Maritime funds for South-east Asia boost US ties

Significance In response to China's activities in the South China Sea, the United States has begun to implement its South-east Asia Maritime Security Initiative (MSI), which seeks to build the maritime capacity of security partners in the region. Impacts Duterte's anti-crime agenda for the Philippines could see some positive knock-on effects for coast guard procurements. Closer defence ties underlined by the MSI will also see greater diplomatic spats between Washington and its allies over human rights issues. A victory by Hillary Clinton in the 2016 elections would help bolster US credibility as a long-term regional security guarantor.

Subject Emerging US policy towards South-east Asia under the Trump administration. Significance On May 5, the 30th US-ASEAN Dialogue opens in Washington, to be co-chaired by US Secretary of State Rex Tillerson. This follows Vice-President Mike Pence’s visit to Indonesia of April 20-22, the first to South-east Asia by a cabinet-level official from the Trump administration. The White House used that occasion to announce that President Donald Trump will attend the APEC meeting in Vietnam and the East Asia Summit (EAS) in the Philippines in November. Impacts Trump may co-chair a US-ASEAN Summit with Philippines president on the EAS’s margins, which could improve frayed bilateral ties. Congress could frustrate any Trump administration plans to sanction countries with trade surpluses with the United States. An ASEAN-US free trade agreement is unlikely soon. Trump has invited Vietnam’s prime minister to visit Washington later, which could make Hanoi more bullish towards China.


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 She addressed two key issues during her trip: tensions in post-coup Myanmar and China’s growing regional footprint. Shortly after she left the region, the United States announced that it would donate unused COVID-19 vaccines abroad, including to South-east Asia. Impacts Washington will tighten its sanctions on the Myanmar military while supporting ASEAN’s five-point plan to ease the country’s crisis. The National Unity Government, a parallel administration to Myanmar’s junta set up by its opponents, will try to attract greater US backing. Manila and Washington may extend negotiations over renewing their Visiting Forces Agreement to prevent the pact expiring in August.


Significance Meanwhile, the Myanmar junta and the military-aligned Thai government are under pressure from opponents, and the Philippines is gearing up for elections. With COVID-19 vaccination rates varying greatly, some countries in the region are better placed than others to revive their pandemic-hit economies.


Subject South-east Asian tax bases. Significance Indonesia's tax amnesty programme enters its third phase in 2017. The amnesty will generate short-term revenue, but it is not a solution to a wider problem of limited tax bases found across the ASEAN core economies of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Impacts Bilateral tax treaties may change following OECD reforms, even if South-east Asian states are not party to the initiatives. Compliance costs for country-by-country reporting for multinational companies under the OECD initiatives could be substantial. More efficient tax collection and wider tax bases could benefit ASEAN states' development such as infrastructure.


Subject Online radicalisation. Significance On May 25, the Indonesian parliament unanimously passed stringent anti-terrorism laws allowing the military to be directly involved in counterterrorism operations. The vote followed a string of suicide bombings attributed to local jihadist networks that have pledged allegiance to Islamic State (IS). Jakarta joins other South-east Asian governments -- notably those of Malaysia, the Philippines and Singapore -- in attempting to counter a new push in the region by IS, as it loses territory in Iraq and Syria. Impacts Rising anti-Shia sentiment in the region, a by-product of increased Saudi influence, will likely give IS new issues to exploit. The Rohingya crisis gives IS a regional boost, especially in terms of operations in Myanmar and more likely in Yangon than Rakhine State. Non-ideological, low-wage overseas workers, particularly from the Philippines and Indonesia, are most susceptible to IS.


Subject South-east Asia's push for trade agreements. Significance Late last month, an Indonesian delegation led by Trade Minister Enggartiasto Lukita began a week of negotiations in Washington to lobby against the withdrawal of trade preferences for Indonesian exports to the United States. Meanwhile, South-east Asian states are involved in two major trade agreements: the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the 16-state Regional Comprehensive Economic Partnership (RCEP). Impacts US trade reprisals against Indonesia could weaken Jakarta’s support for Washington’s diplomatic pressure on North Korea. The US-China tariff escalation could prompt partners to redirect some of their trade, boosting trade between Taiwan and South-east Asia. ASEAN Economic Community integration will be slow despite progress in RCEP and the CPTPP.


Subject Outlook for Thai-US-China relations. Significance Chatchai Thipsunaree, Thailand’s permanent secretary in the Ministry of Transport, confirmed on May 17 that construction of the long-awaited Thai-China high-speed railway will begin this year. The project reflects the growing momentum in Thailand’s relations with China, and refiguring of ties with the United States. Impacts Trump administration officials see less strategic imperative in the US-Thailand alliance than previous administrations. China’s growing presence in South-east Asia, particularly on the Mekong, will trigger resistance from affected populations in Thailand. Thai officials will allow Chinese infrastructure projects to proceed despite local protests.


Subject The South China Sea dispute. Significance China and the United States increased their military activities in the South China Sea in January and February, with US ‘freedom of navigation operations’ (FONOPs) pushing back on Chinese maritime jurisdictional claims in the area. The Philippines before June 2016 contested China’s expansive claims. Increased rivalry between Beijing and Washington in South-east Asia raises the risk of a dangerous naval confrontation. Impacts The Philippines will continue to solicit investment from China. China is unlikely to undertake actions in the South China Sea that would seriously irk the Philippines. South-east Asian countries will emphasise the importance of the region not becoming a theatre for China-US rivalry.


Subject South-east Asian defence budgets. Significance The pressure of responding to the COVID-19 pandemic is prompting many South-east Asian governments to cut defence spending and postpone or cancel new arms acquisitions. Meanwhile, China and the United States continue to vie for influence in the region. Impacts Piracy attacks will increase across the region as socio-economic distress rises and budgets for navies and coast guards fall. ASEAN unity will fracture as tensions among member states increase. Economic problems will cause political instability across South-east Asia, possibly even leading to military coups in certain countries.


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