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Will Mahathir Reset China-Malaysia Trade Relations?

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A shock electoral upset has just returned 92-year-old Dr Mahathir Mohamad to the prime ministerial chair in Malaysia. The run-up to this climax was muddled by a miasma of fake news, lurid allegations and outright conspiracy theories from eitherside of the political divide. China-baiting was inevitably drawn into this tawdry mix despite mainland investments being a stabilizing main stay of the local economy.

According to an Economic Intelligence Unit report last year, Malaysia was the fourth-largest recipient of mainland Chinese direct investments – right behind Singapore, United States and the autonomous Chinese province of Hong Kong. Although the sum total of Chinese investments in Malaysia has not been adequately tallied,the US$100 billion Forest City project provides a snapshot of the staggering amounts being invested into the local economy.

While former Prime Minister Najib Razak hailed these investments as an imprimatur ofhis government’s investor-friendly policies, the opposition camp (and new government) accused him of “selling out to China”. In reality, one doubts whether foreign consortiums canmatch the scale, cost-effectiveness and speed of execution of many Chinese-led projects in Malaysia.

Business Compradors

Dr Mahathir has particularly taken issue with the inadequate number of local jobs created by Chinese investments in Malaysia. It is an argument not without merit.Overseas Chinese infrastructure projects are known for their heavy reliance on mainland labour, machines and supplies – of the lock, stock and barrel variety – tokeep costs, graft and middlemen interference to the lowest possible scale.

Curiously, the backbone of Dr Mahathir’s electoral tsunami came from the ethnic Malaysian Chinese community who openly hailedthe global ascent of China. That was until theydiscovered thatmainland business models accommodated as few middlemen as possible.It was Alibaba on a massive scale, missing 40 thieves and in perennial need of 40innovators.

Many Malaysian consumerssave thousands of ringgit each year by purchasing a variety of consumer products directly from China instead of forking out a hefty mark-upat local stores.Unsurprisingly, there are now growing calls to tax online purchases from China. This is not going to help budget-strapped Malaysians who voted in the new administration on the back of complaints over rising living costs. Malaysia’s shadow economy has been estimated by various studies to range between 30 percent and 47 percent of its GDPup till 2010.

The anti-China narrative therefore may be couched in terms of multifaceted grievances like jobs and the South China Sea but it primarily boils downtoincentives for middlemen who contribute little or nothing in terms of value-additions to projects, productsor services offered by mainland companies. These modern-day compradors have an ally in another area bereft of value – added or otherwise.

Media Compradors

The biggest impediment to the Malaysian economy is not China, its business modus operandi or the lack of local talent. It is the Malaysian media which has abjectly failed to relay grassroots ideas and innovations to national policy-makers for decades.

The author himself vividly remembers the lament of Dr Mahathir’s former national science advisor on the dearth of science journalists in Malaysia. This translates to recurring losses in taxpayer money.There is an oft-told account of how a fact-findingdelegation to the United States, seeking particular expertise in renewable energy technology,were told that the expert they were looking for was a Malaysian academic back in Kuala Lumpur!

Researchers needing critical economic or scientific data on Malaysia are likely to get them from foreign sources as even google cannot cope with the bottomless insipidity and juvenile meanderingsof the local media. Publicity-seeking experts with dodgy backgrounds are routinely sought for their banal insights and quotes in return for guaranteed filler spaces in a lack lustre media.Malaysia is gradually losing its economic and intellectual competitiveness due to the entrenched practise of mediocrity promoting mediocrity – egged on by Western interests.This forms the main backdrop to the current anti-China narrative.

Local media stalwarts privately blame politicians, in particular Dr Mahathir himself (during his previous 22-year reign) for the lack of media vigour and freedom in Malaysia. While media restrictions undeniably exist, one wonders how proposed articles on topics such as Open Governance could be seen assubversive.

It is high time to drain the swamp in Malaysia. Dr Mahathir has already indicated that the bloated 1.6 million-strong civil service in Malaysia would be pruned to promote economic and government transparency. For decades, successive governments had rewarded personal loyalty with plush posts and contracts. Malaysians now have another chance to demand efficient, meritocratic and transparent governance. Not mass-mediated bogeymen, viral passions and pies-in-the-skies.

The billion-dollar question now is whether the new administration will be able tousher in a transparent and vibrant media – one that can explore greater synergies within and abroad.Otherwise, Malaysia’s relations with its neighbours and trading partners are bound to deteriorate, along with its economy.

