Asean

Chipped away. What does the global semiconductor shortage teach us?

The semiconductor supply chain has been in crisis since 2020 and the shortage will continue. It takes little to stop global trade flows. Governments want to invest in the sector to strengthen their technological autonomy, and ASEAN and the EU could play an important role.

2021 looks like an annus horribilis for global trade, even more so than 2020. Many sectors of the economy have benefitted from the post-crisis rebound and seem to be returning to pre-pandemic levels. Other sectors, however, are still struggling, with tangible effects on consumers. Energy, raw materials, cars, IT products. Everything is more difficult to obtain and therefore more expensive. Of particular relevance is the shortage of chips, which are now essential components for many everyday objects. The global crisis in the semiconductor supply chain is an excellent case study for understanding the nature and fragility of the globalised economy. And it affects ASEAN countries closely: a couple of them - Singapore and Malaysia - are among the main global producers and a large proportion of chips, even when they come from other parts of Asia, pass through the seas of South-East Asia.

The global value chain for semiconductors has very particular characteristics. All the world's economies need these products, yet their manufacture is concentrated in very few countries that are interdependent since nearly every stage of the production chain takes place in a different country. Companies in each country have specialised in a specific stage of production or a certain type of chip, sometimes creating regional monopolies. For example, 92% of semiconductors below 10 nanometres are produced in Taiwan. One EU company, ASML, is the world's only producer of EUV scanners, an essential piece of equipment to produce sub-7 nanometres chips in Taiwan. This dense network of trade has prompted governments to significantly reduce tariffs and semiconductors are indeed among the least taxed products in the global trade system.

Chips need to circulate and need a liberalised and interconnected global market. Major events that can slow down trade flows, such as the Covid crisis, can produce a succession of bottlenecks and ultimately the unprecedented global shortage we are witnessing. Many chip factories in Asia have been forced to close or reduce production due to the pandemic. The transportation industry is also going through a crisis and can no longer distribute semiconductors produced in Asia to the rest of the world. Increasing production capacity in Asia may not be enough if there is a lack of carriers. The trade war between the US and China waged by Donald Trump until last year also had an impact: restrictions on imports of Chinese chips led American companies to turn to Taiwan Semiconductor Manufacturing Co. (TSMC) and Korea's Samsung, whose production levels were already stretched to the limit. However, the Covid crisis or trade tensions are not the only triggers. What is new is that even smaller events, which at first glance may only be of local relevance, have global effects.

‘A flap of a butterfly's wings in Brazil can set off a tornado in Texas’. The butterfly effect theorised by US meteorologist Edward Lorenz also applies to globalisation and the semiconductor market. A failed manoeuvre by a single ship - built in Japan, operated by a Taiwanese company, registered in Panama and managed by a German company: the now-famous Ever Given - blocked the Suez Canal for days, stopping 12% of world trade and almost $10 billion in goods for every day of obstruction. A few weeks after the Suez incident, another seemingly local event, the drought in Taiwan, had a negative impact on the global semiconductor market - and drew public attention to how much water is needed for their production. A few weeks earlier, a fire in a single factory in Japan had dealt a further blow to the sector’s capacity, causing the concern of the global automotive industry, for which chips are increasingly indispensable.

How long will it take to resolve this crisis, according. to the chipmakers? At least another year. Lisa Su, CEO of AMD, believes the situation will improve in 2022, while Pat Gelsinger, head of Intel, is less optimistic and predicts that the semiconductor shortage will last until 2023. In the short term, semiconductor prices will remain sky-high, partly due to the hoarding of chips by companies. Hoarding is taking on unexpected dimensions and forms, even causing the Biden administration to react. On eBay and other online platforms, freelancers are active, buying single, used or disassembled parts at auction and then reselling them to companies. A symptom of the hardship business is facing in procurement. It is natural then to ask how companies and governments are dealing with the emergency. The consensus solution seems to be massive investment plans to increase production. However, the US and EU governments want new plants to open on their territory. The issue goes far beyond the strengthening of the supply chain or economic and employment returns: semiconductors are a strategic asset too important to leave them to the monopoly of Asian countries. In Joe Biden's and Ursula Von der Leyen's speeches on the subject, expressions such as 'national security' and 'technological sovereignty' come up more and more often. Companies too are interested in moving part of their production out of Asia, especially when they are promised generous incentives by governments: TSMC has already started building a $12 billion plant in Arizona and promises further investments in the US, while Intel intends to invest up to $80 billion to open new factories in the EU. The only question is: where? Italy is courting the American gian to attract part of the investment, as is Baviera since one of the plants will probably be built in Germany.

