Showing posts with label Cambodia. Show all posts
Showing posts with label Cambodia. Show all posts

Wednesday, 20 November 2024

Trade in Southeast Asia under Trump

Southeast Asia appears vulnerable to Donald Trump's threat of universal tariffs and a renewed trade war with China. Five of the region's six largest economies run trade surpluses with the United States. According to Nikkei Asia, all is not lost for Southeast Asia. Exports and economic growth would take a hit in the short term, but the region can reap rewards from trade diversion and substitution and might even take a tougher stance against Chinese firms' anticompetitive practices.

Geopolitically neutral, the area saw an increase in gross trade with both China and the US between 2017 and 2020 during the first Trump presidency. Vietnam, Indonesia, Malaysia and Thailand won big as companies from China, Japan, South Korea, Taiwan and the US relocated from China or duplicated their manufacturing bases in Southeast Asia to avoid US tariffs. 

Here's what you need to know: 

What is Trump's tariff threat?

The objective of Trump's stated trade policy is to return manufacturing jobs to the US and disentangle its supply chains from China. Trump and his advisers view China's trade advantage as unfairly derived from currency manipulation, intellectual property theft and forced technology transfers. 

During his first term, Trump used executive powers to impose tariffs of up to 25% on US$250 billion worth of electronics, machinery and consumer goods imports from China. Beijing retaliated with similar measures against US agricultural, automotive and technology exports. 

Now, Trump has proposed a 60% duty on all Chinese goods entering the US and tariffs of up to 20% on imports from everywhere else. That would be done with a mix of executive and legislative tools.

How bad could it be for Southeast Asia? 

Nearly 40% of Cambodian exports go to US, the largest exposure in ASEAN, in terms of proportion of total exports, followed by Vietnam at 27.4% and Thailand at 17%, according to Oxford Economics, putting all three at particular risk. Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said Thailand's economy might take a 160.5 billion baht ($4.6 billion) hit if Trump follows through on his promises.

Vietnam has the fourth-largest trade surplus in the world with the US The imbalance grew rapidly as Chinese, Taiwanese and South Korean firms used Vietnam to bypass Trump-era tariffs. Vietnam's fortunes could just as quickly turn, especially if the US continues to classify it as a "nonmarket economy," which tends to entail higher tariffs. 

Uncertainty about Trump's tariffs could prompt firms to pause or stop investment plans in Southeast Asia. US companies accounted for about half of the US$9.5 billion in fixed asset investments in Singapore last year, according to the city-state's Economic Development Board. Prime Minister Lawrence Wong was quick to remind Trump in a congratulatory letter that the US has maintained "a consistent trade surplus" with Singapore. 

Any blow to the Chinese economy will spill over to ASEAN countries that depend on Chinese consumption, export demand and tourism. Weaker appetite for Chinese goods will affect Southeast Asian suppliers of inputs to Chinese producers. Indonesia, Southeast Asia's largest economy, would suffer most because of its 24.2% export exposure to China, mainly of commodities.

Chinese exporters unable to send their wares to the US might divert them to Southeast Asia, where governments have fielded complaints from local producers hurt by dumping of metals, textiles and consumer goods. 

What is the upside for Southeast Asia? 

Southeast Asia's current manufacturing boom began because of the trade war. Analysts expect that, in time, trade substitution and diversion will outweigh the hit to growth. 

"We think an even greater pushback on China could drive more supply chain diversion, with Chinese businesses trading and investing more within Asia," said Jayden Vantarakis, head of ASEAN research at Macquarie Capital. 

The electric vehicle factories that some Southeast Asian governments aggressively courted could provide an economic buffer. "There is also EV demand growing outside the US, so I think there may actually be a net benefit to Indonesia. What will happen is that smaller countries that are trying to become carbon neutral, especially since petrol prices are increasingly expensive, will try to take over the supply and buy more electric cars," said Sumit Agarwal, professor at the National University of Singapore Business School. 

Trump's promised tariffs may provide ASEAN governments with the impetus to impose antidumping tariffs on Chinese goods, as Thailand did with rolled steel this year. Tighter US rules of origin could also give governments an opportunity to ensure that more high-value parts production and assembly are done locally. 

What will happen to Southeast Asian currencies and markets?

Trump's tariffs may ease the pressure on Southeast Asian central banks to further loosen monetary policy.

