Tag: Regional trade

Southeast Asia moves closer to economic unity with new regional payments system

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Indonesian President Joko Widodo makes a speech during the Association of Southeast Asian Nations (ASEAN) Foreign Minister’s Meeting in Jakarta, Indonesia on July 14, 2023.

Murat Gok | Anadolu Agency | Getty Images

A new regional cross-border payment system recently implemented by Southeast Asian nations could deepen financial integration among participants, bringing the ASEAN bloc closer to its goal of economic cohesion.

The program, which allows residents to pay for goods and services in local currencies using a QR code, is now active in Indonesia, Malaysia, Thailand and Singapore. The Philippines is expected to join soon.

That’s according to each country’s respective central bank.

The move comes after the five Southeast Asian countries signed an official agreement late last year. At the recent ASEAN summit in May, leaders also reiterated their commitment to the project, pledging to work on a road map to expand regional payment links to all ten ASEAN members.

The scheme is aimed at supporting and facilitating cross-border trade settlements, investment, remittance and other economic activities with the goal of implementing an inclusive financial ecosystem around Southeast Asia.

Analysts say retail industries will particularly benefit amid an expected rise in consumer spending, which could in turn strengthen tourism.

Regional connectivity is considered crucial to reduce the region’s reliance on external currencies like the U.S. dollar for cross-border transactions, particularly among businesses. The greenback’s strength in recent years has resulted in weaker ASEAN currencies, which hurts those economies since the majority of the bloc’s members are net energy and food importers.

“The system will forgo the U.S. dollar or the Chinese renminbi as intermediary,” said Nico Han, a Southeast Asia analyst at Diplomat Risk Intelligence, the consulting and analysis division of current affairs magazine The Diplomat.

A unified cross-border digital payment system will “foster a sense of regionalism and ASEAN-centrality in managing international affairs,” he added. “This move becomes even more crucial in light of escalating tensions among major global powers.”

How it works

By connecting QR code payment systems, funds can be sent from one digital wallet to another.

These digital wallets effectively act as bank accounts but they can also be linked to accounts with formal financial institutions.

For instance, Malaysian tourists in Singapore can make a payment with Malaysian ringgit funds in their Malaysian digital wallet when making a transaction. Or, a Malaysian worker in Singapore can send Singapore dollar funds in a Singaporean digital wallet to a recipient’s wallet in Malaysia.

Fees and exchange rates will be determined by mutual agreement between the central banks themselves.

For now, a region-wide system like this doesn’t exist in other parts of the world but down the road, the Bank of International Settlements, based in Switzerland, hopes to connect retail payment systems across the world using QR codes and mobile phone numbers.

“The ASEAN central banks’ effort is innovative and novel,” said Satoru Yamadera, advisor at the Asian Development Bank’s Economic Research and Development Impact Department.

“In other regions like Europe, retail payment connection via credit and debit cards is more popular while China is well-known for advanced QR code payment, but they are not connected like the ASEAN QR codes,” he continued.

Economic benefits

QR payments don’t impose fees on cardholders and merchants. They also boast of better conversion rates than those set by private payment processors like Visa or American Express.

Micro enterprises as well as small- and medium-sized businesses, or SMBs will emerge as winners from regional payment connectivity, experts say. According to the Asian Development Bank, such companies account for over 90% of businesses in Southeast Asia.

“SMBs can avoid the expenses associated with maintaining a physical point-of-sale system or paying interchange fees to card companies,” explained Han from Diplomat Risk Intelligence.

Marginalized individuals from low-income backgrounds also stand to benefit. As the payment system works via digital wallets and doesn’t require a traditional bank account, it can be used by the unbanked population.

“The system has the potential to improve financial literacy and wellbeing for the underbanked population,” Han noted.

ASEAN’s new system will also enable merchants and consumers to build a robust payment history, and provide valuable data for credit scoring, said Nicholas Lee, lead Asia tech analyst at Global Counsel, a public policy advisory firm.

“That’s particularly advantageous for unbanked and underbanked segments of the population, who traditionally lack access to such credit assessment data.”

Moreover, “increased non-cash transactions would allow policymakers to capture transaction data and trade flow more effectively, assuming these data are accessible,” said Lee.

