gas field that supplies a fifth of the country’s energy needs and that is expected to run dry by 2027.[28]

China is also apparently telling the Philippines that it cannot conduct oil and gas activities, either unilaterally or jointly with other countries, in these areas without Beijing’s approval. And seeking approval would mean that the Philippines recognises China’s claims in its EEZ and Continental Shelf. Even if the Philippines were to conclude an oil and gas deal with China, there is no indication that Beijing would grant permission for Manila to conduct oil and gas activities in these areas.

Rather than give in to Beijing’s pressure, the Philippines opted to impose a ban on oil and gas activities in the West Philippine Sea (WPS), which stalled any attempt at reviving oil and gas cooperation between the two countries.[29] One reason behind the ban announced in March 2022 was China’s harassment of the survey vessels hired by the Philippine service contractors.[30] The ban was aimed at preventing any untoward incidents at sea in the disputed areas involving Chinese and Philippine vessels.[31] Thereafter, in June 2022, the Philippines unilaterally called off oil and gas negotiations with China, effectively handing over the responsibility to conclude a deal to the incoming Ferdinand Marcos Jr. administration.

Critics regard the ban as the Philippines buckling under Chinese pressure. They noted that Malaysia and Indonesia have persisted with oil and gas activities in their respective EEZs despite China’s threats and harassment. In their view, the Philippines should proceed with oil and gas activities in the WPS without being subjected to the restart of joint exploration talks with China.[32]

This is easier said than done. China is likely to continue to interdict such activities, which could lead to an escalation in the event of a miscalculation or mishap. Furthermore, if the Philippines were to provide some form of protection for its companies to harness resources in the WPS, China would probably do likewise, which could complicate matters. In fact, President Duterte disclosed in 2017 that China had threatened “war” if the Philippines insisted on drilling for oil and gas in disputed areas in the WPS.[33]

Deteriorating China-Philippine Relations

The deterioration in China-Philippine relations in the past two years has made it difficult for the BCM to deliver results, especially on oil and gas cooperation despite initial efforts after Marcos Jr. assumed office in June 2022. When Marcos visited China in January 2023,[34] both sides affirmed the importance of the BCM as a confidence-building measure and agreed to resume discussions on oil and gas development at an early date.[35]

However, during the 7th BCM in March 2023, two months after Marcos’ visit, the meeting merely made a general commitment to promote practical cooperation in areas such as diplomacy, defence, coast guard, oil and gas development, fisheries, maritime affairs, maritime search and rescue, and marine scientific research and marine environmental protection.[36] No breakthrough was achieved in terms of oil and gas joint development.

Moreover, the tone at the 7th BCM became more guarded, with the Chinese read-out saying that both sides agreed to “exercise restraint, make good use of the hotline between the two foreign ministries, improve maritime communication and dialogue mechanisms, and enhance talks and exchanges between different departments and on multiple levels”. Both sides further agreed to “manage and control differences and properly handle emergencies at sea through friendly consultations”.[37] This came after a series of incidents at sea especially one involving a Chinese coast guard vessel pointing a military-grade laser at a Philippine coast guard vessel on a resupply mission to Second Thomas Shoal in February 2023.[38] Also in February 2023, much to China’s chagrin, Manila granted US access to four more military bases in the Philippines during US Defence Secretary Lloyd Austin’s visit to the Philippines.[39]

By the 8th BCM in January 2024, China-Philippines relations had hit a new low. China’s read-out of the BCM said both sides agreed to “properly handle maritime emergencies, in particular, the situation on the ground at Ren’ai Jiao” (Second Thomas Shoal). This was the first time Second Thomas Shoal was specifically mentioned, reflecting rising tensions between the two countries near the shoal.[40]

More significantly, the 8th BCM exceeded its mandate with China lodging “solemn representations with the Philippines on Taiwan-related issues”, demanding that the Philippine “earnestly abide by the one-China principle” and “immediately stop its wrong words and deeds on Taiwan-related issues”.[41] The strong language was directed at Marcos who had earlier congratulated Taiwan’s independence-leaning candidate Lai Ching-te on his presidential election victory in January 2024.[42] In contrast, the Philippine read-out did not mention the Taiwan issue at all.[43]

WITHER THE BCM?

The BCM has not met its original objective of being a confidence-building measure, i.e., to discuss issues of mutual concern in the SCS and pursue practical cooperation especially on oil and gas development. Six years after the 2018 MOU was signed, the two countries have not reached agreement on any specific project.

The BCM has also not fulfilled its “pathfinder” role of showing that only the directly concerned parties, in this case the Philippines and China, are able to resolve their differences in the SCS through bilateral negotiations and without external interference. By extension, China’s longer-term expectation for the BCM to serve as a basis for similar cooperation with other claimant states such as Brunei, Malaysia and Vietnam, remains elusive.

Nevertheless, Beijing is likely to press ahead with the BCM as it bears President Xi Jinping’s personal imprint; he had agreed with Philippine President Duterte to establish this mechanism in October 2016. Discarding the BCM would be tantamount to acknowledging that his diplomacy had failed.

Moreover, the BCM enables Beijing to portray itself as a reasonable party by keeping the door open for consultation and cooperation despite current tensions with Manila. This was evident when China’s foreign ministry spokesperson said that the 8th BCM enabled both countries to: (i) implement the important consensus reached by the leaders of the two countries on maritime-related issues; (ii) continue to properly manage maritime-related conflicts and differences through friendly consultations; (iii) continue to promote practical maritime cooperation, and; (iv) jointly maintain maritime peace and stability.[44]

There is also a quasi-official Chinese view lauding Beijing’s effectiveness in getting the Philippines back onto the BCM track by using various means at its disposal including diplomacy, maritime rights protection, law enforcement, and military preparations.[45] Inherent in this message is a veiled threat that while Beijing remains open to talks with the Philippines, it could resort to tougher action if the need arises.

