Southeast Asia from the Corner of 18th & K - Week of June 18 2010
June 29, 2010
Ernie Bower is on vacation with his family. His weekly commentary will resume on Wednesday, July 7, after the Fourth of July holidays.
In this issue
The Week That Was
- Outcome of the US-Indonesia Bilateral talk during G20
- Julia Gillard becomes Australia’s first female prime minister
- Vietnam plan to build nuclear eight power plants by 2030
- Indonesia’s success in de-radicalization questioned
The Week Ahead
- Taiwan and China to reach a historic trade agreement
- Dr. Rajiv Shah, USAID Administrator, to speak CSIS
- CSIS Southeast Asia Debriefing with Robert Scher, DASD
THE WEEK THAT WAS
G-8 and G-20 Summits in Toronto
- ASEAN was well represented at G-20 meeting in Toronto , Canada, by current ASEAN chairman Prime Minister Nguyen Tan Dung of Vietnam, President Susilo Bambang Yudhoyono of Indonesia, and ASEAN Secretary General Dr. Surin Pitsuwan. Headline news came ahead of the summits with news of the Chinese yuan revaluation. At the summits, leaders dodged protesters, sought alignment on steps to recovery for the global economy, and sneaked in viewing parts of World Cup soccer matches. Leaders reached a consensus on lowering deficits, but agreed each country would have to decide on the best approach to avoid inhibiting growth. The G-8 condemned North Korea for attacking the Korean frigate Cheonan and urged Iran's leaders to respect the rule of law.
- Outcome of the U.S. -Indonesia Bilateral talk during G-20. On June 27, U.S. president Obama met Indonesian president Yudhoyono in Toronto. The White House announced elements of the U.S.-Indonesia Comprehensive Partnership, indicating the United States will invest $165 million over five years in programs facilitating the exchange of leadership and management experience, scientific and technical expertise, and cultural understanding between Americans and Indonesians. President Obama also committed $136 million over three years for programs focused on cooperation on the environment and climate change mitigation. The White House also indicated President Obama will visit Jakarta in November. That makes November a very busy travel month for the U.S. president, who will also need to follow through on his commitment to visit India, Korea for the G-20 Summit, and Tokyo/Yokohama for the APEC Leaders Summit.
- Julia Gillard becomes Australia’s first female prime minister, as Prime Minister Kevin Rudd stepped down on Thursday. Ms. Gillard will lead her Labor Party heads into a new election. This historical event occurred on Wednesday night when Gillard made a surprise challenge to Rudd, which resulted in Rudd bowing out of a Thursday morning party vote for leader. Gillard promised to go to the polls in "coming months" for a fresh mandate from voters.
- A free trade agreement on the horizon for Australia and China . Following Chinese vice president Xi Jinping’s visit to Australia on Monday, there was talk that a free trade agreement could be on the horizon, given the positive outcome of Monday’s talks between then-prime minister Kevin Rudd of Australia and Vice President Xi. China is already Australia’s largest trading partner; bilateral trade totaled $75,167 million in 2009 alone. Australia’s Labor Party is considering implementing a 40 percent tax on mining industry prices as part of a larger economic overhaul, if it wins the next elections. It is uncertain how this would affect negotiations, as iron ore comprises half of Australian exports to China.
- North Korean missiles at Burma base? Despite the Burmese government’s continued denial of its nuclear program, North Korean rocket systems have been set up at Burmese army bases in northern, eastern, and central Burma. According to military sources, it is unclear whether the rocket systems were shipped from North Korea, but deliveries of similar equipment have occurred many times in the past five years. Some experts also claim that North Korea is providing Burma with the technology and resources to develop a nuclear program.
- Burma unveils campaigning “laws.” The Burmese government recently unveiled campaign rules, including the following: (1) Political parties running a campaign must give a week’s notice before holding public speeches; (2) parties must not campaign in public places, including schools, workplaces, markets, and government offices; and (3) marching and chanting of slogans are banned. Critics noted that the laws aim to weaken the opposition and ensure a smooth transition for the party currently in power.
