JAPAN - WikiLeaks



MONITOR GUIDANCE – EAST ASIA

JAPAN

Japan is the second largest economy in the world and a close ally of the United States. The country is not particularly rapidly changing – its politics are log jammed, its economy is withering away, its population is withering away – but it is a highly technologically advanced country and a key platform for projection of American power in Northeast Asia. Because of dire economic and public finance situation and shrinking and aging demographics, Japan is probably the top contender for the first developed country to collapse. Throughout history it has been an earthquake society, in which change happens dramatically, suddenly, and totally transforms the country. We are essentially waiting for something like that to happen again in the coming decades. But don’t count Japan out in the short term – it will continue to be an innovator in technology (cars, environmental products, genetics and pharmaceuticals, robotics), and especially significant is the gradual military rearmament that is taking place in response to security challenges from a rising China (and possibly a more distant America).

Politics 

Japanese politics have been dominated since 1955 by one party, the Liberal Democratic Party (LDP). But the LDP’s comprehensive hold on government was broken in 1993, when it lost power to an opposition coalition in elections – it was only out of power for less than a year, but since then it has been forced to form coalitions of its own with lesser parties. The process of erosion is continuing – Koizumi, the most successful prime minister in decades, succeeded because he threatened often to quit the LDP and challenged its members head on. The Democratic Party of Japan is now the leading opposition movement, having taken over the upper house of parliament in 2007 elections, and looks set to make major gains in the 2009 lower house elections – while the DPJ may not gain full leadership, it will create a jam in the lower house and further reduce the ability of Japanese government to make effective policy, thus leaving the country in a situation where it becomes more and more entrenched in the ruts created by special interest groups in government and business, without a nationally coherent strategy.

• Political gridlock and anything that has potential to break it. Elections, defections, new parties, new coalitions, opposition wins at regional elections.

• Liberal Democrat Party (LDP) – anything suggesting intra-LDP fighting, or splits, disagreement, defection among high level members

• Revolving door prime ministers and cabinets

• Junichiro Koizumi – anything he says

• Ichiro Ozawa – anything he says

• Corruption scandals - have a big effect on public perception of politicians

Economics

Since 1990, Japan’s economy has been in a funk, alternating between recession and miniscule growth, struggling with deflation, and seeing its national debt rise every year due to profligate government spending meant to sustain the economy. Public finances are crushing Japan (interest on the debt itself is one of the country’s biggest major expenses), as the government’s borrowing crowds out funds that could go to the private sector. Meanwhile the population is shrinking rapidly, leaving fewer young people to generate capital and more old people to soak it up in medical and retirement expenses. (And Japan is averse to immigration, a tendency that is particularly damaging in the current situation, though it is just conceivable that reform could happen someday to immigration policy.) As the risks mount of an eventual shortfall of purchasers of Japanese bonds, the government will eventually have to raise taxes and cut public programs, which will create enormous social dissatisfaction (in a country that rarely sees any outward sign of protest). Exports and the trade balance are crucial to watch, as this is the only area where Japan has any room left to grow (consumption maxed out in the 1990s and hasn’t grown since). If exports are strong, Japan can move along – an extended period of strong trade balances is its best hope. But if exports fail, as they have in 2008-9, then the country teeters on the verge of disaster.

• Monthly quarterly yearly stats and economic indicators

• Exports – performance of export sector crucial for economy

• Imports – especially mineral fuels, raw materials and food (oil, coal, natural gas, liquid natural gas, iron ore, other ores). Japan’s dependent on these.

• trade balance – deficits, esp any month other than Nov-Feb, are important.

• Fiscal policy, public budget -- stimulus packages, allocations to regions, infrastructure projects

• Interest rates

• Government debt – bond issues

• Deflation – Consumer Price Index, etc

• Non-performing loans – growth rates, ratios, disposal of NPLs, etc

• Liquidity shortage – anything that suggests liquidity shortage anywhere is a red flag

• Bankruptcies – especially affecting SMEs

• Unemployment --

• Demographics – any major studies on population change, births, deaths, life expectancy, etc.

• Immigration – any changes further constraining immigration, or promoting it and trying to become more open to it, are relevant

• Tax increases - consumption tax especially

• Foreign currency reserves

• US dollar assets – buying more or not

• High-technology, green tech, genetics, robotics, etc

Security

Japan is constitutionally pacifist due to American demands after WWII. But since the 1990s it has been advancing the capabilities of its Self-Defense forces and preparing them for a greater role in international missions, while also becoming more capable of securing Japan’s crucial supply lines and reinforcing its territorial claims. Japan provided refueling assistance for American operations in South Asia, and has sent a naval task force to fight pirates in Somalia – these actions require delicate legal juggling to get around the injunction in the constitution not to wage war or maintain armies. With the rise of China posing serious challenges to Japan’s perceptions of its own security and defense capabilities (and with North Korea’s provocations serving as a great excuse), Tokyo is on a long term drive to improve its defense and security capabilities. (The fact that Tokyo feels it cannot and should not always depend on the US entirely is also a factor.) Japan has long-standing quarrels with its neighbors, especially over sovereignty claims on islands and maritime boundaries that could give access to natural resources. The major constraint on defense improvement to watch for, however, are fiscal, because of the weakness of Japan’s economy.

• US-Japan alliance – ballistic missile capability (SM3, PAC, etc), trade/sharing in other weapons and weapon systems, removal of US troops

• Rearmament, evolution of Japanese Self-Defense Forces (JSDF) – including maritime, air, etc.

• Nuclear is also an issue to watch out for here as Japan has always made sure that they have the capability to go nuclear very quickly if the circumstances call for it.

• Space science – legal distinctions long restrained Japan's military exploitation of space, and despite its technological sophistication, the movement into spy satellites, etc., is presenting a certain challenge. Keep an eye on what the Japanese are doing in space.

• Constitutional interpretation, change – relating to pacifist clause

• Ongoing reforms in Self-Defense departments and agencies

• Deployments abroad, peacekeeping – like Somalia, Afghanistan,etc

• Minor security incidents at US military bases

• Godzilla and Mothra

International

Japan is a firm US ally. It is also a major supporter of the global system and international organizations. If the US economy and the global economy are strong, Japan – an export economy – benefits. Therefore Japan will promote more stability, more trade, more economic growth and opportunities, etc. But Japan has long-standing quarrels with its neighbors, especially over islands and maritime boundaries that create diplomatic rows and tensions. Japan is highly distrustful of the Russians, has some sympathy, much interdependence, but much competition, with the Chinese, and will always have a tense relationship with the South Koreans, though that one is improving due to business links and American alliance system. Japan has no leverage over the North Koreans but is wary of their provocations, and fears that the country could become a failed state, casting refugees on its shores. The Japanese also must manage relations with countries that provide it with natural resources, which it depends on entirely. Japan resists immigration, even though that is a potential cure for its demographic problems, so exceptions to this rule (from Filipina nurses to others).

