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Southeast Asia

Limits to the Asia-Pacific Growth

Meseto Abe

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Following the massive  socio-economic success of the largest continent, corruption is the next battleground in the development of the Asia-Pacific. Lately, it has hampered inclusive and sustainable development and is a primary cause of the difficulty experienced by developing Asian-Pacific countries in advancing beyond the middle-income bracket.

Fostered by weak regulation and enforcement frameworks, corruption comes in many forms, including bribery, embezzlement, and cronyism. It undermines not only business ethics and positive social norms, but also people’s trust in political and economic systems, institutions, and leaders.

Transparency International’s Corruption Perceptions Index (CPI), which measures corruption in 180 countries annually, reveals that high-income countries experience far less corruption than their lower-income counterparts do. With Singapore in sixth place and Afghanistan in 177th, the Asia-Pacific is home to countries at both extremes of the CPI. China and India, the world’s most populous countries, are ranked 77th and 81st, respectively.

Countries in the Asia-Pacific have made some efforts to combat corruption, but that the problem remains widespread throughout the region tells us that these are not enough. In fact, there seems to be a willful lack of attention among these countries about tackling corruption head-on.

Corruption affects every aspect of society

This lack of attention may be due to the widespread belief that corruption helps “grease the wheels” in business activities. Top companies pay large amounts to receive faster and better service from authorities; this, the thinking goes, makes the economy more efficient. In the Asia-Pacific, this often manifests itself as bribes, gifts, banquets, and favors given by business entities to politicians and bureaucrats. In the view of its proponents and those who tolerate it, corruption speeds up the wheels of commerce and positively impacts companies’ development by easing bureaucratic barriers. Corruption can also facilitate a company’s entry into a highly regulated economy that is difficult to penetrate otherwise.

But these benefits hold true only for a small number of companies. Corruption has an inverse U-shaped relationship with company revenue: a company may gain benefits when it pays bribes, but the benefits are subject to diminishing returns after a certain amount. Also, corruption has a significant negative correlation with companies’ overall satisfaction with their business environment. These two points seem to indicate that rather than “greasing the wheels,” corruption actually “sands the wheels.”

In fact, corruption has adverse effects on overall economic development. It reduces investment, lowers growth rates, and negatively impacts efficiency. At the company level, corruption absorbs returns from business activities and distorts entrepreneurial spirit and behavior. Companies that are involved in corruption report rises in operational costs of 10 percent on average, in addition to greater uncertainty. These factors ultimately have an impact on their strategic and investment decisions. This could explain why some studies have shown that foreign direct investment in countries that are perceived as corrupt is almost 5 percent lower than it is in countries that are relatively corruption-free.

Corruption also negatively impacts political and societal landscapes. As money that is meant for the public is funnelled away, the cost of providing and maintaining public goods and services increases. Vital goods and services like roads and telecommunications networks eventually fall into disrepair or are not delivered at all due to a lack of funds.

Corruption also undermines the rule of law and the government’s ability to combat externalities such as pollution and security risks. In addition, it hinders development by diverting resources away from productive sectors and reducing human capital and tax revenues. Corruption has been shown to decrease national productivity and diminish the effectiveness of foreign aid. On a macro level, these and other effects of corruption can strip a country of gains from trade in the absence of good institutions. Corruption also makes it more difficult for the poor and other disadvantaged groups, such as women and minorities, to obtain public services, thus deepening inequality.

How can countries reduce corruption?

Governments should introduce anti-corruption laws, which typically require government officials to declare their assets, and enforce strict penalties for corrupt practices. For example, in the wake of recent high-profile revelations of bribery and embezzlement at major state-controlled enterprises, Singapore’s anti-corruption watchdog plans to strengthen anti-graft laws with more severe financial penalties.

The introduction and strengthening of anti-corruption laws can have a massive impact. In 2005, India passed the Right to Information Act, which aimed to make administrative procedures transparent. The law reduced corrupt practices significantly and has since been hailed as a pivotal achievement in the country’s fight against corruption. The rule of law and administrative actions must be constant to be effective in reducing corruption.

Governments can also implement a number of reforms in their legal systems and administrative processes. Such reforms could include measures that provide oversight of the financial sector, public procurement, customs procedures, construction licenses, land registration, and corporate establishment and dissolution. These require adequate institutional capacity and financial support to be successful. Kazakhstan, for instance, has recently strengthened its anti-money-laundering regime: it is now largely compliant with international standards. However, the government still lacks the resources and expertise to properly enforce the regulations. To successfully tackle corruption, strong, transparent, and accountable institutions that deal with taxation, budgeting, and spending must also be established.

