Southeast Asia from the Corner of 18th & K Streets: Indonesia for Indonesians: Can the United States Relate?

Volume IV | Issue 11 | 30th May, 2013

Indonesians want to own all aspects of their economy—equity, capital, technology—and they want it run by Indonesians. Indonesia for the Indonesians. The question for the United States is whether it can relate to this new Indonesia or, more appropriately, can it afford not to.

The populist impulse dominating Indonesia is not a new instinct for a newly empowered country. Indonesians wrested a democracy from the authoritarian rule of President Suharto in 1998 and spent a decade focused almost exclusively on politics. Meanwhile, the economy bounced along with wild gyrations in currency valuation, debt levels, and inflation. Today, Indonesia’s political stability is among the best in Asia. What’s interesting now is its economy.

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The Biweekly Update

  • President Thein Sein makes historic visit to Washington
  • Indonesia confirms investment chief as finance minister
  • Prime Minister Najib unveils new Malaysian cabinet

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Looking Ahead

  • Launch of CSIS India-ASEAN report
  • Annual CSIS South China Sea conference
  • Center for a New American Security annual conference

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Indonesia for Indonesians: Can the United States Relate?

By Murray Hiebert (@MurrayHiebert1), Senior Fellow and Deputy Director, Sumitro Chair for Southeast Asia Studies (@SoutheastAsiaDC), CSIS, and Douglas Ramage, Chairman of the Trade & Investment Committee, American Chamber of Commerce of Indonesia and Managing Director for Indonesia, BowerGroupAsia

Indonesians want to own all aspects of their economy—equity, capital, technology—and they want it run by Indonesians. Indonesia for the Indonesians. The question for the United States is whether it can relate to this new Indonesia or, more appropriately, can afford not to.

The populist impulse dominating Indonesia is not a new instinct for a newly empowered country. Indonesians wrested a democracy from the authoritarian rule of President Suharto in 1998 and spent a decade focused almost exclusively on politics. Meanwhile, the economy bounced along with wild gyrations in currency valuation, debt levels, and inflation. Today, Indonesia’s political stability is among the best in Asia. What’s interesting now is its economy.

Indonesia sits in the geometric center of the world’s newest sources of economic growth. Like Panama and its canal in the twentieth century, Indonesia connects this century’s two most commercially vital oceans—the Indian Ocean and the Pacific. It is also the world’s fourth-largest country and home to one of the fastest-growing major economies on the planet. Gross domestic product has grown between 5 and 6 percent annually for nearly a decade despite the global slowdown.

As the world’s 16th largest economy with a total GDP of nearly $1 trillion, Indonesia now is indisputably an emerging economic power. However, the share of U.S. companies in Indonesia is less than it might have been. Despite its size, Indonesia ranks only 34th among the United States’ trading partners, with two-way trade roughly equal to much smaller countries like, you guessed it, Panama.

Indonesia has never been an easy place to do business—the Global Trade Alert ranks Indonesia alongside such nations as Zimbabwe, Uzbekistan, and Paraguay in ease of doing business—but even so, American firms still rank fourth among foreign investors in the country. Much of U.S. companies’ stock investment in the country, valued at $11.6 billion, is in the mining and oil and gas sectors.

U.S. investment in manufacturing, a sector in which U.S. companies are heavily invested in nearby Singapore, Malaysia, and Thailand, remains shockingly small. The historical reason for this anomaly is that Indonesia’s infrastructure, governance issues, legal system, and dependence on natural resources pushed investors to locate plants in smaller countries with better answers to investors’ questions.

But now that Indonesians can choose their own government and want better economic opportunities, education, equity, and higher wages, the government is responding with less sophisticated policies. These measures bear the tag of populism and import-substitution rather than trying to compete with more policies to draw in capital, technology, and high-end investment.

Over the past few years, a raft of protectionist measures has made a tricky environment even more difficult. In the U.S.-Indonesia Comprehensive Partnership launched in 2010, economic relations lag far behind political, security, and people-to-people ties. The strong bilateral military, diplomatic, counterterrorism, and educational collaboration stands in stark contrast to a tense, in some ways worsening, trade and economic relationship.

Some of the government’s measures have not only disrupted the trading activities of U.S. companies, but caused considerable domestic heartburn as well. For instance, the Trade Ministry’s suspension of garlic from China caused prices to surge more than 30 percent in February. Restrictions on beef imports have resulted in Indonesian consumers paying among the highest beef prices in the world. However, in both cases Indonesian pragmatism prevailed, with the government recently taking steps to ease imports, increase supply, and lower consumer prices.

