CARI Captures Issue 106 (17 Dec 2012)

CARICAPTURES

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SOUTH CHINA SEA DISPUTES PROVES DIVISIVE

Maritime disputes with China and four

ASEAN countries — Vietnam, Brunei,

the Philippines and Malaysia — have

been a sore point in the relationship for many

years. Tensions reached another level at

the ASEAN ministerial meeting in July 2012

where the member states failed to issue a

joint statement for the first time in its history.

Two years ago, China declared the disputed

territories part of its “core interests.” The

oil-rich seas are also a vital trade route for

oil shipments into China. The Chinese claim,

known as the 9-dashed line, also includes the

Spratly and Paracel islands.

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At the July meeting in Phnom Penh,

consensus broke down after Cambodia, the

ASEAN chair, rejected any joint statement

that mentioned the disputed territory.

After the embarrassing failure, Indonesian

Foreign Minister Marty Natalegawa shuttled

between the countries and delivered a six-

point consensus. The document reaffirmed

ASEAN’s commitment to the Declaration on

the Conduct of Parties in the South China Sea

and that nations would exercise self-restraint

and avoid the use of violence in accordance

with the UN Convention on the Law of the

Seas.

Arm Twisting China is Cambodia’s largest investor, trade

partner, and donor. Beijing’s position on the

disputes has consistently been to negotiate

with the claimants bilaterally, bypassing any

ASEAN mechanism. Observers have indicated

that China exerted its economic influence

over Cambodia to tow its line, and ultimately

unravelled ASEAN unity.

Political-security is one of the three pillars

of the ASEAN Community. It is imperative

that ASEAN leaders address the disunity at

this level. While the Philippines and Vietnam

have begun to rely more on the United States’

firepower, ASEAN’s foreign policy calculation

should not centre on the US-China rivalry.

Smaller countries cannot entirely avoid

China’s chequebook diplomacy, but closer

cooperation among the ASEAN countries in

trade and investment through the ASEAN

Economic Community can alleviate external

influence and the dismantling of ASEAN

cohesion and maintain a productive trade and

investment relationship with the PRC.

Looking ForwardThe logic of ASEAN is to provide a regional

platform for the bloc’s interest. This requires

deeper political and economic cooperation

from the member states. Reliance on

Chinese financial gifts and American military

superiority is not a viable long-term strategy.

ASEAN governments must learn from the

events at Phnom Penh and double down

on community-building and economic

cooperation.

The most important policy change the ten

countries can take to achieve closer unity

is to empower the ASEAN Secretariat.

The institution operates on a skeletal staff

and meagre budget that must coordinate

hundreds of political, economic, and

social initiatives adopted at each Summit.

Furthermore, it must prepare ministerial and

leader meetings among the ASEAN countries

and the eight dialogue partners. Without

a strong Secretariat, ASEAN centrality will

diminish. ASEAN leaders must seriously

recalibrate their policies with a focus on a

regional vision.

2012

YEAR EN

D ED

ITION

Chayut Setboonsarng

In thIs CARI CAptuRes yeAR end edItIon, we tAke A CloseR look At the top ten developments In AseAn In 2012

2012YEAR END EDITION

She has not escaped entirely without

criticism however, with questions about

her own transparency in dealings with the

government being raised. More damaging

is her stance on the issue of the Rohingya,

particularly following the Rakhine State riots

in June. Her statements have been hazy at

best, condemning human rights violations

on both sides and appearing to suggest that

the Rohingya are not citizens of Myanmar.

Accusations of elitism and hypocrisy on her

part can already be seen in the social media

commentary.

With so many firsts and accolades having

been already accomplished this year, 2013

may necessitate more decisive action from

Suu Kyi if she is to retain her superstar

status. If, however, that perception were

to tarnish, she will still be Leader of the

Opposition in the House of Representatives,

albeit one dominated by the United

Solidarity and Development Party and the

military.

Whatever the fortunes of President Sein

and Opposition Leader Suu Kyi, Myanmar’s

progress in 2013 will determine how the

country will fare as the ASEAN Chair in 2014.

Accordingly, how the country engages with

ASEAN should also be closely watched.

Already Myanmar has become an arena for

geopolitical tussles between big powers, and

multinationals may not have the long-term

interests of the country at heart. ASEAN,

therefore, provides a natural place to

find support from neighbours with similar

interests and concerns. The unlikely pair

might find it a surprisingly fruitful place.

