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“Understanding and Reducing Methane Emissions in Southeast Asia” by Qiu Jiahui and Ryan Wong

2022/52 “Investment Trends and Industrial Prospects in Indonesia” by Yanuar Fajari and Siwage Dharma Negara

Technicians work on an assembly line of the BMW 7 series in Jakarta on 30 November 2016, as part of BMW announcement as they have started to assemble the luxurious series for the first time in Indonesia in that year. Photo: BAY ISMOYO/AFP.

EXECUTIVE SUMMARY

Investment trends in Indonesia in recent years present a mixed picture. Although total investments increased, much of this was driven by a rapid increase in domestic direct investment (DDI) while foreign direct investment (FDI) remained relatively stagnant. The DDI share of total investment rose from 35% in 2015 to 50% in 2021. In the manufacturing sector, however, FDI’s share increased to 51% in 2021, while DDI’s share declined, because domestic investment flowed mostly to the services sector.

The overall increase in investments has been fuelled by the Jokowi government’s active measures to facilitate business, streamline bureaucratic procedures and improve tax incentives, particularly after the Investment Coordinating Body (BKPM) was upgraded to Ministerial status in April 2021.

However, more can be done to improve Indonesia’s attractiveness to foreign investors vis-a-vis other investment destinations (such as Vietnam), and to encourage the growth of manufacturing activities in sectors which align with the national priorities to create jobs, move up the value chain and enhance knowledge and technology transfers. More policy support is needed to improve the capability of local firms to become reliable suppliers or partners with foreign clients, as well as to address lingering regulatory uncertainties arising from Indonesia’s Job Creation Law and land acquisition issues.

There is also the need to harmonise investment promotion and facilitation measures with suitable industrial policies such as downstream industry development and local content requirements. The latter must be implemented with caution as they violate WTO rules and may turn out to be counterproductive for the economy in the long run.

* Yanuar Fajari is Deputy Director for Investment Planning in Energy at Ministry of Investment/Indonesia Investment Coordinating Board (BKPM). Siwage Dharma Negara is Senior Fellow at ISEAS – Yusof Ishak Institute. We thank Cassey Lee, Tham Siew Yean and Jayant Menon for their useful comments. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency of the Indonesian government.

ISEAS Perspective 2022/52, 13 May 2022

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INTRODUCTION

Last year, Indonesia’s foreign and domestic direct investment realisation reached Rp 901 trillion (US$ 62 billion),[1] surpassing the official annual target of Rp 900 trillion. This is good news for the country, which is struggling to create employment opportunities and to bring its economic growth back to its pre-pandemic level. In 2022, the government has set a more ambitious investment target of Rp 1,200 trillion (US$ 83.8 billion).[2]

Several reasons underline the government’s projection: First, the decline in Covid-19 cases and increase in vaccination rate;[3] second, political and macroeconomic stability remain strong, and; third, strong investor confidence in economic prospects in the country.[4] Yet, given rising geopolitical uncertainties, growing protectionism and increasing financial markets uncertainty due to US monetary policy, achieving the investment target for 2022 will not be easy.

This essay looks at investment trends in Indonesia with a particular focus on the industrial (manufacturing) sector.[5] The growth of this sector is critical to sustainable job creation for millions of workers in the country. The following section will give an update on investment trends in Indonesia, while the subsequent section discusses national investment policies and strategies, and follow that up with a discussion on key industrial policies that may affect investment trends. It concludes with some thoughts on future challenges.

INVESTMENT TRENDS

Since President Joko “Jokowi” Widodo took office, investment has been driven by a rapid increase in domestic direct investment (DDI) (Figure 1). Foreign direct investment (FDI), however, seems relatively stagnant. From 2014 to 2021, DDI grew by 16.4 per cent annually on average, while FDI grew by only 1.4 per cent annually. Indonesia’s relative unattractiveness is partly to blame for causing the slow growth in FDI, compared with other investment destinations, especially Vietnam.[6] The DDI share in total investment increased from around 35 per cent in 2015 to 50 per cent in 2021.

Source: BKPM

While DDI as a whole grew faster than FDI, in the manufacturing sector, domestic investment did not grow as fast as in the services sector. Figure 2 shows that DDI in the manufacturing sector has been relatively stagnant while in the services sector has been increasing since 2016.[7] Interestingly, the industry share of total FDI realisation has increased since 2020, reaching 51 per cent by 2021. This is driven by significant FDI in the base metal and metal goods sector (Table 1), with the government actively inviting FDI to promote downstream industries in mineral resources, especially nickel, bauxite, and copper.

Table 1: FDI realisation in the manufacturing sector (US$ million), 2015-21

	2015	2016	2017	2018	2019	2020	2021
Base metal & metal goods	2,421	3,068	2,969	2,219	3,559	5,969	6,974
Food	1,521	2,115	1,970	1,307	1,272	1,592	2,337
Chemical & pharmacy	1,956	2,889	2,578	1,938	1,486	1,743	1,657
Motor vehicle & transport equipment	1,757	2,370	1,271	971	754	942	1,502
Paper & printing	712	2,789	606	668	446	943	953
Machinery, E&E, medical equipment	678	838	817	1,341	500	601	679
Leather & footwear	162	144	369	244	188	214	486
Non-metal mineral	1,303	1,076	672	456	475	248	327
Textiles	433	321	372	305	239	280	312
Rubber & plastics	694	737	633	447	292	291	262
Wood & furniture	47	268	396	276	95	85	68
Others	83	75	504	174	245	294	246
Sum of Manufacturing	11,768	16,690	13,159	10,348	9,551	13,202	15,804
Total FDI	29,276	28,964	32,240	29,308	28,209	28,666	31,093
Share of total FDI	40%	58%	41%	35%	34%	46%	51%

Source: BKPM

Most of the investments in the metal industry are located outside Java, concentrated in mineral-rich provinces such as Central Sulawesi, Southeast Sulawesi, and North Maluku. The biggest investors in this sector come from China, Hong Kong and Singapore.

Meanwhile, investments in the food industry are primarily located in East and West Java, Riau and Banten provinces. The major investors in this sector come from Singapore, Malaysia and the United Kingdom. For the chemical industry, most investments come from Singapore, Japan and Malaysia, with central locations in Banten, Riau, and West and East Java provinces.

Table 2: DDI realisation in the manufacturing sector (Rp billion), 2015-21

	2015	2016	2017	2018	2019	2020	2021
Food	24,534	32,029	38,540	39,088	36,603	27,873	20,427
Chemical & Pharmacy	20,712	30,054	13,734	13,338	9,484	22,526	12,240
Base metal & metal goods	7,082	10,128	11,345	10,468	8,183	8,858	10,399
Paper & printing	6,533	5,258	9,023	2,894	2,950	3,746	7,834
Rubber & plastics	3,696	3,577	4,823	3,415	3,069	4,429	7,803
Non metal mineral	20,502	15,405	7,641	4,523	3,573	5,862	6,522
Textiles	2,725	3,210	7,863	3,597	1,313	2,103	1,972
Motor vehicle & transport equipment	1,071	1,714	1,313	1,837	2,608	2,556	1,459
Wood & furniture	1,185	3,151	1,569	1,536	1,586	1,263	1,144
Leather & footwear	5	69	196	282	77	395	700
Machinery, E&E, medical equipment	856	1,446	2,464	1,950	1,152	1,156	535
Others	147	744	678	717	2,076	2,051	1,192
Sum of manufacturing	88,901	106,040	98,512	82,927	70,597	80,767	93,506
Total DDI	179,466	216,231	262,351	328,605	386,498	413,536	447,064
Share of total DDI	50%	49%	38%	25%	18%	20%	21%

Source: BKPM

Figure 3 shows that Singapore is the top source of FDI in Indonesia, accounting for around 30 per cent of total inward FDI. FDI from China has increased significantly since 2016, reaching 17 per cent of total FDI in 2019 and 2020, then falling to 10 per cent in 2021. The decline is mainly caused by the Covid-19 pandemic, which caused some investment delays. Interestingly, FDI from Hong Kong has increased during the pandemic, reaching 15 per cent of total FDI in 2021.[8]

Figure 4 shows that most investment realisations are concentrated on Java island (48 per cent of total investment realisation). Resource-rich islands, Sumatera and Sulawesi, received about 21 per cent and 11 per cent of total investment realisation in 2021. Meanwhile, Kalimantan only received about 10 per cent of total investment. It is projected that investment in the island will further increase, boosted by the new capital relocation plan.

Regarding sectoral distribution, metal processing and construction, especially industrial estate and warehouse, received the largest investment realisation in 2021, at around 13 per cent each. This trend is related to the targeted sectors that are given special facilities by the government, especially for integrated industrial estate, special economic zones, and the smelter industry.

POLICY & STRATEGY TO PROMOTE INVESTMENT

The recent growth of investment realisation is partly related to new policy initiatives to facilitate investment realisation. Understanding these policy changes in greater detail is important as they will continue to drive future investments. The key change happened in April 2021, when President Jokowi decided to upgrade the Investment Coordinating Board (BKPM) to Ministry status. The Ministry, led by Bahlil Lahadalia, has a pivotal role in implementing regulatory reforms to promote a more business-friendly environment.

Investment Facilitation

Indonesia has taken several initiatives to improve investment facilitation. It passed Law No. 11/2020 on Job Creation (also known as Omnibus Law), to simplify investment regulations and licensing procedures. As part of the law’s implementation, BKPM introduced a new risk-based investment licensing system, Online Single Submission (OSS), in August 2021. OSS is a web-based business licensing system for expediting business permits and integrating central government and regional administrative procedures. Under the new OSS system, low-risk businesses, especially small-medium enterprises (SMEs), only need a single licensing, i.e., Business Identification Number (NIB), to gain legal status.

Furthermore, President Jokowi has established a task force headed by Minister Bahlil to help resolve investment delays and ensure that investment plans that have received permits can be realised immediately. The task force consists of representatives across ministries/agencies, the National Police, the Attorney General’s Office, the entire Regional Police Chief, and the Regional Prosecutor.[9] At the point of writing, of the total of Rp 708 trillion associated with identified stalled investment projects, the Ministry has succeeded in facilitating Rp 558.7 trillion (78.9%).

The Ministry of Investment has also prepared pre-feasibility studies on some investment projects that will be offered (IPRO) to investors. These studies provide specific and comprehensive information about legal and technical aspects, economic feasibility, social and environmental impacts, business model schemes, and facilities from the government. As of time of writing, there have been 46 IPROs offered in various sectors, involving a total value of Rp 155.12 trillion.[10]

Tax Incentives

The government has also been providing several fiscal incentives to attract investors, especially in the so-called strategic sectors. For example, a tax holiday is provided for pioneer industries, defined as industries with broad linkages that offer added value and high externalities, introduce new technologies, and have strategic importance to the economy. Based on Finance Minister regulation no. 130/2020, there are 18 industrial sectors that fall within the scope of pioneer industries, including base metal, oil & gas, chemical, pharmacy, and infrastructure-related sectors.

To encourage job creation and absorption of local workers, the government offered incentives for labour-intensive sectors in the form of facilities to reduce net income tax by up to 60 per cent of specific tangible fixed assets values within a certain period. In 2021, there were 45 labour-intensive industrial sectors employing an average of 300 workers who received the investment allowance. And to promote the knowledge and innovation ecosystem, the government has introduced a super tax deduction for industries engaging in vocational activities to provide knowledge and encourage knowledge and technology transfer; a maximum reduction of 200 per cent gross income from costs in the context of providing work practice, apprenticeship, and/or learning activities, and; an R&D super deduction to increase the role of industry in fostering innovation and the use of the latest technology in the production process. This incentive provides a maximum gross income deduction of 300 per cent over R&D costs carried out in Indonesia.

Special Economic Zones

The government has created several special economic zones (SEZs), free trade zones and industrial estate, with special regulations and incentives to lure investors. As of now, there are 18 SEZs covering a total area of more than 18 thousand hectares, and 122 industrial estates covering a total area of 47 thousand hectares. Two new SEZs are located in Batam, Riau Islands province. These SEZs focus on the digital economy (Nongsa Digital Park) and maintenance, repair and overhaul (MRO) services for aircraft (Batam Aero Technic), and are projected to create 26,476 jobs for local workers. The authority has set a target of attracting US$1.5 billion investment to the two SEZs in Batam by 2040. It remains to be seen how these SEZs can attract investments, but there is an indication of realisation challenge. In January, the government decided to remove the status of SEZ in Tanjung Api-Api, South Sumatra due to lack of progress in terms of land acquirement.[11]

Land Reallocation

One of the most challenging obstacles investors face is land acquisition. Yet, many companies have owned land rights for several years without realising their investment. To solve the ‘idle land’ problem, the government plans to revoke 2,078 mining business permits (IUP), 192 forest area use permits (IPPKH, Izin Pinjam Pakai Kawasan Hutan), and 34,448 Ha rights to cultivate (HGU)/right to build (HGB). After revoking the land rights from these companies, the government will offer them to new investors.

INDUSTRIAL POLICIES

The effectiveness of investment promotion and facilitation is tied to the national industrial policy. Historically, Indonesia’s participation in the global supply chain has been limited to the low technology, labour-intensive, natural resources-based industries.[12] These industries have a comparative advantage in cheap labour and abundant raw materials, such as mineral products. Indonesia has been trying to change these trends to no longer rely on minerals or commodities exports but move up the manufacturing value chain. Given this, the government has been facilitating investment in the downstream mineral-processing industry.[13]

Mineral export ban to promoting downstream industry

To encourage downstream industry development, since 1 January 2020, the government has prohibited nickel ore exports.[11] In addition, it also regulates the Mineral Standard Price (HPM: Harga Patokan Mineral) for nickel ore; the HPM is set 30-40% below the international market to provide an incentive for the smelter (mineral processing) industry.

These policies have in the last two to three years driven significant investment into nickel processing and nickel-based commodities. It has been reported that several prominent companies have shown interest in investing in the electric vehicle (EV) battery industry. For instance, Korea’s LG Energy Solution signed an MoU with Indonesia Battery Corporation (IBC), a consortium of four state-owned companies consisting of PT Indonesia Asahan Aluminum, PT Aneka Tambang Tbk., PT Pertamina, and PT Perusahaan Listrik Negara, to develop a US$ 9.8 billion integrated EV battery factory in Batang, Central Java.[14][15] IBC has also approached China’s CATL (Contemporary Amperex Technology) to develop a US$ 5 billion national EV battery industry ecosystem.[16] Finally, Taiwan’s Foxconn is reported to invest US$ 8 billion EVs industry in Batang integrated industrial estate, Central Java.[17] Whether or not their investment will materialise depends on many factors, including the EV manufacturers’ global strategies and Indonesia’s trade and industrial policies.

Promoting Local Content

One policy that arguably can become a constraint for attracting FDI is local content requirements (TKDN or Tingkat Komponen Dalam Negeri) and imports restrictions in the respective sectors. TKDN is designed to spur the productivity and competitiveness of the national industry amid more restricted global trade conditions. This essentially goes against WTO rules on Trade-Related Investment Measures (TRIMs).[14] With TKDN, the government requires the use of local-made goods and services that have been certified by official surveyors. This requirement has been strongly applied to foreign companies that want to operate and sell their products in Indonesia, and there is a task force that reports to the President to supervise the implementation of this programme. Moreover, the government encourages big investors to partner with MSMEs to increase domestic companies’ role. Recently, the Ministry of Investment initiated a new requirement for every company that obtains an investment incentive to submit a commitment to partner with MSMEs in the project’s region. The local partner must also go through verification by the business association, local government, and the Ministry of Investment. This policy aims to encourage economic equity and promote the local economy.

Nevertheless, the effectiveness of the TKDN and partnership programme needs further evaluation. There is evidence around the region that local content requirement often fails to achieve the desired ends and imposes huge costs on the economy. Indonesia’s and Malaysia’s national car experiments are examples of such failure and of the costs.

CONCLUSION

While investment prospects in Indonesia remain promising, it is not easy to attract particular investments, especially those that will contribute to more inclusive and sustainable economic growth. The biggest challenge at this time is related to unpredictable business regulations. The Constitutional Court’s order for the government to amend the Job Creation Law gives negative signals to investors about Indonesia’s regulation uncertainties. The government should amend the law as soon as possible and ensure that it follows the proper mechanism, including public consultation. Then, the next step is to finalise the implementing regulations for the Job Creation Law in a consistent, reasonable and prudent manner to give business and legal certainty to investors. If the implementation regulations of the Job Creation Law are inconsistent, this will add to the challenge of attracting new investments.

Finally, it is important to harmonise investment promotion and facilitation measures with suitable industrial policies. In recent years, the latter have become more inward-looking and politically driven, making the FDI investment climate less attractive. Strict local content requirements put in place without domestic firms upgrading their capacity to be “linkage ready”, i.e., having the standards that international investors expect from their suppliers, will not benefit the national economy and international investors.

ENDNOTES

[1] https://www5.bkpm.go.id/id/publikasi/siaran-pers/readmore/2450401/80401. Accessed 30 January 2022. This figure is implemented investment projects and not approved investments figure.

[2] https://money.kompas.com/read/2022/01/27/210944326/kejar-target-investasi-rp-1200-triliun-bahlil-memang-tidak-mudah. Accessed 18 March 2022.

[3] https://sehatnegeriku.kemkes.go.id/baca/rilis-media/20220303/3139457/tren-perbaikan-kasus-covid-19-terus-terjadi-salah-satunya-penambahan-jumlah-provinsi-dengan-kasus-turun/. Accessed 16 April 2022.

[4] https://www.dbs.com/newsroom/DBS_Asian_Insights_Conference_2022_Strategi_percepatan_pemulihan_ekonomi_Pemerintah_RI_menuju_endemi_COVID_19. Accessed 16 April 2022.

[5] Here, industrial sector refers to manufacturing sector. It does not include mining, but includes mineral processing industry.

[6] https://www.gatra.com/news-442797-ekonomi-jokowi-marah-inilah-alasan-indonesia-kalah-dari-vietnam.html. Accessed 16 April 2022.

[7] https://finance.detik.com/berita-ekonomi-bisnis/d-3046027/menkeu-sebut-era-harga-komoditas-tinggi-sudah-berakhir. Accessed 30 January 2022.

[8] Hong Kong is an investment hub, like Singapore, in which many companies have based themselves. Therefore, any investments from there would seem to be from Hong Kong by source although the actual investing ncompany may be from a third country.

[9] https://www.bkpm.go.id/id/publikasi/siaran-pers/readmore/2424801/75101. Accessed 29 March 2022.

[10] PIR: Potensi Investasi Regional https://regionalinvestment.bkpm.go.id/pir/peluang-investasi/

[11] https://www.kompas.com/properti/read/2022/01/22/063000921/pemerintah-cabut-status-kek-tanjung-api-api-ini-alasannya?page=all. Accessed 19 April 2022.

[12] https://unctad.org/system/files/official-document/BRI-Project_RP09_en.pdf. Accessed 30 January 2022.

[13] https://jakartaglobe.id/business/raw-material-exports-have-gone-on-too-long-jokowi. Accessed 18 March 2022.

[14] https://bisnis.tempo.co/read/1548308/ungkap-faedah-larangan-ekspor-nikel-jokowi-19-bulan-neraca-perdagangan-surplus/full&view=ok. Accessed 29 March 2022.

[15] https://www.cnbcindonesia.com/news/20201028201426-4-197837/pemerintah-buka-bukaan-alasan-penerapan-harga-patokan-nikel. Accessed 29 March 2022.

[16] https://www.cnbcindonesia.com/news/20201231091958-4-212731/ngeri-investasi-baterai-lg-rp-142-t-terbesar-pasca-reformasi. Accessed 29 March 2022.

[17] https://www.cnbcindonesia.com/market/20210326070718-17-232976/diumumkan-hari-ini-cek-8-fakta-indonesia-battery-corporation. Accessed 29 March 2022.

[18] https://money.kompas.com/read/2021/04/02/192501126/produsen-baterai-asal-china-akan-investasi-rp-725-triliun-di-indonesia. Accessed 29 March 2022.

[19] https://oto.detik.com/berita/d-5923118/sugeng-rawuh-foxconn-investasi-rp-114-t-bangun-pabrik-kendaraan-listrik-di-jateng. Accessed 29 March 2022

[20] https://www.wto.org/english/news_e/news19_e/trim_06jun19_e.htm. Accessed 16 April 2022.

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2022/51 “Malaysia’s Bumiputera Development Action 2030: Maintaining Focus, Moderating Ambition” by Lee Hwok Aun

People walking past a building along a street in Kuala Lumpur on 24 March 2022. Photo: Mohd RASFAN/AFP.

EXECUTIVE SUMMARY

Malaysia’s Bumiputera Development Action 2030 (known by its Malay acronym TPB2030) is a major blueprint. Its genesis can be traced to Pakatan Harapan’s rule; its continuity across changes in Prime Ministers reflects the embeddedness of Bumiputera policies.

TPB2030 largely maintains the focus of the Bumiputera Economic Transformation programme, its predecessor, on cultivating dynamic and competitive enterprise. These are justifiably high priorities in Bumiputera development, and also areas of acute under-achievement.

The blueprint brings added focus and structure compared to preceding efforts, with targeted sectors, more integrated support, and high-powered oversight. Gaps in the formulation of policy targets and funding, however, need to be addressed.

More fundamentally, TPB2030’s sweeping ambition – conflated with the expansive Shared Prosperity Vision 2030 – departs from its specific scope and may detract from policy coherence and efficacy. Median income of urban Bumiputera households is on par with urban Indian households. Disparities in well-being have diminished as a justification for Bumiputera development policies, underscoring the imperative of TPB2030’s focus on disparities in participation and capacity.

Policy design and evaluation programmes must resolutely and rigorously maintain focus on TPB2030’s primary mission of developing Bumiputera enterprise. Malaysia must monitor progress and draw lessons, not just for Bumiputera policies but also for broader group-targeted policies based on ethnicity and gender.

* Lee Hwok Aun is Senior Fellow and Co-coordinator of the Malaysia Studies Programme at the ISEAS – Yusof Ishak Institute. The author thanks Serina Rahman, Francis Hutchinson and Cassey Lee for their helpful comments on an earlier draft. The usual disclaimer applies.

ISEAS Perspective 2022/51, 12 May 2022

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A MAJOR PROJECT BEHIND THE SCENES

The year 2021, the fiftieth anniversary of the New Economic Policy (NEP), concluded with the 9 December launch of the Bumiputera Development Action 2030 blueprint, widely known by its Malay acronym TPB2030 (Tindakan Pembangunan Bumiputera) (Teraju 2021a). TPB2030 sets out clear objectives and targets related to Bumiputera enterprise development, an area of acute underachievement despite many decades and multiple modes of policy intervention. The blueprint will also establish high-powered structures for implementation and oversight, helmed at the top by the Prime Minister, with clearly delegated coordination and monitoring mechanisms.

TPB2030 is authored by Teraju, the agency under the Prime Minister’s Department tasked with overseeing Bumiputera development, and follows on the Twelfth Malaysia Plan (2021-25) unveiled in August 2021. The Twelfth Plan prominently features Bumiputera programmes within the country’s development framework (Malaysia 2021). The Plan also incorporates Malaysia’s overarching pursuit of the Shared Prosperity Vision 2030 (SPV2030), which was formulated in 2019 under the Mahathir-Pakatan Harapan government and inherited with minimal revision by both the Muhyiddin-Perikatan Nasional and Ismail Sabri-UMNO-led administrations (Ministry of Economic Affairs 2019).

Riding as it does on the Twelfth Plan and SPV2030, TPB2030 is poised to make a big impact on Malaysia’s policy regime, even if it has garnered little attention so far. The political weight behind TPB2030 holds out the potential to make an impactful and productive contribution – most fundamentally in broadening participation and enhancing the capacity of Bumiputera SMEs. Such centralization, of course, can marshal resources and coordinate actions – but also face the pitfalls of political patronage and stifled ground-up initiatives, which have marred similar agendas in the past.

This Perspective provides some background and context to TPB2030, highlighting elements of continuity and difference from previous iterations, and shows how it connects with development policies moving forward. I then survey the key policy contents and assess both TPB2030’s rationales and targets, and its key programmes and priorities. Due to the breadth and nascence of this blueprint, my analysis identifies salient aspects of the policy design and implementation, with emphasis on TPB2030’s enterprise development thrust and the concomitant loss of basis and coherence when the agenda sprawls toward vague notions of prosperity. I also reflect on how these Bumiputera-targeted measures fit within the broader scheme of Malaysia’s policy framework, especially other group-targeted measures benefiting ethnic minorities and women. It is premature to reach concrete conclusions, but not too early to underscore the dual importance of implementing the policy effectively so that Bumiputera business and workforce make steady progress, and of learning from TPB2030 in ways that inform other group-targeted policies.

PRO-BUMIPUTERA AND GROUP-TARGETED POLICIES: EMBEDDED AND EVOLVING

Bumiputera preferential policies such as the contents of TPB2030 are deeply embedded, being constitutionally authorized since Malaya’s independence in 1957.[1] The NEP, launched in 1971, massively expanded this policy regime, which principally involves promoting Bumiputera participation and achievement in higher education, high-level occupations, enterprise development and wealth ownership (Table 1). Over time, some programmes have become firmly entrenched – notably, ethnic quotas or Bumiputera-exclusive access in higher education, public procurement, SME loans and support, and de facto ethnic preference in public sector and government-linked company (GLC) employment. Some others have undergone change, most saliently the efforts to build a Bumiputera Commercial and Industrial Community (BCIC), which was centred on state-owned enterprises in the 1970s, heavy industries and foreign corporate takeovers in the early 1980s, then privatization in the 1990s until the 1997-98 Asian financial crisis (AFC). Post-AFC, following the collapse of major privatized entities and their renationalization, GLCs spearheaded the BCIC.

Since 2011, with the formation of Teraju,[2] Malaysia launched the Bumiputera Economic Transformation (BETR) programme emphasizing the growth of high-performing companies, with some attention to higher education and skills development (Teraju 2012). The follow-up BETR 2.0 broadened the scope to Bumiputera well-being, even while the programmes under Teraju’s purview remained a small subset of the vast system of Bumiputera development programmes (Teraju 2017, Lee 2017). This discrepancy – between the focused Teraju-coordinated interventions and the sweeping ambit of ‘transformation’ agendas – has persisted. On the whole, it is fair to say that BCIC agendas have been undone by a quest for rapid returns instead of patient progress.

The Bumiputera policy regime has endured across changes in federal government. The agenda was established throughout six decades of Alliance-Barisan Nasional rule, and was comprehensively maintained by Pakatan Harapan in the wake of its pathbreaking electoral victory in 2018. Formulation of the Shared Prosperity Vision 2030, which sought to reinvigorate Bumiputera enterprise development and laid the groundwork for TPB2030, was initiated by Pakatan.