• US alliance, US economic relations

• Tensions and economic integration with China

• Relations with South Korea

• North Korean provocations, abductees in North Korea, sanctions on DPRK, etc

• Relations with Taiwan

• Island disputes – Russia (Kurils), China (Senkaku/Diaoyutai), South Korea (Takeshima/Dokdo)

• Maritime activity – such as Japan’s survey of East China Sea, run-ins with China, etc

• Middle East – relations to Japan’s primary energy suppliers

• multilateral and international activities, IMF, UN, etc

• Investments in Southeast Asia

• US military bases – controversies, security incidents, public criticisms by Japanese politicians

CHINA

Politics: 

One of the key drivers of the Chinese leadership is the preservation of the ruling status of the Communist Party of China (CPC or alternately CCP). While there are also several official non-Communist Parties, power is centralized in the CPC (and there is frequent overlap in CPC and Government roles), and concentrated within the Standing Committee of the Politburo, headed by [national] President and CPC General Secretary Hu Jintao. The Politburo Standing Committee also includes (in technical order of heirarchy) NPC Chairman Wu Bangguo, Premier Wen Jiabao, CPPCC Chairman Jia Qinglin, Li Changchun, Vice President Xi Jinping, Vice Premier Li Keqiang, CCDI Secretary He Guoqiand and Zhou Yongkang (former Minister of State Security). Within the top leadership, there are numerous factional affiliations based on age, background, education, family, training, experience and policy leaning. The CPC Congress in 2012 will see a transition from the current “fourth generation” leadership to the “fifth generation,” spearheaded by Xi Jinping and Li Keqiang. These two are representative of one of the factional splits along economic policy lines, Xi backed by those still supporting a focus on exports as a way to keep hard currency and technology flowing in to achieve a much more gradual evening of economic disparity in China, Li backed by those advocating more rapid shifts in China’s economic patterns from the export-dependent resource heavy model spawned in the late 1970s to one driven more on domestic consumption and services. That debate is also manifest in the coastal/interior inequalities, and a south/north split (northern China - Manchuria - being now a rustbelt after the collapse of its oil and heavy industry amid the rise of south China - Shanghai and Guangdong - light industry, technology, exports and banking.

The National People’s Congress (NPC), though still often freferred to in western media as a “rubber-stamp parliament,” has been gaining input and influence in shaping domestic policies and in raising discussions and even criticisms of policy ideas in circulation. When the NPC is not in session, its Standing Committee continues to operate and discuss/debate policy and legal proposals put forward by the Politburo. This often offers one of the first windows into key issues being discussed by China’s top leaders, and reveal some of the alternate policy ideas being circulated. 

The Chinese People’s Political Consultative Congress (CPPCC) is primarily an advisory body where old cadre are retired and ethnic minorities can show off their costumes at annual meetings. It serves little real function. 

Changes in leadership at the provincial or municipal level can ften be indicative of economic or political struggles at higher levels. This includes governors, mayors and local CPC Secretaries. The most significant to watch are usually those along the southeastern coast and one province inland from those, as well as Sichuan, and the municipalities of Beijing, Shanghai, Zhejiang, Guangzhou and Chongqing.

Economics:

China has seen years of double digit economic growth based on exports and foreign direct investment. The Chinese managed to weather the Asian economic crisis and succeeding US slumps, but have been hit hard by the current global slowdown. Internal debates over the viability and desirability of maintaining the export-focus while slowly altering the domestic economy or using quicker and more wrenching methods continue, but all look at it from the persepctive of the impact on the unity and security of the CPC as the single core leadership, and at the impact of economic policies on social stability. In fact, social stability is a major concern for the the leadership in determining economic policies. China sees frequent conflicting economic pronouncements, as well as leaked rumors of policy changes, usually about a week before the actual change occurs (this is particularly true for pricings of commodities and fuel, rebates, taxes, and for governemnt subsidies). 

Chinese economic statistics are nototiously suspect, but that doesnt mean they arent important. Employment numbers are relatively meaningless, but we should be watching for GDP growth (be very clear on the methodology China uses to calculate, it isnt comperable to US or Europe), exports and imports, electricity consumption, oil and gas imports, raw commodity imports (Iron, aluminum, copper and their components), industrial output, bank loan amounts and the like. Also, we should be looking for signs of shifts in trade patterns, shifts in the contribution to GDP or economic activity by province (is there a movement of activity from the coast to the interior? a slowdown in a particular province or an acceleration in another), and any reports on economically-motivated public unrest (a bit more on that in the security section). 

China has been on a binge buying spree around the world, exploiting the availability of credit in China to buy up or invest in companies and commodity producers around the world. This is something to watch - the rumors of bids, active buying tours, completed deals and deals falling through (including nationalistic backlashes in the countries where deals are being struck). The key industries to watch are energy, primary commodities and technology. 

Security:

There are multiple layers of security issues the Chinese leadership is concerned with. At the very basic level is the potential of social unrest, triggered by economic instability, corruption, environmental issues, or, perhaps even more troubling, political or religious rights. 

The second tier is potential domestic unrest triggered by ethnic movements, the two most immediate being the Xinjiang Uighur community (including the East Timor Islamic Movement [ETIM], also known as the Turkistan Islamic Party [TIP] - more at and a three-part series beginning at ) and the Tibetan movements, both domestic and abroad. China also has some concern about other ethnic problems spilling over its borders, including the struggle in Myanmar, the spread of Islamist militancy from Central Asia and Afghanistan, and to a lesser extent social problems with its ethnic Korean population in the northeast. 

The next ring of concern for China is the neighboring countries. China has resolved most of its land border disputes, aside from the Indian border (which is growing more problematic after New Delhi’s defense reviews determined that India was not prepared should China carry out a surprise attack). But its maritime border is another story. China has recently launched the Department of Boundary and Maritime Affairs, which will focus on enhancing and actualizing Beijing’s claims on the whole of the South China Sea (). Chinese maritime activity is growing more assertive, and confrontations with neighbors and the United States Navy will likely increase. Watch particularly close for any submarine and anti-submarine acrtivity. In addition, however, Beijing is likely to be working toward attempting bilateral and multilateral arrangements to explore the South China Sea floor. 

Want to watch for deployments, acquisition, shipbuilding programs but also shifts in training, doctrine and personnel. All developments are worth noting. Watch for both traditional, conventional capabilities (e.g. underway replenishment) as well as asymmetric, unconventional capabilities (e.g. the development of anti-ship ballistic missiles).

In a broader sense, the Chinese military is well advanced in a decades-long process of fundamental reform and modernization. We need to be noting and tracking these efforts – not just the buying and developing of modern weapons but the shifts in training, strategy, tactics, doctrine, personnel issues.

One of the key Chinese concepts is 'informationalization' a blanket concept for 'wiring' its forces with command, control, communications and intelligence surveillance and reconnaissance capabilities.

Finally, China deals with several international-sort of problems, from its East and South China Sea policies butting up against Japan and the other states along the boundary of the seas to its Taiwan policies (look for any sign that Hu Jintao as CPC Secretary General may arrange a meeting with Taiwan President Ma, who is going to be chair of the KMT, allowing for “party-to-party” dialogue between the two presidents) to its mixed dealings with North Korea’s nuclear program. In addition, Chinese projects overseas were, at least briefly, becoming targets of local militants and others. Lets see the reactions on the ground as China takes a more active role internationally, and evolutions of China’s security response. 