"Essentially, Trump's victory is inflationary for the world due to his planned tariffs, so the global monetary normalization or easing cycle likely won't be as sharp as previously thought, including in the Philippines," said Miguel Chanco, chief emerging Asia economist at Britain-based Pantheon Macroeconomics. 

Chanco told Nikkei Asia that Southeast Asian currencies will not strengthen as previously expected, due in part to the markets re-pricing the pace of easing by the US Federal Reserve and therefore continuing dollar strength. 

Among the six major Southeast Asian economies, the Thai baht and Malaysian ringgit have been the worst performers since Trump's victory, declining 3.2% and 2.9%, respectively, against the US dollar through Wednesday. 

Thai securities house InnovestX recommended stocks that will benefit from the strong dollar and weak baht. These include companies with significant export revenue like CP Foods and Delta Electronics, or which are involved in tourism, such as Airports of Thailand, property developers and hoteliers. 

How should Southeast Asian economies prepare? 

Governments are already taking steps to reduce their overreliance on either the US or China by deepening relationships with other countries and regions, and stressing their neutrality.

The Philippines sees its trade agreements with the likes of South Korea as a buffer against US shocks. "We want to see many more of these ... bilateral and multilateral agreements, so that we can open up many more opportunities," said National Economic and Development Authority Secretary Arsenio Balisacan. 

Former Thai Prime Minister Thaksin Shinawatra has suggested, governments could do more to support local companies investing in the US and other diversified manufacturing bases, as Japan did in 2020 with a US$2 billion program known as the "China exit subsidy." 

That support could include reducing operating and logistics costs, providing trade risk insurance and removing barriers to trade. Amending relevant laws to allow transshipment at Laem Chabang port, Thailand's main export channel, would be an invaluable boost to Thai exporters, said Kongrit Chantrik, executive director of the Thai National Shippers' Council. 

Southeast Asian economies should also focus on building resilience by strengthening intra-ASEAN trade, according to Jaideep Singh, analyst at the Institute of Strategic & International Studies, Malaysia.

"There should be efforts to promote economic integration through reduced non-tariff measures, improved trade facilitation and better coordination of regional value chains," he said.

Similarly, countries like Vietnam could "win brownie points" from Trump by buying aircraft engines or liquefied natural gas from the US, according to VinaCapital chief economist Michael Kokalari. 

But he added that fears are "hyperbolic" about trade under Trump, who visited Vietnam twice in his first term. There are no "significant reservations from American consumers to purchase 'made in Vietnam' products," he wrote. On the contrary, the US cannot re-shore everything, so "Vietnam may be viewed as helpful in [weaning] the US off of low-end China-made goods."

 

Wednesday, 6 December 2023

Horrors of Kissinger legacy in Southeast Asia

Half a century after Henry Kissinger drove the US foreign policy in Southeast Asia, the region continues to live with the fallout from the bombing and military campaigns backed by the former secretary of state, who died recently.

In Cambodia, unexploded ordnance left over from Vietnam War-era carpet bombings, orchestrated by Kissinger and President Richard Nixon, are among the remnants of war that continue to kill and maim adults and children, year after year.

The country of roughly 17 million is also still recovering from the genocide perpetrated by the Khmer Rouge, the brutal, ousted government that experts say gained recruits buoyed by desperation in the country after the relentless American assaults.

“(Before the Americans) the countryside of Cambodia had never been bombed out ... but (then) something would drop from the sky without warning and suddenly ... explode the entire village,” said Youk Chhang, executive director of the Phnom Penh-based Documentation Center of Cambodia.

“When your village is bombed and you were told that it’s some Americans that dropped the bomb and when you lost your sister, your brothers, your parents ... what is your choice? Be a victim and die by the bomb or fight back,” said Chhang, himself a survivor of the Khmer Rouge’s notorious killing fields, whose organization now documents the legacy of the genocidal regime.

Even today, the generation born after the Khmer Rouge may largely not be aware of the names or legacy or Kissinger and Nixon, Chhang added, “but (they know) the history of the B52 (bombers) and the American involvement in Cambodia.”

Kissinger’s death at the age of 100 last week has placed back into the spotlight the actions of the controversial titan of American diplomacy, with some of the starkest critiques coming from Southeast Asia, where the US was already at war when Nixon took office in 1969.

