Friday, May 29, 2015
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Author: Sanchita Basu Das, ISEAS

As the ASEAN Economic Community’s (AEC) December 2015 deadline approaches, most observers feel that the initiative’s deliverables — an integrated production space with free movement of goods, services, and skilled labour — will not be achieved. This may be true. But the AEC should be seen as a work in progress. To simply say it will miss its deadline is to ignore other crucial facts about the AEC’s role and circumstances.

Thai office workers walk past advertising promoting the ASEAN Economic Community in Bangkok on 13 January 2013. The AEC is unlikely to be ready by its deadline. (Photo: AAP)

While lessons have been derived from the European Union, the AEC was not developed on the basis of this model. Since ASEAN’s inception, the sovereignty of nation-states and non-interference in domestic matters were key principles guiding the organisation. Economic cooperation was sought in areas where it was deemed necessary. This included allowing for economies of scale and multinationals doing business in Southeast Asia, and anchoring production networks that were already developing in the broader Asian region. Economic cooperation was seen as a gradual process, with long-term aspirations, rather than a mechanism in which strict rules apply irrespective of the nature of member economies and changing global conditions.

Although the AEC is a regional initiative, it is implemented by national economies. Domestic law and policy is required to do things like cut tariffs, remove non-tariff barriers and liberalise the services sector. This can be difficult because each initiative is not the sole preserve of any one body but involves multiple ministries and other agencies. That some domestic economic actors stand to gain or lose from integration means that the AEC generates proponents and opponents. And this slows down the pace of implementation further.

But the AEC is not the sole cause of increasing competition in domestic economies. The AEC vision was developed with an awareness of current global economic trends. The 10 ASEAN countries realised that their own WTO ascension would not lead to quick outcomes in a forum of 150 other countries at different stages of economic development. There the concerns and objections of small economies, like the ones in Southeast Asia, are not likely to be heard.

In contrast, ASEAN and the AEC are small enough to consider the interests of all and may also accord short-term flexibility. While this is likely to slow down the establishment of the AEC, advanced member countries — such as Singapore, Malaysia and Thailand — are not restricted to only this framework. All of them have pursued bilateral free trade agreements with their key trading partners. So, for any single country, heightened competition is a part of the globalisation process. And there are other frameworks — be they bilateral, regional or multilateral — that can further economic liberalisation.

ASEAN economic cooperation is a top-down initiative and hence awareness among stakeholders is low and uneven. The association was instituted in 1967 to promote peace and stability. It took another decade for economic cooperation to make the agenda. But economic cooperation has become a form of diplomacy that is often carried out by foreign ministries in consultation with  commerce or trade ministries.

Some have observed that economic regionalism in Southeast Asia is the subject of political elites, with almost no involvement from other stakeholders. This has been accompanied by a low level of awareness of relevant economic cooperation measures, particularly among the final users.

But with the looming 2015 deadline, the private sector is now being listened to. And advocacy for trade initiatives by the private sector is not unanimous. It is often driven by the relative strength of particular firms that bring foreign direct investment into the country.

Finally, the AEC should not be seen in isolation from, but rather in conjunction with, the ASEAN Political-Security Community and ASEAN Socio-Cultural Community. A political security community works towards regional peace and stability, while a socio-cultural community encompasses regional cooperation in areas like environmental protection, limiting the spread of contagious diseases, transnational crime and cooperation when responding to natural disasters. It is hoped that, when combined, these initiatives will help to cultivate a sense of regional identity.

The AEC is a work in progress. Some promises have been met, but significant challenges also remain. Awareness among policymakers and final users is growing. ASEAN is often criticised for weak institutions, which has also made AEC implementation difficult. But only time will only tell how much of this can be changed. With the AEC and ASEAN Charter, the region has already evolved as a rules-based association.

Now is the time for ASEAN countries to come together to strengthen the economic community. The global economy has been in a constant state of flux since the 2008 economic crisis. While the AEC may not deliver on a fully integrated single market and production base for ASEAN stakeholders in 2015, it will help ASEAN members to withstand the next global crisis with confidence.

Sanchita Basu Das is an ISEAS Fellow and Lead Researcher on economic affairs at the ASEAN Studies Centre, ISEAS, Singapore.

A longer version of this article was published here as an ISEAS Perspective.

