Phnom Penh’s China-backed building spree booms on (photo essay) – The Interpreter

PHNOM PENH –Towering over low shops and French colonial–era townhouses grows a new city in tribute to the politics of the present Phnom Penh was long known as a relatively low-rise city, at least compared to towering neighbours such as Bangkok, Jakarta, Ho Chi Minh City, and Singapore. These cities all saw their skylines shoot up in recent decades – long before Phnom Penh’s belated boom – as their country’s economies expanded and modernised. Cambodia, too, has seen heady economic growth over the past two decades, rarely dipping below 8%. Yet the ravages of war and foreign occupation from the late 1960s until at least the early 1990s meant catch-up for the capital’s skyline did not come until midway through the current decade.

RCEP trade deal moves on without India – Asia Times

PHNOM PENH — The world’s proposed biggest free trade agreement was dealt a blow on Monday when India made a last minute but unsurprising withdrawal from seven-year-old negotiations during a series of weekend meetings of Asian governments in Bangkok. The Regional Comprehensive Economic Partnership, or RCEP, would have encompassed all ten members of the Association of Southeast Asian Nations (ASEAN), as well as Australia, China, India, Japan, New Zealand and South Korea. It also would have made for the world’s biggest trade deal measured by population and factoring in the combined gross domestic products (GDPs) of the putative signatories, though India’s withdrawal could see it drop below the Canada-Mexico-United States deal formerly known as NAFTA in combined GDP. India would have been the third largest economy in the tariff-reducing trade deal.

Pro-business reforms down in Asia, despite trade war – Asia Times

PHNOM PENH — Asian governments appear increasingly reluctant to implement the kind of pro-business reforms that could help offset slowing economic growth and other debilitating impacts of the US-China trade war. The World Bank’s latest “Doing Business” survey, a comparative global index of countries’ business environments previously known as “Ease of Doing Business”, shows the number of “business climate-enhancing” reforms implemented in East Asia and the Pacific fell by a quarter over the 12 months through May this year compared with the previous year. Referring to the region, the World Bank’s survey said “the overall pace of reforms slowed.” The Doing Business survey released last week compiles 11 criteria ranging from electricity access to labor market rules that it sees as crucial to the commercial success of small and medium-sized enterprises. The survey does not take into account wider issues such as national financial systems, macroeconomic policies or perceptions of political stability.

Southeast Asia fires up coal demand – Southeast Asia Globe/RTÉ World Report

PHNOM PENH — In late September, protestors in Central Java, on Indonesia’s most populous island, stood outside a regional government office and vented their frustration at what they saw as inaction over complaints that the towering smokestacks of a nearby coal-fuelled power plant had been sputtering ash onto their farms. With “we need clean air” and “we are covered in coal dust,” among the jeremiads, the protests echoed another long-standing struggle – near Batang, also on Java. There, locals have fought for years against the imminent opening of a 2,000-megawatt coal-fired power plant, part of the government’s plans to expand the electricity grid by 35,000 megawatts to meet the energy demands of an economy growing at 5% a year.  Such protests are likely to become more common across the region in the coming years, as urbanisation, industrialisation and increasing consumer spending in Southeast Asia’s growing economies spur a surge in energy demand. This in turn will likely prompt a trend-defying expansion of coal-fired power plants over the coming years even as most other regions lower their dependence on coal over environmental concerns.

Drawing a line: In dealings with neighbours, Australia tries to move on – Southeast Asia Globe

Indonesians protesting in Jakarta in Feb. 2015 against Australian government efforts to prevent the execution of 2 Australian citizens on drug trafficking charges (Simon Roughneen)

PHNOM PENH — Visiting Dili in late August to mark the 20th anniversary of East Timor’s blood-soaked vote for independence from Indonesia, Australia’s Prime Minister Scott Morrison declared the opening of a “new chapter” in bilateral relations.  “In a region where some boundary disputes remain unresolved,” Morrison said, in a seeming reference to the disputed South China Sea farther north, “Australia and Timor-Leste have set an example by sitting down, as neighbours, partners, and friends, to finalise a new maritime boundary.” Though Morrison followed up by announcing plans to help upgrade East Timor’s internet connectivity and its navy, his Timorese counterpart Taur Matan Ruak was less gushing. “Today will mark a new beginning, a new phase for both countries,” he said. The implication, of course, was that the previous two decades of the relationship had been less than amicable.  While Australia stood by the hundreds of thousands of East Timorese who defiantly voted for independence in the face of scorched-earth Indonesian-backed intimidation, sending 5,000 soldiers to the country shortly after the vote, it later stood accused of strong-arming its tiny and impoverished neighbour out of billions of dollars of vital oil and gas revenues – in part by refusing to delineate a maritime boundary in the Timor Sea until 2018. 

