Southeast Asia in 2019: Four Issues to Watch

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This year promises to be another dynamic one for Southeast Asia—and hopefully for high-level U.S. engagement with the region. With elections and governance challenges in many countries, the Chairmanship of the Association of Southeast Asian Nations (ASEAN) returning to Thailand while it organizes an election and plans a coronation, the region’s trade architecture in flux, and the backdrop of growing U.S.-China strategic rivalry and trade friction, these are the key issues to watch in 2019.

Elections and Governance

Indonesia and Thailand, Southeast Asia’s two largest economies and traditional leaders within ASEAN, are both set to hold elections in early 2019. In Thailand, the upcoming election will nominally return the country to civilian rule nearly five years after a coup d’état overthrew the previously-elected government. However, the timing of the much-delayed election is again uncertain, as the government just announced that the previously set date of February 24 will no longer work due to activities surrounding the coronation of King Maha Vajiralongkorn on May 4. Thai military leaders have sought to reassure the public that the election will be held no later than March and has floated March 10 and March 24 as possible dates. Regardless of the timing, the outcome of the first vote under a newly rewritten constitution does not presage a full return to democracy and civilian rule, as the military retains sweeping powers and an outsized role in shaping the next government. Indeed, a likely post-election scenario is that the elected lower house is controlled by an anti-junta coalition, while the upper house and prime minister remain in the hands of pro-junta parties. This scenario would likely lead to political gridlock and potentially spark social unrest and would diminish the ability of Thailand to return to stronger economic growth and regional leadership.

The Indonesian presidential election on April 17 will see President Jokowi in a rematch against retired general Prabowo Subianto. Although Jokowi appears to be in a favorable position to win reelection, several variables make the outcome uncertain. Another sharp fall in the rupiah—following the currency depreciation that hit Indonesia and several other emerging markets in 2018—could lead to a rise in household goods prices and spark an economic downturn that would undercut Jokowi’s relatively solid record of economic growth. Religious identity politics could also come into play as a central campaign issue, although Jokowi’s controversial choice of conservative Muslim cleric Ma’ruf Amin as his running mate has helped him fend off attacks on his Islamic credentials, at least for now. In the meantime, both Jokowi and Prabowo appear content to focus their campaigns on who is stronger on economic nationalism, an issue that plays well for Jokowi after his government wrested majority control over the massive copper and gold mine in Papua that has been owned and operated by U.S. mining firm Freeport since the 1960s.

Elsewhere in the region, midterm elections in the Philippines in May 2019 will serve as a bell-weather for the Duterte government and a test for how far Duterte can take the country on divisive issues such as his drug war and repression of the opposition and civil society. The election will also test how the public weighs his foreign policy choices regarding China, including effectively shelving their disputes in the South China Sea.

Malaysian politics will continue their wild ride after the astonishing victory of Dr. Mahathir and the Pakatan Harapan alliance in polls last May. All eyes will be on Dr. Mahathir to see if he appears to be moving forward to honor his pledge to hand off power to his former rival-turned-ally Anwar Ibrahim in two years. Other issues to watch will be the United Malays National Organisation (UMNO)’s evolution and potential dissolution as many members flee, UMNO’s relationship with fellow Malay-based opposition party Parti Islam Se Malaysia (PAS), and alliance management within among the diverse coalition partners in Pakatan Harapan.

Meanwhile, in Myanmar, patience with Aung San Suu Kyi is running out internationally and among some domestic elites on both on the Rohingya issue and badly needed economic reforms. Choices that Aung San Suu Kyi makes on these issues will affect Myanmar’s economic prospects and its relations with the world and could threaten to return Myanmar to a state of semi-isolation in the international community, particularly in relation to the United States and Europe.