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Slow but steady for the ASEAN Economic Community

Author: Peter Martin, APCO Worldwide

The relationship between China and India will be one of the most important of this century. Their ability to cooperate will be crucial on international issues ranging from climate change to multilateral trade negotiations. Yet for all of its future significance, the relationship remains shallow, unbalanced and stuck in the past. As Narendra Modi visits Beijing this week, there are signs of change but progress will likely be slow, piecemeal and pragmatic.

India's Prime Minister Narendra Modi receives a floral bouquet from a young Chinese child on his arrival at Xi’an Xiangyang International Airport in Xi’an, 14 May 2015. (Photo: AAP)

Gradually and from a low base, India is creeping up Beijing’s list of diplomatic priorities. Li Keqiang’s first foreign visit after becoming premier in 2013 was to India and Modi’s trip to China this week follows a highly-publicised India trip undertaken by Xi Jinping in September 2014.

India’s increasingly prominent global role — especially through the BRICS group and the G20 — has given it a more serious spot on Beijing’s geopolitical map. And the countries have also found common ground in a weariness of Western-dominated international institutions, with India featuring prominently in China’s efforts to build alternatives, such as the Asian Infrastructure Investment Bank, the BRICS Bank, and the Shanghai Cooperation Organization.

More than politics, it’s the prospect of making money that’s nudging Sino–Indian relations in a positive direction. Annual trade has ballooned to US$66 billion from just US$3 billion in 2000. Chinese companies, such as the high-tech firms Huawei and Xiaomi, are beginning to think big about India. And India, in turn, has high hopes for its software and pharmaceutical companies in China. In a way that would have seemed implausible even a few years ago, Chinese and Indian businesspeople are dreaming in rupees and renminbi.

But there’s still a long way to go before China considers India a peer. Since its victory in the countries’ brief 1962 border war and mindful of its economic heft, China has often treated India dismissively. As Zhu Feng, a leading Chinese commentator and professor at Nanjing University, puts it, ‘we don’t consider India a very successful contender and I don’t think Modi can change that’. India, for its part, has viewed its neighbour with suspicion, fixating on the ongoing border dispute to the exclusion of closer economic or social ties. These attitudes are deeply entrenched among the political and bureaucratic elites of both countries; they will take a long time to change.

Turning economic enthusiasm into political goodwill is also no easy task — not least because the economic relationship remains deeply unbalanced. India runs a US$37.8 billion trade deficit with China and its exports to the country are overwhelmingly composed of raw materials rather than finished goods, a fact that accentuates Indian insecurities about China’s economic success.

These trade imbalances are accentuated by the shallowness of China and India’s investment relationship. Despite its decade-long overseas spending spree, China’s investment in India totals just US$500 million, less than Malaysia, Canada and Poland have invested in the country. Indian investment in China is also relatively feeble at around US$470 million. Without strong investment ties, the relationship is deprived of an important lobby with a vested interest in strong bilateral relations: investing in overseas firms involves businesspeople putting down roots in foreign countries, making investors vulnerable to downturns in bilateral ties.

Much of this reflects the way that Chinese and Indian firms struggle to succeed in each other’s markets. Chinese companies in India are often ensnared by the Indian bureaucracy’s fears of over-dependence on China or of espionage. Indian firms in China struggle to gain market access in information technology and pharmaceuticals. They also deal with deep-seated perceptions that they have little to offer. When companies run into trouble, they have few organisations or experienced compatriots to turn to for help. Indian firms in China, for instance, must rely on an embassy with just 30 diplomats, nominal representation by Indian industry associations, and a small Indian diaspora that lacks any political clout.

Put simply, economic ties are not yet deep or substantive enough to overcome decades of political suspicion.

But perhaps the largest obstacles to a burgeoning relationship are the Chinese and Indian people themselves. The Chinese and Indian publics do not know each other well — and what they do know is coloured by historical baggage. This, combined with strong nationalist strands in both countries, makes it difficult for the political relationship to progress.

According to a July 2014 Pew Global poll, just 30 per cent of Chinese hold a favourable view of India and a mere 31 per cent of Indians hold a favourable view of China. This is partly because there is little interaction between the two populations. Of the 100 million Chinese who travelled overseas in 2013, just 160,000 ended up in India. By contrast, 1.4 million visited France. Of the 270,000 Indian students studying abroad in 2013, just 9200 were in China; at the same time, only 2000 Chinese students were studying in India. On top of this, the visa process is cumbersome and direct flights are limited: only one airline, Air China, covers the Beijing–Delhi route and no direct flight links the commercial hubs of Shanghai and Mumbai.

