14 Jun 2019

The Lee Kuan Yew School of Public Policy (LKYSPP) hosted the second edition of the Asia Thinker Series (ATS), ASEAN and the New World Disorder: Thailand, seeking a new balance, on 12 June 2019 at Chulalongkorn University in Thailand.

Asia Thinker Series BKK

As part of the panel discussions, Professor Danny Quah, Dean and Li Ka Shing Professor of Economics, was joined by other experts including Professor Thitinan Pongsudhirak, Director of the Institute of Security and International Studies (ISIS), Faculty of Political Science, Chulalongkorn University; Ms Gwen Robinson, Senior Fellow at the Institute of Security and International Studies at Chulalongkoran University and Editor-at-Large, Nikkei Asian Review; and Dr Somkiat Tangkitvanich, President of the Thailand Development Research Institute.

The Power of the ASEAN Collective

Dean kicked off the session by stressing that across ASEAN, the “fundamental priorities have got to remain peace and prosperity”. As a region of nearly 3 trillion US dollars in total GDP and 600 million people, set to grow at one of the fastest rates in the world, the world’s economic gravity is rapidly converging towards the ASEAN region.

We have been able to leverage increasingly open markets elsewhere in the world, we have been able to conduct our business with the rest of the world under a well-understood set of rules-based order that has brought to us globalisation, a robust trading system, the way in which to conduct business in the world, the spread of ideas and economic prosperity.

Dean Danny Quah, on how ASEAN has risen to the challenge

However, he cautioned that this rules-based order is being disrupted by larger forces such as geopolitical tensions in the South China Sea, and more broadly, the ongoing US-China trade war.

Dean added that ASEAN, while concerned, sits outside these larger conflicts for the time being. The disruption of the global trading order could affect ASEAN’s manufacturing, industrialisation, learning from economies of scale, and increasing returns that countries leverage on as their economies move from developing to first world income status.

In order to deal with this new world disorder, ASEAN needed to examine two possibilities:

  • To become alternative architects in building its own regional order
  • To become empowered consumers of the resulting world order comprising at least the United States and China

ASEAN also needed to take the lead on transboundary issues concerning the region, such as haze and sustainability, which are not part of the focus of the growing geopolitical conflict.

Now is the time for us to come together, speak in a unified voice, because it is only by doing so that our collection of economies has a footprint that’s large enough to move the needle of world order, whether we see for ourselves, the future, as alternative architects, or as empowered consumers… that is the way ahead.

Dean Danny Quah, speaking on the need for ASEAN to forge its path amidst the trade war

Thailand: “A victim of its own success?”

Drawing parallels between global issues and the local context in Thailand, Prof Thitinan spoke on how Thailand’s political order is facing similar challenges to those of the liberal international order.

Globally, this longstanding international order has helped foster and forge economic developments in many ASEAN nations, bringing them from third world countries emerging from colonial rule to emerging markets. With that, different major powers, from the European Union to Japan, had been established. However, the “power asymmetry... inherent in the system after seven decades” needed to be “revamped through a re-ordering of power makers and takers”, said Prof Thitinan. He added that it was this lack of global adjustments that had manifested in the current tensions between US and China.

Thailand, when emerging from war in the 1940s, was a largely rural, third world country. In the context of the Cold War, Thailand forged “a political order centred on the monarchy, the military and the bureaucracy” – having seen military dictatorships and a semi-military authoritarian rule in the 1970s and 1980s. This order was successful in fighting the expansion of communism, and providing Thailand an environment that enabled economic development. In fact, the Thai economy expanded 6% a year from 1960 to 1997, a rate of growth comparable to China’s.

However, the country’s progress brought about a demand for voice representation and elections, rendering military dictatorship untenable. This led to Thailand developing a reform-driven constitution in 1997, with the promise to end military dictatorship in favour of an open democracy. But this eventually led to a political monopolisation by former Prime Minister Thaksin Shinawatra and his party, which has posed a challenge to establishing political order.

“When you have this chasm, this confrontation between the old and the new, something is happening,” said Prof Thitinan, describing China’s challenge against the US on a number of fronts. He described China as a “totalitarian state that has mastered market capitalism” against an incumbent US which is “being resentful and a bit belligerent."

But while the jury is still out on the new global disorder, Thailand has seen a clear outcome in which after three coups, three constitutions and four elections, “the established order comprising the military, the monarch, the bureaucracy” has won, said Prof Thitinan. He hoped a compromise could be reached on an international scale, with the US sitting back and allowing China to have the space in the “leadership of international organisations and international apparatus set up for the last 17 years. In turn, perhaps the US could make allowances on the Belt and Road Initiative and soften Indo-Pacific strategies rather than directly countering China’s assertiveness.

Similarly, Thailand has also yet to see a compromise between both sides. The way forward for Thailand would be to “strengthen democratic institutions”, for political winners to “be accountable to avoid corruption graft, he concluded.

Thailand’s Place in the Trade War

Dr Somkiat shared that as an economist, he had underestimated the impact of a trade war on the global economic order. In order for both sides to compromise, they needed to shift from non-cooperative to cooperative gameplay, which requires trust from both sides.

But what would this mean for Thailand?

From an economic perspective, the trade war would be both good and bad for Thailand as a small open economy - the raising of tariffs would bring about “trade diversity, meaning that certain kinds of goods that the US used to buy from China will be diverted to other countries, Thailand included”, Dr Somkiat explained.

Secondly, this would mean a huge relocation of factory businesses from China to other countries, as seen during trade tensions between the US and Japan in the last century. Dr Somkiat cited international companies such as Panasonic, Daikin and Delta, amongst many others, who have already expanded their spaces in Thailand in the wake of the trade war.

However, there is bad news for Thailand. The country has deepened its economic links with China in the last 20 years – revenue from Chinese tourists account for 29% of Thailand’s tourism revenue, up from 5% 10 years ago, while foreign direct investment from China has grown to 14% up from 0.3%. Hence, a slowing down of the Chinese economy due to the trade war would inadvertently have negative consequences on the Thai economy.

Echoing Dean’s call for ASEAN to provide a new architecture for a global order, Dr Somkiat said that a test for the region’s leadership ability could lie in whether ASEAN could conclude the RCEP agreement by end-2019. ASEAN has to find its own solution to cope with the trade war and global economy disorder. For a start, Thailand has to “enter into big trade agreements, for example the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) which Singapore, Malaysia and a few ASEAN countries have already joined,” he noted.

It would be wise for Thailand to re-balance its dependence on the global economy, not too much on one particular country, which is China at the moment, but diversify its reliance.

Dr Somkiat Tangkitvanich on how Thailand can cope with the new global disorder

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