Under the Radar News, 1.29.2010

Posted on Friday, January 29, 2010 by Prashanth Parameswaran

A weekly compilation of underreported developments in Asia

  • The International Monetary Fund (IMF) warned that Japan’s rising debt could be unsustainable by the mid-2010’s as its aging population reduces the market’s ability to absorb public bonds. Japan’s debt is already the highest in the industrialized world as the government pours money into lifting the country out of recession, exacerbating market concerns about its fiscal health.

  • A top Chinese official announced Beijing will push for an investment surge in its restive, energy-rich Xinjiang region to quell unrest following deadly riots there last year. While the strategy underscores Beijing’s belief that ethnic discord can be cured with economic development, experts caution that the plan could fail without true input from the Uighur minority there.

  • Indonesia, one of the world’s largest greenhouse gas emitters, plans to raise hundreds of millions of dollars from foreign governments to fund green infrastructure projects in order to meet its target of slashing emissions by 26 percent by 2020. But environmentalists say Jakarta’s corrupt forestry sector will undermine its ability to attract foreign finance for climate change mitigation.

  • South Korea plans to increase its nuclear exports in a bid to become the supplier of choice across the developing world. Seoul, already the world’s sixth largest nuclear reactor exporter, forecasts that it will sell 80 reactors by 2030, earning some $400 billion.

  • The Chinese State Council said that the country’s pollution problem “has yet to be controlled” and “is still severe” despite previous efforts to resolve it. It recommended increased investment in environmentally-friendly industries and tougher standards on water resource management to tackle the issue, which has caused violent protests in some parts of the nation.

  • Vietnam announced that it will tighten its monetary policy in 2010 in order to curb concerns about inflation. The move is part of a government effort to balance surging economic growth with accelerating inflation, which analysts say will be Hanoi’s biggest economic challenge this year.

  • Japanese Prime Minister Yukio Hatoyama said his administration will study a possible reorganization of ministries after July elections. The measure is part of his campaign pledge to streamline government by wresting power from bloated government bureaucracies and handing more responsibilities over to political appointees.

  • A survey of Australian investors regarding China’s role in the country’s business found that they harbored deep concerns, with a majority seeing statist Chinese firms as potential threats to the “national interest”. These concerns come as Beijing’s footprint increases in Australia under the Rudd government, which has approved more than 110 Chinese investment applications thus far.

  • In a nod toward an increasing wave of privatizations, Myanmar's ruling junta allowed its close associate and tycoon Tay Za to co-found an association to control its highly lucrative gasoline and diesel fuel sales. The move confirms fears that privatization will only put the country's economy firmly in the control of the junta's cronies rather than freeing it up.

  • China's national ocean agency announced that record-high sea levels in the past three decades threaten the safety of thousands of people in the coastal areas of the country in the future. It urged the government to beef up sea level monitoring systems and take sea level rise into account in subsequent economic development plans.
  • Under the Radar News, 1.22.2010

    Posted on Friday, January 22, 2010 by Prashanth Parameswaran

    A weekly compilation of underreported developments in Asia

  • Indonesia will soon offer new incentives for investors in infrastructure projects as part of President Susilo Bambang Yudhoyono's plan to boost economic growth to at least 7 percent by 2014. The fresh measures are expected to resolve previous problems stymieing infrastructure development, such as the country's notoriously weak land acquisition laws.

  • China launched a new orbiter into space as part of its effort to build an independent global navigation network to compete with foreign systems. The system, known as Beidou, will have a total of 35 satellites and provide worldwide navigation services by around 2020.

  • As Thailand extended a nearly five-year state of emergency in its insurgency-wracked, Muslim-majority south, its Prime Minister Abhisit Vejjajiva says he will propose an amnesty law for Islamist militants next month to break the continued cycle of violence. But some analysts say a prolonged state of emergency will only perpetuate a culture of impunity there and exacerbate the situation.

  • In a significant shift, South Korea broke its silence on North Korea's human rights record and released its first national assessment of abuses there. The report will be delivered to the United Nations and international organizations to spread awareness on the atrocities in Pyongyang.

  • In an attempt to shore up support ahead of elections this year, the Burmese junta accelerated a wave of privatizations of state-owned buildings and factories. Analysts are skeptical that such efforts will liberalize the economy, which remains one of the world's least free.

  • China objected Japan's claim around the Okinotori atoll which, if construed as an 'island', would give Tokyo the right to claim the surrounding area as an exclusive economic zone. Beijing insists that the atoll is merely “a rock”, and has continued to beef up its own presence in disputed waters and contested island chains.

  • Malaysia intensified security along its eastern maritime border due to fears that Filipinos could flood into the country amidst a Philippine government crackdown on Islamic militants and local politicians. The deteriorating situation also caused the U.S. State Department to issue a travel warning that criminal and terrorist groups were plotting attacks in the area.