International:

The United States is the primary focus of China’s international attention, and is likely to remain so for some time. Beijing is both trying to cooperate with Washington to take a role as a global partner/equal, and hedge to provide defense against any potnetial political, economic or military confrontation with the United States. 

In the Asia-Pacific region, where China is establishing itself as the regional power (challenging Japan), Beijing has a two-part strategy - intra-Asian cooperation to reduce US influence, and a second track of Asia-US dialogue to undercut Washington’s ability to exploit bilateral relations in Asia to contain China. Beijing is obsessed with the prospect of the United States creating an alliance ring around China to “contain” the rise of China. 

China sees multilateral instiututions, such as the United Nations, as entities that can temper U.S. unilateral power (even if it cant directly challenge or replace the USA). In most cases, the norm is for Beijing to side with multilateral rules and regulations and try to coax Washington to follow along and accept the constraints the multilateral institutions impose. At the same time, Beijing is working to gain greater involvement in the operations of multilateral institutions, to better shape their focus. Also watch for efforts by Beijing to redefine international legal norms. The best example of this is it worknig to shift the understanding of certain concepts in the U.N. Convention on the Law of the Sea in order to make it more difficult for U.S. Navy operations near its shores.

The Chinese-Russian relations is complex, and I’m sure the Eurasia team will cover it in part as well in their guidance document. There is the longrunning perception that China’s massive population bordering Russia’s sparsley populated but resource rich far east is a sure formula for a creeping (or not-so-creeping) invasion of the Russian wasteland. History doesnt seem to back this, but the concern does shape relations. The two main issues that Russia and China deal with are energy (and the interminable delays in Russian energy supplies to China) and Central Asia (an issue of energy, resources and regional influence). 

SOUTH KOREA

Politics:

South Korean politics are convoluted and contentious. After decades of autocratic military-backed rule, the country finally held its first truly democratic election in 1997, bringing Kim Dae Jung to power (though there was an election five years earlier btringing Kim Young Sam to power, in that case the outgoing military-backed clique manipulated funding to ensure Kim YS, who had joined their party, won against his competitors). But the South Korean Constitution, to avoid any further chance of a return to autocracy, set up a single-term presidency that serves alongside a parliamentary system with a Prime Minister. The president can only serve a single, five-year term, and there is no Vice president, so continuity is effectively eliminated from the system. The current pattern, then, sees a President elected, taking about one or two years to become truly established and battle past the parliamentary barriers, have a year to rule, then go into decline as a lame duck, usually stuck with a parliament that has elected the opposition to lead. 

South Korea’s democracy is young and volatile. It isnt going away, but after decades of only knowing how to oppose something, the koreans now have a tough time with open political debate, and instead quickly shift to wideranging street protests, strikes, and parliamentary blockades. The recent suicide of former President Roh Moo Hyun, who was accused of corruption, has enflamed protests against President Lee Myung Bak and sparked no end of conspiracy theories about how, actively or incidentally, the current government had Roh killed. 

There is also a geographic split to South Korean politics (though this is finally starting to soften), with the southwest traditionally being the “liberal” base, and stronger authoritarian and industrial power being around Seoul and down the east coast to Pusan. 

The currently ruling Grand National Party (Hannaradang) is normally considered more conservative, closer to the United States, a stronger supporter of national defense an the US defense alliance and less likely to appease North Korea. 

There are other pillars of power in South Korea, including the continued influence of teh Chaebol (major family-run business conglomerates like Samsung and Hyundai), the media (particularly the big three pro-govermment papers Chosun Ilbo, DongA Ilbo and JoongAng Ilbo) and labor. 

Watch for street protests (large scale), crackdowns on “political freedoms” like instagatory internet groups and street rallies, and debates over key policies, particularly domestic economic development (and the national canal plans), North Korean policies and the US defense alliance.

Economics:

South Korea’s economic development is a classic case of an Asian tiger rags-to-riches story. In the 1960s, North Korea, backed by Soviet industrialization, was far ahead of the South economically. Against US advice to focus on labor-intensive light industry for export, then President Park Chang Hee in the 1970s launched a crash heavy industrialization program for South Korea, working directly with the Chaebol and bringing South Korea racing past the North in a decade. 

South Korea’s economy is fairly quick to shift direction, and still can be shaped by govenremnt involvement fairly quickly in times of crisis. In addition, the movement of South Korean investments in Asia has often been a signal of what would come later - so if they go into a country failry heavily, it often meant others would follow a year or two later. If they bailed, others would a year or two later. 

South Korea is heavily export dependent, with major exports including automobiles, technology and shipbuilding. Any major shifts in their markets for these goods needs watched. 

South Korea is always wary of competition from Japan and China, though it also works closely with the two economically. 

Security:

North Korea represents the bulk of South Korea’s security concerns. The status of the US-Korea defense alliance is always one to watch. There is a planned transition of power in the relationship, as well as movement of US bases within South Korea. Watch the discussions and status of this. The occassional misconduct of US soldiers can create rapid protests.  Keep an eye on indigenous South Korean military developments and purchases of new equipment. Seoul is looking far beyond DPRK, and is looking at longer-range technologies like Global Hawk UAVs. Watch strategic capabilities particularly closely. Watch the development of South Korea’s navy closely, as well as the emerging South Korean space program (the first launch is set for late July). 

International:

South Korea has expanded its international reach via its corporations and more recently its energy companies. The Six Party process still takes up a lot of talking time (even though it is largely defunct). SOuth Korea maintains a cautious balance between the USA, Japan and China. Traditionally, Korea is squeezed between China and Japan, so ROK wants to keep the US as a buffer between those two for a while into the future. 

MONGOLIA

Politics:

In May 2009, Democratic Party (DP) candidate Tsakhiagiin Elbegdorj defeated incumbant Nambariin Enkhbayar of the Mongolian People's Revolutionary Party (MPRP) in a close Presidential race. Elbegdorj took office in June. Despite there being two main political parties, Mongolia’s politicans have been known to switch between parties, and both parties form a coalition government, meaning political transition is more about personality than policy. While there has been occassional bouts of violence related to Mongolian elections, protests and demonstrations don’t normally last long. 

Economics:

Mongolian economics is dominated by the mining sector.The Democratic party has suggested it may try to better distribute mining profits; in other words try to soak the foreign mining interests. Watch for negotiations or adjustments, and any new potential investment from different countries. 

One other trend in Mongolia since it became un-Communist is a back and forth of nationalization and privatization, often spurred by over-paid foreign consultants. Watch things like the power sector. 

Security:

Internal security is relatively stable, though there are politically-motivated protests and the like occassionally (and some have resulted in deaths). Mongolia’s biggest concerns are its neighbors, China and Russia. Mongolia is afraid to grow too dependent upon either one, and tries to draw in a third power to balance the two neighbors. The obvious choice is the USA, but Washington remains reticent (largely because you cant get to Mongolia without going through Russia or China). Japan has slowly sought to insiunuate itself into Mongolia as a possible substitute, but not with force yet.

International:

Largely the same as the security section and a bit of the econ section - look at how Mongolia deals with its neighbors and with different mining partners. Also watch for Japanese or South Korean expansion of political or economic influence. 

