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September 3, 2020


ASIA: Weekly politics update

BY Tobias Harris, Bob Herrera-Lim, Gabriel Wildau

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( 7 mins)

Below is the weekly update of political developments across East Asia. Please do not hesitate to contact us if you want to discuss any of the countries mentioned in more detail.

US/CHINA: Washington curbs Chinese diplomats’ activities inside the US

The US State Department announced new curbs on Chinese diplomats’ activities inside the US on 2 September, casting the restrictions as a move towards “reciprocity” in light of obstacles that US diplomats face in China. Chinese diplomats must now obtain State Department approval to visit US university campuses, host cultural events with more than 50 people outside the grounds of Chinese embassies and consulates, or meet with state and local officials. The latest restrictions represent a tightening of rules issued last October that required Chinese diplomats to notify US authorities of meetings with state and local officials, and at educational and research institutions.

Additionally, Secretary of State Mike Pompeo said he had written to the governing boards of US universities warning them of the threat of Chinese intellectual property theft, intimidation of Chinese students, and “opaque talent recruitment efforts.” Pompeo is also encouraging universities to shut down Chinese government-funded Confucius Institutes that operate on university campuses. The State Department will also take action to ensure that the social media accounts of Chinese diplomats are identified as government accounts on platforms such as Facebook and Twitter, though these platforms have mostly already taken such steps voluntarily.

The Chinese embassy said the US move “runs counter to the self-proclaimed values of openness and freedom of the US side.” But Beijing has recently shown forbearance in responding to hardline US actions, apparently hoping that such forbearance could allow a Biden administration greater political space to repair the bilateral relationship.

JAPAN: Suga may seek to be more than a caretaker as polls move in his favor

In a television appearance on Thursday, 3 September, Chief Cabinet Secretary Yoshihide Suga, the prohibitive favorite to succeed Shinzo Abe as Japan’s prime minister, did not rule out the possibility that he could call a snap election, noting that it would “depend on conditions.” Suga’s remark may be an early sign that he does not intend merely to be a caretaker serving out the remainder of Abe’s term until September 2021 before yielding power to a younger successor, but may instead be thinking about how to lay the groundwork for winning an electoral mandate from the public that would enable him to win a full three-year term as Liberal Democratic Party (LDP) leader. Early polls suggest that although Suga had recently been an afterthought in the race to succeed Abe, he has opened a significant lead over Shigeru Ishiba and Fumio Kishida, the other declared candidates, among both the public at large and among LDP supporters. While polls show that the public may be uneasy about the LDP’s decision to hold a closed vote, Suga may nevertheless enjoy healthy support and a honeymoon period after taking office.

Like Abe, Suga may be helped by a fractured opposition. Although the Constitutional Democratic Party (CDP) and Democratic Party for the People (DPFP) are finalizing their merger, it appears that at least 20 members of the DPFP – significantly more than anticipated – will opt out of the merged party and form a new splinter party. These defectors will matter less in terms of numbers than in planting doubts about the efficacy of the new party – which essentially reunites remnants of the old Democratic Party of Japan (DPJ) – to provide an alternative to the LDP. Therefore, the weakness of the opposition could lend credibility to a threat by Suga to call a snap election, since he would not have to worry about losing many seats.

SOUTH KOREA: Fourth supplementary budget increasingly likely as ruling party pressures Moon

Lee Nak-yon, leader of the ruling Democratic Party of Korea (DPK), has stepped up pressure on the Moon administration to introduce a fourth supplemental budget before the end of the year, reportedly telling the leader of the opposition United Future Party (UFP) that a fourth budget was “unavoidable.” The new budget could be focused on another round of payments to households, and may be a similar size as the KRW 12tn (USD 10bn) second supplemental budget, which also provided payments to households. The administration has not made a decision about the budget yet, but with stricter social distancing in place – although case numbers have begun falling – the government is unlikely to resist the DPK’s demands as it seeks to stabilize growth and avoid more economic pain that could harm the DPK’s prospects ahead of the 2022 presidential election.

At the same time, President Moon Jae-in is preparing to advance his Korean New Deal, an ambitious program to pursue new sources of growth for the economy, particularly in clean energy and information technology. In a Korean New Deal strategy meeting Thursday, 3 September, Moon announced that the government would roll out a KRW 20tn (USD 16.8bn) New Deal Fund that would raise a mix of public and private funds for investments in New Deal projects.

PHILIPPINES: Duterte appoints a law enforcer to head national health insurer

President Rodrigo Duterte has appointed the retired former director of the country’s National Bureau of Investigation as the new president of the embattled national insurer Philippine Health Insurance Corporation (PhilHealth). Congressional investigations several weeks ago unearthed serious corruption in the agency, which is supposed to provide universal health coverage for Filipinos. The Senate this week released its report, highlighting the problems created by a scheme to advance payments to hospitals and a corruption-laden IT project. It recommended that charges be filed against the secretary of health, PhilHealth’s president and several of its top officials.

However, the new president, Dante Gierran, openly admitted that he was unfamiliar with the operations of the insurer as well as public health policymaking, which makes it questionable as to whether he will be able to formulate or implement structural reforms in the agency and in how it operates. In fact, the main apprehension in Manila is that corrupt factions within the agency will attempt to manipulate Gierran’s law-and-order focus to remove their internal competition. PhilHealth’s fiscal dependence on the national government is likely to increase over the next two years, owing to a likely decline in contributions due to the recession and the increased payouts for Covid-19 testing and hospitalization.

THAILAND: New consumption and employment stimulus

The government is planning two new efforts to raise consumption and employment. The first is a THB 3,000 (USD 95) spending subsidy for 15mn people, which will be channeled mainly through small retail sellers. The exact mechanics have yet to be disclosed, but the main goal is to help retail SMEs. The second is a scheme under which the government will pay for half of the salaries of new graduates, up to THB 7,500 (USD 238) a month, until September 2021. To be eligible for the employment subsidy, businesses must be part of the social security system and must not have laid off more than 15% of their employees over the past year; only 2019 and 2020 graduates are eligible. An estimated 260,000 new graduates are expected to benefit from the program. With the recent turnover in the country’s economic team, Prime Minister Prayuth Chan-ocha will be under increasing pressure to show that he is dealing effectively with the pandemic. However, the lack of a strong policymaking lead means many of these new policy efforts are likely to be short-term popular programs for the foreseeable future.

MALAYSIA: Is five decades of politics over?

( 6 mins) The political dynamics that had kept Malaysian politics stable since the 1970s have been unravelling gradually over the past decade. The return of a United Malays National Organization (UMNO) politician to the prime ministership is

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