An abridged version of this article was published by CCTV’s Panview on May 14, 2018

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Southeast Asia

Indo-Pacific region and elections in New Caledonia

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The results of the May 12, 2019 parliamentary elections in New Caledonia reflect a lingering political split in this French territory, comprising dozens of islands in the South Pacific. French loyalists won 28 seats in the 54-strong local legislature, just two seats more than the advocates of the region’s greater autonomy and even complete independence from Paris.

The local society is divided along political and geographical lines. The indigenous Melanesians (Kanaks) have been in the minority since 1969, and currently account for 39 percent of the islands’ population. They make up a 70-percent majority in two of the three provinces of the archipelago (the Northern Province and the Province of Loiote), and a 26-percent minority in the Southern Province, where pro-French sentiment is strong.

Elections in New Caledonia are more than just a local development and are a source of serious concern for both France and Australia.

France’s position. New Caledonia is France’s most faraway colony (17,000 km). The New Caledonians may hold two more referendums on independence before 2022 in keeping with the terms of the Noumea  agreement of 1998, which allows a second vote if the first one leaves the proponents of independence in a minority. During the first plebiscite held on November 4, 2018, 57 percent of New Caledonians voted in favor of preserving the archipelago’s status as an overseas French territory.
If New Caledonia gains broad autonomy, let alone independence, from France, this would change the strategic security pattern in the region, giving a boost to secessionist sentiments in US and European overseas territories  (French Polynesia, Reunion, Wallis and Futuna with an exclusive economic zone of 226,000 sq. km.), and seriously impairing Paris’ influence in the region. 

The Indo-Pacific region (IPR) is viewed by France as the Paris-New Delhi-Canberra-Noumea axis. (Noumea is the capital of New Caledonia).

By maintaining its sway over New Caledonia, France will retain its membership of the club of world powers, its continued role in the IPR and participation in theQuadrilateral Security Dialogue (Quad) between the United States, Japan, Australia and India, designed to check China’s attempts to secure for itself a place in the Indo-Pacific region.

Paris fears that an autonomous or fully independent New Caledonia would seek financial assistance from Beijing in exchange for allowing Chinese companies access to the archipelago.

New Caledonia is also a mainstay of French military presence in the Pacific, a platform for scientific research and a source of strategic resources, such as   chromium, cobalt, manganese, gold, copper, lead, and nickel. The archipelago boasts the world’s fifth largest reserves of nickel, whose exports are projected to reach 4 million tons in 2021.

Therefore, Paris is trying, first and foremost, to minimize the consequences of the current divisions within the local pro-French political parties – Calédonie Ensemble, Le Repubilcans Calédoniens, etc. And with good reason too, because even despite their defeat in the May 12 vote, the secessionist forces have been gaining strength increasing their presence in the local parliament from 18 to 25 seats in the decade between 2004 and 2014, and, according to the results of the May 12 elections, bringing their membership to 26.

The indigenous Kanak population is getting politically active too, showing a hefty 81 percent turnout in the November 4, 2018 independence referendum, which exceeds by more than twice the 40 percent voter turnout in national elections in France proper. Moreover, a meagre 3 percent of ethnic Kanaks voted for loyalists. By 2022, the number of Kanak voters is expected to rise even further, while that of French voters will remain at the present level.

Australia’s position. In the southwest, New Caledonia borders on the exclusive economic zone of Australia, with which it shares the region’s potential hydrocarbon reserves. In the southeast, it borders on the island state of Fiji, which is busy building up ties with China.

Canberra worries about the impact that the developments in New Caledonia could have on the secessionist movements on the Island of Bougainville in Papua New Guinea and West Papua (a province of Indonesia), all the more so given the threat of Islamism and illegal migration. Canberra also prioritizes cooperation with Indonesia in the field of economics, science, culture, defense, and in tackling the consequences of natural disasters.

An uncontrolled process of sovereignty declarations in the South Pacific region threatens to destabilize the regional security system Canberra has been building there for quite some time now. New Caledonia’s potential independence would jeopardize an existing defense agreement between Australia and France, which provides the Australian Navy with access to French military bases in the archipelago.

Differed as they are on the format of cooperation with China, the Australian government and the opposition still recognize the need for building up trust between the two countries, and, above all, for  promoting closer economic ties with Beijing.

Here, however, Canberra’s vision about future of the IPR differs in many respects from Paris’. Australia is careful to avoid a head-on clash with China in the region, preferring instead to seek a balance of interests, mindful of the positions of all regional actors, especially international associations, such as the Quad, FRANZ, ANZUS, APEC, Pacific Islands Forum, etc.