Kissinger, who served as his national security advisor and later secretary of state, was awarded the Nobel Peace Prize in 1973 for his role brokering a ceasefire that ended US involvement in the war in Vietnam – and came on the heels of heavy US bombing across northern Vietnam.

But documents declassified in recent decades have shown an unvarnished picture of the closed-door calculations that saw Kissinger and Nixon ramping up covert bombings across Cambodia and extending a secret war in Laos as they sought to choke off North Vietnamese supply lines and quashes Communist movements in the countries.

It’s not known how many people died during this time in Cambodia and Laos, which were officially neutral in the war, but historians say the number could be well over 150,000 in Cambodia alone.

Documents have also revealed what analysts say was the role of Nixon’s successor Gerald Ford and Kissinger in signaling America’s approval of Indonesian President Suharto’s bloody 1975 invasion of East Timor, estimated to have left at least 100,000 dead.

“Kissinger and Nixon saw the world in terms of getting the kinds of outcomes that they wanted – people who were in weaker or marginalized positions, they didn’t really matter that much. So the fact that they were made unwilling pawns, the fact that they became literally cannon fodder, was of no consequence,” said political scientist Chong Ja Ian, an associate professor at the National University of Singapore.

“This sort of action does have a cost on the US more broadly – a lot of the continuing skepticism and suspicion about the US and US intentions was born out of actions such as what Kissinger and Nixon had engaged in.”

From October 1965 to August 1973, the United States dropped at least 2,756,941 tons of ordnance over Cambodia, a country roughly the size of the US state of Missouri. That’s more than the Allies dropped during World War II, according to an account by Yale University historian Ben Kiernan.

Such ordnance in Cambodia, Laos and Vietnam, as well as landmines and other explosives from the decades of conflict that followed in the destabilized region, continue to pose a grave risk to people living there.

Nearly 20,000 people have been killed by mines and unexploded ordnance between 1979 and this past August in Cambodia, with more than 65,000 injured or killed since 1979, according to government data. Most of those casualties are from landmines, but more than a fifth are victims of other kinds of leftover explosives, which include those from American campaigns, experts say.

During the first eight months of this year, four people were killed, 14 injured, and 8 needed amputations due to explosives, according to government data. Experts say the devastation – which is especially acute for people in rural areas – will go on for years to come.

“Twenty, thirty percent of everything shot fired and dropped from an airplane doesn’t work ... we’re going to be dealing with that stuff over here for probably 100 years. That’s Kissinger’s legacy,” said Bill Morse, president of the nonprofit Landmine Relief Fund, which supports organizations including Cambodia Self-Help Demining.

That group works not just to diffuse explosives, but also train people to recognize them. Morse says children across the country are often familiar with how to identify landmines largely planted from years of regional fighting, but may be less aware of the range of unexploded ordnance, often from American operations, which continue to drive injuries and deaths.

Kissinger is widely seen as shrugging off responsibility for wartime decisions and the toll of the campaign in Cambodia, which government documents indicate he helped devise. One journal entry from Nixon’s chief of staff describes Kissinger as really excited as the bombing campaign got underway in 1969.

In a 2014 interview with American radio broadcaster NPR, the diplomat deflected criticism when asked about the bombings in Cambodia and Laos, instead arguing that the B-52 campaigns were less deadly for civilians than the drone attacks in the Middle East ordered by US President Barack Obama.

“The decisions that were taken would almost certainly have been taken by those of you who are listening, faced with the same set of problems. And you would have done them with anguish, as we did them with anguish,” he said at the time.

Today, in Vietnam, Laos and Cambodia government-run agencies and other groups continue to work to remove explosive remnants of war, with experts saying the US government has become the world’s biggest funder of unexploded ordinance and landmine clearance in the world.

But aid groups who are also working on the issue say that the US and other countries shouldn’t lose sight of the on-going consequences of conflict in the region.

“There is particular concern that funding for dealing with the aftermath of historic conflicts in Southeast Asia and elsewhere in the world might be jeopardized if funds are diverted to address new conflict-related crises,” a spokesperson from the United Kingdom-based Mines Advisory Group, which clears explosives in countries including Cambodia, Laos and Vietnam, told CNN.

“The global community has a moral responsibility to all those in the world whose lives continue to be blighted by the impact of wars that ended before many of them were even born.”

