Shah Suraj Bharat/Jakarta

Photo by Uri Tours (Wikipedia)

The peace process between the two Koreas is exactly– a peace process – something that has eluded the peninsula after 70 years of hostility. Investors, policymakers and the international community will have to be patient on the potential for market reform in North Korea. Yet, there is reason for quiet optimism, judging by the actions and statements of North Korean leader Kim Jong-un.

After becoming leader in 2012, Kim signaled a change in economic strategy to a focus on development, saying North Koreans would no longer have to “tighten their belts twice”, a subtle acknowledgment of the shortcomings of the command economy. In March 2013, Kim called for byungjin (parallel advance) on developing nuclear capabilities while building the economy. This contrasted to his father Kim Jong-il’s focus on defense, implicitly survival, as the paramount concern of the state.

State and regime survival is, of course, of paramount concern for the younger Kim. But the emphasis has shifted, from a stance of defensive (and sometimes offensive) neorealism through promoting nuclear capabilities, to deriving legitimacy and strength from economic growth. Confirming this strategic shift in April 2018 prior to meeting South Korean President Moon Jae-in, Kim declared that his signature policy of byungjin was to be retired and replaced with “all-out socialist economic reconstruction”.

After Kim’s summit in Singapore with the United States President Donald Trump in June 2018, war-like rhetoric markedly decreased. The economy has taken center stage in state propaganda and media coverage has shown Kim visiting farms, factories and tourist resorts. Going beyond rhetoric, the seeds of  market-oriented policies are quietly flourishing. Black markets have long been a vital means of acquiring daily necessities for ordinary Koreans, but they have been given more freedom to operate in recent years. Kim has also softly decentralized some economic controls, giving greater freedom to farmers selling crops and factory managers over wages and production.

Kim’s unprecedented steps of lifting economic controls are underpinned by the notion that economic openness does not necessarily pose a threat to the regime. This is underlined by the experience of reform and opening up in China and doimoi reforms in Vietnam, which led to phenomenal growth but cemented rather than eroded the power of the communist parties.

Moreover, such a reform strategy is something of an enigma for supposedly socialist economies. University of North Korean Studies professor Yang Moon-soo sees Kim’s strategy as mimicking China’s early period of opening up and reform, which itself was based on Soviet Union leader Vladimir Lenin’s New Economic Policy, characterized as capitalism subject to state control. Indeed such a reform strategy would suit Kim’s economic ideology, as state-led development will be imperative given the absence of an indigenous industrial class.

The question remains on whether North Korea will give up its nuclear weapons as demanded chiefly by the US. It would, however, be naive to assume that North Korea will completely denuclearize. This is a regime paranoid about its survival with an ingrained neorealist worldview of an anarchical international system, which views maintaining a balance of power through nuclear power as the key to survival.

It is worth noting that in 2003, Muammar Gaddafi and the Libyan regime decommissioned its weapons of mass destruction, winning favor from Western powers. Yet in 2011 during the First Libyan Civil War, NATO enforced a no-fly zone over Libya, which turned into a bombing campaign against government and loyalist forces, leaving Gaddafi feeling betrayed by the West. When Gaddafi  was apprehended in a culvert, he was subsequently tortured, sodomized with a bayonet and shot several times as he pleaded for his life. North Korea will certainly take note of this episode.

In this scenario, a quantum of utilitarianism may be necessary: An isolated, under pressure, nuclear armed and offensive neorealist North Korea with a hemorrhaging economy is more dangerous than a defensive neorealist, nuclear armed North Korea that is enjoying the fruits of economic growth and trading internationally as a result of market reform. The message needs to be sold to North Korea that being a member of international society, which is empathetic to North Korea’s worldview of the anarchic order but recognizes areas for mutual cooperation – in the spirit of raison de systeme (it pays to make the system work) – will give the regime a survival and power advantage as opposed to isolation.

Crucially, South Korea has shown that it understands and is sympathetic to North Korea’s strategic conundrum. During President Moon’s visit to Pyongyang where he addressed a crowd of 150,000 North Koreans, he pledged to “hasten a future of common prosperity”, praising North Korea’s “remarkable progress” and said he “understood what kind of country chairman Kim and his compatriots in the North want to build”.

South Korea’s stance means it is likely to continue pursuing cooperation with North Korea even if denuclearization falters, which would put it at odds with the US, although lifting international sanctions will be critical to kick-starting growth. Indeed this understanding is arguably a key reason as to why diplomatic overtures have made progress and kept North Korea at the negotiating table.

In the broader region, peace on the Korean Peninsula is certainly in everyone’s interests. The question also arises as to whether there is a role for ASEAN in contributing to peace on the peninsula and reforming North Korea’s economy.