It is important to note that TP2030 is neither the product of Pakatan’s power being usurped in 2020, nor of UMNO’s return to the Prime Ministership in 2021. Whichever the coalition in power, a Bumiputera blueprint would have emerged, though possibly with a different name and varying features. We must also note that Bumiputera preferential policies enjoy solid popular support among the Bumiputera population.[3] The system extensively allocates socioeconomic opportunity and facilitates upward mobility. The primary policy shortcomings for the Bumiputera community are deficiencies in cultivating capability, competitiveness and confidence – which inhibit the country’s ability to shift away from overt quotas and preferences.

At the same time, group-targeted policies favouring Indians, Orang Asli and women, mostly in small business financing and higher education access, have become increasingly mainstream in the past decade. Since the Tenth Malaysia Plan (2011-15), policy frameworks have allocated sections expressly for Bumiputeras and for minority groups, women, and persons with disabilities. This juncture in Malaysia’s history thus presents an opportunity to reset the discourses by recognizing the objectives and mechanisms of these group-targeted policies as a distinct policy domain, and focusing on efficacy and fairness in all these efforts to promote participation and capability (Lee 2021c).

Since TPB2030 is bringing the Bumiputera agenda back to basics, its implementation must stay focused, circumscribed and patient, rigorously implemented and monitored based on its direct objectives and targets instead of diffused notions of prosperity. It also aspires to change mindsets and mechanisms, not just dispense copious funds, and hence stands to generate learnings along the way. The broader impact of TPB2030, therefore, will depend on whether its achievements and shortfalls will inform further policy. Unfortunately, TPB2030 appears quite disconnected from Malaysia’s policy mainframe (Lee 2021a).

RATIONALES, OBJECTIVES, AND TARGETS

The empirical rationales for Bumiputera policies derive from the community’s socioeconomic disadvantages, which are continuously changing as policies increasingly provide opportunity and expand participation. TPB2030 builds on SPV2030 and the Twelfth Plan, giving prominence to selected targets from both documents. The driving goals for 2030, derived from SPV2030, are:

Key targets for 2025, as outlined in the Twelfth Plan:

The integration of TPB2030 with its parent policy frameworks yields a mixed bag. Three major issues merit our attention.

First, TPB2030 abides by the novel emphasis on gross operating surplus (GOS), which can be defined as the surplus generated after compensating workers but before deducting interest and rental payments. The concept of Bumiputera GOS merges the goals of Bumiputera effective ownership and productive output. At the same time, a further crucial element of Bumiputera development – the growth of small- and medium-scale enterprises – warrants more weight than currently given, in view of the higher concentration of micro-scale businesses – mostly self-employed solo operators – among MSMEs.[4] TPB2030 missed an opportunity to set the scaling-up of enterprises from micro to small, and especially from small to medium, as a driving policy objective. Questions also remain on the extent to which the aspired increase in Bumiputera GOS will proportionately take away from GLCs or non-Bumiputera companies, and thus avoid reducing the share of workers’ compensation. In fact, Malaysia aspires to raise the share of workers’ compensation. GOS of foreign-owned companies should also be part of the computations, providing a fuller picture of Malaysian ownership.

Nonetheless, this new anchor, in contrast to the erstwhile fixations with equity ownership, is a welcome shift. Policy predispositions toward passive equity holdings, political patronage and acquisitive behaviour, at the expense of effective control and productive participation, can be traced to the 30 per cent Bumiputera equity ownership target that commandeered national policy for some decades (Lee 2021b). That target undoubtedly remains, but keeping it in a supplementary position, as seems to be the case, bodes well for TPB2030.[5]

Second, TPB2030 replicates some conceptual and empirical missteps of the Twelfth Plan, most consequentially the misguided reference to national inter-ethnic household income disparity as grounds for continuing Bumiputera preferential treatment. Malaysia’s Chinese and Indian populations are overwhelmingly urbanized, while a quarter of the Bumiputera population still reside in rural areas where incomes are lower. When comparing household income between groups, taking the nationwide population is misleading because Bumiputera income levels are deflated by the much higher presence of rural households, which in turn overstates the Bumiputera to non-Bumiputera gap. Indeed, the median income of urban Bumiputera households is precisely on par with urban Indian households (Lee 2021a).[6] If anything, referencing household income provides justification for more group-targeted assistance for the Indian community.[7]

Moreover, highly aggregated targets such as household income and individual wages are impacted by numerous factors, whether related to economic conditions, labour market dynamics or social policy, while TPB2030 is both narrower in scope and also contains various experimental components. Bumiputera household income will assuredly continue to increase, due to complex reasons beyond TPB2030’s focused projects. Fixing household income as a performance indicator may perilously provide misleading or even false validation that TPB2030 policies are succeeding, and possibly perpetuate experiments that should be revisited or discontinued.

Third, despite Prime Minister Ismail Sabri, in his TPB2030 foreword, declaring the paramount importance of grooming new Bumiputera generations that are self-reliant and visionary, the blueprint neglects to consistently emphasize capacity-building policies. This includes a lack of attention to higher education and training. In large part, these omissions result from the fact that TPB2030 is demarcated based on extant institutions or new initiatives under Teraju’s purview, instead of the comprehensive system of Bumiputera programmes overseen by myriad ministries: education, finance, rural and regional development, and more. Nonetheless, the end result is that education, despite being the policy area most instrumental for upward mobility between generations, features rather peripherally in Malaysia’s flagship Bumiputera policy. This gap is amplified by the fact that Malaysia has made strides in mass provision of higher education, but needs to shift from more quantitative to qualitative emphases, such as quality of graduates and participation in various specialized fields.

KEY PROGRAMMES AND PRIORITIES

TPB2030’s sprawling, and in parts unwieldy, 600-page document is too vast to be discussed at length.[8] Nonetheless, the basic elements of seven key economic growth areas (KEGA), seven priority areas, and three Bumiputera economic transformation areas (BETA) provide an outline for summarising the basic contents and drawing out notable features. This article focuses on the KEGAs and priority areas. On the proposed investment amounts, public sources will account for RM10.9 billion (10.8 per cent) while private sources, including government-linked investment companies and state-owned commercial entities, will provide RM90.4 billion (89.2 per cent). This corresponds with an annual quantum of RM10 billion for the period 2021-30 and represents a modest portion of total investment, which registered RM297 billion in 2020, with a 25-to-75 public-to-private breakdown (Malaysia 2021). The KEGAs, aggregates of which are shown in Table 1, carry high hopes of extensive impact despite modest outlays. TPB2030’s exceptionally high reliance on private sector investment balance raises concerns on feasibility in general, and more specifically on the actual contribution of government-linked entities and the justification for tapping such sources. These questions demand more robust answers than provided so far.

The blueprint articulates the case for intervention in each of the KEGAs and their respective development programmes. On the whole, we can readily grasp the basis for various selections, especially when there is clear potential or existing capacity, while some are venturing into new terrain or aligning with economic trends. The land-owning segment of the Bumiputera community is positioned to take agricultural activities to a higher plane. Sizable numbers should also be able to make productive inroads in halal industries and Islamic finance. The digital economy, of course, has been a priority for Bumiputera development in recent years, and foreseeably will accelerate in the post-Covid era, with spillovers into the logistics and transportation spheres.

The summation of numbers of projects, investments, jobs and surplus generated are helpful for gaining impressions of the scope and scale of TPB2030 (Table 2). However, differences in the form and timeframe of these major categories warrant further clarification. Gross operating surplus constitutes a flow; the reported targets, totalling RM201.7 billion, evidently refer to the GOS generated in one year, 2030. This annual flow is distinct from the cumulative form of the other components – the total amounts for the 2021-30 period. Further clarification would also be welcome on the job creation estimates. If these numbers refer to Bumiputera workers, questions immediately arise as to whether the entire workforce of companies cultivated by TPB2030 will be ethnically homogeneous, and whether this is wise and fair, or will some degree of workforce diversity also be pursued. The selection of KEGAs should be scrutinized, but it is more important for the performance of policy beneficiaries to be monitored, and success cases rigorously documented.

The Bumiputera Economic Transformation Areas are more exploratory and potentially impactful, but merit scrutiny. The designation of defence and security industries as a BETA sector might cause some unease. The proclivities of this sector toward political patronage raise concern that past entanglements in abuse and corruption may recur. The second BETA of modern construction, specifically the adoption of industrialized building systems (IBS), relies predominantly on public procurement. While the gains from broader IBS application are undeniable, reforming public procurement presents steep hurdles. Aerospace, the third BETA, leveraging as it does on existing capacity and skills training institutions, may hold out distinct positive prospects, albeit in a challenging and uncertain sector.

TPB2030’s seven priority areas span a vast array of interventions that enable the agenda more broadly, with notable proposals in governance or facilitation systems, enhancement of existing programmes, and empirical exercises. Correspondingly, the estimated investment funds amount to a mere RM5.2 billion. Table 3 presents a selection of initiatives or proposals associated with the priority areas.

Three observations arise from this expansive menu of proposals, with ensuing questions. First, TPB2030 establishes an elaborate governance structure that centralizes oversight powers. At the apex, the Bumiputera Prosperity Council, chaired by the Prime Minister and comprised of relevant Cabinet Ministers and Bumiputera figures, oversees the entire process. Teraju serves as the main coordinator and secretariat of the Council, including the Council’s steering committee involving ministry secretaries-general and GLC/GLIC CEOs, and the Council’s working committee, as well as a special committee for GLCs and GLICs. Teraju’s project management teams will oversee the overarching KPIs the KEGAs and priority areas. The Bumiputera agenda empowerment committees (JPAB), chaired by the secretary-general of the relevant line ministry, are primarily responsible for policy monitoring, with Bumiputera agenda empowerment units (UPAB) in each government ministry tasked with tracking performance and intermediating between stakeholders.

The frame grants hierarchical, top-down authority. However, TPB2030’s progress will also depend on striking an astute balance of centralized control with self-claimed “bottom-up” monitoring by the UPABs. Fostering private sector buy-in, amid heavy presence of government and GLCs, will also be challenging – and decisive for TPB2030 to sustainably develop Bumiputera talent and capacity. The general critique of lack of focus emerges again, in the context of a proposed act of parliament to empower Teraju. Given the potentially sprawling scope of TPB2030 and its articulated sweeping ‘prosperity’ objectives far beyond Teraju’s ambit, including a questionable Bumiputera Prosperity Index, there are grounds to be circumspect toward this proposal, which may vest too much power in an agency without clarifying its limits.

Second, among TPB2030’s distinctive propositions are some facilitating roles and new institutions. Facilitative interventions, such as entrepreneurship ecosystems, growth hubs and an exchange platform for land-based assets, and fresh ideas such as a rent-to-own housing scheme, stand out for their novel characteristics. Many of the problems being addressed have been intractable for decades and hence new approaches may be necessary, although the complexities of these challenges raise questions about the government’s capacity to effectively implement all the plans. It is also imperative to ask whether Bumiputera-exclusivity is warranted. Access to shelter is a human right and home ownership is principally a policy objective that applies to all groups. Existing SME programmes for the Indian and Orang Asli communities, and for women, surely can also benefit from the creation of ecosystems and growth hubs, which by definition involve linkages and spillovers. Malaysia should decide sooner rather than later whether TPB2030’s priority area interventions will make room for non-Bumiputeras, or will introduce parallel programmes for other target groups.

Third, a few priority areas resemble past efforts. Malaysia has previously divested state-owned assets, promoted business through preferred tenancy arrangements, and executed the “carve out and compete” scheme in public procurement. TPB2030, of course, articulates principles for these initiatives to be executed more successfully than in the past. On a positive note, these aspirations align with the core objective of Bumiputera enterprise development. However, expectations must be tempered, and progress vigilantly monitored, in view of the vested interests that may come to bear on lucrative opportunities and wealth transfers, and the difficulties in enforcing discipline.

CONCLUDING THOUGHTS

Malaysia stands on the cusp of the next big push in Bumiputera enterprise development. The past decade saw new efforts to promote Bumiputera SMEs, under the Bumiputera Economic Transformation Programme coordinated by the federal agency Teraju. However, the agenda also strayed from that focus by imbibing foggy well-being related goals far beyond Teraju’s capacity. Bumiputera Development Action 2030 (TPB2030) appears on track to become the next policy driver, undergirded by the Shared Prosperity Vision 2030 and the Twelfth Malaysia Plan, 2021-25.

TPB2030 projects a more methodical and integrated approach than previous iterations but encounters the same challenge of maintaining focus. Enterprise development is daunting enough, and deserves full attention with sustained effort, especially considering Malaysia’s shortcomings in developing a Bumiputera Commercial and Industrial Community envisaged by the NEP since 1971, rebranded the Bumiputera Economic Community in 2015. TPB2030 can broaden its impact not by venturing into overambitious and tenuous interventions in ‘prosperity’, but by drawing out lessons in SME development for group-targeted programmes favouring ethnic minorities and women.

REFERENCES

DOSM. (2020). Household Income and Basic Amenities Survey Report 2019. Putrajaya: Department of Statistics Malaysia (DOSM).

DOSM. (2021). Labour Force Survey Report 2020. Putrajaya: DOSM.

Lee Hwok Aun (2017). Malaysia’s Bumiputera preferential regime and transformation agenda: Modified programmes, unchanged system. Trends in Southeast Asia 2017 No. 22. Singapore: ISEAS.

Lee Hwok Aun. (2021a). Mapping Errors and Missed Opportunities in the Twelfth Malaysia Plan. ISEAS Perspective 2021 No. 152. Singapore: ISEAS.

Lee Hwok Aun. (2021b). Malaysia’s New Economic Policy and the 30% equity target: Time for a revisit and reset. ISEAS Perspective 2021 No. 36. Singapore: ISEAS.

Lee Hwok Aun. (2021c). The New Economic Policy Beyond Fifty: Assessing its Strengths and Weaknesses to Chart a Cohesive Malaysian Society. IDEAS Policy Paper 73, November 2021. Kuala Lumpur: IDEAS.

Malaysia. (2021). Twelfth Malaysia Plan, 2021-2025. Kuala Lumpur: Government of Malaysia.

Ministry of Economic Affairs. (2019). Shared Prosperity Vision 2030. Putrajaya: Ministry of Economic Affairs.

Teraju. (2012). Hala Tuju Transformasi Ekonomi Bumiputera,Petaling Jaya: Teraju.

Teraju. (2017). Bumiputera Economic Transformation Roadmap 2.0. Mutiara Damansara, Selangor: Unit Peneraju Agenda Bumiputera (Teraju).

Teraju. (2021a). Tindakan Pembangunan Bumiputera 2030 (Bumiputera Development Action 2030). Mutiara Damansara, Selangor: Teraju.

Teraju. (2021b). Soalan lazim Tindakan Pembangunan Bumiputera 2030 (TPB2030) (Frequently asked questions on TPB2030). Mutiara Damansara, Selangor: Teraju.

ENDNOTES

[1] Article 153 stipulates that the Yang di-Pertuan Agong can exercise his functions, “as may be necessary”, to safeguard the special position of the Malays and natives of Sabah and Sarawak – i.e. those formally identified as Bumiputera – through reserving for these designated groups a reasonable proportion of public sector employment, scholarships, training and licensing. A 1971 amendment added higher education admissions to this list.

[2] Teraju, meaning lead, is the acronym for Unit Peneraju Agenda Bumiputera, or Bumiputera agenda lead unit.

[3] Solid Malay support for the policy has been repeatedly documented. The most recent findings are provided by a nationally representative survey of March 2022 on ethnic relations, conducted as part of the Institute for Democracy and Economic Affairs’ tracking of perceptions toward ICERD (https://www.ideas.org.my/publications-item/the-2nd-national-perception-survey-towards-icerd-and-etnic-relations-in-malaysia/). Strikingly, the survey found 50 per cent of all Malaysians, and an overwhelming 81 per cent of Malays, agree with the statement “Malay special rights and privileges are a core feature of our society and should stay in place forever”.

[4] Among Bumiputera MSMEs, 88 per cent fall in the micro category, while 11 per cent are small, and only 1 per cent medium. In comparison, the distribution of non-Bumiputera MSMEs is 69 per cent micro, 28 per cent small, and 3 per cent medium (Teraju 2021a: 578). Such data are available for medium-term policy monitoring, but have yet to be given due prominence.

[5] Following official estimates, in 2019 Bumiputeras held 17.2 per cent of total equity, with non-Bumiputeras holding 25 per cent and nominees 12.3 per cent, while the mammoth’s share of 45.5 per cent was in foreign hands. These figures are contested due to methodological controversies and the considerable presence of nominees, but the equity ownership agenda also warrants less weightage because of its tendency to foster passive ownership and to deviate toward profiteering behaviour (Lee 2021b).

[6] TPB2030 conveys that, in 2019, Bumiputera households received 27 per cent less income than Chinese households, and 9 per cent less than Indian households. These disparities combine urban and rural populations. The more valid comparison limited to urban households changes the picture: the Bumiputera-Chinese gap falls to 19 per cent, while urban Bumiputera household income is 2 per cent higher than urban Indian household income (author’s calculations from DOSM 2020).

[7] Population census data are scarce, but labour force statistics show the stark contrasts in urban concentration between the main ethnic categories. Among the working age population, 74 per cent of Bumiputeras reside in urban areas, compared to 95 per cent of Chinese and Indians. Bumiputeras account for 91 per cent of the rural working age population and 62 per cent of the urban working population (author’s calculations from DOSM 2021).

[8] TPB2030 is currently published only in the Malay language (https://www.tpb2030.gov.my/).

2022/50 “Why Vietnam Might Want to Reconsider its Russia Policy” by Derek Grossman

Russian President Vladimir Putin (R) shakes hands with Vietnam’s President Nguyen Xuan Phuc during their meeting in Moscow on 30 November 2021. Photo: Mikhail KLIMENTYEV/SPUTNIK/AFP.

EXECUTIVE SUMMARY

Russia’s war in Ukraine has put many countries in a tough spot, pitting them between maintaining healthy ties with Moscow and supporting Western punitive measures. One such nation is Vietnam.

Despite their close cooperation on military affairs, Vietnam and Russia have been drifting apart for decades. The primary impetus for their cooperation during the Cold War—countering China—is no longer applicable to their partnership. Russia’s positions on the South China Sea disputes and Mekong River issues also do not align with Vietnam’s strategic interests.

Much to the chagrin of the West, Vietnam’s “comprehensive strategic partnership” with Russia is likely to persist due to Hanoi’s reliance on Russian arms, bureaucratic momentum, the China factor, and shared ideology.

Vietnam will try to weather the Russia storm and preserve ties with both Moscow and Washington, as well as other Western nations.

For now, the best that the West can do is consistently note their concerns and the likely implications that refusing to condemn or punish Russia might have on Vietnam’s own security. No amount of poking or prodding by outside powers will be successful or be appreciated in Hanoi.

* Guest writer, Derek Grossman, is a senior defence analyst at the non-profit, nonpartisan RAND Corporation, and an adjunct professor at the University of Southern California. He formerly served as the daily intelligence briefer to the assistant secretary of defence for Asian and Pacific security affairs at the Pentagon.

ISEAS Perspective 2022/50, 11 May 2022

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INTRODUCTION

Russia’s war in Ukraine has put many countries in a tough spot, pitting them between maintaining healthy ties with Moscow and supporting Western punitive measures. One such nation is Vietnam. Earlier this year, Washington spotlighted Hanoi as a “leading regional partner” in its Indo-Pacific strategy, and Vietnam has been bolstering ties with American allies and partners, including Australia, India, Japan, South Korea, as well as key European nations.[1] Vietnam also recently completed its two-year term as a non-permanent member of the United National Security Council (2020-21), reinforcing its image as a responsible player on the international stage.

However, when the West introduced resolutions at the United Nations (UN) to condemn or punish Russia, Vietnam has either abstained or rejected each motion. On 2 March, Vietnam was one of the 35 nations that abstained from a vote on the UN General Assembly’s resolution to condemn Russia’s invasion of Ukraine, with the Vietnamese envoy to the UN simply noting that his country is “against all attacks on civilians that were in violation of international laws on humanitarianism and human rights.”[2] Hanoi’s latest vote on 7 April 2022 to reject ousting Moscow from the UN Human Rights Council may have struck a particular nerve among Western nations, potentially jeopardizing Vietnam’s bid to become the chair of the Council from 2023 to 2025.[3] And on 19 April, a report surfaced quoting a Russian source that Vietnam and Russia are planning a joint military exercise.[4]

The above developments show that Vietnam is facing a mounting challenge in maintaining a strategic balance between Russia and its Western partners, especially the United States. How Hanoi handles this challenge in the coming years will have important implications for Vietnam’s foreign policy outlook and the West’s future strategic engagements with the country.

After providing a brief overview of the modern history of Vietnam-Russia ties, this article argues that despite some limited benefits, the partnership is rapidly becoming a Cold War relic and may increasingly harm Hanoi’s overall security interests. However, much to the chagrin of the West, Vietnam’s “comprehensive strategic partnership” with Russia is likely here to stay for the foreseeable future due to Hanoi’s reliance on Russian arms, bureaucratic momentum, the China factor, and shared ideology.

HOW VIETNAM AND RUSSIA GOT HERE

Vietnam’s partnership with Russia was borne out of hard national security interests. During the Cold War, Moscow supported Vietnamese anti-colonialists to oust France, and later assisted the Vietnamese communists’ fight against the US military and its South Vietnam ally to reunify the nation. China also supported Vietnam in both efforts. However, by the 1960s, Moscow and Beijing’s doctrinal differences and their competition to lead the socialist bloc led to the Sino-Soviet split. Vietnam initially adopted a neutral stance between the two powers, but later sided with Moscow, partly due to China’s support for the anti-Vietnam Khmer Rouge regime in neighbouring Cambodia. One month prior to invading Cambodia to remove the Khmer Rouge regime in December 1978, Vietnam signed a Treaty of Friendship and Cooperation with the Soviet Union, establishing a de facto security alliance between the two countries. In response, China launched an invasion of its own into northern Vietnam in February 1979.

Although Hanoi received only limited military assistance from Moscow in this war effort, and by 1985 the Soviet Union and China were reconciling their differences to Vietnam’s detriment, the Vietnam-Russia partnership endured. Throughout the early 1980s, Soviet economic assistance was crucial to keeping the Communist Party of Vietnam (CPV) in power. After the breakup of the Soviet Union in late 1991, Vietnam and Russia tried to maintain the momentum of their traditional relationship, and on 16 June 1994 signed an agreement on basic principles of the “friendly relationship” between the two countries to replace the 1978 Treaty of Friendship and Cooperation. In March 2001, the two sides signed a “strategic partnership agreement,” and in July 2012, upgraded their relationship to a “comprehensive strategic partnership,” the highest level of Vietnam’s partnership with a foreign country.

Economic ties between Russia and Vietnam, however, are minimal. In 2020, for example, their two-way trade turnover was less than US$5 billion. For comparison, Vietnam’s combined trade with China and the United States during the same year reached US$153.4 billion and US$87.2 billion, respectively.[5] Russia’s accumulative investment in Vietnam also remains modest, at only US$944 million across 144 projects by the end of 2020.[6] A significant component of economic cooperation is joint energy extraction operations. For example, Vietsovpetro, a joint venture established in the 1980s between Russia’s Zarubezhneft and PetroVietnam, had by the late 2010s produced approximately 242.7 million tonnes of crude oil and 37.3 billion cubic metres of gas from the South China Sea.[7]

The main feature of their partnership, however, has been military cooperation, primarily in the form of Russian arms sales to Vietnam. Approximately 80 per cent of Hanoi’s military systems are from the Soviet Union/Russia, although the Vietnam People’s Army (VPA) has been trying to diversify suppliers in recent years. Notable Russian systems procured by the VPA include dozens of Su-30MK2 maritime strike aircraft, four Gepard-class frigates, six Kilo-class submarines, and a range of different air defence missile systems, among other platforms. Russia has also provided training for VPA officers and maintenance services for Russian systems. In perhaps the most potent sign of their military cooperation, the Soviet Union/Russia maintained access to Vietnam’s naval base at Cam Ranh Bay from 1979 to 2002. In 2014, the two sides signed an agreement allowing Russia to have unlimited port calls to Cam Ranh through simplified administrative procedures. The Russian air force was also reportedly using the Cam Ranh airfield for its refuelling aircraft that service Tu-95 Bear long-range nuclear-capable bombers.[8]

VIETNAM-RUSSIA PARTNERSHIP A COLD WAR RELIC

Despite their close military cooperation, Vietnam and Russia have been drifting apart for decades. Most significantly, one of the primary drivers of their cooperation during the Cold War—countering China—is no longer applicable to their partnership. This is because China-Russia relations today are perhaps at their best in history. On 4 February, President Putin visited China for the Opening Ceremony of the Beijing Winter Olympics, at which the two sides highlighted that their partnership has “no limits.”[9] As Hanoi is the junior partner in its relationships with both Russia and China, it is vulnerable to the two major powers’ strategic manipulations, including in the South China Sea.

Indeed, Moscow’s current position on the South China Sea does not align with Hanoi’s preferences. When asked in an interview in September 2016 if Moscow supported the Permanent Court of Arbitration’s (PCA) landmark ruling in July 2016 that dismissed Beijing’s claims to much of the South China Sea, Putin responded that he did not. This is a blow to Hanoi’s efforts to uphold the PCA ruling to counter China’s mounting aggression in the South China Sea and seek peaceful resolution to the dispute through international law.[10] Although Moscow’s neutral position on the South China Sea is generally shared by the United States, there are key differences. Notably, much to Hanoi’s delight, Washington welcomed the PCA ruling, and since July 2020, has upheld the legality and integrity of counterclaimants’ exclusive economic zones.[11] Washington also regularly conducts open sea patrols and freedom of navigation operations in the South China Sea to challenge Beijing’s expansive maritime claims based on its notorious “nine-dash line”.

When it comes to the Mekong River, an issue of increasing strategic significance to Vietnam where Hanoi worries that the construction of hydropower dams upstream is generating calamitous environmental consequences for Vietnam’s Mekong Delta, Russia is indifferent. In a move echoing Chinese behaviour, a Russian investor in 2013 planned to invest in three Laotian hydropower dams along the Mekong’s tributaries, with at least two of them posing serious consequences downstream.[12] By contrast, the United States established the Lower Mekong Initiative in 2009 along with Cambodia, Laos, Thailand, and Vietnam to discuss solutions to common problems, and promote sustainability of river resources.[13]

Vietnam’s traditional ties with Russia and its reliance on Russian arms may have explained its reluctance to condemn Russia’s invasion of Ukraine. However, this position is incongruent with Hanoi’s wish to uphold international law, especially in resolving the South China Sea dispute. Hanoi should not endorse, even tacitly, the invasion of a sovereign state, particularly since Vietnam itself has been the victim of foreign aggression multiple times throughout the 20^th century. Indeed, Vietnam’s 2019 Defence White Paper states that it is against “using force or threatening use of force in international relations.” This is not a mere recitation of an obvious norm of modern international relations, but a new “no” to add to the pre-existing “Three No’s” defence policy of the country, namely no foreign bases on Vietnamese territory; no military alliances; and no siding with one country against another.[14]

The decision not to uphold this position at the UN carries some inherent risks for Hanoi. It inadvertently signals to other states in the Indo-Pacific that they might also remain silent when great powers invade smaller countries. If China were to attack Vietnam over South China Sea disputes, for example, these nations might adopt a “neutral” posture, just like what Vietnam has done during the Russia-Ukraine conflict. Rather, Hanoi should be seeking to send the opposite message—that unprovoked, unilateral military action against any state, anywhere, is unjustified. Doing so is more likely to convince other states that Vietnam will stand up for them, and in turn, they should stand up for Vietnam to oppose unilateral aggressions.