MYANMAR’S REFORMS AND THE LADY

Investors and democrats the world over

have been following the reforms in

Myanmar closely this year (and so have

we, through the Myanmar Monitor featured

in the weekly CARI Captures). Milestones

have included Coca-Cola re-entering the

market after six decades, approval for

the introduction of credit cards (Visa,

MasterCard and JCB will be operational in

the country in 2013) and the finalisation of

the delayed and much-amended foreign

investment law. The latest version of this

law removes the cap on foreign ownership of

joint ventures, and boosts the discretionary

powers of the Myanmar Investment

Commission to determine foreign investment

levels in sensitive sectors. Though the

passing of the law has provided more

certainty, the question remains at what rate

the country can receive investment owing to

weaknesses in basic infrastructure.

National notable barometers of the changing

landscape include the suspension of US

sanctions, the approval by the World Bank

to resume aid after 25 years, the offer by

the EU of 70 million euros of development

aid besides pledges by other governments,

including Saudi Arabia’s announced provision

of US$50 million to Myanmar’s Muslims.

Throughout this process two figures have

been prominent: President Thein Sein

and Aung San Suu Kyi. Both were jointly

awarded the top spot in Foreign Policy

magazine’s 100 Top Global Thinkers 2012, but

Aung San Suu Kyi’s celebrity status began

earlier. 2012 saw her prominence being

joined by officially recognised democratic

and institutional legitimacy within Myanmar,

having been elected as an MP in April. After

a short brouhaha regarding the wording of

the oath necessary to formally take office,

she and others from the National League for

Democracy nonetheless took the oaths, upon

which Suu Kyi also became Leader of the

Opposition.

Amongst the heads of state or government

she met in 2012 were US President Barack

Obama and British Prime Minister David

Cameron, and she was feted by many

international organisations and think tanks,

picking up numerous awards throughout

the year. Particularly high profile examples

included her acceptance speech in June for

the Nobel Peace Prize awarded to her in

1991, and receiving in September the United

States Congressional Gold Medal awarded to

her in 2008. In addition, she met with civil

society and regional business organisations,

including the ASEAN Business Club. Her

profile in popular culture has thrived

following the success of the sympathetic

Hollywood portrayal The Lady, released in

Asian countries in the first half of the year.

International commentary and diplomatic

responses to the reform process in Myanmar

continues to demand the reactions of Aung

San Suu Kyi. Her stated confidence in the

president’s sincerity for reform, her opinion

that the US should not fully lift economic

sanctions until all political prisoners are

released, and most recently her words of

caution against over-optimism on reforms in

her country are all seen as indicators of the

strength and pace of the reforms.

Tunku ‘Abidin Muhriz

2012YEAR END EDITION

ASEAN PRIVATE SECTOR

WEATHERS THE STORM

Despite the ongoing uncertainty in

the global economy, the ASEAN

private sector has remained

resolute. This past year saw Kuala

Lumpur’s IPO scene become the world’s

4th largest, raising US$6.8 billion,

surpassing that of London. Notable IPO

include the palm oil producer Felda

Global Ventures, IHH Healthcare and the

cable network, Astro. The state-owned

PTT of Thailand expects to raise US$3

billion in an IPO next year. Thai business

tycoons became Asia-Pacific’s third largest

investors’ after China and Japan. The

agribusiness, Charoen Pokhpand Group Co.

recently purchased a US$9.4 billion stake

in China’s Ping An, while ThaiBev continues

to make a play for a US$11.4 billion

takeover of Singapore’s Fraser & Neave.

CIMB Group, built on an ASEAN platform,

also made high-profile acquisitions this

year including RBS and Philippines Bank of

Commerce, expanding its operations into

the Philippines, Hong Kong and Australia.

This year also saw the launch of the

ASEAN Trading Link, a portal for investors

that enables fluidity in ASEAN investments.

Currently, the ASEAN Link connects

Bursa Malaysia, Singapore Exchange,

and the Stock Exchange of Thailand. This

creates a single gateway to over 2,200

listed companies with a combined market

capitalisation of US$1.4 trillion. In the

future, the ASEAN Exchanges project aims

to incorporate Indonesia Stock Exchange,

the Philippine Stock Exchange, and the

two exchanges in Vietnam.

Why it MattersThese developments are a reflection of

immense investor confidence, growing

consumer demand in ASEAN, and a bloc

that is advancing commercial relations

despite political disagreements and a

bearish global environment.