ASEAN is certainly neutral ground in which to bring all stakeholders together, indeed Singapore was the host of the summit between Trump and Kim in June 2018 and Hanoi played host in February 2019.

Skeptics may point out that once again Southeast Asia acts as a venue instead of power broker, and ASEAN’s chief asset is its ability to organize meetings that have little tangible outcome.

On reflection, however, we must not underestimate the importance of the norms, socialization and legitimacy that ASEAN can bring in welcoming North Korea into a club of international society. The norms of the “ASEAN way” are surely attractive to North Korea as it seeks regime survival while ending its isolation. Peace and stability is often taken for granted, but in the context of development it is a mandatory precursor to growth and lifting ordinary people out of poverty. China and Vietnam are testament to this.

A dose of realism, however, for ASEAN member states is also necessary. A North Korea open to trade and investment will be another economic competitor for Southeast Asia’s developing economies. From afar, North Korea does appear to have the right conditions for takeoff growth. Similarly to South Korea before it began its journey of phenomenal growth, North Korea has the advantages a highly centralized state, high levels of elite unity, a relatively well educated but low waged labor force, a strategic geographical position and supposedly under Kim a developmental ideology.

Significantly, a reforming North Korea will capture precious value-added industries from South Korea, and all the technology, expertise and opportunities that come with it, something that ASEAN member states desperately need as they try to climb up the value-chain.

If we truly believe North Korea is on a path to market reform, then there is added urgency for ASEAN member states to upgrade economic relations with South Korea to remain competitive, and ensure that the economic benefits of a peaceful Korea can be shared by all.

The writer is an emerging markets editor and analyst. Find him on Twitter @ShahSurajBharat.

Habibah H. Hermanadi – Research Associate to Institute of International Studies and Post-graduate candidate from University of Delhi

India imagined a larger role beyond its current dominance in South Asia, the Act East Policy had become a known concept subject to the discussion under foreign policy context. When India reaches Southeast Asia, it becomes clear ASEAN became one of the defining actors which shall complete the pieces of Indian Act East puzzle. Thus, in this article, writer will try to capture the demands and perceptions of India out of ASEAN, focusing on the great interception of Indo-pacific concept which was recently brought up in the 34th ASEAN summit in Bangkok, as India on their own had developed its own model of what New Delhi ought to be the groundwork of their foreign policy in comparison to ASEAN’s outlook on what they define as Indo-Pacific.

Naturally, when it comes to dealing with ASEAN, it has been a tricky ordeal for India. The regional organization claimed centrality has been a vague click in the realpolitik context, and this put New Delhi in a difficult position if the regional organization will instead hampers the gateway to further India’s Act East Policy, ASEAN is definitely no South Asian Association for Regional Cooperation (SAARC) where India’s dominance is inevitable and India can stretch its arms to fast-forward other member states compliance unlike the situation where New Delhi have to wait around for ASEAN and its sluggish narratives. Moreover, the abundance of normative entanglement caused India to strategically reach certain players who happened to be ASEAN member countries, for example, India’s commitment to Cambodia, Myanmar, Laos, and Vietnam (CMLV) economic development and cooperation and deepening maritime dialogue with Indonesia, Narendra Modi has made it clear of what India wanted all along. Reflecting upon India’s perception, we can see how this signified the lack of relevance of ASEAN might portray as a regional organization, thus we are moving to the next point, whether or not ASEAN’s response to Indo-Pacific put the organization closer to India’s arms.

Indo-Pacific: a case for unification or dissension? 

India has committed itself in actively promoting Indo-Pacific, constructively as an idea and as a regional model of cooperation. In addition to containing China’s Belt and Road initiative which India has strongly voiced against, the key point that differentiated the two models lie on Indo-Pacific’s freeness and cooperative nature and BRI that according to India ignored core concerns of sovereignty and territorial integrity.

On the ideational level, Indo-Pacific for India appeared as a challenge to the old notion of Asia-Pacific that excluded India, setting apart an East Asian led economic regime. However, as the term gained popularity, considering the responses from France, the United States, and Japan, ASEAN felt the need to reassess the infant concept into the best of its interest.

The Summit which took place last June answered such need by some key points that clarified ASEAN’s intention in complying to Indo-Pacific model. However, despite the so-called finalized version of the outlook is, the substance has been designed in such ASEAN manner, to which du Rocher deemed slow due to the narratives trap ASEAN has when it comes to the diplomatic mechanism.

While India pointed out the importance of Indo-Pacific as an advanced concept, its existence meant to face contemporary challenges and match up new power configuration. ASEAN is still assuring its outlook would recognize the organization’s significance, pointing out the need of ASEAN centrality both geographically and policy-wise. This kind of response is alien to New Delhi style of pragmatic foreign policy hoping for a rather concrete response, yet ASEAN member states’ concerns with their traditional allies were also one of the reasons of the ambivalent stance the organization took when it comes to Indo-Pacific.