In sum, while the benefits for Vietnam from a close Russia partnership keep diminishing, Moscow’s strengthening ties with Beijing and the collateral damage from its invasion of Ukraine are putting Vietnam into an increasingly precarious strategic position. Maintaining close ties with Moscow may become a liability that undermines Vietnam’s reputation and national interests in the long run. Going forward, Vietnam should therefore reconsider the nature and future direction of its partnership with Russia.

VIETNAM UNLIKELY TO BUDGE FOR NOW

However, Hanoi is likely to maintain the current state of its relationship with Moscow for several reasons. One is sheer bureaucratic momentum. The reality is that Vietnam and Russia have been on good terms since the early days of the Cold War, and the two sides are quite comfortable with each other. Many older CPV leaders and VPA officers were trained in Russia. The camaraderie runs deep. As such, it would require a significant rupture in their bilateral ties to convince the Vietnamese leadership that friendly Russia ties were no longer in their interests. War in Eastern Europe does not impact Vietnam directly, and unless Moscow does something in the Indo-Pacific that hurts Hanoi’s key interests, the current situation is likely to persist.

Another factor is China. Although Moscow and Beijing are strengthening bilateral ties, Vietnamese leaders probably still believe there is some residual benefit in maintaining a close relationship with Russia, as such a partnership might temper China’s worst impulses. Another benefit for Hanoi in maintaining close ties with Moscow is the latter’s continued arms sales to Vietnam which help offset Beijing’s military advantages in the South China Sea.[15] Hanoi will certainly look to keep this pipeline open, even though it has diversified arms imports away from Moscow in recent years.[16]

Vietnam’s energy cooperation with Russia in the South China Sea also provides Hanoi with important resources that it might have to make up elsewhere if Vietnam-Russia ties were downgraded. Additionally, such cooperation activities in waters claimed by China complicate Beijing’s response—another advantage for Vietnam.

Finally, there is an unmistakable ideological component. Both Vietnam and Russia are authoritarian regimes, making them naturally comfortable with each other. This is important for Vietnam’s old guard who continue to be suspicious of the West and the perceived threat that it is fostering democratization in the country through political and economic interactions, a quiet and incremental process known as “peaceful evolution.” Russia shares similar suspicions of the West. Hence, Western democracies are unlikely to ever become as close to Vietnam as authoritarian states like Russia.[17]

HOW SHOULD THE WEST RESPOND?

From Hanoi’s perspective, while it values Russia ties, it does not wish to see its relations with Washington and other Western partners, including on the South China Sea and Mekong issues, negatively impacted by its position on Russia’s war in Ukraine. As such, it’s likely that Vietnam will try to weather the Russia storm and preserve ties with both Moscow and Washington, as well as other Western nations.

America and its allies can threaten consequences to move Vietnam’s position, but the risks probably outweigh the costs for them. Indeed, the Biden administration strongly values Vietnam’s role in its Indo-Pacific strategy, and Washington probably would not want to sacrifice this burgeoning strategic partnership for an unrelated war in another part of the world. Washington in recent weeks has shown that it is willing to look the other way on partner policies that it disapproves of in order to retain cooperation. For example, the Biden administration appears to have relented on India’s rebuff against Washington’s calls for Delhi to choose between Moscow and the West.[18] The one potential caveat is, however, on the enforcement of the Countering America’s Adversaries Through Sanctions Act (CAATSA), which was designed to sanction both Russian entities selling military equipment above a certain threshold and the recipients. Thus far, the Biden administration has been silent on whether it would seek a CAATSA waiver for Delhi’s previous purchase of Russia’s S-400 missile system and any future deals. Given its high dependence on Russian arms sales, Vietnam is probably in a similar predicament with regard to CAATSA if it were to make new purchases while Putin’s war still rages in Ukraine.

For now, the best that the West can do is consistently note their concerns and the likely implications that refusing to condemn or punish Russia might have on Vietnam’s own security, whether in the form of unprecedented China-Russia collaboration or standing up for invaded nations. At the end of the day, it is Hanoi—and Hanoi alone—that can make adjustments to its Russia policy, either because it finally realizes the negative consequences of its partnership with Moscow, or because its old guard who hold strong sentimental attachment to Russia fade away. In the meantime, no amount of poking or prodding by outside powers will be successful or appreciated in Hanoi.

ENDNOTES

[1] White House, Indo-Pacific Strategy of the United States, February 2022, https://www.whitehouse.gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf. For an earlier mention of Vietnam’s importance to the Biden administration, see White House, Interim National Security Strategic Guidance, March 2021, https://www.whitehouse.gov/wp-content/uploads/2021/03/NSC-1v2.pdf.

[2] “Vietnam’s vote for Russia on UN council could damage campaign to lead it,” Radio Free Asia, 8 April 2022, https://www.rfa.org/english/news/vietnam/russia-04082022183521.html.

[3] Ibid. Vietnam’s position is not unique within Southeast Asia, where only Singapore, a de facto US ally, has signed on to Western sanctions, and only the Philippines (a US treaty ally) and Myanmar (still represented by the previous civilian government at the UN) voted in favour of expelling Russia from the Council. Although expected, Hanoi’s position is nevertheless disappointing for the West because it shows that despite recent progress, engagement of Vietnam has not resulted in further alignment with the West on key initiatives.

[4] It is important to note that Vietnamese state-run media thus far have not reported on this planned exercise, and my sources indicate that Hanoi probably has some hesitation with proceeding. For the original report on the proposed exercise, see “Russia Says Military Drills Planned with Vietnam,” Benar News, 19 April 2022, https://www.benarnews.org/english/news/philippine/vietnam-russia-military-drills-04192022170936.html.

[5] “Russia-Vietnam; China-Vietnam; United States-Vietnam,” Observatory of Economic Complexity, https://oec.world/en/home-a

[6] General Statistics Office, Statistical Yearbook of Vietnam (Hanoi: Statistical Publishing House, 2021), p. 281.

[7] Vietsovpetro, Gioi thieu (Introduction), https://www.vietsov.com.vn/Pages/GioiThieuCT.aspx.

[8] Anton Tsvetov, “Vietnam–Russia Relations: Glorious Past, Uncertain Future”, in Vietnam’s Foreign Policy under Doi Moi, edited by Le Hong Hiep and Anton Tsvetov (Singapore: ISEAS – Yusof Ishak Institute, 2018), p. 153.

[9] Chao Deng, Ann M. Simmons, Evan Gershkovich and William Mauldin, “Putin, Xi Aim Russia-China Partnership Against U.S.,” Wall Street Journal, 4 February 2022, https://www.wsj.com/articles/russias-vladimir-putin-meets-with-chinese-leader-xi-jinping-in-beijing-11643966743.

[10] “Answers to Journalists’ Questions,” Hangzhou, 5 September 2016, http://en.kremlin.ru/events/president/news/52834. For Vietnam’s position on the ruling, see “Vietnam Welcomes South China Sea Ruling, Reasserts its Own Claims,” The Straits Times, 12 July 2016, https://www.straitstimes.com/asia/se-asia/vietnam-welcomes-south-china-sea-ruling-reasserts-its-own-claims.

[11] Edward Wong and Michael Crowley, “U.S. Says Most of China’s Claims in South China Sea Are Illegal,” The New York Times, 13 July 2020, https://www.nytimes.com/2020/07/13/world/asia/south-china-sea-pompeo.html.

[12] “Russian Firms Steps Up Dam Deal,” Radio Free Asia, 16 February 2013, https://www.rfa.org/english/news/laos/hydropower-02062013151208.html.

[13] US Department of State, “Lower Mekong River,” 21 February 2019, https://www.state.gov/lower-mekong-initiative/.

[14] For more insights on Vietnam’s 2019 Defense White Paper, see Derek Grossman and Christopher Sharman, “How to Read Vietnam’s New Defense White Paper: A Message to Great Powers,” War on the Rocks, 31 December 2019, https://warontherocks.com/2019/12/how-to-read-vietnams-latest-defense-white-paper-a-message-to-great-powers/.

[15] Derek Grossman, “Can Vietnam’s Military Stand Up to China in the South China Sea?,” Asia Policy, January 2018, https://www.rand.org/pubs/external_publications/EP67504.html.

[16] Le Hong Hiep, “Will Vietnam Be Able to Wean Itself Off of Russian Arms?,” Fulcrum, 4 April 2022, https://fulcrum.sg/will-vietnam-be-able-to-wean-itself-off-russian-arms/.

[17] It is interesting to note that Hanoi’s only democratic comprehensive strategic partner is India which also maintains good ties with Russia.

[18] Vikas Pandey, “How India and US Agreed to Differ on the Ukraine War,” BBC, 12 April 2022, https://www.bbc.com/news/world-asia-india-61042314.

Editorial Chairman: Choi Shing Kwok
Editorial Advisor: Tan Chin Tiong
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha.
Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng
Comments are welcome and may be sent to the author(s).

2022/49 “Asia’s Regional Security Architecture: An Australian Perspective” by Nick Bisley

Prime Minister of Australia Scott Morrison speaks during a meeting with US Secretary of Defense Lloyd Austin (not in photo) at the Pentagon on 22 September 2021 in Arlington, Virginia. One week before 22 September, Australia, the United States and the United Kingdom announced a security pact (AUKUS) to help Australia develop and deploy nuclear-powered submarines and other military cooperation. Picture: Drew Angerer/Getty Images/AFP.

EXECUTIVE SUMMARY

The regional security architecture established in the 1990s and early 2000s is under considerable challenge in the face of Sino-American rivalry.

Some states, Australia amongst them, are exploring new, non-ASEAN-centred ‘minilateral’ means of advancing their security goals in a region which is now viewed more pessimistically than in the past.

The Quadrilateral Security Dialogue (Quad) and AUKUS have rapidly emerged as dynamic and high-priority endeavours to advance collaborative military operations, share technology and coordinate strategic policy.

The new initiatives are small-scale, narrowly focused, and result-oriented, in contrast to inclusive, process-focused mechanisms.

These circumstances reflect ASEAN’s declining centrality to security regionalism which in turn may reduce ASEAN’s importance in the region and to its members. The new ‘minilaterals’ may indeed mark the end of the road for the existing inclusive approach to security multilateralism in the region.

* Guest writer, Nick Bisley, is Dean of Humanities and Social Sciences and Professor of International Relations at La Trobe University, Melbourne, Australia.

ISEAS Perspective 2022/49, 10 May 2022

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INTRODUCTION

In the decades following the end of the Cold War, Asia’s security environment was notable for the emergence of a distinctive security architecture.[1] Comprising both the extensive bilateral security alliances forged by the US to manage its containment policy in the Cold War, as well as a set of new multilateral mechanisms and institutions, these arrangements provided a mix of liberal and realist ways of managing the region’s changing environment.[2] The desire of most states was to retain a stable strategic balance, organised around the preponderance of US military power, in the face of a rising China, while also creating mechanisms to tackle the emerging non-traditional security challenges that globalisation had brought to the fore.[3] ASEAN sought to position itself at the centre of these new mechanisms.[4] With India, the US and Russia all joining the most expansive of these, the East Asia Summit (EAS), in the early 2010s the architecture looked well placed to keep the region peaceful and prosperous in spite of the many threats that loomed over the horizon.[5]

More than ten years on from the EAS expansion in 2011, the regional security architecture looks decidedly shaky, given that its ability to prevent or contain US-China rivalry has proven illusory. Equally, the ASEAN-centred mechanisms look leaden footed and poorly placed to respond with the necessary speed and agility to a rapidly deteriorating regional and global security environment. While ASEAN-led groupings struggle, states seeking to advance their security interests are taking things into their own hands, and ‘minilateral’ groupings, hitherto at the margins of the broader architecture, have come to the fore.[6] The rapid reinvigoration of the Quadrilateral Security Dialogue (Quad), as well as the creation of the Australia, United Kingdom and US trilateral security partnership (AUKUS), are illustrative of these new dynamics.

Australia, always an enthusiastic multilateralist, has been an especially active player in this period. This article takes stock of the state of the region’s security architecture and in particular explores Australia’s recent approach to security multilateralism. It does so both because Australia has been so instrumental to these new developments and also because the country has become something of a bellwether. Its circumstances as a security ally of the United States with important economic ties to China reflect the situation of many middle-ranking powers in the region. It was an enthusiastic participant in the proliferation of new multilateral mechanisms in the 1990s and 2000s but has clearly changed its priorities, reflecting a turn from a more optimistic sense of the region to a gloomier outlook about both the region and the mechanisms needed to advance the country’s interests.

AUSTRALIA’S PESSIMISTIC TURN

Until the early 2010s, particularly before the ascension to power by China’s President Xi Jinping in 2012, the regional architecture appeared to be a good, if not optimally designed, means to secure the world’s most important region. Australia had been an enthusiastic participant in the development of these new mechanisms as well as being keen to reshape its alliance with the US to reflect the changing circumstances.[7] During this period, Canberra evinced an optimistic sense about the region and its prospects. While Sino-American rivalry was evident, it appeared to be able to be kept within the guardrails established by the security architecture and the economic interests that were shared across the region. Australia’s Foreign Policy White Paper of 2017 was imbued with this outlook.[8]

Shortly after the paper’s publication, Australia began to take a more pessimistic view of the region, prompted in the main by a significant recasting of its relationship with China.[9] Australian policy elites were unsettled by the more assertive turn in Xi’s foreign policy in the region, the heavy-handed approach to Hong Kong, as well as by the significant modernisation and expansion of its military capabilities. Canberra also perceived that China was seeking to challenge Australia at home through political interference and espionage activities. The government blocked Chinese companies Huawei and ZTE from participating in Australia’s 5G network rollout, and introduced legislation intended to curtail foreign interference in key institutions such as universities and corporations more broadly.[10] In addition, Washington has adopted a much harder line towards Beijing, putting great power contestation with China as the centrepiece of its global strategy,[11] which confirmed to elites in Canberra the need to put aside the optimistic sense that major power conflict was a generation away. In the 2020 Defence Strategic Update Australia adopted a much bleaker outlook towards the region.[12]

NEW FORMS OF SECURITY COOPERATION

The Quad

As a result, Australia has recalibrated its approach to its security and strategic policy. Most obviously, this has entailed a commitment to the biggest expansion of Australia’s armed forces outside of war time.[13] However, as a middle-ranking power with extensive international vulnerabilities, security cooperation has long been a central component of its defence policy. Unsurprisingly, this shift in approach has generated some of the most dynamic new initiatives in Australian policy. The two most visible forms of this shift are the reinvigoration of the Quad and the AUKUS partnership.

The Quad was first established in 2007, and then Japanese Prime Minister Abe Shinzo was its most voluble advocate.[14] Lasting barely twelve months before being mothballed, the gathering of Australia, India, Japan and the US to discuss shared security matters seemed not well suited to the needs of the four nor to the security environment at the time.[15] Ten years later it reconvened with a meeting at the sidelines of the 2017 EAS. It then held a series of senior officials’ meetings in 2018 and at the foreign minister-level in 2019 on the sidelines of the UN General Assembly, with subsequent ministerial meetings in 2020 in Tokyo and virtually at the start of 2021. The first leaders’ level meeting was hosted by President Joe Biden in 2021 and will be an annual event to ensure sustained political momentum for a grouping that the four now see as a crucial new component of what they describe as the Indo-Pacific’s security setting. As they explained in the rather lengthy first leaders’ communique, the Quad exists to promote “the free, open, rules-based order, rooted in international law and undaunted by coercion, to bolster security and prosperity in the Indo-Pacific and beyond”.[16]

The Quad is avowedly focused on security cooperation with a particular emphasis on coordinating military operations and strategic policy more broadly. But it has, in fairly swift order, expanded its remit to include proposed work programmes on the environment, public health and high technology. Economic matters are not part of the equation at present, a notable shortcoming given the ways in which China uses geo-economics to advance its interests. That said, it has developed rapidly and is the most dynamic of the region’s many security groupings. This is aided by its small size, narrow focus and pragmatic approach. Yet it is important to note that while it has swiftly gathered political momentum and a shared sense of purpose, as yet it has not taken any major steps to turn its words into action and the decidedly not-unified views of the four to Russia’s invasion of Ukraine show the ongoing challenge of aligning the interests of these major maritime powers.[17]

For Australia, the Quad is a priority in terms of political emphasis and bureaucratic resourcing, with a Quad branch recently established by the Department of Foreign Affairs and Trade, and a deputy secretary responsible for the Quad, AUKUS and naval shipbuilding in the Department of Prime Minister and Cabinet.[18] This priority comes because of Canberra’s perception that the regional consequences of China’s rise require developing and managing balancing coalitions to contain the expansion of Chinese influence and power, especially in the maritime domain. It is also underpinned by the consensus across the four countries about how to respond to China. Australian policy-makers have long found the process-oriented approach and consensus building at the heart of ASEAN and its offshoots frustrating – the view in Canberra has long been more focused on results – and the sense of geopolitical pessimism has driven this to the fore. The sentiment, entirely unspoken of course, is that the existing regional security architecture is unable to provide the kind of collaborative action that Australia, the US and Japan think is needed and they will take the necessary steps to achieve those goals even if it means creating new mechanisms. The emergence and dynamism of the Quad is an unmistakable vote of no-confidence by Canberra in both the form and function of Asia’s existing multilateral security initiatives.

Interestingly, Australia and the other members have been at great pains to try to avoid this perception, emphasising repeatedly that they are committed to ASEAN centrality and the importance of the Southeast Asian grouping to the region. The Quad leaders’ joint statement of March 2021 “reaffirm[s] our strong support for ASEAN’s unity and centrality as well as the ASEAN Outlook on the Indo-Pacific”.[19] In the September communique, the four “reaffirm our strong support for ASEAN’s unity and centrality and for ASEAN Outlook on the Indo-Pacific, and we underscore our dedication towards working with ASEAN and its member states—the heart of the Indo-Pacific region—in practical and inclusive ways”.[20] The most full-throated declaration of ASEAN-fealty to date came from a meeting of the Quad foreign ministers in February 2022: “As unwavering supporters of ASEAN unity and centrality, and the ASEAN-led architecture, we continue to support ASEAN partners to advance the practical implementation of ASEAN Outlook on the Indo-Pacific. The Outlook’s principles are fundamental to regional stability and prosperity and will be key to guiding the region’s economic and political future.”[21] Australia and its Quad partners talk a good ASEAN game, but their deeds do not match their words.

AUKUS

The sudden announcement of the AUKUS partnership on 15 September 2021 took the world by surprise. With no warning to friends and allies, indeed with few even in the Australian government being aware, Australia announced that it was walking away from its contractual agreement with the French Naval Group to provide its next-generation submarine fleet. Instead, Australia entered into an ambitious technology sharing arrangement with the US and the UK to acquire nuclear-powered submarines, and committed to a wide range of technology sharing and capability enhancing cooperative endeavours.[22] The intent of the partnership is to “help sustain peace and stability in the Indo-Pacific region”[23] and presumably over time will move beyond matters of technology cooperation and into strategic policy collaboration.

AUKUS represents a striking development in Australia’s approach to security cooperation in Asia, and not only because of the nuclear dimension. It embodies, more than any other policy decision Canberra has taken, its priority on outcomes, its surprising disregard for partners and the benefits of multilateral processes, as well as an appetite for risk that had hitherto not been the norm. It is important to note that AUKUS is in its infancy. It remains a statement of intent – notably no further formal documentation has been agreed to beyond the press release of September 2021; and what it will eventually deliver both in terms of specific capability enhancements and cooperative activity is difficult to discern with any clarity. Nonetheless, it illustrates a significant shift in Canberra’s approach to a range of military matters – nuclear-powered submarines had previously been ruled out for both technical and political reasons. It clearly indicates that a middle-ranking power seeks to collaborate with others to advance its security interests in a much more contested Asian region in a more risk-taking and outcome-driven manner.

AUKUS is also notable for the rather lesser concern its members show for ASEAN. Where the Quad has volubly declared its rhetorical commitment to ASEAN centrality – perhaps protesting a bit too much – the AUKUS arrangements show much less concern with the Southeast Asian institution or its members. Indeed, the lack of any substantial prior warning to the group or key partners, along with the rudeness shown to France, produced diplomatic blowback.[24] ASEAN is mentioned once somewhat perfunctorily in Australian Prime Minister Scott Morrison’s AUKUS press release that the trilateral agreement “will complement Australia’s network of strategic partnerships, including with our ASEAN friends”.[25]

These new security initiatives in which Australia is closely involved share a number of distinctive attributes. Most obviously they are narrowly focused on matters of military and defence. Whereas in the past, security cooperation in Asia often centred on non-traditional concerns, humanitarian assistance and disaster relief and other areas of low political contention, now, reflecting Australia’s heightened focus on more old-fashioned security threats, controversial military matters are at the centre of activity. Second, they are collaborations between a small number of countries. The more broad-based and inclusive visions of security architecture of the past are not seen as particularly useful in the current climate. Instead, Australia is attracted to more circumscribed groups where it is easier to generate consensus and rally common actions based on shared interests and where the group is not hide-bound by rules and norms that might get in the way of concrete action. While Canberra retains a strong rhetorical commitment to ASEAN and to its norms and centrality, pragmatic outcome-oriented groups are the order of the day. Third, security cooperation has, in the past, been driven by a liberally inspired outlook whereby economic cooperation and technical collaboration in functional spheres can build trust among elites, drive cooperation in other more sensitive domains, and in turn reduce security risks over the longer term. This outlook is plainly not part of these moves, and indeed the emergence of the Quad and AUKUS should be interpreted as a repudiation of that approach to security cooperation.

This also reflects the broader reality that while Australia has focused on ASEAN for some time, most notably hosting a special summit in 2018 and appointing a resident ambassador to ASEAN in Jakarta, and even established a ‘comprehensive strategic partnership’ with the grouping in 2021, it has struggled in getting that engagement with the institution to generate preferred policy outcomes. Southeast Asia will remain important for Canberra, but the focus on the region will be less through the lens of ASEAN and multilateralism and instead be concerned with specific issues and bilateral ties. Overlaying that will be the overriding concern of security risks and great power competition.

CONSEQUENCES FOR ASEAN AND THE REGION

Although the evolution and expansion of the region’s security architecture was very much an ASEAN-centred development, the dynamism and significance of the non-ASEAN bodies with which Australia has invested so much time and political capital should be a cause of some concern within the grouping. Put simply, ASEAN’s goal of remaining at the centre of regionalism in Asia is at risk. The Quad and AUKUS are centred around the US due to its paramount military power. Washington also shares Australia’s interest in result-oriented security mechanisms, and has found it difficult to sustain long-term engagement with ASEAN. The Southeast Asian grouping was able to command the stage precisely because none of the region’s great powers was interested in leading security cooperation; with the US favouring these minilateral groupings and showing little confidence in ‘inclusive’ approaches to cooperation, ASEAN’s appeal to members and non-members alike is likely to be diminished.

The erosion of ASEAN centrality is also likely to reduce the institution’s broader regional influence. This in turn risks exacerbating the already extant cleavages within the grouping. An often-forgotten aspect of ASEAN centrality is the locus of the organisation in the foreign policy of its members. Its importance to the region is a function of its importance to its members and vice versa. A decline in ASEAN centrality in the regional security architecture will likely lead to a decline in ASEAN’s importance to its members, thus driving the already existing divisions within the group to the surface.[26]

This speaks to the final more worrying implication of initiatives such as AUKUS and the Quad. When Asian security multilateralism emerged, it was driven by a number of motives, key among which was the desire to manage great power relations and prevent the return of great power rivalry following the violent experiences of Asia during the Cold War. The extraordinary destruction and millions of deaths in the wars on the Korean Peninsula and Indochina remain in living memory; Asia knows the cost of uncontrolled great power competition. There is a good chance that the moves in the region that Australia has been at the heart of will mark the end of post-Cold War security multilateralism in Asia. The casting aside of the more inclusive forms of security cooperation, and the focus on exclusive mechanisms which are intended to shape great power competition and not to prevent it, reflect the grim reality of a region in which war is once again in the realm of the thinkable.

ENDNOTES

[1] Michael J. Green and Bates Gill (eds), Asia’s New Multilateralism: Cooperation, Competition and the Search for Community (New York: Columbia University Press, 2009).

[2] Kai He (ed.) Contested Multilateralism 2.0 and Asian Security Dynamics (Abingdon, UK: Routledge, 2020).

[3] Nick Bisley, Building Asia’s Security, Adelphi No. 408 (London: Routledge for the Institute of International Studies, 2010).

[4] Alice D. Ba, “Regional Security in East Asia: ASEAN’s Value Added and Limitations”, in Journal of Current Southeast Asian Affairs 29, no. 3 (2010): 115-30.

[5] Victor D. Cha, “Complex Patchworks: US Alliances as Part of Asia’s Regional Architecture”, Asia Policy no. 11 (2011): 27-50.

[6] Joel Wuthnow, “U.S. ‘Minilateralism’ in Asia and China’s Responses: A New Security Dilemma?”, Journal of Contemporary China 28, no. 115 (2019):133-50.

[7] Nick Bisley, “Enhancing America’s Alliances in a Changing Asia-Pacific: The Case of Japan and Australia”, Journal of East Asian Affairs 20, no. 1 (2006): 2006.

[8] Department of Foreign Affairs and Trade, Foreign Policy White Paper, 2017, Australian Government, 2017, https://www.dfat.gov.au/sites/default/files/2017-foreign-policy-white-paper.pdf.

[9] Rory Medcalf, “Australia and China: understanding the reality check”, Australian Journal of International Affairs 73, no. 2 (2019):109-18.

[10] Andrew Chubb, “The Securitization of ‘Chinese Influence’ in Australia”, The Journal of Contemporary China (2022), tandfonline.com/doi/full/10.1080/10670564.2022.2052437?src=recsys.

[11] White House, National Security Strategy of the United States, December 2017, https://trumpwhitehouse.archives.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf.

[12] Department of Defence, 2020 Defence Strategic Update (Canberra: Department of Defence, 1 July 2020), https://www.defence.gov.au/sites/default/files/2020-11/2020_Defence_Strategic_Update.pdf.

[13] Andrew Greene, “‘Defence to grow to largest size since Vietnam War, increasing by nearly 20,000 people by 2040”, ABC News, 10 March, 2022, https://www.abc.net.au/news/2022-03-10/defence-workforce-growing-2040-national-security/100896902.