Narendra Modi and Xi Jinping clearly understand the potential of the Sino–Indian relationship. They have emphasised the countries’ shared history of trade along the ancient Silk Road, their shared ties of Buddhism and the nations’ past economic glories. They will no doubt reemphasise them this week. But to move forward the leaders need to deal with more recent history. This means encouraging creative thinking to alleviate the border dispute, eliminating bureaucratic hurdles to the bilateral business relationship and, above all, working to improve attitudes on both sides through academic exchange and people-to-people contact. The obstacles may be formidable, but the outcomes will be critical to regional — and global — geopolitics.

Peter Martin is Associate Director, India, at APCO Worldwide. He was previously based in Beijing.

This article was adapted from a longer version published here in Foreign Affairs and is reprinted with the permission of the Council on Foreign Relations.

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How to heat up lukewarm India–China relations

Author: David Dollar, Brookings Institution

To understand the impetus for launching the Asian Infrastructure Investment Bank (AIIB), look no further than China’s concern that the governance structure of existing international financial institutions was evolving too slowly. An important agreement to increase the resources of the International Monetary Fund and to raise the voting shares of fast-growing emerging markets, ratified by other nations, has been stalled in the US Congress. It is ironic that one of China’s frustrations with the US-dominated institutions is that China sees a need for more resources and is willing to contribute, whereas the different parts of the US government cannot agree to this expansion.

China’s frustration is not just about the size of the institutions and its weight within them. In the case of the World Bank, China has argued for years for more focus on infrastructure and growth.

Several years ago, Ernesto Zedillo, former president of Mexico, chaired the High-Level Commission on Modernization of World Bank Group Governance. This was a serious effort by a distinguished international committee, including Zhou Xiaochuan from China and other emerging market heavyweights.

The Zedillo report is quite critical of the current World Bank arrangement of a resident board that approves all loans. The resident board is both a large financial cost to the bank (US$70 million per year) and an extra layer of management that slows down project preparation and makes the bank less efficient. Slowness of project preparation is one of the main criticisms of clients concerning the poor performance of the multilateral development banks.

The Chinese officials charged with developing the AIIB are looking at the Zedillo report for ideas. It is likely that the bank will have a non-resident board that meets periodically in Beijing and also by videoconference. Given the newness of the bank, a likely compromise among the countries that have signed up is that the board will approve many of the initial projects and eventually delegate more decision-making to management.

The Zedillo report recognises the importance of environmental and social safeguards but argues that the World Bank has become so risk averse that the implementation of these policies imposes an unnecessary burden on borrowing countries. In practice, developing countries have moved away from using the existing multilateral development banks to finance infrastructure because they are so slow and bureaucratic. The enthusiastic response of developing countries in Asia to the AIIB concept reflects their sympathy with the idea that a bank can have good safeguards and still be quicker and more efficient than the existing banks.

Some of the Western commentary on the AIIB expresses a fear that China will use the bank for narrow political or economic ends. Now that a diverse group of nearly 60 countries have signed up, it would be difficult for China to use the bank to finance projects in favoured countries over the exclusion of other members.

The idea that AIIB projects would help absorb China’s over-capacity problem does not make sense. If the bank is very successful, then in five years it might lend US$20 billion per year, on a scale with the World Bank’s International Bank for Reconstruction and Development lending. In the steel sector alone, China would need US$60 billion per year of extra demand to absorb excess capacity. Add in excess capacity in cement, heavy machinery and other sectors — the point is that the bank is just way too small to make any dent in the excess capacity problem, even if China were the sole supplier for these projects, which it won’t be.

The initial success of AIIB is a diplomatic victory for China. The US diplomatic response has not been adroit, playing into the narrative of US decline in the Asia Pacific. But that perception could change quickly. Infrastructure is the necessary ‘hardware’ of economic integration. But trade agreements such as the Trans-Pacific Partnership (TPP) are the ‘software’. If the US and its partners can negotiate and implement this agreement for deeper integration, that will provide a large boost for the members and re-establish US importance to the Asia Pacific economy.

China pursuing the AIIB and other initiatives that do not include the US, while the TPP negotiations do not involve China, creates a risk of competing blocs and institutions. But the most likely outcome is that the world ends up with a more robust and inclusive set of institutions. The AIIB is likely to make the other development banks more effective and become a part of the global architecture. China and other Asian countries not now involved in TPP are likely to join if it is successful. Bringing the hardware and the software together, the outcome could be a more integrated Asia Pacific economy.

