Asia's Week: Southeast Simmer, Soon to Boil?

May 9 2014, 3:59pm CDT | by

Political risk levels are rising in parts of Southeast Asia, which may come to bear on the economies and shake them from the recent general glide-path.

Ships from Vietnam and China rubbed against the other this week in the disputed Paracel Islands, where the Chinese want to drill offshore for oil. For now only a water cannon was fired, but let’s remember that the two nominally Communist countries fought a war of sorts in 1979 over less valuable stakes.

Meantime, China was again at naval odds with the Philippines, this time over the alleged poaching of endangered sea turtles. A Chinese boat was seized in the vicinity of other disputed territory.  Release of the crew was demanded by China, and the offense was denied, although the record of habitat protection in the People’s Republic did not inspire faith in this testimony.

These South China Sea areas, along with those in the north separating China and Japan, are some of the world’s most dangerous tripwires. Friends of China such as New York law professor Jerome Cohen have long urged Beijing to seek international legal arbitration of its increasingly insistent claims.  So far, it has instead tried a quasi-military push.

This is thought to be putting the Chinese on the diplomatic back-foot with much of Southeast Asia, where it might otherwise hope to find trade-based allies. A soft ASEAN consensus, along with the implicit or explicit backing of the U.S., could embolden the spirits of Hanoi and Manila. Countervailing Chinese efforts to shore up relations where possible are thus in order, before matters come further to a head. Malaysia is one potential soft spot. Understandable, then, that China appears now to be seeking to repair relations with Kuala Lumpur that suffered from MH370 plane disaster. Malaysian PM Najib Razik is due to visit Beijing later this month.

China might also hope to play a bigger supportive role in two stumbling Southeast Asian economies where, for instance, Japanese business is busy.  Those would be Indonesia, where output growth is slowing thanks in part to resource protectionism, and Thailand, a governmental basket case. Events there spiraled further out of control this week as Yingluck Shinawatra was forced out of office and possibly into the dock by opponents of her family’s rule.  Although commercial forces have mostly shrugged off the power struggle there for the past many months. new concern shaved the past month’s recovery off the Stock Exchange of Thailand index and the baht currency dipped.

If things weren’t troubled enough in the region, the Sultan of Brunei has managed through restrictive new social policies to get his tourist properties abroad boycotted by Western entertainment and arts figures. He is unlikely to need Chinese succor to survive the pinch, although the PRC rulers–embroiled in another crackdown of their own on dissent these days–might feel a certain autocratic kinship.


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