[14] Brahma Chellaney, “Quad Initiative’: an inharmonious concert of democracies”, The Japan Times, 19 July 2007, https://www.japantimes.co.jp/opinion/2007/07/19/commentary/quad-initiative-an-inharmonious-concert-of-democracies/.

[15] Daniel Flitton, “Who really killed the Quad 1.0?”, Lowy Interpreter, 2 June 2020, https://www.lowyinstitute.org/the-interpreter/who-really-killed-quad-10.

[16] Prime Minister’s Office, Quad Leaders’ Summit Communique, 24 September 2021, https://www.pm.gov.au/media/quad-leaders-summit-communique.

[17] Nick Bisley “Contested Asia and the Return of the Quadrilateral Security Initiative”, Melbourne Asia Review, no. 9 (March 2022), https://melbourneasiareview.edu.au/contested-asia-and-the-return-of-the-quadrilateral-security-initiative/.

[18] Department of Foreign Affairs and Trade, Organization Chart February 2022, https://www.dfat.gov.au/sites/default/files/dfat-org-chart-executive.pdf, Department of Prime Minister and Cabinet, Organization Chart, March 2022, https://www.pmc.gov.au/sites/default/files/files/pmc-org-chart-31-march-2022.pdf.

[19] Prime Minister’s Office, “Spirit of the Quad Statement”, 13 March 2021, https://www.pm.gov.au/media/quad-leaders-joint-statement-spirit-quad.

[20] Prime Minister’s Office, “Quad Leaders’ Summit Communique”, 24 September 2021, https://www.pm.gov.au/media/quad-leaders-summit-communique.

[21] Office of the Minister of Foreign Affairs, “Quad Cooperation in the Indo-Pacific”, 11 Feburary 2022, https://www.foreignminister.gov.au/minister/marise-payne/media-release/quad-cooperation-indo-pacific.

[22] For an excellent summary of the surprise and fallout see “An AUKUS surprise – Best of The Interpreter 2021”, Lowy Interpreter, 29 December 2021, https://www.lowyinstitute.org/the-interpreter/aukus-surprise-best-interpreter-2021.

[23] Prime Minister’s Office “Joint Leaders’ Statement on AUKUS”, 16 September 2021, https://www.pm.gov.au/media/joint-leaders-statement-aukus.

[24] William Choong and Ian Storey, “Southeast Asian Responses to AUKUS: Arms Racing, Non-Proliferation and Regional Stability”, Perspective, No. 134, 14 October 2021, /wp-content/uploads/2021/09/ISEAS_Perspective_2021_134.pdf.

[25] Prime Minister’s Office, “Australia to pursue nuclear power submarines through new trilateral enhanced security partnership”, 16 September 2021, https://www.pm.gov.au/media/australia-pursue-nuclear-powered-submarines-through-new-trilateral-enhanced-security.

[26] See Nick Bisley “The East Asia Summit and ASEAN: Potential and Problems”, Contemporary Southeast Asia 39, no. 2 (2017): 265-72.

2022/48 “Enhancing Regulatory Cooperation for Agricultural Trade in the Greater Mekong Subregion” by Sithanonxay Suvannaphakdy

This aerial photograph shows terraced rice fields in northern Vietnam’s Mu Cang Chai district on 18 September 2020. Manan VATSYAYANA/AFP.

EXECUTIVE SUMMARY

The intra-regional trade in agricultural products among six countries in the Greater Mekong Subregion (GMS), namely China, Cambodia, Laos, Myanmar, Thailand and Vietnam, recorded a robust growth of 10.3 percent per annum before the pandemic and 9.2 percent during the pandemic in 2020. Thailand is the largest exporter, and China is the largest importer in the GMS agricultural markets.

However, deepening the intra-GMS trade further has been impeded by the long regulatory distance regarding non-tariff measures (NTMs) due largely to the different structures of NTMs between China and other GMS countries. Producers and traders have to comply with the large number of NTMs on the import of agricultural products such as vegetables, ranging from 8 in Laos and Thailand to 11 in Vietnam and 24 in China.

Simulation results for reducing regulatory distance in the GMS reveal that a partial harmonization of NTMs would see an increase in the intensive margin (volume of existing products) of agricultural trade by 10.62-17.45 percent, while boosting the extensive margin (variety of products) by 5.05-8.16 percent. Such a reform would however only benefit trading pairs between China and other GMS countries.

In a more ambitious scenario of full harmonization of NTMs, the agricultural trade gains would be expanded to all trading pairs in the GMS and see an increase in the intensive margin of agricultural trade by 36.31-77.57 percent, while boosting its extensive margin by 16.32-32.34 percent.

Gaining increased agricultural trade integration, coupled with the potential benefits of NTM harmonization, highlight the importance of regulatory cooperation in the GMS. This could be strengthened under the Regional Comprehensive Economic Partnership which contains key regulatory cooperation instruments such as the promotion of transparency, the adoption of international standards and the mutual recognition of conformity assessment.

* Sithanonxay Suvannaphakdy is Lead Researcher at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute, where he undertakes policy-oriented research on ASEAN’s economic integration. He is grateful for valuable comments and suggestions from Jayant Menon. All remaining errors are his own.

ISEAS Perspective 2022/48, 6 May 2022

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INTRODUCTION

Despite progress in tariff liberalization over the past decade, agricultural producers and traders in the Greater Mekong Subregion (GMS) – including Cambodia, Laos, Myanmar, Thailand, Vietnam, and China (especially Yunnan Province and Guangxi Zhuang Autonomous Region) – still face deeply-rooted regulatory obstacles to achieve their full potential as beneficiaries of road transport corridors (see Annex 1). Two case studies of road projects—the East–West Corridor linking Laos and Vietnam and the Phnom Penh–Ho Chi Minh City Highway linking Cambodia and Vietnam—show that travel times after project completions are lower than those before project completion by more than 50 percent (Hettige, 2008, p. 29).[1]

While improved road connectivity has shortened travel times between the GMS countries, different market access conditions remain a key trade barrier between them. Govindaraju et al. (2021)[2] have calculated the regulatory distance and the differences in non-tariff measures (NTMs) imposed on imports in ASEAN+5 countries, i.e. the 10 ASEAN countries and Australia, China, India, Japan and New Zealand. They find that the NTMs imposed on imports by China are substantially different from those in ASEAN countries, and that the regulatory differences between them hampers trade. On average, a 10 percent increase in the regulatory distance between China and ASEAN countries reduces the intensive margin (reducing exports of existing products) by 2.38 percent and the extensive margin (reducing the variety of products in the export basket) by 0.65 percent.

The present study focuses on NTMs in the agricultural sector to present a subset of ASEAN+5 countries represented by the GMS countries. It explores the possibilities for enhancing regulatory cooperation for agricultural trade in the GMS, analyzing three indicators of trade integration, namely intra-GMS trade share and trade balance, incidence of NTMs on agricultural imports and exports, and simulation of agricultural trade gains under the partial and full harmonization in the GMS.

The GMS can be a good case study for NTM cooperation in agricultural trade. A large proportion of the labour force in the subregion is employed in the agriculture sector, ranging from 25 percent in China to 37 percent in Vietnam and 61 percent in Laos.[3] Reducing the diversity in NTMs saves costs and increases profits for producers and traders, while reducing prices and expanding choices of products for consumers. This should complement the role of road transport corridors in facilitating agricultural trade in the subregion.

REGIONALIZATION OF AGRICULTURAL TRADE

The intra-GMS trade (i.e. import plus export) in agricultural products among six countries, namely Cambodia, China, Laos, Myanmar, Thailand and Vietnam, has increased its importance in absolute terms and in relative importance to the extra-GMS trade. Before the COVID-19 pandemic, the value of intra-GMS trade had been rising by 41.2 percent or 10.3 percent per annum from US$37.3 billion in 2015 to US$52.6 billion in 2019. Such growth is twice that for extra-GMS trade which was recorded at 21.4 percent or 5.3 percent per annum for the period 2015-2019. This has increased the share of intra-GMS trade in GMS’s total agricultural trade from 14.3 percent in 2015 to 16.2 percent in 2019 (Figure 1a).

The same trend of agricultural trade growth continued during the pandemic. The intra-GMS trade grew at 9.2 percent in 2020, while the extra-GMS trade grew at 6.6 percent that same year (Figure 1a). The sustaining of agricultural production and the maintaining of an open agricultural trade policy in the subregion during the COVID-19 outbreak have been encouraging. It also highlights the importance of agricultural trade in ensuring food security in the subregion, and in providing essential income for farmers and traders in the exporting countries.

The GMS countries are both exporters and importers of agricultural products in the sub-region. In 2019, intra-GMS export was recorded at US$32.5 billion, 87 percent of which was accounted for by Thailand (33 percent of total intra-GMS export), China (30 percent) and Vietnam (24 percent). The remaining 13 percent was accounted for by Myanmar (8 percent), Laos (4 percent) and Cambodia (1 percent). Countries with less productive capacity tend to export lower quantities of agricultural products than those with greater productive capacity. Nonetheless, agricultural export within the GMS markets accounted for 93 percent of total agricultural export in Laos, 59 percent in Myanmar, and 48 percent in Cambodia (Figure 1b).

Figure 1b also shows China, Cambodia and Vietnam to be net importers of agricultural products in the GMS, while Laos, Myanmar and Thailand are net exporters. Values of agricultural export from China, Cambodia and Vietnam are lower than those of their agricultural import, resulting in trade deficit between these countries and other GMS countries. Meanwhile, values of agricultural export from Laos, Myanmar and Thailand are greater than those of their agricultural import, resulting in trade surplus between them and other GMS countries. The status of net importers or net exporters in the GMS suggests that any policy aimed at restricting agricultural trade reduces social wellbeing in the sub-region, and limits the variety of products available to the net importers, while destroying job opportunities and income sources among the net exporters.

DIVERSITY IN NON-TARIFF MEASURES

Agricultural exports in the GMS have been affected by NTMs imposed by their governments and their trading partners’ governments. On the export side, the coverage ratio in Figure 2a reveals that Cambodia, China, Laos, Myanmar and Vietnam have imposed NTMs on almost all their agricultural exports, especially vegetable and animal products. In contrast, agricultural exports from Thailand are less affected by NTMs imposed by its government.

In addition, the prevalence score in Figure 2b shows that the number of NTMs on agricultural exports is largest in China, followed by Laos, Myanmar and Vietnam. On average, China applies five NTMs on its exports of food and vegetable products, and six NTMs on its exports of animal products. In contrast, the average number of NTMs applied on agricultural exports in Thailand is almost zero. This suggests that Thai producers and exporters of agricultural products face less complex trade regulations than those in other GMS countries.

Meanwhile, exporters have to comply with different market access conditions at destination markets, such as product standards for food safety and packaging and labelling requirements. NTMs on imports have greater coverage than those on exports. In Vietnam, the coverage ratio is 69 percent for food export, while it is 100 percent for food import. In Thailand, the coverage ratio is 19 percent for animal export, while it is 98 percent for animal import. China, Cambodia, Laos and Myanmar have maintained a relatively high coverage ratio of NTMs (Figure 3a).

The prevalence score of agricultural imports in Figure 3b shows that China applies 24 NTMs on imports of food and vegetable products. This is greater than those on its exports by almost four times. Similarly, Thailand’s imports of vegetables, animals and food face 8, 9 and 13 NTMs, respectively, which are significantly more than those imposed on its exports. The cost of regulatory compliance incurred by agricultural producers and exporters increases when they export products to two or more markets with different NTMs.

More than half of NTMs on agricultural imports are accounted for by the sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT). For example, the number of NTMs on import of vegetables (HS070960) ranges from 3 in Cambodia to 9 in Laos, 13 in Myanmar, 15 in Thailand and 20 in China and Vietnam. The share of SPS and TBT measures in total NTMs imposed on import of vegetables is 90 percent in Cambodia, 56 percent in Laos, 77 percent in Myanmar, 93 percent in Thailand, 90 percent in China and 85 percent in Vietnam.

The most frequently found SPS measures on agricultural imports in the GMS are the authorization requirement for SPS reasons, tolerance limits for residues of certain substances, product registration and approval requirement as well as testing, certification and inspection requirements. The most commonly found TBT measures on agricultural imports include product quality, safety or performance requirements as well as labelling and packaging requirements.

The SPS and TBT measures aim to reduce the impacts of perceived market imperfections such as risks for human, animal or plant health, or information asymmetries (Beghin et al., 2012).[4] The empirical evidence shows that import prices of agricultural products can increase by about 15 percent due to restriction or special authorization for TBT or SPS reasons and conformity assessment. At the same time, they can increase demand for agricultural imports by providing a positive signal to consumers that enhances confidence in imported products (Gordon et al., 2020).[5] When the quality of products is heterogeneous and unknown to buyers, SPS and TBT measures such as labelling and packaging requirements can overcome the information deficit and convey a signal that all producers conform to a certain standard, encouraging demand for such products.

POTENTIAL BENEFITS OF REGULATORY COOPERATION

This section assesses the extent to which a lower level of differences in NTMs between the importing country and the exporting country in the GMS increases the intensive margin and the extensive margin of agricultural trade. This happens when NTMs imposed on an imported product by an importing country are significantly different from those applied in the exporting country. NTM-related costs for traders and producers include gathering information on regulatory requirements in different markets, adjusting the specification of goods and services to comply with different regulatory requirements of importing countries, and complying with different conformity assessment procedures across importing countries. The information and specification costs raise fixed costs, while the costs of conformity assessment increase variable costs for exports. Higher fixed and variable costs of NTMs discourage firms from scaling up their production and investing in the development of new products for exports.

The regional cooperation on NTMs to reduce regulatory differences may be viewed as a gradual process involving the promotion of transparency, adoption of international standards and mutual recognition of conformity assessment procedures of GMS countries.

This study applies counterfactual simulations by conducting “what if” exercises based on the current reality of regulatory differences and two reform scenarios, namely partial and full harmonization of NTMs. The level of regulatory differences between the importing country and the exporting country is measured by the regulatory distance at the HS 6-digit product level. This is obtained from Govindaraju et al. (2021, pp. 42-44).

Table 1 reveals that the structure of NTMs on agricultural imports in China is substantially different from that in other GMS countries. The regulatory distance for bilateral trade between China and other GMS countries is greater than 0.35, while the regulatory distance for other country pairs is lower than 0.27. Among country pairs in the GMS, the regulatory distance is lowest at 0.21 for the bilateral trade between Cambodia and Laos, and highest at 0.39 for the bilateral trade between China and Myanmar. This confirms our findings in the last section on the diversity of NTMs in the GMS, where China imposes a greater number of NTMs than the other countries. A higher value of regulatory distance for a country pair means greater dissimilarity in NTMs between them.

The simulation results of agricultural trade gains under Scenario 1 in Table 2 reveal that the partial harmonization of NTMs in the GMS enhances the agricultural trade between China and other GMS countries. It increases the intensive margin of agricultural trade by 10.62-17.45 percent, and boosts its extensive margin by 5.05-8.16 percent. These findings suggest that reducing the regulatory differences would boost the agricultural trade largely by increasing the volume of existing products, and to a lesser extent by diversifying the export baskets.

The partial harmonization of NTMs in the GMS is represented by the reducing of the regulatory distance of all country pairs in Table 1 to the regional average of 0.283. This reduces the regulatory distance for country pairs between China and other GMS countries by 20-28 percent. The reduction of regulatory distance is then used to simulate the agricultural trade gains based on the estimated coefficients of regulatory distance on agricultural trade in Govindaraju et al. (2021, pp. 24-25). Govindaraju et al. (2021) find that the coefficient of regulatory distance is estimated at -1.461 for the log of intensive margin and at -0.713 for the log of extensive margin.

For example, the regulatory distance between China and Vietnam is 0.352. In Scenario 1, reducing the regulatory distance to the regional average of 0.283 means that the regulatory distance between China and Vietnam must be reduced by 20 percent from 0.352 to 0.283. The reduction in regulatory distance is -0.069 (0.283 – 0.352). The impact of the reduction in regulatory distance on the intensive margin is estimated at 10.62 percent with the formula: 100 x [exp(-1.461 x (-0.069)) – 1][6] Similarly, the impact of the reduction in regulatory distance on the extensive margin is estimated at 5.05 percent with the formula: 100 x [exp(-0.713 x (-0.069)) – 1]. The simulation result shows that a 20-percent reduction in regulatory distance between China and Vietnam enhances the bilateral trade by raising the volume of existing agricultural products by 10.62 percent and increasing the variety of agricultural products by 5.05 percent.

Full harmonization of NTMs is more ambitious and will result in larger and more inclusive trade gains than its partial harmonization in Scenario 1. In Scenario 2, the full harmonization of NTMs is represented by the reduction of existing regulatory distance to zero, indicating the regulatory convergence in the GMS. In this case, the regional average of the intensive margin of agricultural trade (all GMS countries) is around 52 percent of its baseline value. The range is wide, running from 36 percent for Cambodia-Laos trade to 48 percent for Thailand-Vietnam trade and 78 percent for China-Myanmar trade. The full harmonization of NTMs would also increase the extensive margin of agricultural trade, ranging from 16 percent for Cambodia-Laos trade to 18 percent for Thailand-Myanmar trade and 32 percent for China-Myanmar trade in agricultural products (Table 2). This suggests that greater harmonization of NTMs expands the benefits of agricultural trade for all GMS countries.

CONCLUSION AND POLICY IMPLICATIONS

This study demonstrates the potential benefits of greater regulatory cooperation in agricultural trade in the GMS. The intra-GMS trade in agricultural products has grown by 10.3 percent per annum in the period 2015-2019 and shown a robust growth of 9.2 percent despite the COVID-19 outbreak in 2020. Thailand is the largest exporter, and China is the largest importer. While the transport distance between China and other GMS countries has been shortened by the road corridors, the regulatory distance for NTMs between them has not yet been streamlined. Producers and traders in the subregion face the challenge of complying with the diversity of NTMs, especially SPS and TBT, imposed on imports and exports by the GMS governments.

The simulation results in this study show that greater harmonization of NTMs results in larger and more inclusive gains in agricultural trade in the GMS. Partial harmonization of NTMs would see an increase in the intensive margin of agricultural trade between China and other GMS countries by 10.62-17.45 percent, and boost its extensive margin by 5.05-8.16 percent. Under a more ambitious scenario of full harmonization of NTMs, the trade gains would be expanded to all trading pairs in the GMS and be associated with an increase in the intensive margin of agricultural trade by 36.31-77.57 percent, while its extensive margin will be boosted by 16.32-32.34 percent. These findings suggest that reducing the regulatory differences would boost the agricultural trade largely by increasing the volume of existing products, and to a lesser extent by diversifying the export baskets.

There are legitimate reasons for different structures in NTMs on agricultural products across GMS countries. These include different perceptions of risk, income levels, cultures, or political and legal systems. To facilitate agricultural trade, however, the GMS governments should consider the impact of their NTMs beyond their domestic borders, incorporate the design and implementation of the existing and proposed NTMs of their trading partners into their NTMs, and cooperate with their trading partners in bilateral, regional or multilateral contexts to reduce unnecessary trade costs associated with the diversity of NTMs across countries.

The GMS countries should strengthen their cooperation on NTMs under the Regional Comprehensive Economic Partnership (RCEP) for three reasons. First, the GMS economic cooperation programme does not have a comprehensive legal framework for NTM cooperation. The key document on trade facilitation in the subregion is the Cross-Border Transport Agreement (CBTA) ratified by Laos, Thailand and Vietnam in 1999, Cambodia in 2001, China in 2002, and Myanmar in 2003,[7] which focuses on transport and trade facilitation rather than the harmonization of trade-related regulations.

Second, the RCEP provisions on SPS and TBT include the regulatory cooperation instruments commonly found in other regional trade agreements. These include the promotion of transparency, adoption of international standards, and mutual recognition of conformity assessment procedures. The provisions on transparency and adoption of international standards require regulators of RCEP partners to embed international best practices into their domestic rule-making procedures and prevent regulations creating unnecessary barriers to trade. In addition, mutual recognition of conformity assessment results between two or more RCEP partners will help ensure that traders do not face duplicative requirements or procedures when regulations differ across markets.

SPS cooperation under RCEP aims to protect human, animal or plant health; enhance the implementation of WTO SPS Agreement;[8] increase the transparency and understanding of the development and application of SPS measures; and encourage the adoption of international standards, guidelines and recommendations (Article 5.2). Chapter 5 in the document stresses compliance with the WTO SPS Agreement (Articles 5.5 and 5.7 of RCEP); encourages the use of international standards for SPS measures (Article 5.5); promotes mutual recognition and acceptance of SPS certificates issued by RCEP partners to prevent goods being tested by both exporting and importing countries (Article 5.5); and increases transparency through the notification of SPS measures with significant trade effects to WTO (Article 5.12) and the establishment of contact points to facilitate communication on SPS matters.

The TBT cooperation under the RCEP is covered in Chapter 6. It aims to reduce unnecessary trade costs associated with standards, technical regulations, and conformity assessment procedures; enhance the implementation of WTO TBT Agreement;[9] and strengthen information exchange and cooperation. It stresses compliance with the WTO TBT Agreement (Article 6.4 of RCEP); promotes the transparency through information exchange and cooperation (Articles 6.5 and 6.6) and establishment of contact points (Article 6.12); provides guidance on assessment procedures for conformity to technical standards and norms and how they should be implemented or accepted (Article 6.8); promotes mutual recognition of the conformity assessment procedures used by the RCEP partners to prevent goods being tested in both the exporting and importing countries (Article 6.8); and encourages the use of international standards and harmonization of technical regulations (Article 6.5).

Finally, all GMS countries are RCEP partners, and five GMS[10] have already ratified the agreement. By being early adopters of the SPS and TBT provisions in RCEP, they should be able to enhance intra-GMS agricultural trade. Subregional NTM cooperation among a small number of countries coupled with the possibility of technical and financial supports under the GMS programme should be effective in dealing with specific challenges such as building bridges with existing national regulatory systems, agreeing on common regulatory objectives, and domestic resistance to liberalize agricultural trade. The RCEP-based NTM reform in the GMS can be scaled up or linked to NTM reforms among other RCEP partners. In the long run, RCEP should consolidate the national regulatory reforms of its members, and reduce trade costs associated with the regulatory diversity.

The harmonization of NTMs should be complemented with a strict monitoring and evaluation mechanism. Part of NTM-related trade costs occurs during their implementation. Menon and Roth (2022)[11] find that NTMs in GMS countries are used in a discretionary fashion to protect domestic production whenever required and that this can be a moving target, i.e. a new NTM can morph and be a substitute for the original one after that has been identified and targeted for dismantling by the authorities. These are usually applied at the border with China, and other GMS countries can do little to address it, or seek compensation for losses incurred. While harmonization can go some way towards reducing its occurrence, it cannot overcome the problem entirely.

Annex 1: Economic Corridors in the Greater Mekong Subregion

Note: SEC: Southern Economic Corridor; NSEC: North-South Economic Corridor; EWEC: East-West Economic Corridor

Source: Greater Mekong Subregion, GMS Economic Corridors, available at https://www.greatermekong.org/gms-economic-corridors-subcorridors; accessed March 15, 2021.

ENDNOTES

[1] Hettige, M. (2008). Greater Mekong Subregion: Maturing and Moving Forward. Manila: Asian Development Bank.

[2] Govindaraju, V.C., Foster-McGregor, N., and Devadason, E.S. (2021). Regulatory Distance, Margins of Trade, and Regional Integration: The Case of the ASEAN+5, ERIA Discussion Paper Series, No. 403. Jakarta: Economic Research Institute for ASEAN and East Asia.

[3] World Bank’s World Development Indicators, available at https://databank.worldbank.org/source/world-development-indicators#. Accessed December 8, 2021.

[4] Beghin, J., Disdier, A.-C., Marette, S. and Tongeren, F. van (2012). Welfare Costs and Benefits of Nontariff Measures in Trade: A Conceptual Framework and Application. World Trade Review, 11(3), 356-375.

[5] Gourdon, J., Stone, S. and Tongeren, F. van (2020). Non-tariff Measures in Agriculture, OECD Food, Agriculture and Fisheries Papers, No. 147. Paris: OECD Publishing.

[6] The simulated intensive and extensive margins in Table 2 are calculated by the following formula: (please see endnote 6 of pdf document for actual notation), where is the exponential, (please see endnote 6 of pdf document for actual notation) is the estimated coefficient of regulatory distance on the intensive or extensive margin of agricultural trade, and (please see endnote 6 of pdf document for actual notation) is the change in regulatory distance.

[7] http://www.gms-cbta.org/cross-border-transport-agreement

[8] WTO Website, available at https://www.wto.org/english/tratop_e/sps_e/spsagr_e.htm

[9] WTO Website, available at https://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm

[10] As of 7 December 2021, the RCEP has been ratified by five GMS countries, namely Cambodia, China, Laos, Thailand and Vietnam.

[11] Menon, J. and Roth, V. (eds.) (2022). Agricultural Trade between China and the Greater Mekong Subregion Countries: A Value Chain Analysis. Singapore: ISEAS – Yusof Ishak Institute.

Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha.
Managing Editor: Ooi Kee Beng
Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng
Comments are welcome and may be sent to the author(s).

2022/47 “The Russia-Ukraine War and its Potential Impact on Russia’s Arms Sales to Southeast Asia” by Ian Storey

Russian President Vladimir Putin attends an ASEAN summit via a video link at his residence outside Moscow on 28 October 2021. Evgeny PAULIN/Sputnik/AFP.

EXECUTIVE SUMMARY

Russia has been the largest exporter of arms to Southeast Asia over the past two decades but since 2014 the value of its defence sales to the region has fallen sharply.

Russia’s invasion of Ukraine will not only make it difficult for the country’s defence industry to revive sales but will likely lead to a further decline in arms exports to Southeast Asia.

Economic sanctions imposed by the United States, European and Asian countries will make it harder for Russian defence companies to conduct financial transactions while export controls will restrict their access to high-tech components.

The Russian armed forces’ poor performance on the battlefield has caused significant reputational damage to Russian-manufactured military hardware.

If Russia becomes more dependent on China for economic and military assistance, Beijing may apply pressure on Moscow to reduce sales of offensive weaponry to Vietnam.

The problems facing Russia’s defence-industrial sector will create market opportunities in Southeast Asia for other countries, including China.

*Ian Storey is Senior Fellow and co-editor of Contemporary Southeast Asia at the ISEAS –Yusof Ishak Institute.

ISEAS Perspective 2022/47, 5 May 2022

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INTRODUCTION

Since President Vladimir Putin took office in 2000, Russia’s defence-industrial sector (DIS) has played a key role in the country’s military modernisation programme, enabling the Kremlin to pursue a more assertive foreign policy in the post-Soviet space, Europe and the Middle East. In addition, Russia’s DIS provides employment for over a million workers and generates foreign currency revenues through the sale of military hardware to overseas customers.