Indeed, an effective fight against corruption requires the building of robust democratic institutions, particularly those that champion trade openness, fair competition, and press freedom. Institutional structures are also important, as more decentralized states have lower levels of corruption. As can be expected, social norms and culture are important determinants of corruption levels, but they can be hard to measure. In general, strengthening governance is a good way to reduce corruption, because inefficient bureaucracies make it easier for corrupt practices to be carried out.

Beyond national governments, the United Nations and its various agencies must raise awareness of corruption in the Asia-Pacific. Addressing and combating the issue will pave the way for countries in the region to work towards the UN Sustainable Development Goals.

While Transparency International plays a leading role in exposing corruption worldwide, the World Bank has drawn up, and continuously updates, anti-corruption policies for governments. The International Monetary Fund also recently unveiled its new framework for addressing corruption. Developing countries in the Asia-Pacific must embed the principles of both the United Nations Convention Against Corruption and the OECD Bribery Convention in their governance frameworks. Engagement with international organizations can facilitate the development of an effective national anti-corruption strategy.

For this purpose, “a committed political leadership and broad political support are necessary” – says the independent expert in the field, Luigi Coretti of Canada. It well captures a consensus on the matter in the community of specialists. Coretti concludes:  “Engagement with local stakeholders, such as civil society organizations, the media, and academic institutions, helps build a sense of national ownership and ensure the acceptability and effectiveness of coordinated and comprehensive actions.” Both governments and companies are encouraged to report to these stakeholders their anti-corruption activities and outcomes achieved. They should also use all available communications channels, such as websites and flyers, to provide more insight into their assessment mechanisms and corrective actions.

Finally, it is to hope that more comprehensive research will be conducted to help identify ways to eradicate corruption and other business obstacles in the Asia-Pacific. One crucial issue in this arena is that many previous studies on corruption have been conducted jointly with local authorities, so their results are questionable. With the participation of the authorities in such research, surveyed firms and people are likely to be hesitant to offer their candid opinions on the level of corruption among officials. Before any anti-corruption strategies can be determined for a given country, we must have the full picture of the problem of corruption.

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Southeast Asia

ASEAN Summit Meeting 2019: Expectations and Norms

Prof. Pankaj Jha

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The 2018 ASEAN Summit had posed a valid question with regard to the compatibility between ASEAN centrality and the Indo-Pacific concept. ASEAN addressed this impending question through its approach paper on the Indo-Pacific. However, the question remains that whether ASEAN can remain central to the Indo-Pacific or would address regional issues in routine manner which have become victim of ASEAN norms without any strong recourse to regional mechanisms related to security.  ASEAN policy of consensus building has made ASEAN more predictable in terms of its yearly communique and discussions. During the last three years ASEAN Communiqué have outlined lofty ideals and impressive blueprint for future but the core security issues have been sidelined or accorded with a low priority listing, in the face of bon homie between ASEAN member states and dialogue partners. The fault lines on major economic issues, South China Sea, environmental problems such as Indonesian haze and the template for industrial revolution 4.0 needs better focus and strategy along with new ideas and compatible processes.

ASEAN strategy on the efficacy of Indo-Pacific manifests itself in the document which highlights that ‘ASEAN centrality as the underlying principle for promoting cooperation in the Indo-Pacific region, with ASEAN-led mechanisms, such as the East Asia Summit (EAS), as platforms for dialogue and implementation of the Indo–Pacific idea, while preserving their formats’. The dichotomy with regard to ASEAN position is that Indo-Pacific is more of a strategic and regional security construct. The subscribers of Indo-Pacific are not very accommodating towards China in the architecture despite the fact that few dialogue partners have expounded the need for the construct to be inclusive. The long drawn US-China trade war and the barb of words on the increasing Chinese assertiveness in South China Sea have made matters more complicated. Further, Vietnam has been highlighting the Chinese bullying tactics in Vanguard bank and also its repeated foreign ministry briefings have stressed that China is trying to make non-disputed zones as contentious zones. Over a period of time, it is expected that US and Vietnam might enter strategic partnership agreement with defence and security cooperation as a priority. This would jeopardize Chinese designs in South China Sea and also bring the Eagle closer to the Dragon’s chest.

