U.S.-Japan Alliance Gets a Boost with Suga-Biden Summit

April 20, 2021

Photo Credit: White House Twitter Account

BGA Japan Managing Director Kiyoaki Aburaki wrote an update to clients on visit of Japanese Prime Minister Yoshihide Suga to the United States from April 15 to 17. The update explored the significance of Suga’s White House meeting with U.S. President Joe Biden – Biden’s first in-person meeting with a foreign leader since taking office earlier this year.

Context

Prime Minister Yoshihide Suga made his first visit to the United States from April 15 to 17 since assuming office last September, marking U.S. President Joe Biden’s first in-person meeting with a foreign leader in the White House. In a joint leaders’ statement, the two sides emphasized the roles of the U.S.-Japan alliance to promote a free and open Indo-Pacific and expressed concern over China’s assertiveness in the region.

Significance

Biden and Suga announced two new partnerships – the U.S.-Japan Competitiveness and Resilience Partnership and the U.S.-Japan Climate Partnership. The former covers bilateral economic and technological cooperation, including 5G and next-generation mobile networks and management of sensitive supply chains, such those of semiconductors. The latter focuses on addressing climate change and green growth.

The two leaders’ commitments are expected to provide vast new opportunities for U.S. and Japanese companies in developing 5G and next-generation networks, bolstering supply chains and semiconductor production and investing in technology and services to stem climate change.

Suga’s visit marked a symbolic return to face-to-face diplomacy, following 14 months of remote engagement due to the coronavirus pandemic. The meeting allowed the two new leaders to get to know each other, an important milestone as the cultivation of personal trust is fundamental to pursuing the challenging goals to which they committed.

Implications

The trip will be closely watched for its domestic and international implications. Domestically, public support for Suga’s administration has steadily declined since he took power last September, stemming from the periodic resurgence of Covid cases and the slow vaccine rollout, both of which are widely seen as being due to mismanagement by his Cabinet. If Suga loses support in the coming weeks, his reduced backing will trigger uncertainty among his Liberal Democratic Party (LDP) members about whether they want to rely on Suga as party leader to fight the next general election. The LDP leadership election must take place before September 30, when Suga’s term expires, and the lower house election must occur before October 2021, when the lower house chamber term expires.

Internationally, eyes will be on the evolution of the U.S.-Japan cooperation and collaboration on wider issues including China’s conduct in the region. China’s strong, albeit cautious criticism of the joint statement was not surprising given that it marked the first time U.S. and Japanese leaders mentioned the Taiwan issue in writing, covering Hong Kong and Xinjiang as well. More broadly, U.S.-Japan cooperation in areas such as competitiveness and innovation will probably have a major impact on international relations both politically and economically beyond the alliance itself.

BGA’s Japan team will continue to keep you updated on developments in Japan at home and abroad as they occur and assess the implications for companies and other stakeholders.

What Lies Ahead for India Amid its Massive New Covid Wave?

April 19, 2021

Photo Credit: Government of India Press Information Bureau

The BGA India Team, led by Managing Director Ratan Shrivastava, recently wrote an update to clients on the implications of India’s new wave of Covid-19 cases. While the exact economic and political consequences of the new wave may still be unclear and the government of Prime Minister Narendra Modi has quickly stepped in to try to address the crisis, it already is showing signs of affecting the country’s overall growth and certain sectors that have implications for companies.

Context

India is facing a second wave of the Covid-19 outbreak, with a virus that has mutated twice and is infecting even those who are vaccinated in the largest spike since the country was impacted by the pandemic in March 2020. The wave led by a resurgence in infections in the state of Maharashtra in March 2021 has now spread to other parts of the country, with the infected including chief ministers of the states of Uttar Pradesh, Karnataka, Kerala and Telangana and former Prime Minister Manmohan Singh.

The current outbreak has been attributed to multiple factors including a double mutation of the virus and an onset of Covid fatigue. Experts and leading virologists are concerned about the transmission of the highly infectious B.1.1.7 mutated strain of the virus among the population as it spreads rapidly among the younger population and children.

Significance

The outbreak has overwhelmed the country’s health care systems, with several states now reporting a shortage of hospital beds, oxygen and antiviral drugs. States are also grappling with dwindling supplies of vaccines as the country faces a capacity crunch in vaccine manufacturing.

The central government led by Prime Minister Narendra Modi has attempted to step in quickly. The Modi government has tried to reinforce the country’s vaccination drive and has also empowered states to impose restrictions. It has also stressed the importance of tracking, tracing and testing to effectively contain the spread along with social distancing and the wearing of masks.

The rising number of infections has seen states reintroduce restrictions such as night curfews, limited lockdowns and restrictions on large public gatherings. Delhi has introduced a lockdown until April 26. This has added some pressure on the country’s economic recovery, with several brokerages and ratings agencies revising their growth forecasts for FY 2022.

Implications

Domestic travel has taken a hit in recent weeks because states have announced the need for negative RT-PCR tests from passengers arriving from hotspot states. Some states have reintroduced mandatory quarantine requirements for domestic passengers, and these restrictions are expected to put a further strain on airlines, with carriers likely seeking financial support from the government.

The new Covid-wave is already having an economic impact, though it remains to be seen how long this will last. While it is unclear if the effects will be as much as it was during the first wave,

sectoral areas such as manufacturing and services have already shown declines, and, in the agricultural sector, hits will be particularly notable since India is also currently going through the rabi (which refers to crops planted in winter and harvested in spring) marketing season. As states impose and lift restrictions, India’s growth forecasts are expected to be revised continuously throughout the year.

BGA will continue to keep you updated on new developments as they occur. If you have any questions or comments, please reach out to BGA India Managing Director Ratan Shrivastava at ratan@bowergroupasia.com.

What Australia’s Energy Policies Mean for Business

April 12, 2021

Albany Wind Farm, Western Australia (Photo Credit: Wikipedia Commons).

BGA Australia Deputy Managing Director Michael McNeill wrote an update to clients on what the energy policies of the government of Prime Minister Scott Morrison mean for business. The update delved into Australia’s approach to energy and climate issue, some of the key areas of focus for Morrison’s government and key upcoming developments for companies to watch.

Context

Australia has beaten its Kyoto-era targets and is expected to beat its 2030 Paris targets. The government has a 2030 emissions reduction target which aims to reduce emissions 26-28 percent below 2005 levels by 2030.

The government’s overall goal is to reach net-zero emissions as soon as possible, while Australian state governments have hard net-zero targets, as do Australia’s major businesses. Australia’s climate change strategies include a Technology Investment Roadmap, National Hydrogen Strategy, emissions abatement strategies and a Clean Energy Finance Corporation (CEFC).

While the government of Prime Minister Scott Morrison sees increasing gas supply as an important tool to drive down energy prices for families, encourage manufacturing, boost fuel security and deliver lower greenhouse emissions, Morrison faces internal resistance from pro-coal members of Parliament and a gas industry weary of interference.

Significance

The position Morrison takes to U.S. President Joe Biden’s Leaders’ Summit on Climate from April 22-23 is of great interest to political observers but is likely to have little impact on companies already factoring in a low-emissions future in their investment decisions.

