Microfinance demand will grow in South-east Asia

Subject Microfinance in South-east Asia. Significance Microfinance lending in Cambodia rose 45% last year, while the number of borrowers has doubled since 2010, a national summit on the industry was told in Phnom Penh last month. Other emerging South-east Asian economies will seek to emulate Cambodia's success as intra-regional financial ties heighten credit gaps, especially for small business. Most funding will come from abroad, but foreign investors are worried about regulatory shortcomings and high borrowing costs in some markets. Impacts Cambodia will see the fastest microfinance industry growth among South-east Asian countries. However, larger markets such as Indonesia have greater long-term potential microfinance demand. Microfinance could increase SMEs' viability by paying for efficiencies and boost their presence in exports and supply chains.

Significance It is the only country in South-east Asia with a large-scale nuclear plant, although this was never loaded with fuel. Other countries in the region have tentative plans to develop nuclear power programmes. Impacts The current absence of nuclear power programmes will help avert the diversion of capital from renewable energy development in the region. South-east Asian countries with small, non-power reactors, built for research, will try to maintain these facilities. Across the region, the need for electricity grid investment will increase as more decentralised generation sources are deployed.


Subject The outlook for Indian naval engagement with South-east Asian countries and ASEAN. Significance At the ASEAN summit in mid-November, India's Prime Minister Narendra Modi underlined India's 'Look East' policy, pledging to cultivate diplomatic, economic and security relationships with South-east Asia. One manifestation of Delhi's willingness to undertake a more strategic regional role is the Indian navy's growing portfolio of partnerships with South-east Asian navies. Amid concerns over China's maritime assertiveness, India's navy has been welcomed in the region as a security partner. Impacts India will avoid South-east Asian undertakings that may provoke China. Delhi will need to define 'Look East' policies concretely to convince South-east Asia fully of Indian strategic utility. Modi will expand bilateral naval exercises, humanitarian aid and counter-piracy/smuggling efforts in South-east Asia.


Subject Development of South-east Asian coastguards and their geopolitical implications. Significance Senior coastguard officers from Australia, Japan, the Philippines and the United States will meet later this year to discuss cooperation and capacity-building -- and the assertive actions of China's coastguard in littoral waters. With external partners' support, South-east Asian states are developing their coastguards to fight crime and assert maritime territorial claims. Impacts Fishing activities will probably trigger spats between South-east Asian and China's coastguards. Gradually, inter-operability between South-east Asian coastguards will expand. Tokyo and Washington will use coastguards to deepen ties with South-east Asian countries. There could be frictions between Indonesia's and Malaysia's coastguards over waters around Ambalat.


Significance With Trump within striking distance of catching Clinton in popular polls, though not yet the Electoral College, South-east Asian leaders and diplomats have privately expressed concern about the next US administration and the outlook for South-east Asia-US relations. Impacts A Trump presidency could destabilise South-east Asian economies and regional security. Maritime frictions could soon flare if China 'tests' the incoming US president. If the TPP is delayed or fails, Vietnamese labour rights and state-owned enterprise reform will likely founder.


Significance The preferential US trade programme faces renewal or lapse by December 31. South-east Asia’s economies are structured to take advantage of the GSP and many of the products exported to the United States under GSP (such as light manufactures and seafood) are important for South-east Asia’s supply chains. Impacts Vietnam may make another application for inclusion in the US GSP programme. The more authoritarian South-east Asian countries could find it easier to gain US GSP preferences under Trump. The Trump administration could use the GSP as a bargaining chip in trade negotiations or renegotiations.


Subject Microfinance in Cambodia and other South-east Asian countries. Significance A report published last month by two human rights groups in Cambodia said microfinance debts have increased hardship for borrowers in the country. Meanwhile, a global economic slowdown is prompting monetary authorities in South-east Asia and beyond to cut interest rates. Impacts Debts associated with microfinance could make borrowers more vulnerable to human trafficking and forced labour. With their limited resources, micro-borrowers will be more exposed than most in the event of a global recession. Countries in South-east Asia and beyond will come under pressure to increase oversight of their microfinance sectors.


Subject South-east Asia's relations with Russia. Significance Russia’s ties with the West are deteriorating. South-east Asia offers Moscow important diplomatic and economic opportunities. Impacts As Russia-China strategic alignment strengthens, Moscow and Beijing will increase coordination and cooperation in South-east Asia. Advanced Russian defence technology will further strengthen Beijing against South-east Asian claimants in the South China Sea dispute. Washington will try to encourage South-east Asian countries to buy US rather than Russian weapons.


Subject South-east Asia's regional response to Islamic State. Significance South-east Asian countries face security risks from Islamic State (IS)-affiliated militants. States are seeking to coordinate action at a region-wide level, with the ASEAN-Australia Special Summit last month including a parallel Counter-Terrorism Conference. Impacts Washington will likely use support for counterterrorism to develop defence relations in South-east Asia. Tougher legal frameworks to combat terrorism could result in laws that constrain civil liberties. For Australia, stronger ties with ASEAN could encourage a more conciliatory approach to the region’s autocratic regimes.


Subject COVID-19 situation in South-east Asia. Significance South-east Asia has less than 12,000 active cases of COVID-19 and less than 600 deaths have been recorded from the disease in the region. These numbers appear relatively small, but they probably reflect a lack of testing in most of the region’s countries. Many South-east Asian governments are bracing for intensifying outbreaks. Impacts Some of South-east Asia’s state-owned enterprises face insolvency. The region’s supply chains and labour flows will likely remain paralysed for months. Emergency powers could remain in place in certain South-east Asian countries for over a year and be exploited by authoritarian governments.


Subject The outlook for the current migrant crisis in South-east Asia. Significance Over the last three weeks, an estimated 25,000 Rohingya and Bangladeshi migrants have sought to reach Indonesia and Malaysia, on boats mostly abandoned by people smugglers based in Myanmar, Bangladesh and Thailand. Malaysia and Indonesia have received around 3,000 such migrants so far. Seeking a solution, a regional summit will be held in Bangkok on May 29, including representatives from Myanmar, Australia and the United States. Meanwhile, suspected people-smuggling camps discovered in Thailand and Malaysia in May have led to allegations of official complicity. Impacts Amid allegations of official complicity in people smuggling and trafficking, scrutiny of the Thai and Malaysian governments will increase. Discovery of further people smuggling camps in other ASEAN countries, and allegations of official complicity, are possible. Capacity-building for ASEAN states' police forces, and ASEAN itself, is needed to counter people smuggling and trafficking. South-east Asian countries will enhance maritime patrols to search for other migrants.


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