- Burma’s nuclear program, in process of development, as confirmed by former director of the International Atomic Energy Agency (IAEA) Robert Kelley. Mr. Kelley spoke on Tuesday at the National Endowment for Democracy on the recently released report produced by the Democratic Voice of Burma (DVB) on Burma’s nuclear program. Kelley, in response to evidence from a defected Burmese military engineer, asserted that the program exists but assured that it is still in its infancy, with poor execution and crude technology. Additionally, he stated that ASEAN should increase its pressure on Burma, and create a team to inspect the country, as Burma is a signatory to the Southeast Asian Nuclear-Weapon-Free Zone Treaty (SEANWFZ). With that, ASEAN might have more enforcement power than the IAEA.
- Singapore, Malaysia to finalize land swap deal. Singapore’s prime minister Lee Hsien Loong visited Malaysia’s prime minister Najib Tun Razak in Kuala Lumpur on Tuesday, and they reached a common resolution on the land swap proposal involving Malaysia’s railway land in downtown Singapore. Both countries agreed that land parcels would be vested in a jointly owned company, M-S Pte Ltd (Malaysia 60 percent; Singapore 40 percent), for joint development. The railway station will be relocated to the northern causeway in Singapore by July 1, 2011.
- Trilateral air exercise Garuda enters final phase. The Republic of Singapore Air Force is participating in Exercise Garuda for the first time with the air forces of India and France at the Orange and Istres air bases in France. During the exercises, six IAF SU-30 MKIs, along with Mirage-2000-5, Rafales, and F-16s, were engaged in various air defense maneuvers such as implementation of "no fly zones" and large-force engagements during day and night. This exercise is said to augment and refine the defense doctrine, as countries would be likely to operate in cooperative defense scenarios.
- China expands Expanding QDII Program to Malaysia. The China Banking Regulatory Commission (CBRC) signed an agreement with Malaysia's Securities Commission to recognize Malaysia as an approved investment destination under the Qualified Domestic Institutional Investor (QDII) program. It is understood that the Chinese government had mandated the QDII program to get their institutional and other investors to diversify their funds into different asset classes and different parts of the globe. Malaysia joins Australia, Canada, Hong Kong, Germany, Japan, Luxembourg, Singapore, South Korea, the UK, and the United States as an approved jurisdiction. It is still unclear how many funds will actually flow into the Malaysian market as a result of this development.
- Illegal sand exports from Malaysia to Singapore uncovered? The Star, a government-owned Malaysian newspaper, alleged in an article published on Thursday June 24, 2010, that sand is being exported illegally from southern Malaysia across the straits to Singapore and sold to Singapore's Housing Development Board. The report estimated that for three years, more than 3 million cubic meters of sand has been smuggled out through Sungai Johor. In response, Singapore says that there is no evidence that sand received has been smuggled as alleged, and, in accordance with laws, sand suppliers must have the necessary import permits to come through the country. Singapore’s need for vast amounts of sand for its many land reclamation and construction projects has long been a source of friction with its neighbors.
- Key witness of the Maguindanao massacre killed. The Philippine National Police (PNP) confirmed on June 27 that Suwaib Upham, a member of the armed militia that served the Ampatuan family in Maguindanao and a self-confessed gunman in the massacre, was killed on June 14. On November 23, 2009, some 57 people, including at least 32 journalists, were killed in what is considered the single most-deadly pre-election violence in recent history. The Philippine police assured that the rest of the witnesses are safe. The powerful Ampatuan clan are said to be loyal allies of outgoing president Gloria Macapagal-Arroyo.
- Japan funds $110 million to help Vietnam tackle climate change. The funds will be put into a Support Program to Respond to Climate Change (SP-RCC), a policy-based lending support initiative devised by Japan to assist developing countries tackle the effects of climate change. Vietnam has the one of the highest annual rate of increase in greenhouse gas emissions in world at 11.3 percent compared to 6.4 percent in China.
- Vietnam plan to build eight nuclear power plants by 2030. The first reactor, with a capacity of 1,000 megawatts, is scheduled to be operational by 2020, and the second by 2021. State media reported last month that the government has chosen Russian technology for the construction of its first nuclear power plant, in Ninh Thuan province.