Australian politics will be heavily impacted by energy and climate policy ahead of the next federal election, which could be held as soon as the second half of 2021.

Implications

Eyes will be on any new commitments Australia makes in the future, including adjustments of its emissions targets. The Department of Industry, Science, Energy and Resources is leading the development of Australia’s Long-Term Emissions Reduction Strategy, which will be taken to the Glasgow U.N. climate conference in November, and Morrison has previously said he would not take a new 2030 or 2035 emissions reduction target to Glasgow.

Strong investment in renewables is forecast to continue. Over the last quarter of 2020, the share of renewables in the National Electricity Market exceeded 30 percent for the first time.

Coal will remain a key part of Australia’s energy mix for at least the next decade. Coal accounts for 40 percent of Australia’s primary energy consumption and 75 percent of Australia’s electricity generation.

BGA’s Australia team will continue to keep you updated on developments in Australia as they occur and assess the implications for companies and other stakeholders.

Bangladesh Post-Golden Jubilee Outlook Clouded by New Covid-19 Outbreak

April 9, 2021

Bangladesh Flag (Photo credit: Wikimedia Commons).

The BGA Bangladesh team led by Country Director Imran Al-Amin wrote an update to clients about Bangladesh’s political and economic outlook after the country commemorated its 50th anniversary since independence and the birth centenary of the father of the nation Bangabandhu Sheikh Mujibur Rahman, the father of current Prime Minister Sheikh Hasina.  The country’s post-Golden Jubilee outlook has been clouded by a new Covid-19 outbreak, which has forced the country into lockdown.

Context

The new Covid-19 outbreak comes weeks after Bangladesh’s dual celebration March 17-26, which was a major source of legitimacy for the ruling Awami League. The celebration included participation by a number of foreign leaders, including Indian Prime Minister Narendra Modi.

The Covid-19 outbreak has forced the country into its second lockdown in less than a year. It comes just as the country had hopes of getting back on the path of post-pandemic recovery, with the World Bank doubling its growth prediction for Bangladesh in March to 3.6 percent, up from 1.6 percent in January.

Significance

While major companies may still be able to operate to some degree during the lockdown, they will be subject to some restrictions and potential instability. Some government offices are operating at partial capacity and the fact the surge in cases is occurring amid Ramadan suggests there could be further restrictions.

In spite of the new outbreak, Dhaka continues to prioritize international engagement, as evidenced by ongoing developments such as the official launch of the U.S.-Bangladesh Business Council on April 6 and the holding of the D-8 Organization for Economic Cooperation Summit in Bangladesh the week of April 5-8.

Implications

Though there may be some disruptions, the country’s overall political stability is unlikely to be affected by the recent Covid-19 outbreak given the Awami League’s strong political support and its continued restrictions on dissent.

Apart from getting back on the path to post-pandemic recovery, policymakers will also continue to prepare to manage major challenges ahead, including the country’s graduation from least development country status.

The BGA Bangladesh team will continue to keep clients updated on developments in the country and its impacts on companies and other stakeholders.

What Does Cambodia’s New Covid-19 Decree Mean?

April 6, 2021

The Phnom Penh skyline (Photo Credit: Wikimedia Commons).

The BGA Cambodia Team, led by Managing Director Bora Chhay, recently wrote an update to clients about the implications of Cambodia’s Covid-19 subdecree. The subdecree, which was approved March 31, holds implications for the country’s broader political and economic landscape as well as businesses operating within it.

Context

The approval of the decree was fast, coming just 20 days after the government promulgated the law. That speed came as no surprise: it follows a community outbreak on February 20 and the emergence of a new, fast-spreading and deadly Covid-19 variant, which has already claimed Cambodian lives with community infections in the thousands.

Significance

The measures in the new decree are significant. Effective April 1, curfews have been high-risk areas, with travel, nonessential business activities and gatherings suspended from 8 p.m. to 5 a.m. in Phnom Penh. Authorities said the curfew will last no more than two weeks and claimed that the measures will protect public health, maintain order and minimize the spread of Covid-19 and its impact on the social and economic sectors, helping them keep ahead of the upcoming Khmer New Year from April 14-16.

Beyond the measures themselves, the decree has also raised broader questions. Human rights activists have expressed concern that the subdecree restricts freedom and has vague provisions that will allow authorities to arbitrarily punish individuals and businesses. Government officials have defended the bill, arguing that it is necessary to combat Covid-19 and noting that other moves, including a state of emergency law enacted last April, have yet to be enforced because the government is weighing the potential impact on the country’s economy carefully.

Implications:

Beyond Phnom Penh, there may be directives or restrictions issued in other parts of the country.  This is particularly the case in provincial capitals with Covid-19 hotspots.

Companies operating in Cambodia should be prepared to fall back on business continuity plans in response to potential disruptions. These include restrictions on the trade of goods and access to buildings, offices and other areas.

The BGA Cambodia team will continue to monitor developments as they occur. If you have any comments or questions, please contact BGA Cambodia Managing Director Bora Chhay.

India’s Historic Technology Hub Opportunity

April 4, 2021

Indian Prime Minister Narendra Modi addresses a technology summit (Photo Credit: Wikimedia Commons).

BGA senior advisor Alex Capri published a recent report exploring India’s opportunity to position itself as a 21st century technology hub. The report was released on March 31 by the Hinrich Foundation, an organization that seeks to advance sustainable global trade.

Context

The report outlines India’s “historic opportunity” to transform itself into one of the world’s most important technology hubs. In the report, Capri, who has over three decades of experience in areas including value chains, trade, geopolitics and technology and is the author of a forthcoming book Techno-Nationalism: How it’s Shaping Trade, Geopolitics and Society, argues that this opportunity emerges from a combination of both geopolitical and internal dynamics, including the U.S.-China technology cold war and promising government policies in areas such as foreign direct investment, infrastructure and technology clusters.

Significance

India’s economy has averaged 6.6 percent over the last decade and its population of some 1.3 billion “will fuel strong market demand for digital services and online services” in the coming years. This has been reinforced by some of the reforms undertaken by Indian Prime Minister Narendra Modi, in spite of the underlying challenges.

Implications 

As Capri points out, this has implications for companies as India has significant advantages amid these domestic and international developments that could draw in more global value chains. This includes its role as a security partner for Washington and its allies and its alignment on technology related values as a democracy.

As important as these advantages are, India will find it difficult to succeed unless it overcomes its main systemic challenges that have hampered earlier efforts to grow the manufacturing sector. “It is too early…to proclaim India’s policies or initiatives a success,” Capri writes in the paper. “New Delhi’s goal of transforming India into one of the world’s top technology manufacturing hubs, therefor, will constitute a work-in-progress for years to come.”

You can read Capri’s full report here. As developments continue to play out in the secure supply chain space and related areas such as value chains, trade, geopolitics, technology and the digital economy, Capri will continue to weigh in on developments as they relate to our clients

Navigating Global Supply Chain Shifts: Implications for the Philippines

March 30, 2021

A picture of the port of Manila (Photo Credit: Wikimedia Commons).

