MAGA’s (“Make America Great Again”) impact on the ASEAN (Association of Southeast Asian Nations)
MAGA’s impact on the international order
The international order continues to be weakening. There is more than one cause to it. The driving factor for change in the international power equation, however, is the domestic transformation that the USA is undergoing with President Trump’s MAGA (“Make America Great Again”) movement, which is coming closer to a revolution. The guiding principles of the Rule of Law, laws and conventions determining democracy and institutions and the fabric of society in general are being challenged to a degree that the USA’s reputation as the centre of Western values will not be easily reconstituted after the end of this Administration.
For the purposes of this quarterly analysis of external environment factors, a special focus must be applied to MAGA’s international impact. On its surface, “MAGA” may sound like a non-committal slogan; its underlying substance, however, is of fundamental importance. MAGA taken as a programme, is defined by its systematic abandonment of political and strategic loyalties. For the global superpower to relinquish its duties to allies, partners and friendly countries alike and to abolish the essential difference between friends and foes, means giving up its most fundamental source of global influence, which is its soft power. The current state of world affairs and the dominant trends of geostrategic changes must be seen as consequences of the domestic transformation in the USA.
The first and most obvious impact is the nearly break-down of transatlantic cohesion in front of the military aggression by Russia against the Ukraine at Europe’s most Eastern border. One more devastating move is the imposition of substantially increased trade tariffs against practically the whole world, in certain arbitrary cases against individual countries such as Brazil or India, who would be better looked after as important geostrategic partners. Overall, the comprehensive set of trade tariffs threatens the benefits of global free-trade policies, damages economies of weaker countries and will, in the longer term, also hit the US economy, according to leading experts in the field. In addition, the cancellation of US contributions to international development aid for the neediest, particularly in Africa, alienates a whole continent. By withdrawing from positions of political influence, MAGA offers China an opportunity not only to challenge the US’ position as the global superpower, but in the long run to replace the current liberal and rules-based world order by a new order, in which autocratic and undemocratic countries, and foremost China, will obtain a commanding say in world affairs.
The Indo-Pacific as a large region experiences MAGA shockwaves in many different ways and of varying intensity. Soon, the world will have to acknowledge that MAGA is changing the power equation of the whole region and is possibly ending the decades-old stability of the over-arching PAX AMERICANA. The Subcontinent and South Asia are already adapting to new realities, and in Northeast Asia staunch supporters and adherents of the Western-inspired liberal order like Japan and South Korea are redesigning their strategic means. In this regard, Southeast Asia, a large region of particularly varied traditions, cultures and political choices, deserves a closer look at its options and trends. The ASEAN (Association of Southeast Asian Nations) is the region’s comprehensive structure for handling political challenges.
The ASEAN – only partly functioning
The ASEAN (Association of Southeast Asian Nations) has the hallmarks of an international regional organization: a) geographical proximity, b) common interests, c) organizational structures such as a rotating presiding country (2025: Malaysia, 2026: Philippines), a plenary and ministerial meetings in the presiding country and a permanent secretariat (in Jakarta). Since its inception 1967 with initially five countries ASEAN has, however, struggled with very divergent interests among its presently ten member countries preventing most common action on fundamental issues for the region.
The most important of those is security. Heretofore the bulk of the members have, if not officially (US bases in the Philippines) but de facto relayed on the overarching Pax Americana throughout the Indo-Pacific. Singapore, e.g., always aware of the need for a security backstop to its rapid economic development, has been granting berthing rights in its blue water port to the US Navy for decades. Laos and Cambodia were the sole exceptions as quasi-colonies of China.
Regarding the economy the disparity between the now ten member countries is considerable, ranging from low development status to being on an OECD threshold and more (Singapore). This explains to a certain extent why internal economic structures, while in place – such as the ASEAN Free Trade Area, the free movement of persons and certain mutual recognition agreements – do not really work well as national interests interfere to block the functioning of a true internal market. ASEAN is in no way comparable to the EU internal market. ASEAN-wide Free Trade Agreements (FTA) exist with China, India, Japan, South Korea and Australia/New Zealand. The EU and EFTA, thus also Switzerland, has concluded FTAs with some individual ASEAN member countries. On the plus side work is progressing within ASEAN on agreements on trade in services and interlinking the digital economies.
The other main reason why ASEAN lacks real internal cohesion is rooted in the history of the region. Age-old conflicts between neighbours had been frozen by long years of domination by European colonial powers, only to be revived by independence. No catalytic event such as the 2nd World War in Europe has ever had the effect of demonstrating the futility of strife in the region. Thailand vs. Cambodia on religious symbols and Thailand vs. Malaysia regarding the Thai South are examples within ASEAN, as is Indonesian aggressive behaviour towards smaller neighbours. The organization is more of an attempt to ascertain what its members believe is the soul of Asia against the continental elephants China and India, than a true community of destiny.