The ASEAN’s corporate sector is in a

unique position to push governments

to dedicate more effort in their foreign

policies towards the ASEAN Economic

Community (AEC). The 2012 AEC

Scorecard, a report on the implementation

of policies, indicates that the governments

only achieved 67.5% of its integration

objectives. Commerce ministries and trade

agencies are not the only institutions that

are responsible for this shortcoming, but

the firms of ASEAN as well.

The policy community works to ease

regional trade and investment, creating

gains for the entire region. It will spur

innovation and ultimately benefit the

consumer by offering higher quality goods

and services at lower prices.

Going ForwardJust as the American private sector

aggressively promotes the Trans-Pacific

Partnership (TPP), corporate ASEAN should

do the same for the AEC. However, only a

handful of ASEAN companies have taken on

this responsibility.

The ASEAN Secretariat has been vocal about

including the private sector, from large

multinationals to small-medium enterprises

(SMEs). The Secretariat held an AEC

Symposium and released the AEC Handbook

for Businesses earlier this year. These

initiatives allowed firms to network, voice their

concerns, and learn about the AEC blueprint.

Complacency has never been a

characteristic of a successful company, thus,

it is incumbent on the businesses of ASEAN

to support and advocate for the acceleration

of the AEC. Business leaders should engage

in more dialogue with their commerce

and foreign affairs ministries in order to

learn, prepare, and push for further more

economic integration. The ASEAN business

community is in a geo-economic sweet spot;

this will not always be the case in the future

as competitors begin to emerge. The time is

right for the private sector to capitalise on

this advantage and realise the goals of the

ASEAN Economic Community.

Chayut Setboonsarng

It is incumbent on the businesses of ASEAN to support and advocate for the acceleration of the AEC

2012YEAR END EDITION

ASEAN IN A G-ZERO WORLD

The stalled Doha trade negotiations,

ineffective climate change

conferences, non-ratification of

the UN Conventions on the Law of the

Seas (UNCLOS) by the United States,

indicate a vacuum in global leadership. The

G-Zero is an emerging era of international

politics, described by political scientist,

Ian Bremmer. After the American financial

debacle in 2008 and ongoing debt crisis in

Europe, no single country or organisation

can drive a global agenda. Nations in the

G7 and G20 groupings have competing

ideas and are too involved with their own

politics to spend political and economic

capital on international issues. Global affairs

without a clear agenda and regulation give

way to pivot states, or countries that are

“able to build profitable relationships with

multiple other countries without becoming

over reliant.” These countries are adaptable

and can manoeuvre through the rivalries

of larger powers. This is where Bremmer’s

G-Zero world metaphor ends, because

ASEAN member states are able to persuade

friends and allies to a common cause.

The Pivot States of ASEANIndonesia is a prime example of such a

country. Its diversified economy and trade

profile combined with a growing middle

class and young population give it a

growth engine that is not dependent on a

single relationship. As the largest ASEAN

country, Indonesia has the capacity to

build consensus. Indeed, after the non-

issuance of a joint statement at the ASEAN

ministerial summit, Foreign Minister Marty

Natalegawa persuaded his counterparts

and arrived at a 6-point plan. But this is the

extent of Jakarta’s commitment. It had the

ability to form ASEAN unity on many other

occasions on the South China Sea, but did

not take action.

Domestically, the government has enacted

a series protectionist reforms to nationalise

its mining sector. It also has a significant

labour problem that must be addressed

after massive strikes enveloped the nation’s

capital. Measures taken against foreign

investors and slow action over labour issues

are alarming for the progress of the ASEAN

Economic Community. In 2012, Indonesia

was the premier investment destination

for retail, manufacturing, and industrial

production; however, it should not get too

comfortable and seize the opportunity to

take ASEAN community building forward.

Many of the same things can be said

about Malaysia. It is a country comfortably

growing, while furthering its relationship

with China and the US. Prime Minister

Najib Razak has also shown remarkable

leadership by helping broker a peace

agreement between the Moro Islamic

Liberation Front and the Philippines

government in Mindanao. Prime Minister

Najib also began the Global Movement of

Moderates to curb radicalism in the world.

However, this was the extent of Malaysian

guidance in ASEAN’s challenges. The

government has not taken further action

to assist Thailand’s southern insurgency

or the Myanmar’s Rakhine state. Even

more important, Malaysia is a claimant in

the South China Sea, but it has repeated,

in China’s favour, not to internationalise

the dispute. The Prime Minister should

use the newly institutionalised platform of

moderation to convene ASEAN and China

to find a resolution over the disputed

territories.