The following is an edited version of written remarks delivered by BGA President and CEO Ernie Bower to a virtual roundtable organized by the Stratbase-ADR Institute entitled “The Private Sector as a Reliable Partner for Economic Recovery” held on March 26. A full version of the deliberations can be seen here. 

Thank you Ambassador Del Rosario and Dindo for inviting me to join you today, and for your opening remarks. It is an honor to be with both of you and so many friends from Manila. I am sorry I can’t be with you in person. I hope I will be able to come and visit you in Manila very soon, and that I can welcome all of you to Washington as well.

The topic of Philippine competitiveness is near and dear to my heart. I have been working with many of you for the last three decades and more on promoting investment and trade in the Philippines, not only with my home country the United States, but with all of Asia as well.

Philippine Companies and Competitiveness

Our focus today on the Philippine private sector is most appropriate. Philippine companies are among ASEAN’s finest and management of many top companies here is world class. Your companies have led the way, even ahead of government efforts, in providing pandemic response and relief. Philippine companies tend to invest in their people and communities, and this has a critical impact on the economy and will help drive recovery. And there is no greater force for economic dynamism in the Philippine economy than domestic investment.

Still, it is true that the Philippines is not as well represented as a regional and global investor as some of its ASEAN neighbors, despite some outstanding exceptions such as Jollibee, FirstPacific and Ayala Corporation to name a few.

Additionally, given the level of skill, human talent, outstanding geographic position, size and scale of economy and its vast diaspora of Filipinos around the word, the Philippines is not as core a player in global supply chains as it should be.

There are many reasons for this, but I don’t believe defining the problem is the focus of our agenda today. Instead, we are here to talk about the private sector’s role in driving economic recovery. Let’s look at the situation:

In 2020, the Philippines experienced the worst economic downturn since 1947; GDP shrunk by 9.5 percent. Still, ever resilient, the Philippines is expected to return as a fast-growing economy with a strong bounce in 2021 and into 2022.  The IMF’s latest World Economic Outlook projected that the Philippines’ GDP growth would return to 6.6 percent in 2021, higher than the estimated ASEAN-5 growth at 5.2 percent and average world growth at 5.5 percent.

In 2020, Japan, the US, China, and Hong Kong were four major export destinations for the Philippines, respectively sharing 15.5, 15.2, 15.1, and 14.2 percent of its total exports valued at $63.9 billion. In January 2021, over 84 percent of Philippines exports worth nearly $5 billion went to APEC economies.

China is ahead of other markets as the Philippines’ primary source of imports, contributing 24.4 percent of the Philippines’ total in the last year. Most of these imports are electrical products, mineral fuels and machinery.

Pandemic and Global Supply Chain

The Philippines is highly dependent on its Asian neighbors, especially China, for intermediate and export markets. Its reliance on the global value chain made Philippine businesses particularly vulnerable to disruption of foreign supplies and orders during the pandemic’s early stage. The sharpest contraction came in March 2020, where the Philippines saw a 25 percent decrease in product exports and a 26 percent drop in imports year-on-year.

The pandemic shock has been a wake-up call for Philippine businesses to reflect on how to improve the resiliency and flexibility of their production, including increasing inventory capacities, diversifying supply chains and adopting digital technologies.

Companies will also lead the way here in understanding and adapting to global supply chain trends. This is the hottest topic in C-suites of the world’s top global companies. Supply chains are quickly shifting and adapting to new economic and geopolitical realities, and the fast-changing demands of not only consumers and customers, but government regulators who are demanding more accountability, transparency and adherence to new standards in the environment, social and corporate governance (ESG) areas.

Management teams in Manila and around the country are delving into these new trends and requirements and trying to anticipate and adapt to the fast-changing landscape.

The most disruptive dynamic the Philippines, ASEAN and Asia will see over the next decade is much more focused competition between the United States and China. This competition will be fierce, not only in economics and commercial spaces, but in areas like technology (especially digital ad related technologies such as 5G, artificial information, semiconductors and related standards.)

On February 24, U.S. President Joe Biden signed an executive order instituting broad 100-day reviews of supply chains in four areas: semiconductors, large-capacity batteries such as those used in electric vehicles, pharmaceuticals and rare-earth elements. In addition to these reviews, the executive order called for one-year reviews of sectors including defense, ICT, healthcare, energy, transportation and agricultural commodities.

The order outlined a “whole of government” approach, to be coordinated by Assistant to the President for National Security Affairs Jake Sullivan and Assistant to the President for Economic Policy Keith Hennessey, involving Cabinet departments and consulting with outside stakeholders. The resulting reports will drive regulatory and legislative changes in the U.S. and it will influence U.S. partners such as Japan, Korea, India, much of ASEAN and Australia and New Zealand.

The executive order marked a rare spot of bipartisan agreement in bitterly divided Washington, reflecting the growing consensus among U.S. policymakers that the U.S. is overly dependent on fragile supply chains. While the order itself never explicitly mentions Asia in general or China in particular, it was clearly envisioned with China in mind, as each of the four 100-day review industries are especially dependent on China trade. Though the rhetoric selling the order focused on benefits for American consumers and potential job creation in the U.S., it left potential remedies unclear. The most likely outcome of the review will be a push to accelerate both onshoring back to the U.S. and reshoring to friendly countries in Asia.

Expect these new rules to focus on the perceived threat from China that is quickly spreading in the United States. These new rules and standards will represent challenges for Philippine companies who want and need to do business with both China and the United States.

Looking Ahead

So what can be done?

Prior to the pandemic, the Philippines pursued a strategy of export-led growth and moving up in global value chains. In 2012, DTI launched the Industry Development Program to consolidate a national industry roadmap. Since 2016, under the Manufacturing Resurgence Program (MRP), multiple governmental agencies have stepped up their efforts in providing better incentives, training, and other support for improving industry competitiveness. The MRP program set the target of establishing the Philippines as the hub of auto, electronics, machinery, garments, and food production by 2025.

In 2016-2017, DTI and the BOI conducted studies with USAID and Duke University to understand the Philippines’ role in global manufacturing supply chains. The studies identified several key advantages of Philippines’ participation in global supply chains, including its close trade relations with neighboring countries, its continuing attractiveness for foreign investment, and a relatively young, skillful and fast learning workforce.

The Philippines government is actively pushing forward multilateral and bilateral free trade negotiations. After signing the RCEP in November 2020, DTI has announced that it will explore joining the CP-TPP in the future. The Philippines government has also resumed trade negotiation with Korea and expects to finalize the agreement in 2021.

Constraints faced by businesses

Regarding the RCEP agreement, there are criticisms that the deal will not significantly expand the export market for Philippine businesses but lead to import inflow from Korea, China, and Vietnam, thus bringing additional challenges to the Philippines’ domestic industries, who are struggling to recover from the pandemic.

Like other Southeast Asian countries, the Philippines can profit from industry reallocation away from China. However, factors such as the business environment may constrain the Philippines to expand its footprint in the regional supply chain. The Philippines ranks 95th in World Bank’s Doing Business index in 2020, behind Vietnam (70th) and Indonesia (73rd).