Today, Russia is the world’s second largest arms exporter after the US. In Southeast Asia, however, it ranks number one. Between 2000 and 2021, the value of Russia’s arms exports to the region was US$10.87 billion, followed by the US (US$8.4 billion), France (US$4.3 billion), Germany (US$2.94 billion) and China (US$2.9 billion).[1]

Russia’s most important defence customers in Southeast Asia are Vietnam, Myanmar, Malaysia and Indonesia (see Table 1). Russia has offered for sale to these countries a full range of military equipment (from fighter jets and submarines, to tanks and small arms) at prices which are cheaper than those manufactured in the US and Europe. In addition, Russian defence companies have been willing to accept part-payment in commodities, pursue joint production, and, unlike the US and European countries, they do not take into consideration a country’s human rights record when selling arms. Moreover, some countries, such as Vietnam until 2016, and Myanmar, Cambodia and Laos to date, have been unable to procure Western-manufactured arms due to sanctions, leaving them little choice but to buy from Russia or China.[2]

Table 1: Russia’s Arms Sales to Southeast Asian Countries, 2000-2021 (US$ millions)

	Cambodia	Indonesia	Laos	Malaysia	Myanmar	Thailand	Vietnam	Total
2000			7				2	9
2001				1	87		89	177
2002		11		46	134		54	245
2003		229		16			2	247
2004		27			120		294	441
2005					137		164	301
2006			4		151		16	171
2007				398	127		2	527
2008		41		400	14	3	164	622
2009		165		399	14		53	631
2010		191			47		149	387
2011		58			382	20	974	1,434
2012		19	14	2	144		760	939
2013		351		12	55		313	731
2014		54			28		1,056	1,138
2015					12	14	735	761
2016							702	702
2017					69		465	534
2018			66		72	14	333	485
2019			18		31		137	186
2020			17		64	20	9	110
2021	5	9	3				72	89
Total	5	1,155	129	1,274	1,688	71	6,545	10,867

Source: Data compiled from Stockholm International Peace Research Institute (SIPRI), https://www.sipri.org/databases/armstransfers

Figure 1 shows arms exports to the region by the top five country suppliers over the past 21 years. While the value of sales from all five countries has fluctuated, Russia’s arms sales to Southeast Asia have declined sharply over the past seven years―from US$1.2 billion in 2014 to just $89 million in 2021. Four main reasons account for this.

Figure 1: Arms Exports to Southeast Asia From Top 5 Country Suppliers, 2000-2021 (US$ million)

Source: Data compiled from Stockholm International Peace Research Institute (SIPRI), https://www.sipri.org/databases/armstransfers

First, Moscow’s annexation of Crimea and support for separatist forces in the Donbass region of Ukraine in 2014 led the US and European countries to impose sanctions and export controls on Russia’s DIS. In addition, the conflict brought to an abrupt end longstanding and extensive cooperation between Ukrainian and Russian defence companies, especially in the production of engines for surface ships, helicopters and aircraft.[3] As a result of Moscow’s actions in Ukraine, the DIS’ manufacturing processes were disrupted and its reputation for quality and timeliness of deliveries was negatively affected.

Second, Russia’s biggest customer in Southeast Asia, Vietnam, has paused its military modernisation programme, partly because of concerns over Moscow’s ability to fulfill orders but also due to an anti-corruption drive.[4] Vietnam’s last defence orders with Russia were in 2016 (for 64 T-90 tanks) and 2019 (for 12 Yak-130 training/light combat aircraft). To make up for falling orders in Vietnam, Russia’s DIS has tried to penetrate new markets, including US allies Thailand and the Philippines, but with limited success.[5] Following the February 2021 coup in Myanmar, Russia moved quickly to strengthen relations with the junta, with a view to increasing defence sales to the country and displacing China as its primary arms vendor.[6] Although the junta has responded positively to Moscow’s overtures―Myanmar was the only ASEAN member to explicitly endorse Russia’s invasion of Ukraine[7]―it has yet to place any major defence orders with Russia since the coup. Myanmar’s government has alluded to the potential problems the Ukraine conflict may cause to future Russian arms exports to the country.[8] If Russia cannot fulfill the junta’s military requirements, Myanmar may be forced to increase its reliance on China.

Third, in 2017 the Trump administration signed into law the Countering America’s Adversaries Through Sanctions Act (CAATSA). CAATSA allows the US government to impose sanctions against individuals or countries that have commercial dealings with Russia’s DIS, although the President can ask Congress for a waiver on national security grounds. The Trump administration used CAATSA selectively, sanctioning only entities in China and Turkey.[9] However, the threat of CAATSA sanctions appears to have been the decisive factor in the Philippines’ decision not to pursue a defence contract with Russia for the provision of two submarines in 2020, and Indonesia’s decision to cancel an order for 11 Russian-made SU-35 Flanker fighter jets in December 2021 in favour of US and French fast jets.[10]

Fourth, Russia’s DIS has faced growing competition from American and European defence corporations, as well as relative newcomers from countries such as China and South Korea.

POST-INVASION FACTORS AFFECTING RUSSIAN ARMS SALES TO SOUTHEAST ASIA

Russia’s invasion of Ukraine on 24 February 2022 will make it difficult for the country’s DIS to revive sales, and will in all likelihood lead to a reduction in Moscow’s arms exports to Southeast Asia. This is due to the imposition of tighter sanctions and export controls by a number of countries, the reputational damage caused by the poor performance of Russia’s armed forces in Ukraine, and its need to replenish battlefield losses. Over the long term, if Russia becomes more dependent on China, Beijing may pressure Moscow to reduce sales of certain kinds of weaponry to Vietnam.

Sanctions and Export Controls

Following Moscow’s invasion of Ukraine, the US, European Union (EU) and Britain tightened economic pressure on Russia by imposing new and more wide-ranging economic sanctions and stricter export controls on dual-use technologies. They were soon joined by several advanced industrial economies in Asia including Japan, South Korea, Taiwan and Singapore. These measures are designed to punish Russia for its military aggression in the hope that economic hardship will force the Kremlin to withdraw its forces from Ukraine. These measures will impact Russia’s DIS in two important ways.

First, sanctions on Russian banks, and their exclusion from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international payment network, will make it harder for the country’s DIS to conduct financial transactions with overseas clients. An early indication of the problems faced by Moscow became clear when the majority of Russian defence companies―including state-run Rosoboronexport which is responsible for the country’s defence sales― were forced to withdraw from the 17^th Defence Services Asia (DSA) Exhibition and Conference held in Kuala Lumpur from 28 to 31 March because they could not pay the exhibition fees.[11] At the 2018 DSA, 14 Russian defence companies had exhibited their products.[12] For the same reason, no Russian defence firms participated in the Asian Defense And Security (ADAS) exhibition in Manila in late April.

Regarding CAATSA, as yet, there is no indication that the Biden administration will apply CAATSA sanctions more extensively against countries that buy arms from Russia, including Vietnam. At this point in time, it seems unlikely that Washington would impose CAATSA sanctions against Vietnam. The Biden administration has made improving ties with Vietnam, and upgrading their relationship to a strategic partnership, a priority in Southeast Asia.[13] In addition, as noted earlier, Vietnam has not placed any major orders with Russia over the past few years, though it is reportedly interested in buying additional Russian-made fighter aircraft such as the SU-35[14] and possibly even fifth-generation SU-57 or SU-75 ‘Checkmate’ stealth fighters.[15] However, Washington may use the prospect of CAATSA sanctions to persuade Hanoi to procure non-Russian arms, as it did with Indonesia. But even if Vietnam does decide to proceed with further arms purchases from Russia, the Biden administration could request a congressional waiver in view of Hanoi’s disputes with Beijing in the South China Sea.

Second, export controls imposed on Russia will restrict its DIS access to advanced technologies critical in the manufacture of modern military hardware and which Russia itself does not produce and cannot easily purchase from other countries.[16] These include semiconductors, microelectronics, machine tools and software. This will not only affect the production of military equipment for use by Russia’s armed forces and overseas buyers, but also the provision of spare parts, munitions and upgrade packages to existing customers. As a consequence, foreign buyers may decide to switch to more reliable sources of military hardware.

Reputational Damage and Recapitalising Russia’s Armed Forces

Contrary to the expectations of Western analysts―and presumably the Kremlin itself―Russia’s military campaign in Ukraine has to date gone very badly. In the opening stages of the conflict, Russia’s armed forces failed to capture the capital Kyiv and replace the government of President Volodymyr Zelenskyy with a pro-Moscow regime. Russia’s air force failed to destroy Ukraine’s air defences and gain air superiority. Moscow failed to anticipate the strong resistance of the Ukrainian armed forces and people, and the Zelenskyy government has gained the upper hand in the information war. Russian tanks, armoured vehicles and trucks have been destroyed in large numbers.[17] Estimates of Russian military personnel killed in action range from 10,000 to 20,000, plus tens of thousands of battlefield casualties.[18]

The poor performance of Russia’s armed forces can be attributed to a number of factors, including poor planning and leadership, inadequate training, low morale among Russian troops and weak logistical support which has left soldiers on the frontlines without food, fuel and munitions.[19] The Russian army’s high attrition rate of military vehicles is partly the result of the Ukrainian army’s effective use of Western-supplied shoulder-fired missiles (such as US-made Javelins and the Anglo-Swedish Next Generation Light Anti-tank Weapon) and Turkish-manufactured Bayraktar TBT drones. Russian vehicles also appear to have been poorly constructed and maintained.[20] On 14 April the Ukrainian armed forces used anti-ship cruise missiles to sink the guided-missile cruiser Moskva in the Black Sea, the largest naval vessel to be destroyed since World War Two. Endemic corruption within the armed forces―resulting in modernisation funds being misappropriated― may also have been a factor in its poor performance.

The war in Ukraine is a public relations disaster for Russia’s DIS. Images of wrecked and abandoned vehicles call into question the quality and reliability of Russian-manufactured military hardware. In addition, much of the equipment deployed by Russia is based on Soviet-era designs (such as the T-90 tank which is based on the 50-year old T-72) and highlights the lack of innovation within the country’s DIS. Some of the military equipment which has been destroyed on the battlefield has been purchased by Southeast Asian countries. These include tanks (Vietnam and Laos), infantry fighting vehicles and armoured personnel carriers (Indonesia), military attack and transport helicopters (Indonesia, Malaysia, Myanmar, the Philippines and Vietnam) and air defence systems (Myanmar). Russia’s most lucrative defence export to the region is combat aircraft, including SU-27/30 Flankers and MiG-29 Fulcrums. The reputation of Russian manufactured jets took a hit on 7 April when one of its most advanced fighters, a fourth-generation-plus SU-35, was shot down by an anti-aircraft missile over Ukraine. As mentioned previously, Vietnam has reportedly considered purchasing the SU-35, though to what extent this incident will influence its procurement decision remains to be seen.[21]

The high attrition rates of equipment suffered by Russia’s armed forces may have other implications for the country’s defence exports. To replenish its heavy losses, Moscow may direct the DIS to divert military equipment manufactured for export to recapitalise its own armed forces. This will result in delivery delays and possibly cancellations, further damaging the DIS’ reputation for reliability.

The China Factor

China has refused to condemn Russia’s invasion of Ukraine and instead blamed the conflict on NATO’s eastward expansion. As the war looks set to drag on for months and possibly years, and sanctions increasingly disrupt Russia’s economy, Moscow’s dependence on Beijing may deepen. Although Russia’s invasion violates a number of China’s cherished core foreign policy principles (including respect for the sovereignty, territorial integrity and independence of states), Beijing will probably provide Russia with economic support and military assistance in the form of equipment and munitions. In return, China will seek quid quo pros, probably including discounted energy imports, increased access to the Russian DIS’ most sensitive military technology and greater support for its ‘core interests’ in Asia such as Taiwan and the South China Sea. On the South China Sea, Beijing may prevail upon Moscow to draw-down its commercial energy operations in Vietnam’s exclusive economic zone (as Russia’s biggest energy company Rosneft has already done)[22] and phase out sales of offensive weaponry to Hanoi that complicate China’s irredentist aims in the South China Sea. Russia would be loath to reduce military sales to Vietnam as it is the Kremlin’s closest defence partner in Southeast Asia and pressure by Beijing to do so might open a potential fault line in Russia-China relations. If Moscow does reluctantly agree to Beijing’s requests, it would be a major blow to Vietnam as over 80% of its military hardware is manufactured in Russia and its armed forces will be dependent on Russia’s DIS for spare parts, upgrades and munitions for many years to come. Although changing suppliers would be very costly and time consuming, the strengthening of the Russia-China nexus as a result of the war will likely force Hanoi to seriously consider alternative sources of arms imports.

CONCLUSION

Russia’s invasion of Ukraine is likely to create severe problems for its DIS, resulting in falling overseas arms sales, including to Southeast Asian countries. Sanctions will make it difficult for Russian defence companies to receive payments from foreign customers, and export controls will severely restrict their access to high-tech components. The Russian armed forces’ dire performance in Ukraine has damaged the reputation of Russian-manufactured equipment, and export orders may be diverted to replenish battlefield losses. The DIS will look for workarounds, including closer collaboration with defence companies in countries that have not imposed sanctions and export controls on Russia, including in China and India. Moscow may be more willing to accept larger part payments in commodities from countries such as Vietnam and Myanmar. Russia’s problems will create market opportunities for defence companies in other countries, such as Europe, Israel, Turkey, China and South Korea.

ENDNOTES

Acknowledgements: The author would like to thank Darren Cheong at ISEAS for his research assistance.

[1] Data compiled from Stockholm International Peace Research Institute (SIPRI), https://www.sipri.org/databases/armstransfers.

[2] See Ian Storey, “Russia’s Defence Diplomacy in Southeast Asia: A Tenuous Lead in Arms Sales but Lagging in Other Areas”, Perspective, No. 33 (18 March 2021), /wp-content/uploads/2021/03/ISEAS_Perspective_2021_33.pdf.

[3] Tomas Malmlöf, “Russia’s Arms Exports: Successes and Challenges”, Revue Défense Nationale 7, No.802 (2017), https://www.cairn.info/revue-defense-nationale-2017-7-page-64.htm.

[4] Le Hong Hiep, “Will Vietnam be able to Wean Itself off Russian Arms?”, Fulcrum (4 April 2022), https://fulcrum.sg/will-vietnam-be-able-to-wean-itself-off-russian-arms/; Nguyen The Phuong, “Why is Vietnam’s Military Modernisation Slowing?”, Perspective, No. 96/2021, ISEAS-Yusof Ishak Institute (22 July 2021), /wp-content/uploads/2021/06/ISEAS_Perspective_2021_96.pdf.

[5] Storey, “Russia’s Defence Diplomacy in Southeast Asia”.

[6] Ian Storey, “The Russia-China Strategic Partnership and Southeast Asia: Alignments and Divergences”, Perspective, No. 117 (6 September 2021), /wp-content/uploads/2021/08/ISEAS_Perspective_2021_117.pdf.

[7] “Myanmar’s Military Council Supports Russia’s Invasion of Ukraine”, VOA, 25 February 2022, https://www.voanews.com/a/myanmar-s-military-council-supports-russia-s-invasion-0f-ukraine/6458527.html

[8] “Junta Watch: Myanmar Military ‘Not Worried’ as World Shuns Main Supplier Russia”, The Irrawaddy, 5 March 2022,https://www.irrawaddy.com/news/burma/junta-watch-myanmar-military-not-worried-as-world-shuns-main-supplier-russia.html

[9] Lesley Wroughton and Patricia Zengerle, “U.S. sanctions China for buying Russian fighter jets, missiles”, Reuters, 21 September 2018, https://www.reuters.com/article/us-usa-russia-sanctions/u-s-sanctions-china-for-buying-russian-fighter-jets-missiles-idUSKCN1M02TP.

[10] Frances Mangosing, “US sanctions could kill PH plan to get heavy-lift choppers from Russia”, Philippine Daily Inquirer, 17 December 2020, https://globalnation.inquirer.net/192739/us-sanctions-could-kill-ph-plan-to-get-heavy-lift-choppers-from-russia; Yannick Smaldore, “Euronaval: Naval Group Confirms Negotiations With The Philippines For Submarine Sale”, Naval News, 19 October 2020, https://www.navalnews.com/event-news/euronaval-2020/2020/10/euronaval-naval-group-confirms-negotiations-with-the-philippines-for-submarine-sale/; Mike Yeo, “Indonesia gives up on Russian aircraft purchase, instead turning to US and French options”, Defense News, 23 December 2021, https://www.defensenews.com/air/2021/12/22/indonesia-gives-up-on-russian-aircraft-purchase-instead-turning-to-us-and-french-options/.

[11] Two Russian companies did participate in DSA 2022 though both only sold software and had Malaysian subsidiaries. Adrian David “Russia, Belarus and Ukraine out of DSA 2022”, New Straits Times, 10 March 2022, https://www.nst.com.my/news/nation/2022/03/778600/russia-belarus-and-ukraine-out-dsa-2022.

[12] See DSA 2018 Exhibitors’ Index, https://www.dsaexhibition.com/data/editor/images/product-index/37-76_DSA%202018%20Dir_2-Exh%20Index_R2.pdf.

[13] “US priority is upgrading relationship with Vietnam: US Ambassador”, Vietnam Express, 20 April 2022, https://e.vnexpress.net/news/news/time-to-upgrade-us-vietnam-relationship-says-us-envoy-4453788.html.

[14] “Vietnam Orders $350M Combat Training Jets From Russia – Vedomosti”, Moscow Times, 29 January 2020, https://www.themoscowtimes.com/2020/01/29/vietnam-orders-350m-combat-training-jets-from-russia-vedomosti-a69074.

[15] “Vietnam To Become 1st Country To Get Russian SU-57 5th Generation Fighter Jets”, Eurasian Times, 8 January 2019, https://eurasiantimes.com/vietnam-to-become-1st-country-to-get-russian-su-57-5th-fighter-jets/; “Russia unveils stealth fighter jet to compete with US F-35s”, Straits Times, 21 July 2021, https://www.straitstimes.com/world/europe/russia-unveils-stealth-fighter-jet-to-compete-with-us-f-35s; Vladimir Karnozov, “Russia targets low cost, high performance with SU-75 Checkmate fighter”, Flight Global, 21 July 2021, https://www.flightglobal.com/defence/russia-targets-low-cost-high-performance-with-su-75-checkmate-fighter/144693.article.

[16] Paul Goble, “Russia’s Defense Industry Struggles to Deliver Putin’s Promised Weapons”, Eurasia Daily Monitor 17, No. 28 (27 February 2020), https://jamestown.org/program/russian-defense-industry-struggles-to-deliver-putins-promised-new-weapons/.

[17] Lexi Lonas, “Ukraine claims over 20,000 Russian troops killed during invasion”, The Hill, 16 April 2022, https://thehill.com/policy/international/3270702-ukraine-claims-over-20000-russian-troops-killed-during-invasion/.

[18] Ibid.

[19] Bonnie Berkowitz and Artur Golacha, “Why the Russian military is bogged down by logistics in Ukraine”, Washington Post, 30 March 2022, https://www.washingtonpost.com/world/2022/03/30/russia-military-logistics-supply-chain/.

[20] “Poorly made Chinese tires – A new theory on Russia’s slow advance”, Defence Connect, 4 March 2022, https://www.defenceconnect.com.au/land-amphibious/9612-poorly-made-chinese-tires-a-new-theory-on-russia-s-slow-advance; Serina Sandhu, “Ukraine war: Burst tyre on army truck suggests Russia has failed to keep military kit maintained, expert says”, i-news, 3 March 2022, https://inews.co.uk/news/world/ukraine-war-burst-tyres-army-truck-shows-russa-failed-keep-military-kit-maintained-expert-1496186.

[21] “Vietnam Orders $350M Combat Training Jets From Russia – Vedomosti”, Moscow Times, 29 January 2020, https://www.themoscowtimes.com/2020/01/29/vietnam-orders-350m-combat-training-jets-from-russia-vedomosti-a69074.

[22] Storey, “The Russia-China Strategic Partnership and Southeast Asia”.

Editorial Chairman: Choi Shing Kwok
Editorial Advisor: Tan Chin Tiong
Editorial Committee: Terence Chong, Cassey Lee, Norshahril Saat, and Hoang Thi Ha.
Managing Editor: Ooi Kee Beng Editors: William Choong, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng
Comments are welcome and may be sent to the author(s).

2022/46 “Vietnam’s Peacekeeping Contributions: Drivers and Prospects” by Phan Xuan Dung and Nguyen Cao Viet Hung

Vietnamese forces taking part in the United Nations peacekeeping mission in South Sudan march with flags before their departure in Hanoi on 27 April 2022. Nhac NGUYEN/AFP.

EXECUTIVE SUMMARY

Despite being a newcomer, Vietnam has emerged as an active contributor to United Nations Peacekeeping Operations (UN PKO).

In the past, Vietnam was sceptical of such peacekeeping operations, but its quest for international integration under the Đổi Mới (Renovation) policy gradually socialised Vietnam into these peacekeeping norms.

Vietnam’s growing peacekeeping commitments are also motivated by perceived gains from joining UN PKO, namely strengthened national defence capabilities and enhanced international reputation.

Vietnam aims to scale up peacekeeping participation but will abstain from coercive or combat activities.

Championing women’s participation in peacekeeping could be a niche diplomacy area for Vietnam, given the country’s success in this regard and its efforts in advancing the UN agenda on women, peace and security.

*Phan Xuan Dung is a research officer at the Vietnam Studies Programme of the ISEAS – Yusof Ishak Institute, Singapore. Nguyen Cao Viet Hung is an MA student at the Graduate School of Political Science, Waseda University, Japan.

ISEAS Perspective 2022/46, 29 April 2022

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INTRODUCTION

Participation in United Nations peacekeeping operations (UN PKO) has been a major item in Vietnam’s foreign policy and defence diplomacy over the past decade. In 2013, the Politburo of the Communist Party of Vietnam (CPV) ratified the Master Plan on Vietnam’s Participation in UN PKO,[1] and the Vietnamese National Assembly subsequently amended the Constitution to allow armed soldiers to be deployed overseas.[2] In 2014, Vietnam established the Vietnam Peacekeeping Centre—which was later upgraded to the Vietnam Department of Peacekeeping Operations (VDPO)—and began sending officers to peacekeeping missions. In November 2020, the National Assembly unanimously passed Resolution 130/2020/QH14, providing a comprehensive legal framework for Vietnamese troops to engage in peacekeeping activities.[3]

Despite being a newcomer, Vietnam has emerged as an active contributor to UN PKO. Since 2014, Vietnam has deployed 512 personnel to UN headquarters and peacekeeping missions in South Sudan and Central Africa.[4] These include 76 military officers (military advisors, observers and liaison officers), 252 medical personnel of level-2 field hospitals, and 184 sappers.

This paper analyses the rationale behind Vietnam’s peacekeeping contributions. We posit two drivers behind this trend: Vietnam’s socialisation into peacekeeping norms and its expectation to strengthen its national defence capabilities and enhance its international reputation. The paper will also assess Vietnam’s future peacekeeping contributions.

VIETNAM’S SOCIALISATION INTO PEACEKEEPING NORMS

Vietnam’s recent enthusiasm with regard to peacekeeping contributions was a complete departure from its previous position. In 1993, UN Secretary General Boutros Boutros-Ghali raised the idea of Vietnam participating in UN PKO, but Hanoi was not fond of the suggestion.[5] From 1975 until 1994, Vietnam even eschewed paying its annual peacekeeping levy as a UN member.[6] One apparent reason behind Vietnam’s indifference to UN PKO for such a long time was the lack of resources for external commitments. Facing several challenges to its post-war economic management, Vietnam was preoccupied with domestic issues and thus could not afford to pursue what it saw as expensive policy objectives. But even if Vietnam had managed to overcome the problem of insufficient resources, it would still have been reluctant to support UN PKO for other reasons. In a piece published on the website of VDPO, Deputy Foreign Minister Le Hoai Trung lists three considerations that informed Vietnam’s former unfavourable view of UN PKO.[7] First, due to the country’s historical experience of foreign invasions, Vietnam was averse to sending troops overseas and perceived peacekeeping activities as a tool for the United States and Western nations to infringe upon other countries’ sovereignty and territorial integrity. Second, Vietnam was concerned about several risks associated with UN PKO such as potential political complications, risks to human lives, and risks of great power manipulation. Third, Vietnam was new to this field and lacked relevant knowledge, experience and participation capacity.

However, these reservations gradually dissipated as Vietnam opened up and embarked on international integration under its market-based economic reforms since the late 1980s. Back then, in order to ensure its survival, Vietnam aimed at creating a stable and peaceful external environment conducive to its internal socio-economic development. Thus, improving its external relations toward peace and cooperation became a foreign policy priority. At its 7^th National Congress in 1991, the CPV stated that Vietnam “wants to become friends with all countries in the world community.”[8] The once-pariah state then embarked on a quest to mend ties with neighbouring and Western countries. This culminated in Vietnam’s accession to ASEAN in 1995 and its diplomatic normalisation with the United States in the same year. Subsequently, the Political Report of the 9^th CPV National Congress in 2001 stated that Vietnam would multilateralise and diversify its relations and be “ready to become a reliable friend and partner to countries in the world community, striving for peace, independence, and development.”[9]

With the economic benefits and diplomatic success attained under the new foreign policy, Vietnam gained the confidence to deepen engagement with the broader international community. By the latter half of the 2000s, Vietnam had entered a phase of “proactive international integration”, moving beyond economic cooperation and venturing into other areas. The 10^th CPV National Congress in 2006 reiterated the principles of multilateralisation and diversification of foreign relations but further stressed that Vietnam ought to “participate proactively in regional and international mechanisms” and conduct “defence and security diplomacy.”[10] Subsequent party congresses continued to reaffirm these foreign policy directions, which provided the conditions for Vietnam to be socialised into peacekeeping norms.

