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November 6, 2020


ASIA: Weekly politics update

BY Bob Herrera-Lim, Gabriel Wildau, Tobias Harris

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( 6 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.

CHINA/AUSTRALIA: China expands trade sanctions against Australian exports

Chinese authorities have either imposed or are preparing partial import bans on a widening range of Australian products, including coal, barley, copper, sugar, timber, cotton, wine, and lobster. The stated reasons for the bans range from alleged dumping of wine to pests allegedly discovered in grain shipments. In other cases, authorities did not publicly announce new restrictions but instead informally instructed Chinese traders to halt purchases or told customs authorities not to clear inbound shipments.

The import restrictions reflect a broad deterioration in Sino-Australian relations since early this year. Relations began deteriorating in April, when Australian Prime Minister Scott Morrison joined US President Donald Trump in calling for an international investigation into the origin of Covid-19. His advocacy included writing a letter to the G20 to drum up support. Beyond the pandemic, Australian politics has been gripped by concerns about alleged Chinese interference, with many ethnic Chinese politicians, civil servants, and businesspeople in Australia facing charges of inappropriate links with the Chinese Communist Party. The abrupt departure of two Australian journalists from China in September after they were questioned by the Ministry of State Security further activated anti-China sentiment in Australia. In response to that incident, Chinese official media revealed that Australian security officials had raided the Australian homes of Chinese journalists in June.

Despite rising tensions, Australia’s largest export to China – iron ore – remains unaffected. In fact, iron ore exports reached an all-time high in the first half of this year as China’s industrial economy roared back to life following the pandemic shutdown. Beijing remains unlikely to target iron ore because no other exporting countries can fully substitute for Australian supply. Still, China’s moves against other products will add urgency to longstanding concerns in Australia about excessive reliance on China, which purchases around 39% of Australia’s total exports.

JAPAN: Third supplemental budget could swell as election year approaches

The ruling Liberal Democratic Party (LDP) and its coalition partner Komeito have been in negotiations regarding the size and content of a third FY2020 supplemental budget, which would be submitted to the Diet in early 2021. The parties agreed that the budget should include spending that would promote the “conversion of the structure of the economy” for the post-Covid-19 world – perhaps with additional funds for diversifying supply chains away from China and investment in Prime Minister Yoshihide Suga’s “digital transformation” agenda – in addition to other spending on job and wage security, and investment in disaster prevention and mitigation infrastructure. The supplemental budget could also fund extensions of the “Go To Travel” and “Go To Eat” programs that have subsidized consumption and supported the crisis-hit tourism industry.

As negotiations have proceeded, the likely size of the stimulus package has swelled. Officials from both parties have suggested that the supplemental budget could be JPY 10tn-15tn (USD 96.8bn-145.25bn), larger than initial estimates that suggested JPY 10tn was the upper end of the range. It is possible that, with a general election guaranteed to be held within the next 11 months and perhaps as early as H1 2021, the size could grow even larger. Hiroshige Seko, the LDP’s upper house secretary-general, suggested a new stimulus package should include upwards of JPY 30tn (USD 290.5bn) in new government spending (“freshwater”), with the implication that much if not all of this spending would be backed by government debt. Either way, new stimulus could be divided between a third supplemental budget and the FY2021 budget, as the government seeks to implement a “15-month” budget as the economy recovers from the pandemic and during the run-up to the general election.

INDONESIA: Omnibus law is challenged in court

President Joko Widodo earlier this week signed the Omnibus Law on Job Creation, paving the way for the preparation of government regulations needed to implement it. The target for the release of these regulations is February, but delay is common in Indonesia. However, petitions challenging provisions of the law, particularly those relating to labor, were also filed this week by two major unions, the Confederation of Indonesian Workers Unions (KSPI) and Confederation of All Indonesian Workers Unions (KSPSI), before the country’s Constitutional Court.

A law passed recently extends the terms of the current chief justice and associate justices, raises their retirement age, and expands the court’s powers. There is speculation that its approval may have been timed to give the government some leverage to lobby the court not to void the omnibus law. If true, this means the law will likely survive the legal challenge, although its survival could come at the cost of governance improvements in the judiciary. Meanwhile, even with the case, sporadic protests are possible against the law, especially as hearings progress.

THAILAND: Another round of large protests planned but lack of endgame could hurt anti-government movement

The Free People, the anti-government group that has led most of the protests of the last two months, will attempt to mobilize another large demonstration on Sunday, 8 November, to further pressure the government to agree to their demands: the resignation of the prime minister, constitutional change and reforms in the monarchy. Although support for the movement is still running high, its ability to push its agenda has been affected over the last few weeks by the arrest of many of its most visible leaders. Many of them have since been released and they have apparently re-grouped.

At the end of October, parliament announced its plans to form a reconciliation committee to find a way out of the crisis, but the protesters rejected it at a press conference held on 4 November, saying that Prime Minister Prayuth Chan-ocha remains the main obstacle and that real reforms are impossible as long as he is in office. The primary challenge for the movement is that its members are still primarily the youth and while their presence on the streets generates significant attention, they will likely need to attract other sectors of society to raise the sense of crisis, and force a response from the government and the monarchy.