Briefing MONTHLY #29 | July 2020
Vietnam’s model | China troubles | Asian business blueprint
BEATING THE STORM
Amongst the many sayings attributed to Vietnam’s founder Ho Chi Minh is the observation that a storm is an opportunity for the pine and cypress to show their strength. The country has withstood several storms since those words, but its successful management of COVID-19 has suddenly given it new regional and global credibility.
With only 432 cases and no official deaths in a population of almost 100 million in a developing country on China’s border, Vietnam’s pandemic management stands out amongst the east Asian countries with successful records. However, with the first new community transmission cases for about three months this week, Vietnam’s may well be facing its own second wave challenge. Nevertheless, as the chair country of the Association of Southeast Asian Nations and a non-permanent member of the United Nations Security Council this year, its mix of fast health policy responses and soft authoritarianism has received more notice than might have been.
This is significant for Australia, which is set to double-down further on its recent deepening bilateral relationship for both economic and strategic reasons. And it is likely to add further momentum to the already well-established flow of foreign investment into Vietnam as an Asian manufacturing hub. While the country’s success is being commonly attributed to its authoritarian structure and experience with the SARS epidemic in 2003, a Brookings Institution study says it also reflects many years of deeper reforms in the governance relationship between the local authorities and the national government. It says this provides lessons for other developing countries beyond simple distinctions between practices in democracies and authoritarian regimes.
- Huong Le Thu, from the Australian Strategic Policy Institute, explains Vietnam’s success in this Radio National interview.
Below: Vietnam’s model in WHAT WE’RE READING
Animation by Rocco Fazzari.
The gulf between Foreign Minister Marise Payne’s June 16 speech on Australia and the world, and this week’s high-profile trip to the US despite her government’s tough COVID travel advice, says something about the delicate state of relations with China and the US. The speech didn’t even mention the US (until questions), debunked the Trumpian idea of “negative globalism”, and was followed by a Defence Update which hints at less of a lockstep alliance with the US in Asia. The latter trip was proceeded by a statement that it has never been more important that “we as allies, find every possible way to advance shared interests.”
In between, Australia has stepped up its opposition to Chinese territorial claims in the South China Sea after public pressure from the US. Then US Secretary of State Mike Pompeo said it was time for countries to accept economic pain to rein in China’s rising power, which he suggested was akin to Frankenstein’s monster. It was a message with particular relevance for Australia, which is more dependent on China than any other major economy.
But the journey to the US for Payne and Defence Minister Linda Reynolds seems to have been necessary to yet again personally remind the US, amid this feverish atmosphere, that Australia has different long-term national interests in relation to China. As Reynolds put it after the meeting: “We are still aligned with the US, but not completely aligned, and that is how it should be.”
Given how both the US and Australian leaders emphasised they are teaming up with other Asian countries to manage China’s rise, they could usefully pay attention to an influential strategic policy voice from one of those countries this week. Speaking to an Australian Strategic Policy Institute webinar, former senior Indonesian diplomat and presidential candidate Dino Patti Djalal said: “There is a tendency to China-bashing in certain quarters in the western world. There is a certain degree of finesse that needs to be exercised. The language coming out of Washington is a bit harsh and I would be surprised if many Southeast Asians agree with this language.”
- In this Lowy Institute paper, Richard McGregor says China’s pandemic successes and failures have the same foundations, making it difficult to sell an attractive Chinese model to the rest of the world.
- With Australia tilting further towards the US on China, this New York Times article examines a more nuanced approach in Japan reflecting some lessons of history.
- While Australia’s Defence Strategic Update hints at greater independence from the US, Evan Laksamana says it fails to adequately explain what interests Australia really shares with Indonesia.
Below: China research links deepen as business risks rise
THE SINGAPORE ALTERNATIVE
He went to the National University of Singapore, has a law degree, was a major in the armed forces and is a Sikh. Pritam Singh could just be another middle-ranking functionary from Singapore Inc. But the 43-year-old politician is now the human face of a subtle step change in Singapore politics: the country’s first formally recognised Leader of the Opposition.
