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: Impact of US export controls on Ant Group would be mainly symbolic
The Trump administration is reportedly considering a proposal from the State Department to add Ant Group, the financial services affiliate of e-commerce heavyweight Alibaba, to the Commerce Department’s entity list, which Washington has used to restrict US technology exports to Huawei and other Chinese groups. Secretary of State Mike Pompeo is among the administration’s most forceful advocates for a hardline approach to China, but any final decision would require agreement from the Commerce Department and the White House. Ant’s flagship mobile payments service, Alipay, is not currently available for use with US or other non-Chinese bank accounts, and the app has few US users. Still, the State Department is reportedly concerned that Ant could seek to grow its US user base in the future and thereby gain access to sensitive banking data. Like its main competitor, Tencent’s WeChat Pay, Alipay is widely accepted by international retailers, hotels, and tour companies that aim to attract Chinse tourists.
Even if the administration adopts the State Department’s proposal, the impact on Ant would be mainly symbolic. Unlike Huawei and ZTE, Ant does not rely substantially on US semiconductors or other US technology. If the administration wanted to impose more impactful sanctions on Ant, it could use the Treasury Department’s Specially Designated Nationals List (SDN), which would cut off Ant from the US dollar banking system. Such a move would also force both US and international banks from participating in Ant’s pending double IPO in Hong Kong and Shanghai, which is on track to be the biggest equity market debut ever at USD 35bn. But there is no sign that the Trump administration is currently considering this option.
JAPAN: Suga to announce new defense and economic cooperation on Southeast Asian trip
Yoshihide Suga will take his first foreign trip as prime minister from 18-22 October, going to Vietnam and Indonesia. Suga’s decision to visit Southeast Asia for his first overseas travel is another indicator of the role that the region will continue to play in Japan’s foreign policy. (Former prime minister Shinzo Abe also made Southeast Asia the site of his first trip after returning to the premiership in 2012.) Tokyo views Southeast Asia as the main arena for political and economic competition with China and has accordingly sought to strengthen the maritime security capacity of ASEAN countries engaged in territorial disputes with China in the South China Sea and has encouraged deeper trade, investment, and aid ties between Japan and the region.
Accordingly, in Hanoi, Suga and Vietnamese Prime Minister Nguyen Xuan Phuc will ink two agreements, an arms sale agreement that will allow Japan to export defense equipment to Vietnam and an agreement to deepen Vietnam’s integration into Japan’s supply chains for medical and pharmaceutical products. The latter agreement indicates that Vietnam will likely be a major beneficiary of Tokyo’s new efforts to promote supply chain resilience. This includes a program rolled out as part of a Covid-19 stimulus package to subsidize companies that shift production from China to Japan or elsewhere in Asia and a newly announced trilateral initiative with India and Australia. The arms export agreement, meanwhile, is Japan’s second in the region, following an August agreement with the Philippines to export an early warning and control radar system. A similar deal will likely be on the agenda when Suga meets with President Joko Widodo.
MALAYSIA: Anwar Ibrahim’s claim is in suspended animation
The palace announced on Wednesday that the king’s meeting with the heads of political parties would be postponed for two weeks due to the movement control orders that were recently re-imposed because of the growing cases of Covid-19. The meetings were being scheduled to verify opposition leader Anwar Ibrahim’s claim that he had more than a majority support of MPs, which if true would lead to the collapse of the government of Prime Minister Muhyiddin Yassin. A partial lockdown started from 15 October in the capital Kuala Lumpur, including the nearby state of Selangor.
Although the reason for the suspension may nominally be true, it gives rise to speculation that the additional time will allow for the backroom negotiations between the political parties to avoid an outcome where parties are divided when presenting their position, thus putting the king in a difficult position to decide which competing claim is valid. The target of this speculation is the United Malays National Organization (UMNO), which is reportedly split between staying with its National Alliance partners that now form the government and supporting Anwar’s bid to become prime minister. This could mean that the events of the past two weeks may be UMNO attempting to gain greater leverage with its coalition partners and using the threat of supporting Anwar in the process.
THAILAND: Was the government’s emergency order a miscalculation?
Anti-government protesters will return to the streets of Bangkok on Friday afternoon. Even though there is a state of emergency prohibiting any gatherings of more than five people, more than 10,000 people showed up at Bangkok’s main commercial district Thursday evening in defiance of the order and possibly more may show up Friday. Police were present in numbers at the Bangkok rally, but aside from asking the demonstrators to leave, they did not take any action against them.
The government could let the rallies continue, continuing its earlier strategy, in the hope that they eventually lose steam because its key leaders are now detained. This was one of the strategies adopted by the post-coup government in 2014, when it summoned Red Shirt leaders to police precincts for so-called “attitude adjustment”meetings.
However, Thursday’s lack of action may also embolden the movement’s supporters, causing their numbers toswell even more in the coming days – especially now that they have another focal point, which is to seek the release of the activists arrested Thursday morning. Since, the declaration of a state of emergency appears to have been triggered by the near confrontation between a royal motorcade and protesters on Wednesday afternoon, the continued presence of the protesters on the streets may generate a sense of the government losing control of the narrative that it is effectively protecting the monarchy. This would further rile conservatives within the military and increase speculation of military intervention.
One complicating factor for the government is that, based on anecdotal reports, possibly two-thirds of the protesters are composed of youth and school-age students. Many apparently proceeded to the area after school. Their presence makes a violent dispersal difficult.