Unfortunately, these projects may not have the desired effect. Although the global value chain of semiconductors is carefully and rigorously studied by experts, it remains difficult to codify the competitive advantages of the sector’s leading companies. Much of the know-how required falls into the realm of tacit knowledge and cannot easily be transferred from the factories in Asia to those in Europe or the USA. So much so that companies build new plants by strictly reproducing the organisation and layout of their existing ones - in line with its famous Copy Exactly! strategy, Intel reproduces details such as barometric pressure, the colour temperature of the lighting or the colour of workers’ gloves. Moreover, the fact that global semiconductor production is so concentrated in a single region, East Asia, and depends on a dense network of regional value chains is a weakness but also a strength of the industry. Will the new factories in the EU or the USA be able to find their place in the global value chain? Will they be able to be competitive?

ASEAN countries can play an important role in the future of semiconductors and already account for 22% of world exports of electronic components. As mentioned above, Singapore and Malaysia are major players in the sector and could attract new investment from the USA, Taiwan and Korea. Thailand and Vietnam have launched ambitious incentive and investment plans to encourage the growth of the sector in their territory. Although Hanoi should pursue an ambitious plan of infrastructure upgrades and reforms if it wants to attract foreign direct investment. Indonesia is also a promising environment for the development of the semiconductor industry, even if this development is held back by a lack of infrastructure and deep free trade agreements. Even for semiconductors, trade deals will play a crucial role in the development of regional and global supply chains: all ASEAN countries are part of the RCEP agreement and, among them, Singapore and Vietnam already benefit from very close trade ties with the EU.

It is difficult to predict the future of the global semiconductor market. Or rather, where that future will take place. The traditional producer states intend to maintain their central role, while the ASEAN countries, the EU and the USA want to start playing a greater part. The only certain thing is that the sector will attract billions of dollars in private and public investment in the years to come.

I thank Filippo Bizzotto for his assistance throughout the writing and revision of the manuscript.

Green and strategy: London’s interest in Southeast Asia

The ultimate British ambition is to return to a relevant role in the international context. Consolidating a relationship with ASEAN countries is considered a fundamental element in this strategy.

Articolo a cura di Luca Sebastiani

The announcement came during Cop26 in Glasgow. The UK will provide GBP 110 million in funding for sustainable infrastructure projects in Southeast Asia. An economic support to the “Catalytic Green Finance Facility” of ASEAN (the Association of Southeast Asian Nations), managed by the Asian development bank (Adb). Developing countries of the region will therefore take advantage from funds to launch programs related to renewable, clean transport and “green” technologies.

It is a declaration that is mixed in with others of similar impact released in recent hours by British government, such as that of new investments on the African continent, and that is accompanied by similar public statements from other countries and organizations – including the EU. Despite this, it is news worthy of particular attention.

The line dictated by Prime Minister Boris Johnson, particularly after Brexit, is clear: “Reappropriate old friends and embrace new ones”. The Southeast Asian region is one of London’s favorite areas in which to forge economic and diplomatic friendships. The GBP 110 million, in fact, are just the last sign and outlay of money proceeding in this direction. In addition to highlighting the increase of employment and work in the UK resulting from the investment, Liz Truss, British Foreign Secretary, defined ASEAN “an important partner for Global Britain”, expressing the will to deepen mutual ties and bring the relationship into a new era. A further step forward after that, in August 2021, the Southeast Asian association conferred to UK the status of “dialogue partner”, a recognition that had not been granted for more than 25 years. An unequivocal signal that even by ASEAN there is the will of interest for tightest relationships.

The obligatory search for support and commercial agreements around the world, carried out by London after its exit from the EU, has found a particular outlet in the Indo-Pacific area. Not a random choice since today this region is under the spotlight of world attention and is considered the strategic area par excellence. Between 2020 and 2021, ASEAN countries (Indonesia, Thailand, Malaysia, Singapore, Philippines, Vietnam, Myanmar, Cambodia, Laos and Brunei) with which the 10 Downing Street has signed free trade treaties were Singapore and Vietnam, in the wake of similar agreements already in force between the two nations and the EU. However, to strengthen economic relations, the UK has signed bilateral pacts with almost every other state.