ASEAN – the present trends
Most important is the impact of Trump’s MAGA policy out of Washington. Much like in Europe Trump is gambling away practically all traditional US assets in the region, both visible and intangibles. As he has slapped punishing tariffs on friends and foes alike, Southeast Asia, bent on rapid industrialization and open access to world markets, including the potent US market, is especially hard hit by Trump’s ‘Liberation Day’ tariffs, which average 20 percent in ASEAN even after some reductions. Moreover, especially Vietnam but also other countries feel the additional brunt of Trump’s tariff war through ‘no circumvention tariffs’ of up to 40 percent on exports of Chinese made wares through their countries. More important is the loss of trust in the US under Trump as a country standing by its overseas commitments and partners, a solid reputation built up in Southeast Asia since the US liberated the area from Japanese dominance in the 2nd World War. Will Trump have their back against Chinese aggression in the region? Taiwan will be a litmus test, followed attentively especially by those ASEAN countries perennially menaced by Chinese aggression in their territorial waters of the South Chinese Sea. A small but significant example was the humiliation of neighbouring Korea when Trump first pressured Hyundai to invest and manufacture on US soil, only to have experts from Korea, there to make the investment work, arrested, shackled and deported like criminal immigrants. Asian memories on past colonial humiliation run long.
Thus, ASEAN countries are looking around for alternatives to Trump’s USA – the second significant trend. China, the most important economic partner of the region since the beginning of Chinese state capitalism under Deng Hsiao Peng, is an obvious choice. And this despite the age-old mistrust both against mainland China as well as the indigenous Chinese population within, as is the case in Indonesia and Malaysia. China tries to be as welcoming as possible. An example is what analysts call Beijing’s ‘Durian policy’. Durian is an exotic fruit, known for an unpleasant smell when whole but delicious to eat when cut up. It is a favourite among Chinese consumers and mainly grown in various Southeast Asian countries from where it is imported on favourite terms.
Not only China is being welcomed more warmly in the region but also the other big players there such as Japan and India, even neighbouring, but colonially borne Australia. Whether security policy commitments by European countries, mainly the UK and France, are being taken 100 percent seriously is open to question but in many other fields, especially trade, Europe is a much-appreciated partner. Thus, again under the Trump effect both in Brussels and in the ASEAN Headquarter, the dream of a region-to region FTA EU-ASEAN, bringing together over one billion people is pursued with more chances for success than ever.
The third general trend within ASEAN is less promising for Europe and what it (still) stands for: Autocracy seems to be gaining further ground, again under the banner of ‘If King Donald does it, why not us too.’ While ASEAN heavy-weight Vietnam, still governed by the communist party, never had a true democratic awakening, others are receding. Indonesia’s president, former General Prabowo is on a Trumpian line to autocracy, the Thai generals have crushed the youthful opposition, regardless that the latter is backed by a clear majority of the people, and Malaysia, on a course to theocracy, appears to position itself as a true Islam replacement of liberalising Saudi-Arabia.
Last but not least a ray of hope regarding the fourth general trend: Youth, demanding a political voice, a better economic deal and fair treatment by the authority. Nothing new under the sun looking back both a good decade to the Arab spring and just months and weeks ago to Bangladesh, Nepal and Madagascar, where student-led revolutions swept governments away. This trend has already a long history within ASEAN. The particularly bloody military regime in Myanmar was first challenged by students who, together with dissident tribes, have over decades fought the reigning generals to a standstill in the country’s civil war. Myanmar is incidentally the best example why ASEAN is so politically toothless. The other member countries could not or would not (e.g. the Thai generals) bring the Burmese tyrants to reason despite the endless bloodletting from this open and disgraceful wound in the soft belly of the region.
The student core of the Thai ‘Red Shirts’, challenging the blue shirted troops of monarchists, the military and the oligarchy for more democracy since 2006, have been practically silenced by recent sham ‘elections’ in the country but are certain to try again. Newest reports out of Indonesia tell of growing unrest among the young population faced with receding economic prospects and thus prone to rebel. Finally, an echo from an unexpected place. A Swiss professor at the University of Phnom Penh tells us that his students are eager to change things in their country so thoroughly traumatized by the national self-genocide under the Khmer Rouge. But that was under our grandparents they say and look forward.
Recent developments in key ASEAN countries
Indonesia
The official version of the economic outlook for the country both by the Indonesian government and the IMF (International Monetary Fund) is unabashedly positive; they both see the country on a path to achieve high income country status by 2045. This was echoed by a recent Swiss economic delegation, under economy minister Parmelin, which came away impressed by new possibilities for Swiss exporters, as trumpeted back home by Economie Suisse. Such may indeed be the case looking at the big infrastructural projects underway, as exemplified by the building of the new capital city Nusantara on an originally ‘green meadow’ in Borneo.