France, for its part, sticks to a more confrontational tactic as it tries to maintain its status as a Pacific power. However, the financial assistance that the states of Oceania are getting from Australia ($1.3 billion) is way bigger that what is provided by France ($100 mln.). (2)

Simultaneously, Canberra would like to see a rise in the humanitarian aspect of the French policies in Oceania.

 First published in our partner International Affairs

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Indo-China integration meets Cambodia’s interests

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Cambodia, which is located between Thailand and Vietnam and has a 440-kilometer coastal zone which is separated from the rest of the country by a mountain ridge, is in need of a “third neighbor” in order to survive economically and politically, and for improving its export opportunities.

Pnomh Penh’s hopes for partnership with the United States fell through. After Washington passed the Cambodia  Democracy Act in 2018 in support of the Cambodian opposition, it became clear that the US was ready to use legal instruments against Pnomh Penh to pursue its interests in the region.

At present, Cambodia’s “third neighbor” is China. Cambodia is doomed to participate in the Chinese infrastructure project “One Belt, One Road” because otherwise it will not get access to South East Asia markets. The extent to which the Cambodian economy is sensitive to market changes was demonstrated by Italy, which initiated extra duties on Cambodian rice imports into the EU. Rice is the main item of Cambodian food exports. Rome thereby secured a review of the Cambodia-EU “Everything Except Weapons” trade scheme.

In the course of a visit to  Beijing in January 2019 by Prime Minister of Cambodia Hun Sen, the Chinese side promised to allocate $ 588 million as aid for Cambodia by 2021, to increase rice imports to 400 thousand tons and boost bilateral trade volume to $ 10 billion by 2023 . This is designed to ensure the economic survival of Cambodia.

In foreign policy, Cambodia avoids aggravating relations with its neighbors lest there appear conflicts detrimental to the weak Cambodian economy, and underscores the importance of maintaining peace in the Asia-Pacific Region.

Phnom Penh is fully aware that it can improve its economic performance only on condition it maintains a long period of peace and strict neutrality. Cambodia is among the world’s fastest growing economies (7.5% in 2018). If the country is to preserve and build on the current pace of development, it will have to boost exports of manufactured goods (80% in the structure of exports) and rice, and should encourage tourism and attract foreign investment.

Phnom Penh is worried about two major problems in Asia – the North Korean issue and territorial disputes in the South China Sea as part of a greater US-China conflict.

Pnomh Penh sees the essence of the North Korean issue in that Cambodia traditionally maintains close economic and political ties with both Koreas. Cambodia and North Korea form a united front at international forums on the issue of human rights, North Korean military experts have assisted Cambodia with the development of a demining service, and North Korea has invested $ 24 million in the country’s tourism industry.

South Korea is the second largest investor for Cambodia after China. By 2018, the total volume of South Korean investments in Cambodia had reached $ 4.56 billion. For Pnomh Penh, Seoul is an influential economic player and cooperation with it contributes to the diversification of the Cambodian economy.

South Korean capital helps Phnom Penh to dilute the financial presence of Chinese investors in the Sihanoukville Special Economic Zone – the country’s main economic gateway. For Cambodia, the conflict between the two Koreas is fraught with significant financial and political losses.

In the opinion of Pnomh Penh, diplomatic clashes between the United States and China over territorial disputes in the South China Sea may exacerbate Cambodian-Vietnamese relations. Although relations between Cambodia and Vietnam have  always been tarnished by conflict,  Phnom Penh, following a policy of strict neutrality, has been promoting broader cooperation with Hanoi in recent years.

As Vietnam, unlike China, is moving closer to Washington, Phnom Penh does not want to find itself in a situation where he will have to make a clear choice in favor of one of the parties to the conflict. Militarization of Vietnam, whose territory blocks Cambodia’s access to the sea, will be ruinous for the economy of Cambodia.

Vietnamese seaports are the final point of the Southern Economic Corridor, which runs from Myanmar via Thailand and Cambodia to Vietnam. Phnom Penh pins  big hopes on cooperation within the framework of the Southern Economic Corridor. An ASEAN report describes Cambodia as a perfect place for an export-oriented economy that serves as a binding link for the regional economy as a whole.

Given the situation, it can be assumed that Phnom Penh’s policy over the next few years will focus on diversifying the economy, attracting a greater number of foreign economic partners (Japan, Australia, Russia, the EU), strengthening regional integration within the Southern Economic Corridor and within the framework of the ASEAN, and minimizing US-North Korean, Sino-US, and Sino-Vietnamese differences. 