- Indonesia’s success in de-radicalization questioned. According to recent reports, a suspected militant who was released from Indonesia’s jails for his good behavior one year ago was recaptured on Wednesday. . Going back to his old ways, he was suspected of involvement in a plot to carry out a Mumbai-style attack in the capital, Jakarta, and several high-profile assassinations, including that of President Susilo Bambang Yudhoyono. The reports said that de-radicalization efforts here have been largely police-led, focusing on getting prisoners to renounce violence and co-opting informers, providing financial help to find jobs and reintegrate into moderate Indonesian society. However, there is systematic mechanism for rehabilitation of terrorist detainees. Indonesian police also warned by Counter-terrorism squad chief Colonel Tito Karnavian that the country’s prisons were at risk of becoming terrorism schools as extremists could preach, recruit, and plot in a “prison sanctuary.”
- Lifting of emergency decree. The Thai government indicated that its emergency decree would likely not be renewed in many areas when its enforcement expires on July 7. Additionally, Prime Minister Abhisit Vejajjiva announced the partial lifting of the emergency rule even before its expiration. Authorities said the emergency rule will be lifted in many provinces. The emergency decree covered about one third of the country.
- New land route from Thailand to Burma considered. The Thai government plans to develop a land transport route of 180 to 190 kilometers to link Thailand's Kanchanaburi province with the port of Dawei in Burma as a gateway to markets to the west of the country. The proposed Dawei-Kanchanaburi land route would be connected to a new 1,360-km highway network linking India, Burma, and Thailand. Additionally, Dawei Port in Burma is considered a major component in the overall strategy to create an East-West Economic Corridor, the Southern Economic Corridor, and the North-South Economic Corridor in mainland Southeast Asia.
- Japan to build second bridge across Mekong River. On Wednesday, Japan announced that it will provide $131 million to Cambodia to build a second bridge across the Mekong River. The bridge would be the longest bridge across the Mekong River and is due for completion in 2015. Japan is by far the largest single-country donor to Cambodia.
- Captions: The Mekong River is one of the main transportation systems in Southeast Asia
- Similarly, Cambodia and China reach mutual “understanding” on infrastructure assistance. Last Thursday, a Memorandum of Understanding (MOU) was signed between Cambodia and China to strengthen bilateral cooperation on infrastructure development. According to reports, China has built three bridges and 1,500 km (approximately 932 miles) of roads, totaling nearly $1 billion, and this figure, is set to increase in the near future.
- Cambodia and Vietnam review and renew their friendship. The royal family of Cambodia, including former King Norodom Sihanouk, Queen Mother Norodom Moninieth Sihanouk, and King Norodom Sihamoni, arrived in Hanoi last Wednesday for a four-day visit in Vietnam. They were invited by Vietnamese president Nguyen Minh Triet to celebrate Cambodia’s and Vietnam’s history of friendship and cooperation. At the meeting, after discussing similarities between the two countries’ history—in particular their struggles for independence—the two leaders thanked each other for mutual support and development in the past and present.
- Laos and China to boost cooperation. Last week, Chinese vice president Xi Jinping met with Lao prime minister Bouasone Bouphavanh to utilize fully their geographical advantage to strengthen cooperative partnership. Xi provided suggestions on promoting trade between China and Laos. The results were positive: the two countries signed 18 cooperation pacts covering assistance and cooperation on trade, infrastructure, finance, and power generation.
- 30th anniversary of Exercise Pelican. The Republic of Singapore Navy (RSN) and the Royal Brunei Navy (RBN) conducted a bilateral exercise, code-named Exercise Pelican, from June 21 to 25. Personnel from two RSN ships — RSS Formidable and RSS Vigour — and two RBN ships — KDB Waspada and KDB Seteria — conducted a series of discussions and training exercises in naval warfare such as anti-surface, anti-submarine, anti-air, and maritime-air operations. Both the RSN and the RBN thanked each other for support in maintaining peace and stability in the region, and stated that Singapore and Brunei, both subject to maritime security problems, will work together to develop operational doctrines and naval tactics.
