October 1, 2020


ASIA: Weekly politics update

BY Tobias Harris, Bob Herrera-Lim, Gabriel Wildau

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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 New export controls target top Chinese chipmaker

US semiconductor producers must obtain a license from the US Commerce Department to export certain technology to Semiconductor Manufacturing International Corp (SMIC), China’s largest chipmaker. The action by the US Commerce Department is not as strict as restrictions imposed on Huawei, since they only apply to certain products. Still, the action could cut off SMIC’s access to chip design software and manufacturing hardware from US companies. The restrictions on SMIC make use of new rules issued in April that aimed to deny US technology to Chinese companies and institutions with connections to the Chinese military. Those rules expanded the definitions of “military end-use” products that are subject to export control and of “military end-users” to whom the sale of such products is restricted.

But US companies may still be able to obtain licenses to continue at least some sales to SMIC. Commerce issued the temporary licensing requirement pursuant to a pending interagency review of SMIC’s relationship with the Chinese military. In theory, this review could eventually conclude that no such relationship exists and revoke the licensing requirement, though this outcome is unlikely. Alternatively, the review could conclude that such links do exist and that SMIC should be added to the entity list. SMIC says it has “no relationship with the Chinese military” and “does not manufacture for any military end-users or end-uses.” But SMIC has benefitted from an array of state subsidies and is central to Beijing’s plans to increase self-sufficiency in semiconductors.

JAPAN: Snap election will likely wait until next year, as Suga focuses on governing

Prime Minister Yoshihide Suga increasingly appears to have withstood pressure from his Liberal Democratic Party (LDP) to call a snap election before the end of the year. While senior LDP members, including members of his own cabinet, suggested that he should take advantage of his political honeymoon to win a new majority for the ruling coalition and a mandate of his own from the public, Suga has stressed the importance of combating the pandemic and its economic fallout and delivering on other policy priorities before going to the polls.

By resisting calls from his own party for an election, the new prime minister showed that, at least for now, he is in control, despite concerns that the manner of his election signaled the return of factional dominance within the LDP. Resisting a snap election also likely reflects Komeito’s influence in the ruling coalition, particularly given Suga’s longstanding ties with the junior coalition partner. Suga can still use the threat of a snap election to keep backbenchers in line and, depending on the timing, could also use a snap election to ease his path to a full term as LDP leader next year.

In the meantime, Suga is preparing for his first foreign trip as prime minister – to Vietnam and Indonesia, later this month – and the start of the autumn extraordinary session of the Diet, which could begin on either 23 or 26 October and run through around 10 December. The government’s priorities for the session will include ratifying the economic partnership agreement with the UK and a bill that would enable the government to compensate individuals who suffer side effects from a Covid-19 vaccine. LDP Secretary-General Toshihiro Nikai also suggested in an interview Wednesday that the government and ruling parties are looking into a third stimulus package, with an eye towards passing it during the extraordinary session.

SOUTH KOREA: New case numbers fall, but government anxious about holiday travel, protests

Though South Korea’s “second wave” of Covid-19 infections appears to be fading, with new daily case numbers gradually falling below 100 per day, a spike back to 113 new cases on 30 September raised concerns among health authorities that the autumn Chuseok holidays could lead cases to rise again. The Moon administration sought to discourage travel for the holidays – the period is usually one of the busiest travel periods of the year – but millions are still likely to travel, despite nationwide social distancing rules restricting public gatherings and other activities.

In the meantime, the administration is engaged in a battle of wills with conservative activists regarding protests in Seoul on 3 October, South Korea’s National Foundation Day. After right-wing protests on 15 August, Liberation Day, appeared to serve as “super-spreader” events for the second wave, the Moon administration is trying to prevent a repeat on 3 October. A Seoul court on 29 September upheld a ban on demonstrations, but a day later the court ruled that small “drive-thru” protests with fewer than 10 vehicles will be permitted, though they will not be allowed to roll down windows, chant slogans, or have face-to-face contact before or after rallies.

INDONESIA: Debt monetization concerns ease

A majority of parliament does not yet appear to support proposed revisions to the central bank law that would allow for indefinite debt monetization and the creation of a committee to guide central bank (BI) policymaking. In fact, according to legislative commission vice-chair Ahmad Baidaowi, no official bill has been filed or is under deliberation, and that what has been circulating are only proposals from the president’s party, the Indonesian Domestic Party of Struggle (PDI-P). The other parties – Golkar, Partai Demokrat, National Awakening Party (PKB), the Justice Welfare Party (PKS) and Gerindra – seem to be uninvolved in the plan.

Combined with Finance Minister Sri Mulyani Indrawati’s ambiguous statements on the issue (as noted in our previous reports), these developments suggest that the proposal will not gain traction. Still, the government resorted to debt monetization – albeit under temporary authorization – at the peak of the pandemic. With the finance minister planning some reforms to the financial system to better prepare it for a crisis, PDI-P legislators may still initiate a legislative debate on the matter.

PHILIPPINES: Duterte’s hollow threat to ban Facebook

President Rodrigo Duterte made an implicit threat to block Facebook, after the social media company banned groups and removed postings, some of which were apparently being run by the armed forces to spread propaganda against left-wing organizations and the local communist movement. According to Facebook, the posts exhibited “coordinated, inauthentic behavior.” Many of these pages and posts supported Duterte and his daughter’s potential candidacy in 2022 and criticized the social news site Rappler, which hosts criticism of Duterte. But Facebook also removed a broader range of posts and users, including those supporting “military activities against terrorism, pending anti-terrorism bill, criticism of communism, youth activists and opposition, the Communist Party of the Philippines and its military wing the New People’s Army, and the National Democratic Front of the Philippines.”

Though Duterte seemed willing to reach accommodation with left-wing politicians and organizations shortly after winning the 2016 vote, he now openly paints the Communist Party and its rebel arm, the New People’s Army, as among his administration’s top targets, second only to the drug trade.

More by Tobias Harris, Bob Herrera-Lim, Gabriel Wildau