Conclusion

Philippine business can help address some of these constraints by working together to convince Filipinos and Congress that the amending some of the key economic provisions in your constitution to allow the Philippines to adapt to new global competitiveness requirements, welcome more foreign investment, update labor and environmental laws and position to drive a revolutionary increase in investment and trade.

Philippine companies are among the best managed in Asia. Your people are among the most well-educated and resilient workforce in the world. Your geography and economic scale suggest the Philippines has every natural advantage (except for your exposure to tropical storms and volcanoes, of course.) Believing in these strengths and making the needed reforms will grow the economy of this great country, provide new jobs and linkages to global opportunities and markets and ensure a golden age of prosperity for Filipinos.

Thank you for inviting me.

Advancing India-US Defense Relations in the Biden Era

March 28, 2021

Biden and Modi, seen here in 2014 during Modi’s visit to Washington, D.C when Biden had been vice-president. (Photo Credit: Wikimedia Commons).

The BGA India Team, led by Managing Director Ratan Shrivastava, recently wrote an update to clients about the implications of U.S. Defense Secretary Lloyd Austin’s visit to India. The visit, which occurred from March 19-21, came shortly after the first summit of the Quadrilateral Security Dialogue (Quad) held virtually on March 12 between the heads of states of India, the United States, Australia and Japan.

Both meetings reflected efforts made by the Modi government and Biden administration to strengthen the U.S.-India relationship across multiple sectors within the context of the Indo-Pacific. The discussions could provide important opportunities for businesses, particularly in the defense, health care and energy sectors.

Austin’s India visit signifies the urgency with which both nations are shoring up their military capabilities through a stronger bilateral defense partnership. A key driver for New Delhi has been countering the assertiveness of a rising China, with New Delhi witnessing increasing border standoffs, skirmishes and growing cyberattacks on critical infrastructure systems during the Covid-19 pandemic. In this context, the informal grouping of the United States, Australia, Japan and India to contain the growing influence of China in the Indian Ocean region gains momentum and credence.

The bilateral security partnership is expected to continue its focus on increasing military-to-military engagement across services and expanding cooperation in areas such as information sharing and emerging sectors like artificial intelligence, imagery and mutual logistics support across the Indo-Pacific. From the Indian government’s perspective, the relationship will not just focus on buying weapons and security systems from the United States but also encourage American investment in India’s defense production with relaxed foreign direct investment (FDI) norms in defense.

The broader focus on investment from U.S. companies is part of the Modi government’s vision of promoting a more self-reliant India (Atmanirbhar Bharat) that remains open to foreign investment, as it is not aimed at being protectionist. The Modi government has been placing an emphasis on a self-reliant India through increased investments in manufacturing, with implications for the defense sector as well. In particular, in May 2020, the government increased the FDI limit for defense production from 49 to 74 percent under the automatic route.

The Biden administration has also recently sought to help strengthen India’s defense industrial base so that New Delhi is better equipped to partner with the U.S. military. In its Interim National Security Strategic Guidance released on March 3, the Biden administration called for deepening the U.S. security partnership with India. The messaging suggests that the Biden administration intends to kickstart a new phase of the U.S.-India security partnership to operationalize the gains made through years of arms sales, technology transfers, defense agreements and Washington’s 2016 designation of India as a “major defense partner.” The Biden administration would build on the existing U.S.-India framework of defense and security cooperation through the Defense Technology and Trade Initiative (DTTI) and 2+2 ministerial-level dialogues.

The U.S.-India defense relationship is not without its share of challenges. One that got attention during Austin’s visit was India’s procurement of the Russian S-400 missile defense system, which would potentially invite sanctions from the United States under the Countering America’s Adversaries Through Sanctions Act (CAATSA).

Austin’s visit also came as pandemic cooperation emerges as a security and geopolitical priority for both India and the United States. In light of the Covid-19 pandemic, India has solidified its position as the leading manufacturing hub for drugs and vaccines, and several leading U.S. drug and vaccine developers have tied up with Indian companies to manufacture vaccines for distribution. India’s role as a crucial link in the vaccine supply chain is evidenced by the initiative announced at the Quad Summit on March 12 to deliver U.S.-developed vaccines, which would be manufactured in India using distribution mechanisms from Japan and Australia. If successful, the effort will provide a much-needed boost to India’s domestic capacity and allow for faster distribution of vaccines to other Indo-Pacific countries including those in Southeast Asia, which New Delhi has been unable to reach so far owing to licensing restrictions.

The joint statement issued by both sides during Austin’s visit also highlighted the issue of climate change as a key transnational challenge, which has also factored into the wider bilateral relationship. Engagement on climate change will likely be strengthened through the new working group on climate that was established at the Quad summit, and Modi will be addressing the Earth Day summit hosted by the United States in April. For companies, areas of collaboration to watch include cleaner automobiles, hydrogen fuel from green sources and developing cleaner transportation systems.

The BGA India Team will continue to monitor and assess the trajectory of U.S.-India defense ties as well as what the relationship means for New Delhi, Washington and the wider Indo-Pacific region in the coming years.

The Paradox of Australia-PNG Relations

March 25, 2021

Picture of the Papua New Guinea high commission in Canberra, Australia (Photo Credit: Wikimedia Commons).

In the wake of a spike in Covid-19 cases in Papua New Guinea in March, BGA Senior Adviser Ian Kemish wrote a recent commentary reflecting on what he equated to “a dam” that “has been breached” what it says about Australia’s relations with PNG.

In the piece published in The Conversation, Kemish, one of the world’s top experts on PNG who grew up there and served several times for the Australian government in Port Moresby, outlined what he termed as the “paradox” of Australia-PNG relations, where despite the fact that many Australians might have been caught off guard by the spike in Covid cases in its northern neighbor, there are some deep connections between the two countries, including through the around 20,000 Australians who call PNG home and engage as teachers, miners, diplomats, aid workers and government advisers along with some companies engaging there as well.

As Kemish points out, the spike in Covid-19 cases has made this clear in ways that relate to Australia’s own self-interest, as evidenced by concerns about the disease spreading across into parts of Australia. “Our neighbor’s stability and prosperity is in our interests,” Kemish writes. “Surely, there can be no better example of this than the current crisis: what is good for PNG is also good for Australia.” The ties between the two countries is a theme of several other recent commentaries Kemish has written as well, including on the death of Grand Chief Michael Somare.

You can read Kemish’s full post here. As events in PNG and the wider Indo-Pacific region continue to play out, Kemish, who had a quarter-century of service to the Australian government and now provides advice at BGA on several key countries including Australia, Timor-Leste, Fiji, will continue to weigh in on developments as they relate to our clients.

Sri Lanka’s Path to Post-Pandemic Recovery

March 21, 2021

BGA Sri Lanka Senior Advisor Chullante Jayasuriya recently wrote a forecast for the country for clients looking ahead to the rest of 2021. The forecast, published March 21, focused on the manifold challenges the country faces domestically, including in addressing the current coronavirus pandemic, as well as its future prospects.