First published in our partner International Affairs

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Vietnam Fisheries Brace for EU Yellow Card Review

James Borton

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Vietnamese fishing vessels credit: VNA

The tides wait for no one and each day fisheries, particularly those closest to the shores, are over-fished and harmed by industrialization. For emerging economies like Vietnam, the issuance of a yellow card by the European Union caught the attention of fishers and government officials alike, with a clear warning that the country has not been tackling illegal, unreported and unregulated fishing.

Tran VanLinh, the chairman of the Danang Fisheries, like others, is worried about the industry’s export future. After all, the fisheries sector is a cornerstone of the Vietnamese economy and has contributed to an average growth rate of 7.9 percent. Nevertheless, he understands that the yellow card offers not only a roadmap for the government but also for all people to address long-standing conservation and sustainability issues.

“After receiving the commission’s carding system notice, Vietnam has tried to satisfy all the requirements imposed by the EU. We do need to protect our sea and environment,” claims Linh.

The overall picture in the South China Sea or East Sea as Vietnam refers to this body of water, is grim. Total fish stocks have been depleted by 70-95 percent since the 1950s, and catch rates have declined by 70 percent over the last 20 years. Giant clam harvesting, dredging, and artificial island building in recent years severely damaged or destroyed over 160 square kilometers, or about 40,000 acres, of coral reefs, which were already declining by 16 percent per decade.

Challenges around food security and renewable fish resources are fast becoming a hardscrabble reality for more than just fishermen. With dwindling fisheries in the region’s coastal areas, fishing state subsidies, overlapping EEZ claims, and mega-commercial fishing trawlers competing in a multi-billion-dollar industry, fish are now the backbone in this sea of troubles.

Meanwhile, Vietnam’s fisheries employ more than 4.5 million people and the nation is ranked as the world’s fourth largest exporter of fish commodities after China, Norway and Thailand. In 2016, the country’s seafood products were exported to 160 countries and territories with the three major markets of the US (20.6%), EU (17.3%), and Japan (15.7%). Vietnam is currently the largest tra fish supplier and fourth biggest shrimp exporter in the world.

There’s even greater pressure placed on fishermen to meet Vietnam’s ambitious seafood sector target of earning 10 billion USD from exports this year, up 10 percent from 2018.  According to the Vietnamese Association of Seafood Exporters and Producers (VASEP), the goal can be achieved largely from $4.2 billion from shrimp exports, $2.3 billion from tra fish exports, and some $3.5 billion from other seafood shipments.

Meanwhile, coastal fish stocks have become either fully exploited or overfished. As a consequence, the South China Sea is considered Vietnam’s vital fishing ground.

With a delegation of the EU’s Directorate of Maritime Affairs and Fisheries expected to arrive at the end of May, Vietnam is urgently adopting measures to convince inspectors that they have smartly corrected their fishery conservation course.

 “The Danang Fishery Department has implemented numerous educational programs to teach fishermen about the new laws and to train them about the EU requirements,” adds Linh, a respected industry leader.

From Hai Phong, Da Nang, LySon, Phu Quoc and Vung Tau, more fisheries are attempting to reign in bad practices and reach towards modernization, eliminating the destructive fishing practices which affects fishery resources. However, more work is still required to revise their legal framework to insure compliance with international and regional rules, to increase the traceability of its seafood products, and to strengthen the implementation of its conservation and management of fisheries resources.

Mr. Le Khuon, chairman of the fishery association in An Vinh Village located in Quang Ngai Province and a former fisherman, who has stared down an aggressive Chinese fishing vessel or two near the Paracels, knows the hardships of fishing. “Of course the yellow card does impact on our local fishermen since we export sea cucumbers to the EU.”

Along with others in the area, Ly Son fishermen recognize the importance of marine protected areas since the coastal areas are overfished. “It’s a hard life and I have lost friends to the sea,” claims 42 year-old Tran Phuc Linh, who has also been harassed by the Chinese since he often fishes near disputed historic fishing grounds in the Paracel Islands.

In fact, the fishing incidents continue in the Spratlys, where China’s mega steel hulled vessels regularly intimidate Vietnam’s colorful wooden trawlers. Just two months ago, a fishing trawler moored at Da Loiis land, in the Paracel archipelago was chased by a Chinese Maritime Surveillance vessel before it crashed upon the rocks and sunk without loss of life to crew.

According to analyst and consultant, Carlyle A. Thayer, “the Chinese government, as a matter of policy, employs it commercial fishing fleet as a third arm of its maritime forces after the regular navy and civilian maritime enforcement agencies, now grouped into a national Coast Guard.”

Linh and his wife do not want their two teenage sons to make their living as fishermen. They know the perils at sea from the seasonal typhoons and the threats associated with patrol and interdiction of ships violating mutually agreed upon fishing restrictions.