David Dollar is Senior Fellow, John L. Thornton China Center, Brookings Institution. He was the former World Bank Country Director for China and Mongolia in the East Asia and Pacific Region.

This article was originally published here for the Brookings Institution.

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What the AIIB can learn from World Bank shortcomings

Author: Rupakjyoti Borah, India

Indian Prime Minister Narendra Modi’s recent visit to Seychelles, Mauritius and Sri Lanka reflects New Delhi’s changed foreign policy priorities. It signals that India is no longer willing to be outmanoeuvred in the Indian Ocean region — its strategic backyard.

Modi’s visit was also part of the prime minister’s efforts to reach out to India’s neighbours. This started with his inauguration when he invited the heads of state of all the member nations of the South Asian Association for Regional Cooperation.

Modi was also scheduled to visit Maldives during this trip. But it was dropped from his itinerary in a not-so-gentle rebuke of the Maldivian government, which had arrested the former Maldivian President Mohammed Nasheed. New Delhi considers Nasheed to be pro-India. Nasheed has now been convicted on a terrorism charge and sentenced to 13 years in prison, showing the limits of India’s influence.

On the first leg of his trip to Seychelles, Modi unveiled the first Indian-built Coastal Surveillance Radar System. And, in a very significant move, Assumption Island in Seychelles was leased to India. In Mauritius, Modi commissioned an India-built offshore patrol vessel, Barracuda, into the Mauritian National Coast Guard. This will help Mauritius patrol its vast exclusive economic zone.

But it was on the last leg of his trip to Sri Lanka that Modi gained the most attention. It was no secret that under former president Mahinda Rajapaksa, Sri Lanka was titling towards Beijing. This has been exacerbated by the fact that no Indian prime minister had paid a visit to Sri Lanka in the last 28 years. But the India–Sri Lanka relationship has begun to change following the election of President Maithripala Sirisena.

Sirisena made India his first foreign destination after taking office. During his visit India and Sri Lanka signed a civilian nuclear deal.

During Modi’s visit to Sri Lanka, he announced that India would be providing a new US$318 million line of credit to Sri Lanka to upgrade its railway infrastructure. He also paid a historic visit to Jaffna city in Sri Lanka’s Tamil heartland. During the Sri Lankan civil war, India sent troops — the Indian Peace Keeping Force — to Sri Lanka and the Tamil heartland had seen heavy fighting.

In the past, central governments in India have found it difficult to articulate a clear foreign policy towards Sri Lanka. Shaky coalition governments in New Delhi have relied on support from political parties in the south Indian state of Tamil Nadu for their survival. They have therefore found it extremely difficult to take a strong stand on issues related to Sri Lanka, which is home to a significant Tamil minority. As Modi leads a majority government in New Delhi, he can afford to make strong decisions on Sri Lanka without succumbing to pressure from interest groups in Tamil Nadu.

One of the reasons why India has reached out to these Indian Ocean nations is China’s Maritime Silk Road initiative, which is seen by many in India as an attempt to undercut New Delhi’s influence in the Indian Ocean region. Beijing has aggressively courted countries like Sri Lanka, the Maldives and Seychelles in the past. The Maldives are viewed as having openly snubbed India. For example, the Maldivian government overturned a contract to expand its international airport in Male that had been awarded to an Indian infrastructure company and later gave the contract to a Chinese company.

While Modi’s visit has been successful, there is no denying that the Indian Ocean will be a new playground between New Delhi and Beijing. India will no longer have the luxury of being the unchallenged power in the region (with the sole exception of the United States). This will call for some nimble-footed diplomacy from New Delhi. Beijing has asked India to collaborate in the Maritime Silk Road initiative, a move that has put New Delhi on the diplomatic back foot.

But New Delhi’s problems do not seem to have ended. Many Indian Ocean nations are wary of aligning with either India or China and will therefore try to get the best out of both of these powers. India’s reticence in reaching out to these countries in the past led them to open up to Beijing. This trend will continue as Beijing, flush with both economic and military muscle, tries to secure sea-lanes to carry minerals and energy resources from the Middle East and Africa to China.

Rupakjyoti Borah is a former Visiting Research Fellow at the Japan Institute of International Affairs.

A version of this article was first published here by Global Asia.