In the update, Jayasuria argued that while Sri Lanka has made clear that it is eager to facilitate post-pandemic economic recovery as it transitions from income support measures to growth enhancement policies in the first quarter of 2021, leaders are also acutely aware that vestiges of the Covid-19 pandemic linger beneath the surface in the form of low business confidence, rising debt, depleting foreign exchange reserves, high unemployment and reduced exports.

Colombo, Sri Lanka

To manage this, Sri Lankan policymakers are exploring opportunities to reset and emerge from the downturn on a surer footing. Some of these moves include specific measures such as trade policies and currency swaps. More broadly, they are also designing incentive schemes to attract greater foreign investment, providing concessional loans to businesses in key sectors and embarking on an ambitious vaccination program.

Still, Jayasuria notes that Sri Lanka’s policymakers have their work cut out for them as they chart the way to recovery. The country’s reliance on import substitution and reluctance to perform market reform may inhibit its reintegration into global value chains, impacting export performance. Geopolitical realities also factor into Sri Lanka’s post-pandemic economic outlook: although Sri Lanka’s currency swap with China may stave off looming debt defaults, it has pushed the country further into China’s orbit and strained ties with India. And, domestically, the passage of the 20th constitutional amendment has invested considerable power in President Gotabaya Rajapaksa, removing parliamentary checks on his authority with broader implications for democracy, rule of law and human rights.

While companies can expect a return to some positive growth in 2021, Jayasuria, who has over 30 years of experience in various areas including trade and investment promotion, private sector development and policy planning and implementation, notes that it will be important to keep an eye on any potential policy changes the government may enact — whether in trade, investment or fiscal measures — to shepherd the country through the recovery period.

Thailand’s Murky Political and Economic Failure

March 17, 2021

Image: Wikimedia Commons

As part of BGA’s analysis of developments on the ground in Thailand, the BGA Thailand team headed by Managing Director Art Siripant outlined the contours of the current political and economic situation in the country for clients earlier this month. The analysis, following a recent court order on previous street protests that rocked the country in 2013 and 2014, suggested that the first two months of 2021 have marked a strong change in the country’s direction, both politically and economically, which remain important to watch for the next few months.

The recent court order marks one of several key developments affecting Thailand’s political dynamics. It came on the heels of a no-confidence debate held in Thai parliament from February 16-20, which brought key themes to the fore including corruption, incompetent governance in managing issues ranging from mining to transportation, and, perhaps most of all, the handling of the coronavirus pandemic. While the number of Covid-19 cases has been falling since the peak in January, the government’s response to its vaccine rollout and measures such as the extension of the state of emergency have come under scrutiny.

The court order is a significant development, both on its own terms as well as within the context of Thailand’s broader political and economic landscape. Most directly, the loss of three ministers to a court order intensifies the sense of shifting political dynamics within the Palang Pracharat Party and its coalition, which could play out in several upcoming developments including a cabinet reshuffle. Current indications suggest that the associates of Deputy Prime Minister Prawit Wongsuwan are the most likely benefactors, which would suggest that he has been centralizing internal power.

The Constitution Court ruling to allow parliament to draft a new constitution via an elected Constitution Drafting Committee provides a possible solution to the political conflict, but in reality, it is more likely to set the stage for further political drama. The process is expected to drag on for years, including the requirement for two referendums from both sides and the desire by politicians to strip the unelected Senate of its constitutional power.

More broadly, the court order and related developments do also bear close watching for what they say about future political and economic dynamics in Thailand. Politically, the coalition government has continued to strengthen its position despite reportedly increasing internal turmoil and opposition inroads such as the recent no-confidence vote, and it is not in serious danger of being toppled before the end of its four-year term. But the dynamics of the protest movement remain much more uncertain. Though it has waned to a shadow of its former self, it has also pushed many protestors to more extreme measures amid growing frustration, which increases the risk of potential violence by hardliners.

Economically, the court order and other developments in early 2021 have not detracted from Thailand’s worrying future, with growth numbers pulled down by Covid-19 and economic management remaining the single biggest black mark on the government. The government has already had to rely on massive fiscal policies via schemes rolled out in 2020, and it is limited in options it can pursue as the government does not want its public debt to GDP ratio to get out of control.

To be sure, this does not mean that the country is necessarily headed for a bleak outlook. For all its faults, the coalition government remains in its strongest position since it came to power in 2019. And a successful vaccine rollout planned by the government could see the Thai economy opening to almost 2019 levels by the fourth quarter of 2021, especially by welcoming tourists from low-risk countries of origin. Much will depend as ever on how Thailand’s government and its people will navigate what looks like a murky political and economic future. As all this unfolds, the BGA Thailand team will continue to monitor ongoing developments on behalf of our clients.

What Myanmar’s Post-Coup Future Means for Companies

March 10, 2021

Image: Wikimedia Commons

Amid the escalation of violence in Myanmar’s post-coup future, BGA Myanmar’s team, led by Acting Managing Director Judy Ko, has been closely monitoring what the unfolding events mean for the country as well as the implications for companies. While the prospects may still remain unclear on some fronts, this remains a key theme to watch in the coming weeks and months.

First and most directly, the post-coup landscape is already affecting Myanmar’s economy. From the outset, the civil disobedience movement, known as CDM, had impacted day-to-day financial operations and boycotted businesses owned by military conglomerates. While the State Administrative Council (SAC) has several experienced bureaucrats serving in some key positions and the cabinet is generally seen as business-friendly, the brutal crackdown on protestors and actions such as internet shutdowns and suspension of social media platforms have already hit some companies such as digital service providers, financial services and e-commerce businesses.

Second, the post-coup developments are also expected to negatively impact Myanmar’s domestic economic climate more generally as well. As the military-led State Administrative Council (SAC) continues implementing its roadmap to ensure the military’s participation in politics and the economy and permanently banning the National League for Democracy and its leadership in Myanmar’s future, it will likely continue to encounter opposition which will make the country’s handling of its economic issues and the Covid-19 pandemic much more difficult. Policymaking on aspects of economic policy could also be impacted, with a case in point being a significant rise in inflation under the junta’s rule.

Third and finally, the events in Myanmar could also impact the country’s wider regional and international obligations and partnerships. The junta is already struggling to meet basic budget requirements given the cut in development aid by international donors. The implementation of regional free trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) may slow as well, and the number of targeted sanctions – already imposed by countries including the United States, United Kingdom and New Zealand – could increase further.

Given all of this, it is reasonable to expect that reputational risk will initially continue to increase in the post-coup landscape, and that greater and more thorough due diligence is likely to become a standard procedure for both local and foreign firms dealing with Myanmar. The coup and the heightened political risk could dissuade investors and lead to the relocation of responsible investors out from the country, as we have already seen in examples such as the exit of Kirin brewery and the suspension of Puma Energy’s operations.

To be sure, businesses have already begun to react to this changing environment, including some firms rallying together to express grave concern in cooperation with some local companies. Companies can also take a number of measures to insulate themselves in Myanmar, including engaging with government offices now under control of the SAC. As this process unfolds, the BGA Myanmar team will be closely monitoring developments on the ground.