NORTH KOREA

Politics:

Politics in North Korea are dominated by Kim Jong Il and his family at the core, with the main support group being the National Defense Commission, recently expanded to 12 plus Kim (for a lucky 13). In addition, there is the Worker’s Party of Korea (WPK or sometimes KWP) and the Korean People’s Army (KPA) that have their own elements of power (but are both represented on and managed through hte NDC). The Supreme People’s Assembly (SPA) is another, lesser source of power, more often a reflection of existing influence than a place from which it emerges. 

In North Korea, the current center of political debate (well, not exactly debate, perhaps interest) is the succession program. Kim Jong Il has suggested he will step down in 2012, handing power to his youngest son (Kim Jong Un) who will be backed by a collective leadership group comprising the NDC (with Kim Jong Il at the head of the NDC to manage power as his son learns). There are still two other sons, Kim Jong Nam (AKA Fat Bear, who got caught going to Tokyo Disney and spends most of his time in Macau and Hong Kong - recently talking quite a lot to the media) and Kim Jong Chul, the middle son and a one-time contender for succession (but allegedly too “effeminate” for his dad’s taste). Kim Jong Il’s brother-in-law, Jang Song Thaek, has recently been appointed to the NDC as well.

Other politics revolves around how to deal with South Korea, how to deal with the United States, relations with China, Japan and Russia, and economic policy. Changes in govenrment positions are always important, as are overseas trips of top officials. The ongoing rumors of family and succession struggles are itneresting, but not necessarily vital, as it appears there is a renewed drive by Japan and some others to spread rumors in an attempt to reshape foreign perceptiuon and throw the regime off balance.  

Economics:

There are none.

Just kidding.

North Korea has a centralized economic system, but has been experimenting with economic reforms, local markets and even private ownership of houses and land. There is a realization that the current economic system doesnt work well, that the country needs change, but there is a fear that economic openess leads too quickly to challenges to the political order. 

North Korea has a history of involvement in illicit activities, from drug running to counterfeiting, as well as less savory activities like missile sales abroad for hard currency. 

Reports of North Korea’s economic condition are often skewed, particularly reports about famine. In North Korea, the northern provinces along the Chiense and Russian borders were usually places whjere the less desirable were sent, and are geographically the places where agriculture flourishes the least. Thus reports of food problems from people in this area to interested parties outside is usually misleading. There is a strong motive to make things look worse, the situation in the north is usally worse than the rest of the country, but observers apply northern conditions to the whole country. 

Keep an eye on the movement of funds from north korean accounts aborad. Also for changes in focus domestically (heavy industry, energy, Kaesong).

Security:

North Korea’s core security concern is the preservation of the elite, with the Kim family at its core. This drives both domestic and itnernational security activities. While North Korea has a large army, with plenty of artillery aimed at Seoul (any details or discussion of the precise nature of this threat would be valuable), its biggest cocnern is the United States. Pyongyang has a strong fear of ending up like Iraq - a country attacked and ultimately invaded by the USA. The missile and nuclear programs serve as deterrents to this, as does North Korea effectively holding Seoul as a human shield. Anti-ship and asymmetric/unconventional capabilities are also where we may see meaningful shifts in DPRK military capability. Keep an eye on ways Pyongyang is attempting to hold its adversaries at risk.

Tests of North Korean nuclear devices and long and medium range missiles are important to monitor. So are reports of North Korea cooperation/activity with other programs abroad as well as sales of its weapons. 

North Korea has threatened possible military action in the West Sea/Yellow Sea, which may include naval clashes or even action against UN/South Korean controlled islands along teh so-called Northern Limit Line (the western extension of teh DMZ into the sea, which North Korea doesn’t recognize because it limits access to the deep water port of Haeju and to the rich crab fishing grounds around one of the islands.)

In addition to North Korea’s actions, watch the way other countries position themselves to deal with North Korea, especially dealing with anti-missile systems and surveillance.

International:

North Korea has the uncanny ability to draw global attention whether it is deserved or not. This is a critical part of Pyongyang’s survival strategy since the end of the Cold War lost it its sponsor - what we have affectionately dubbed the Crazy Fearsome Cripple Gamut. In short, the regime gives the impression it is crazy and unpredictable, then it adds a level of fearsomeness and danger from weapons, making people afraid North Korea might use them if provoked. That alone would not be enough, though, and would invide forceful disarmament. But DPRK added the cripple element, giving the impression the country is always on the verge of collapse. The bigger fear from the neighbors and otehrs is the fear of collapse and dealing with the aftermath, which would include refugees and the flow of arms and weapons all over the place. Thus the international community does what it can to keep North Korea from collapsing, giving North Korea the leverage it needs to survive. 

With additional punitive measures on North Korea for its latest round of nuke and missile tests, keep an eye out for movement of North Korean funds, for interception of North Korean ships, and the like.

TAIWAN

Politics:

The two major parties in Taiwan are the ruling Kuomintang (Nationalist Party, or KMT) and the opposition Democratic Progressive Party (DPP). The KMT retook the presidency a little over a year ago with Ma Ying-jeou’s victory, ending two terms of DPP leadership under then-President Chen Shui-bian. Internal politics are often dirty in Taiwan, and both sides engage in mud-slinging, street protests and corruption and other legal investigations. One of the biggest issues is always China policy, and the KMT has engaged in a policy of peaceful cooperation with Beijing in order to ease tensions and gain more “international space” for Taiwan, and the DPP is now facing an internal debate over how to respond to a Chinese offer to begin engaging DPP officials. It is important currently to watch the evolution of the debate in the DPP, and the potential for Beijing to use its offers to weaken the ostensibly pro-independence DPP. 

Economics:

Like much of the region, Taiwan’s economy is heavily tied to exports. Over the past several years, there has been an increase in Taiwanese economnic integration with mainland China, and this has both helped the Taiwanese economy, and contributed to political cocnerns. The rural farmers traditionally supported the DPP, but Chinese openings to Taiwanese produce weakened that connection. It is hard to seperate economics from cross-straits politics at times, so watch for deals made via political parties as opposed to the govnerment. 

Security:

Taiwanese security revolves around the China-Taiwan-USA triangle. Washington tries to keep an uneasy balance in the region, backing Taiwan’s defense, but not granting Taiwan access to defense materials that would give Taipei more independence of U.S. security and political influence. Chinese missile numbers are always a major issue. Taiwan’s quest for more submarines, and any new ASW capabilities or activities are important to watch, as is Taiwan’s potential expansion of security ties with Japan.

International:

Aside from the ever-present China issue, Taiwan’s international relations focus now on gaining “international space” - a euphamism for more representation in multilateral international bodies, particularly various organizations under the United Nations. Two major ones Taipei is focusing on next, after the WHA victory, are the IMO and the ICAO. Also watch for the continued (but much quieter these days) dollar diplomacy as Taiwan tries to keep its few remaining diplomatic connections, and China counters. Any overseas travel by the president needs watched.

INDONESIA

Politics: 

Indonesia is a product of the anti-colonialism movement following World War II. Founding President Sukarno harnessed the new nationalism to hold the vast archipelago together, balancing numerous political forces including the Muslims, non-Javanese and communists. It was his flirtation with the latter that gained his successor, Suharto, the opportunity to throw a US-encouraged coup, first putting down a “communist rebellion,” then ultimately seizing power. Suharto held teh island nation together through an invasive bureaucracy (in the form of Golkar - meaning “functional group” - to which everyone on government pay, from the military to school teachers, held membership), a strong military with a regional command system, transmigration policies to mix up the ethnicities (and to ensure continued Javanese dominance) and a strongly centralized economic power (centralized in the person of Suharto himself). 

