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”.
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”.
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.”
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.
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.
KUALA LUMPUR — While Philippine citizens disagree with the Duterte administration’s head-in-the-sand response to Chinese aggression in the disputed South China Sea, a substantial number still support his so-called drug war that has claimed thousands of lives. But there are serious public misgivings about the industrial-scale extrajudicial killings that could yet result in President Rodrigo Duterte being charged by international prosecutors. Last week several hundred protesters marked the third anniversary of a landmark international tribunal ruling in favor of the Philippines and against aspects of China’s expansive claims to the South China Sea. The same week survey by local polling outfit Social Weather Stations showed 87 percent backing for the proposition that the Philippines “should assert its right to the islands in the West Philippine Sea (the local name for the South China Sea) as stipulated in the 2016 decision of the Permanent Court of Arbitration (PCA). However President Duterte, who marked three years in office on June 30, has several times referred to an apparent threat by China to go to war should the Philippines assert its claims to the sea based on the court’s ruling, which China refused to recognize.
KUALA LUMPUR — At an age when most people would either be dead or coming up on three decades’ retired, Mahathir Mohamad shows no signs of slowing down in his second coming as Malaysia’s prime minister. It has been a hectic year-and-a-bit back in office for the world’s oldest head of government, who turns 94 today. From renegotiating multi-billion-dollar railway construction deals with China to lambasting the European Union over proposed curbs on palm oil imports, he has arguably been as dynamic as any leader living. Making regular public appearances and often giving lengthy speeches – hands on podium and his back goalpost-straight throughout – Mahathir is, as he put it in March, “in a hurry”. “I realise I don’t have much time,” he explained. It’s not just Mahathir’s prodigious age that has the clock ticking. After he led the Pakatan Harapan (PH, Alliance of Hope) coalition to a historic first-ever opposition win in Malaysia’s parliamentary elections last year, the idea was that Mahathir – the country’s longest-ruling leader by dint of his first 1981-2003 tenure – would step down after a year or two in favour of former protégé-turned-nemesis-turned-ally Anwar Ibrahim, the leader of the Parti Keadilan Rakyat (PKR, People’s Justice Party), the biggest party in the PH alliance.
KUALA LUMPUR — “We do not want to choose between the United States and China.” So said Malaysia’s Deputy Defense Minister Chin Tong Liew during a speech last week on his country’s relations with China. Earlier this month the U.S. Secretary of Defence and his Chinese counterpart told a conference of defence ministers in Singapore that they do not expect other countries to takes sides. But many in Southeast Asia fear this is a choice they will have to make, given the increasingly-acrimonious Chinese-American rivalry.
KUALA LUMPUR — U.S. Secretary of State Mike Pompeo has singled out China for its “extreme hostility” to religion and accused the ruling Communist Party of demanding “that it all alone be called God.” Pompeo was speaking at the release of the U.S. Government’s 2018 Report on International Religious Freedom on June 21. “In China, the government’s intense persecution of many faiths — Falun Gong practitioners Christians, and Tibetan Buddhists among them — is the norm,” Pompeo said. “The Chinese Communist Party has exhibited extreme hostility to all religious faiths since its founding. The party demands that it alone be called God.”
KUALA LUMPUR — The United States has kept Malaysia on its watch list of countries that do not meet minimum efforts for the elimination of human trafficking. The 2019 Trafficking in Persons (TIP) report, launched on June 20 by U.S. Secretary of State Mike Pompeo, said Malaysia’s government had not demonstrated overall increasing efforts compared with the previous year. But the report noted that Malaysia’s year-old government led by Prime Minister Mahathir Mohamad had initiated an official Royal Commission of Inquiry into the mass graves of human trafficking victims at Wang Kelian near the border with Thailand. “In general, the situation has not changed in any significant way,” said Dobby Chew of human rights group Suara Rakyat Malaysia.