Hanoi began seriously considering the possibility of participating in UN PKO in 2003 when Indonesia, the ASEAN Chair that year, suggested the formation of a regional peacekeeping force.[11] By that time, ASEAN’s five original members—Indonesia, Malaysia, the Philippines, Thailand and Singapore—had all contributed to peacekeeping missions. While remaining hesitant, in 2004 and 2005, Vietnamese officials frequently alluded to the possibility of Vietnam contributing to UN PKO in response to ASEAN discussions on the topic and as a way to strengthen the country’s bid for non-permanent membership of the United Nations Security Council (UNSC).[12] From 2005, the Ministry of Foreign Affairs (MOFA) began organising interagency groups on UN PKO, which comprised of representatives from various bodies, such as MOFA, Ministry of National Defence, Ministry of Public Security, Ministry of Finance, Government Office, Office of the National Assembly, and Office of the Central Committee of the CPV.[13] These groups conducted field trips and joined international conferences to study UN peacekeeping missions and the experiences of other countries, thereafter advising MOFA and the Politburo on Vietnam’s participation in peacekeeping activities. Also from 2005, Vietnam People’s Army (VPA) officers started to be sent to overseas training courses on peacekeeping, which exposed them to international and regional peacekeeping norms.[14]

Vietnam’s non-permanent membership in the UNSC (2008-09) also deepened its interest in UN PKO. Having gained a better understanding of the critical role of blue-helmet soldiers in providing security and protecting civilians in conflict zones, Vietnamese representatives to the UN frequently voiced their country’s support for peacekeeping activities.[15] A concomitant perception shift occurred at home. Vietnam’s 2009 Defence White Paper became the country’s first defence white paper that mentioned peacekeeping, noting that “Vietnam greatly appreciates the role of the UN and regards the peacekeeping operations as an important function of the UN.”[16]

Through deepened interactions with the international community, Vietnam was convinced that peacekeeping participation would not be at odds but compatible with its overarching foreign policy goals of peace, diversification, multilateralisation, and proactive international integration. Today, Vietnam has fully reckoned that if it wants to be seen as “a responsible member of the international community,” it needs to become a peacekeeper donor country and internalise peacekeeping norms. This thinking is reflected in Vietnam’s 2019 Defence White Paper, which notes that:

As a responsible member of the international community, Viet Nam is keen on fulfilling its duties while actively cooperating with other nations to address emerging security issues, contributing to the protection of peace and stability in the region and the world. Viet Nam appreciates the role of the UN in peacekeeping operations and prevention of conflict and war. Viet Nam upholds standards and norms of international relations set forth in the Charter of the United Nations [emphasis added]. [17]

PERCEIVED BENEFITS FROM PEACEKEEPING PARTICIPATION

Two perceived benefits are behind Hanoi’s peacekeeping commitments: Enhanced national defence capabilities and increased international reputation.

Enhanced National Defence Capabilities

Vietnamese defence officials believe that peacekeeping participation can help strengthen the country’s defence capabilities. An article on the website of VDPO suggests that Vietnam’s venture into peacekeeping contributes to “the building of [a] revolutionary, formal, elite and increasingly modern People’s Army.”[18] One reason is that Vietnam’s peacekeeping cooperation with other countries attracts foreign defence-related resources and assistance for the VPA. At a conference reviewing Vietnam’s involvement in peacekeeping operations from 2012 to 2020, Senior Lieutenant General Nguyen Chi Vinh, then-Deputy Defence Minister, asserted that participating in UN PKO had become a pillar in the VPA’s defence diplomacy and a spotlight in its multilateral cooperation.[19] So far, Vietnam has signed memorandums of understanding on peacekeeping cooperation with nine countries, the UN and the European Union.[20] Some partners, such as the United States, France, Japan and Australia, have supported Vietnam with training, facilities, equipment, vehicles and transportation of peacekeepers to UN PKO.[21] Vietnamese personnel can therefore acquire defence-related experiences and foreign-language skills necessary for their missions from foreign partners. Peacekeeping partnerships also serve as confidence-building measures between the VPA and other armies, laying the ground for future cooperation and interoperability in other areas.

Participation in UN PKO also facilitates Vietnam’s exchange of best practices and critical information with other countries on a wide range of civil and defence matters, especially in the context of modern warfare and traditional and non-traditional security threats. As Senior Lieutenant General Vinh noted, Vietnam’s greater involvement in international security affairs through UN PKO complements the national strategy of “preventing the risks of war and conflict from afar.”[22] The strategy entails proactively identifying and neutralising potential threats to Vietnam’s national interests at an early stage, during peacetime, and with the long-term goal of preserving a stable and peaceful environment for internal socio-economic development. By gaining insights on the ground and through UN discussions on peacekeeping missions, Vietnamese policymakers can better grasp the causes of conflict and ways to manage them, thereby refining national defence strategy. In other words, Vietnam sees peacekeeping participation as a means to shape external conditions in its favour.

Increased International Reputation

Vietnam’s contribution to UN PKO can also help the country gain credibility as a responsible UN member, augmenting its overall global diplomatic standing. Notably, Vietnam’s growing peacekeeping profile was a factor behind its successful bid for the UNSC non-permanent membership for the 2020-21 term. According to Dang Dinh Quy, Permanent Representative of Vietnam to the UN, Vietnam’s peacekeeping activities elevate its image and relations with the UN while providing critical information for the country to fulfil its UNSC duties effectively.[23] Vietnam has also been recognised for promoting women’s empowerment in peacekeeping. A 2020 background paper by the Vietnam office of the UN Development Programme (UNDP) notes that the country is a successful case regarding increasing the proportion of women in deployed troops, at 16 per cent.[24] This figure is higher than the UN’s recommended proportion of 15 per cent—a fact frequently cited by Vietnamese media and officials. The UN has chosen Vietnam as the venue to organise several training programmes for peacekeepers from regional countries. This decision reflects the organisation’s high regard for Hanoi’s growing peacekeeping profile.

In addition to peacekeeping duties, the VPA tasks its peacekeepers with an auxiliary mission of acting as “peace messengers” to promote the virtues of “Uncle Ho’s soldiers”,[25] the VPA’s “tradition of heroism”, and positive aspects of the Vietnamese nation and people.[26] Outside of their official missions, Vietnamese blue helmets often volunteer to help the host countries’ people with daily tasks, provide education for local children, and organise programmes to introduce Vietnamese culture and cuisine to the local population. These activities help burnish Vietnam’s image as a reliable, friendly and peace-loving nation.

Since improving international prestige is an objective of its peacekeeping contributions, Vietnam is attuned to how its peacekeepers have been lauded for their dedication and professionalism. According to President Nguyen Xuan Phuc, UN Secretary-General Antonio Guterres told him that Vietnamese personnel had fulfilled their duties in an excellent manner and acted as exemplars for peacekeepers from other countries.[27] In an international symposium, Deputy Defense Minister Hoang Xuan Chien remarked that Vietnamese female soldiers had been “highly appreciated by the United Nations for their professionalism, ability to fulfil missions and becoming a highlight in many UN activities in field missions.”[28] Meanwhile, Major General Hoang Kim Phung, Director of VDPO, claimed that the UN’s and international friends’ recognition of Vietnam’s contributions was his department’s “biggest success.”[29] These statements highlight how attentive leaders in Hanoi are to international perception of Vietnam as a peacekeeping contributor.

PROSPECTS OF VIETNAM’S PEACEKEEPING CONTRIBUTIONS

In the coming years, boosting peacekeeping contributions will remain a major diplomatic and defence task for Vietnam. The Political Report of the 13^th CPV National Congress in 2021 reaffirms the Party’s vision for national defence and foreign policy priorities, which emphasises a peaceful external environment, protection of the Homeland from afar, enhanced defence diplomacy, and effective and proactive participation in multilateral organisations, including the UN.[30] It specifically notes that Vietnam should step up international cooperation and integration on defence and security, and contribute positively and effectively to UN PKO. President Phuc, who is also Chairman of the National Defence and Security Council, has asked the VPA to study and participate in more peacekeeping fields, enlarge the number of peacekeepers, and explore more operating geographical areas.[31]

In terms of future personnel deployments, Vietnam is considering foot soldiers, police officers, and helicopter troops.[32] Hanoi is keen on enhancing the effectiveness of its peacekeeping contributions by focusing on capacity-building, aiming to be a leading nation in the region in the field. Notably, Vietnam has sought support from the UN to upgrade its peacekeeping training centre into an Asia-Pacific regional facility, focusing on engineering, medical, foreign language and legal training.[33] Going forward, Vietnam should conduct more policy research, increase budget for VDPO, and expand international collaboration on peacekeeping to realise these objectives and further enhance the performance of its blue helmets.

At the same time, Vietnam will abstain from coercive and combat activities, limiting its participation to consulting, humanitarian and logistical tasks. The country is cautious about appearing to side with a coalition against another country, which would contravene its key defence principles and hamper its endeavour to befriend all nations. Hanoi has therefore reached an agreement with the UN to allow Vietnamese personnel to retain the right to forgo missions that would affect Vietnam’s bilateral relationships or go against Vietnamese soldiers’ mannerisms.[34]

Acknowledging the vital role of women in different stages of peacebuilding and post-war reconstruction,[35] Vietnam has actively advanced the UN agenda on women, peace and security (WPS). From November 2020 to March 2022, Vietnam and UN agencies co-organised four international conferences on WPS, three of which took place during Vietnam’s tenures as non-permanent member of the UNSC (2020-21) and ASEAN Chair (2020).[36] As a co-chair of the Expert Working Group on UN Peacekeeping under the ASEAN Defence Ministers Meeting-Plus (2021-23), Hanoi has also been working to ensure that the topic of women in peacekeeping is high on the group’s agenda.[37] Building upon its success in increasing the proportion of female personnel in the peacekeeping force, Vietnam now aims to bring the percentage of women working at level-2 field hospitals from the current 21 per cent to 25 per cent.[38] Given its experience and efforts in implementing WPS, Vietnam should designate the promotion of women’s role in peacekeeping as a niche area within its multilateral and defence diplomacy. Doing so will reinforce Vietnam’s image as a responsible member of the UN while making a meaningful impact toward the betterment of global security governance.

ENDNOTES

[1] Chi Vinh Nguyen, “Participation in the UN Peacekeeping Operations – an Important Mission of the Military in the New Period,” National Defense Journal, November 6, 2018, http://tapchiqptd.vn/en/theory-and-practice/participation-in-the-un-peacekeeping-operations-%E2%80%93-an-important-mission-of-the-military-in-/12745.html.

[2] David Capie, “Evolving Attitudes to Peacekeeping in ASEAN” (17^th International Symposium on Security Affairs, National Institute for Defense Studies, Japan, 2014), 117, http://www.nids.mod.go.jp/english/event/symposium/pdf/2014/E-06.pdf.

[3] National Assembly of the Socialist Republic of Vietnam, “Resolution No. 130/2020/QH14 the Participation in the United Nations Peacekeeping Forces,” November 13, 2020, https://english.luatvietnam.vn/resolution-no-130-2020-qh14-dated-november-13-2020-of-the-national-assembly-on-the-participation-in-the-united-nations-peacekeeping-forces-195365-Doc1.html.

[4] See, “Đội Công binh và Bệnh viện dã chiến Việt Nam lên đường gìn giữ hòa bình quốc tế,” Người Lao Động, April 27,2022, https://nld.com.vn/chinh-tri/doi-cong-binh-va-benh-vien-da-chien-viet-nam-len-duong-gin-giu-hoa-binh-quoc-te-20220427090618065.htm; Hoàng Thùy, “7 Sĩ Quan Tham Gia Gìn Giữ Hòa Bình Liên Hợp Quốc ở Phái Bộ Mới,” VNExpress, January 28, 2022, https://vnexpress.net/7-si-quan-tham-gia-gin-giu-hoa-binh-lien-hop-quoc-o-phai-bo-moi-4422121.html.

[5] Capie, “Evolving Attitudes to Peacekeeping in ASEAN,” 116.

[6] Ibid.

[7] Hoài Trung Lê, “Ngoại Giao và Hoạt Động Gìn Giữ Hòa Bình Liên Hợp Quốc,” Vietnam Department of Peacekeeping Operations, March 25, 2021, http://www.vnpkc.gov.vn/tin-tuc/nghien-cuu-trao-doi/ngoai-giao-va-hoat-dong-gin-giu-hoa-binh-lien-hop-quoc.

[8] CPV, “Báo Cáo Chính Trị Của Ban Chấp Hành Trung Ương Khoá VI Trình Tại Đại Hội Đại Biểu Toàn Quốc Lần Thứ VII Của Đảng” (Tư liệu Văn kiện Đảng Cộng sản Việt Nam, 2017), https://tulieuvankien.dangcongsan.vn/ban-chap-hanh-trung-uong-dang/dai-hoi-dang/lan-thu-vii/bao-cao-chinh-tri-cua-ban-chap-hanh-trung-uong-khoa-vi-trinh-tai-dai-hoi-dai-bieu-toan-quoc-lan-thu-vii-cua-dang-1800.

[9] CPV, “Báo Cáo Chính Trị Của Ban Chấp Hành Trung Ương Đảng Khoá IX Tại Đại Hội Đại Biểu Toàn Quốc Lần Thứ X Của Đảng” (Tư liệu Văn kiện Đảng Cộng sản Việt Nam, 2015), https://tulieuvankien.dangcongsan.vn/ban-chap-hanh-trung-uong-dang/dai-hoi-dang/lan-thu-x/bao-cao-chinh-tri-cua-ban-chap-hanh-trung-uong-dang-khoa-ix-tai-dai-hoi-dai-bieu-toan-quoc-lan-thu-x-cua-dang-1537.

[10] Ibid.

[11] Carlyle A. Thayer, “The Contrasting Cases of Cambodia and Vietnam: Active Engagement and Considering Engagement in United Nations Peacekeeping Operations,” in Asia-Pacific Nations in International Peace Support and Stability Operations, ed. C. Aoi and Y. Heng (New York: Palgrave Macmillan US, 2014), 229.

[12] Ibid.

[13] Lê, “Ngoại Giao và Hoạt Động Gìn Giữ Hòa Bình Liên Hợp Quốc”; Hương Giang and Thanh Tuấn, “Việt Nam Đã Sẵn Sàng Tham Gia Lực Lượng Gìn Giữ Hòa Bình!,” Tuổi Trẻ, January 29, 2014, https://tuoitre.vn/viet-nam-da-san-sang-tham-gia-luc-luong-gin-giu-hoa-binh-591742.htm; Hoàng Thùy, “Trung Tâm Gìn Giữ Hòa Bình Việt Nam Được Thành Lập,” VNexpress, May 27, 2014, https://vnexpress.net/trung-tam-gin-giu-hoa-binh-viet-nam-duoc-thanh-lap-2996223.html.

[14] Thayer, “The Contrasting Cases of Cambodia and Vietnam: Active Engagement and Considering Engagement in United Nations Peacekeeping Operations,” 235–36.

[15] See, for example, “Sudan: Vietnam Supports Mediation Efforts in Congo and Darfur,” Reliefweb, January 30, 2009, https://m.reliefweb.int/report/295703/sudan/sudan-vietnam-supports-mediation-efforts-congo-and-darfur?lang=es; BQT, “Phó Thủ Tướng Chính Phủ Phạm Gia Khiêm Sẽ Chủ Trì Phiên Thảo Luận Mở Của HĐBA,” Sức Khỏe & Đời Sống, July 11, 2008, https://suckhoedoisong.vn/pho-thu-tuong-chinh-phu-pham-gia-khiem-se-chu-tri-phien-thao-luan-mo-cua-hdba-1697264.htm; Ngọc Hà Bùi, “Việt Nam Ủng Hộ Cách Tiếp Cận Toàn Diện Vấn Đề Bảo vệ Người Dân,” Báo Chính Phủ, July 29, 2009, http://baochinhphu.vn/Utilities/PrintView.aspx?distributionid=16891.

[16] Ministry of National Defense, 2009 Vietnam National Defense (Hanoi: National Political Publishing House, 2009), 27.

[17] Ministry of National Defense, 2019 Vietnam National Defense (Hanoi: National Political Publishing House 2019, 2019), 25.

[18] Quỳnh Vân, “Để Màu Cờ Việt Nam Phủ Rộng Hơn Trên Bản Đồ Gìn Giữ Hòa Bình Thế Giới,” Vietnam Department of Peacekeeping Operation, May 28, 2021, http://www.vnpkc.gov.vn/tin-tuc/nghien-cuu-trao-doi/de-mau-co-viet-nam-phu-rong-hon-tren-ban-do-gin-giu-hoa-binh-the-gioi.

[19] Sơn Hà, “Tổng Kết Thành Tựu Việt Nam Tham Gia Hoạt Động Gìn Giữ Hòa Bình Liên Hợp Quốc Giai Đoạn 2012-2020,” Baoquocte.Vn, January 8, 2021, https://baoquocte.vn/tong-ket-thanh-tuu-viet-nam-tham-gia-hoat-dong-gin-giu-hoa-binh-lien-hop-quoc-giai-doan-2012-2020-133411.html.

[20] The nine countries with which Vietnam has signed peacekeeping MOUs are Australia, China, France, India, Japan, New Zealand, Russia, South Korea and the United States. See Kiều Giang, “Lực Lượng Gìn Giữ Hòa Bình: Góp Phần Nâng Cao vị Thế Của Việt Nam Trên Trường Quốc Tế,” Báo Điện Tử Đảng Cộng Sản Việt Nam, December 2, 2021, https://dangcongsan.vn/chao-xuan-tan-suu-2021/dat-nuoc-vao-xuan/luc-luong-gin-giu-hoa-binh-gop-phan-nang-cao-vi-the-cua-viet-nam-tren-truong-quoc-te-574148.html.

[21] VietnamPlus, “Việt Nam Tham Gia Gìn Giữ Hòa Bình LHQ,” December 30, 2019, https://special.vietnamplus.vn/2019/12/30/viet_nam_gin_giu_hoa_binh_lhq_dau_an/.

[22] Chí Vịnh Nguyễn, “Đóng Góp Của Lực Lượng GGHB LHQ Của Việt Nam Vào Chiến Lược Bảo vệ Tổ Quốc Từ Sớm, Từ Xa Trong Thời Đại Hiện Nay,” Vietnam Department of Peacekeeping Operation, March 30, 2021, http://www.vnpkc.gov.vn/tin-tuc/nghien-cuu-trao-doi/dong-gop-cua-luc-luong-gghb-lhq-cua-viet-nam-vao-chien-luoc-bao-ve-to-quoc-tu-som-tu-xa-trong-thoi-dai-hien-nay.

[23] Đình Quý Đặng, “Đóng Góp Của Lực Lượng GGHB LHQ Của Việt Nam Đối Với Nhiệm Kỳ Ủy Viên Không Thường Trực Hội Đồng Bảo an Liên Hợp Quốc 2020 – 2021 Của Việt Nam,” Vietnam Department of Peacekeeping Operations, March 15, 2021, http://vnpkc.gov.vn/tin-tuc/nghien-cuu-trao-doi/dong-gop-cua-luc-luong-gghb-lhq-cua-viet-nam-doi-voi-nhiem-ky-uy-vien-khong-thuong-truc-hoi-dong-bao-an-lien-hop-quoc-2020-2021-cua-viet-nam.

[24] Jenkins Margaret, “Women and Peacekeeping in ASEAN Countries” (UNDP Vietnam, 2020), 15, https://www.vn.undp.org/content/vietnam/en/home/library/democratic_governance/women-and-peacekeeping-in-asean-countries.html.

[25] “Uncle Ho’s soldiers” is a honour that Vietnamese people confer to members of the VPA. The term also embodies virtues that a VPA soldier should uphold, such as loyalty to the CPV and the people, willingness to overcome all difficulties and fight and sacrifice for the nation, self-discipline, creativity and bravery in conducting their duties, etc. For a detailed explanation of the term, see Ngoc Hoi Nguyen, “‘Uncle Ho’s Soldiers’ – an Undeniable Vietnamese Military Cultural Value,” National Defense Journal, December 22, 2018, http://tapchiqptd.vn/en/events-and-comments/uncle-hos-soldiers-%E2%80%93-an-undeniable-vietnamese-military-cultural-value/13025.html.

[26] Kiều Giang, “Gìn Giữ Hòa Bình – Hoạt Động Quan Trọng Của Đối Ngoại Quốc Phòng Việt Nam,” Báo Điện Tử Đảng Cộng Sản Việt Nam, February 17, 2018, https://dangcongsan.vn/chao-nam-moi-2018/dat-nuoc-vao-xuan/gin-giu-hoa-binh–hoat-dong-quan-trong-cua-doi-ngoai-quoc-phong-viet-nam-473586.html.

[27] Văn An, “Chủ Tịch Nước Tuyên Dương Các Tập Thể và Cá Nhân Có Thành Tích Xuất Sắc Tham Gia Hoạt Động Gìn Giữ Hòa Bình LHQ,” Báo Thế Giới và Việt Nam, October 18, 2021, https://baoquocte.vn/chu-tich-nuoc-tuyen-duong-cac-tap-the-va-ca-nhan-co-thanh-tich-xuat-sac-tham-gia-hoat-dong-gin-giu-hoa-binh-lhq-162097.html.

[28] Vietnam News, “Women Play Key Role in COVID-19 Prevention in UN Peacekeeping Operations,” November 26, 2020, https://vietnamnews.vn/society/813013/women-play-key-role-in-covid-19-prevention-in-un-peacekeeping-operations.html.

[29] Kiều Giang, “Gìn Giữ Hòa Bình – Hoạt Động Quan Trọng Của Đối Ngoại Quốc Phòng Việt Nam.”

[30] CPV, “Báo Cáo Chính Trị Của Ban Chấp Hành Trung Ương Đảng Khoá XII Tại Đại Hội Đại Biểu Toàn Quốc Lần Thứ XIII Của Đảng” (Tư liệu Văn kiện Đảng Cộng sản Việt Nam, 2021), https://tulieuvankien.dangcongsan.vn/ban-chap-hanh-trung-uong-dang/dai-hoi-dang/lan-thu-xiii/bao-cao-chinh-tri-cua-ban-chap-hanh-trung-uong-dang-khoa-xii-tai-dai-hoi-dai-bieu-toan-quoc-lan-thu-xiii-cua-3734.

[31] Vietnam News, “President Requests More Solutions to Non-Traditional Security Challenges,” December 8, 2021, https://vietnamnews.vn/politics-laws/1094868/president-requests-more-solutions-to-non-traditional-security-challenges.html.

[32] Hoàng Thùy, “‘Việt Nam Xem Xét Cử Đội Trực Thăng Tham Gia Gìn Giữ Hòa Bình,’” VNExpress, December 1, 2021, https://vnexpress.net/viet-nam-xem-xet-cu-doi-truc-thang-tham-gia-gin-giu-hoa-binh-4219516.html; Hong Giang, “Vietnamese Police Eager to Join UN Peacekeeping Activities,” Ministry of Public Security, June 5, 2021, http://en.bocongan.gov.vn/international-relations-cooperation/vietnamese-police-eager-to-join-un-peacekeeping-activities-t7996.html.

[33] Quỳnh Vân, “Để Màu Cờ Việt Nam Phủ Rộng Hơn Trên Bản Đồ Gìn Giữ Hòa Bình Thế Giới.”

[34] Hoàng Thùy, “‘Việt Nam Xem Xét Cử Đội Trực Thăng Tham Gia Gìn Giữ Hòa Bình.’”

[35] Anh Sơn, “Liên Hợp Quốc Cần Quan Tâm Thúc Đẩy Thực Hiện Chương Trình Nghị Sự về Phụ Nữ, Hòa Bình và an Ninh,” Báo Thế Giới và Việt Nam, July 12, 2021, https://baoquocte.vn/lien-hop-quoc-can-quan-tam-thuc-day-thuc-hien-chuong-trinh-nghi-su-ve-phu-nu-hoa-binh-va-an-ninh-167168.html; Margaret, “Women and Peacekeeping in ASEAN Countries,” 25.

[36] These are International Symposium on ‘The Role of Women and Prevention of COVID-19 Pandemic in Peacekeeping Operations’ (November 2020), International Conference on ‘Strengthening Women’s Role in Building and Sustaining Peace: From Commitments to Results’ (December 2020), International Conference on ‘Accelerating Implementation of the Women, Peace and Security Agenda: The Role of National Action Plans’ (December 2021), and International Workshop on ‘Women, Peace and Security National Action Plans: International Experiences and Recommendations for Vietnam’ (March 2022).

[37] Margaret, “Women and Peacekeeping in ASEAN Countries,” 25.

[38] Hoàng Thùy, “Tăng Tỷ Lệ Nữ Tham Gia Gìn Giữ Hòa Bình,” September 22, 2021, https://vnexpress.net/tang-ty-le-nu-tham-gia-gin-giu-hoa-binh-4360562.html.

2022/45 “Hydropower Development in Sarawak: Sensitivities over Sustainability and China’s Involvement” by Tham Siew Yean

The Bakun Hydroelectric Dam in Sarawak. Picture: IEEE Curtin Malaysia Student Branch, https://www.facebook.com/IEEE.CurtinMalaysia/photos/a.558865270846311/5054565917942868/.

EXECUTIVE SUMMARY

China has become the most significant foreign partner in Sarawak’s hydropower development, as its extensive knowledge and experience in this domain dovetails with Sarawak’s ambitious programme to develop hydropower for its own needs and for export to the region.

The construction of large dams has inevitably attracted controversy and protests over its negative impact, particularly in the dislocation of local communities and endangerment of wildlife and the natural environment. China’s track record in this field and Sarawak’s earlier dam construction projects had raised questions over their commitment to address such sensitivities and meet mandatory requirements for ecological sustainability. In this context, both Sarawak and China have stepped up their game to alleviate these concerns.

Sarawak Energy, the key stakeholder in Sarawak’s dam projects, has committed to attaining the international Hydropower Sustainability Council (HSC)’s performance standards and certification. Providing a roadmap towards achieving this goal and increasing the disclosure of performance metrics will help to enhance the sustainability claims of the company to regulators, investors and consumers in Malaysia and the region.

Likewise, China has declared ambitious goals and enunciated policies towards improving sustainability performance. However, this must be followed through with rigorous implementation and regulatory enforcement on the reporting of environmental sustainability measures and metrics, in order to reverse the image of China as a sustainability laggard, especially in its investments and construction of dams outside the country.

* Tham Siew Yean is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute and Emeritus Professor, Universiti Kebangsaan Malaysia. She thanks Siwage D. Negara, Lee Poh Onn and Winston Peng (of The Society of Certified Risk Professionals), for useful comments. The usual caveat remains.

ISEAS Perspective 2022/45, 28 April 2022

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INTRODUCTION

In 2008, Malaysia launched five corridors of development, including the Sarawak Corridor of Renewable Energy (SCORE). SCORE differs fundamentally from the other Malaysian economic corridor projects in its predominant emphasis on hydropower, aiming as it does to use the state’s vast network of rivers as a source of energy. Sarawak, unlike Peninsular Malaysia, also has topographic features and rainfall that enhance its hydropower resources. Hydropower is also chosen because it is a renewable form of energy, with low emissions.

Hydropower is used for driving economic development especially in energy-intensive industries such as food, pulp and paper, basic chemicals, refining, iron and steel, nonferrous metals, and nonmetallic minerals.[1] It has two main advantages: low cost, making it a competitive source of renewable electricity,[2] and flexibility in that its supply can be adjusted to demand. However, the construction of dams affects the ecosystem of rivers and forests, and displaces communities and wildlife in these habitats. Dams in tropical forests have another disadvantage in that methane is produced from anaerobic decay of the massive amount of plant materials flooded by the reservoir. It is therefore not surprising that the construction of large dams are often heavily criticised for its negative impact on the environment.

China is the largest hydroelectric power-generating country in the world. It also has the largest dam in the world, namely the Three Gorges dam, and half of all the large dams worldwide. Chinese leaders and hydropower State Owned Enterprises (SOEs) continue to uphold and promote hydropower as a source of clean energy for China and the world.[3] Negative concerns are deemed as technical issues that can be solved by the state.