US Chip Supply Challenge is a Case for Strong Taiwan Ties

March 5, 2021

Image: Wikimedia Commons

BGA Taiwan Managing Director Rupert Hammond-Chambers wrote a recent commentary in The Wall Street Journal on the computer chip supply issue experienced by American auto makers and how the challenge is a case for stronger ties with Taiwan, rather than casting blame on the U.S. ally. The piece, titled “A Chip Problem of Detroit’s Own Making,” was published on March 4.

In the commentary, Hammond-Chambers argued that despite attempts by some U.S. lawmakers to blame Taiwanese chip manufacturers, including Taiwan Semiconductor Manufacturing Co. (TSMC), the chip supply shortage in the American automobile industry is primarily of its own making since the projected drop in demand for vehicles was less than what had been anticipated. Beyond the validity of individual claims, attempts to pressure companies to change legally binding contracts in the interest of preferred business sectors like autos also raise serious concerns about the nature of international commerce and the laws that govern it.

In the piece, Hammond-Chambers, an expert on Taiwanese political and economic issues as well as defense and security issues who also concurrently leads the U.S.-Taiwan Business Council, also added that blaming Taiwan’s companies for U.S. domestic issues ignores the helpful role they can play as the United States seeks to increase production. TSMC’s commitment to building a plant in Phoenix could help provide the basis for expanded domestic chip production, and developments such as these also reinforce the necessity of binding Taiwan’s technology and security closer to the United States to ensure the critical sector remains within the orbit of U.S. national interests.

You can read the full commentary on The Wall Street Journal website here. Hammond-Chambers has also weighed in regularly on other developments that relate to the supply and demand of chips, be it legislative efforts such as the authorized CHIPS for America Act and the dynamics of intensifying U.S.-China competition, and the BGA Taiwan team as well as the company more generally will continue to monitor such developments as they occur on behalf of our clients.

India’s New Digital Rules

February 25, 2021

Logo of the Digital India campaign. Photo: Wikimedia Commons.

In a press conference on February 25, the Indian government announced the Information Technology (Intermediaries Guidelines and Digital Media Ethics Code) Rules 2021. The rules represent the latest effort by the government to regulate social media, over the top (OTT) platforms and digital media platforms publishing news in India.

The discussion on the need to place stricter controls on social media and online content has taken place frequently in the last few years in India, largely brought on by instances where platforms were misused to incite violence and post defamatory content. The Supreme Court of India and the government have increasingly expressed concerns over the lack of transparency and accountability of online platforms in curbing the spread of fake news, disinformation, and prevention of abuse on social media, and some social media and online platforms have come under scrutiny over their content moderation practices.

Viewed from this perspective, the release of the new guidelines represents the latest effort by the Indian government to regulate this space. An initial draft of the guidelines was first released for public consultations in December 2018, under which the Ministry of IT received 171 comments from industry, civil society, industry associations and other stakeholders. The new guidelines had been aimed at making platforms more accountable for content shared, placing stricter requirements on takedown actions, traceability of originators of unlawful content, verification of users, and also setting up grievance redressal mechanisms in India, while empowering users/viewers.

The passage of the new guidelines, following a finalization of rules by both the Ministry of Electronics & Information Technology and the Ministry of Information & Broadcasting, represents a significant development for companies. Companies will be subject to new compliance requirements in a number of areas – including notification, certification, user verification, norms of journalistic conduct to curtail misinformation and traceability of first originators of information in case of offences –though in some cases, there are distinctions made in accordance with different factors including the extent of compliance required and company type and size.

Even as it has passed these guidelines, the Indian government has also signaled its appreciation of the role companies can play in the advancement of broader national objectives. Information Technology Minister Ravi Shankar Prasad complimented the role social media platforms have played in furthering Digital India objectives and empowering Indian users, as the proliferation of social media platforms is widespread in India.

Moving forward, the focus will shift to the implementation of these regulations and their wider significance. While the guidelines will come in to immediate effect from the date of publication in the gazette, a time period of three months has been given for significant social media intermediaries to comply with the additional provisions. As this process takes shape, the implementation of these guidelines, along with the broader subject of the regulation of India’s digital space, will continue to be an important issue to watch in the coming months and years.

The BGA India Team, led by Managing Director Ratan Shrivastava, will continue to monitor and assess how this development and other significant milestones in India’s growth story continue to shape the country’s development in the coming years.

How Myanmar’s Civil Disobedience Movement Matters

February 16, 2021

Protesters against the coup in Yangon. Photo: Wikimedia Commons

Since a military coup was staged on February 1, BGA’s Myanmar team, led by Acting Managing Director Judo Ko, has been closely monitoring the situation and updating our clients. One consistent theme in our updates has been the focus on the domestic opposition in Myanmar, which bears careful watching in terms of how it affects the military’s actions and the future of the country’s political landscape.

After seizing power, Senior Gen. Min Aung Hlaing has taken a series of actions to cement his political power amid international censure from countries such as the United States, including ousting State Counsellor Aung San Suu Kyi and President Win Myint, declaring a one-year state of emergency, forcing cabinet ministers and their deputies to resign and appointing new officials in their place. But in spite of all of the focus on the military and the international response, it is the domestic opposition we are seeing within Myanmar that bears careful watching.

Since the military’s seizure of power, there have been some notable international responses, including investment delays from some companies, targeted sanctions by the United States and calls of alarm by several other countries. But at the same time, there have been problems with coordinating an international response, and points of leverage such as punitive actions typically have unintended economic consequences and tend to firm up the military’s dependence on China rather than encourage a change in behavior.

Yet domestic discontent might be a more important factor to watch in how the military calibrates its actions. There is support for the National League for Democracy (NLD) in calling for peaceful, nonviolent resistance, and demonstrators that have taken to the street have indicated that they will neither be silenced nor goaded into aggression through repressive measures.

Even if the military has the capacity to violently suppress continuous protests, it will need to calibrate its actions carefully. The economy is a pressure point, and it is no coincidence that General Min Aung Hlaing has himself been meeting with private sector representatives to indicate some stability with the previous government and also reassure companies. Clearly, the military finds the withdrawal of investments concerning as it looks for ways to court business sympathetic to the ousted civilian government, which the swelling protest movement may complicate.

The military also understands that it will need to preserve some measure of popular support to address the challenges the country faces, including the Covid-19 pandemic. If it overreaches, it risks facing an uphill battle in pandemic management for a population that widely sees it as illegitimate. As the civil disobedience movement galvanizes Myanmar’s population across social strata into action and solicits the support of international investors, the military junta may be forced to make political concessions to support an economy already burdened with a global economic downturn.

To be sure, the military has shown that it does not back down easily during previous instances of civilian discontent, and there is a real risk of violence in the coming weeks. But merely focusing on that possibility misses the larger point: that protests in Myanmar have already resulted in the voice of the country’s population being heard by the military in a way that cannot be easily silenced forever. The military must factor this into its calculations if it is worried about foreign companies pulling out and countries leaving it isolated, thereby narrowing its own options for survival. In the meantime, the BGA Myanmar team will be closely monitoring developments on the ground.