Strikingly, inside reports, by specialized think tanks, on the future prospects of the country paint a different picture. President Prabowo, former general and one time son-in-law of past strongman Suharto, is very different from his predecessor Widoyo who was low born, prudent and basically democratic. That cannot be said of Prabowo – once internationally shunned on account of war crimes against civilians in various parts of the country – who might be on a course to repeat the performance of his father-in-law. True, General Suharto came to political power through a putsch, Prabowo through elections. He succeeded in his fourth attempt for the presidency, mainly because of the sound economic and fiscal base left by Widoyo but also including the latter’s imposition of his son as Vice-President of his successor.
Politically repression of dissidents is on the rise, economically the rich get richer, the middle class slides back into relative poverty, and a good part of the population remains stuck in absolute poverty. In true populist fashion Prabowo wants to alter that with lavish social spending – e.g. a free school meal for every Indonesian child – rather than using the accumulated riches of the country for better educational structures and more job opportunities. While the fiscal reserve position of the country remains healthy for the time being, the sudden sacking by the president of the long serving, fiscally prudent and internationally well-regarded Finance Minister (Mrs.) Sri Mulani at the beginning of this year alerted the international financial markets.
Vietnam
Vietnam, the proverbial non-Chinese market for economic actors fleeing or avoiding mainland China, is an economic success story. By a leading international rating agency (FTSE -Russell) it was recently upgraded to Emerging Market status, placing it alongside China, India, Indonesia and the Philippines. Meaning that rule-governed investment, e.g. internationally active funds, can now invest based on this rating which will boost the economy further.
Yet it is still governed, and very much so, by the communist party, whose Secretary General To Lam came up the ranks through a career as a brutally effective security official. This symbolises the two-faced reality of the country, politically repressive towards any democratic tendencies within while being wide open for business from abroad. Thus, in line with the rating upgrading, commercial law is constantly being adapted to the needs of international companies. At the same time labour cost is generally below that of China with a lower but constantly increasing level of education among its university graduates. On the negative side widespread corruption and the heavy bureaucracy keeps the country placed out of the top tier with regard of ‘Ease of doing business’ (2020 by the World Bank, last available such classification).
Trump’s tariff war has severe repercussions for Vietnam, vitally dependent on access to open markets. Currently a general tariff of 20 percent is imposed with higher rates for steel, aluminium and, especially, transshipped goods, meaning mostly rerouting of Chinese goods through third countries thus Vietnam as the leading ‘non-Chinese’ economy in the region. Moreover, the US required zero tariffs on all US goods into Vietnam. Not even a huge golf course development in the country, hacked out between Trump’s son Eric and a Vietnamese millionaire, could prevent this setback to Vietnamese exports.
Singapore
Singapore is a favourite first stop for business, including from Switzerland, when expanding first into the region. Many stay there later, at least with a regional headquarter or similar. This despite the high cost of maintaining expat staff, let alone starting production in Singapore where space is at a premium, but ‘ease of doing business’ is incomparable, including the use of English as the prime national language, business-friendly legislation and the absence of corruption in commercial dealings. Lately there have been reports that this privileged position in the region is being challenged by Hong Kong, even Dubai. What gives?
In the case of Hong Kong, it supposedly is a rebirth as a region-wide capital which was eroded after the incorporation of the city into China. But that is precisely the point. Hong Kong is now, including legislation and political control of the economy and its actors, another Chinese mega town, well positioned for ‘in China for China’, but not necessarily beyond. The mega bank HSBC is an example, somewhat withering in its European presence because the management has decided/was forced by the Chinese authorities to shift its real centre from London to Hong Kong.
Dubai is attractive at first sight by its geographical position half-way between Europe and Southeast Asia and its reputation of ‘anything goes’. The latter might be, however, the core of the problem. In its haste to make the UAE (United Arab Emirates) a global turning point the Emirati authorities are well known for lax oversight as long as business and individuals from abroad make money, not in the least for the few and privileged local citizens and especially the ruling families. There is no semblance of a democracy including the rule of law. So, when something goes wrong with locals the awakening for foreigners can be brutal. And that might even be a minor problem when compared with the uneasy geopolitical situation in the Middle East in general and at the exit of the Persian Gulf into the Indian Ocean and the Pacific in particular.
So, the position of Singapore as a Drehscheibe to the region appears solid, unless of course the present stability anchor, Pax Americana, is fundamentally put in jeopardy.
Picture: GovernmentZA