Given the saturation in China’s home market, external markets for hydropower and dam construction have become crucial, making hydropower projects an important component of China’s Belt and Road Initiatives (BRI).[4] In fact, the energy sector constitutes the largest sector in Chinese BRI engagement in 2013-2021.[5] In particular, China’s engagement in green energy and hydropower amounted to USD10 billion in 2021. The trend also shows a decrease in investment and an increase in construction projects.

Chinese investors have already invested in a majority of the hydropower projects in Laos, Cambodia and Myanmar.[6] Between 2006 and 2011, China was responsible for more than USD6.1 billion to finance the addition of 2729 MW of hydro capacity in the three countries.

There are currently three large hydropower dams operating in Sarawak, and a fourth is being built. As much as 67.9% of the total installed capacity in the state’s electricity supply was sourced from hydropower in 2018 (latest year available).[7] Sarawak’s hydropower ambitions also make the state a natural attraction for China to be involved in dam development there, be it in terms of investments or construction.

CHINA’S INVOLVEMENT IN SARAWAK

Twelve hydropower projects were planned for the period 2008-2020 to meet the power demand for SCORE, as well as Sabah and Peninsular Malaysia.[8] Out of these, three are up and running while a fourth is being constructed.

Japan was engaged in the construction of the first dam, the Batang Ai dam which was commissioned in 1984 (Table 1). China is involved in the three subsequent dams, including Baleh dam that is currently being constructed. The Chinese SOEs involved are Sinohydro, Three Gorges, Gezhouba and Yellow River Engineering Consulting.

Bakun dam, the first project with China’s involvement predates the launch of the BRI initiative in 2013, and offers interesting insights on mega dam construction in Sarawak. It is, by far, the most controversial as its completion spanned over five decades.[9] Although it was first mooted in the 1960s, numerous challenges dogged the construction of this dam, from technical, economic, political, legal and regulatory, to social issues. It should also be noted that the Bakun project, as a federal project, initially aimed to supply electricity to Peninsular Malaysia by undersea cables across the South China Sea, but this idea was subsequently abandoned due to the costs involved and the possibility of leakages.[10]

Although initiated by Australia, pressures from green and human rights groups over the inevitable relocation of the longhouse communities as well as massive cost over-runs led to the withdrawal of Australian interests from the project. The Chinese then took over the project, with Sinohydro which is part of PowerChina,[11] managing to bring it to completion.[12] Sinohydro was established as a state-owned (SOE) hydropower project contractor in the 1950s, and has participated in the construction of China’s large and medium-scale hydropower projects. It established a joint-venture (30% Sinohydro and 70% Sime) with Sime Engineering Berhad, which is part of Sime Darby, a government-linked company (GLC), for the Bakun project, building the dam as part of an Engineering Procurement Construction (EPC) / turnkey contract.[13] The project was funded by federal and state agencies including EXIM bank, China’s official export credit agency that funded most of China’s overseas dams.[14] The official cost is RM7.4 billion. Subsequently, Sarawak Energy, the state-owned investment holding company of Sarawak that generates, transmits, distributes and sells electricity acquired Sarawak Hidro, the owner and operator of Bakun Hydroelectric Plant from the federal government at RM2.5 billion, in 2017.[15] RM2.5 billion is reportedly the original cost of the dam.[16]

Work on a second dam, the smaller Murum Dam, was started in 2008, and its first generator was commissioned in December 2014. The Murum dam is the second hydroelectric project (HEP) to be developed by Sarawak Energy (SE) after the Batang Ai HEP in the 1980s. The main EPC (Engineer, Procure, Construct) contractor is Three Gorges Development Company (M) Sdn. Bhd. and Yangtze Three Gorges Technology & Economy Development Co. Ltd.[17] Three Gorges built China’s largest hydro dam – the 22,500MW Three Gorges dam, and has extensive dam-building experience. SE apparently issued RM3 billion Islamic bonds to fund the dam.[18]

Two dams were subsequently slated for development, namely the Baram and Baleh dams. Baram dam was however called off by the former Chief Minister of Sarawak, the late Datuk Patinggi Tan Sri Datuk Amar Adenan Satem, in March 2016, following massive protests by affected communities.

Baleh dam, like the Murum dam is being developed under SE, and it is slated for commissioning in 2026. SE is moving towards exporting electricity, first to Sabah, and then to the regional market. It is reportedly funding Baleh dam through its own internal funds while RM5.5 billion is obtained from sukuk financing.[19] The main civil works contract has been awarded to a joint venture formed by China Gezhouba Group Company Ltd and local firm Untang Jaya Sdn Bhd.[20] The former is a large state-owned development company which has built and financed dams in over 30 countries in Asia and Africa.[21] Yellow River Engineering Consulting Ltd, has provided designs for more than 10 concrete-face rock-filled dams worldwide. Untang Jaya, is a local Dayak Iban contractor from the Baleh/Kapit area, that was established in 2000, and holds 30% of the joint venture.[22]

Table 1. Large Hydropower Dams in Sarawak

Dams (starting date and completion date)	Capacity	China’s involvement	Financing	Estimated Costs (RM)
Batang Ai* (1982-1984)	108 MW	None	Multiple federal funds and loans, including from EXIM bank	93 million*
Bakun** (1986 – 2011)	2400 MW	Sinohydro Corporation China	Federal and state government and loans from EXIM bank	7.4 billion **
Murum*** (2008-2014)	900 MW	Three Gorges Dam Company (Malaysia) https://www.business-humanrights.org/en/latest-news/sarawak-energy-fact-sheet-murum-dam/	Sarawak Energy, using Islamic bonds	2.98 billion***
Baleh**** (2018-2026)	1285 MW	Sinohydro Corporation China Gezhouba Group Company (CGGC); Yellow River Engineering Consulting Company was engaged as a design consultant by CGGC.	Sarawak Energy; internal funding and sukuk bonds	8 billion****

Sources: *: https://www.power-technology.com/marketdata/batang-ai-malaysia, https://www.adb.org/sites/default/files/evaluation-document/35473/files/ss-36.pdf, page 28 converted at exchange rate then from https://data.worldbank.org/indicator/PA.NUS.FCRF?locations=MY/;

**: https://www.jstage.jst.go.jp/article/seas/5/3/5_373/_pdf/-char/en, and https://www.malaymail.com/news/malaysia/2013/10/02/a-g-report-mismanagement-cost-bakun-dam-operator-extra-rm1.3b/535411 ; ***: https://www.sarawakenergy.com/what-we-do/power-generation, https://www.malaymail.com/news/malaysia/2016/05/18/murum-dam-cost-rose-by-rm530m-federal-audit-shows/1122545 ;

****: https://www.nsenergybusiness.com/projects/baleh-hydroelectric-power-project/ ; https://www.malaymail.com/news/malaysia/2021/10/05/nothing-to-worry-about-baleh-dams-cofferdams-seepage-says-sarawak-energy/2011037#:~:text=The%201%2C285%2Dmegawatt%20Baleh%20dam,renewable%20energy%20for%20the%20state.

GOVERNANCE

Environmental and social issues are the most common problems encountered in the development of hydropower, especially by large dams. Environmental Impact Assessment (EIA) is a common project-specific tool used to assess the positive and negative environmental, economic and social impacts of a project. When properly conducted, an EIA can help minimise adverse environmental effects by identifying the risks, and reducing conflicts through community participation. It is therefore used to help decision makers make informed decisions.

In Malaysia, the use of Environment Impact Assessment (EIA) became a mandatory legislative requirement in 1988. The Batang Ai dam, however, was constructed before the mandatory requirement, before any EIA needed to be conducted as a legal requirement.[23] But even after the requirement became mandatory, construction on the Bakun dam, for example, was started in 1994 before an EIA had been conducted (Table 2).[24] In fact, in September that year, an earth-breaking ceremony for the BHP was officiated by Mahathir Mohamad, the Prime Minister at that time, before the project had received Cabinet approval and the EIA was approved. The EIA report was completed only after the ceremony and received Cabinet approval in March 1995. Likewise, the Murum project was contracted out before the EIA report was finalised.[25]

There has however been an improvement in terms of adherence to the mandatory EIA requirements after the Murum dam. The Social and Economic Impact Assessment (SEIA) for Baleh dam was conducted and submitted to the Natural Resources and Environment Board (NERB) for approval before construction work started. It was reported in December 2015 that the SEIA report was made available for public viewing at various district and government offices in Sarawak. It was also made available for external review by stakeholders such as government agencies and NGOs, as part of the stakeholder review process, around Sept 2014. Public viewing is reportedly possible at NERB’s office, if permission is granted. But the report has not been uploaded at either NERB nor Sarawak Energy’s web-site, nor at Malaysian Administrative Modernisation and Management Planning Unit (MAMPU)’s open data portal.

Table 2. EIA Reporting in Big Dam Developments with China Involvement

Dam	Year	EIA Issues
Bakun Dam	1986	EIA was conducted after the construction of the dam startedLack of public participationEIA report is not available for public viewing
Murum Dam	2008	EIA was conducted after the construction of the dam startedLack of public participationEIA report is not available for public viewing
Baleh Dam	2018	Social and Environmental Impact Assessment (SEIA) was conducted from 2012-2014 by Chemsain.comSarawak Energy received approval of the SEIA report from Natural Resources and Environment Board (NREB), Sarawak on 13 March 2015. Available to the public for viewing at the NERB office, with permission

Source: Maisarah Makmor, Hafez Salleh, Nikmatul Adha Nordin, 2020,[26] and updated by author for Baleh dam.

MANAGING FUTURE DEVELOPMENTS

Bakun dam has become an example of poor governance in large dam building, or the case study in numerous studies documenting that phenomenon. These studies typically lay the blame for the adverse effects on the environment and the displacement of indigenous communities and wild life on the Chinese company (Sinohydro), while neglecting the fact that the Malaysian partner holds 70% of the equity and local governance and local stakeholders have a role to play in the governance of the project.

Governance of any project, especially large-scale and expensive projects, requires both source countries of investors and builders as well as host countries to play complementary roles. Host economies need to have political willingness and capacity to maintain, implement and enforce stringent environmental laws and regulations.[27] Regardless of whether it is an FDI or a construction project, weak local requirements open the door for minimal safeguards from dam builders. This is especially the case where short-term contracts are concerned, such as engineering, procurement and construction (EPC) contracts which do not incentivise contractors to deal with long-term social and environmental problems.[28]

Malaysia as a host economy

Continued emphasis on hydropower for powering economic development in Sarawak will require continuous improvements in the governance of dam-building. Sarawak Energy (SE) as a vertically integrated electric utility company which is 100% owned by the state of Sarawak, is a key stakeholder in the development of sustainable energy in Malaysia.

SE became a member of the International Hydropower Association (IHA) in 2010. It is also one of the early adopters of the guidelines in IHA’s Hydropower Sustainability Assessment Protocol (HSAP). According to SE, it is currently adopting the HSAP for the ongoing 1,285MW Baleh Hydroelectric Project. This is a significant shift as it seeks to embed sustainability best practices into the project’s development and operation.

As sustainability issues increase in importance, SE has also started producing sustainability reports to “provide clarity on what sustainability means to us and how we measure our corporate sustainability performance to safeguard the commercial viability of our business while creating value to our stakeholders”.[29] Five of these reports (2014-2018) are available for download from their website.

In September 2021, the Hydropower Sustainability Council (HSC) launched an Environmental, Social and Governance (ESG) performance standard to enhance transparency in the industry and give investors more confidence in backing new projects.[30] This move is not surprising, given that ESG-reporting requirements for companies and mandatory disclosures by financial service firms are expanding rapidly. Moreover, the World Bank has reported that enhanced ESG disclosure plays a role in reducing information asymmetries, thereby improving investment efficiency, which, in turn, can have significant consequences on the real economy.[31]

Given SE’s commitment to the HSAP, targeting the HSC’s ESG performance standard and certificate is a natural progression on its sustainability journey. Going forward, a roadmap towards the attainment of this certificate will further enhance the ESG standing of the company. In particular, such a roadmap should include clear targets for the scores of each dimension in this instrument, as well as an implementation programme. Second, in view of the increasing demand for disclosures, it is important that the targets, progress and milestones achieved, including short falls in outstanding metrics and plans to overcome these shortfalls, need to be enumerated in the sustainability reports in order to align commitments with disclosures. This, in turn, will enhance the sustainability claims the company makes to regulators, investors, and consumers in Malaysia and to the region as well, in view of its regional ambitions to be an energy exporter.[32] Many international leading companies have in fact improved public disclosure in line with their commitments to transparency and accountability.

Beyond disclosure, extending due diligence on contractors and suppliers is equally important in keeping with the trend to incorporate ESG best practices into the entire supply chain of a project. This would include the contracts awarded for the different components of the project. In this regard, the ESG rating of China’s major hydropower companies need to be considered, besides experience and costing, in the selection of contractors and sub-contractors as well.

China as a source of hydropower investors and contractors

The environmental risks associated with large-scale BRI infrastructure projects, including the construction of large dams, gave rise to many negative reports on such projects. China’s “Green Investment Principles for the Belt and Road” (GIP), launched in November 2018, is an attempt to address sustainability issues in BRI projects. As of June 2021, the GIP expanded its membership to 39 signatories and 11 supporters from 14 countries and regions around the world.[33] The signatories have jointly agreed to ensure that BRI’s investment and operations are environmentally friendly, climate resilient and socially inclusive. As finance plays a key role in BRI projects, the green principles agreed upon by major bankers are meant to incentivise the use of sustainable principles in investment decision-making as well as in daily operational procedures. The seven principles included in the GIP are: (i) embedding sustainability into corporate governance, (ii) understanding ESG risks, (iii) disclosing environmental information, (iv) enhancing communication with stakeholders, (v) utilising green financial instruments, (vi) adopting green supply chain management, and (vii) building capacity through collective action.

China continues to press on with new and updated guidelines. For example, in September 2021, Beijing issued the “Green Development Guidelines for Overseas Investment and Cooperation”.[34] Significantly, companies are encouraged to adhere to international norms when local standards are inadequate, to engage with host country environmental protection organisations, and to focus on non-fossil energy technologies. Environmental impact assessments and due diligence based on international standards are other promoted measures.

But since all these policy statements are merely guidelines, they are toothless without enforced implementation by China’s own regulatory bodies. Effectiveness still depends on the commitment from the joint stakeholders, namely the host economies and China, to adhere to these guidelines in the negotiation and implementation phases of BRI-related projects. Thus, it is not surprising that China is deemed as a sustainability laggard. Certainly, this image is supported by the MSCI median ESG score[35] that aims to ascertain the ESG performance of countries. In 2021, China was ranked 47 out of 50 countries measured. The UK was ranked first, followed by Australia, Japan and the US.[36]

At the firm level, regulatory requirements are needed to push companies towards sustainability reporting. For example, China’s first mandatory ESG information reporting scheme was proposed by the Ministry of Ecology and Environment (MEE) in October 2021.[37] The proposed measures require relevant companies to disclose a variety of environment-related information. When implemented, this would shift China towards establishing a nationwide mandatory environmental disclosure system by 2025. Global trends further indicates that ESG reporting is shifting beyond mere narratives towards common ESG metrics for reporting purposes.[38]

CONCLUSION

China’s involvement in hydropower development is driven by push and pull factors. Push factors include China’s belief that hydropower is a source of clean energy that can be harnessed for development and for the export of the country’s capacity and knowledge in dam building. Sarawak’s green energy ambitions focussing on hydropower production for itself and for export, dovetails nicely with China’s outward strategies.

Although the construction of large dams is littered with environmental sustainability issues, there are increasing signs of improvements with greater adherence towards regulatory compliance in the current construction of the Baleh dam. This is also boosted by Sarawak Energy, the key stakeholder in the green energy ambitions of Sarawak, and its adoption of IHA’s Hydropower Sustainability Assessment Protocol (HSAP) for the development of Baleh dam.

While China has been heavily criticised for the negative environmental impact of its large dam constructions, these projects really do require both the host and source countries to work together.

For Sarawak Energy as a key stakeholder in dam development, targeting the HSC’s ESG performance standard and certificate is a natural progression along its sustainability journey. Providing a roadmap towards the achievement of this standard as well as improving transparency through increasing disclosures of the metrics on this roadmap will enhance the sustainability claims made by the company to regulators, investors and consumers in Malaysia and ultimately in the region as well. This is very important in view of Sarawak’s ambitions to be an energy exporter.

Likewise, China has put forth many policies and ambitious goals towards improving sustainability performance. Implementation is key and regulatory enforcement on enhanced disclosures and reporting of environmental sustainability measures and metrics will definitely reverse the image of China as a sustainability laggard, especially in its investments and construction of dams outside the country.

ENDNOTES

[1] See definition in https://www.eia.gov/outlooks/ieo/pdf/industrial.pdf

[2] Askari Mohammad Bagher, Mirzaei Vahid, Mirhabibi Mohsen, Dehghani Parvin. Hydroelectric Energy Advantages and Disadvantages. American Journal of Energy Science. Vol. 2, No. 2, 2015, pp. 17-20

[3] Lila Buckley, Hua Wang, Xiaoxi Zhou and Andrew Norton 2022. What drives safeguarding for China’s hydropower projects in LDCs? International Institute for Environment and Development (IIED) Working Paper January 2022. https://pubs.iied.org/sites/default/files/pdfs/2022-01/20721iied.pdf

[4] https://www.greenrecruitmentcompany.com/blog/2020/09/is-hydropower-the-secret-winner-of-the-belt-and-road-initiative

[5] Nedopil, Christoph, 2022. “China Belt and Road Initiative (BRI) Investment Report 2021”, Green Finance & Development Center, FISF Fudan University, Shanghai.

[6] Xunpeng Shi, Lixia Yao, 2019. “Prospect of China’s Energy Investment in Southeast Asia under the Belt and Road Initiative: A Sense of Ownership Perspective”, Energy Strategy Reviews, Volume 25, Pages 56-64. https://doi.org/10.1016/j.esr.2019.100365.

[7] https://meih.st.gov.my/documents/10620/6d3608ca-ec57-4034-b8b6-28809ee7cd67

[8] Suhakam 2009. SUHAKAM’S Report on the Murum hydroelectric project and its impact towards the economic, social and cultural rights of the affected indigenous peoples in Sarawak. http://www.suhakam.org.my/wp-content/uploads/2013/12/Murum1.pdf

[9] Sovacool, Benjamin K. & Bulan, L.C., 2011. “Behind an ambitious megaproject in Asia: The history and implications of the Bakun hydroelectric dam in Borneo,” Energy Policy, Elsevier, vol. 39(9), pages 4842-4859, September.

[10] https://www.theborneopost.com/2017/09/21/electricity-from-bakun-dam-will-not-be-sold-to-peninsular-malaysia-cm/

[11] PowerChina, is a wholly State-owned company administered by the State-owned Assets Supervision and Administration Commission and part of the heavy and civil engineering construction industry.

[12] Fam, Shun Deng (2017), “China Came, China Built, China Left?: The Sarawakian Experience with Chinese Dam Building”, Journal of Current Chinese Affairs, 46, 3, 119–158.

[13] Schapper, A, Urban, F., 2021. “Large dams, norms and Indigenous Peoples”, Development Policy Review 2021; 39 (Suppl. 1): O61-O80. https://doi.org/10.1111/dpr.12467.

[14] International Rivers 2008. The New Great Walls: A Guide to China’s Overseas Dam Industry. https://www.china.tu-berlin.de/fileadmin/fg57/Lehre/0809_Wasserwirtschaft/China_dam_guide.pdf

[15] https://www.sarawakenergy.com/media-info/media-releases/2017/sarawak-energy-completes-acquisition-of-bakun-hep-from-federal-government

[16] https://theecologist.org/2014/apr/22/large-dams-are-uneconomic

[17] https://www.business-humanrights.org/en/latest-news/sarawak-energy-fact-sheet-murum-dam/

[18] https://www.hydroreview.com/world-regions/malaysia-utility-to-issue-bonds-to-fund-900-mw-murum/#gref

[19] https://www.theborneopost.com/2017/08/03/construction-of-baleh-hep-to-cost-rm8-bln-seb/#:~:text=KUCHING%3A%20The%20total%20construction%20cost,generated%20funding%20and%20sukuk%20financing.

[20] http://ir.chartnexus.com/source/2/52/market_news/757/Works%20to%20start%20on%20Baleh%20hydro%20dam.pdf. Reportedly the work packages are tendered out.

[21] Op.cit. International Rivers, 2008.

[22] https://www.pressreader.com/malaysia/the-borneo-post/20160919/281938837383284

[23] https://www.adb.org/sites/default/files/evaluation-document/35473/files/ss-36.pdf . According the ADB 1999, “The Batang Ai Project was approved in 1981 before environmental guidelines were developed in ADB and the relevant agencies were established in Malaysia. Therefore, its preparation did not include an environmental mitigation plan.”

[24] Ho, Peter, Bin M.S. Nor-Hisham, and Heng Zhao. 2020. “Limits of the Environmental Impact Assessment (EIA) in Malaysia: Dam Politics, Rent-Seeking, and Conflict”, Sustainability 12, no. 24: 10467. https://doi.org/10.3390/su122410467

[25] See Op cit. Suhakam 2009. Page 6.

[26] Maisarah Makmor, Hafez Salleh, Nikmatul Adha Nordin 2020. “Ineffective public participation for EIA: The cause of environmental issues in Malaysia?”, Journal of Surveying, Construction and Property (JSCP), 11(1): 83-96.

[27] Coenen, Johanna & Bager, Simon & Meyfroidt, Patrick & Newig, Jens & Challies, Edward. (2020). Environmental Governance of China’s Belt and Road Initiative. Environmental Policy and Governance. 31. 10.1002/eet.1901.

[28] Op cit., Lila Buckley, Hua Wang, Xiaoxi Zhou and Andrew Norton 2022.

[29] https://www.sarawakenergy.com/investors/annual-and-sustainability-reports/sustainability-reports#:~:text=Sarawak%20Energy%20Sustainability%20report%20provides,creating%20value%20to%20our%20stakeholders.

[30] https://www.reuters.com/business/sustainable-business/global-hydropower-industry-launches-esg-standard-attract-investors-2021-09-08/#:~:text=LONDON%2C%20Sept%208%20(Reuters),projects%2C%20it%20said%20on%20Thursday

[31] https://blogs.worldbank.org/allaboutfinance/can-esg-disclosure-improve-investment-efficiency

[32] https://www.theedgemarkets.com/content/advertise/energising-region-hydropower

[33] https://greenfdc.org/green-investment-principle-gip-belt-and-road-initiative/

[34] https://chinadialogue.net/en/business/what-chinas-new-guidelines-on-green-development-mean-for-the-belt-and-road/

[35] MSCI Inc. is the world’s largest provider of ESG Indexes. See https://www.msci.com/our-solutions/indexes/esg-indexes

[36] https://www.euromoney.com/article/297g1ykzy4xbli3gtf7cw/esg/chinas-weak-esg-data-undermines-xis-bold-pledges

[37] https://www.fitchratings.com/research/corporate-finance/proposed-rules-may-strengthen-chinas-esg-disclosure-28-10-2021

[38] https://assets.kpmg/content/dam/kpmg/be/pdf/2020/12/The_Time_Has_Come_KPMG_Survey_of_Sustainability_Reporting_2020.pdf

2022/44 “The Russia-Ukraine War: Unpacking Online Pro-Russia Narratives in Vietnam” by Hoang Thi Ha and Dien Nguyen An Luong

Russian President Vladimir Putin speaks with Vietnam’s President Nguyen Xuan Phuc during their meeting in Moscow, on 30 November 2021. Picture: Mikhail KLIMENTYEV/SPUTNIK/AFP.

EXECUTIVE SUMMARY

The Russia-Ukraine war’s ramifications for Vietnam are felt beyond the economic and diplomatic realms. It has in fact become an online hotbed of conflicting and confounding narratives that demonstrate different worldviews and political leanings among Vietnamese netizens.

An examination of 28 Facebook pages/groups active in trending pro-Russia narratives finds an ‘echo chamber’ that is on a constant lookout for Russian, Western and even Chinese news sources that peddle and amplify pro-Russia and anti-Western voices.

The most salient pro-Russia narratives in Vietnam’s cyberspace revolve around justifying Russia’s invasion of Ukraine, echoing anti-America and anti-imperialist worldviews, and lionising Russia while demonising Ukraine.

These online groups have likely carved out a niche for the conservative segment of the Vietnamese state to shape a propaganda environment where there is space for pro-Russia and anti-Russia narratives, so that pro-Ukraine sentiments will not become predominant in the public discourse.
Pro-Russia narratives in Vietnam’s cyberspace are the result of cross-pollination between sentimental attachment since the Soviet era, psychological bias towards Russia embedded in Vietnam’s education and propaganda system, and the overriding imperative to preserve the Vietnamese state’s political and ideological interests.

Due to the interplay of the above-mentioned factors, the Vietnamese government’s response to the war in Ukraine comes in different shades of grey, instead of binary pro- and anti-Russia stances.

* Hoang Thi Ha is Fellow and Co-coordinator of the Regional Strategic and Political Studies Programme and Dien Nguyen An Luong is Visiting Fellow of the Media, Technology and Society Programme at the ISEAS – Yusof Ishak Institute. Dien is a journalist with significant experience as managing editor at Vietnam’s top newsrooms, and his work has also appeared in the New York Times, the Washington Post, the Guardian, South China Morning Post, and other publications.

ISEAS Perspective 2022/44, 27 April 2022

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INTRODUCTION

The ongoing Russia-Ukraine war following Moscow’s invasion on 24 February has sparked intense public debates on Vietnam’s social media. For Vietnam, the ramifications of the war are felt beyond the economic and diplomatic realms. It has become an online hotbed of conflicting and confounding narratives that demonstrate different worldviews and political leanings among Vietnamese netizens. Of note, those who support Russia and Putin have been as energised and engaged as those who are against the war and sympathetic towards Ukraine.[1]

Using discourse analysis, this article examines Vietnamese netizens’ pro-Russia posts and conversations between 24 February and 10 April on Facebook – the dominant social media platform in Vietnam with 68 million users.[2] It looks into 28 pro-Russia Facebook pages/groups[3] with strong followings so as to profile these Russia-sympathisers and the narratives they engage with. The article also seeks to understand why these pro-Russia netizens are so intimately impacted and actively engaged on a supposedly remote international conflict. It argues that their pro-Russia posturing is the result of cross-pollination between sentimental, psychological, ideological and political factors that are quite unique to Vietnam, given the country’s historical links to Moscow.

PROFILING OF VIETNAM’S PRO-RUSSIA NETIZENS

This section analyses the content of posts and comments on 28 Facebook pages/groups which have been most active in trending pro-Russia narratives online (See Appendix 1). These are divided into three categories:

Category I – 8 Russia-nostalgia groups show a strong attachment to Russia and Putin. These groups have been very active in propagating the Russian stance on the invasion. They have built up a solid base of followers, ranging from around 6,600 to some 90,000.

Category II – 18 self-proclaimed patriotic or conservative pages/groups explicitly adopt a pro-regime stance. Amassing a strong base of followers of between 21,000 and 570,000, they have been very active in defending Vietnam’s position on the war in Ukraine.