Sent by their governments to find food for their people, fishers find themselves on the front lines of this new ecological battle. These fishing sentinels and their trawlers are fighting the maritime disputes between China and its neighbors.

This fishing competition for available fish has resulted in increased number of fishing vessel conflicts. These hostile sea encounters have been witnessed in Indonesia waters whereat least 23 fishing boast from Vietnam and Malaysia have been accused of poaching in that nation’s waters.

As a result, Indonesia’s fisheries minister, Susi Pudijastuti, ordered the dynamiting of these boats and over 170 fishing vessels have been sunk in their waters over the past several years. The increasing number of fishing incidents reflects not only deeply different interpretations and application of the law of the sea, but a fundamental conflict of interest between coastal states and maritime powers.

Even with these threatening clouds on the horizon, some fisheries are going about responsibly reigning in illegal fishing. In Da Nang, its 509 fishing trawlers (all longer than 15 metres) have installed with GPS. This includes the seven steel hulled vessels subsidized by the government’s generous loan program.

The mandatory installation of the GPS offers more assurance in the identification of catch origins and it also helps that more fishermen are also completing and submitting the required fishing diary or logbook.

Meanwhile, the government insists that statistics on fishing vessels, fishing logs and fishing yields of each commercial trawler are now part of a Vietnam Fish Base, a nationwide fishery software database in accordance with the law.

Within the disputed territory, there are over 1.9 billion people, seventy-five percent of them living within one hundred kilometers of the coast. Nearly eighty-five percent of the world’s fishers are concentrated in Asia, particularly in the South China Sea, according to the Food and Agriculture Organization of the United Nations.

Subsequently, fishing remains a politically sensitive and emotionally charged national security issue for all claimant nations. This ocean plundering presents the region with a looming food crisis. Any effort to balance the economic benefits with the security context within the South China Sea will require a coordinated, multi-level response from scientists, historically engaged in collaborative research and already addressing issues of sustained productivity and environmental security in the region.

It’s a prevailing view that the collapse of fisheries is the major driver of competition for marine resources. This continues to result in a lack of respect among claimants for mutually agreed-upon fishery restrictions within 12 nautical miles of outposts and in the recognition of management area within 200 nautical miles of coastline. Last year 86 Vietnamese fishing boats were destroyed by Indonesia for illegally catching fish in its waters.

However, senior Vietnamese officials are confident that these violations are now being eliminated, if not sharply reduced.

“ Because local governments and relevant agencies such as the Coastguard, and Border guard are conducting more surveillance and enacting stern measures in monitoring and investigating; fishing violations are reduced,” claims Nguyen Manh Dong, Director General of the Department of Maritime Affairs, and National Boundary Commission.

He’s quick to add that while the EU’s requirements have been fulfilled including port control, some cases still happen, particularly with Indonesia.

To offer additional counter-balance, Vietnam’s Fisheries Resources Surveillance Department has stated that it is working to raise awareness of maritime boundaries and international maritime laws among its fishermen, apart from conducting frequent patrols to prevent potential violations

The complicated nature of the Vietnam’s East Sea or the South China Sea (SCS) disputes, makes short term resolution of fishing disputes difficult. More parties, believe that proper management of these disputes to insure stability  becomes a priority.

“Vietnam will never tolerate or permit activities related to illegal, unreported and unregulated (IUU) fishing,” adds Deputy Minister of Agriculture and Rural Development (MARD) Vu Van Tam.

For example, Binh Dinh province is adopting necessary measures to remove the “yellow card” status. All local fishing boats are required to obtain certificates of registration, inviting local authorities to review design documents, supervise the building, improvement and repairing of fishing vessels.

Among policy shapers, and marine scientists, there’s a general consensus that the best approach for managing SCS disputes and addressing IUU issues is to set aside the sovereignty disputes and jointly develop and manage the natural resources, such as fisheries. While advancing fisheries cooperation in the SCS has been increasingly recognized as a political, ecological, socio-economic and security imperative, a crucial question remains unanswered. What objective can be achieved through fisheries cooperation in the SCS?

Marine biologists like Professor Nguyen Chu Hoi advocate the creation of ecosystem- based fishery zones covering reefs that are vital to regional fish stocks, especially in the Spratlys and Paracels. This action requires the adoption of an urgent cooperative marine management system, regardless of the location of their territorial and maritime claims.

While the growing demand for fish by global markets can fray even the strongest fisher’s net, the challenge for Vietnam is the imperative for management of its declining fisheries in order to create long-term sustainability. The protection of the “commons” requires more than a pass fail report card from the EU.

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