Vietnam’s dependence on tech investors leaves it vulnerable to trade war swings – Southeast Asia Globe/RTÉ World Report

Roadside decor in Hanoi as Vietnam's ruling Communist Party held a major conference in Jan. 2016. Photo: Simon Roughneen

PHNOM PENH – Going by the sometimes breathless reports about how well Vietnam has done out of the US-China tariff joust, a reader would be forgiven for thinking that an authoritarian single-party state where farmers make up 40% of the workforce has been transformed into a kind of scaled-up Singapore, which despite its small size usually sucks in around half the annual foreign investment bound for Southeast Asia. The numbers in so far suggest that Vietnam’s trade war triumph is indeed nigh. Its economy grew by just over 7% in 2018 – though that has dipped a notch, according to government statistics, to around 6.7% so far this year. But even that slight fall-off will nonetheless make for high growth – due in part to record levels of foreign investment, including some business seemingly diverted to Vietnam as American tariffs add to the cost of exporting to the US from China. “Following the US-China trade tensions, there is evidence of companies making adjustments to avoid the high tariffs situation,” said Bansi Madhavani, economist at ANZ Research, part of Australia and New Zealand Banking Group. According to Madhavani’s counterparts at Maybank Kim Eng, part of Malaysia’s Maybank, Vietnam “is emerging as the biggest beneficiary” of those adjustments, “with FDI [foreign direct investment] registration up by +86% in the first quarter of 2019”.  

Stitched together – Southeast Asia Globe

PHNOM PENH — With no end in sight to the so-called trade war between the US and China, the European Union (EU) sees a chance to act as the guardian of free trade and hold its own against the two giants. But as the bloc gets increasingly bogged down in spats with individual Southeast Asian countries, prospects for a wider regional trade relationship look increasingly precarious. With Cambodia’s eligibility for preferential market access to the EU coming under question and with the likelihood growing that Myanmar could be put under similar scrutiny, the EU appears to be hedging against any consequent damage to its relations with Southeast Asia by seeking free trade agreements and closer defence ties with some of the region’s countries. While for now Cambodia can export duty-free to the 28-country, 513 million-population European Union market, this week saw the end of the “monitoring and engagement” phase of a review of that access, potentially putting $5 billion worth of Cambodian garment exports at risk. A European Commission spokesperson said in an August 12 email that “over the next six months, the Commission and the European External Action Service will analyse all the evidence collected”.

Free from darkness – Southeast Asia Globe/RTÉ World Report

Zubaidi working a new fishing boat in Kwangko. Photo: Simon Roughneen

KWANGKO, SUMBAWA ISLAND — As afternoon turns to evening and the high and blinding sun sinks slowly toward the horizon, Zubaidi still keeps the peak of his cap tilted slightly down, all the better to run an eye over the sky-blue paint job on the small skiff he and his small team are putting the finishing touches to. Behind Zubaidi’s seaside house, set about three feet up on stilts to keep the floor above any high tide, the whine of the electric saws and planes readies another batch of precision-cut timber for the next boat, each one to be sold to eager local fishermen at 1.5 million Indonesian Rupiah (US$106) a pop. Less than two years before, Zubaidi and team had to saw the planks by hand. It was only a year and a half ago that his tiny village of Kwangko on the coast of the island of Sumbawa was connected to the national electricity supply. “I can do three times as much now, more than I had before we got power,” Zubaidi says. “Now you have to pre-order if you want a boat.”

Low tax, low spend – Southeast Asia Globe

Among the finished infrastructure projects in Indonesia is the new metro in Jakarta, pictured here in April 2019 (Simon Roughneen)

PHNOM PENH – Tax And Spend has rarely been part of the Southeast Asian governance lexicon. And judging by the region’s dismal tax-to-gross domestic product (GDP) ratios, it doesn’t look like that will be changing anytime soon. Newly published revenue statistics compiled by the Paris-based Organisation for Economic Co-operation and Development (OECD) show that the five biggest Southeast Asian economies have ratios of half or less than the 2017 OECD average of 34.2%, though most countries in the region showed small increases in revenues compared with the previous year. The OECD defines the tax-to-GDP ratio as “total tax revenue, including social security contributions, as a percentage of GDP”. While more prosperous countries in Southeast Asia’s vicinity such as Australia, Japan and New Zealand all come in around the 30% mark, Southeast Asia’s own numbers were much lower, with Indonesia at 11.5%, Malaysia on 13.6 and Singapore only slightly above on 14.1. This last number in particular seems surprisingly low given that Singapore’s economy more resembles higher-tax Western counterparts than its neighbours in Southeast Asia.

Despite tensions with U.S., Cambodia joins trade war beneficiaries – Asia Times

PHNOM PENH – Cambodia appears to be the latest beneficiary of the US-China trade war, joining the already exhaustively profiled Vietnam among the countries enjoying increased exports to the US as tariffed Chinese goods open the door for other cheap suppliers. Latest US government data show annual imports from Cambodia rising significantly since the start of the year, with the US$1.8 billion registered from January-May a roughly 20% increase on the same period last year. Like Vietnam, Cambodia has duty-free access to American markets under the Generalized System of Preferences, a trade program designed to promote economic growth in the developing world. Trade represented 125% of Cambodia’s gross domestic product (GDP) in 2017, according to the World Bank. In 2018, the bulk of Cambodia’s goods exports to the US were clothing and footwear, with the Office of the US Trade Representative listing the top four sectors as knit apparel ($1.8 billion), woven apparel ($628 million), leather products ($390 million), and footwear ($329 million). Cambodia’s 2018 trade surplus with the US was $3.4 billion — which, though relatively-small compared with Vietnam’s near-$40 billion for the same year — will continue to rise this year as Cambodia’s exports to the US surge. Parsing the numbers for a direct trade war link is not as clear-cut as it may seem, however, with both Vietnam – where trade represented 188% of GDP in 2018 – and Cambodia expanding their commerce with the US since before the start of the tariff war.