Also important is Thailand. It received

state visits from US President Obama and

outgoing Chinese Premier Wen Jiabao.

The European Union has also sent strong

signals to being FTA negotiations with

the Kingdom. Furthermore, its private

sector and industrial production has

miraculously turned around the destruction

from the 2011 floods. As a nation that has

a celebrated history of skilled diplomats,

on the surface Thailand appears to

have managed the balance of power in

Southeast Asia perfectly and can bring the

ASEAN countries together.

However, it is a political basket case. Former

Prime Minister Abhisit now faces murder

charges for the death of a taxi driver during

the 2010 military crackdown on Red Shirt

protestors, resulting in 90 civilian deaths.

Meanwhile, royalists, now rebranded as Pitak

Siam or Protect Siam, took to the streets in

December and called for the resignation of

Prime Minister Yingluck. Political gridlock

has stunted the government from investing

in foreign policy and ASEAN. The country’s

political drama is threatening the its

long-term success.

Going ForwardThe emergence of pivot states gives way for

ASEAN to exert its centrality. In 2013, these

countries will maintain a similar status, but

the G-Zero is only a transitory period. ASEAN

has shown that it has the potential to drive

a global agenda, while maintaining ASEAN

centrality. The fact that the association has

the ability to convene eight world leaders

in Phnom Penh speaks for itself. The East

Asia Summit and Regional Comprehensive

Economic Partnership have all been ASEAN

initiatives. As the centre of Asian regional

architecture, the governments of ASEAN

must resolve outstanding issues and further

commit to ASEAN integration to strengthen

the bloc and advocate for ASEAN interests in

the international community.

Chayut Setboonsarng

Nations in the G7 and G20 groupings have competing ideas and are too involved with their own politics to spend political and economic capital on international issues

- ASEAN has shown that it has the potential to drive a global agenda, while

maintaining ASEAN centrality

2012YEAR END EDITION

FAILURE TO LAUNCH: ASEAN BANKING

INTEGRATION FRAMEWORK

In November 2012, the central banks,

monetary authorities, and members of the

ASEAN Bankers Association convened at

Bank Negara Malaysia for the 19th ASEAN

Banking Conference and addressed the

role of banks in regional integration. At

the centre of the conference was the

ASEAN Banking Integration Framework

(ABIF). The goals of

the framework and

its conditions are

clear; to harmonise

regulations, build

stable financial

architecture, support

Brunei, Cambodia,

Laos, Myanmar, and Vietnam, and set the

criteria for a Qualified ASEAN Banks (QAB).

Banking integration is vital for the

realisation of the ASEAN Economic

Community. The regional expansion of

ASEAN’s investment and commercial

banks are indicative of this compulsion.

In her remarks at the conference, Bank

Negara governor, Dr. Zeti Aziz noted that

the framework was in the “final stages to

launch.” However, following the conference,

the policy community has not made it clear

what this process entailed.

Think in Generalities, Live in DetailDetails of how the central banks will

achieve the objectives outlined in the

framework are not clear. Firstly, arriving

with a set of criteria for a QAB remains

ambiguous. Answering

this question will

require not only the

vast experience and

knowledge of the

central banks, but

also involvement of

commercial banks and

financial institutions. Details of expanding

capacities and allowances and building

financial infrastructure are also currently

unavailable.

ABIF has been silent on the foreign equity

ownership, which is an important factor

in a regional integration. As banks seek to

expand operations in member countries,

the strategic method of expansion is

through mergers and acquisitions, which

would involve measures of foreign equity

ownership by the central banks. It remains

to be seen how partnership dynamics and

banking paradigms will change with the

implementation of ABIF.

Going ForwardPolicymakers should engage academics

and the private sector and bring them into

the discussion. Debates and conversations

need to happen, as this will crystallise ideas

into actionable policies. Thought leaders

and seasoned bankers could share their

opinions on how fund raising facilities

should be set up across the region.

Information sharing and the dissemination

of ideas is the first order of business for the

ASEAN Banking Integration Framework.

Stakeholder buy-in from the ASEAN

business community is fundamental for the

implementation of the ASEAN Economic

Community blueprint. This is precisely the

same case for the banking framework, thus it

is imperative that policy makers and financial

institutions work together in formulate and

designing the framework and the QAB. Only

through cooperation will banking integration

be successful.

Chayut Setboonsarng & Paul Leong

Policymakers should engage academics and the private sector and bring them into the discussion.