On the other hand, these countries are in a phase of impressive economic expansion. Currently, ASEAN ranks sixth among the world’s largest economies, but the forecast is that by 2030 it could be the world’s fourth largest market, behind the US, China and the EU (not necessarily in that order). These figures alone explain the reason for the special British attention. At this time, the value of trade in goods and services between the two parties is important. In 2020, British exports to ASEAN countries were USD 21.5 billion and imports were USD 24 billion, for a total of about USD 46 billion. A declining figure due to the Covid-19 pandemic, as it in 2019 reached USD 52 billion. In the same year, investment from the UK, and directed into the regional bloc, reached USD 36.5 billion.

However, if Global Britain branches out on the one hand with commercial agreements, on the other one diplomatic, strategic and military factors emerge in a plastic way. In November 2019, London established its mission to ASEAN and appointed an ambassador specifically for the area. Last March, more recently, British government released the “Integrated Review of Security, Defence, Development and Foreign Policy” with the emblematic title “Global Britain in a Competitive Age”. In the document is highlighted the interest in the Indo-Pacific and ASEAN countries. Among the goals set by the UK there is one about supporting the central role of Southeast Asian countries in regional stability and prosperity.

Lastly, the military character. In recent months, the Carrier Strike Group – led by the British aircraft carrier HMS Queen Elizabeth – has traversed and is traversing the hottest waters of the globe, crossing those famous bottlenecks fundamental to trade and control of seas. The most significant stops of his journey were made in ports and bases of the Indo-Pacific area and in some Southeast Asian countries. During the deployment, the group conducted exercises with various allied armies, but most importantly, it was tasked with demonstrating the UK’s strength – or at least its willingness – to be a valuable containment tool in an anti-Chinese key useful to the US in the future.

The ultimate British ambition is to return to a relevant role in the international context. Consolidating the relationship with ASEAN countries is considered a fundamental element in this strategy.

All projects lead to the Indo-Pacific

AUKUS is just the latest in a series of multilateral initiatives focused on the region. From the United States to the United Kingdom, from Australia to the European Union, all have a reason to increase their presence in the area.

By Dmitrii Klementev

All roads lead to Rome – one could say when the Roman Empire stretched across the vastness of the Mediterranean. The greatness of ancient civilizations shaped the way in which most of us see the planet approaching a world map centered on the Mediterranean. Now we see how the world is turning in the other direction - towards the Indo-Pacific region. Every year an increasing number of projects are being implemented in this region. More and more global actors adjust their strategies taking into account its growing importance. This article seeks to shed light on the most significant of them, drawing conclusions for the future of world order.

Recently, the signing of the “AUKUS” agreement has provoked heated discussions all around the globe. Some countries were even caught off guard by the decision of the US, the UK and Australia. Nevertheless, “AUKUS” is but one link in a big chain of events which has been gradually developing over the last decade and even not a surprising one.

With regards to the UK, the “Global Britain” foreign policy concept, issued in March 2021, particularly emphasized the importance of the Indo-Pacific region for the country. This shift in focus of British foreign policy was demonstrated already in 2016 when the country voted to leave the European Union. In line with the new strategy, the European countries are considered to be the UK’s competitors in the region, as long as it seeks to “establish a greater and more persistent presence than any other European country” in the Indo-Pacific.

The US, another “AUKUS” signatory state with which the UK enjoys the Special Relationship, started reorienting its foreign policy towards the Indo-Pacific even earlier. Therefore, it already possesses a number of ambitious initiatives, aiming to promote its influence in the region. On June 12, 2021 at the US initiative the G7 leaders launched the “Build Back Better World” (B3W) initiative, which is officially focused on addressing infrastructure needs in low- and middle-income countries. However, the absolute majority of experts tend to consider the project as an alternative to the Chinese Belt and Road Initiative (BRI).

It is worth mentioning that the Biden administration did not design the B3W initiative from scratch. It was based on the project developed under D. Trump - the Blue Dot Network (BDN). The latter was kicked off by the US, Japan and Australia in 2019 on the occasion of the Indo-Pacific Business Forum. The BDN aims to provide assessment and certification of infrastructure projects worldwide ensuring their compliance with a number of environmental, financial and social criteria. The rationale behind it was to divert countries from the Chinese BRI, which is believed to force them into indebtedness and, as a result, fall into the Chinese area of influence. Under the Biden administration the BDN started operating under the OECD.

For the third party to the “AUKUS” deal, Australia, the agreement became an opportunity to voice its concerns about regional security. Cooperation with the US and the UK, allows the country to achieve a nuclear-powered submarine fleet as well as potentially get access to long-range missiles and some other capabilities.

