Tag Archives: Sunnylands

Clouds Gathering as Obama Hosts Southeast Asian Leaders at Sunnylands

ASEAN leaders gather for a family photo with U.S. President Barack Obama (5th L) after a US-ASEAN meeting at the ASEAN Summit in Kuala Lumpur, Malaysia November 21, 2015. REUTERS/Jonathan Ernst TPX IMAGES OF THE DAY

Photo courtesy aseanmp.org

On Monday and Tuesday, February 15-16, President Obama will host eight leaders and two senior alternates from the 10-country Association of Southeast Asian (ASEAN) at Sunnylands, the former estate of Walter and Leonore Annenberg in Rancho Mirage, CA.

The Sunnylands summit will be an historic development in US-ASEAN relations and a significant testament to the positive impact of the Obama administration’s Rebalance to the Asia-Pacific and its broad all-of-government reengagement with ASEAN. But amidst the bonhomie many if not most of the leaders are likely to have more questions than answers about future US initiatives towards the region.

Obama and most Presidents since Dwight Eisenhower have used the Sunnylands conference center for retreats and to host high-level foreign visitors.  Obama hosted Chinese president Xi Jinping at Sunnylands in 2013.

But even as relations with ASEAN have never been stronger, clouds are gathering over arguably the world’s most successful developing region. The most serious are blowing from China, which has followed an erratic course almost since Xi Jinping became Asia’s “man-in-a-hurry” since he took office in March 2013.

Since 2000 the ASEAN countries have averaged GDP growth of more than 5 percent, though per capita income and living standards still vary widely.   McKinsey & Company judged ASEAN collectively to rank the lowest among the world’s largest economies in GDP growth volatility from 2000-2013.

Still, economic cooperation has generally not lived up to the hopes and aspirations of most member countries.  Over nearly five decades the rhetorical bar regarding intra-ASEAN trade and investment has always been set significantly higher than actual performance.

At the time of the initiation of the ASEAN Economic Community in 2015, the ten countries were still trading much more with the rest of the world than with one other, especially if trade figures are adjusted to separate intraregional trade among Japanese and Chinese corporate shipments of parts and components for their regional supply chains.

Relations with the US have been warm throughout ASEAN’s expansion and evolution, though US preoccupation with the Middle East after 9/11 and the invasion of Iraq created significant anxiety in some capitals about the strength of American interest and staying power.   Relations have been on the upswing since the beginning of the Obama administration, though some important moves such as the Rebalance to Southeast Asia and closer engagement with Vietnam had bureaucratic if not high level political roots in the last year or so of the George W. Bush administration.

To date, nervousness about China’s increasingly assertive efforts to solidify its claim to nearly 90 percent of the South China Sea—including parts of the 200 nautical mile Exclusive Economic Zones (EEZs) of five ASEAN countries—has been the single most important reason for the positive reception in the region to the US military rebalancing to East Asia and the US’s its broader political and economic reengagement with Southeast Asia.

China’s effort to create a modern mare nostrum in the South China Sea through bullying and the deployment of overwhelming numbers of maritime police vessels, Coast Guard and PLA warships remain a continuing threat to regional peace and stability and drive other claimants closer to the US, but in recent months China’s fast slowing economy and unsettling blunders by the Central Bank have created even more imminent dangers to both to ASEAN economies  and regional stability.

The main reason has been China’s emergence little more than five years ago as the single largest market for ASEAN exports of commodities and manufactured goods. Chinese imports and fast growing American investment were twin engines of growth that supported ASEAN throughout the global recession.

Now China’s rapidly slowing growth and questions about its financial stability are imposing a serious and unexpected drag on ASEAN’s largest economies, where massive Chinese investment in mines as well as deforestation in order to create rubber and oil palm plantations and transportation infrastructure have left communities adrift in a wasteland of environmental devastation.

The falling Yuan and the Xi administration’s surprisingly clumsy handling of its financial turmoil have shaken investor confidence throughout the world.  China’s economic slowdown is likely to continue until policymakers finally make well recognized but politically difficult reforms and the economy purges itself of excess capacity and non-performing debt.  Meanwhile, the rapid fall in imports of commodities coupled with a weak and still tenuous recovery of the global economy pose a serious short and medium threat to the wellbeing of most of the ASEAN countries.

Several non-military moves of the Obama administration, including the 2009 Lower Mekong Initiative (LMI) and the Trans-Pacific Partnership (TPP), have been strongly welcomed by the relevant countries—Cambodia, Laos, Myanmar, Thailand and Vietnam in the case of the LMI and Brunei, Singapore, Malaysia, and Vietnam in the case of the TPP talks. But Thailand and one or more other countries have reason for concern that their own exports and attractiveness to multi-national investors will suffer as a consequence.

How Washington responds to the situation in the South China Sea and its overall policy towards Beijing are certain to be high on the list of talking points for the ASEAN leaders, as will a range of multilateral and bilateral development and capacity building programs under the framework of the new US-ASEAN Strategic Partnership and the LMI.