  • In a clear separation of political and humanitarian concerns, the United States allowed a Taiwanese military plane to transit its territory for the first time in 30 years so that it could make its way to disaster-struck Haiti despite potential backlash from China. Haiti is one of just 23 countries that recognize Taiwan as a country, and Taipei is contemplating debt relief for its ailing ally.
  • Malaysia's Radical Drift

    Posted on by Prashanth Parameswaran

    “We are…a moderate, Muslim state”, Malaysian Prime Minister Najib Razak declared last November. “There may be some incidents along the way that take place, but that should not be seen as evidence of a radical shift”.

    Those words are ringing increasingly hollow. Following a December court ruling that reversed a government ban on the use of the term “Allah” for God in Malay-language Christian publications, almost a dozen churches were attacked in Malaysia with Molotov cocktails and rocks. The instability threatened to upset Malaysia’s fragile multi-ethnic fabric and derail Mr. Najib's own vision of inter-racial harmony.

    The brouhaha is more political than religious. The word “Allah” predates Islam and is still commonly used by Christians in other predominantly Muslim countries like Syria and Egypt. Even the traditionally Islamic Parti Islam-se Malaysia (PAS) makes no bones about it.

    But Malaysia’s ruling party UMNO is anxious to court Malay-Muslim voters by posing as the guardian of Islam, particularly after its unprecedented drubbing in 2008 elections. It insists – curiously – that using ‘Allah’ is part of a pro-Christian plot to convert Muslims.

    This is only the latest episode of the government’s Islamic posturing. During the past year, it dithered before prosecuting Muslims who offended Hindus by using a severed cow’s head in public demonstrations, and threatened to cane a Muslim woman for drinking.

    The ‘Allah’ controversy could cost the government dearly. Non-Malays and even moderate Muslims might fault Mr. Najib’s half-hearted initial attempts to stop Muslim demonstrations in mosques for emboldening the radicalism that followed. And UMNO’s lurch toward extremism could alienate its constituencies in the Christian-strong eastern states of Sabah and Sarawak.

    If these sentiments persist, voters could desert the ruling party in the next election (expected before 2013) in favor of the more moderate Pakatan Rakyat (PR) opposition coalition. Though the gulf in parliamentary control is still quite jarring to expect an outright UMNO defeat – UMNO holds 137 of 220 seats while PR holds 82 seats – it is not unreasonable to expect an even greater shift of voter sentiment away from UMNO if this politicking continues.

    More broadly, UMNO’s exclusivist Islamist agenda could tarnish Malaysia’s reputation as a moderate and prosperous Muslim country. Incidents such as this will only exacerbate the flight of capital and non-Malay talent from it, thereby crippling Malaysia’s long-term economic competitiveness.

    Malaysia also risks facing international opprobrium for its radical drift. Already, Kuala Lumpur’s decision to back Iran in a key vote in the International Atomic Energy Agency (IAEA) last month along with Cuba and Venezuela, when even China and Russia did not, raised eyebrows in Western countries in general and Washington in particular. What may seem like a deft political strategy for Malaysia's ruling elite is fast looking like a damaging political game for the country.

    Under the Radar News, 1.15.2010

    Posted on Friday, January 15, 2010 by Prashanth Parameswaran

    A weekly compilation of underreported developments in Asia

  • Taiwan allegedly plans to buy eight second-hand Perry-class frigates from the United States despite the recent thaw in cross-strait relations, according to the Taipei-based China Times. Once procured, they would be armed with the Aegis Combat system and sophisticated missile launch technology. The country’s defense ministry, however, has denied that a decision has been made.

  • Japanese Prime Minister Yukio Hatoyama vowed to uphold Japan's ban on arms exports, ending months of speculation that the nation might consider revising the decades-old stance.

  • Myanmar assured the Association of Southeast Asian Nations (ASEAN) that promised national elections would be held this year and would be fair. ASEAN, which has faced criticism for not taking a firmer stance against Myanmar, said it hopes the issue will be resolved this year so the region can move on to a “new era of relations”.

  • South Korean businesses are positioning themselves to gain a strategic foothold in Asian markets to capitalize on the region’s burgeoning middle class, focusing on areas like information technology, automobile exports, electronics and finance.

  • China’s possible $1.4 billion purchase of Australian sugar company CSR Ltd., while a potential capital boost for Australia’s embattled sugar industry, has revived debates about the foreign ownership of national assets. Beijing’s previous investments in Australia were primarily focused on the strategic resource industry.

  • Japan’s parliament will begin debate on a bill granting voting rights to about 600,000 ethnic Korean permanent residents. South Korean President Lee Myung-bak is optimistic the bill will pass, but Japanese conservatives are opposed to granting such rights to foreign residents.

  • Vietnam plans to market $1 billion of its dollar-denominated 10 year-bonds next week in order to free up funds for infrastructure development and energy projects. The move is expected to be a key test for investor confidence in the country, which has been shaken by inflation.

  • Russia gave a boost to South Korean President Lee Myung-Bak’s comprehensive rewards package for North Korean by announcing that it is willing to construct gas pipes, electrical grids and railways to bridge the two Koreas and Moscow if Pyongyang surrenders its nuclear arsenal.