ASEAN’s Relevance

With Thailand taking on the ASEAN Chairmanship while also trying to manage an election and the coronation of its new king, its primary objective is to simply make it through the year unscathed. Thailand’s ambition for its ASEAN year is therefore rather low, and observers should not expect significant progress on big initiatives such as the ASEAN-China Code of Conduct or concluding the Regional Comprehensive Economic Partnership agreement, which remains a huge lift due to India’s reluctance to significant market liberalization. Thailand will also not be eager to tackle issues that divide ASEAN members such as standing up to China on the South China Sea or confronting Myanmar on the Rohingya crisis. In the end, Thailand’s 2019 ASEAN chairmanship is likely to amount to little more than a hyphen between Singapore’s 2018 and Vietnam’s 2020 chairmanships.

Economic and Trade Issues

Further evolution of the regional economic architecture is expected to take place this year now that the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) came into force in the final days of 2018. Singapore and Vietnam are now full members of the trade pact, and Brunei and Malaysia are likely to ratify the agreement early this year. Several countries including Thailand and Indonesia have expressed interest in joining the CPTPP, although Colombia, South Korea, and a post-Brexit United Kingdom may lead the pack of new entrants. The Philippines’ trade policy will also be in focus, as it hopes to overcome human rights concerns in Congress that have delayed the launch of bilateral free trade agreement (FTA) negotiations with the United States, and also weighs its options with regard to joining CPTPP.

Meanwhile, the impacts of escalating U.S.-China tariffs may begin to be felt in 2019 as multinational corporations make decisions about their shifting their supply chains, with some potentially relocating manufacturing from China to Southeast Asia. Dynamic economies in Southeast Asia stand to potentially benefit from these production shifts, although it remains to be seen whether the gains of any new investment are outweighed by the drag on the Chinese and global economies. With Vietnam poised to attract a large portion of any relocated investment, it is unclear whether Indonesia, the Philippines, and others will compete successfully in this highly competitive space. Meanwhile, China’s economic slowdown could loom large for Southeast Asian economies heavily dependent on exports of commodities and components to China.

U.S. Engagement

After intensive presidential engagement with Southeast Asia in 2017, 2018 saw a dramatic downturn with President Trump skipping the East Asia Summit and U.S.-ASEAN summit in Singapore and not hosting any Southeast Asian leaders in the United States. However, the administration did make progress fleshing out its Free and Open Indo-Pacific strategy, including announcing some substantive initiatives and rhetorically affirming that ASEAN centrality remains a pillar of U.S. policy in the region.

For 2019, it remains to be seen whether the strategy can really take off in Southeast Asia. One barometer will be whether the new tools created by the Better Utilization of Investments Leading to Development (BUILD) Act recently passed in Congress, which will dramatically expand U.S. government-backed financing for infrastructure projects, will be strategically targeted on Southeast Asia or have a more global focus.

President Trump’s personal engagement in Southeast Asia will also be watched closely. Opportunities for presidential engagement abound, ranging from inviting the victor in the Indonesian presidential election for a visit, initiating a meeting with Malaysian prime minister Mahathir, hosting all 10 ASEAN leaders for a special Sunnylands-style summit at Mar-a-Lago, and attending the East Asia Summit and U.S.-ASEAN summit this fall in Bangkok.

Finally, personnel in the Trump administration will be an important variable for U.S. engagement to watch. Two years into the administration, numerous positions essential for carrying out an Indo-Pacific strategy and deepening ties with Southeast Asia continue to sit empty. Retired Air Force general David Stilwell has been nominated for the long-vacant position of assistant secretary of state for East Asia and Pacific Affairs, but he has not yet been confirmed. Meanwhile, no one has yet been nominated to be the next U.S. ambassador to ASEAN, Singapore, or Thailand, while W. Patrick Murphy, the career diplomat nominated as U.S. ambassador to Cambodia, has been awaiting confirmation for months. The departure of Defense Secretary Mattis also creates questions, as Mattis was one of the key Trump administration players on Southeast Asia and frequently traveled to the region. Mattis’s well-stocked Asia policy office may also see shakeups with the transition at the Pentagon, which would also hold potentially significant implications for U.S. engagement with the region.

Amy Searight is a senior adviser and director with the Southeast Asia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Brian Harding is a fellow and deputy director with the CSIS Southeast Asia Program.