U.S. companies ranging from consumer goods providers to oil and gas firms to pharmaceutical companies face a complex and constantly changing series of regulations. New regulations are often imposed without consulting the appropriate ministries, affected firms, or other key stakeholders, resulting in confusion, shortages, and rising prices.

The country’s 2009 mining law stipulates that beginning in 2014, mining firms are required to process ore before exporting it. Last year, however, the government suddenly decided to implement the measure two years early, creating considerable anxiety for mining companies. Regulation 79, signed in 2010, allows the government to change the terms of existing oil and gas production-sharing contracts, eliminate tax deductions for some expenses, and change the terms and criteria for cost recovery, creating uncertainty for U.S. energy companies. This, in combination with a series of nationalist policies that discourage exploration, has led in part to a fall in the country’s oil production of nearly 50 percent over the past 15 years.

Despite complaints about protectionism, U.S. firms operating in Indonesia regularly tell the American Chamber of Commerce in Jakarta that they are doing well in the country and intend to ratchet up investments. Most U.S. companies are rapidly learning to adjust to the new rules of the game and to Indonesia’s newly assertive and muscular trade policies. However, the complexity and vagaries of the investment climate keep new U.S. companies from entering the market and blunt capital expenditure on new investment that established companies are keen to make.

Indonesia has long had a tendency toward economic nationalism. The country’s giant size, wealth of natural resources, and 240-million-person economy give it the luxury of considerable self-sufficiency. Domestic consumption accounts for almost 60 percent of GDP, and international trade is a much smaller driver of growth than in many developing countries. These attributes, along with deft macroeconomic management and thriving democracy, have given Indonesians a healthy dose of self-confidence.

A widespread perception has taken hold in the country that free trade is a one-way street. Indonesians often cite the “damage” done to domestic firms by the ASEAN-China free trade agreement (FTA) or by Australia’s unilateral ban on the export of live cattle in 2011. Indonesians are surprised that ASEAN economic integration and the ASEAN FTA with Australia and New Zealand make it easier for companies to export into Indonesia rather than adding value in the country. In this context, the introduction of non-tariff measures is described as an effort to protect the market share of domestic companies.

Most senior Indonesian policymakers genuinely want Indonesia to avoid getting caught in the lower-middle-income trap. They desperately want to add value domestically in everything from manufacturing to commodities to ownership of banks. But the capacity of the bureaucracy and policymakers to create sophisticated incentives to add value in Indonesia is limited.In effect, the Indonesian government attempts to achieve these goals through regulation – often through a punitive approach – resulting in frustrated investors that would otherwise like to adhere to the rules so that they can access the size and potential of the Indonesian market.

So how should U.S. companies and the government operate in Indonesia? For starters, U.S. companies must have boots on the ground. They should engage Indonesia like a rising power, much like they do India and Brazil, two other tough markets for U.S. firms.

John Riady, who heads up the U.S.-Indonesia Committee of Indonesia’s Chamber of Commerce and Industry, suggests that U.S. companies not take the vagaries of new regulations personally or assume ill intent. Companies need to recognize that Indonesia is a high-risk regulatory market before jumping in.

The U.S. government and companies could launch an “America Matters for Indonesia” campaign, which would highlight jobs created and income generated by U.S. investment. Without greater understanding of the positive role of foreign investment and trade there is little chance of Indonesia joining the United States, Japan, and 10 other countries in the Trans-Pacific Partnership trade negotiations. In advance of the APEC summit in October, the American Chamber of Commerce in Indonesia, in collaboration with two Indonesian universities, will release a study showing the long-term economic and social contributions of American investment in Indonesia.

Indonesia today looks much like other large, competitive democracies, complete with the risks associated with electoral cycles and populist campaigning. No Indonesian politician will run on a platform of “free trade.” In this sense, Indonesia resembles the democracy of the United States—or that of comparable economies like India or Brazil. Indonesia is neither the toughest trade relationship for the United States nor a uniquely difficult investment climate. It is just that we are not used to the new Indonesia. But this is likely the new normal, so companies—and governments—must learn how to adapt.