  • New economic statistics released by China’s central bank indicated a record 1.4 trillion U.S. dollars in loans for the country in 2009, an amount that is almost double the amount of the previous year. In part due to fears that this ‘lending boom’ could spark inflation, Beijing announced that it would raise the bank reserve requirement ratio to rein in liquidity.
  • Beyond Vietnam's Defense White Paper

    Posted on by Prashanth Parameswaran

    Earlier last month, the Vietnamese Ministry of National Defense (MoND) released its third white paper since 1998. The document is markedly more transparent than its predecessors. It provides multi-year defense budget numbers and extensively maps out the country’s security situation and defense structure and outlook.

    However, the document reveals little about the country’s future strategic plans and priorities. It was silent on Vietnam’s recent two-billion dollar deal to buy six Kilo-class diesel-powered submarines from Russia, and was also relatively muted on the country’s simmering territorial disputes with China in the South China Sea. These recent key developments beyond the white paper clearly point to a future strategy that is maritime-centric and focused on defending the country’s territorial claims.

    This should come as no surprise. Vietnam is a coastal state that has a long coastline and close proximity to the South China Sea. Its strategy of “advancing seawards” is enshrined in several government declarations, most notably the informal ‘Maritime Strategy towards the Year 2020', formulated in 2007, which clearly states Vietnam’s intention to harness its maritime resources for economic development so that they can contribute more than fifty percent of the country’s GDP by 2020. “The priority is now being accorded to maritime issues”, concludes Carlyle Thayer, an expert on Vietnam at Australian National University.

    In order to exploit its maritime resources, Vietnam will have to protect its sovereignty, particularly from Beijing with which it has locked horns over the potentially oil and gas-rich Spratly and Paracel Islands. China has been increasingly assertive over the last few years, pressuring foreign firms not to develop Vietnam’s maritime sector in disputed areas, constructing new structures on key reefs, and beefing up its naval presence.

    Vietnam’s future defense strategy will thus be heavily focused on acquiring the capabilities to address this threat. Experts agree that the Kilo submarines were at least partly geared at countering China’s burgeoning military capabilities. But they are only a small part of Hanoi’s broader naval ambitions in the near future, which will include assembling missile frigates, expanding naval cooperation with Southeast Asian states (including possible joint exercises), procuring more arms and technology, and enhancing the professionalism of its forces. Hanoi has also attempted to bolster its relationship with the United States, with Defense Minister Gen. Phung Quang Thanh meeting with U.S. Defense Secretary Robert Gates at the Pentagon last month and some officials suggesting that nascent security ties could mature in the future to include eventual arms sales.

    The extent to which Vietnam is able to achieve its goals will largely be determined by its financial capacity and ability to turn equipment into effective capabilities. The global financial crisis reduced the country’s defense budget as a percentage of GDP from 2.5% to 1.8% last year, and its continuing economic troubles may put some dents on its defense hopes.

    Acquiring new technology is also hardly the quick fix it appears to be. Vietnam needs to develop a naval doctrine that incorporates these technological capabilities, and thus far it lacks even a coordinated marine policy. Furthermore, new equipment (like submarines) requires funding to make the force combat ready, and the transition period between acquiring equipment and fully integrating its force capabilities into a country’s existing force structure varies depending on the infrastructure and finances available.

    Despite these constraints, one can expect Vietnam’s eyes to be set firmly on the sea in the years to come.

    Under the Radar News, 1.8.2010

    Posted on Friday, January 8, 2010 by Prashanth Parameswaran

    A weekly compilation of underreported developments in Asia

  • Myanmar’s ruling junta will boost the salaries of low-paid government employees starting Jan. 31 in a bid to placate civil servants ahead of this year’s critical general elections.

  • Thousands of Indonesian workers rallied in Bandung demanding the postponement of ASEAN-China Free Trade Agreement implementation because it could trigger 40,000 layoffs in just three months.

  • Apple is reportedly blocking iPhone users in China from downloading applications about the Dalai Lama and exiled Uighur leader Rebiya Kadeer.

  • Taiwan passed a refugee draft bill, finally creating a legal basis for the government to handle refugees and asylum-seekers.

  • The Eurasia Group, a global political risk consulting firm, found that South Korea is the most politically stable nation among a group of 24 emerging economies.

  • A top Chinese naval official proposed setting up a permanent base to support ships on anti-piracy missions, raising the possibility that China could build foreign bases elsewhere.

  • An increasing number of North Korean refugees are fleeing to northern Thailand to escape poverty and oppression.

  • Visiting Prime Minister Yukio Hatoyama and his Indian counterpart Manmohan Singh agreed to a joint statement on greater cooperation in maritime security, which includes joint training exercises and cooperative measures to deal with natural disasters.

  • A liquefied natural gas (LNG) agreement between China and Australia expired, mainly because the Australian company, Woodside, failed to supply gas as scheduled.
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