Without a doubt, China’s growing influence is the main reason explaining why Australia has become an active actor in big politics nowadays. This can be also confirmed by the fact that in 2018 Australia upgraded its relationship with Vietnam to a strategic partnership. Both Canberra and Hanoi share concerns about freedom of navigation in the South China Sea, which is the most important transport hub in the region.

Interestingly enough, “AUKUS” is not the first multilateral initiative in the region which brings the US, the UK and Australia together. Alongside Canada and New Zealand, the above mentioned countries form up the Five Eye intelligence alliance the establishment of which dates back to the beginning of the Cold War. Originally designed to counter the Soviet threat, nowadays, the alliance aims to deal with China.

Last but not least, the announcement of the “AUKUS” defense pact on September 15, 2021, outshadowed another important event – the presentation of the Indo-Pacific strategy by the European Union, which is not going to give up in the race for influence in the region.

Being preoccupied with the rising tensions in the Indo-Pacific, disregard for human rights and democratic values, the EU mainly relies on trade and investment policy instruments, since it is in these areas that the Union possesses a number of advantages in the region.

This list of initiatives, strategies and actors is far away from being exhaustive. However, even this may be enough to state that the world order has entered an active phase of transition. The latter represents a unique opportunity to make a breakthrough for those who lagged behind. Nevertheless, this process will equally show no mercy to those who ignored it. Probably, in a few years the centrality of the world map we are accustomed to will change, since almost all projects today eventually lead to the Indo-Pacific.

Facebook Papers are shaking ASEAN Countries

Hate speech, propaganda, elimination of political dissent and human trafficking. Issues of which the giant company was aware, but did not act, according to the allegations of the investigation called Facebook Papers

Recently, Facebook has been in dangerous waters after several U.S. and European newspapers simultaneously published articles based on internal documents released by whistleblower and former employee Frances Haugen on some controversial matters concerning the company.

The leaked documents, initially known as the "Facebook Files" and later dubbed the "Facebook Papers," detail the failures of the company's leadership to curb misinformation, hate speech and violence on the site. The situation is aggravated by Facebook's alleged knowledge of these problems, which it has failed to solve sometimes due to inertia, sometimes due to a lack of technical means, but probably, the investigation claims, due to the choice of putting profit and the pursuit of engagement before the safety and well-being of users.

For more than a decade, Facebook has pushed to become the world's dominant social network However, its efforts to keep the social media platform safe and inclusive have not kept pace with its global expansion. The documents also revealed several issues related to ASEAN countries, particularly Vietnam, Myanmar and the Philippines, where social media use has grown exponentially in recent years, as has access to mobile networks. For many people in these countries, Facebook is the only point of access to information, and many consider social media posts to be real news.

One of the main aspects of the investigation concerns the fact that Facebook is largely unprepared to counter misinformation outside of the United States and a few other Western countries. In fact, if we consider that, according to an internal document cited by the New York Times, 87% of the platform's resources are dedicated to fighting misinformation in the United States, the remaining 13% for the rest of the world seems a very small figure. Like other tech companies, the social networking giant uses algorithms to flag and eventually delete content deemed harmful before it quickly spreads online, but many posts are written in local languages and dialects or feature culturally specific references that the algorithms understand with extreme difficulty. For example, until 2020 the company did not have Burmese language screening algorithms, a flaw that allowed aggressive language and incitement to racial hatred to flourish on the platform. Facebook has been accused of playing a key role in spreading racial hatred against the Rohingya minority in Myanmar when the military carried out "cleansing operations" of the ethnic group, forcing 650,000 Rohingya refugees to flee to Bangladesh due to persecution.

Vietnam also found itself involved in the Facebook Papers scandal, albeit for other reasons. According to a series of internal documents that emerged during the investigation, CEO Mark Zuckerberg allegedly gave in to the Vietnamese government's demands to censor the posts of anti-government dissidents so as not to risk losing a billion dollars in annual revenue in the country, a figure estimated by an Amnesty International report. Vietnam is one of Facebook's most lucrative Asian markets, with more than 53 million active users (over half the population). According to Huynh Ngoc Chenh, an influential blogger who works on democracy and human rights issues, the Menlo Park giant "mistreated activists by eliminating free speech, turning itself into a media tool in the service of the Communist Party of Vietnam." In response, the company said that the choice to censor is justified "in order to ensure that services remain available to millions of people who rely on them every day," according to a statement provided to The Washington Post.