Equally if not more important will be the TPP agreement and its uncertain fate in Congress. If approved by Congress, the far-reaching agreement  will almost certainly have significant economic, financial and even domestic political impacts on both the four ASEAN signatories, as well as the six who are not. Non-signatory ASEAN countries as well as China will be disadvantaged by restrictions on third party content.  The most likely short-term disadvantage will fall on Thailand, the largest ASEAN economy after Indonesia, because of its deep integration in regional supply chains and geographic centrality astride major regional transportation networks.

In addition TPP discussions and the South China Sea tensions, concern that ISIS is establishing a foothold in the region and the best means to counter its recruitment efforts and the establishment of terrorist cells will be high on the Sunnylands agenda.  Economic and security concerns, particularly those where the root cause emanates from China, continue to drive several ASEAN states closer to the US, openly in the case of Vietnam and the Philippines and quietly in the case of Malaysia and Indonesia. It is unsurprising that these issues will drive the conversation at Sunnylands. The Obama administration and ASEAN would also be wise to begin give equal weight to conversations on climate change resilience and energy governance, two areas which ASEAN countries are lagging but are beginning to articulate the need for external partnerships.

 

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Laos’s leadership transition raises questions over regional alliances

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Bounnhang will be the leader of Laos’ ruling Lao People’s Revolutionary Party.

Laos’ Communist Party elected vice-president Bounnhang Vorachit to be its next leader last week, after a vote by the newly formed 10th Party Central Committee.

State media announced on Friday that the congress of the Lao People’s Revolutionary Party, which is held every five years, had selected a new central committee and politburo to lead the country. The 78-year-old Bounnhang is replacing Choummaly Sayasone, 79, as secretary-general and president, who is stepping down after almost a decade in power.

Some observers believe that the change in leadership signifies a tilt away from China and closer to longtime ally Vietnam, as Laos takes on the chairmanship of the Association of Southeast Asian Nations (ASEAN) regional bloc.

The secretive nature of Lao People’s Revolutionary Party, which has ruled the country since 1975, makes its internal politics difficult to understand, but the changes in the politburo offer some indications of a slight shift in the ruling elite.

The choice of Bounnhang, a senior figure of the regime who was a prominent member of the Pathet Lao armed independence movement and has previously acted as prime minister, is an unsurprising one for the single-party state.

However, few expected the departure from the party of Prime Minister Thongsing Thammavong, 71, who had been in the politburo since 1991. Speculation in Laos is rife that his exit from power is linked to the recent arrests for corruption of Central Bank Governor Somphao Sayasith and former Finance Minister Phouphet Khamphounvong.

The 70-year-old Deputy Prime Minister Somsavat Lengsavad was also reported as not having sought re-election to the central committee, where he had been been a politburo member since 2006. Though less highly ranked in the cabinet, he was notable for being the principal pro-Beijing voice within the government.

A fluent Mandarin speaker, Somsavat has shepherded many joint ventures with China and is currently overseeing the controversial Laos-China high-speed rail project, whose ground-breaking ceremony took place in early December 2015.

The 427 km railway would connect the Lao capital to the Chinese border and is expected to cost  US$6.04 billion. A Radio Free Asia (RFA) report from January 4 mentions some government officials as criticizing Somsavat for having accepted a deal unfavorable to Laos, noting that it was not the first “high-cost investment where he gave too much away as collateral for project loans with little or no payoffs for ordinary Lao citizens.

The railroad has been mired in controversy ever since it was announced in 2010. The project was alleged to have created tensions between Laos and Vietnam, whose “own relations with China were then at a standstill,” explains Ian Baird, a Laos expert and a professor at the University of Wisconsin-Madison.

Bouasone Bouphavanh, the then-prime minister, is believed to have been removed from power and replaced by Thongsing in 2010, due to perceptions that he was favoring Beijing over Hanoi. Soon after, plans were started for a Laos-Vietnam railway, but never formalized.

In recent years, Beijing has vied aggressively for influence in Laos through aid, loans and infrastructure investment.

“China is using its economic interests to get political power” says Baird. “Politically, though, Laos remains much closer to Vietnam. Most of the country’s leaders studied or trained in Vietnam, including Bounnhang. They were already in governmental positions in the 1980s when there were strong enmities between Laos and China, who were then almost at war, with no trade or real relations.”

“What the Lao are doing now is trying to balance between the Vietnamese and Chinese. They want political support from Vietnam and financial support from China…The United States is also getting closer to Laos, but has relatively low investments in the country.”

“Ultimately”, Baird concludes, “I believe that Vietnam has more power than China in Laos.

Such diplomatic balancing was already visible this week. The Associated Press reported on Monday that Thongsing had assured US. Secretary of State John Kerry that “Laos would help counter China’s assertiveness in the South China Sea.

Xinhua, meanwhile, detailed a meeting on Tuesday between Bounnhang and Song Tao, a special envoy mandated by Xi Jinping, where the former announced “he was ready to join hands with China to further develop the relations between the two parties and two countries.” Unmentioned publicly by either government was the death of two Chinese nationals in a suspected bomb attack on Sunday in central Laos, though it remains unknown whether they were individually targeted.

As this year’s ASEAN chairman and co-convenor of the upcoming Sunnylands Summit, it is likely that Laos will be trying to strengthen its own position in the regional balance, particularly in light of mounting tensions in the South China Sea.

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