“This, in turn, could lead to better economic forecasting and policymaking.”

Currency pressure ahead

While strengthening payment connectivity within the region has the potential to reduce payment friction and accelerate digital transition, it could inadvertently put pressure on certain currencies, particularly the Singapore dollar.

“The potential scenario of the [Singapore dollar] emerging as a de facto reserve currency within the region poses a challenge that ASEAN states will need to confront,” said Lee.

“With the [Singapore dollar’s] strength and stability, both international and regional businesses may opt to hold more of their working capital in [Singapore dollars], relying on the new payment network for efficient currency conversion,” he explained.

If that happens, it could weaken the purchasing power of other currencies in the region and result in higher imported inflation if central banks don’t intervene.

In such a scenario, authorities may feel the need to impose capital restrictions in order to protect their respective currencies, which could undermine the very purpose of establishing a regional payment network.

Regulations pose another challenge.

Central banks will have to address security and fraud issues, plus undertake the task of educating the public to embrace the new payment system, said Han.

“These factors can collectively contribute to a time-consuming process,” he warned.

This kind of coordinated action will require strong political will from regional leaders and it remains to be seen if ASEAN members can come together to successfully implement such an ambitious venture.

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July 30, 2023
US and Chinese defense chiefs meet amid strained relations

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SIEM REAP, Cambodia — The defense chiefs of the United States and China held talks Tuesday on the sidelines of a regional meeting in Cambodia to discuss strained bilateral relations and regional and global security issues, U.S. and Chinese officials said.

It was the second face-to-face meeting in six months between U.S. Secretary of Defense Lloyd J. Austin II and Gen. Wei Fenghe, China’s minister of national defense. It came just over a week after a meeting in Indonesia between U.S. President Joe Biden and Chinese President Xi Jinping which was widely seen as an effort to ease tensions between the two superpowers over trade and China’s claim to Taiwan.

Austin and Wei are in Siem Reap, Cambodia, attending a meeting of defense ministers from the Association of Southeast Asia Nations and other major countries in the Asia-Pacific region.

Already-tense relations between Washington and Beijing soured even more in August when U.S. House Speaker Nancy Pelosi visited Taiwan, which is independently governed but claimed by China. The United States, Taiwan’s most important ally, mantains a longstanding “one China” policy, which recognizes the government in Beijing but allows informal relations and defense ties with Taipei, and “strategic ambiguity” over whether the U.S. would respond militarily if the island were attacked.

Biden said after meeting Xi that when it comes to China, the U.S. will “compete vigorously, but I’m not looking for conflict.”

Pentagon Press Secretary Brig. Gen. Pat Ryder said Austin assured Wei of Biden’s commitment to the “one China” policy.

Austin “underscored his opposition to unilateral changes to the status quo” and called on China to refrain from destabilizing actions toward Taiwan, Ryder said in a statement.

He also urged continuing talks on “reducing strategic risk, improving crisis communications, and enhancing operational safety,” noting concerns over “dangerous behavior” by Chinese military aircraft “that increases the risk of an accident.”

In a news conference, Chinese Defense Ministry spokesperson Senior Col. Tan Kefei described Tuesday’s talks “as a concrete measure to implement the important consensus reached between Xi and Biden.”

He said the meeting was “of great significance” for bringing China-U.S. relations “back to the track of healthy and stable development.”

But an official statement issued by China’s Defense Ministry quoted Wei as saying, “The responsibility for the current situation facing China-U.S. relations is on the U.S. side, not on the Chinese side.”

Wei said the issue of Taiwan was a “red line” over which China would brook no foreign interference. China’s military “has the backbone, the determination, the confidence and the ability to resolutely safeguard the unity of the motherland,” Wei said.

The Defense Ministry statement said the two sides also exchanged views over the South China Sea, Ukraine and the Korean Peninsula, without giving details. The U.S. statement said Austin discussed Russia’s war against Ukraine and noted that both Washington and Beijing “oppose the use of nuclear weapons or threats to use them.”

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November 22, 2022
China, US officials to attend Southeast Asia defense meeting

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BEIJING — The defense chiefs of rival powers China and the U.S. will both attend next week’s expanded meeting of Southeast Asian security ministers in Cambodia, though it’s unclear whether they would meet face to face.