2012YEAR END EDITION

US as the region becomes more and more

important to the US. Australia therefore

should not overly focus its efforts on

whether to support the US — Canberra’s

most important security ally, or China

— Australia’s primary trading partner;

instead, Australia should focus on ASEAN

to secure its place in the Asian century.

The UK Looks EastThe United Kingdom has also engaged

closely with ASEAN this year. In

November, Britain opened an embassy

in Laos and is thereby represented in all

ten ASEAN states. UK’s Foreign Secretary

William Hague has been quoted several

times stating that ASEAN is at the centre

of UK’s Asia policy. The United Kingdom’s

strategic shift was evident in July when

the UK acceded to the Treaty of Amity and

Cooperation in Southeast Asia (TAC).

Going ForwardASEAN should leverage on its geopolitical

position, as it becomes the centrepiece of

power of the Asia-Pacific. It is clear that

ASEAN is poised to inject its centrality

into the international community. The

pre-requisite to centrality is a strong

Secretariat and a united ASEAN

Community. This will allow the ten

countries to place its interest on the

international fora and advance regional

goals.

THE WORLD

COURTS ASEAN

07

LAOS STEPS UP

With a population of 6.5 million

people, ASEAN neighbours and

China dwarf Laos' output. The

country has taken on bold developments

to show the world that the small country

is facing its challenges and undertaking

market reforms.

In October 2012, the World Trade

Organisation (WTO) approved Laos’ bid to

become a member, a major step forward

for Laos. WTO membership helps bring

investor confidence, as Laos will begin

to implement WTO principles of non-

discrimination and transparency into law.

Already, the government has initiated

an online trade portal, which publishes

information that traders need for importing

The United States' pivot towards

the Asia-Pacific officially started

late last year when US President

Obama became the first US president

to attend the East Asia Summit, and US

Secretary of State Hillary Clinton outlined

the government’s policy in her article

America’s Pacific Century in Foreign Policy

Magazine. This year, the US has stepped up

its engagement with the region, and other

western nations are following suit.

US Defence Secretary Leon Panetta

announced mid this year at the Shangri-La

Dialogue that the US navy would move a

part of their fleet to the Pacific, as a part

of the US military rebalancing program.

Under the new Pentagon strategy, the US

will reduce its forces in the Middle East

and Europe, but will sustain and perhaps

increase its military presence in East Asia.

As well as maintaining its defence alliances

with Australia, Japan, South Korea, the

and exporting goods. Yet, Laos still has

some ways to go before it becomes a full

member and realises all the benefits that

come with a WTO accession.

As a landlocked country, connectivity is

immensely critical for development. To this

end, Laos is forging ahead in connectivity

and transportation as it develops a US$7

billion high-speed

train link. The

railway will connect

Vientiane with the

Chinese border in

the Luang Namtha

province, enabling

more trade with

China of Laos’

natural resources. The project was initially

to be undertaken in partnership with

China. Sometime later, China withdrew

its investments due to concerns over

profitability. However, the Vientiane

decided to go ahead with the project,

signalling its determination to the world.

However, Laos’ development plan is not

without its challenges. This is clear from the

recent uproar by environmental activists

over the damage Laos is inflicting with its

Xayaburi dam project. The dam, which is

located on the Mekong River, may threaten

the livelihood of riparian communities

and the ecological balance of the river.

Environmental groups have warned that

the dam could affect 23 to 100 fish species,

and lead to the extinction of the famed

giant Mekong catfish. When protests first

ensued from neighbouring countries,

Cambodia and Vietnam, Vientiane agreed

to suspend construction pending a 10-

year investigation. However, it resumed

work and faced

international

criticism. Davong

Phonekeo, Laos’

Minister of Energy

and Mines, noted

that the country’s

water resources are

part of its national

plan to become the “battery of Asia and

alleviate poverty”.

Economic liberalisation and growth in

Laos comes at a time when ASEAN is

booming. Laos should work closely with

other ASEAN member states that have

extensive experience in development and

international trade. It should be sensitive

to the environmental impact it creates

and consult with other parties to find

viable alternatives. For Laos to maximise

this regional growth wave and avoid

Chinese dominance it must look to ASEAN

governments and businesses for lessons

and partnerships.

Manissa van Geyzel

Sóley Ómarsdóttir

lAos should woRk Closely wIth otheR AseAn membeR

stAtes thAt hAve extensIve expeRIenCe In development And InteRnAtIonAl tRAde

Philippines and Thailand, the US is also

looking towards establishing partnerships

with Singapore and Vietnam.