While the title has been informally used before and rejected by some past opposition politicians, Singh is being given a salary, staff and other resources to act as a formal alternative government leader. Singh’s Workers party won 10 seats in the 93-seat Parliament at the July 10 election, which is the largest number of opposition members since the first post-independence elections in the early 1960s.
There are two other non-constituency opposition members. The long ruling Peoples Action Party won 61 per cent of the vote, which was only slightly above its lowest vote in 2011, raising questions about the public confidence in the country’s so-called fourth generation leadership which was seen to be taking over after this election from Prime Minister Lee Hsien Loong, the son of the country’s founder Lee Kuan Yew. Lee announced the formalisation of the opposition leader role saying: “We hope that this will lead to the opposition in Parliament playing a more constructive and more substantive role, not just asking questions of the Government, but also putting up alternatives, putting up proposals and being scrutinised.”
- Asia Society global co-chair Chan Heng Chee says in this post-election lecture that a new political culture is emerging in Singapore.
JAPAN: WRONG PODIUM
Japan marked July 24 – the day the 2020 Olympic Games were due to start – with a record number of new COVID-19 cases at 927, raising further doubts about whether a conventional Olympics competition will be viable even a year away. The country’s invidious position as the host for a delayed competition was underlined earlier in the month when the popular conservative Tokyo Governor Yuriko Koike won re-election largely built around her quest to keep the Olympics on track. But the campaign saw her criticised from different ends of the COVID policy spectrum. Some argued that by backing COVID shutdown measures she is placing her hoped-for Olympic hosting legacy above the interests of the economy now. On the other hand, others criticised her for continuing to spend too much on the Olympics and not enough on immediate health care challenges.
Both Koike and Prime Minister Shinzo Abe have sought an Olympics legacy to round out their personally competitive legacies national politicians, but less than one quarter of the public now favour a conventional Olympics competition being held next July. A Kyodo News poll in late July showed 36 per cent of respondents think the Games should be postponed again and 34 per cent want them cancelled. Most respondents think COVID-19 won’t be under control enough to hold the Games next July, prompting discussion about radical changes including a spectator-free competition.
Political return acts (or attempts) have dogged Malaysia for more than a generation, but this year may be shaping up as the time when the three modern giants of Malay politics are overtaken. The main recalcitrant, Mahathir Mohamad, spectacularly bungled a bid to cement himself into the prime ministership in February, His one-time protege and long-time rival Anwar Ibrahim continues to fail to win broad public support. And now former prime minister, former prime minister’s son and former Mahathir protégé Najib Razak has become the first Malaysian leader to be conflicted of corruption.
This leaves party-swapping incumbent Prime Minister Muhyiddin Yassin with the opportunity to go to an early election free of Najib’s powerful shadow, while the former Pakatan Harapan coalition government forces are in disarray. And Muhyiddin has a big budget stimulus and a reasonable record of containing COVID-19 to his favour. History suggests it is rash to write-off the likes of Najib and Anwar. But the country needs new leaders to make the most of the greater fluidity in party formation and coalitions that has emerged in the past two years.
MORRISON GOES GLOBAL WITH ABE
Negative globalism appeared to be firmly off the agenda as Prime Minister Scott Morrison held a virtual meeting on July 9 with Japanese Prime Minister Shinzo Abe, whose country is a longstanding enthusiastic backer of multilateral institutions. The first paragraph of the meeting statement declares unequivocally: “They recognised that global solidarity, cooperation and effective multilateralism, including through the G20, the East Asia Summit, APEC, the United Nations, the World Health Organization (WHO), the OECD and international financial institutions were required more than ever to defeat the virus and support economic recovery.”
Coming a day after the US announced it would stop funding the WHO, the two leaders reaffirmed the role of the WHO and the need for the review of how it handled the pandemic. They also backed an observer role for Taiwan in the body. Without actually mentioning China, the two leaders reinforced increased collaboration on a range of initiatives designed to provide alternatives to Chinese assertiveness, ranging from PNG electrification to critical minerals and 5G telecommunications.
