Southeast Asia: Political Pawn or Proxy?
As Covid-19 continues to cast its pall over the world, some analysts say China — and other autocrat nations for that matter — are using the occasion to exert power. To make matters worse, Trump continues to paint China as the source of all woes and if some diplomatic effort isn’t made, we may find ourselves in the midst of a new Cold War or even worse.
One part of the world is particularly susceptible to these geo-political transgressions, and that’s Southeast Asia. In order to understand what’s at stake, I spoke with Adam Schwarz, CEO of Singapore-based advisory firm, Asia Group Advisors. Our conversation in this episode of Inside Asia reminded me how the sub-region has weathered its fair share of colonial and post-colonial flack. The Southeast Asia of today is not the Southeast Asia of yesteryear. For generations, the spice trade defined commerce. Europeans cottoned on in the 16th century and throughout the 17th century, the region was divided up through a series of unequal treaties.
The post-World War II era ushered in a wave of independence movements. But even then the governments of Southeast Asia were divided along ideological lines. Indochina became the staging ground for American and Russian aggression. The Vietnam War…well…that served as a bloody reminder that post-colonialism was alive and well.
The past 50 years has given Southeast room to grow. The results have been mixed. While Singapore has emerged as one of the most sophisticated city-states on the planet, other countries, like Laos, have wallowed in stagnation. Perhaps because of these major developmental differences, the Association of Southeast Asian Nations, or ASEAN, has struggled to build consensus. The 10 member nations represent a collective GDP of $2.3 trillion. That’s relatively small compared to an American GDP of $21 trillion, but not unimportant. Combined, its equivalent to the world’s 7th largest economy.
Now could be Southeast Asia’s phoenix moment. Member nations are a collection of relatively stable and growth-oriented markets that may be about to reap the benefits of a geopolitical pissing match between the US and China. As my conversation with Adam reveals, investors are swarming, supply-chains are shifting, and confidence is mounting. The sub-region’s ability to weather and managed the Covid-19 crises will either make or break the rate of that ascendance. Much is yet to be seen.
Politically, the US had distanced itself from the region for all the wrong reasons and at precisely the wrong time. US investors and multinationals operating in this part of the world aren’t happy about that. Layer in China’s ambitions and the fact that it is now the region’s largest trading partner and the possibility for one of two scenarios emerges.
Best case, ASEAN finds its footing, doubles down on its effort to economically integrate, and sets an example to the world in areas of sustainability and innovation. Worse case, China exerts power to replace US influence while leaders in the region dicker, only to find themselves, once again, beholden to a Northern neighbor with a historical fondness for tribute.Then there’s the matter of transparency. How or why Covid-19 reported cases are to date so low through ASEAN countries is a bit of a mystery. As any epidemiologist will tell you, a virus thrives in densely populated and immune-compromised communities. Asia’s slums — of which there are many — come to mind. Maybe not in the high-rise cosmopolitan centers of Singapore, Hong Kong or Tokyo, but certainly in places like India, Cambodia, Indonesia and the Philippines.
According to the World Bank, Asia is home to 563 million urban slum dwellers, or 64% of the world’s slum population. Urban slums pose the greatest concern, where people live on top of each other and sanitation is virtually non-existent. In Manila, places with names like Tondo, Happyland and Aroma are home to millions of poor and destitute. They rank among the world’s most densely populated areas. Conditions are shocking. The same goes for Tambora in Jakarta, where an estimated 250,000 people are packed into a 5–1/2 square mile radius.
So here’s my big concern: If Covid-19 can sweep through the orderly, albeit crowded, worker dorms in well-appointed Singapore — as it has — with nearly a thousand cases a day for the last three weeks, then what’s to prevent this virus from wreaking havoc in large-scale slums, where most assuredly, no one will come to the rescue? Could it be that for reasons that defy logic, Asia’s urban poor have been spared the disease, or is it possible that governments in less developed countries are simply under-reporting cases, knowing full well that they can neither test nor treat the infected?
This is what I mean by transparency. If Southeast Asia has a shot at growing its global reputation, any move to cover up the truth with respect to the spread of the disease is sure to tarnish the sub-region’s image. For investors, it’s a test. Political competency and stability are precursors if the plan is to invest and grow long-term.
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