- 5th ASEAN-Japan Counterterrorism Dialogue held June 22 to June 24 in Bali, Indonesia. The Dialogue is intended to serve as a forum for reaffirming the importance of international cooperation in countering terrorism as well as freely and frankly exchanging views between Japan and member states of the Association of Southeast Asian Nations about strengthening cooperation in the region. The Dialogue also identifies the areas of cooperation, designs concrete projects to improve counterterrorism efforts in the region, and implements those projects through the Japan-ASEAN Integration Fund (JAIF).
- ASEAN finance ministers see inflation risks ahead. The finance ministers from ASEAN countries recently cited rising global asset prices, inflationary pressures, and the possible impact of sovereign debt on capital inflow as the key risks facing their economies. The finance ministers of the 10 ASEAN member states, plus those of China, Japan, and South Korea, also finalized a plan to set up a $700 million credit guarantee fund in a big step to help funnel more of the region’s massive foreign reserves into the local bond markets.
- APEC energy ministers going green. After meeting in Fukui City, Japan, the APEC energy ministers, in the face of the Gulf of Mexico oil spill, called for a larger energy-intensity reduction target. A declaration issued after the meeting stated that not only do the ministers believe that their goal in 2007, which was to reduce energy use by 25 percent by 2030, is “likely to be far surpassed,” but they also claim that renewable energy technologies can now be developed at a much lower cost. They encourage countries to develop and utilize renewable energy technologies such as solar, wind, and geothermal for electricity, and biofuels for transport. Currently, the 21 APEC member states account for 40 percent of the world’s population, 54 percent of global GDP, and 44 percent of world trade.
South China Sea
- BP moving into South China Sea. Despite BP’s failure to stop the oil spill in the Gulf of Mexico, it is set to partner with its rival, Chevron Corp, to bid for a South China Sea exploration block. If they win the bid, Chevron will have 60 percent stake in the block and act as operator, while BP will hold the remaining interest. However, if the two companies make an oil or gas discovery, Cnooc Ltd, a unit of China National Offshore Oil Corp, has the right to take a 51 percent stake in the block.
- Vietnam reaffirms rights over South China Sea islands. Vietnam’s government opposes China’s plan to develop Hainan Island for tourism. It is said that China’s proposal incorporates the Spratly and Paracel islands. Vietnam’s Ministry of Foreign Affairs spokeswoman Nguyen Phuong reaffirmed Vietnam’s “indisputable sovereignty” over the islands. Additionally, Vietnam’s Ministry of Foreign Affairs met Chinese embassy officials on June 22 over this dispute. Vietnam reiterated that China’s actions violate Vietnam’s sovereign right and go against the spirit of the Declaration on the Conduct of Parties in the South China Sea, which China and ASEAN signed in 2002.
THE WEEK AHEAD
- Inauguration of Benigno Aquino III on June 30. Three heads of state have confirmed their attendance at the inauguration of president-elect Benigno Aquino III on June 30. The Aquino camp said Thailand’s prime minister Abhisit Vejjajiva, Malaysia’s prime minister Najib Abdul Razak, and East Timor’s president Jose Ramos-Horta will attend the inauguration as well as the dinner at Malacañang along with some 600 to 700 guests, including members of the diplomatic corps.
- Taiwan and China to reach historic trade agreement. It is expected that the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China will be finalized after negotiations on June 28–30, following six months of trade talks. The ECFA is set to bind Taiwan's economy to its giant neighbor to an unprecedented degree and to ease remaining political tensions between the two. Beijing has agreed to give Taipei easier initial market access to 539 items of goods as well as to 11 service sectors, both sides announced Sunday in Taipei. Be it in terms of number of items or value, the early harvest list has far surpassed in ratio any similar pact in the world, even in comparison to the China-ASEAN early harvest list
- Dr. Rajiv Shah, the administrator for the United States Agency for International Development (USAID), will be at CSIS on Tuesday, June 29, for a keynote address and discussion on global health issues. Interested parties please RSVP at http://smartglobalhealth.org/page/s/rajivshah
- CSIS Debriefing with Robert Scher , Deputy Assistant Secretary of State for Southeast Asia, on the Indonesia, Malaysia, and Vietnam bilateral discussions last week as well as the Shangri-La Dialogue. Details will be available later. Interested parties please email firstname.lastname@example.org
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