The incompatibility between ASEAN centric approach in even regional security apparatus envisaged under Indo-Pacific is a concern. ASEAN has imposed the recurrent and repeated thoughts of Indo-Pacific as inclusive zone and a zone for promoting interconnectedness and dialogue between partners. ASEAN position is understood in terms of maintaining its relevance but it must recognize the fact that Indo-Pacific was not an ASEAN process to serve its interests. The dialogue partners’ interests are involved and they might or might not accept ASEAN diktats on the subject. In that case ASEAN would be seen as the fog horn without much contribution to larger security issues. The synergies envisaged between ASEAN and Indo-Pacific is flawed because ASEAN as an institution has failed in terms of providing maritime security but has been successful in information sharing through institutional mechanisms. Given the limited naval capacities that most of the ASEAN members have, with the exception of Singapore, the efforts for regional maritime security needs a better approach. The naval and maritime security cooperation under ASEAN needs better coordination with dialogue partners and structural support.

The ASEAN summit meeting 2019 might have to address the following issues in a more focused way rather than template responses which now anyone can anticipate. Firstly, it will have to make clear commitment among the members of maintaining the status quo and promising that the skirmishes between the ASEAN member states on South China Sea(SCS)should not be advantageous to China. China has been advocating negotiations through bilateral consultations, incrementally happening in this region. Secondly, ASEAN will have to stop meting out step-motherly treatment to the interest of Vietnam because of the intrinsic Cold war apprehensions. Thirdly, ASEAN must make a strong stance with regard to finalizing the draft Code of Conduct with China on terms acceptable to all the claimant parties rather than towing the Chinese instructions. Fourthly, the dialogue partners have also failed the security initiatives undertaken by ASEAN and it would be prudent for the Dialogue partners to commit to a new framework which might be known as Treaty of Amity and Cooperation (TAC) Plus framework which provides natural corollary to offensive action undertaken by any dialogue partner against any ASEAN member, leading to its eviction from the ASEAN and ASEAN centered mechanisms. The consensus laden framework at times leads to constraining action in the regional organization. Lastly, the ASEAN members must institute a South China Sea high powered committee to bring about dialogue and also raise relevant issues of concern without any fear or favour.

It has been seen that the deployment of Chinese survey ship in Vanguard bank for long duration of time defies any logic with regard to any scientific experiments or serious survey. China has used the survey ship Haiyang Dizhi 8 as a decoy for its strategic military activities and the deployment of large coastguard and naval vessels are a testimony to it. The withdrawal of the survey ship just before the ASEAN summit shows that China does not want SCS to figure anywhere in the ASEAN Communique and thereby taking evasive measures. Also, there is no guarantee that China would not return to the same area in future. The international community must take note of Chinese tactics and must issue a strong rebuttal. Mike Pence, US vice President speech (October 24) during a lecture at Wilson Center said, “…. make it clear to Beijing that no nation has a right to claim the maritime commons as territorial seas”. He accepted that, “the Chinese Coast Guard has tried to strong-arm Vietnam from drilling for oil and natural gas off of Vietnam’s own shores’’. It clearly shows that Chinese activities were illegal and were strong arm tactics, the signs of an irresponsible UN Security Council member. Vietnam would also be joining as non-permanent member of Security Council in 2020, and therefore it is imperative for the country to raise the South China Sea issue at this important forum. Vietnam would also be assuming the ASEAN Chairmanship in 2020. It has been seen in the past chairmanship of 2010 that Vietnam has avoided larger discussion on South China Sea. This shortsightedness was detrimental to the interests of Vietnam due to which the South China Sea as a major security hot spot was avoided in subsequent ASEAN meetings. Even in ADMM plus meeting this has to be raised and better rebuttal of Chinese action in Vanguard Bank is needed. China has already established the bilateral consultation mechanism with Malaysia on South China Sea, completely undermining the role and responsibility of ASEAN as a legitimate organization for such discussions. This also forewarns that China might wean away other claimants from the South China Sea consultations, forcing Vietnam to protect its own interest in not so obliging ASEAN forum.  During this year ASEAN Summit Vietnam must do lobbying with dialogue partners as well as claimants to put South China Sea as a main point in the East Asia Summit discussion and also in 35th ASEAN Summit Communique. This would help getting necessary traction in international and regional media.  