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India’s renewed push into the Indian Ocean

Author: Tridivesh Singh Maini, Jindal School of International Affairs

Ever since former prime minister P.V. Narasimha Rao reshaped India’s foreign policy in the 1990s under the so-called ‘Look East’ policy India has strengthened ties with Southeast Asia. The current government of Prime Minister Narendra Modi has unequivocally said that it is keen to progress from the ‘Look East’ policy to ‘Act East.’

The post-Cold War world has compelled India to reshape relations with important countries, such as the US and Japan. India’s increasing economic clout has also meant that the outside world has paid greater attention to it.

Since the 1990s, India has moved from being a sectoral partner of ASEAN to being a dialogue partner. Trade between India and ASEAN is tipped at US$76 billion (as of 2013–2014), which — while far below its potential — is up more than 20 per cent compared to a decade ago. This has been facilitated by the India–ASEAN free trade agreement (FTA) in goods. Bilateral trade is likely to increase further, with both sides setting a target of US$100 billion by this year.

In the strategic sphere too, India has strengthened ties with Vietnam and Singapore. India has been carrying out joint naval exercises with Singapore near the Andaman Islands for two decades. India signed a military agreement in 2003, which includes joint exercises and training. And in September 2014 the two countries decided to strengthen cooperation in the context of counterterrorism.

India has extensive strategic ties to Vietnam, which include interactions between defence services and assistance in the maintenance of defence equipment. During Indian President Pranab Mukherjee’s visit to Vietnam, a US$100 million line of credit was signed between the EXIM Bank of India and Vietnam’s Ministry of Finance, specifically for defence procurement.

India is also no longer ambivalent about its role in Southeast Asia, especially in regards to the South China Sea dispute. This was evident in Modi and US President Barack Obama’s joint statement. Modi also stated: ‘We have a shared interest in maritime security, including freedom of navigation and commerce, and peaceful settlement of disputes in accordance with international law’.

India has begun to place special emphasis on Cambodia, Myanmar, Laos and Vietnam. It has ramped up financial aid and development assistance, and has set up a special desk at the Ministry of External Affairs. India is now assisting these countries in areas like information technology as well as English-language training.

Steps are also being taken to enhance both land and sea connectivity with Southeast Asia. Myanmar is the only gateway through land to South East Asia. A trade zone connecting Behiang in Manipur with Myanmar’s Chin province is being discussed, while a land customs station at Zawkhatar in Mizoram is also likely to be inaugurated soon. Chief ministers of north Indian states are involved as key stakeholders, not just in the context of ties with Myanmar but the overall Act East policy.

India is also seeking to build closer maritime links with Southeast Asia. The Shipping Corporation of India initiated a bi-weekly container shipping service to Myanmar in October 2014. It is likely that similar services will also be launched to Vietnam and Cambodia.

But if India wants its Act East policy to be successful it needs to take a number of further steps.

First, India must strengthen important infrastructure projects such as the trilateral highway linking India–Myanmar–Thailand and infrastructure on land borders with Myanmar.

Second, India needs to utilise its diaspora more effectively. So far, it has engaged only with the Indian diaspora in Singapore, Malaysia and to some extent Thailand. India needs to pay greater attention to the Indian community in Myanmar.

Third, there is scope for greater engagement with countries like Indonesia and the Philippines. There is immense potential for strengthening India–Indonesia relations not just due to their common past, but also due to the similar backgrounds of Modi and Indonesian President Joko Widodo, who were both strong regional leaders before becoming heads of state.

Finally, a large number of Indian states are beginning to engage with Southeast Asian countries, especially Singapore and Malaysia. While it is logical to make northeastern states key stakeholders in the Act East policy, it is also important to rekindle ties between other Indian states and ASEAN countries.

Indian cities that share a common history and heritage with countries in ASEAN can deepen relations on the basis of religious history. For instance, the Buddhist site of Sarnath near Varanasi receives a large number of tourists, many from Thailand. There are a number of sites in Madhya Pradesh such as Mahurijhari that can similarly be linked with ASEAN countries. Links between cities in states such as Kerala, which were part of the Spice route, can also be built. Already, UNESCO and the government of Kerala signed an agreement in 2014 to revive the Spice Route Project.

There is immense potential for India finally to play a greater role not just in South Asia but in Asia as a whole.

Tridivesh Singh Maini is a Senior Research Associate with the Jindal School of International Affairs, Sonepat, India.

A version of this article was first published here on Global Asia Forum.