 

Sunday, 3 September 2023

ASEAN losing its composure

Southeast Asia is at a dangerous crossroads. Once regarded as a haven of relative stability and economic progress, today the region is buffeted by escalating geopolitical struggle between the United States and China, state fragmentation in Myanmar and internal political conflicts that are exposing the limits of democratic reform and the dangers of populism.

These issues will be on full display at the annual leaders' summit of the Association of Southeast Asian Nations next week in Jakarta and may well intensify as the group's rotating chairmanship passes afterward from Indonesia to Laos, the bloc's smallest and poorest member.

Civil society and the international community have long looked to ASEAN, which has reliably preserved regional peace for decades, to deal with major challenges.

But the bloc is now deeply divided. On Myanmar, for example, mainland states have put a premium on state integrity and security over political change and reform while more democratic maritime states, led by Indonesia, regard military rule as intolerable.

In an alarming public display of regional dissonance, Thailand recently directly engaged with Myanmar's military junta without informing Indonesia. By playing on such divisions, the junta has avoided complete ostracization.

The region is also divided over the extent to which China poses a threat and whether it should be contained by the United States and its allies.

Laos, Thailand and Cambodia have close ties with Beijing, reflecting proximity or long-standing political alignment. Vietnam views China with deep historical enmity but maintains a dual-track relationship sustained by ties between the two nations' ruling communist parties. Even so, Hanoi has drawn closer to the US.

The Philippines has effectively checked out of ASEAN because officials in Manila believe the group has done nothing to defend the country's maritime claims against Chinese intrusions, noting its failure to support the 2016 arbitral ruling by a court in The Hague affirming Philippine sovereignty over contested areas.

"We might as well be allied with Taiwan, Japan and South Korea," said a former official after the recent confrontation between a Chinese coast guard ship and Philippine vessels attempting to resupply troops on Second Thomas Shoal in the disputed Spratly Islands. Manila has indeed moved closer to the US since Ferdinand Marcos Jr. became president last year.

Compounding such rifts over external issues is a distinct political divide. The rise of democratic reform movements in Indonesia, Malaysia and even Thailand over the last 30 years has led to more frequent changes in national leadership.

As a result, the personal relationships that held ASEAN nations together under more authoritarian regimes have frayed. Some democratic leaders have begun to wonder why they need to spend so much time with tedious ASEAN meetings when their domestic constituents are more interested in social equality and food security than strengthening regional identity.

All this has made Southeast Asia more fragile and isolated than it appears. Great power leaders who once routinely attended regional summits now often skip them. The US and China prefer bilateral engagements during which they can press for alignment. While he will skip this month's ASEAN summit, US President Joe Biden will visit Vietnam right afterward, reportedly to sign a bilateral strategic partnership agreement.

ASEAN has lost its much-touted centrality and is frankly on life support as an autonomous multilateral platform, reflecting to some degree the decline of multilateralism globally.

What can be done to revive effective multilateral cooperation and rescue the region from fracture by competing great powers and division by political dispute?

Civil society has traditionally helped in quiet ways to build and sustain the sinews of connectivity in the region. Networks of academics and think tanks helped promote connections and address sensitivities among governments and offered regional policy ideas.

Many of those veteran scholars are now retired or deceased. The younger generation has not filled the void, in part because the rivalry of the great powers has polarized much of their ranks.

A possible new approach would be to launch a recovery process to help reconnect the 10 ASEAN states. This would involve identifying common challenges rather than relying on outdated institutionalized processes or weak mechanisms to manage conflicts and protect human rights.

There is clearly a need for cross-bloc dialogue about what can be done. A bottom-up approach could offer innovative ideas and help ease the acrimony that has built up over the past few years. Post-pandemic, there is an urgent need for more contact and understanding in a region vastly more challenged than it was even five years ago.

The US and China are locked in an epic, dangerous rivalry that treats Southeast Asia as a battleground, so they will not be of help. But midsized powers and traditional partners such as Australia, the EU and UK could support regional cohesion if they spent less time pushing Western values and seeding animosity toward China, which even if justified, generates further division.

Southeast Asian governments and their leaders could help by speaking with one voice on critical issues and maintaining traditional balancing approaches to great power competition. As things stand today, there is a real chance that the Philippines and China will come to blows over the Second Thomas Shoal.

That would bring the United States and China dangerously close to war. Will ASEAN leaders be able to combine and collaborate to prevent any crisis from escalating? Right now, that looks doubtful.