Suharto’s downfall in the wake of the Asian economic crisis led to a period of political uncertainty as the elite jockeyed for position and tried to avoid massive infighting or loss of territorial integrity (though East Timor did break free during this period). Suharto was replaced in the interim with his VP, Habibi. Abdurrahman Wahid became the next President, representing one of the two largest Muslim organizations in the country (his being less fundamentalist than that of his rival Amien Rais). Wahid never finished his term, his “cabinet of national unity” a dismal failure, and his VP, Megawati Sukarnoputri, daughter of founder Sukarno, took over. Megawati was a relatively ineffective president, and lost in the next election to Susilo Bambang Yudhoyono, the current President. Yudhoyono had ties to numerous pillars of Indonesian elite - the military, the backing of the Muslims, the popular street (previously held by Megawati), Golkar and the economic community. 

Indonesia is heading for another Presidential election in July. Yudhoyono (Democrat Party) has teamed up Boediono, an economist and Bank of Indonesia governor, to take on his former VP Jusuf Kalla (Golkar) and his running mate General Wiranto (Hanura/People’s Conscience Party), and Megawati (Indonesian Democratic party of Struggle PDI-P) who teamed up with former General Prabowo Subiantoro.

Politics in Indonesia can be violent, and large demonstrations clashing are not unusual in election season. 

Political power is centered in Java, the most populous island, while the further away from Java one travels, the less influence a province has in the center. 

Economics:

Once a major oil exporter, Indonesia is now a net importer.

Indonesia’s economy has done better in the current global slowdown than some of its neighbors, registering a GDP growth rate in 1Q09 of 4.4 percent. GDP in 2008 was just shy of $500 billion. 

Java is the power of Indonesia, but Java exploits resources in other islands, adding a bit of tension to the economic policies. The central government has experimented with greater autonomy in economic activity for provinces to alleviate some of this pressure. 

Look for new investments in energy and mining. Watch for developments regarding Japanese, Chinese, US and Australian investments, aid or trade. 

Security:

A heavy security focus is on the potential for domestic separatist activity. The two potential hot spots are Aceh (where the Free Aceh Movement - GAM - is now partially cooperating with Jakarta, though there are elements still hiding out in the mountains) and Papua (also called West Papua or Irian Jaya, where the Free Papua Movement - OPM - and others are often engaged in small-scale activities, as are rebel soldiers who get stir crazy being stuck out in the jungles of Papua for too long).

Due to its size and dispersion, Indonesia is a hard place to control militarily. Transport aircraft is vital, and the military has seen several crashes recently. Maintenance was delayed for years after the US cut off spare parts. Watch for expanded budgets for new aircraft. 

Indonesia has become more aware of the potential to lose many of its smaller outlying islands to others, and the Navy is trying to step up patrols and get more ships. Keep an eye on these developments, as well as potential clashes or verbal exchanges with its neighbors over counter-claims to maritime territory and resources.

International:

Indonesia is a key player in ASEAN, and to a lesser extent NAM. It sits astride one of the most important maritime choke-points - the Strait of Malacca - and has an occasionally cooperative occasionally contentions relationship in dealing with maritime security with its neighbors Malaysia and Singapore.  

There is a slow and quiet game for influence over Indonesia among China, Japan and Australia. The United States is coming in a little late to the game. 

THAILAND

Thailand is the core of mainland Southeast Asia, a GDP around $250 billion, an ally of the US, and a popular tourism and travel hub. It was never colonized by a European power, and was one of the first Asian countries (following Japan’s lead) to modernize and westernize in the twentieth century. Thailand is mainly interesting for two reasons: (1) global economic significance as a regional finance center and export powerhouse (2) constant, cyclical domestic social and political disruptions that lead to mass protests and often (19 times since 1932) military coups.

ECONOMY:

Thailand is the second biggest economy in the sub-region (second to Indonesia) and a leader in the Association of Southeast Asian Nations (ASEAN). Bangkok is a vibrant export and finance hub for the region – crucial enough that the collapse of its currency triggered the Asian Financial Crisis of 1997-8. After recovering from that crisis, Bangkok has not shown itself to be the most stable economy in 2008-9 because it is still highly export dependent, and political impasse has eroded public finances. The Thai population was humiliated by the country’s borrowing from foreign institutions (like the IMF) to get out of the previous crisis, and the current Democrat Party-led government will incur similar criticism by reaching out to foreign lenders to help in the current recession (though this time, because Thailand’s reserves are deep, there is not a risk of debt default or anything so grave).

POLITICS:

Recently the focus falls on Thailand because of its unstable domestic political and social situation. The first thing to know about politics in Thailand is that the country is (1) a highly religious kingdom, in which the monarchy is revered on a level with Buddha (2) that big business and free market capitalism has disrupted this old world order, over the past twenty years especially. Essentially the country is divided in half between the old status quo, which consists of members and sympathizers with the civil bureaucracy, military, palace, whose power is centered in Bangkok (where the palace and military are stationed) and in the Southern regions, and the new rich – the big business class that has infiltrated all levels of political power, and often draws its support from the poor rural people in the country’s north and northeast. The new rich is embodied in the form of former Prime Minister Thaksin Shinawatra, who is in exile after the military deposed him in 2006, but who continues to control proxy politicians in the country because of his popularity.

These two sides have given rise to two mass protest movements – the People’s Alliance for Democracy (PAD), or the Yellow Shirts, are broadly the royalists and Bangkok elite, who supported the military coup in 2006; the United Front for Democracy against Dictatorship (UDD), or Red Shirts, are broadly upcountry supporters of Thaksin and his allies. These two sides engage in major protests when the other is in power, in which they attempt to provoke security forces to crack down on them violently, which would turn public sympathy towards them and their cause.

Governments come and go quickly in Thailand, and military coups happen frequently. King Bhumibol is much revered, but is in his late 80s and will soon die, and the prince that will succeed him has not always been popularly admired and is only gradually fitting into his role. There are fears that after the king dies the military could seek to seize control, or anti-monarchical forces could push for a republican revolution, or simply that the monarchy will be weakened with the prince on the throne and other forces will contend even more violently for power.

SECURITY:

Thailand is a long-time American military ally, though the alliance has become far less relevant since the US withdrew from Vietnam in 1975 and China opened up to the world in the late 1970s (and Beijing helped stopped Vietnamese communists from funding Thai communist rebels). Because it is lodged in the center of Southeast Asia, Thailand is constantly struggling with its neighbors over borders (as it has for its whole history). Border disputes are important to watch.

Chaos in Myanmar (Burma is Thailand’s number one ancient rival) sometimes results in shootings or even shelling and skirmishes on the Thai side of the mountain border – even without fighting the waves of refugees from the Burmese side (not all of which arrive in the north and west, since the Rohingyas come by boat to southern Thailand) present social problems for poor Thai communities on the borders.