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Why India needs to ‘act’ East

Author: Terry Russell, Denpasar

Timor-Leste’s new Prime Minister, Rui Araujo, has inherited a policy of decentralising the nation’s governance. Given capacity issues, this process is unlikely to bring broader-based rural development to Timor-Leste in the short term. But, if managed effectively, greater decentralisation could have some positive impacts on village-level infrastructure and autonomy.

Timor Leste Prime Minister Rui Maria de Araujo talks to former prime minister Xanana Gusmao and former president Ramos Horta, 21 March 2015. (Photo: AAP)

Administrative decentralisation is embedded in Timor-Leste’s Constitution. Recent laws, most notably Decree-Law no. 4/2014 on Administrative Pre-deconcentration, have now provided the legal framework for increased decentralisation to the districts. Under these laws, district managers continue to be appointed by the national-level government. Yet now these managers will have a bigger budget and direct authority over most of the offices operating at district level.

Considering the lack of institutional capacity even at national level, Timor-Leste is highly unlikely to find sufficient institutional capacity in its districts. The government needs to devolve budgetary power gradually so that the districts put the skills and systems in place before being given a large budget.

The main mechanism for devolving budgetary power to district governments has been through the government’s PDID program (Planeamento Desenvolvimento Integrado Distrital, Integrated District Development Planning). This program has also been the main mechanism for enabling district governments to gain experience in planning and procurement. Since 2012, PDID and its predecessor program PDD have been allocated a total US$193.7 million for small-scale infrastructure development in Timor-Leste’s 13 districts. That’s an average of only around US$5 million annually per district. Decentralisation is clearly moving slowly and so is the building of experience at the district level.

But slowing down devolution of budgetary power does not mean giving up on rural development in the short term. Timor-Leste’s government still has other tools for rural development. One less promising way is simply to continue directing its national budget through line ministries to develop agriculture, education, health and other services in the districts. Since 2002, this appears to have had no success in lifting Timor-Leste’s rural poor out of subsistence farming and has had only limited success in providing services to rural areas.

An alternative way — one that produces more bottom-up planning and less bureaucratic red tape — is through the PNDS program (Programa Nasional Dezenvolvimentu Suku, National Program for Village Development). Here, money goes straight from the national to village level, with district-level government only playing a technical support role.

The PNDS is modelled on Indonesia’s PNPM program, which gives grants directly to communities for high-priority, small-scale infrastructure projects. While it’s still early days, PNDS has so far been praised for its success in improving physical infrastructure and village-level planning.

The PNDS has limitations. It does not directly boost local production and it is not big enough to provide major infrastructure. It can refurbish schools and health posts but it cannot provide for ongoing costs. The government’s 2015 budget has allocated only US$20 million for the PDID and PNDS programs combined. This represents only around 1.3 per cent of the national budget: the government is clearly not in a hurry to stake everything on the program. But while the budget may not be sufficient for each of Timor-Leste’s 442 villages to receive the initially planned US$50,000 it will benefit many and will do so quickly.

Finally, the upcoming Suco Law formally recognises village councils as an arm of the government and provides a monthly allowance to each village chief and sub-village chief, as well as other members of the Suco Council. It will thus increase the accountability of village officials to the demands of the government.

The Suco Law and the PNDS and PDID programs will provide small-scale infrastructure, with some impacts on village-level and district-level governance. Decree-Law no. 4/2014 on Administrative Pre-deconcentration devolves decision-making to district level government structures, but in the short term these structures will lack skills and funding to have significant impacts.

Ultimately, none of the above elements of decentralisation provide confidence that government services and economic vibrancy will improve in rural Timor-Leste in the short term. Instead, the main hopes for improved government services come from national investment in large-scale road networks and telecommunications infrastructure. This will be of direct benefit to rural people, improving access to agriculture, health and education services in remote areas.

The main hope for economic growth comes from a large-scale source that has nothing to do with decentralisation: foreign investment. For example, Dutch-based brewery giant, Heineken, will begin construction of a brewery at Hera just east of Dili in 2015. Its total investment will range between US$30–45 million and is expected to provide 200 jobs directly and 800 indirectly. Also planned for construction in 2015 is a cement factory near Baucau, with investment from a Western Australian company. This investment has been projected to create thousands of jobs. Several large hotels will be constructed, including in Oecussi and just west of Dili, while hopes and planning continue for a gas processing plant at Beacu and a petrochemical refinery at Betano.