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The Biweekly Update


Thein Sein makes historic Washington visit. President Thein Sein traveled to Washington on May 19 for a historic three-day visit, meeting with President Barack Obama on May 20 to discuss Myanmar’s ongoing democratic reforms. Myanmar deputy commerce minister Pwint San and acting U.S. Trade Representative Demetrios Marantis signed a Trade and Investment Framework Agreement the following day, establishing a bilateral platform for trade and responsible investment. The visit signals growing cooperation between the two countries and U.S. recognition that dialogue and engagement are key to sustained reforms in Myanmar.

State Department issues reporting requirements for U.S. investors in Myanmar. The State Department on May 22 issued reporting requirements for U.S. companies and individuals in Myanmar whose investments exceed $500,000. Requirements include data on investments, partners involved, individual transactions associated with investments, and human rights and environmental policies associated with the investment. The move follows Senate minority leader Mitch McConnell’s announcement a day prior that he will not seek the renewal of the Burmese Freedom and Democracy Act, which is up for renewal in July, thus allowing long-running economic sanctions against Myanmar to expire.

Myanmar to privatize state-owned telephone service provider. Myanmar’s government on May 20 pledged to privatize state-owned Myanmar Post and Telecommunications, saying the new company will be called Myanmar Public Telecom and inviting private companies in Naypyidaw to help establish the firm at an undisclosed date. The company will become one of four private telecommunications providers in the country, along with Yatanarpon Teleport and two other still-undetermined operators.

Myitsone hydropower investor looks to restart project. State-owned China Power Investment Corporation (CPI) is looking to restart the controversial Myitsone hydropower project in Kachin State, according to May 18 statements by members of the opposition National League for Democracy who recently traveled to China. CPI previously committed $3.6 billion to build the dam, but in 2011 President Thein Sein suspended the project until 2016, citing environmental concerns. Most of the 6,000 megawatts of electricity the dam will generate will be exported to China.

Government frees political prisoners. President Thein Sein released more than 20 political prisoners on May 18, some of whom were sentenced to 65 years or more in jail, just ahead of his visit to Washington. The released prisoners were not made to sign any documents requiring them to refrain from political activities, as previously released prisoners have been, or to make any other concessions. The government has long denied the existence of political prisoners but has released hundreds of them since President Thein Sein took office in 2011. Roughly 200 political prisoners remain in jail.

Rakhine officials resume enforcement of two-child policy for Rohingyas. Rakhine state officials announced in late May they would resume enforcing a long-standing two-child policy for Rohingya Muslims in the state. Rakhine leaders say they began implementing the lapsed policy on May 12 after authorities received a directive from Naypyidaw to resume the practice. Rights groups such as Human Rights Watch lambasted the decision. Rohingya are heavily discriminated against in Myanmar and are denied citizenship. Aung San Suu Kyi, often criticized for her silence on discrimination against the minority group, on May 27 condemned the policy.

Myanmar's currency plunges more than 7 percent. Myanmar’s currency has dropped more than 7 percent in May, falling to its lowest level since its value was first allowed to float in 2012. The depreciation appears to be linked to an influx of imported goods into Yangon as construction firms rush to purchase foreign equipment and materials amid a real estate boom. The drop in currency value has raised concerns about Myanmar’s economic stability, though exporters, including farmers who comprise 70 percent of the country’s workforce, will benefit from the rising exchange rate.


Indonesia confirms investment chief as finance minister. President Susilo Bambang Yudhoyono appointed Investment Coordinating Board director Chatib Basri as finance minister on May 21, replacing central bank governor Agus Martowardojo. The appointment of Chatib, a highly regarded technocrat, suggests Indonesia is shifting toward a more prudent fiscal policy as it grapples with slowing economic growth, a widening current account deficit, and costly fuel subsidies. Chatib plans to cut fuel subsidies by June to free up funds to build infrastructure and encourage long-term investment.

Indonesia extends logging moratorium as activists call for stricter enforcement. President Susilo Bambang Yudhoyono renewed a forest clearance moratorium on May 20 that prohibits the issuance of new exploitation permits for protected forests and peat lands. Activists applauded the move but called for stricter enforcement of deforestation regulations, mapping areas, and exploitation permits. Separately, the Constitutional Court on May 16 decided to scrap the word “state” from Article 1 of the 1999 Forestry Law, which states that “customary forests are state forests located in the areas of custom-based communities.” Public forests thus cannot be located within state forests or vice versa.