The Significance of India’s New Budget

February 5, 2021

Indian Prime Minister Narendra Modi. Photo: Wikimedia Commons.

As part of BGA’s analysis of political economic developments on the ground from India, BGA India Managing Director Ratan Shrivastava outlined the contours of the country’s new budget presented to the Parliament by the Finance Minister Nirmala Sitharaman on February 1 for clients earlier this month. The budget is one of the key economic developments watched by observers with regard to the world’s fifth-largest economy, slated to grow by 11.5 percent per projections by the International Monetary Fund (IMF) as the country seeks to become a $5 trillion economy by FY2024.

The Union Budget for financial year 2021-2022 had many firsts to its credit – it was paperless, presented on a tablet and it introduced no new direct taxes. It was also bold in its intent, using expansionary fiscal policy to support growth, health care, financial capital, energy and infrastructure to provide fiscal stimulus supporting demand and economic recovery, with a 34.5 percent increase in capital expenditure to $75.4 billion – the largest-ever of its kind to be allocated.

The Budget as outlined is based on six pillars: health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and R&D, and minimum government and maximum governance. These six pillars form the basis of wide-ranging sector-specific proposals that also build on the $420 billion Aatmanirbhar Bharat economic packages announced in 2020 to overcome the Covid-19-induced economic slowdown.

The Budget also has important implications for specific sectors. These include the highest-ever allocation of budgetary resources to the infrastructure and the health care sectors, policy changes to boost the automobile, insurance and fintech sectors and value addition in agriculture through enhanced investments. Reforms to the finance sector, including permitting more foreign direct investment in the insurance sector along with management control and a statutory body for asset reconstruction for banks, also illustrate the intent of the Modi government.

At the time the budget was released, it was hailed by supporters as forward-looking, with the benchmark stock index (Sensex) reaching a historic high crossing 51,000 points. More broadly, the budget, bold as it was, also reflected a pragmatic intent to balance both a focus on stimulating economic growth and recovery but also with a clear intent toward fiscal prudence as it aims to reduce the fiscal deficit from 6.8 percent to 3.5 percent. It also allows for debt financing by foreign portfolio investors and facilitates the creation of a development financial institution (DFI) for infrastructure financing with an initial sum of $2.7 billion which is to grow to $68.5 billion in three years.

The BGA India Team will continue to monitor and assess how this development and other significant milestones in India’s growth story continue to shape the country’s development in the coming years.

Reinforcing the Pillars of the U.S.-Thailand Alliance 

January 19, 2021

U.S. and Thai personnel during the opening ceremony of the 2019 Cobra Gold exercise. Photo: Wikimedia Commons).

BGA Senior Director Desmond Walton recently participated in a January 19 event on understanding Thailand’s protest movement. The event, hosted by the think tank U.S. Institute of Peace (USIP), featured a range of perspectives on the dynamics underlying the protests that have been rocking the Southeast Asian state and how the U.S. government might respond to the ongoing events in one of its five Asian treaty allies.

The discussion, moderated by USIP Senior Expert for Southeast Asia Brian Harding, was focused around the theme of “Defiance and Democracy: Understanding the Thai Protest Movement,” featuring remarks by Walton along with Rattaphol “Ahn Onsanit”, the Thai service chief of Voice of America, Penchan Phoborisut, an assistant professor at California State University, Fullerton, and Jonathan Pinkney, a senior researcher for nonviolent action at USIP.

In his remarks, Walton, who served for decades in the U.S. Army and held various key policy positions previously including director for Southeast Asia at the U.S. National Security Council and U.S. defense attaché in Bangkok, said the path to advancing U.S. relations with Thailand under the new administration led by U.S. President Joseph R. Biden rests on an understanding of the broader context for policymaking in both the United States and Thailand as well as the various areas in the multifaceted relationship.

On the former, Walton emphasized that the Biden administration would face a number of challenges both at home and abroad – be it restoring U.S. economic strength at home or contending with a challenging Asian security landscape with threats from China and North Korea. “I don’t think it’ll be a news flash for anyone to say that the incoming Biden administration faces a wanton array of global challenges and challenges at home,” Walton said.

With respect to improving U.S.-Thailand relations, Walton said that the agenda should begin with a recognition of the fact that though the relationship has been characterized as not fully living up to its potential on some of its four key pillars – security, economic, people-to-people and politics – overall, the relationship has been “relatively well-performing, and has been for decades.”

To improve on ties further, he suggested both sides double down on strengths, including on the security side, while also finding creative mechanisms to increase economic and people-to-people through various ways, be it new trade pacts or the establishment of new American centers on university campuses to foster education among Thai youth.

On navigating politics, which he emphasized has been an enduring challenge for U.S. policy, he suggested Washington carefully “thread the needle” and “avoid overreach” as Thailand continues to manage its own domestic challenges, relying on “informed views from our teams on the ground.” He also counseled not overemphasizing the China aspect of U.S.-Thailand relations, focusing instead on what Washington does well and Thailand’s importance for its own sake. That sense of perspective, in his view, would both help right-size the China challenge within the centuries-old U.S.-Thailand relationship while also ensuring that the United States is seen as treating its allies and partners on their own terms rather than as mere pawns in a broader geopolitical rivalry.

Unlocking the Potential of India’s Space Sector

December 16, 2020

On December 15, BGA Managing Director India Ratan Shrivastava (pictured on the bottom right of the screenshot) participated in a discussion on unlocking India’s potential in the space sector. The conversation, hosted by one of India’s largest broadcasting organizations, featured a conversation that followed an appearance and remarks by the head of India’s space agency.

The discussion, hosted by public service broadcaster Doordarshan (DD) and focused on the theme “Unlocking India’s Potential in Space,” featured remarks by K. Sivan, chairman of the Indian Space and Research Organization (ISRO), along with a discussion that followed with comments by Shrivastava as well as Subba Rao Pavuluri, CMD Ananth Technologies Ltd. It touches on various issues across the Indian space sector, including integrating this with broader national development priorities, fostering public awareness, increasing talent and building relationships with the private sector and academic institutions.

During the discussion, Shrivastava, a recognized space expert who has decades of experience on defense issues both in the Indian Army as well as in the private sector, shared his insights on navigating the opportunities and challenges in India’s space industry and the roles of various domestic and international actors in advancing government priorities. In his remarks, Shrivastava hit on several important themes, including the private sector’s ability to help widen the size of India’s space sector and realize Prime Minister Narendra Modi’s declared objective of ensuring that the benefits of outer space investments reach the common man.

Beyond the relationships among various players, Shrivastava also focused more specifically on the role of talent and fostering “space awareness” in younger generations. While ISRO and other institutions do have some initiatives in place directed at this, he said there needed to be a broader inculcation of a sense of outer space at a young age to “nurture the next generation of space technologists,” where schools will have an important role to play across all levels and whether they are government or private. He noted that institutions such as the Indian Institute of Space Science and Technology in Trivandrum play an important role not only in building talent, but also encouraging international cooperation if individuals are able to link up with like-minded individuals in other countries such as Germany, France, the United States and Japan.