In conclusion, one might witness that in this ASEAN summit the resonance of ‘One ASEAN One Identity’, ASEAN Community, sustainable development partnership, marine pollution, haze, culture, strategic trust, defence cooperation, military medicine, cyber security, transnational crime, and industrial revolution 4.0 would be discussed. The ASEAN would have to identify its approach to evolve as the regional organization furthering the needs of the region and consolidating itself as one homogenous identity. Interestingly, the core values of ‘ASEAN way’ and consensus might get reflected in the communiqué under Thailand’s chairmanship. However, much depends on Thailand’s priorities in highlighting issues and taking cognizance of the developments in economic cooperation, security and building strategic trust while keeping the ASEAN values intact. The biggest question is whether ASEAN is ready for its role in ASEAN 4.0. Vietnam would have to make assertive diplomatic approach and not a hesitant demeanor to protect its EEZ and territorial waters threatened by Chinese encroachments.

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Southeast Asia

Progressive Development of Democracy in Asia-Pacific Region

Shaza Arif

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The Asia- Pacific region is becoming an interesting entity to study as of the various dynamics it entails. This region is characterized with the gradual elimination of poverty resulting from regional integration, cooperation between proximal states, inflow of capitals, and development initiatives. At the same time territorial disputes and regional rivalries also prevail in the region. Likewise, the democratic patterns of the region have undergone a democratic transition.

There has been a prevailing notion that the Asian region has been dominated by authoritarian regimes with very little or no room for democracies. These circumstances have gradually evolved and democracies are consolidated and made their way into the region. Likewise, all the regimes have found democracy as instrumental to elevate their stature in international standing.

Indonesia particularly has been an ardent supporter of spreading democracies beyond its shores. Similarly, circumstances in Malaysia, Singapore, and Thailand have paved way for democracies to make its way through electoral process.

Historically, the struggle for democracy in the Asian region commenced following the decolonization from the colonial powers. The struggle for democracy suffered as the instability and ethnic rebellions resulted into chaos and created such a vacuum that was filled by elites and left no room for democracy. Secondly, the second wave of democratization initiated in the mid-1980s followed by uprisings against corrupt and oppressive regimes such as the Marcos regime in Philippines in 1986, the removal of military-backed regimes in South Korea and Taiwan in 1987.

Following the fall of Soviet Union, Mongolia also made a transition to democracy. Likewise, this was followed by the resumption of a civilian government in Thailand in 1992.In 1993, democracy made its way to Cambodia with the intervention of the United Nations. Furthermore, Indonesia’s Suharto Regime fell apart in 1998 and in 2001 the U.N made endeavors to bring democracy to East Timor after the termination of the civil war. 

As a result of these transitions, Indonesia, South Korea, Philippines, Thailand and Japan have established strong democracies in the region. In 1997, South Korean voters elected Kim Dae Jung, the region’s most prominent democracy activist to power.  Similarly, Taiwan, and Mongolia are also the examples of successful democracies. In March 2000, the island first democratic transition of democratic power of power in which the opposition leader, Chen Shui-Bian became the president, this was a historic moment for the burgeoning democracy for Taiwan.

In Nepal, following the peace agreement between Maoist insurgents and the government there came a replacement of the royals with the republic after few years and a new constitution was introduced in 2015.In 2008, in Bhutan, the constitutional monarchy substituted absolute monarchy followed by its first political elections. Likewise, in Myanmar, the military paved way for democracy and it materialized into a multiparty election in 2015, the first of its kind in 20 years

Today when different political parties run for elections, human rights is one of the crucial factors on which they compete on, this is opposed to the earlier practices of oppressing the public. Similarly, Mongolia has also encountered with positive changes following the democratic transition along with competitive democratic elections

On the other hand, there are exceptions as well such as China and North Korea. China still has one party system and it poses obstruction to a free and fair elections. Similarly, North Korea has an authoritarian regime which has an absolute control over the lives of individuals. Human rights are violated, freedom of speech is prohibited, regime is worshipped and Kim Jong Un is not accountable for any of his actions. Even, the media is strictly controlled by the government and only a limited number of channels are streamed on the media. Internet and any western content is also banned in North Korea.

Though there are calls that democracy is waning away, for example in Cambodia there has been a severe crackdown on political opposition. Similarly, there have been curbs on freedom of speech along with censorship. Likewise, the military coup in Thailand in 2014 has also affected the democratic values. Also many argue that the democracies in the region are diluted to a large extent yet the fact of the matter remains that democracy is gaining momentum. According to the EIU Democracy Index, when comparing the level of democracy, measured on a 10 point scale from 0 (authoritarian) to 10 (full democracy) over the past ten years, the average democracy score in Asia has increased from 5.05 in 2006 to 5.41 in 2016.This region is making progress at an expedited rate as compared to other regions of the world.