Freeport Papua mine collapse results in 28 dead. A section of U.S.-based Freeport-McMoRan’s Grasberg mine in Papua Province, the largest gold and third-largest copper mine in the world, collapsed during a training course on May 14, killing 28 people and trapping several others. All 28 bodies were recovered by May 21. The incident is one of Indonesia’s worst industrial accidents and further strains relations between Freeport and trade unions that have lobbied for higher wages since 2011. The Indonesian government on May 28 allowed Freeport to resume open-pit mining but did not allow it to restart underground production. The government and Freeport are conducting separate investigations into the cause of the accident.

Attorney General’s Office rearrests Chevron executive, ignores court ruling. Indonesia’s Attorney General’s Office rearrested Chevron Indonesia oil executive Bachtiar Abdul in April despite a December 2012 Jakarta district court ruling that cleared him of any crimes. Bachtiar is one of four Chevron employees detained on September 26, 2012, over an allegedly botched remediation project in Duri Riau, Sumatra. The case is the latest blow to Indonesia’s regulatory environment, which has seen a spate of protectionist policies in recent months.


Najib unveils new cabinet. Prime Minister Najib Razak on May 15 announced his new cabinet, appointing Paul Low of Transparency International Malaysia as minister in the prime minister’s office and Mary Yap of the United Sabah Party as deputy minister of education. Low and Yap are the only Chinese Malaysians in the cabinet. The Malaysian Chinese Association, a member of the ruling coalition, declined to accept any cabinet posts due its poor performance in the May 5 elections. Najib rewarded members of his own party, the United Malays National Organization (UMNO), with key ministerial posts as he looks to the UMNO party elections later this year.

High Court releases three individuals linked to terrorism. Malaysia’s High Court released three individuals linked to terrorism on May 21, with Justice Kamardin Hashim acquitting them of charges brought under the Special Offences (Security Measures) Act (SOSMA). The judge ruled that SOSMA applies only to acts or threats of terrorism within Malaysia and is therefore not applicable to the trio. They were detained on February 7 for suspected terrorism and militancy involvement in Syria.

Prosecutors charge opposition activists and lawmaker. Malaysian prosecutors on May 29 brought charges against three opposition politicians and three antigovernment activists under the country’s contentious Sedition Act for calling on Malaysians to contest the May 5 national elections. Earlier this month, the government detained several prominent activists on similar charges, including Nik Nazmi Nik Ahmad, a lawmaker with the opposition People’s Justice Party for failing to inform the police 10 days before a May 8 opposition rally. Tens of thousands of people rallied in Kuala Lumpur on May 25 against the results, in the latest of a series of protests led by opposition leader Anwar Ibrahim.

Groups protest International Hydropower Association’s World Congress in Sarawak. More than 300 indigenous activists, led by the nongovernmental organization Save Sarawak’s Rivers Network, protested outside the biennial World Congress of the International Hydropower Association (IHA) in Sarawak on May 22. The protesters were members of Bengoh, Murum, and Bakun indigenous communities whose livelihoods would be affected by proposed dam sites in Sarawak. IHA executive director Richard Taylor came outside during the one-hour peaceful protest to hear a statement of demonstrators’ grievances.


Aquino announces $1.8-billion military modernization program. President Benigno Aquino said on May 21 that the Philippines will spend $1.8 billion on military upgrades to help defend the country’s maritime territory against “bullies.” The Philippines will acquire two new frigates, two helicopters capable of antisubmarine warfare, three fast vessels for coastal patrols, and eight amphibious assault vehicles by 2017, according to Aquino. The president said that Manila has spent roughly $637 million on military modernization over the past three years.

Survey shows that 3.9 million Philippine families suffer from hunger. An estimated 3.9 million families in the Philippines say they have experienced hunger at least once in the last three months, according to a Social Weather Stations survey released on May 23. The nationwide survey of 1,200 individuals was conducted March 19–22 and defined hunger as having nothing to eat. The last Social Weather Stations survey reported that 3.3 million Philippine families had experienced hunger in the last quarter of 2012.

Moro groups sign a truce to end feud. Representatives of the Moro Islamic Liberation Front (MILF) and the Moro National Liberation Front (MNLF) signed an agreement in North Cotabato Province on May 23 to end a weeks-long feud between the groups that has displaced 6,320 villagers in the province. The hostilities erupted shortly before the May 13 midterm elections, when MNLF members prevented MILF guerillas from attending a peace dialogue. The feuding MILF and MNLF forces have clashed three times in as many weeks.