But it doesn't end there. Finally, scandals have also emerged about Facebook's behavior in the Philippines, where often misleading posts and content continue to fuel the popularity of controversial President Duterte. Earlier this year, an internal Facebook report identified gaps in the detection of criminal groups using the platform for human trafficking. In fact, even though the Government in Manila has a task force committed to preventing such situations, the company's platforms are being used to recruit, buy, and sell domestic workers.

Belt and Road Initiative: where are we now in ASEAN countries?

From the enthusiasm of the early years, the pandemic crisis now also affects China’s ambitious infrastructure projects abroad. Beijing doesn’t give up, some decision makers are hesitating, and the data show impending dangers. However, the group of the ten countries looks favorably on Chinese money, at least on a discursive and diplomatic level.

ASEAN needs the Belt and Road Initiative (BRI). Or is it China that needs ASEAN to carry out the new Silk Road? The answer lies somewhere in between. What has been happening in the last year tells something more about how Xi Jinping’s project is evolving, which has changed a lot in terms of substance and objectives since its beginning in 2014.

The pandemic and the halt to production activities gave another blow to Beijing's plans. The growth forecasts of the Southeast Asian economies continue to remain cautious, while the Chinese government seems to be more careful and disciplined to the distribution of its foreign direct investments. This hasn't stopped China from maintaining its role as the largest investor in the region, as the US tries to move forward to replace Beijing as it begins to lose ground. Whether it is territorial disputes in the South China Sea, or simple skepticism coupled with greater negotiating power, China is facing a rapidly changing BRI.

BRI calls China

How Beijing manages its investments abroad is a well-known phenomenon. The deals between China and poorer nations in the BRI framework are often embedded in bonds that are paid off, in the absence of liquidity, by supplying raw materials, or granting an asset to investors for their own use. However, the fascination of Chinese capital remains one of the most powerful tools of the People's Republic's foreign policy. On 1st September at the Belt and Road summit, ASEAN representatives announced that more investment in BRI projects is needed to help their economy recover from the post-pandemic crisis.

There are many projects promoted since the beginning of the Covid19 crisis, but there are also some stops due to the uncertainty of the identity of the joint ventures between Chinese and local companies. In the first four months of 2021 alone, 61 new projects were signed with Vietnam, for a total value of 1 billion dollars. The analysis phase has started for the Kyaukphyu Special Economic Zone (SEZ) in Rakhine, Myanmar. A place where China International Trust and Investment Corporation Group (CITIC) promises collaborations with an ad hoc Chinese-Burmese consortium, even if the ambitious incentives (9-10 billion dollars) are now opening the way to projects on a more "small-medium scale ". In Malaysia, the latest BRI project involves the construction of a new photovoltaic plant. Again, Chinese companies (almost always state-owned) promise $ 10.1 billion worth of jobs.

Thailand is a separate case. Although like its neighbors Cambodia and Laos, the leadership of the country is de facto autocratic, the government is more cautious towards Chinese capital. It has been realized that often costly solutions have been favored instead of fixing the problems at their root, and that many of the Chinese projects could end up in the vacuum of investments with no return. The negotiating power of nations such as Cambodia and Laos is weaker, therefore Beijing seems to dictate the rules with greater consent from governments, often because other forms of independent organization are absent or powerless.

China calls BRI

Even China remains cautious, even as BRI projects seem to continue with no or less friction. This is the case of the Thailand-China railway, which starts from Bangkok, and it will pass through Vientiane to reach Kunming. Beijing has also offered to take on the project to move the waters of the rivers, a thirty-year-old ambition of the Thai government, but which until now seemed feasible given the enormous costs that the project would require. China's proactivity, in this sense, aims to touch the needs of individual countries, even if it is from Thai environmentalists that the complaint comes that an efficient water system would save citizens from water lost every year (40% of that transported).

The numerous initiatives involving the ten countries of Southeast Asia also act as an attractive pole towards Beijing. China hosted the first face-to-face meeting after 16 months with ASEAN representatives on 7 June, while the 18th China-Asean expo on 10-13 September allowed for new proposals to be made on the issue of trade. This report has long inspired Beijing, which has since aimed to move beyond the concept of investing in the region as capital to build “empty” infrastructure, with a greater focus on cooperation for advanced research and development.

Debt trap or hidden debt?

AidData, a research center affiliated with William & Mary University, has announced that the debt accumulated by Asian governments towards China could be much more expensive than expected. The research analyzed the 13,427 Chinese projects in Laos since 2000, calculating a total cost of around 800 billion dollars. Of these, at least 385 billion would be of "ghost" debt. In total, there would be at least 44 countries that have debts with China equal to 10% of their GDP.