The US showed its engagement with

the region in November when three

ASEAN countries; Cambodia, Thailand

and Myanmar, were the first countries to

receive Barack Obama after his re-election.

Australia’s New OutlookThe Obama administration is not the

only western government with an Asian

agenda. Australia, under Prime Minister

Julia Gillard and Foreign Minister Bob

Carr, launched a policy white paper titled

Australia in the Asian Century, on 28

October. The paper makes it clear that it

does not see the Asian century as being

entirely characterised by China’s rise, but

recognises that it is rather an Asia-Pacific

century. It further identifies China, India,

Japan, Indonesia, and South Korea as

Australia’s key Asian partners.

Asialink, an Australian centre aimed

at strengthening Australia’s Asia

engagement, released a Commission

Report, which criticised the white paper

for its silence on the value of the country’s

relationship with ASEAN. The report points

out that ASEAN is the key for Australia

to engage with Asia, that a strong a

relationship with ASEAN would also

strengthen Australia’s alliance with the

2012YEAR END EDITION

DEMOCRACY FOR,

UM, ASEAN

Twelve heads or deputy heads of state

or government – including Afghan

President Hamid Karzai, Iranan

President Mahmoud Ahmadinejad, Australian

Prime Minister Julia Gillard, Turkish Prime

Minister Recep Tayyip Erdogan and South

Korean President Lee Myung-bak – attended

the fifth Bali Democracy Forum that took

place in November. Four (including the host)

were from ASEAN countries.

The event’s track record was not entirely

complimentary according to comments

within Indonesia itself. A think tank chairman

described the annual meeting as “an

international event with not much left in

terms of lessons learned after the forum was

over”. Meanwhile an academic opined that

“it is being used by some countries to show

they can be part of the democratic world”,

and activists called for it to be expanded to

include civil society rather than limited to just

governments. Indeed, news reports about the

forum itself focused on the attendees rather

than any substance – and no official website

with recent or previous communiqués seems

to exist.

A slightly more substantial barometer for

the appreciation of democratic values in

the region was provided by the signing of

the ASEAN Human Rights Declaration the

following week in Phnom Penh. This too

did not receive universal praise. The United

Nations High Commissioner for Human Rights

officially welcomed the commitment, but

expressed concern that its language was not

consistent with international standards. The

US Department of State was more forthright:

“we are deeply concerned that many of

the ASEAN Declaration’s principles and

articles could weaken and erode universal

human rights and fundamental freedoms

as contained in the Universal Declaration of

Human Rights.” While naturally governments

have been presenting their signing as a big

step forward, many civil society and lawyers’

groups within ASEAN countries are sceptical

of any substantial changes to national laws.

Elections of ASEANThe reality is that, with the unique exception

of Myanmar, democratisation in ASEAN

countries is largely dependent on domestic

dynamics.

In Malaysia, political life has been dominated

by a de facto extended campaign period for

a general election that many predicted could

happen in 2012 but now looks set to occur

in early 2013 (the latest date allowed by law

is 27 June). This period has seen continued

argument across and within the two political

coalitions dominated by issues of electoral

reform, a contested rare earths plant, subsidy

reform, the budget deficit and social freedoms

– accompanied by racial and religious tension.

2013 in the Philippines will see the midterm

elections in which half of the Senate and all of

the House of Representatives will be elected.

The new mining policy and a reproductive

health bill will be amongst key issues.

Singapore’s political elite is still adjusting to

the unprecedented results of the 2011 general

election where the ruling People’s Action

Party received its lowest share of the vote

(60%) since independence.

Indonesia’s next slate of presidential and

legislative elections will be in 2014, while

Thailand expects a general election in 2015,

which is the followed by the Philippine

presidential election in 2016.

While democratisation in ASEAN will

continue to take a backseat to economic

integration, the association has always

openly acknowledged the diversity amongst

members’ systems of government, a legacy

of history and culture. Combined with

the ASEAN Way and the non-transfer of

sovereignty to any regional bodies, it will be

difficult to foresee any explicit cross-regional

calls for democratisation by national leaders.

However, with issues such as human

trafficking and human rights gaining credence

amongst civil society in the region with

the cognisance of Western democracies,

there are at least efforts to show further

commitments though they may be mostly

lip service for now. The hope amongst

ASEAN’s genuine democrats is that these will

substantiate themselves in due course.