China’s Defense Ministry said Gen. Wei Fenghe will attend the Association of Southeast Asian Nations Defense Ministers’ Meeting-Plus from Sunday to Thursday.

The Department of Defense said Defense Secretary Lloyd J. Austin III will also attend following stops in Canada and Indonesia.

Both officials plan to meet with participants on the margins of the main gathering of ministers from the 10-nation organization known as ASEAN.

Their two countries are chief rivals for influence in the region, where China is seeking to smooth over disputes surrounding its determination to assert its claim to the South China Sea, including through the construction of artifical islands equipped with airstrips and other infrastructure.

The two countries are also at odds over Russia, which China has refused to condemn or sanction over its invasion of Ukraine, and the status of Taiwan, which China claims as its own territory and threatens to attack.

China’s Defense Ministry said Wei would address the assembly and meet with heads of other delegations to discuss “bilateral cooperation and issues of regional and international concern.”

It said he would also hold talks with civilian and military leaders of close Chinese ally Cambodia, with whom it is working on expanding a port facility that could give it a presence on the Gulf of Thailand.

China and four ASEAN members share overlapping claims to territory in the South China Sea, home to vital shipping lanes, along with plentiful fish stocks and undersea mineral resources. China and ASEAN have made little headway on finalizing a code of conduct to avoid conflicts in the area.

While China’s capacities are growing rapidly, the U.S. remains the region’s dominant military power and, while it doesn’t officially take a stand on sovereignty issues, it has refused to acknowledge China’s blanket claims. The U.S. Navy regularly sails past Chinese-held islands in what it calls freedom of navigation operations, prompting a furious response from Beijing.

The U.S. also has a security alliance with the Philippines and strong relations with other ASEAN members, with the exception of Myanmar, where the military has launched a brutal crackdown since taking power last year.

The U.S. Defense Department said that Austin would hold an “informal multilateral engagement” with his ASEAN counterparts and meet with officials from Cambodia and partner nations “to bring greater stability, transparency, and openness to the Indo-Pacific region.”

At a previous defense forum attended by both U.S. and Chinese ministers in June in Singapore, Austin delivered a speech saying China’s “steady increase in provocative and destabilizing military activity near Taiwan” threatens to undermine the region’s security and prosperity.

Wei said at the same conference that the U.S. is trying to turn Southeast Asian countries against Beijing and is seeking to advance its own interests “under the guise of multilateralism.”

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November 19, 2022
Asia-Pacific leaders tackle trade, sustainability in Bangkok

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BANGKOK — The war in Ukraine, great power rivalry Asia, inflation and food and energy shortages are on the agenda as leaders prepare for the third back-to-back gathering this week, a Pacific-Rim summit taking place in a heavily guarded venue in Thailand’s capital.

Leaders from the 21-member Asia-Pacific Economic Cooperation forum will meet formally in closed-door sessions Friday and Saturday. For some, it will be at least the third such opportunity for face-to-face talks in the past two weeks, though the U.S. is represented in Bangkok by Vice President Kamala Harris, who is attending instead of President Joe Biden.

APEC’s official mission is to promote regional economic integration. Most of the business conducted happens on the summit’s sidelines in meetings such as a planned meeting between Chinese President Xi Jinping and Japanese Prime Minister Fumio Kishida.

The two Asian powers have a history of tense relations, a legacy of Japan’s World War II aggression compounded by territorial disputes and China’s growing military might. A Chinese Foreign Ministry spokesperson, Mao Ning, said the encounter would “carry great importance.”

Xi, Harris and French President Emmanuel Macron will also speak at a business conference held just ahead of the summit meetings that is mostly closed to media apart from outlets sponsoring the event.

The APEC meetings are being held in downtown Bangkok’s main convention center, which is cordoned off with some streets in the area completely closed to all traffic. Rows of riot police stood guard behind the barricades at a major intersection nearby, underscoring host Thailand’s determination to ensure the summit suffers no disruptions.

“The APEC meeting this year takes place amidst a dual jeopardy. We need not be reminded of the severe security conflicts that know not what victory looks like. Meanwhile, the world is staring at the hyper inflation married to recession, a broken supply chain and scarcity and climate calamities,” Don Pramudwinai, Thailand’s foreign minister said in opening a meeting of foreign ministers and commerce ministers who were working on draft statements due to be issued after the summit.