Last year's G20 had established that in 2020 the debt of 73 less developed economies had to be suspended to face the Covid emergency. This type of investment, considered risky for the health of state budgets, can however be hidden among the various exceptions contemplated by international law. For example, agreements can be made directly by state-owned companies, joint ventures, and individuals without necessarily receiving a resolution from the Chinese government. In this way, as in the case of the Laos-China railway, the financial hole could be much larger than expected. A complex issue, which sees the last two most important projects underway as protagonists: the Laos-China railway and 580 km of motorway.

The risks for ASEAN’s weaker nations in terms of governance frighten analysts, who fear a return to the "debt trap". With this type of practice, China has already resolved various disputes by obtaining the concession of some Laotian assets, including part of the electricity grid. Again, the debt is much less hidden than it might appear: just look at the combination of the joint venture to see that the majority of the capital is controlled by three Chinese state-owned companies. A complicated mix of challenges and opportunities, which for now has not significantly slowed Beijing's race along the new Silk Roads but has nevertheless helped to evolve the reasoning in some of the ASEAN governments. A useful experience, which now requires more cohesion to avoid the risk of default among the most fragile member states.

Environment, here are ASEAN’s Greta

Youth activism in Southeast Asia is an opportunity for fighting climate change.

Greta Thunberg's environmental concerns fuel youth movements in Southeast Asia. In this region, the threat of climate change is particularly alarming, especially for countries such as Indonesia, Vietnam, Thailand and the Philippines. This is the reason why, as the inauguration of the Glasgow international climate negotiations approaches, vanguards of young activists have organized to lobby national governments to do more for the environment, to reduce greenhouse gas emissions, and to address the social implications that the environmental crisis entails.

Hopes of a sustainable future are in the hands of new generations and in the case of climate action, it is not just empty rhetoric. "Sustainable development is a development that satisfies the needs of the present", reads the UN report "“Our Common Future”" (1987), a milestone in international cooperation on the subject, "without compromising the ability of future generations to meet their own needs". This principle is called “inter-generational equity” and consists of collective responsibility towards the planet and those who will inhabit it.

Information and sensibilization movements on the issue proliferated within the ASEAN area. In the Philippines, 23-year-old Mitzi Jonelle Tan co-founded Youth Advocates for Climate Action, a Filipino version of Fridays For Future inaugurated by Greta Thunberg, together with some peers. In the weeks leading up to the UN Climate Change Conference (COP26) meeting to be held in Glasgow, activist and activist groups such as Tan and her collective took part in numerous awareness-raising meetings, strikes, and protests to demand real change. In particular, young people in the Philippines are well aware that theirs is among the countries most exposed to the environmental and social consequences of the climate emergency. Tan said the global North owes less rich countries a concrete commitment to climate cooperation since they "caused the climate crisis". Therefore, it is appropriate to demand an ever greater commitment on the part of these governments, to have the certainty of “being able to adapt, to face losses and damages and to switch to renewable energies'', she concluded. 

The spirit of Fridays For Future is also spreading in Vietnam. One of the first climate strikes, held in September 2019, was initiated by Huyen Phan. Once back from her studies abroad, this young student felt she had to do something for her city, Ho Chi Minh, one of the places most exposed to the risks associated with rising sea levels, as well as one of the cities with the worst air quality in Vietnam. “I was very surprised that people around me didn't care at all about climate change or air pollution,” said Huyen, “when I heard about the global climate strike, I tried to find an event in Ho Chi Minh City but I failed, so I decided to create one myself. Hong Hoang, coordinator of an association that promotes the energy revolution by raising awareness in local communities from below, said he was very proud of the event. “This time the strike was not organized by any climate NGO, but by concerned individuals”, he said,“ this is the popular power that is essential to pressure world leaders to take things more seriously ”.

The great determination of young environmentalists should not come as a surprise: for new generations, climate change is an existential threat. This is why the label of "young activist", used by people or institutions of power, is not much appreciated. The effect is to diminish in a paternalistic sense the concrete commitment that these youth movements are claiming before the world leaders. Experts suggest that this expedient risks continuing to exclude young people from decision-making processes, which instead express a disruptive force precisely because "they are future-oriented, community-oriented and willing to think beyond the status quo". What new generations of activists in Southeast Asia are claiming is that national governments and international institutions go beyond the paradigms of exploitation of natural resources, and figure out alternative ways of development. The action of youth activism has so far shown that it can be widespread and radical, precisely the kind of change required by exceptional circumstances such as the current climate emergency.