Tunku ‘Abidin Muhriz

We are concerned that many of the ASEAN Declaration’s principles and articles could weaken and erode universal human rights and fundamental freedoms as contained in the Universal Declaration of Human Rights

Singapore - 2016Incumbent Lee Hsien Loong (People Action Party)Low Thia Kiang (Workers Party)Goh Meng Seng (National Solidarity Party)Chee Soon Juan (Singapore Democratic Party)Kenneth Jeyaretnam (Reform Party)Chiam See Tong (Singapore People’s Party)Desomnd Lim (Singapore Democratic Alliance)

Philippines - 2016Incumbent Benigno Aquino III, Liberal Party ineligible to run due to term limitations

Jejomar Binay (PDP LABAN)

Richard Gordon (Bagumbayan VNP)

Indonesia - 2014

Laos & Vietnam(single party state)

Brunei(no elections present)

NOTE

ELECTIONS ANDWHO’S RUNNING

Incumbent Susilo Bambang

Yudhoyono is constitutionally

barred from running for a 3rd term

Aburizal Bakrie (Golkar Party)

Malaysia - 2013

Incumbent Najib Razak

(Barisan Nasional)

Anwar Ibrahim (Pakatan Rakyat)

Thailand - by 2015Incumbent Yingluck Shinawarta (Pheu Thai)

Abhisit Vejjajiva (Democrat)

Cambodia - 2013

Incumbent Hun Sen

(Cambodia People Party)

Sam Rainsy (Sam Rainsy Party)

Myanmar - 2015Incumbent Thein Sein(Union Solidarity andDevelopment Party)Aung San Suu Kyi (National League for Democracy)Sai Ai Pao (Shan Nationalities

Democratic Party)

2012YEAR END EDITION

SUGARCANE

THE FORMATION

OF ASEAN

CARTELS

ASEAN countries have stepped up

cooperation in certain production

sectors this year. Major sugar

producers, Thailand, the Philippines,

and Indonesia created the ASEAN Sugar

Alliance. Meanwhile, the top rubber

producers, Indonesia, Malaysia, and

Thailand created the International Tripartite

Rubber Council (ITRC), which agreed on

a mechanism that would stabilise prices.

Lastly, rice producers in the region are

mulling the formation of a Rice Federation.

Thailand has been the main mover behind a

proposed rice cartel between rice exporting

ASEAN nations Laos, Myanmar, Vietnam,

Cambodia, and Thailand. The countries

are planning to establish the ASEAN Rice

Federation, with the aim to increase rice

prices by 10% annually. The combined

market share of these countries is currently

about 56% of total global rice trade or 19

Sóley Ómarsdóttir

million tonnes. Thailand accounts for the

largest share, as it is the source of 28% of

worlds rice exports followed by Vietnam

which sources 24.5%.

Sugar producers in Indonesia, the

Philippines and Thailand agreed in

November to establish the ASEAN

Sugar Alliance (ASA). The purpose

of the alliance is to be a platform of

cooperation in research and technology,

logistics and business development. The

partnership aims to assist the public sector

in eliminating obstacles hindering the

development of the sugar industry and

facilitate sugar sales in the region. The

three countries produce about 15 million

tonnes of sugar annually, with the largest

share or 10 million tonnes produced in

Thailand. Indonesia is the region’s largest

sugar importer and imports 1.6 million

tonnes of sugar from Thailand each year.

Other ASEAN countries are expected to

join the ASA in the near future, according

to the ASA chairman.

Vietnam is currently considering joining

the International Tripartite Rubber Council

(ITRC), which includes Thailand, Indonesia,

and Malaysia. Together the three countries

are responsible for 70% of global rubber

supply. The council have already agreed to

cut rubber shipments by 300,000 tonnes

to push up prices. Thailand, which is the

world’s largest rubber producer, is also

supporting higher rubber prices in Thailand

with a state-buying programme. The

government has bought 170,000 tonnes

since May and is planning to buy a further

250,000 tonnes by March next year.

Good for regional integration?The proposed rice cartel could possibly

work against regional integration since

other ASEAN members excluded from the

organisation are major rice importers and

would be forced to be price-takers if the

cartel is realised. The Philippines is the

destination of 17.3% of world rice imports

and Indonesia 16.8%. Plans for the cartel

have received criticism from international

organisations and could be challenged by

the World Trade Organisation (WTO).

Despite reducing rubber supply, the

Tripartite failed to increase global prices.

The ASEAN market share in the rice

market is even smaller than that of rubber

producers and therefore unlikely to be

successful in pushing up prices. In addition,

rice importers could move closer towards

self-sufficiency. Other major producers,

such as India and Pakistan, which currently

account for 36.7% of total rice exports,

could increase production and exports.