Thailand and Cambodia also have about a thousand years of tensions behind them, evident in border skirmishes and military flare-ups. The root of the problem is that Cambodia has a influence in Thailand’s northeastern region. Tensions have gravitated lately around the disputed Preah Vihear Temple, which a UN cultural body granted to the Cambodians in the 1960s but which the Thais still claim. Also, Cambodian leader Hun Sen has been friendly with Thaksin and even sheltered him in exile – while exiled Thai politicians typically go to Cambodia, they usually do not attempt, as Thaksin has done, to pull strings to change the internal situation. This is not specific to Thaksin, but indicates Cambodia’s geopolitical interest in destabilizing Thailand. The two countries also have maritime boundary issues in the Gulf of Thailand, where there could be hydrocarbon resources worth fighting over.

A Muslim insurgency that has its roots back in the 1950s was revived in the post-9/11 era and has resulted in a constant pitter patter of bombings in the far southern provinces bordering Malaysia and over 4,000 deaths since 2003. Thailand’s handling of the southern situation has been problematic (with Thaksin pulling the military out of the province, declaring return to civil life and installing the police, which emboldened the rebels and antagonized the southern Thai people and the military). The current government has overhauled strategy for dealing with the south, created a cabinet level military advisory board to deal with the insurgency, and is attempting to reduce military presence and create a set of political incentives to reduce tensions and encourage militants to abandon their guns. It remains to be seen whether this will work. Malaysia is often accused of providing sanctuary and financing for Muslim rebels in Thailand.

INTERNATIONAL

Thailand is a member of ASEAN and other major international groups, and has good relationships with the US, Europe, China, Japan, South Korea and others. Thailand needs energy and raw materials from Myanmar, and generally agrees not to interfere with its internal politics (as with other ASEAN countries who generally try to avoid criticizing each other for their own domestic political issues). Bangkok is thought to not get along well with Singapore, and border disputes with Cambodia and tensions with Malaysia over the southern insurgency are always simmering.

MALAYSIA

Malaysia is a notable Southeast Asian state because of its relatively strong economy, with a GDP of around $200 billion. (1) It is an exporter of oil and natural gas (2) it is an exporter of manufactured goods, highly linked into the East Asian supply chain. Malaysia is geographically challenged – it is the only country to be both a peninsula and an island, with the mainland a peninsula and two large provinces (Sabah and Sarawak) on Borneo island.

POLITICS

Malaysian politics have been dominated by the United Malay National Organization (UMNO) since independence in 1957. The UMNO is the biggest party in the Barisan Nacional (BN) or National Front ruling coalition. The problem for Malaysia is that ethnic tensions run deep between the Malay majority and the Chinese and Indian minorities. Ethnic Malays have a privileged position in society and the country’s legal system contains the notorious bhumaputra set of laws, which are essentially affirmative action for the majority Malays.

Politics have gotten rockier since the retirement in 2003 of former Prime Minister Mahathir Mohamad after ruling the country with a tight grip for twenty two years. Various opposition groups have formed to oppose both the one-party domination of the country and to oppose the ethnically biased status quo, as well as more general class disparities, and the opposition has been increasingly successful (denying the UMNO of a 2/3rds super-majority in 2008 elections).

The problem for the opposition is that it is divided ethnically (and along religious lines) among Malays, Chinese and Indians, and therefore has trouble uniting (though Anwar Ibrahim, the opposition leader, has been increasingly successful in doing so). Moreover every possible institutional structure favors the incumbent party, including the controversial Internal Security Act which enables police to snuff out dissent with few or no restraints.

The current government, led by Najib Razak, is in trouble because (1) the opposition has gathered momentum since the last parliamentary elections in 2008, and proved it in successive symbolic local elections (2) the economic crisis is pounding the export-reliant economy, and high budget deficits are easily associated with Najib, a former minister of finance (3) the ruling coalitions attempts to undermine and stifle opposition have suffered some embarrassing exposures, hardening resistance to its rule (4) efforts to appease the opposition with legal reforms (especially relating to Malay privilege) will provoke the wrath of factions within Najib’s own party.

ECONOMICS

Malaysia is one of the countries that is most heavily dependent on exports in the region (exports make for about 100 percent of GDP), so the economy is highly sensitive to shifts in global consumption patterns. Not only does the country export manufactured goods (like electronics and parts) but also raw materials, from oil and natural gas to foodstuffs. Malaysians are also attempting to compete with Singapore and Bangkok in financial services, especially Islamic-style finance. The state energy firm Petronas, which handles Malaysia’s petroleum production, refinement and export, alone contributes a significant portion of the country’s GDP and of the government’s tax revenues. But state taxes and legal interference with the firm threatens its international competitiveness and its ability to transition to a global player. Economic woes amid the 2008-9 crisis are serious in Malaysia, creating high budget deficits and income losses and layoffs adding to social unrest.

SECURITY

Malaysia has a tight grip on the internal security situation due to the colonial era Internal Security Act, which has never been repealed and gives authorities sweeping powers, and also due to Mahathir’s heavy hand in managing internal situation during his 22 year premiership. However protests emerge from ethnic minorities and political groups frequently and sometimes turn violent. Malaysia has also had Muslim militants from all over the world seek to hide, plan or gather funds inside its borders, creating tensions with neighbors like Thailand and other interested players, such as the US after 9/11. Malaysia has played an active role in fighting piracy in one of the world’s most important maritime transit points (the Straits of Malacca on the southern tip of the Malay peninsula) and has been attempting to upgrade its naval capabilities to defend its maritime boundaries (and resources) in the South China Sea and Indian Ocean.

INTERNATIONAL

Malaysia is a member of ASEAN, a predominantly Muslim country with ties to the Middle East, an energy exporter with ties to energy consumers, and thorough links with other states in the East Asian manufacturing and supply chain. Kuala Lumpur, especially under Mahathir, has occasionally been a harsh critic of the west, after having successfully avoided the IMF’s strict fiscal prescriptions during the Asian Financial Crisis (and come out the better for it).

PHILIPPINES

Politics:

Politics in the Philippines is often characterized by Cronyism and Corruption. There is a long-running attempt at Constitutional reform (Charter Change or Cha-Cha) to move away from the current presidential system to a Parliamentary system. Resistance to this centers on the idea that current president Gloria Macapagal Arroyo (who came to power after the ouster of former President Joseph “Erap” Estrada) will try to use the new system to become Prime Minister, and thus stay in power even longer. Keep an eye on the Cha-Cha debate; it seems to never die.

The Philippines has a history of “people power” movements to overthrow governments. These are also sometimes referred to as EDSA movements, after the Epifanio de los Santos Avenue (EDSA), the major road in Manila. While there are numerous attempts to oust the governments, in general a successful People Power movement must have the Church and the Urban Poor, and buy-in from the Business community and the military. 

Coup plots, coup warnings and coup crackdowns are always circulating, and sometimes may even involve a few military folks. But more frequently are political PR tools.

Economics:

The Philippine basically never recovered from the Asian Economic Crisis, and few would lump Manila in with any list of resurging Asian Tigers. 

A significant portion of the Philippine economy is remittances from overseas workers. Watch for changes in the pattern amid the economic problems as well as new arrangements to send more Filipino workers abroad (like nurses to Japan).