 

 

Vaccini, Italia in aiuto dei Paesi ASEAN

Il sostegno sanitario al Sud-Est asiatico può aiutare anche una ripresa economica inclusiva e duratura in un’area di crescente interesse per il nostro Paese

Editoriale a cura dell’Amb. Giorgio Marrapodi, Direttore Generale per la Cooperazione allo Sviluppo

Da alcuni mesi il Sud-Est asiatico è interessato da una nuova ondata pandemica, caratterizzata da un incremento preoccupante dei contagi e dei decessi, specie tra le fasce più vulnerabili della popolazione. L’impegno delle Autorità locali nella lotta alla pandemia si scontra con la limitatezza dei mezzi a disposizione, specie in termini di dosi vaccinali disponibili. L’Italia, Partner di Sviluppo dell’ASEAN dal 2020, si è immediatamente attivata per l’inclusione del Sud-Est asiatico fra le aree beneficiarie in via prioritaria di donazioni di vaccini mediante la Covax Facility. Tale azione si è finora tradotta nella donazione da parte italiana di oltre 2,8 milioni di dosi al Vietnam e di quasi 800.000 dosi all’Indonesia, per un totale di oltre 3,5 milioni di dosi. Altre dosi saranno in arrivo nelle prossime settimane, sulla base delle più recenti allocazioni, e sulla base della segnalazione della regione del Sud-Est Asiatico come un’area prioritaria. Il nostro Paese sta lavorando alla donazione di dosi anche a favore di altri Paesi ASEAN. Le donazioni si inseriscono nel più ampio impegno dell’Italia a destinare entro la fine dell’anno 45 milioni di dosi ai Paesi a medio-basso reddito, annunciato dal Presidente del Consiglio, Mario Draghi, il 22 settembre scorso nel corso del “Global COVID-19 Summit”, a margine della 76esima Assemblea Generale dell’ONU. L’Italia “triplica” in questo modo l’impegno assunto lo scorso 21 maggio in occasione del Global Health Summit di Roma di donare 15 milioni di dosi entro il 2021 e conferma di essere in prima linea, anche in qualità di Presidente di turno del G20, nella lotta alla pandemia e nell’accelerazione della campagna vaccinale nelle aree più colpite, incluso il Sud-Est asiatico. Ciò nella piena consapevolezza che “no one is safe until everyone is safe” e che solamente attraverso una più equa ed ampia distribuzione dei vaccini sarà possibile creare le condizioni necessarie per un ritorno alla normalità e per una ripresa economica inclusiva e duratura, specie in un’area di crescente interesse per il nostro Paese e per le nostre aziende quale l’ASEAN.

Rocco Papapietro: “ASEAN markets, being there to grow”

ITALY-ASEAN / We begin a cycle of interviews and insights on Italian companies and realities present in Southeast Asia. This interview puts the spotlight on the CEO of Verdevita Sdn Bhd, a consulting company based in Kuala Lumpur, specializing in the design of strategies or companies that aim to penetrate and invest in Malaysia and in the ASEAN markets.

With over twenty years of international experience in management positions, Eng. Rocco Papapietro, CEO and founder of Verdevita Sdn Bhd, is involved in commercial development of Italian and European companies in ASEAN countries.

How and when did your business in ASEAN start?

My first trips to Malaysia date back to 1999. At that time, I was working as Head of Development in Asia of the electronics/automotive sector for a well-known international company. I have held global roles where cross culture was essential, also collaborating with Toyota and Honda in Malaysia. I immediately appreciated the dynamism of Southeast Asia. Trip by trip, I noticed a continuous evolution, clearly visible from the endless construction of skyscrapers and buildings, which changed the skyline of the cities. Given such energy, I imagined the creation of a bridge of knowledge and business between Italy and Southeast Asia. Local companies were very curious and interested in learning Italian know-how. Being passionate about international development, in 2009 I started an exploratory phase and the following year I decided to move permanently to Malaysia, starting a consulting business. I understood that supporting companies directly from Malaysia would be the trump card. So, I founded Verdevita Sdn Bhd in collaboration with a local partner. I am the CEO of Verdevita. It is a company incorporated under Malaysian law, registered with the Ministry of Finance. This allows for easier access to government tenders and incentives. I have been living in Kuala Lumpur since 2010 and the same year I was appointed General Secretary of the Italy Malaysia Business Association – IMBA. Living in Malaysia allows me the direct management of projects and staff, training for partners, continuous updating on incentives, new laws and opportunities in the territories. I don't believe much in remote management, even if the pandemic has forced us to do it through new geometries and dynamics; difficulty overcome thanks also to our fantastic local staff, made up of highly trained collaborators, including Elena Konovalova, Kumaressan Suppiah, Kenneth Karnan, Emanuele Esposito.