The approach of the sugar alliance

towards cooperation in technology and

development is more likely to be beneficial

for the region. These industries should

move away from price fixing and focus

their collective efforts to Research and

Development collaboration, information

sharing, raising standards, and improving

efficiency.

These industries should move away from price fixing and focus their collective efforts on research and development

SUGARCANE

2012YEAR END EDITION

ASEAN IN 2013:

ENTER BRUNEI

Many challenges lie ahead of ASEAN

in the next year. Security concerns

will be characterised by heightened

tensions in the South China Sea as the

dispute continues unresolved. China has

not been shy in asserting its interests in

the disputed territories with the ASEAN

countries and Japan

over the chain

of islands. Next,

uncertainty in the

global economy will

be characterised

by the rise of Asia,

slow recovery of

the US, and ongoing

Eurozone debt

crisis. Lastly, the

worsening effects of

climate change will

be more apparent as

Thailand withstood

2011’s flooding

and the Philippines is still reeling from

Typhoon Bopha. ASEAN countries stand

a greater chance of success if they face

these challenges together. What is clear

is that these forces will be testing the

region’s political economy. Only through

cooperation can the member states become

more resilient against external pressure and

shocks.

The incoming chair of ASEAN is Brunei. As

chair, Brunei will have the mandate to set the

agenda and issue the chairman’s statements

at ministerial and leader summits. This is a

powerful tool for a country with a population

Chayut Setboonsarng

of 400,000. Observers have dismissed

Brunei as diplomatic featherweight. However,

it has considerably high stakes in ASEAN’s

success. Unlike Cambodia, Brunei is a

dispute party in the South China Sea. This

compounds the issue and suggests that

Brunei may take a stronger line against

Chinese claims. How

well it can persuade

other ASEAN countries,

especially non-claimants

in Beijing’s satellite,

will hinge on the

diplomatic prowess of

its statesmen. Brunei’s

Foreign Minister Prince

Mohamed Bolkiah has

famously advocated for

“defence diplomacy,”

a doctrine that

focuses on continuous

dialogue and personal

relationships. This may

give some indication of how the Sultanate

will use its status as ASEAN Chair to

approach the dispute.

In the economic realm, ASEAN will continue

to work towards the ASEAN Economic

Community (AEC), which is severely behind

schedule. However, the AEC will be high on

the agenda of the next chairman. While it is

the responsibility of the member countries

to accelerate this AEC blueprint, Brunei

will have to be the stimulus. Economic

cooperation matches Brunei’s policy

of diversifying from its oil wealth and

developing other sectors of the economy; all

of new partnerships in the AEC can help it

achieve this objective.

Cooperation in humanitarian assistance

and disaster relief (HADR) is also pressing.

This provides a venue for ASEAN, through

Brunei’s chairmanship, to engage with

ASEAN’s dialogue partners. In addition to

the urgency, leaders consider HADR less

politically sensitive making it a good area

for collaboration. ASEAN can work with

its dialogue partners in improving HADR

such as faster response time and long-term

solutions for addressing climate change.

Lastly, the ASEAN Secretariat will also

welcome a new Secretary-General, Le Loung

Minh from Vietnam. A seasoned diplomat,

Mr Loung Minh was formerly Vietnam’s

ambassador to the United Nations in New

York City and Geneva and President of

the UN Security Council in 2008. His five

years at the Secretariat will be devoted to

increasing the efficiency of the Secretariat

and improving the monumental task of

coordinating the actions and commitment of

the ten countries.

2013 will be a critical year for ASEAN.

The challenges carried over from the

previous year will be more intense. The

ASEAN integration process is deeply

under resourced. Commitment to

ASEAN community building from people,

businesses, and political leadership from

all countries will be crucial in 2013. The

message Brunei is sending to ASEAN and

the world: thrusters on full.

The ASEAN integration process is deeply under resourced. Commitment to ASEAN community building from people, businesses, and political leadership from all countries will be crucial in 2013.

- Brunei will have the mandate to set the agenda and issue the chairman’s statements

at ministerial and leader summitry.This is a powerful tool for a country with a

population of 400,000

Editorial Team: Manissa van Geyzel, Chayut Setboonsarng, Sóley Ómarsdóttir and Paul Leong Consultant Editor: Tunku ‘Abidin Muhriz

The work in this issue of Captures are solely the opinions of the authors and do not necessarily reflect the position of the CARI or CIMB