Manila, Taipei agree to parallel investigation of fisherman’s death. Taiwan’s foreign minister, David Lin, said on May 19 that the Philippines and Taiwan had agreed to perform parallel investigations into the May 9 fatal shooting of a Taiwanese fisherman by the Philippine Coast Guard. Taipei had earlier insisted on a single joint investigation. The Philippines and Taiwan agreed to allow each other to conduct fact-finding missions on their soil. Manila sent officers from the Philippine National Bureau of Investigation to Taiwan on May 23.


National Assembly session will include confidence votes on leaders. Vietnam’s National Assembly convened a month-long session in Hanoi on May 20. The session’s agenda includes a review of draft revisions to the country’s 1992 constitution and a revised land law, as well as its first-ever confidence votes for officials elected or approved by the assembly. Head of the National Assembly Office Nguyen Hanh Phuc said on May 17 that officials who garner less than 50 percent in the vote will face a no-confidence vote or be called on to resign. The confidence vote will be carried out on June 13.

Hanoi appoints new finance minister. The Vietnamese government announced on May 24 that it has appointed Dinh Tien Dung as finance minister after his nomination was approved by nearly three-quarters of the parliament. Dung replaces Vuong Dinh Hue, of the Economic Commission of the Communist Party’s Central Committee. Dung served as chief of the State Audit Office until August 2011.

Vietnamese rubber companies drive land grabs in Cambodia, Laos. Environmental group Global Witness released an online report and short film on May 13 exposing that the Lao and Cambodian governments have been subsidizing highly corrupt and environmentally destructive land grabs within their borders by Vietnamese companies. Hoang Anh Gia Lai (HAGL) and Vietnam Rubber Group (VRG), two of Vietnam’s largest companies, have acquired more than 494,000 acres of land through deals with the Cambodian and Lao governments. Deutsche Bank has significant holdings in both HAGL and VRG, while the World Bank’s International Finance Corporation invests in HAGL.

Vietnam creates asset management company to address bad debt. Central bank deputy governor Le Minh Hung announced on May 21 that Prime Minister Nguyen Tan Dung has approved a regulation to set up a debt asset management company to address bad loans in Vietnam’s banking system. The asset management company will be state-owned with initial charter capital funds provided by the State Bank of Vietnam, and it will start operations in the third quarter of 2013. The government originally planned to establish the company at the end of March.

Crane operator triggers massive blackout in Vietnam and parts of Cambodia. State electricity provider Electricity of Vietnam (EVN) said in a statement on March 22 that a crane operator caused a 10-hour blackout over one-third of Vietnam and parts of neighboring Cambodia. The operator knocked a tree onto a key power line, causing a shortfall of some 9,400 megawatts, according to officials of the state-owned company. Twenty-two of Vietnam's southern provinces, along with Ho Chi Minh City, lost power for several hours during the afternoon on March 22. Offices and factories across the south were forced to close and traffic lights failed, according to state media and online news sources.


Officials attend the Asia-Pacific Water Summit. Foreign leaders pledged during the May 20 Asia-Pacific Water Summit in Chiang Mai to make the issue of water security a policy priority. Participants at the conference agreed to work together to build regional resilience to natural disasters and increase cooperation to improve resource management. Brunei’s Sultan Hassanal Bolkiah said that Asian nations would need to invest $380 billion in water and sanitation systems before 2020 to achieve water security.

Blackout hits 14 provinces in Thai south. A major power outage in Thailand blacked out 14 southern provinces on May 21, with some regions not regaining power until the next morning. Sirichai Maingram, president of the Electricity Generating Authority of Thailand Employees Union, claimed that the blackout was the country’s largest ever. A failure in high-voltage transmission lines between central Thailand and the southern provinces caused the outage, which has raised concerns about the country’s electricity infrastructure.

Narathiwat hotel bomb blast wounds six. A bomb blast in the Asia Hotel in Sungai Kolok in the southern province of Narathiwat wounded six people on May 18. The explosion damaged 20 rooms, and water and electricity systems. Damage from the blast is estimated to be about $50,000. Thai police believe that six men were involved in the bombing, and have brought several of the suspects in for questioning. Violence in southern Thailand has escalated since peace talks began in February, with many insurgents using targeted killings to demonstrate their opposition to the negotiations.