PACIFIC STEP-UP #2
The federal government is increasing its integration of activities in the South Pacific after drawing on unused development aid and defence resources to fund its $280 million Partnerships for Recovery COVID-19 emergency assistance program. International Development Minister Alex Hawke says the Department of Foreign Affairs and Trade Office of the Pacific – which was established as part of the Pacific Step-up policy – is being expended into other parts of the government. And he says the Australian integration of Pacific policy making arms is being closely watched by other countries looking for new ways of managing international development. “It doesn’t diminish the development mission.
"It just enhances those (combined) tools,” he told an Asia Society Australia briefing on Partnerships for Recovery. He said the government was now looking for new ideas about how to best use existing projects and repurpose money to take action in response to how the pandemic still unfolded in the region. He highlighted how Australia had been an active voice in global institutions, ensuring that the interests of Pacific nations were being taken into account and that money was flowing to them as fast as possible. “There’s work to be done there but the region is certainly getting access to that money as early as possible,” he said.
Hawke acknowledged that COVID-19 had forced the government to refocus on Southeast Asia after shifting attention to the Pacific in the past few years. He specifically cited work helping Indonesia with economic stimulus and long-term fiscal recovery strategies and a partnership with the World Bank on a stimulus package in Vietnam. And he said Australia had distinguished itself to some extent by keeping its diplomatic networks open throughout the pandemic.
CHINA RESEARCH LINKS DEEPEN
China has now overtaken the US as Australia’s leading international partner in producing scientific publications, just as Australian researchers face a funding crunch due to the decline in revenue from foreign students. The growing collaboration also comes despite the federal government issuing new rules requiring universities to disclose more information about such foreign collaboration to prevent Australian research being misused by other countries.
In 2019, the number of Australian scientific publications involving a researcher affiliated with a Chinese institution grew by 13.1 per cent, while the number involving a US-affiliated researcher declined by 0.3 per cent. Australia-China collaborations now comprise 16.2 per cent of total Australian scientific publications, up from 3.1 per cent in 2005. The US (15.5 per cent), UK (11.7 per cent), Germany (5.9 per cent) and Canada (5.0 per cent) are the next top five international partners. The research by the Australia-China Relations Institute also reveals that, despite the predictions of a US-China technological decoupling, last year 56,487 US scientific publications involved a China-affiliated researcher, or a 6.8 per cent increase on 2018.
DEALS AND DOLLARS
EIGHT RULES FOR ASIAN SUCCESS
Australian businesses have been given eight principles to follow in any Asian business expansion in a new report which aims to make greater regional investment part of the recovery from COVID-19. The report also makes 25 recommendations to businesses and governments on how to lift Australian participation in Asian business ranging across more collaboration abroad, better domestic policy coordination and more use of talent from the country’s Asian diaspora communities and people who have worked in Asian business.
The report from a taskforce set up by the Business Council of Australia and Asia Society Australia, with PwC and the University of Sydney Business School is the first stage of a broader report which will be released later this year. It says: “Australia will have to look for new sources of growth if future generations are going to enjoy the standard of living that we have become accustomed to. Asia presents an attractive option, but to succeed we will have to tackle some difficult reform issues at home and we must lift our economic engagement in Asia.” The eight principles which aim to offer a practical roadmap for Asian business are: long term vision; knowing where, when and how to compete; understanding local business practice; knowing the who and how of relationships; building local alliance management capacity; managing reputation and image; empowering people in market; and developing a governance model.
It argues that while Asia is not a risk-free proposition, experience shows that companies that have done well have been consistent and persistent in their strategies, while those that failed changed their plans half-way, paused or retreated early. “There is no guaranteed formula for success but there are certain features that are always present,” the report says. Taskforce chairman and Compass Group Asia Pacific regional general manager Mark van Dyck says: “While Australian business has done comparatively well, particularly in exporting to Asia, our competitors are quickly catching up and, in some cases, overtaking us.” Meanwhile a parallel report on this subject is also being prepared by Asialink and the Commonwealth Bank which will examine the level of Asian capabilities among the senior leadership of ASX-200 companies and assess how these capabilities contribute to corporate performance in Asian markets.