Apparently alluding to Russia and recent condemnation of its war on Ukraine, he also said there was a growing “cancel mentality” that makes “any compromise appear impossible.”

Before the summit, Thai officials said they were hoping to steer APEC toward long-term solutions in various areas, including climate change, economic disruptions and faltering recoveries from the pandemic.

“What we are going to do is to have all economies agree on a set of targets … climate change mitigation, sustainable trade and investment, environment resources conservation and, of course, waste management,” said Cherdchai Chaivaivid, director-general of Thailand’s Department of International Economic Affairs. “This is the first time that APEC is going to talk about this. This is the first time that we are going to open a new chapter in how trade, business, investment should be done.”

APEC’s official mission is to promote regional economic integration, which means setting guidelines for long-term development of a free trade area. Most of its work is technical and incremental, carried out by senior officials and ministers, covering areas such as trade, tourism, forestry, health, food, security, small and medium-size enterprises and women’s empowerment.

Leaders from the 21 economies on both sides of the Pacific Ocean often take the opportunity to conduct bilateral talks and discuss side deals. The Latin American contingent comes from Chile, Mexico and Peru. Other members are Australia, Brunei, Canada, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Papua New Guinea, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, the United States and Vietnam.

Russian President Vladimir Putin and Biden are no-shows this year. Putin has been avoiding international forums where he would be showered with criticism over the invasion of Ukraine. Biden will be hosting his granddaughter’s wedding at the White House.

That leaves Chinese leader Xi as the star attendee in Bangkok, where he also is making an official visit to Thailand just after obtaining a rare third term as top leader at a once-in-five years Communist Party congress.

Biden is giving ground to China in the competition for friends and influence in Southeast Asia by skipping the APEC meetings. But U.S. officials say Washington has demonstrated its seriousness in relations with the region through frequent visits by Cabinet members including Secretary of Defense Lloyd J. Austin III and other key senior officials.

As host, Thailand invited three special guests to the meeting: the French president Macron; Crown Prince Mohammed bin Salman, the prime minister of Saudi Arabia, and Cambodian Prime Minister Hun Sen, who was to represent the Association of Southeast Asian Nations but will not attend after getting COVID-19.

For Thai Prime Minister Prayuth Chan-ocha, the most welcome visitor may well be the Saudi leader, who is making an official visit to help restore friendly relations with Thailand after decades of disruption due to a theft of Saudi royal jewelry and the unsolved murders of Saudi diplomats in Bangkok.

“This is a good opportunity, that Mohammed bin Salman is visiting Thailand and both countries will resume a good economic relationship after over 30 years,” the chairman of the Thai Chamber of Commerce, Sanan Angubolkul, told The Associated Press. “To have the French president join us also shows how important this region is.”

The war in Ukraine remains a likely thorn in APEC’s consensus-oriented efforts. None of the earlier APEC meetings this year issued statements due to disagreements over whether to mention the conflict.

Like Indonesia, which hosted the Group of 20 summit in Bali this week, and Cambodia, which hosted the ASEAN meetings, Thai officials have put the best possible face on the situation, contending that agreement on other points will allow APEC to move forward regardless.

Skeptics doubt the meeting will accomplish much.

“This APEC is only a photo opportunity for leaders. Its agenda has drawn much less attention than the ASEAN summit and G-20,” Virot Ali, a political scientist at Thailand’s Thammasat University, told The Associated Press.

“I don’t think we will see any progress from APEC. The current geopolitics, trade war, COVID-19, and Russia-Ukraine war are the issues that people are paying more attention to and feeling more impact from,” he said.

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Associated Press journalists Grant Peck and Tassanee Vejpongsa contributed to this report.

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November 16, 2022
Biden working on ties with Southeast Asia in shadow of China

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PHNOM PENH, Cambodia — President Joe Biden is formally kicking off his participation at a conference of southeast Asian nations on Saturday, looking to emphasize the United States’ commitment in the region where a looming China is also working to expand its influence.