Category III – 2 pages provide news about the conflict. With a following of approximately 27,000 and 30,000 respectively, they appear to be set up just recently and seek to keep viewers abreast of the war’s developments. These pages also adopt an explicitly pro-Russia stance.

What are their news feeds?

The news feeds of these pro-Russia netizens are typical of the ‘echo chamber’ phenomenon in which people only interact with information from or opinions of like-minded peers that reflect and reinforce their existing beliefs. They actively disseminate positive information about Russia from various Russian sources, including statements by Putin and his cabinet members, the ministry of defence (mil.ru), Russian News Agency (TASS), RIA Novosti, Channel One Russia, RT and Russia-1.[4] The Russian proficiency of some Vietnamese – mostly the older generation – has been instrumental for their access to and dissemination of Russian language materials, including many images and videos to create an impression of authenticity. This also means that they are more directly exposed to Moscow’s information warfare.[5]

Occasionally, these pro-Russia netizens would interact with mainstream Vietnamese news outlets when there are commentaries that are seen as favourable to Russia and negative to Ukraine and the West.[6] They also rely on Chinese sources, which are generally friendlier towards Moscow and critical of the West, including quoting comments of Chinese analysts and the spokesperson of China’s foreign ministry. There are other dubious references or unidentified sources that cannot be verified.[7] Additionally, perhaps unique to Vietnam, there is a large number of Vietnamese in Russia – ranging from 26,000 to 100,000 according to various sources, some of whom actively propagate favourable narratives about Russia on these groups.[8]

They also look out for pro-Russia or anti-Western voices from the West as long as the narratives serve their confirmation bias. Notable figures in this respect include Chris Hedges – a former New York Times reporter and currently host of RT’s On Contact programme, and retired US Marine Corps officer Scott Ritter, both of whom were opponents of America’s war in Iraq. Hedges believes that the war in Ukraine serves American strategic and ideological interests by ‘making Russia bleed through Ukrainian blood’ whereas Ritter questions the authenticity of the evidence regarding Russian soldiers’ Bucha massacre. Notably, Vietnamese netizens’ access to these Western voices is also channelled through Russian outlets, especially the RT.

The zeal of defending and glorifying Moscow also drive these netizens to a range of Western media of different genres and political directions – including The Economist, The Hill, Die Zeit to the tabloid Daily Mail and Junglewelt (a left-wing and Marxist German daily), to pick and choose opinions and information that they consider positive for Russia and negative for Ukraine and the West. Such information mainly focuses on the energy crunch in Europe and Europeans’ grievances over spikes in energy and food prices. They also actively seek to debunk what they see as ‘fake news’ and ‘fake images’ from Ukrainian and Western sources about Russia’s atrocities and military losses in Ukraine or about the dire economic situation and anti-war sentiments in Russia.

What are their pro-Russia narratives?

Based on the analysis of these Facebook pages/groups, the following most salient pro-Russia narratives are distilled:

Russia’s invasion of Ukraine is justified.

These netizens rationalise Russia’s incursion in Ukraine as a necessary step to respond to Western (mainly American) political, ideological and military antagonism against Moscow. According to this narrative, the US and its Western allies in the North Atlantic Treaty Organization (NATO) have cornered Russia into this war because they have never abandoned their containment strategy against Russia since the end of the Cold War. By expanding NATO further eastward, they have disregarded Russia’s legitimate security interests in its own neighborhood while at the same time sowing widespread hatred and hostility towards Moscow. Additionally, buying into Putin’s ‘manufactured’ history that Ukraine is a historical part of Russia, this narrative justifies the invasion as Moscow’s timely intervention to stop Kyiv’s genocide, fascism and racism against Russian-speaking communities in Ukraine. In sum, they view the Russian act as a legitimate response to a ‘neo-Nazi’ Ukrainian government kowtowing to the US and the West.

Pro-Russia posturing is a veil for underlying anti-America and anti-imperialist worldviews.

Pro-Russia sentiments, chiefly by pro-regime Facebook pages/groups, are tinged with anti-American imperialism among Vietnamese whose hatred of American involvement in the Vietnam War remains strong. They castigate America and the West for lulling Ukraine into this conflict by the promise of NATO admission, and ridicule Western countries for not rendering Kyiv the scale of military support that President Volodymyr Zelensky asked for. This anti-imperialist narrative points the finger at America’s ulterior motives in pushing Ukraine to go to war with Russia: a weakened Russia and a Europe more dependent on American security guarantees and energy supply. A Vietnamese military-linked commentator encapsulated the tenor of this narrative: “Russia and Ukraine must go to war and Ukraine must fight the Russians until the last Ukrainian soldier, for the sake of America.”[9] They also criticise Western sanctions and media coverage against Russia, which they view as emblematic of the West’s hegemony over the global financial system and information sphere. Notably, ‘whataboutism’, or the highlighting of double-standards on the part of the US and the West, has also been used to lay bare what is perceived to be American and Western hypocrisy in criticising the Russian invasion but waging catastrophic wars in Iraq, Afghanistan or elsewhere.

Russia is lionised and Ukraine demonised.

This narrative holds that Russia is surely winning on the battlefield given its military might and strategic mastery. Unverified video clips of ‘Ukrainians’ welcoming Russian soldiers are widely circulated among these pages/groups, which heap fulsome praise on Russian soldiers as ‘liberators’. This narrative also lauds Putin’s high approval ratings and Russia’s economic resilience despite Western sanctions. On the other side of the spectrum, Ukraine is belittled as a ‘small state’ that should know its place. President Zelensky is written off as a ‘clown’ who dabbles in politics and who has become a ‘puppet’ of the West. A content analysis of 10 Facebook pages representative of the two categories finds that of thousands of posts between 24 February and 10 April, the most engaged one is a video on Zelensky’s profession as a comedian prior to his entry into politics.[10] It ridicules Zelensky’s handling of the conflict as well as Ukraine’s relations with Russia and the West, dovetailing with the dominant pro-Russia narratives. The video is widely circulated across various Facebook pages/groups, with 1.1 million views, 2,400 shares, 28,000 reactions and 4,600 comments, a vast majority of which are supportive of the video’s messages. Netizens also dig into what is perceived to be a shameful record of Ukraine in its relations with Vietnam, for example: Ukrainians once toppled the statue of Lenin; Ukraine sold the aircraft carrier Liaoning to China, which has a longstanding South China Sea dispute with Vietnam; and Ukrainian media[11] defamed Ho Chi Minh, Vietnam’s most iconic liberation hero.

To what extent are they linked to the government’s position on the conflict?

Vietnam’s state-controlled news outlets generally adopt a neutral tone and refrain from editorialising the Ukraine crisis. Their main messages revolved around reiterating Vietnam’s desire to stay strategically neutral.[12] But there have been some outliers. One notable example is a YouTube video by TV24h owned by VTC, a cable firm that is labelled as being ‘funded in whole or in part by the Vietnamese government.’ The video was broadcast on 3 April with the title ‘The Russia-Ukraine war lays bare the West’s true colors’. [13] It quoted Chris Hedges as saying that it is hypocritical for US President Biden, an ardent supporter of the Iraq war, to brand Vladimir Putin as a war criminal. According to Hedges, such double standards have permeated American politics. As of this writing, the video has been viewed nearly 890,000 times and attracted over 6,800 likes. Of around 2,600 comments in response to the video, an overwhelming majority threw strong support behind Hedges’ position, saying it helped enlighten the broader public on the true nature of the US and the West.

In a country where the authorities have strictly controlled all news outlets and obliged them to censor readers’ comments even on social media platforms,[14] any coverage of such a major issue like the war in Ukraine is unlikely to escape censors’ gaze if they have strayed away from the party line. Meanwhile, whether these pro-regime Facebook pages/groups have the backing of the Vietnamese state is perhaps an evergreen question. But even if some of these pages/groups were state sponsored, not explicitly admitting it seems to be the strategy of choice; that ambivalence gives the authorities both the deniability and the flexibility to shape public opinion and play the nationalist card when deemed necessary.[15] Arguably, pro-Russia narratives on these pro-regime Facebook pages/groups do not clash with the party’s classical orthodox discourse about anti-imperialism, anti-Western hegemony, and its view that Russia as a traditional friend and benevolent power. Therefore, these platforms are likely to shape a propaganda environment for the Vietnamese state – especially the more conservative segment in it – within which there is adequate space for pro-Russia sentiments and narratives, so that anti-Russia, pro-Ukraine sentiments will not become predominant in the public discourse.

EMOTIONAL AND POLITICAL UNDERCURRENTS OF PRO-RUSSIA NARRATIVES

The salience of pro-Russia narratives in Vietnam is the result of many factors that are simultaneously sentimental, psychological, historical, ideological and political.

Sentimental attachment

The fervent support for Russia’s war against Ukraine among a significant number of Vietnamese brings to the fore latent pro-Russia sentiments in the country. Such sentiments are strongly felt among older generations, many of whom used to study, work and live in Russia and have kept fond memories and sentimental attachments since the Soviet era. Vietnam is perhaps the only outlier in Southeast Asia where Russia’s soft power still holds some appeal, with many Vietnamese professionals and intellectuals growing up immersed in Russian/Soviet ideology, literature, music and culture during the Cold War.[16] Their feelings towards Russia are a mix of admiration, nostalgia and gratitude, given the Soviet’s invaluable assistance to Vietnam’s national liberation and reunification during the wars against France and America. Therefore, they tend to frame other Vietnamese fellows who denounce Russia’s invasion of Ukraine as ‘disloyal’ and ‘ungrateful’ to Russia, a longstanding and trusted friend of Vietnam.

This attachment has been nurtured by decades of government indoctrination lauding Soviet revolutionary heroism through multiple wars in the 20^th century. The adulation and admiration of Russia/the Soviet Union is embedded in Vietnam’s education and propaganda system, especially in literature and history textbooks. For many Vietnamese sympathisers, Russia commands respect and admiration because of its contributions and sacrifices in the First and Second World War. Meanwhile, there is little talk about the darker sides of the relationship – for example the Soviet Union’s inaction during Vietnam’s 1988 naval clash with China in the Spratlys or anti-Vietnamese violence and racism in Russia. This has resulted in a romanticised idea of Russia among a number of Vietnamese, which shutters their ability to perceive the country with a dose of objectivity and realism. They are therefore most susceptible to the narrative that the Russian offensive in the Ukraine is a ‘salvation mission’ for its Russian-speaking population; it fits their worldview that Russia is a magnanimous and benevolent power.

Ideological and political concerns

Beneath the waves of pro-Russia sentiments on Vietnam’s social media are deep-rooted ideological and political undercurrents. Strong pro-Russia sentiments are prevalent on conservative, pro-regime and orthodox-nationalist Facebook pages, and although it is difficult to prove that these pages are state-sponsored or whether they are peppered with pro-government trolls to influence and direct the conversation, this possibility is not entirely ruled out. Of note, robust defence of Russia and fervent criticism of Ukraine/NATO/the US/the West are also found among public figures whose profiles indicate former affiliations with the military and public security sector. Many posts and comments on these pages associate anti-Russia and pro-Ukraine sentiments with anti-regime and pro-democracy conspiracies. While it is true that a pro-Ukraine stance is more prevalent among liberal-leaning segments of society, not all of them advocate for regime change. However, conservative pages tend to see any criticism levelled at the government’s position on the war in Ukraine or any negative parallels – i.e. between Russia under Putin’s authoritarianism and Vietnam under the ruling communist party – as hostility towards the government.

There is also an almost instinctive refutation of negative information about Russia on these pages/groups, especially concerning Russia’s reported military setbacks in Ukraine. The reason for this uncritical defence – as well as efforts to amplify and glorify Russian military advance in Ukraine – can be both psychological and political. Given the length, breadth and depth of Vietnam’s reliance on Russian military equipment and technical assistance, the image of a beaten and battered Russia in Ukraine would not reflect well on the strategic choice of the Vietnam People’s Army (VPA) to rely on Moscow as its major arms supplier and its all-weather trusted partner.

At this, pro-Russia netizens in Vietnam widely share sanguine assessments about Russia’s military strategy in Ukraine by some Vietnamese retired military/public security figures, most notably Colonel Le The Mau, Colonel Le Ngoc Thong and Major General Le Van Cuong who was former director of the Strategic Studies Institute of the Ministry of Public Security. While the Western media said that Russia had not secured a swift and decisive victory as originally planned, Mau counter-argued that Russia was actually engaged in a ‘steady and phased advance’ strategy to simultaneously achieve three objectives of protecting civilians; destroying Ukraine’s military power; and annihilating neo-Nazis in Ukraine.[17] In the same vein, Cuong believed that Russia will not be bogged down in a protracted war in Ukraine and that “Putin is appropriate in and faithful to his statement that Russia does not invade Ukraine and does not attack Ukrainian civilians since Ukrainians and Russians share the same race, ancestors and blood”.[18] Similarly, some Russia-sympathisers did not see Russia’s withdrawal from the Kyiv region as a setback but a masterful diversion tactic to seize control of Mariupol.

Russia’s footprint in Vietnam is arguably both military and political. Although Russia’s position in Vietnam’s foreign policy post-Cold War has been relegated to it being only one among other peer powers, Moscow enjoys a deep reservoir of strategic trust within the Vietnamese defence-security establishment. The confluence of military-political interests between Russia and Vietnam was demonstrated in the agreement to enhance cooperation in political and ideological education, and promote collaboration in military history at a meeting in May 2021 between the General Department of Politics of the Vietnam People’s Army and the Main Directorate for Political-Military Affairs of the Russian Armed Forces.[19] This is an intriguing development because today’s Russia – unlike the Soviet Union – no longer subscribes to the same socialist and communist ideology that Vietnam still does.

Ideological considerations could have also influenced pro-Putin sentiments among these conservative segments. Putin’s strongman leadership appeal may be strong among some Southeast Asian peoples,[20] but his popularity in Vietnam is not attributed to his macho personality cult only. According to Vietnam’s mainstream discourse, post-Cold War Russia under Boris Yeltsin’s leadership was a diminished great power which was ideologically adrift, economically weakened, and strategically disoriented and misled by the West. Therefore, the election of Putin as Russian president was viewed as a judicious choice of strategic significance.[21] Of note, Putin’s re-validation of the Soviet heroic past and his restoration of Soviet symbols rendered some political comfort among Vietnamese conservatives who were apprehensive of the US ‘unipolar moment’, ‘liberal excess’ and ‘imperial overreach’ in the wars in Yugoslavia, Iraq and Afghanistan. They found gratification in Putin’s statement that the collapse of the Soviet Union was “the greatest geopolitical catastrophe of the century”.[22]

Last but not least, Vietnamese conservatives cheer on Putin not only because they see him as a strongman who can restore Russia to its greatness but also because his leadership oversaw the renaissance of Vietnam-Russia relations after more than a decade of estrangement under Yeltsin. As noted by Anton Tsetov, after Putin came to power, high-level visit exchanges between Russia and Vietnam became frequent, high-value arms deals were sealed, bilateral trade increased, and the official rhetoric in bilateral documents embraced references to ‘traditional partners’, ‘historical roots’ and ‘friendship’ between the two peoples.[23] In fact, some Vietnam netizens – in their zeal to defend Putin’s war in Ukraine – referred to his decision to write off 85 per cent of Vietnam’s debt to Russia as a demonstration of his magnanimity.

CONCLUSION

Pro-Russia narratives in Vietnam’s cyberspace bear major resemblance to their counterparts in Southeast Asia and elsewhere, particularly because they are interwoven with anti-America, anti-Western hegemony discourse as well as adulation of Putin’s ‘strongman’ leadership.[24] But the underlying factors driving such narratives are what makes Vietnam unique. Sentimental attachment and nostalgia aside, behind the façade of those pro-Russia narratives are in fact historical, ideological and political factors that underpin the core interests of the Vietnamese state. Given the interplay of deep and powerful drivers behind pro-Russia sentiments in Vietnam, it is perhaps understandable that the Vietnamese government has responded to Russia’s invasion of Ukraine with different shades of grey, as opposed to stark pro- or anti-Russia stances.

APPENDIX

SELECTED PRO-RUSSIA FACEBOOK PAGES/GROUPS IN VIETNAM

ENDNOTES

[1] It should be noted that there is also a large number of Vietnamese netizens who demonstrate strong anti-Russia and pro-Ukraine sentiments, and they subscribe to different worldviews and different news feeds. This Perspective, however, focuses only on pro-Russia sentiments and narratives.

[2] Social Media in Vietnam Report 2020 – 2021: Viet Nam, IRIS report, 30 October 2021, https://iris.marketing/social-media-report-vietnam-2020.

[3] Facebook pages are predominantly public, and are visible to everyone on the platform. A Facebook group, however, can be both public and private. The group’s privacy settings can be customised depending on who its administrator allows to join and see the group.

[4] According to Wikipedia, RIA Novosti is a Russian state-owned domestic news agency, RT (Russia Today) is a Russian state-controlled international television network, Channel One Russia is a television channel whose ultimate owner is believed to be Roman Abramovich who is allegedly closely linked to the Russian state, and Russia-1 is a state-owned Russian television channel.

[5] For example, the authors suspect that the Facebook page “It’s all within Vladimir Putin’s calculus” (https://www.facebook.com/tsarputinvn/) is supported by Russia’s information warfare because it constantly shares the most updated and authentic pro-Russia images and videos.

[6] These include, among others, the Doanh nghiệp và Tiếp thị (Enterprise and Marketing) magazine by the Vietnam Marketing Association, and Vnews – the television channel of the Vietnam News Agency.

[7] These include, among others, Nước Nga Infor, a Facebook page, followed by 8888 and liked by 4812 people.

[8] For example, these Vietnamese overseas took photos at Russian supermarkets to show the abundance of food and other supplies together with the price tags to prove that the Russian economy was in good shape.

[9] Le Ngoc Thong, “Russia-France-Germany sideline America in Ukraine: A spectacular exit from the storm!”, soha.vn, 08 February 2022, https://soha.vn/nga-phap-duc-loai-my-ra-khoi-ukraine-cu-ne-ha-khoi-tam-bao-ngoan-muc-20220208114034851.htm.

[10] https://www.facebook.com/watch/?v=948366282543656

[11] Vietnamese netizens and even the website of the Ho Chi Minh Communist Youth Union – the largest social-political organisation of Vietnamese youth – reacted strongly to what they view as Ukraine media’s disinformation about Vietnam, especially a commentary on Ukraine 24TV titled “Ho Chi Minh – an autocrat with Bolshevik ambitions”. See “Offending President Ho Chi Minh is unacceptable”, tiengnoitre.org, 30 March 2022, http://www.tiengnoitre.org/2022/03/xuc-pham-chu-tich-ho-chi-minh-la-ieu.html.

[12] Hoang Thi Ha, “Vietnam’s Mediascape Amid the War in Ukraine: Between Method and Mayhem”, Fulcrum, 30 March 2022, https://fulcrum.sg/vietnams-mediascape-amid-the-war-in-ukraine-between-method-and-mayhem/.

[13] https://www.youtube.com/watch?v=S8FgxJh9B8E.

[14] “Một số báo VN ‘dừng hoạt động fanpage’”, BBC News, 9 September 2020, https://www.bbc.com/vietnamese/vietnam/2016/09/160909_vn_news_fanpages_vanished

[15] Dien Luong, “Vietnam learns to exploit nationalist rage over Chinese maps”, Nikkei Asia, 9 July 2021, https://asia.nikkei.com/Opinion/Vietnam-learns-to-exploit-nationalist-rage-over-Chinese-maps.

[16] The Soviet Union helped train 52,000 Vietnamese scientists and technicians, including 30,000 graduates, 3,000 PhD and more than 200 D. Sc, as well as thousands of technical workers, who became the core of the country’s labour force in all sectors and industries. Many of them became high-level Party and state leaders and reputed scientists and artists. See Tu Thi Loan, “Vietnam-Russia Cultural Exchanges and Issues to Consider in the Age of Integration”, Ho Chi Minh City Institute for Development Studies (HIDS), http://www.hids.hochiminhcity.gov.vn/c/document_library/get_file?uuid=4a380122-4f02-42fa-860f-24862569fc92&groupId=13025.

[17] “Interview with Le The Mau: Which side is pursuing power politics?”, Viettimes, 12 March 2022, https://viettimes.vn/khung-hoang-ukraine-ben-nao-dang-theo-duoi-hoc-thuyet-loi-thoi-ve-chinh-tri-cuong-quyen-ly-giai-cua-dai-ta-le-the-mau-post155184.html.

[18] “General Cuong: Nga will not get ‘bogged down’ in Ukraine”, 28 February 2022, baonghean.vn, https://baonghean.vn/tuong-cuong-nga-se-khong-sa-lay-o-ukraine-303077.html; “Major general Le Van Cuong assesses scenarios in Russia-Ukraine conflict”, dantri.com.vn, 18 March 2022, https://dantri.com.vn/the-gioi/thieu-tuong-le-van-cuong-nhan-dinh-ve-cac-kich-ban-xung-dot-nga-ukraine-20220316151828630.htm.

[19] “Vietnam, Russia forge cooperation in political education in military”, vietnamplus, 20 May 2021, https://en.vietnamplus.vn/vietnam-russia-forge-cooperation-in-political-education-in-military/201779.vnp.

[20] Benjamin YH Loh and Munira Mustaffa, “Examining Narratives of the Russo-Ukraine Conflict Among Malaysia’s Social Media Users”, ISEAS Perspective (date and link to be updated).

[21] Nguyen Dinh Thien, “A lost and adrift decade of Russia after Soviet collapse (1991-2000), 23 January 22, website of the Political Academy under the Ministry of Public Security, http://hvctcand.edu.vn/nghien-cuu-quoc-te/thap-nien-lam-duong-lac-loi-cua-nga-sau-khi-lien-xo-tan-ra-1991-2000-ky-1-3759.

[22] “Putin: Soviet collapse a ‘genuine tragedy’”, NBCNews, 26 April 2005, https://www.nbcnews.com/id/wbna7632057.

[23] Anton Tsvetov, “Vietnam–Russia Relations: Glorious Past, Uncertain Future”, in Vietnam’s Foreign Policy under Doi Moi, edited by Le Hong Hiep and Anton Tsvetov (Singapore: ISEAS Publishing, 2018).

[24] See Benjamin YH Loh and Munira Mustaffa, op. cit; Darren Cheong, “Unpacking Russia’s Twitter Disinformation Narratives in Southeast Asia”, Fulcrum, 08 April 2022, https://fulcrum.sg/unpacking-russias-twitter-disinformation-narratives-in-southeast-asia/; Ians, “Why do many in Indonesia, Southeast Asia support Russia’s war in Ukraine?”, Business Standard, 17 March 2022, https://www.business-standard.com/article/international/why-do-many-in-indonesia-southeast-asia-support-russia-s-war-in-ukraine-122031700481_1.html; “Why are Indonesians on social media so supportive of Russia?”, Aljazeera, 19 March 2022, https://www.aljazeera.com/news/2022/3/19/why-are-indonesians-on-social-media-so-supportive-of-russia.

“Understanding and Reducing Methane Emissions in Southeast Asia” by Qiu Jiahui and Ryan Wong

2022/52 “Investment Trends and Industrial Prospects in Indonesia” by Yanuar Fajari and Siwage Dharma Negara

EXECUTIVE SUMMARY

INTRODUCTION

INVESTMENT TRENDS

POLICY & STRATEGY TO PROMOTE INVESTMENT

INDUSTRIAL POLICIES

CONCLUSION

ENDNOTES

2022/51 “Malaysia’s Bumiputera Development Action 2030: Maintaining Focus, Moderating Ambition” by Lee Hwok Aun

EXECUTIVE SUMMARY

A MAJOR PROJECT BEHIND THE SCENES

PRO-BUMIPUTERA AND GROUP-TARGETED POLICIES: EMBEDDED AND EVOLVING

RATIONALES, OBJECTIVES, AND TARGETS

KEY PROGRAMMES AND PRIORITIES

CONCLUDING THOUGHTS

REFERENCES

ENDNOTES

2022/50 “Why Vietnam Might Want to Reconsider its Russia Policy” by Derek Grossman

EXECUTIVE SUMMARY

INTRODUCTION

HOW VIETNAM AND RUSSIA GOT HERE

VIETNAM-RUSSIA PARTNERSHIP A COLD WAR RELIC

VIETNAM UNLIKELY TO BUDGE FOR NOW

HOW SHOULD THE WEST RESPOND?

ENDNOTES

2022/49 “Asia’s Regional Security Architecture: An Australian Perspective” by Nick Bisley

EXECUTIVE SUMMARY

INTRODUCTION

AUSTRALIA’S PESSIMISTIC TURN

NEW FORMS OF SECURITY COOPERATION

CONSEQUENCES FOR ASEAN AND THE REGION

ENDNOTES

2022/48 “Enhancing Regulatory Cooperation for Agricultural Trade in the Greater Mekong Subregion” by Sithanonxay Suvannaphakdy

EXECUTIVE SUMMARY

INTRODUCTION

REGIONALIZATION OF AGRICULTURAL TRADE

DIVERSITY IN NON-TARIFF MEASURES

POTENTIAL BENEFITS OF REGULATORY COOPERATION

CONCLUSION AND POLICY IMPLICATIONS

Annex 1: Economic Corridors in the Greater Mekong Subregion

ENDNOTES

2022/47 “The Russia-Ukraine War and its Potential Impact on Russia’s Arms Sales to Southeast Asia” by Ian Storey

EXECUTIVE SUMMARY

INTRODUCTION

POST-INVASION FACTORS AFFECTING RUSSIAN ARMS SALES TO SOUTHEAST ASIA

CONCLUSION

ENDNOTES

2022/46 “Vietnam’s Peacekeeping Contributions: Drivers and Prospects” by Phan Xuan Dung and Nguyen Cao Viet Hung

EXECUTIVE SUMMARY

INTRODUCTION

VIETNAM’S SOCIALISATION INTO PEACEKEEPING NORMS

PERCEIVED BENEFITS FROM PEACEKEEPING PARTICIPATION

PROSPECTS OF VIETNAM’S PEACEKEEPING CONTRIBUTIONS

ENDNOTES

2022/45 “Hydropower Development in Sarawak: Sensitivities over Sustainability and China’s Involvement” by Tham Siew Yean

EXECUTIVE SUMMARY

INTRODUCTION

CHINA’S INVOLVEMENT IN SARAWAK

GOVERNANCE

CONCLUSION

ENDNOTES

2022/44 “The Russia-Ukraine War: Unpacking Online Pro-Russia Narratives in Vietnam” by Hoang Thi Ha and Dien Nguyen An Luong

EXECUTIVE SUMMARY

INTRODUCTION

PROFILING OF VIETNAM’S PRO-RUSSIA NETIZENS

EMOTIONAL AND POLITICAL UNDERCURRENTS OF PRO-RUSSIA NARRATIVES

CONCLUSION

APPENDIX

ENDNOTES

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