Thailand PM pushes for Thailand-Laos-China high-speed train project. Thailand’s Prime Minister Yingluck Shinawatra on May 9 called for China to push for a high-speed train connecting Thailand, Laos, and China during a meeting with China’s vice chairman of the National Committee of the Chinese People’s Political Consultative Conference Edmund Ho. Yingluck said that the project would support the formation of an ASEAN Economic Community by 2015. She acknowledged that Beijing has been supporting transport networks between China and ASEAN, and expressed hope for further cooperation between Bangkok and Beijing.


Family of dead U.S. engineer quits Singapore coroner’s inquiry. The family of Shane Todd, a U.S. engineer found hanged in his Singapore apartment in June 2012, walked out of a coroner’s inquiry into his death on May 21, claiming that it is not being carried out fairly. The Todds insist that their son was murdered because of his work at the Singapore Institute of Microelectronics. Two U.S.-based medical examiners testified on May 23 that they agreed with the conclusion by Singaporean authorities that Todd’s death was a suicide by hanging.

Indonesia approves DBS-Danamon deal, but takeover hinges on reciprocity. Indonesia’s central bank on May 21 gave approval for Singapore’s DBS Group Holdings to purchase a 40 percent stake in Indonesia’s PT Bank Danamon for $2.7 billion. DBS has been seeking to acquire 67 percent of Danamon since 2012. The central bank said approval of full takeover of Danamon would be dependent on Singapore allowing Indonesian banks greater access to the city-state’s financial services industry. Danamon is Indonesia’s sixth-largest bank, while DBS is one of Southeast Asia’s largest banks but has little presence in Indonesia.

NUS ends dual graduate law program with NYU. National University of Singapore (NUS) is ending its dual graduate law program with New York University (NYU), which started in 2007, according to a May 21 Channel News Asia report. NYU School of Law said that the 10-month program failed to become self-financing and will be discontinued in 2014, with a batch of 21 students enrolled this month being its last. The move follows a November 2012 decision by NYU’s Tisch School of Arts to shut down its Asia campus in Singapore due to similar financial concerns.


Sam Rainsy removed from candidate list. The opposition Cambodia National Rescue Party (CNRP) on May 10 officially registered for Cambodia’s July 28 national elections, but omitted its self-exiled leader, Sam Rainsy, from the ticket. The decision comes after the National Election Commission struck Sam Rainsy’s name from the voter registry and suggests that even his own party does not expect him to return to Cambodia. Nevertheless, the CNRP staged a 2,500-person rally on May 20 calling for Sam Rainsy’s participation in the elections.

U.S.-Cambodia military exercises begin. Roughly 317 members of the Royal Cambodian Armed Forces and 139 U.S. Army troops on May 18 began the annual Angkor Sentinel two-week bilateral training exercises. The exercises focus on building relations between the two armies by training Cambodian troops in disaster relief, unconventional cross-border threats, humanitarian assistance, leadership, and medical training.

Cambodia introduces 100,000 riel note. The National Bank of Cambodia, which controls currency production in the country, released a new 100,000 riel note on May 14 to increase liquidity amid rising growth and demand in the country. The central bank, which plans to gradually release the new note while absorbing older denominations to avoid inflation, has not disclosed the total value of new bills that will be circulated. Critics argue the move will cause inflation at a time when the currency is losing value against the U.S. dollar, will hobble Cambodia’s long-term growth, and will create inflationary pressures.

Working conditions face scrutiny following garment factory collapses. Two recent factory accidents have drawn international attention to poor working conditions in Cambodia’s growing low-cost garment industry. A storage floor in a sneaker factory owned by Japan’s Asics Trading Company and a Taiwanese partner collapsed on May 16, killing 3 workers and injuring 6 others. Then the ceiling of the Top World Garment factory collapsed on May 20, killing at least 10 people and injuring 20. Minister of Social Affairs Ith Sam Heng promised a full investigation into the accidents and recommendations for needed industry reforms.


Vientiane to draft new five-year development plan. The Lao Ministry of Planning and Investment announced in mid-May that it is drafting the eighth five-year national socioeconomic development plan, which will target economic growth at 8.5 to 9 percent annually from 2016 to 2020. Laos had 8.3 percent growth during 2011–2012 due to growing foreign investment in the country, especially in the mining and hydropower industries. The government targeted an annual growth rate of 8 percent during the current five-year plan, from 2011 through 2015.