INDONESIA STARTS UP
Indonesia’s growing stature as Southeast Asia’s start-up capital is getting more attention as Australian companies examine opportunities arising from the new bilateral trade agreement. CC Amatil managing director Alison Watkins says changes to her company’s information technology systems and the digitisation of its supply chains has benefitted from input from its Indonesian IT team. She says she had been surprised by the amount of start-up activity in Indonesia after CC Amatil’s venture capital arm Amatil X launched there. “There is so much entrepreneurship going on in and round the technology space there. We have really needed to move very fast with some local start-ups we have got there,” she told a webinar hosted by the Australia Indonesia Business Council.
The chief executive of cybersecurity company Ionize, Andrew Muller, says there is a growing hunger in Indonesia for improved skills in cyber security and digital business to underpin the start-up culture. “There is huge entrepreneurial energy in Indonesia to solve problems. There are just looking for some inputs. They are certainly pushing the boundaries of where they are going,” he told the webinar to mark the beginning of the Indonesia-Australia Closer Economic Partnership Agreement.
Bluescope Steel chief executive Mark Vassella said the Strategic Supply Agreement embedded in the trade deal was already working for his company by allowing it to supplement the supply chains it already had in Indonesia with new products from Australia which could eventually then be made in Indonesia if the market was ther
NZ MODEL FOR INDIA BUSINESS
Business Council of Australia chief executive Jennifer Westacott has backed a new business group based on the Australia New Zealand Leadership Forum to revive business ties with India. She says there is a need for a new group with an “enduring conspicuous structure” to raise awareness of opportunities in India over the long term. “It must be about where we go to get things resolved,” she told a webinar hosted by the Australia India Business Council (AIBC), which is talking with the BCA about a new peak group. Westacott said the new body would need to commit to high level business missions, working group on key issues and an annual meeting each year attended by senior government leaders. “That’s the sort of stuff we need to think about if we are going to bring the dialogue forward,” she said.
Westacott said Prime Minister Narendra’s visit to Australia in 2014 had been transformative in raising understanding about changing India but it had not shifted the focus much from seeing India as a natural resources opportunity. AIBC former chairman Neville Roach said he had been struck by the irony that there had been a much greater increase in Indian companies and business groups setting up in Australia in recent years than Australian counterparts going to India.
CHINA RISKS INCREASE
The deteriorating relationship between Beijing and Canberra now ranks about equally with COVID-19 travel disruption as a concern for Australian businesses operating in China. A new survey of 87 businesses by the China-Australia Chamber of Commerce found that 72 per cent thought bilateral political tension was their biggest business risk, up from 45 per cent in 2018. Seventy-four per cent said global travel disruption was the biggest business challenge, up from 33 per cent in February.
The other top challenges were virtually unchanged from February at about 50 per cent for decreased demand for products and 43 per cent for difficulty making business decisions. The business risk assessment saw concern about the Chinese economic slowdown and the global economic slowdown rise sharply, compared with 2018 as the second and third most important risks. Meanwhile concerns about boomtime issues such as labour shortages and costs have fallen since 2018.
Property developer Stockland has joined up with its first foreign investment partner on a residential project in a deal with the Bangkok-listed company Supalai PLC which will have a 50 per cent stake in northern Melbourne master-planned community. Although this will be Stockland's first overseas partnership, Supalai has invested in Australian greenfields projects since 2014. The Thai company, founded in 1989, has a market capitalisation of about $2 billion and has a rolling development pipeline in Thailand of about 200 projects a year.
“The world will not allow Beijing to treat the South China Sea as its maritime empire. Today we are strengthening US policy … we are making clear: Beijing’s claims to offshore resources across most of the South China Sea are completely unlawful, as is its campaign of bullying to control them.”