For the time being, given the tensions in the SCS between the two countries, Beijing is likely to continue with the BCM and hold it up as a strand of its multi-pronged approach in engaging the Philippines on the SCS issue. Even though Beijing appears to be wielding more of the stick now based on actions it has taken against Philippine vessels in the SCS, the BCM is there to show that China stands ready to talk with the Philippines at some future point.

ANNEX

EventDateWhat transpired
1st BCM19 May 2017 (Guizhou)Co-chaired by China’s Vice Foreign Minister Liu Zhenmin and Philippine Ambassador to China Jose Santiago L. Sta. Romana.   Agreed that the BCM should be a platform for confidence-building measures and for promoting maritime cooperation and maritime security. It will comprise equivalent officials from the respective foreign ministries and relevant maritime affairs agencies, and will meet alternately in China and the Philippines once every six months.   Discussed the promotion of next-step practical maritime cooperation and possible establishment of relevant technical working groups.  
2nd BCM13 Feb 2018 (Manila)Co-chaired by China’s Vice Foreign Minister Kong Xuanyou and Philippine Foreign Affairs Undersecretary for Policy Enrique A. Manalo.   Exchanged views on ways to strengthen cooperation in areas such as marine environmental protection, fisheries, marine scientific research, and oil and gas.   Discussed mutually beneficial joint initiatives and agreed to convene technical working groups in the areas of fisheries, oil and gas, marine scientific research and environmental protection, and political security. The technical working groups identified a number of possible cooperative initiatives although details of these initiatives were not made public.  
3rd BCM18 Oct 2018 (Beijing)Co-chaired by China’s Vice Foreign Minister Kong Xuanyou and Philippine Foreign Affairs Undersecretary for Policy Enrique A. Manalo.   Exchanged views on ways to enhance maritime cooperation in areas such as on recent developments in the SCS carrying political and security implications, maritime search and rescue, maritime safety, marine scientific research and environmental protection, and fisheries in relevant working group meetings under the framework of the BCM.   Discussed possible cooperation in joint exploration and development of offshore oil and gas.  
4th BCM2-3 Apr 2019 (Manila)Co-chaired by China’s Vice Foreign Minister Kong Xuanyou and Philippine Foreign Affairs Assistant Secretary Meynardo LB. Montealegre of the Office of Asian and Pacific Affairs.   Exchanged views on strengthening maritime cooperation through the respective working groups. Areas covered included the development of the political and security situation in the SCS, maritime search and rescue, maritime security, marine scientific research and environmental protection and fisheries.   Discussed cooperation in offshore oil and gas development.  
5th BCM28 Oct 2019 (Beijing)Co-chaired by China’s Vice Foreign Minister Luo Zhaohui and Philippine Foreign Affairs Undersecretary for Policy Enrique A. Manalo.   The working groups on political security, fisheries cooperation, and marine scientific research and environmental protection were convened.   Considered to undertake mutually agreed practical maritime cooperation initiatives covering maritime search and rescue, maritime safety, and marine research or marine environment protection and fisheries cooperation in the SCS.   Discussed establishing possible mechanisms for exchanges of visits and communication.   (First meeting of the Philippines-China Inter-Governmental Joint Steering Committee on Cooperation on Oil and Gas Development was convened on the sidelines of the 5th BCM.)  
6th BCM21 May 2021 (via video link)Co-chaired by China’s Assistant Foreign Minister Wu Jianghao and Philippine Foreign Affairs Undersecretary Elizabeth Buensuceso.   The working groups on political security, fisheries cooperation, and marine scientific research and marine environmental protection were convened.  
7th BCM24 Mar 2023 (Manila)Co-chaired by China’s Vice Foreign Minister Sun Weidong and Philippine Foreign Affairs Undersecretary Maria Theresa P. Lazaro (the first face-to-face BCM meeting since the onset of Covid-19).   Agreed to promote practical cooperation in areas such as diplomacy, defence, coast guard, oil and gas development, fisheries, maritime affairs, maritime search and rescue, and marine scientific research and marine environmental protection.  
8th  BCM (Shanghai)17 Jan 2024Co-chaired by China’s Assistant Foreign Minister Nong Rong and Philippine Undersecretary of the Department of Foreign Affairs Maria Theresa P. Lazaro.   The Chinese side said that both sides agreed to improve maritime communication mechanism, properly manage maritime disputes and differences through friendly consultation, “properly handle maritime emergencies, in particular, the situation on the ground at Ren’ai Jiao” (i.e. Second Thomas Shoal), and constantly promote practical maritime cooperation.   The Chinese side added that it “lodged solemn representations with the Philippines on Taiwan-related issues, demanding that the Philippine side should earnestly abide by the one-China principle and immediately stop its wrong words and deeds on Taiwan-related issues. The Philippines reiterates its adherence to the one-China policy and will continue to implement the policy in earnest”.   The Philippine side did not mention the Taiwan issue in their read-out of the 8th BCM meeting. On the situation near Second Thomas Shoal, it said that “both sides presented their respective positions on the Ayungin Shoal and assured each other of their mutual commitment to avoid escalation of tensions.” It further said that both sides agreed to improve maritime communication mechanisms in the SCS, including communications between foreign ministries and coast guards of the two countries. It added that both sides agreed to initiate talks on academic exchanges on marine scientific research between Filipino and Chinese scientists.

Meetings of the China-Philippines Bilateral Consultation Mechanism (BCM)

ENDNOTES

For endnotes, please refer to the original pdf document.

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