Perhaps the great crossroad between what New Delhi wanted out of Indo-Pacific and ASEAN became clear in the “rule-based-order” clause, an option which indicated ASEAN common understanding with Beijing, in comparison to rule of law basis. The mechanism they proposed pointed out how international law is incapable to solve the regional problem, while New Delhi begs to differ with the importance of referring to the rule of law when it comes to diplomatic conducts within the Indo-Pacific model of regional cooperation. This difference can harbor future conflict of interests between New Delhi, which currently tries to contain Beijing, while at the same time needing ASEAN’s compliance to further its foreign policy objectives.

Conclusion

To round up the commentary, we have to refer back to what India wants out of ASEAN, and through this context, we can see that India wants the Indo-Pacific to work under India’s terms, and within that terms, ASEAN must be included. Throughout the competing concepts, models, or regional external influence from some of the major global politics players. We can see despite accepting the common idea of Indo-Pacific, ASEAN and India are not completely on the same side in the development of this idea. For ASEAN, this is subject to ASEAN’s way of diplomatic engagement among member states alongside domestic conditions which cannot be denied, and regional challenges which the organization has to overcome. For India, the open to interpretation and vast meaning of Indo-Pacific, a concept which was meant not to dictate, definitely puts New Delhi in the intricate position.

So far, New Delhi’s concern over Beijing’s next move had been matched up by deepening strategic bilateral relations with ASEAN member states, considering these strategic partnerships will result in a tangible outcome. Perhaps, despite ASEAN’s decision on the creation of its Indo-Pacific Outlook the dynamics of India to Southeast Asian countries will remain the same, when it comes to the region, New Delhi has to adjust to the region’s dynamics and diplomatic pace instead of bypassing the ambitions through ASEAN.

By Matthew LoCastro, illustration by Lommes (Wikipedia)

The Belt and Road Initiative within ASEAN

The Belt and Road Initiative (BRI), also known as One Belt One Road (OBOR), is one of the most prominent and one of the most shrouded global development initiatives in modern history. With estimated investments of about US$150 billion over the next decade with a total price tag ranging from US$1trillion to US$4 trillion, BRI still remains only a singular part of China’s larger desire to invest, connect, and craft a sphere of influence, or as President Xi describes it, “a community of common destiny,” across Asia.

As of 2018, China has funded 96projects across South East Asia. China’s projects, a variety of roads, railroads, ports, power plants, and other infrastructure projects have provided insight into China’s grand strategy. ASEAN member states will have to determine if China’s investments and influence will support or disrupt ASEAN’s commitments to resiliency and innovation within the realm of its socio-cultural, economic, and political/security pillarsoutlined in the ASEAN 2025: Forging Ahead Together. As with many investment and economic development initiatives, ASEAN members can expect tangible benefits aligned with the ASEAN development framework but should ultimately air caution to China’s advances due to long term and deeply embedded costs.

A Positive Outlook for the BRI

China’s BRI and larger foreign investment goals have the potential to bolster the ASEAN 2025 vision. China has been a leader in poverty alleviation within its own boarders, uplifting 800 million people out of poverty since the 1980’s with the goal of eliminating all domestic extreme poverty by 2020. China’s success has the potential to carry across ASEAN as investments lead to job creation and infrastructure development, and consequentially reducing spatial inequality.

The potential for successful investment impacts are further supported by a 2018 study conducted by The Brookings Institute. Brookings evaluated the national economic impacts of approximately 4,300 Chinese government financed development projects in 138 countries and found that on average, Chinese aid and investment yielded economic growth dividends. For the average host country, a doubling of Chinese official development assistance produced a 0.4% point increase in economic growth two years after the funding was approved.

Reducing inequality, ensuring equitable economic growth, and developing an interconnected ASEAN that can effectively and easily trade goods and services are accomplishments that fall within the ASEAN 2025 vision. By evaluating the benefits of China’s investments, policymakers can be convinced to welcome BRI funding with open arms. However, it is important to recognize that China’s ambitions do not remain in a silo of intentions to promote regional economic growth.  China’s larger goal is to strengthen its international influence. Such a goal will come at a cost to ASEAN’s socio-cultural, economic, and political and security pillars and negate the economic benefits incurred by these investments.

The Adversarial Nature of the BRI and ASEAN’s Three Pillars

The ASEAN socio-cultural pillar states that it is a pivotal goal for ASEAN members to promote equitable access to quality opportunities and to protect human rights. BRI financing is not beholden to these standard. Other institutions, such as the IMF and the World Bank Group, will limit financing to causes that may violate the human rights of an ASEAN member country’s citizens. The BRI allows an option to seek financing from a source that does not abide to a standard of respecting human rights. This outlet inherently undermines that drive and motivation for all member countries to strive to uphold the same obligation. It can be more cost effective or convenient to ignore universally agreed upon standards of human rights when there are limited consequences. This issue is further compounded by the appeal of the ease in structuring financing and receiving funds from China.