Biden’s efforts at the Association of Southeast Asian Nations summit are meant to lay the groundwork ahead of his highly anticipated meeting with Chinese President Xi Jinping — the first face-to-face encounter of Biden’s presidency with a leader whose nation the U.S. now considers its most potent economic and military rival.

The two leaders will meet on Monday at the Group of 20 summit that brings together leaders from the world’s largest economies, which is held this year in Indonesia on the island of Bali.

Traveling to Phnom Penh earlier Saturday, national security adviser Jake Sullivan said Biden will raise issues such as freedom of navigation and illegal and unregulated fishing by China with the ASEAN leaders — aimed at demonstrating U.S. assertiveness against Beijing.

Freedom of navigation refers to a dispute involving the South China Sea — where the United States says it can sail and fly wherever international law allows and China believes such missions are destabilizing. Sullivan said the U.S. has a key role to play as a stabilizing force in the region and in prevention of any one nation from engaging in “sustained intimidation and coercion that would be fundamentally adverse to the nations of ASEAN and other countries.”

“There’s a real demand signal for that,” Sullivan told reporters aboard Air Force One on Saturday. Referring to the People’s Republic of China, Sullivan continued: “I think the PRC may not love that fact, but they certainly acknowledge it and understand it.”

One new initiative related to those efforts that Biden will discuss later Saturday focuses on maritime awareness — specifically using radio frequencies from commercial satellites to better track dark shipping and illegal fishing, Sullivan said.

Biden’s visit to Cambodia — the second ever by a U.S. president — continues his administration’s push to demonstrate its investments in the south Pacific, which was highlighted earlier this year when the White House hosted an ASEAN summit in Washington, the first of its kind. He also tapped one of his senior aides, Yohannes Abraham, as the official envoy to the 10-country bloc that makes up ASEAN, another way the White House has highlighted that commitment.

ASEAN this year is elevating the U.S. to a “comprehensive strategic partnership” status — a largely symbolic enhancement of their relationship but one that puts Washington on the same level as China, which was granted the distinction last year.

Biden will begin his day in Phnom Penh by meeting with Hun Sen, the prime minister of Cambodia, the host for the regional summit. He’ll then speak at the annual U.S.-ASEAN summit and participate in the traditional family photo with southeast Asian leaders, and attend a gala dinner hosted by a parallel summit in Cambodia focusing on east Asia.

Another topic Biden will raise is Myanmar, where the military junta overthrew the ruling government in February 2021 and arrested its democratically elected leader, Aung San Suu Kyi. While in Phnom Penh, the president will discuss with other leaders how they can “coordinate more closely to continue to impose costs and raise pressure” on the military, Sullivan said, as it continues to repress people of Myanmar, which had steadily headed toward a democratic form of governance before the coup.

Biden will participate in East Asia summit meetings on Sunday, including a gathering with the leaders of South Korea and Japan, before leaving for the G-20 summit in Bali.

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November 12, 2022
UN Secretary-General: World has failed strife-torn Myanmar

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United Nations Secretary-General Antonio Guterres says the world has failed Myanmar, and is expressing hope the Association of Southeast Asian Nations will be able to pressure the member state to comply with its plan for peace over the next year

PHNOM PENH, Cambodia — United Nations Secretary-General Antonio Guterres said Saturday that the world had failed Myanmar, and expressed hope the Association of Southeast Asian Nations would be able to pressure the member state to comply with its plan for peace over the next year.

ASEAN leaders at the group’s ongoing summit in Phnom Penh agreed on a plan Friday that largely puts the onus on Indonesia when it takes over the group’s rotating chair in 2023 to develop measurable indicators and a timeline for Myanmar to implement the so-called five-point consensus for peace.

Indonesia has been one of the ASEAN countries most outspoken about the need to do more to address the situation in Myanmar, and Guterres told reporters he felt “the Indonesian government will be able to push forward the agenda in a positive way.”

The ASEAN decision announced Friday includes asking the U.N. and other “external partners” for assistance in supporting the group’s efforts. Guterres said he hoped the U.N. special envoy for Myanmar, Noeleen Heyzer, would cooperate closely with her ASEAN counterpart to bring about an end to the “dramatic violations of human rights” in the country.

“Everybody has failed in relation to Myanmar,” Guterres said. “The international community as a whole has failed, and the U.N. is part of the international community.”