No one can safely say when district governments will have sufficient skills and systems to handle a larger portion of the national budget. The Special Social Market Economy Zone in Oecussi is already trying to handle a large budget — almost US$82 million in 2015. Hopefully it will provide important lessons before large budgets are devolved to other district governments. In the meantime, rural areas in the other 12 districts will remain largely reliant on the national government for any improvements in government services and economic vibrancy.

The relative impotence of decentralisation in the short term should not cause despair. Instead, it should be a spur to building skills and systems at district level in preparation for rising power. And it should also stimulate more innovative and efficient governance at the national level. Rural Timor-Leste has waited too long already.

Dr Terry Russell worked with the UNTAET mission in East Timor in 2001–2002 and has, as an NGO worker and consultant, made regular visits to Timor-Leste since its independence.

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Decentralisation and rural development in Timor-Leste

Author: Alice Beban France, Cornell University

While the majority of Cambodians live off the land, access is precarious. Recently the Cambodian government has been making some encouraging reforms, but troubling signs remain.

Rapid, unregulated development with unclear property rights has left an estimated 770,000 people affected by land disputes. Smallholder property claims are pitted against companies with Economic Land Concessions (ELCs), long-term leases that allow for the development of land for industrial agricultural purposes. Development programs awarding private communal land titles have so far done little to stem the tide of disputes.

New land disputes continued to erupt in 2014 and there have already been reports of new urban eviction threats in 2015. The central problem is the opacity of the land sector. It is unclear whether or not the recent ELC cancellations are meaningful because there is almost no public data available for state land boundaries, titled areas, or agribusiness investment.

In a pre-election land titling push in 2012–14, thousands of university students were sent around the country to survey and title land to more than 600,000 land owners occupying state land. The government has promised that titling will continue in 2015 under the auspices of the Department of Land Management. In Cambodia’s chaotic post-conflict scramble for resources, land titling has long been held out by the government and donors as key to quelling disputes and spurring investment.

But, a growing number of reports link Cambodia’s land titling campaign with land grabbing and deforestation, particularly in indigenous communities. An alarming number of people whose land was surveyed by the student volunteers are still waiting for their land title. Seventy-four per cent of people whose land was surveyed between 2012–14 are still waiting for at least one title according to an upcoming nationwide report from the NGO forum. People whose land was passed over and left untitled by the student measurement teams are worried.

In the wake of the titling campaign, some people have sold land under pressure from powerful urbanites buying up large swathes of land. These deals fly under the radar of government and CSO monitoring. In Ratanakiri, northeast Cambodia, land sales have continued inside an indigenous community awarded Communal Land Title. The logic of promoting the collateral potential of land title for farm investment is also questionable in a country with high amounts of rural indebtedness and a high-risk banking sector.

A lot more than land title is needed to provide land security in Cambodia. Titles, community training and stakeholder meetings provide nicely packaged quantitative data for donor agencies but the real outcome measurement remains: are people still losing land?

Some innovative approaches to tackling this question have emerged, including exposing the roles of consumers and investors tied to increased commercial land pressure. The Blood Sugar Campaign, targeting European and US sugar buyers, has encouraged the European Union to launch an investigation. A new report exposes the illegal timber trade satisfying Chinese demand for luxury timber and the International Finance Corporation (IFC, part of the World Bank) is currently investigating a complaint about an IFC funded rubber company filed by sixteen upland communities.

Community activists have become more closely linked nationally and regionally. Donors are realising the need to move beyond brief technical fixes to more long-term support for legal and community empowerment. Discourses linking land rights with food security and the need for dignified farming livelihoods are also growing.

But activism is limited by ongoing intimidation and harassment including the imprisonment of Boeung Kak lake activists for blocking traffic, frequent reports of harassment, attempts to buy off community activists and NGOs, and the recent refusal to extend the visa of a foreign activist. The National Assembly is quietly debating draft media laws that will restrict freedom of speech, agricultural laws that may restrict farmers’ crop choices and includes punishments for those who do not abide by the rules. There is also a controversial NGO Law requiring greater government oversight for NGOs. These regressive legal maneuvers may affect the ability of communities and NGOs to fight for their land.

Cambodia’s experience with the student-led land titling campaign shows that ‘big man rule’ can accomplish a massive amount in a short time. When Hun Sen speaks, people listen. Cambodia’s ruling regime is built on land as a political tool. Land is distributed to elites to bring them into the orbit of the prime minister and facilitate the private accumulation of national resources. Land title is given to poor people as part of pre-election campaigning.