More generally, Shrivastava noted that the understanding of outer space in the people of India would need to be both broadened and deepened, focusing not only on specific manifestations such as rockets and satellites but also applications involving software and the integration of technologies such as remote sensing. This broader sense of space awareness, in his view, would both be a more complete representation of reality as well as a more interconnected, whole of India perspective that would recognize the connections between the government, private sector, non-governmental organizations and wider society.

Southeast Asia’s Post-Covid Future

November 17, 2020

On November 16, 2020, BGA Indonesia Deputy Managing Director Alisha Sulisto (pictured on the boom center of the screenshot) participated in a virtual conference with the Perth USAsia Centre think tank known as the Western Australia-ASEAN Trade and Investment Dialogue, a series designed to promote engagement between the Western Australia business community and its ASEAN counterparts.

The theme for this year’s session – the third in an annual series – was “WA and ASEAN: A Shared Economic Recovery,” emphasizing post-Covid-19 economic and business recovery opportunities as well as strengthening supply chains with secure and reliable training partners. In her session, Sulisto was joined by moderator and Perth USAsia Centre founding CEO Gordon Flake, Western Australia Minister for Asian Engagement Peter Tinley and fellow speaker Emma Connors, Southeast Asia correspondent for the Australian Financial Review.

In their comments, both Tinley and Flake reaffirmed the importance of ties between Western Australia and Southeast Asian countries that the series aims to support, particularly as policymakers and experts look to shape a post-Covid-19 landscape. In her remarks, Sulisto noted that ASEAN economies had actually managed the pandemic well, and had looked to get past the “zero-sum” notion mentioned in other contexts of either prioritizing a hardline pandemic response or putting economic growth first. She also suggested that Covid-19 and other disruptions, including the U.S.-China trade war, had reinforced the fact that Western Australian businesses should look to diversify supply chains and their consumer base and tap into new markets, including in Southeast Asia, as Asia becomes the next driver of global growth.

Sulisto’s remarks also focused particularly on Indonesia – Southeast Asia’s largest economy, a member of the G-20, and the world’s fourth most populous nation. Though she noted that Indonesia had been able to leverage key internal and external developments to enhance its competitiveness before the pandemic hit, including the omnibus law and the milestone Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA), she also added that Jakarta needed to up its game due to lingering concerns about the pandemic in country as well as an evolving competitive context. “With heightened competitiveness in the region,” Sulisto said, “I worry that the political capital spent by the Indonesian government won’t produce the return on investment the government so desperately wants.”

Overall, despite lingering challenges, Sulisto said that Indonesia represented a case within Southeast Asia where despite the government’s shortcomings in addressing the pandemic, it remained committed to working with the world rather than turning inward. As such, she emphasized that companies should continue to be engaged and recognize such goodwill, along with the broader point that Southeast Asia will continue to be a key driver of Asia’s growth in the coming years including as the region seeks to navigate a post-Covid-19 future.

“Out of the Shadows: Cybersecurity in Australia and the Indo-Pacific”

October 26, 2020

Last month, BGA Singapore Managing Director James Carouso – previously a senior advisor at the U.S. Indo-Pacific Command in Hawaii and deputy chief of mission and chargé d’ affaires at the U.S. Embassy in Australia – participated in an Australian Chamber event featuring a video conference with Minister for Defense Linda Reynolds. The event delved into the cyber challenge for Australia and how the government had in response tried to bring cyber agencies “out of the shadows” to raise public awareness about cyber security and the role of intelligence agencies.

“Defense Minister Reynolds did not mince words regarding the threat our governments and businesses faced from state-based cyber attacks,” Carouso wrote on Linkedin in response to a shared event summary. “She also said Australia is working with allies and partners to develop more secure supply chains for critical goods and tech.”

The effects of trends such as cybersecurity on aspects of interest to companies such as supply chains is a particular area of thought leadership at BGA, especially with the confluence of geopolitical developments including simmering U.S.-China tensions, innovative ideas such as the Supply Chain Resilience Initiative, and configurations like the Quad – grouping Australia, India, Japan and the United States.

As a case in point, in a recent op-ed published in the South China Morning Post, Carouso along with BGA New Zealand Managing Director Penny Tucker – one of the premier experts on international trade and economic issues – flagged supply chains as being among the areas where companies and governments have to adjust amid growing U.S.-China tensions. “Global commentators have written widely about how the post-Covid-19 world and the impetus to make supply chains more resilient will affect trade and investment considerations. It behooves the governments of Southeast and South Asian nations to negotiate their inclusion as trusted suppliers to their large trading partners,” Carouso and Tucker wrote.

In the op-ed, Carouso and Tucker also both note that Western countries can and should help other countries in managing such issues. As such, how Australia manages the cybersecurity challenges that Reynolds laid out as well as its wider domestic and foreign policy agenda more generally has implications not only for Canberra, but the wider Indo-Pacific region as well.

“The Philippines’ Quest for South China Sea Justice in Perspective.“

September 16, 2020

On September 16, BGA co-hosted a virtual event with the Stratbase Albert Del Rosario Institute (ADRi), an independent international and strategic research organization, on China’s role in Southeast Asia tied to the launch of a new book on the subject by Head of Research Murray Hiebert. The event, moderated by BGA Philippines Managing Director Dindo Manhit, featured remarks by BGA President and CEO Ernie Bower, keynote remarks by former Philippine Foreign Secretary Albert del Rosario, and insights from some leading Philippine thinkers: Justice Antonio Carpio, Justice Conchita Carpio-Morales, Renato de Castro and Richard Heydarian.

In his keynote address, Del Rosario, who was instrumental in the Philippines’ historic South China Sea arbitral tribunal case against China, framed the importance of Manila’s efforts in a wider regional and global perspective given Beijing’s recent maritime assertiveness, noting that the “quest for justice will shape our world and our country’s role in it.” He also added that it was important for the Philippines to reject the notion of “might makes right” not just for its own sake but for other middle and small powers in the world.

Both Bower and Manhit noted the strategic importance of Southeast Asia for its own sake as well as for both China and the United States, bringing with it their share of opportunities and challenges. Manhit also subsequently elaborated on his views in a column for the Philippine Daily Inquirer, where he noted that the chief challenge that China’s rise poses for the Philippines and Indo-Pacific states is that Beijing’s greater power has in turn resulted in growing ambitions and positioning itself as a global leader and a shaper of the international order, at times to the detriment of these countries’ interests. “[Its] rise is far from ‘peaceful,’ with its questionable economic initiatives and aggression in the West Philippine Sea,” Manhit wrote.

In his remarks, Hiebert, who has been on a virtual book tour across Indo-Pacific capitals, highlighted the Philippines as a particular case where while China’s quest for influence is far from new, Beijing is using “its full toolbox” across realms – political, economic, and societal – to increase its influence quickly. But he also added that the administration of Rodrigo Duterte had illustrated the limits of Beijing’s influence in the Philippines as well, since some of the deals initially reached had either not taken off due to legal obstacles or not really produced much value for Manila.

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