Dark clouds in South Asia

Political risk clouds darken in South Asia – Bangkok Post

Bangkok Post

27/01/2014  

By Nalin Viboonchart and Nithi Kaveevivitchai.

BildSoutheast Asia, once seen as a rising power that would balance the rise of China and India, has started to face hurdles in its path toward that goal as political risk takes an increasing toll…  

  • The turmoil in Thailand, where protesters are determined to scuttle a Feb 2 election and force the ouster of the caretaker government led by Yingluck Shinawatra, has attracted the most attention.
  • Next door in Cambodia, unrest continues among low-paid garment industry workers, whose cause has been embraced by the political opposition to strongman Hun Sen.
  • Asean’s biggest economy and the region’s only member of the G-20 economies, Indonesia has also faced occasional protests from workers demanding wage hikes or calling for the restoration of subsidies…

 The issue of governance is one of the causes of the ongoing political turmoil, according to Dr Posh Raj Pandey, executive chairman of South Asia Watch on Trade, Economics and Environment.

  • Poor governance and high levels of corruption, he said, have left many governments unable to deliver what they have promised to their citizens, who are no longer afraid to come out onto the streets to vent their anger…
  • noting  that the rise of the middle class has been an important factor given that people are better informed than ever before.

 Dr Kanit Sangsubhan, director of the Fiscal Policy Research Institute Foundation of Thailand, agreed that

  • as more people get better access to information, they aspire to a better livelihood. That is why they are coming out to demand fairness and justice.

The protests are happening at a time when stable governments are becoming more important ahead of the formation of the Asean Economic Community (AEC), he said. Without political stability, regional economic cooperation will be impeded…

Rajiv Biswas, Asia-Pacific chief economist with IHS Global Insight, a global market and economic information provider, said that while other parts of Asia Pacific are reviving because of the strengthening recovery in the United States and Europe, Asean in 2014 faces an outlook clouded by political risks. Asean’s regional GDP growth is forecast to slow from 5% in 2013 to 4.7% in 2014 due to both political and economic factors.  

In Cambodia, major global garment companies are very concerned about the violent suppression of strikes by the government, and the reputational risk they face to their brands…

In Indonesia, Mr Biswas said economic growth was expected to moderate in 2014 as uncertainty persists over the composition and leadership of the next government.

In Thailand, he said, foreign investors have been reducing their stock and bond exposure in recent weeks. The attractiveness of Thailand for FDI is also being eroded…

Stephen Groff, vice-president for East Asia, Southeast Asia and the Pacific of the Asian Development Bank (ADB), said the bank was monitoring protests in Asean countries closely.

  • In the short term, political tensions can affect tourism and dampen domestic consumption.
  • In the long term, tensions can weigh on investment decisions, risk downgrading of a country’s credit rating, and delay priority infrastructure projects

In countries such as Malaysia or Indonesia, temporary protests against specific government policies are unlikely to have notable, long-term economic consequences…

Despite the seemingly bleak outlook, the current uprisings may bring a better future to the region, says Dr Ronald Mendoza, executive director of the Asian Institute of Management (AIM) Policy Centre. He says the region should support protests as they represent what democracy offers. He raised the example from his country, the Philippines, where some democratically elected leaders have been forced out by street protests. Yet today Philippine democracy and the economy are stronger than ever. He has a different view of the economic impacts from current protests, saying he expects stronger institutions to emerge in the longer term…

“You need institutions to underpin the trust of the people, not personalities. Personalities come and go but institution will stay. A credible supreme court, a credible justice system, a credible congress, a credible media, a private sector that really cares about social responsibility — these are the things we need to focus on.”

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