US Secretary of State Mike Pompeo, July 14
"Australia will continue to adopt a very supportive position of freedom of navigation in the South China Sea. We back that up with our own actions and our own initiatives and our own statements but we'll say it the Australian way, we'll say it the way it's in our interests to make those statements and continue to adopt a very consistent position."
Prime Minister Scott Morrison, July 16
“The Australian government rejects any claims by China that are inconsistent with the 1982 United Nations Convention on the Law of the Sea (UNCLOS), in particular, maritime claims that do not adhere to its rules on baselines, maritime zones and classification of features.”
Australian note to the United Nations, July 23
“They (Chinese territorial claims) are consistent with international law including the UNCLOS and cannot be altered by the unwarranted allegations of any country.”
Chinese foreign ministry spokesman Wang Wenbin, July 27
Australia is steadily rising towards the top of the Oxford University assessment of the relative toughness of pandemic suppression actions in the Asian region.
WHAT WE'RE READING
Vietnam’s Success In Combatting COVID-19 by Era Dabla-Norris, Anne-Marie Gulde-Wolf, and Francois Painchuard (International Monetary Fund)
Emerging from the Pandemic by Bruce Delteil, Matthieu Francois, and Nga Nguyen (McKinsey Global Institute)
Mobilising The Police From The Top Down As Public Health Partners by Hai Thanh Luong, Melissa Jardine, and Nicholas Thomson (Journal of Community Safety & Well Being)
Reopening Vietnam by Trang (Mae) Nguyen and Edmund Malesky (Brookings Institution)
Nationalism, Heroism And Media In Vietnam’s War by Lena Le and Vietnam’s COVID-19 Political Gains by Phuong Pham (East Asia Forum)
Despite Asia’s reputation for variable but mostly successful approaches to COVID-19 by international standards, it is still hard to find a country where there might actually be net benefits. Putting Taiwan aside, Vietnam now stands out as the region’s most surprising success story with the potential to be a pandemic role model for other developing countries and to gain even more foreign investment from its perceived safe haven status. Indeed, its pre-existing status as Australia’s newest go-to diplomatic interlocutor in the region seems to have been strengthened.
There is a striking irony here in the way China’s image as an authoritarian country has been reinforced by the pandemic, from initial finger pointing at its drone surveillance approach to horror at its welding of doors shut in Wuhan. On the other hand, Vietnam, Asia’s other authoritarian communist regime, is being treated increasingly as a trusted partner with an efficient, forward leaning health care system. In a subtle example of this, while it has now become almost standard for many western leaders (including Prime Minister Scott Morrison) to refer pointedly to China’s government as Communist Party China, Vietnam’s regime gets a leave pass with more accommodating nomenclature such as the “Vietnam-Party State".
Without delving much into this irony, these diverse essays nonetheless explain Vietnam’s successful approach to the pandemic going beyond simple country categorisation to its specific approaches to reforms and state power. The Brookings Institution’s Trang Nguyen and Edmund Malevsky provide the most interesting framework for understanding the country’s success by explaining how it reflects long-running efforts to improve governance and central-local government policy coordination. This is in contrast to the more commonly cited explanations of past experience with SARS and authoritarian power. “Vietnam’s state capacity was not born overnight but resulted from decades-long efforts to improve governance and responsiveness at local levels,” they argue.
They use data to show how Vietnamese provinces have made steady improvements in healthcare, information access, and corruption control which came together in the management of the latest pandemic at the national level. As a result, they say this Vietnamese evolution of policy reform from the local level deserves further attention as part of a larger, global account of the administrative state in times of crisis because it “goes beyond the simple distinction between authoritarian and democratic regimes.”
In contrast, policing specialists Melissa Jardine, Hai Thanh Luong and Nicholas Thomson argue Vietnam’s firm policing approach to the pandemic has been “incredibly effective” with apparent strong support from the community. But they stop short of saying how much is can be applied to other countries. Nevertheless, when police around the world are under pressure to better integrate with their communities, these authors do suggest that Vietnam’s capability for expansive local-level police engagement in a pandemic provides a useful model of community policing. “It demonstrates how a close relationship between police and local residents as a form of community-based policing can work productively,” they say.