Thailand to propose single-visa plan to Laos. A Thai government source told the Bangkok Post on May 15 that Thailand invited Laos to sign a single-visa scheme for foreign tourists at a summit meeting between Lao premier Thongsing Thammavong and Thai prime minister Yingluck Shinawatra in Chiang Mai on May 19. The plan will allow tourists going to both countries to apply for only one visa. Tourism is the second biggest source of income for Laos after mining. Around 3.3 million people visited Laos in 2012. The government projects that 3.7 million tourists will visit in 2015, when the ASEAN Economic Community comes into effect.

South China Sea

Philippines objects to Chinese ships at Spratlys shoal. The Philippine Department of Foreign Affairs revealed on May 21 that it had sent a complaint to the Chinese Embassy weeks earlier denouncing the presence of a Chinese warship and other vessels near Second Thomas Shoal in the South China Sea. The ministry said the shoal, which is occupied by Philippine troops, is “an integral part” of the Philippines’ national territory. China’s Foreign Ministry responded by urging claimants to fully implement the ASEAN-China Declaration on the Conduct of Parties in the South China Sea, implying that recent actions by the Philippines—such as its decision to bring a case against China to the United Nations—are to blame for current tensions.

Philex holds ongoing discussions with CNOOC for joint exploration. Manuel Pangilinan, chairman of the Philippines’ Philex Petroleum, said on May 22 that his company is holding ongoing discussions with the China National Offshore Oil Corporation (CNOOC) about a potential partnership to develop oil and gas resources in Reed Bank, which is considered a part of the disputed Spratly Islands archipelago. The talks are still exploratory, according to Pangilinan, who added that Philex is not in partnership discussions with any other company at this time.

Mekong River

Mekong countries boost anti-drug cooperation. Cambodia, China, Laos, Myanmar, and Vietnam signed a pledge on May 9 in Naypyidaw to boost cooperation in combating illegal drugs. The countries agreed to increase cross-border cooperation, step up alternative development programs, and share experiences in prevention, treatment, and raising public awareness. Meanwhile, police engaged in joint patrols of the Mekong River detained more than 800 suspects on May 21 in a crackdown on drug rings, seizing 2.1 tons of narcotics along with guns and ammunition.


ASEAN countries show varied opinions on economic progress. The Global Attitudes Project at the Pew Research Center released a survey on May 23 reflecting diverse opinions in Southeast Asia on progress toward economic growth. Only 37 percent of Indonesians ranked the country’s current economic situation as “good,” reflecting this quarter’s slow national growth. Sixty-eight percent of Filipinos and 85 percent of Malaysians gave their country a “good” rating. More than 50 percent of participants in all three countries believe that their personal economic situation will improve in the next 12 months, reflecting an overall positive outlook in Southeast Asia.

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Looking Ahead

Launch of CSIS India-ASEAN report. The Sumitro Chair for Southeast Asia Studies and the Wadhwani Chair in U.S.-India Policy Studies will launch their report Enhancing India-ASEAN Connectivity on June 3. Ted Osius, senior visiting State Department fellow in the CSIS Sumitro and Wadhwani Chairs and lead author of the report, will present its executive summary and key recommendations. The full report will be released later in June. The event will take place from 10:30 a.m. to 12:00 p.m. in the Fourth Floor Conference Room at CSIS, 1800 K St., NW. Please RSVP here.

Annual CSIS South China Sea conference. The Sumitro Chair for Southeast Asia Studies at CSIS will host its third annual South China Sea conference on June 5–6. The event will feature speeches by congressional and senior administration officials and remarks and discussion by an all-star lineup of South China Sea experts, including representatives from China, Japan, the Philippines, and Vietnam. It will take place in the B1 Conference Center at CSIS, 1800 K St., NW. Registration is available here.

Center for a New American Security annual conference. The Center for a New American Security will host its annual conference on June 12 focused on national security issues facing the United States. Participants on a series of panels will cover a range of security topics, including "The Future Rebalancing to Asia: A Conversation with Former State Department and National Security Council Asia Hands." The conference will take place from 8:30 a.m. to 5:30 p.m. at the Willard InterContinental Hotel, 1401 Pennsylvania Ave., NW. More information is available here.

Presentation of Asia Foundation study on subnational conflict. The Asia Foundation will present the findings of a new study on conflict in Southeast Asia on June 13. The study examines the impact of international assistance in conflict areas, with a focus on Mindanao, Aceh, and southern Thailand. For more information on this event, or to RSVP, please contact Diana Kelly Alvord at

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Murray Hiebert
Senior Associate (Non-resident), Southeast Asia Program

Douglas Ramage