The challenge for the government now is to use this big man power to create long-lasting change rather than short-term political gain. This requires more than gifting land titles or confiscating under-performing or already logged land concessions. Fundamental changes to social policy are needed that see land not as a political tool but as a livelihood.

Alice Beban France is a PhD Candidate with the Department of Development Sociology at Cornell University funded by an award from Fulbright-Hays.  

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Time to sow the seeds of land reform in Cambodia

Authors: Murray Hiebert and Nigel Cory, CSIS

Malaysian opposition leader Anwar Ibrahim’s seven-year fight against sodomy charges ended on 10 February 2015. His five-year prison sentence was widely seen as a victory for his political opponents in using the law to silence him (again). The opposition coalition will struggle to overcome the loss of its leader. But Prime Minister Najib Razak is expected to face minimal international pressure on the verdict.

Anwar’s case was seen by many as an attempt by the ruling United Malays National Organisation (UMNO) party, which has been in power since Malaysia’s independence in 1957, to eliminate Anwar from the political landscape. In 2013, the opposition coalition came close to achieving Malaysia’s first change of government. It won the popular vote in the national elections, but fell short of gaining a majority of seats in the highly gerrymandered electoral system. Anwar was seen as the lynchpin to the opposition’s success.

There were accusations of political interference in Anwar’s sodomy trial from the start. Reports stated that Najib met the man Anwar allegedly sodomised two days before the act reportedly took place in 2008. Anwar’s lawyers raised questions early in the trial about whether the DNA samples had been properly maintained and had possibly been contaminated. They also expressed concern that the major evidence presented against Anwar was the alleged victim’s statements which were never corroborated by other sources.

In January 2012, a High Court judge agreed that the DNA had been compromised and acquitted Anwar. But the Court of Appeals overturned this ruling in March 2014. The judges argued that the High Court had made a mistake in doubting the integrity of the DNA and reinstated the original guilty verdict and a five-year prison sentence. At the time, the United States and other countries condemned the verdict saying that it showed Malaysia’s judiciary was neither independent nor fair.

The opposition coalition is at a critical juncture as it prepares to elect new leaders. The problem is that there is no clear successor. The next generation significantly lacks Anwar’s charisma and political skill. In the meantime, the opposition leadership has fallen to Anwar’s oldest daughter Nurul Izzah Anwar. The 34-year-old, who has twice served as a member of parliament, represents the next generation in political leadership, but there are many doubts about her ability to fill Anwar’s shoes.

The opposition’s task of rebuilding is made harder with the death of Nik Aziz Nik Mat in February 2015. Nik Aziz was the head of the opposition Pan-Malaysian Islamic (PAS) party, one of the component parties of the opposition coalition. Anwar and Nik Aziz were essential in keeping the disparate members of the coalition together and on message. The contest to replace Nik Aziz in his own party will be crucial to determining PAS’s future in the opposition. There is a faction within PAS that wants to break away to join UMNO because of their shared Islamic values and policies.

Najib has not gained much politically from Anwar’s removal as his main opponents are within his own party. Former prime minister Mahathir Mohamad has mounted an increasingly bitter fight to undermine and remove Najib.

Although the domestic struggles are obvious, the foreign policy implications for Malaysia are less clear. Malaysia is safe from criticism from its neighbours in ASEAN as the group adheres to the principle of non-interference in the affairs of other countries. The problem for Najib is that the international spotlight will focus on Malaysia in 2015 as it serves as the chair of ASEAN and the host of the East Asia Summit (EAS).

The United States’ cautious reaction to Anwar’s jailing stands in contrast to its condemnation of Malaysia following his first imprisonment. The US appears to have decided that it cannot afford disengagement and high-handed rhetoric because it has considerable interests attached to the 2015 ASEAN summit and EAS meeting. Malaysia also plays a critical role in the Trans-Pacific Partnership trade negotiations, which could be completed this year.

The US administration appears to remain committed to building its comprehensive partnership with Malaysia. It has maintained its invitation for Najib to visit Washington ahead of the EAS. Protests about Anwar’s imprisonment will likely arise during Najib’s visit, but the White House seems likely to downplay those concerns due to its broader interests in Malaysia and the Southeast Asian region.

Murray Hiebert is a senior fellow and deputy director of the Sumitro Chair for Southeast Asia Studies at CSIS.

Nigel Cory is a researcher with the Sumitro Chair for Southeast Asia Studies at CSIS and previously served as an Australian diplomat in Malaysia.

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