Prospects for South-east Asia in 2022

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 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 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 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.


Significance The ADMM-Plus is primarily a confidence-building forum, but Esper will need to navigate various issues that will affect US security relations in South-east Asia for the remainder of President Donald Trump’s current term. Impacts The forthcoming US election could further diminish Trump’s attention towards multilateral meetings. US defence ties with Singapore and Vietnam will grow more easily than with Thailand and the Philippines. US counterterrorism cooperation with South-east Asian states will likely grow.


Subject Outlook for automation in South-east Asia and its implications. Significance Cambodia's garment industry started its annual minimum-wage-setting talks on September 9. The sector is just one that will be affected by automation. The International Labour Organization (ILO) said in July that 137 million workers are at risk of losing their jobs in Thailand, Cambodia, Vietnam, the Philippines and Indonesia over the next 20 years from the automation of manufacturing and services, potentially creating social strains and damaging growth prospects in the event that work leaves the region. Impacts Automation's economic impact will be most felt by low-income countries with narrow manufacturing bases, such as Cambodia. Labour-intense industries (eg, clothing) could leave South-east Asia once technology changes end the need for offshoring production. Women will be disproportionately affected due to their over-representation in automation-exposed industries.


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.


Subject Construction needs as South-east Asia integrates and develops economically. Significance South-east Asia will be one of the world's fastest-growing construction markets in the next five years as rising incomes spur demand for better infrastructure and more urban housing. Foreign contractors have increased their presence in the region, but most will broker alliances with domestic firms or government to ensure easier market access. Impacts Myanmar's new government wants to develop infrastructure; regulatory reforms may attract investors later. Amid geopolitical frictions, some ASEAN states such as the Philippines may be more open to non-Chinese construction investment. Investors will need to be atuned to local cultural sensitivities for investment projects such as entertainment venues.


Subject Outlook for ASEAN's agenda in 2017. Significance The Philippines begins operating as ASEAN's chair for 2017 in January, the annual position having rotated to Manila, which will preside over ASEAN's 50th year. Political changes in South-east Asia, including Philippines President Rodrigo Duterte's inauguration back in June, call into question ASEAN's future direction on issues including territorial disputes between China and several South-east Asian nations in the South China Sea. Impacts The terrorist threat in South-east Asia and the southern Philippines particularly could grow. AEC integration could help Duterte politically, as his domestic and foreign affairs interests converge in the economic sector. The current Myanmar Rohingya Muslims controversy may spread into ASEAN next year.


Subject South-east Asia's stance on cryptocurrencies. Significance After Facebook issued a white paper on June 18 on its plans to launch Libra, its new cryptocurrency payment platform, the central banks of Singapore and the Philippines called for more in-depth information. Impacts South-east Asia's response to the rise of cryptocurrencies and other virtual financial instruments will remain uneven. Criminal financing via cryptocurrencies is a major concern for Indonesia, Malaysia and the Philippines. Social media misuse could rise if Facebook's financial instrument draws in more users.


Subject Outlook for South-east Asia-Japan relations. Significance Japanese Prime Minister Shinzo Abe meets US President Donald Trump on February 10. This follows his January 12-17 tour of the Philippines, Vietnam, Indonesia and Australia and new US defence secretary James Mattis's visit to Tokyo and South Korea last week. China’s assertiveness and influence in the Asia-Pacific region, and the policy uncertainties surrounding the Trump administration threaten Japan’s traditional foreign and security policy settings and East and South-east Asian leadership role. Impacts South-east Asian states will try to play China and Japan off against each other for improved infrastructure financing. Australia and Japan are now the leading countries committed to the TPP’s continued relevance. Vietnam is likely to seek deeper economic and security ties with Japan. Japan may face US pressure to conduct South China Sea freedom-of-navigation patrols.


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