China’s investments have also been linked to instances of supporting local corruption, degrading the environment, and weakening trade union participation.

In a 2016 case study of Chinese investment in Africa, empirical results consistently indicated more widespread local corruption around active Chinese project sites. This corruption would linger after the project implementation period, seemingly not driven by an increase in economic activity, but rather signifying that the Chinese presence impacts norms.

Chinese investments also do not have an incentive to support the development of renewable infrastructure or low-carbon investments. As China aims to achieve its own sustainability goals, locating financing for high-carbon projects internationallyallows for China to take credit for emission reduction and environmental quality improvements when in reality the environmental damage is occurring abroad.

Among the projects that BRI supports, researchers have also found a tendency for China to maintain control over development projects throughout the entire implementation phase, using Chinese contractors for work performed in the recipient countries. These contract workers weaken the ability of trade unions to advocate for reasonable labor protections and decrease the overall economic benefits received by locals.

Despite promises of potential economic growth, the economic pillar of the ASEAN 2025 framework is also threatened by BRI investments. Chinese banks are worried about the safety of current lending. Since 2015, commercial banks have cut new BRI financing. Furthermore, China is finding it hard to identify profitable projects in belt-and-road countries leading to BRI being commonly referred to as “One Road, One Trap” amongst the business community.

The investment environment is further complicated by the lack of investment transparency and at times, predatory nature of investments. Chinese backed projects have a uniform contractor base. 89% are Chinese companies, 7.6% are local companies from the country of investment, and 3.4% are foreign companies, non-Chinese companies from a country other than the one where the project was taking place. Compared to multilateral development bank funded projects, 29% are Chinese, 40.8% are local, and 30.2% are foreign.China’s investment strategies also provide little room for local organizations to secure contracting opportunities. The lack of contract diversity coincides with the lack of project transparency preventing ASEAN members from understanding the investment activities occurring in the market and discouraging investment.

Several of China’s infrastructure investments, though not the majority of infrastructure investments, have also been labeled as “debt-traps.” A debt-trap occurs when China finances projects on unfair and unequal terms taking advantage of lower income countries financial needs. The trap component occurs when payment deadlines approach and the borrowing country is no longer able to pay its debts.This leads to Chinese intervention to gain control over the physical assets or gain some other distinct advantage to collect on what they are owed.

In Sri Lanka, the Hambantota Port project fell victim to this scheme. Upon striking a deal with a Chinese state-owned enterprise, Sri Lanka borrowed $307 million from the Chinese Export-Import bank, then $700 million, and finally, $1 billion. Once Sri Lanka found itself unable to pay these loans back, it ceded control and sovereignty of the port to China under a 99-year lease agreement.Similar instances of “debt-trap” financing have occurred in Malaysia, the US$20 billion East Coast Rail Link Project, and in Laos, the China-Laos railway project, among a few examples.

China’s investments abroad have become recognized as attempts to dominate smaller economies. Such actions strip ASEAN members of their economic and political sovereignty. This loss of sovereignty can expand into concerns of security and directly affect the third and final ASEAN 2025 framework pillar of promoting political and physical security.

As seen in Sri Lanka and Laos, there is the potential for vital domestic assets to be under the direct ownership of a foreign entity in the instances of defaulting on project payments or loans. Control over ports and harbors, especially in South East Asia poses a large security threat as the acquisition of these assets could bolster Chinese presence in contested areas such as the South China Sea.

Considering several BRI projects involve maritime infrastructure, China could potentially influence ASEAN member states’ ability to use maritime trade routes and block the development of comprehensive maritime cooperation. Chinese ownership of power plants and access to other supply chains, raw materials and natural resources poses a major security risk in the event of conflict and will increase Chinese soft power over the governance decisions of ASEAN due to this looming threat.

The Need for Caution When Addressing the BRI

As ASEAN member states plan to forge ahead together, it is vital that the 2025 framework for the region takes into consideration the external influences that seek to threaten the ASEAN community. Though investment opportunities from China may appear lucrative, they pose a serious threat to the leadership and success of the ASEAN community. The BRI’s goals are vast and this initiative has the potential to produce a network of infrastructure projects unlike anything the world has yet to see. However, the ambitions and intentions of the BRI must be policy maker’s first consideration. Unlike multilateral development banks and other international financial institutions, China’s intention is not focused on aid and mutual global development. It is driven by a desire to control and dominate the actions of other sovereign nations.

Matthew LoCastro attended Hunter College in New York City and is a Luce Scholar