One of the reasons for the burgeoning democracies is the empowerment of the youth. Through the Social media youth has become more empowered and they do not hesitate to speak on the matters on which they feel that the government has acted irrationally upon. Similarly, anything that highlights the misdoings of the leaders becomes viral on the internet, therefore the leaders are subjected to accountability and it ultimately steers in democratic values.

Coming to the conclusion there are a number of measures which can accelerate the progressive development of democracy in any region. For example, democracy should be considered as a bottom-up process where the individuals are considered the foundational elements and should be taken in this regard. Individuals should be involved in the decision making through the effective delegation of power. Likewise, Urbanization is also one of the triggers for augmenting democracy since it leads to more awareness which ultimately demands the notion of accountability. Likewise, if the youth of the country fully involved in the political affairs then it can avert the prospects of circumventing from democratic values. If these patterns prevails then democracy will nurture to a great extent in the region.

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Southeast Asia

Indonesia’s new electric car may disrupt its relations with Japan

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Authors: Muhammad Zulfikar Rakhmat, Dimas Permadi, and Ramadha Valentine

President Joko Widodo has recently signed a presidential regulation on electric cars. The regulation instructed several things, including forming a coordinating team to support the implementation of the electric vehicle program.

Jokowi hopes that electric vehicles will be able to replace fuel oil vehicles.

Due to air pollution in large cities such as Jakarta which continues to increase, Indonesia sees it important to begin using electric cars for the general public.

Jokowi also views the opportunity for Indonesia to develop electric cars because Indonesia has the main raw materials to build them. In Jokowi’s statement, he stated: “We know that 60 percent of the key to electric cars is the batteries and we have the components to make them [such as] cobalt and manganese in our country,”

To implement the agenda, the Indonesian government is likely to collaborate with various partners, including China. Although it is still a prediction, this was indicated by China’s intention to move its electric car companies to Indonesia, namely BYD Auto Co., Ltd and JIC. Moreover, Chinese car manufacturer Dongfeng Sokonindo (DFSK) also intends to produce DFSK E3 Glory cars in Indonesia which will be marketed in ASEAN. This strengthens the possibility that China will play a role in Indonesia’s plan.

China’s entry into Indonesia’s plan for electric cars could be a reasonable move and may be welcomed by Jakarta. Nonetheless, there is a potential that it may disrupt Jakarta’s long ties with Japan as its largest partner in the automotive sector.

Japan: Indonesia’s long-time automotive partner

When it comes to automotive, Indonesia has been relying hardly on Japan. As reported by the Association of Indonesia Automotive Industry, the majority of cars used in Indonesia are Japanese ones. CNN’s polling also shows that Indonesians prefer Japanese cars more than those produced by Europe, Korea, and China.

Another case which exemplifies the strong automotive ties between Jakarta and Tokyo is the Indonesian-made car “Proton” which was made under a special collaboration between Indonesia and Suzuki.

Considering the position of Indonesia as a country that has just stepped in to the business of electric cars, Indonesia seems to be very careful in involving foreign investors. Indonesia sees goods from China as relatively cheaper and of comparable quality.

In addition, Chinese companies applying for relocation in Indonesia was also considered as a serious step to strengthen the relations that had been built by the two countries.

Indonesia’s plan, which was conveyed by the Deputy for Infrastructure at the Coordinating Ministry of Maritime Affairs, Ridwan Djamaluddin, to involve China in making electric cars is likely to disrupt the stability of its long-time cooperation with Japan.

This could be true, especially if we look at how Indonesia has increasingly become a battleground between Beijing and Tokyo such as in the recent bidding for the construction of a railway between Jakarta and Bandung, whereby China succeeded in winning the bid. Japan, which has made a number of preparations to obtain Indonesia’s permission to participate in the project, feels disappointed as expressed by its Chief Cabinet Secretary, Yoshihide Suga.

Looking at this, electric cars can be another battleground between Japan and Indonesia.

Indonesia may take careful steps

To this date, it remains unclear whether Japan or China who will have a considerable take in Indonesia’s move towards electric cars.

Nonetheless, in the midst of the potential rivalry between Beijing and Tokyo, Indonesia may take careful steps. The government in Jakarta will try to ensure that it would not hurt the two sides. It is likely to weigh the interests and opportunities of both parties.

On the one hand, it needs to maintain close relations with its long time partner in the automotive industry, while on the other hand it sees considerable opportunities in cheap Chinese raw materials.

The three authors are analysts on Indonesian political economy

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