Predictions for Southeast Asia: A Look Back and Ahead
January 6, 2016
Southeast Asia faced a number of big challenges in 2015 – ASEAN economic integration, resolving maritime security disputes, ratification of the Trans-Pacific Partnership, Myanmar’s historic elections, and the precarious state of Thailand’s democratic development.
Last January, I predicted how five of the biggest issues for the Southeast Asia region would play out in 2015. Here’s a look at where I got it right, wrong, and where these same issues stand at the start of 2016.
Did the ASEAN Economic Community come to fruition? In November in Kuala Lumpur, ASEAN leaders signed a declaration to establish the ASEAN Economic Community (AEC) at the grouping’s annual summit. The AEC was to take effect on Dec. 31, 2015, in the effort to boost the region’s trading clout and to attract more investment. The AEC’s vision is a single market with free flow of goods, services, and investments, as well as freer flow of capital and skills. But the AEC is not the European Union. Although 70 percent of ASEAN’s intra-regional trade has no tariffs, and the average tariff rate is only 5 percent, non-tariff barriers continue to replace tariff barriers in domestic industries.
Economic nationalism in Indonesia, the region’s largest economy, continues to remain strong. Moreover, ASEAN’s physical infrastructure remains lacking, and the “ASEAN way” of non-interference in the affairs of member countries may give member states a convenient pretext for non-compliance. Last year, I was incorrect in saying that ASEAN will declare that it has reached a “milestone” as opposed to creating an economic community. But whatever semantics are used, a true, single market for ASEAN remains out of reach given the disparity of economic and political development in member countries.
Did maritime security dominate as the issue of paramount importance to the region? Absolutely. The Permanent Court of Arbitration in The Hague ruled in October that the Philippines was within its rights under the U.N. Convention on the Law of the Sea (UNCLOS) in filing its case challenging the legality of China’s claims in the South China Sea. With the jurisdictional issue now resolved, the Court will move forward to evaluate the merits (or lack thereof) of the Philippines’ legal assertions in the South China Sea. China has said it will not recognize the Court’s decision. Under this scenario, how can arbitration be used in other cases to peacefully resolve disputes, be they in Asia or elsewhere, if one side elects not to participate? In all of Southeast Asia, only 20 percent of maritime boundaries are demarcated. ASEAN members are still competing for maritime territory and this competition only serves to impede intra-ASEAN cooperation. The lack of clear maritime boundaries seriously compromises ASEAN’s ability to establish good order at sea, which has resulted in a plethora of illegal activities such as piracy, armed robbery, human trafficking, and illegal, unreported, unregulated (IUU) fishing in the region.
Were the 2015 elections in Myanmar free, fair, and inclusive? With Daw Aung San Suu Kyi’s party, the National League for Democracy (NLD), winning 77 percent of the eligible seats in the national elections, the 2015 Myanmar elections were largely “free and fair.” However, you could not say they were “inclusive.” The Rohingya, a Muslim minority, are not recognized as citizens and not allowed to vote. Moreover, many ethnic voters were unable to cast ballots after voting was cancelled in Kachin and Shan States because of continuing conflict and instability. But clearly the election was an overwhelming victory for the NLD and a decisive repudiation of military rule. Although the election is a positive step forward in Myanmar’s political development, challenges remain in 2016. While the military was willing to hold the elections and acknowledge their results, Myanmar’s generals are still not prepared to surrender their clout. The constitution reserves 25 percent of the parliamentary seats for the military and ensures that the most powerful ministries – Defense, Home Affairs, and Border Security – remain under military control, regardless of which political party controls the government. Aung San Suu Kyi is constitutionally barred from being president because she was once married to a foreigner and has two foreign-born children. How Aung San Suu Kyi, the NLD, and the military work together in the near future will have an important bearing on Myanmar’s trajectory. Myanmar faces enormous problems – drug trafficking, corruption, ethnic insurgencies, poverty, and inadequate healthcare and education systems. If the political transition goes well, sanctions could be lifted, not just suspended. The U.S. and other countries will continue to keep a wary eye on how Myanmar handles its ethnic and religious divisions, and how the military handles its central political role.
Did Thailand’s democratic development continue to weaken? Sadly, yes. A few years ago no one would have predicted that Myanmar, despite its challenges, would be mainland Southeast Asia’s most democratic country. While Thailand’s military government is preventing large scale clashes between rival political parties, the country’s deep political divisions remain unresolved. Reconciliation does not seem to be within sight. In September, the National Reform Council rejected the latest draft of a new constitution which will delay a potential return to civilian rule to mid-2017 at the earliest. The military’s priority is to prevent proxies or allies of Thaksin Shinawatra, the former prime minister overthrown in the 2006 coup, from ever regaining power. Thaksin and his allies have won every election since 2001. What the military wants is a “guided democracy” in which the established elite control the country’s institutions.
The Thai economy has also lagged under military rule. Growth in 2015 was 3.2 percent, the weakest in all of Southeast Asia. Farmers, which form the political base of Thaksin Shinawatra, comprise 40 percent of Thailand’s population but only contribute 8 percent of the country’s total GDP, exacerbating the ever-increasing gap between the rich and poor. Although the military-led government has ended the financially disastrous policy of paying farmers above-market prices for rice, it continues to provide subsidies and cash transfers for small-scale farmers. Compounding this already difficult problem is a severe drought that has lowered agricultural production by 20 to 30 percent. With further dry climatic conditions expected in 2016 due to the El-Nino weather pattern, this will have further negative effects on rural incomes and consumer spending. Under these circumstances, working out a political compromise will be difficult.
Did the United States ratify the Trans-Pacific Partnership (TPP) in 2015? Yes and no. Last April, Congress granted President Obama Trade Promotion Authority (TPA) and in October, the U.S., alongside 11 other nations, ratified the negotiation of the TPP. However, Congress has yet to ratify the trade pact. Environmentalists, labor unions, internet freedom activists, and Democratic presidential candidates Hillary Clinton and Bernie Sanders as well as Republican front-runner Donald Trump all oppose the TPP. The terms of the TPA stipulate that when the deal is formally submitted to Congress, lawmakers must act within 90 legislative days. Because of the 2016 presidential and congressional elections, any ratification will likely take place during the lame-duck session after November or perhaps as even as late as 2017 after the next president and Congress is sworn in. If the TPP is not ratified, many Asians would question the U.S.’s sustaining power in the region.
Southeast Asia will continue to face significant challenges in 2016, but it is a stable, more prosperous region than many countries in the Middle East, Africa, and elsewhere. With a population of more than 600 million and a GDP of $2.5 trillion, prospects for the region are relatively bright.
John J. Brandon is senior director of The Asia Foundation’s regional cooperation programs in Washington, D.C. He can be reached at [email protected]. The views and opinions expressed here are those of the author and not those of The Asia Foundation or its funders.
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