Security:

The Armed Forces of the Philippines (AFP) faces numerous insurgencies and militant groups domestically. The largest active insurgencies are the Moro Islamic Liberation Front (MILF), which operate primarily in Mindanao, and the New People’s Army (NPA), the armed wing of the Communist Party of the Philippines, which operates throughout the archipelago, but more heavily along the western edge. The MILF is a split-off from the Moro National Liberation Front (MNLF), which has been in a peace accord with the government since the late 1990s, and holds nominal control over the Autonomous Region of Muslim Mindanao (ARMM). The Abu Sayyaf, originally founded as an Islamist insurgency, has devolved into largely a militant kidnap-for-ransom and extortion gang, and operates primarily in the Sulu archipelago (including Basilan and Jolo) and around Zamboanga City on Mindanao. 

The United States has a series of military training and exercises with the AFP (including the annual Balikatan) that sometimes draw domestic opposition. The US bases were kicked out of the Philippines several years ago, but the near constant presence via training ops restarted after Sept. 11, 2001. 

The philippines has a running dispute with China over control of parts of the Spratly islands. 

International:

Issues with China, and the relationship with the United States remain significant. 

Problems often arise with the treatment of overseas workers. 

AUSTRALIA

Australia is an island continent unto itself between the Indian Ocean and southern Pacific, the sixth largest country in the world by landmass with a population of merely 20 million. It is a member of the British Commonwealth, an American and NATO ally. 80 percent of the population is concentrated within 6o miles of the coast, mainly in three east-coast cities – Sidney, Melbourne and Brisbane. The rest of the vast continent is mostly desert, and the costs of developing infrastructure on such a landmass are forbidding, though it has been necessary to gain access to far-flung patches of resource deposits and arable land.

POLITICS

The country is currently led by Prime Minister Kevin Rudd’s Labor Party, which defeated PM John Howard’s Liberal-National Party in elections in 2007. Rudd is seen as a leader that attempts to lead Australia in a more internationally focused way that does not depend on following the United States’ lead on every issue. He has also cultivated stronger ties with China, an important developing relationship. Australian domestic politics are often insular, but currently evolving policies on free trade (including FTAs), foreign direct investment and defense and security are important to watch.

ECONOMICS

Australia is a resource rich liberal economy – exports amount to roughly $200 billion per year, about 20 percent of GDP, and Australia is broadly open to foreign investment (and is an active investor in foreign countries as well). Australia has therefore experienced ups and downs following fluctuations in global commodity prices and capital flows in 2007-9, but it is relatively self-sufficient and not in the same financial troubles as other developed nations. Australia produces mineral and agricultural commodities, the most notable of which are coal, uranium, iron ore, zinc, tin, beef, wheat, sugar and wool, though there are many others, including petroleum and natural gas (which Australia exports as LNG). The goings on in Australia’s resource production and export sectors are important to watch. Top trading partners are China, Japan, the US, Britain and Singapore, all key relationships to monitor.

Relations with China are a crucial area to watch in terms of Australia’s economy – the Chinese have sought to invest in resource deposits and production sites in Australia in order to secure their own needs, and while Australia recognizes that China is one of its most important trade partners, a public backlash against Chinese presence (which is often seen as baldly exploitative without benefiting local Australians) has had a hand in nixing major deals (such as Chinalco’s $20 billion bid for Rio Tinto assets in 2009).

SECURITY

Australia is firmly part of the US alliance system in East Asia and the Pacific, along with its neighbor New Zealand. The US alliance will always be primary in a geopolitical sense, but in a regional sense the United States has gradually handed more responsibility over to its allies since the Cold War ended, expecting them to manage situations that the US would prefer to avoid. The relative retreat of the US has been an important factor in Australia’s developing security goals, which range from counterterrorism to international peacekeeping, as well as fighting international crime like smuggling. Australia’s developing security policies and defense strategies are important to watch. Australia has deployed forces in Afghanistan and East Timor, and its international deployments should be monitored.

Australia’s navy will seek greater definition in its role in the Indian Ocean, South China Sea and Pacific as China’s navy expands its range of operations and the region’s seas become more crowded generally. The government has recently released an ambitious modernization plan for the military that focuses in particular on the navy, but at the moment, there is a real crisis in the navy – especially the submarine fleet. Keep an eye on this. Australian is also the primary guarantor of security for Pacific islands like the Solomons, Fiji and Papua New Guinea, where occasionally incidents will flare up to take note of.

The East Timor deployment highlighted the sometimes tense geopolitical relationship between Australia and Indonesia, which is also important to monitor. East Timor sought independence from Indonesia for decades, resulting in intermittent fighting and refugee scenarios. In 1999 Australia intervened to secure the island’s transition to an independent nation after a public referendum and the deployment of the Indonesian army. Australia will seek to get along with Indonesia, its sprawling northern neighbor but would prefer for it not to be too strongly unified or assertive, since Indonesia’s geographical position could enable it to interfere with Australia’s critical sea lanes and supply lines to the rest of the world. Australia deployed in East Timor ultimately to ensure its own security and to appease the United States, which expected Canberra to put out the flames.

Australians are highly wary of rising immigration levels from countries in South Asia, and have established detention centers (such as the one on Christmas Island) to prevent entry. International smuggling, especially narcotics, is another issue that concerns Australian security forces.

INTERNATIONAL

Australia is a member of the British Commonwealth, an ally of the United States and NATO, and a member of the WTO and numerous Asia-Pacific regional groupings, including APEC, the East Asia Summit, the ARF (ASEAN Regional Forum, and the Pacific Islands Forum (PIF). Canberra is attempting to prove its international credentials to gain a non-permanent seat on the United Nations Security Council in 2013. In addition to Australia’s generally supportive role in going along with US-led international initiatives, PM Kevin Rudd is an outspoken supporter of China and has sought to maintain good relations with Beijing. This is a result of the developing geopolitical dynamic in which China’s growth is increasingly beneficial to Australia’s economy, but must be balanced along with Australia’s position in the US economic, political and security sphere (including Australia’s substantial partnerships with Japan and South Korea).

NE W ZEALAND

New Zealand is an isolated island east of Australia. Its primary importance is its economic relationship with Australia, which is probably the most liberal of any bilateral partnership in the world. In addition, New Zealand seeks free trade agreements (FTAs) with East Asian neighbors and other states. New Zealand acts as a financial center for a number of countries, and has extensive financial relations with Japan (including being the primary target of the yen carry trade, and hence the exchange rate of the New Zealand dollar is an indicator that finance in Japan is about to get interesting). New Zealand is an active negotiator and political participant in events up in Southern Pacific island states, which occasionally rise to the level of regional importance.

SINGAPORE

Singapore is a city-state on the southernmost tip of the Malay Peninsula and the most important city in Southeast Asia. It is a sound and smoothly run commercial center with strong relations to the West as well as centrality in Southeast Asia. It overlooks the Malacca Straits, which is one of the world’s crucial maritime chokepoints, seeing about one-fourth of seaborne trade transit through each year, so it is geopolitically significant.