This journal article also provides some interesting insights into how this evolving soft authoritarian policing model has helped underpin Vietnam’s pandemic suppression. For example, police distributed health essentials such as face masks and even provided accommodation to isolating local residents. But residents in turn provided information on potential infection cases to police through public notification boxes or private hotlines.
At East Asia Forum, two Vietnamese academics separately describe how a surprisingly nimble one-party state seems set to renew its legitimacy with the population after some lost trust over corruption and land disputes. Lina Le says the country’s notable capacity to curb the virus at a much lower cost than most other countries should be attributed as much to “government mobilised nationalism, heroism and the role of media” as tough policing or early aggressive lockdown and quarantine strategies. “The legacy of the Vietnam War is still strong, so soldiers are considered to be the true manifestation of heroes,” she says while noting the pandemic has seen doctors, nurses and volunteers also depicted as a new kind of frontline heroes. But Phuong Pham says a highly repressive regime has proven very transparent in its response to the pandemic and the security forces have regained considerable public popularity. “Emerging from the crisis with little damage will substantially reinforce the Communist Party of Vietnam’s legitimacy, which will in turn lay a foundation for the future of the one-party regime,” he argues in a timely rejoinder to those inclined to bundle Vietnam into prototype alignments of democracies facing up to China.
The International Monetary Fund analysis of Vietnam’s pandemic response declares that its effective and transparent communications provides a clear role model for other developing countries. “Early on, the Prime Minister prioritised health above economic concerns. The strategy was swiftly deployed with the help of the military, public security services, and grass-root organizations, which speaks to some features unique to Vietnam.” This is in sharp contrast to expectations of the country in January when the IMF says: “Vietnam was regarded as highly vulnerable, given its long border and extensive trade with China, densely populated urban areas, and limited healthcare infrastructure.
But for all Vietnam’s success in managing a world beating, low-cost pandemic suppression strategy, the IMF along with the McKinsey Global Institute (MGI) underline the irony that the country’s recent embrace of foreign investment and trade means its economic recovery remains beholden to the more uncertain global recovery from the pandemic. “A rebound in international tourism and labour-intensive manufacturing exports will be critical for this growth. Given the unpredictable nature of COVID-19, it is difficult to analyse how the tourism recovery will play out, but it’s likely that the industry will restart first within the ASEAN region as borders reopen,” MGI says in the first of two articles on Vietnam’s pandemic recovery approach.
Despite being a relatively new mainstream diplomatic player in Asia, Vietnam has recently established itself as a significant participant with a more confident embrace of freer trade than established countries such as Indonesia and India. And it has been more forthright in dealing with China’s maritime territorial claims than countries such as Malaysia. This was meant to be its year to reinforce this higher profile as the Association of Southeast Asian Nations (ASEAN) chair country, something that has been circumscribed by that group’s limited collective response to the pandemic. But, as this collection of articles suggests, COVID-19 has likely given Vietnam a bigger global reputation boost than a routine year as a regional diplomatic placeholder.
ON THE HORIZON
G7: SCO-GO OR NO GO
Prime Minister Scott Morrison faces a difficult decision later this month about whether to invest the time in a trip to the US for President Donald Trump’s bid to expand the membership of the Group of Seven major economies. The summit has already run into problems with Canada and Britain rejecting Trump’s bid to bring Russia back into the fold. But Morrison will face bigger local dilemmas over being away from the country and then doing two weeks of quarantine just when the government will face tough choices about reopening the economy (particularly Victoria) to underpin a more optimistic outlook in the October Budget. Morrison says the trip is still on if the Summit proceeds following media reports that his attendance was uncertain.
When the Prime Minister accepted the invitation in June, a spokesman said: “Participation at the G7 for the second year in a row will give Australia another significant opportunity to promote our interests during highly uncertain times in the global economy.” Trump has also invited the leaders of India and South Korea in a bid to fashion a body that would be a shadow of the Group of Twenty major economies, which has been ineffectual so far in dealing with the pandemic.
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