ASEAN’s peace plan calls for the immediate cessation of violence, a dialogue among all parties, mediation by an ASEAN special envoy, provision of humanitarian aid and a visit to Myanmar by the special envoy to meet all sides.

Myanmar’s government initially agreed to the plan but has made little effort to implement it.

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November 11, 2022
Watches, daggers and cricket ice cream: Asian summit treats

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BANGKOK — A custom wristwatch from Cambodian leader Hun Sen at the ASEAN summit in Phnom Penh, a foot-long dagger at the G-20 meetings in Bali, and cricket ice cream and Thai noodles with worm sauce at the APEC talks in Bangkok.

World leaders have a surfeit of swag and surprises awaiting them as they attend back-to-back-to-back summits in Asia starting this week.

Hun Sen raised eyebrows a few weeks ago when he announced that he would be having special-edition watches made for U.S. President Joe Biden and other leaders attending the Association of Southeast Asian Nations summit, which runs through the weekend. Many speculated the former mid-level Khmer Rouge commander would feature his own mug on the timepiece in the narcissistic vein of autocratic leaders in the past, like Iraq’s Saddam Hussein or Libya’s Muammar Gaddafi.

But the final product, which Hun Sen said was designed and made in Cambodia, is a sleek silver timepiece with coppery-gold hands and a leather strap, with “ASEAN Cambodia 2022” imprinted on its face.

Hun Sen did not say what the gift was worth as he unveiled it this week on his Facebook page, but did say he’d be wearing it himself at all three summits — foregoing one of the rare, designer wristwatches in his collection whose $1 million-plus price tags have been a source of grumbling in impoverished Cambodia.

In addition to Biden, many other world leaders who will be receiving the Cambodian watch, including Australia’s Anthony Albanese, Canada’s Justin Trudeau and Japanese Prime Minister Fumio Kishida, will travel from Phnom Penh next to the Indonesian island of Bali where there are some traditional trinkets in store for them at the Group of 20 summit.

G-20 organizers this year say the leaders, also expected to include China’s Xi Jinping, will be asked to wear colorful shirts made of the traditional Balinese woven fabric endek, similar to those that Indonesia gave out at the 2013 APEC meetings they hosted in which the country revived the on-again, off-again summit tradition of a group photo in what some have dubbed “silly shirts.”

The tradition was started in 1993 by then-President Bill Clinton, who gave out leather bomber jackets as a memento to leaders in attendance as a way to lighten the mood of the serious economic talks.

In Indonesia, all 120 member and non-member states’ representatives attending will also be given shawls made from another Balinese fabric known as gringsing, typically red, off-white and black woven in a geometric pattern.

Leaders will also receive a traditional kris dagger, a distinctive asymmetrical knife usually between 11 and 14 inches long with a wavy blade.

According to organizers, each dagger takes between one and six months to make, and while used as combat weapons in the past they are today typically worn at special ceremonies.

There were no “silly shirts” last year at the Asia-Pacific Economic Cooperation meetings, held virtually due to the pandemic, with host New Zealand instead providing merino wool scarves for the men and capes for the women.

It looks like Thailand doesn’t plan on reviving the shirts this year at the upcoming APEC summit in Bangkok. Instead, organizers say they will be giving leaders silk neckties and shawls, as well as handkerchiefs and face masks.

There is culinary excitement, however, as the country, renowned for its cuisine, brings in Thai food startups selected from a competition to highlight sustainability under a concept dubbed “plate to planet.”

Biden isn’t expected to be on hand for the APEC meetings, but Vice President Kamala Harris, Xi and others will be given the opportunity to try out dishes like carb-free ramen noodles made from egg white protein, milk-free ice cream with kale and passion fruit, low-sodium Thai noodles with a sauce made from sandworms, and ice cream made from the protein from crickets, government spokesman Anucha Buraphachaisri said.

Celebrity chef Chumpol Chaengprai is preparing the gala dinner to cap the event, under the concept of “sustainable Thai gastronomy.” Its menu has not yet been announced.

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Chalida Ekvitthayavechnukul in Bangkok, Niniek Karmini in Jakarta and Sopheng Cheang in Phnom Penh contributed to this story.

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November 10, 2022