POLITICS

The People’s Action Party (PAP), the party that won Singapore independence from Malaysia in 1965, successfully squelches potential opposition – the political consolidation is evident in that the first Prime Minister, Lee Kuan Yew, now advises his son, Lee Hsien Loong, who is the current prime minister. Any signs of a rising opposition, of increased factionalization within the PAP, is important to watch, in case it could affect policies that would touch on Singapore’s trade or foreign relations.

ECONOMICS

Economics and trade are the primary reason to pay attention to Singapore. Singapore’s geographic location makes it well positioned to benefit enormously from shipping and transportation industries and finance – meanwhile its own manufacturing industries are globally competitive. Singapore is an export hub, with domestic-made exports roughly equal to its GDP, but it is also a transshipment hub, with re-exports also equaling GDP (making its total export dependency close to twice the size of its GDP). Singapore has benefited commercially from centuries of Chinese business and from British colonial presence, but it has largely come into its own as an independent country.

SECURITY

Singapore secures its national interests by using its geography and trade know-how to make itself indispensable to the interests of various world powers. Singapore has strong relations with the US, for which it serves as a port. It is also has its own powerful navy to secure its commercial interests, for instance by stomping out piracy in the straits that were once the most pirate-infested in the world. Singapore’s navy is worth watching as naval activity across the region picks up in coming years.

INTERNATIONAL

Singapore is an active member of ASEAN, APEC, the WTO, and has FTAs with more than a dozen countries and economic groupings, plus numerous other preferential trade agreements. Free trade is a priority, and trade barriers and financial regulations that could affect Singapore’s trade with neighbors or international players are important to monitor.

VIETNAM

Vietnam comprises the long narrow coastline of the Southeast Asian landmass, with fertile coastal plains on the eastern edge and mountains and jungle separating it from western neighbors Laos and Cambodia. The great Mekong River forms the western border.

POLITICS

The country is split culturally and economically between the north and the south, a split that was intensified during the US Vietnam war and that is still evident today. The North is where political power is held in the capital Hanoi, but it is poorer, more insular, less developed due to its Communist history. The South, with its greatest city Ho Chi Minh, has more economic and commercial power and therefore seeks closer international ties and relations with Western nations.

The opening-up of economic policies have sown the seeds for political tensions. The communist leadership and political elite fear that influential pro-western capitalist-oriented persons could eventually create a direct opposition, and will wield the full might of the state security apparatus to prevent this from happening and ensure that they remain firmly in control. Nevertheless change is happening, since lucrative trade and communication with the outside world has created generational differences within the communist party that will result in contests for power in coming years as the elders die off.

ECONOMICS

Vietnam is a commodities exporter, the second biggest rice exporter in the world and one of East Asia’s few oil and natural gas exporters (with oil and gas fields off the southeastern coast). As with modern China, Vietnam’s communist leaders have partially reconciled themselves to the global economy, attempting to attract foreign corporations to invest heavily in manufacturing and resource production in Vietnam. Vietnam’s rapid growth, as a result of these open economic policies, has occurred despite rampant corruption and heavy-handed state presence that often appropriates private enterprise only to mismanage it. It is important to watch developments in economic policy, foreign direct investment, energy policy and any changes in direction towards or away from liberalization.

SECURITY AND INTERNATIONAL

Vietnam has long had a rough relationship with its northern neighbor China, over sovereignty along their shared border in the north (they fought a war as recently as 1978-9, though the land border has largely been resolved, at least for the time being) and boundaries in the Gulf of Tonkin and South China Sea. These bodies of water are vital to Vietnam’s interests because they form its eastern horizon (which Beijing and the rapidly evolving Chinese navy hope to exercise indisputable supremacy over). Vietnam dominates Laos and Cambodia politically and economically, but as Cambodia develops on its own (and as Thailand ramps up investments in along its border with Cambodia) there could be some tug-of-war, though it will mostly take place within Cambodia.

LAOS

Laos is a small, underdeveloped Southeast Asian mountain and jungle state that is dominated by its neighbors Thailand to the west and Vietnam to the east (both of which are investing in the country). But business is beginning to develop (Laosbeer, for instance, is being exported globally) and foreign investors are making a wider entrance. China is showing an interest in investment opportunities in its near abroad, and Laos is no exception (especially if China hopes to make use of the Mekong River). China has invested in Laos farmland (though there is not much of it), as part of an attempt to gain food security. Domestic The United States in June 2008 removed Laos from a list that prevented US businesses operating in the country from receiving financing from the US, which should increase investment there.

MYANMAR

Myanmar, formerly Burma (and still called so by some English-language media) is a large country comprising the westernmost edge of the Southeast Asian landmass, with Bangladesh and India to its west, China to its north, and Thailand and Laos to the east. It is ruled by a military government that oversees the chaotic mess of jungles and hills that shelter various ethnicities, tribes and rebel groups.

Politics

A military junta, the State Peace and Development Council, has ruled Myanmar since 1962. The junta's power was challenged by mass protests in 1988, which were suppressed, An outpouring of supporters for pro-Democracy opposition leader, Aung San Suu Kyi, led to her arrest in 1989 and a victory for her party in elections in 1990, but the junta refused to recognize the results and has imprisoned Suu Kyi ever since. A new constitution was passed in May 2008 (after much devastation caused by Cyclone Nargis) by referendum. Opposition is systematically suppressed. The central government moved the capital from Rangoon (Yangon) in 2005 to Nyapyidaw, the official capital since 2006. New elections will be held in 2010, and the military is seeking to tighten its grip beforehand to ensure that the elections go as planned. The junta shows no sensitivity to internal or external calls for reform. However, its power is far from absolute: the combination of ceaseless insurgency by rebel groups and thriving black markets prevents the military leaders from maintaining full control, which in turn justifies their repeated attempts to clamp down on the country.

Economics

Myanmar does not have a normal functioning economy, but it is rich in natural resources, primarily oil and natural gas, rubber, timber and metals like tin. Energy is the biggest focus in the twenty-first century: China is conducting an all-out acquisitions campaign to make sure that Myanmar affords a constant supply, through infrastructure that the Chinese help build – very important to keep an eye on. Thailand is cooperating with Myanmar for natural gas reserves and hydroelectric power as well. Goods from China, India and Thailand dominate Myanmar’s thriving black markets.

Security

Myanmar has never been a stable state -- its territories are divided violently between military rule and long-running insurgencies. The military junta that took control in 1962 has waged numerous campaigns against minority rebel groups, most notably the Karen hill tribe, and has had trouble consolidating power. One third of the country is part of an ethnic minority, and the variety of ethnic groups has been a constant source of tensions and factionalism. Campaigns by the military to pacify the various rebel groups leads to skirmishes on most of Myanmar’s borders.

International

Internationally Myanmar is a member of ASEAN and has commercial ties with its neighbors, but it is overall a pariah state, with countless United Nations resolutions imposing economic sanctions. The regime survives attempts by foreign powers to punish it for not meeting international standards of governance. Refugees from Myanmar create problems for neighbors like Thailand and India. China continues to bolster the regime in order to meet its needs for natural resources and gain access to ports along Myanmar’s lengthy coastline. China is looking to expand naval operations and needs friendly ports. India is uneasy with increasing Chinese presence and influence in Myanmar. North Korea and Myanmar have a relationship which is not particularly important but obviously attracts attention because of their bad reputations. But China is essential.

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