Why did you decide to invest in Malaysia?

The initial push was the strong interest in going abroad and getting involved with curiosity and desire to do so. Italy and Made in Italy can count on a very positive image in Malaysia and Malaysia presents, in turn, all the essential elements for the development of a business abroad. It is the third largest market in the world and attracts 11% of global FDI. It comprises different cultures and makes it possible to expand not only in Southeast Asia, but also towards India and China. It is a well-connected country thanks to the presence of 39 airports (5 international airports), and 8 ports, and a key logistics hub for all of Southeast Asia. The favorable exchange rate and the low costs of incorporation for new companies were primary elements, especially compared to other ASEAN realities, such as Singapore, Hong Kong. As well as the low costs of energy, rents in city centers, the wide availability of skilled workers, incentives for digital start-ups and companies, and the possibility of opening regional offices, which is very useful in the exploration and study of the market and local laws. Malaysia enables investment sustainability. This is the concept that encompasses all the reasons for my choice. Furthermore, its role as a bridgehead for expanding into Southeast Asia is getting stronger thanks to a combination of the following factors: strategic geographical position, stable political system (as demonstrated by the last elections and the formation of the current executive), openness to international trade, good infrastructure system (fiber cabling is currently underway throughout the Mid Valley between Selangor and KL; Penang and Johor are landmarks for the electronics industry), excellent quality of life, spread of the English language, and tax incentives. The current government has adopted a strongly pro-business approach, with the aim of encouraging the development of local entrepreneurship. Among other things, with the entry into force of Act 2016 it is possible to establish Wholly Foreign-Owned Enterprise (WFOE) without the presence of a Local Director. An equally important initiative is the launch of the Digital Free Trade Zone to prompt the digital export of local and foreign companies. Malaysia is not only an ideal setting for doing business, but it also has a naturalistic and cultural charm. "Malaysia Truly Asia'' is the motto that best captures and defines the uniqueness of this country, also the diversity of its landscapes, from Langkawi to Borneo with Sipadan. It is a true blessing country.

Has the Malaysian government taken business support measures to face the pandemic crisis?

Yes, Malaysia's Recovery Plan has approved a comprehensive package of measures to stimulate economic growth after the pandemic and business-friendly investment policies. It has also established a double taxation agreement with Italy and includes a hiring incentive program - Penjaya Kerjaya - which aims to reduce unemployment. Those eligible employers will be receiving up to 60% of the subsidy of the total salary.

What are the activities carried out by the Verdevita company?

Verdevita Sdn Bhd is a key part of the Malaysian economic ecosystem. It provides customized consulting services (commercial, administrative, and legal services) to support Italian and European companies that want to start winning projects in Malaysia, Indonesia, China, Australia. We employ local professionals, who are part of our network, and we also take care of finding financial resources for the implementation of our customers' export and internationalization projects. We create a specific market entry project, a business plan shared with the client company, in compliance with local laws, government and market directives. We analyse the needs of the company, evaluating the best integration solution: finding distributors, opening representative offices and/or branches, monitoring the progress of projects with both customers and local players. We also work to reduce internal conflicts, mistrust, and lack of team spirit; if this is missing, it becomes difficult to bring companies to the other side of the world.

 

We collaborate with important Malaysian government agencies: MIDA – Malaysian Investment Development Authority, in Malaysia and in Italy through the Director of MIDA Milan Mr. Awangku Fiarulnazri, and MARii – Malaysia Automotive, Robotics and IoT Institute, in which I hold the role of Technologies Advisor. In addition to the headquarters in Kuala Lumpur, we are also in China and Australia, with offices in Shanghai and Sydney.

What are the Verdevita company’s prospects?

The future is marked by continuous improvement. We have started a collaboration with the Ca 'Foscari University of Venice, through the internship agreement to be started in ASEAN, to make our contribution to strengthening the professional skills of young people and to train future managers. We will carry out a new project in the State of Sarawak for the integration of telecommunications and digital connectivity. We are setting up the UNITI Association with the aim of involving Italians living in Asia and Oceania to promote the culture and beauty of Made in Italy. Since the Malaysian government is encouraging the attraction of companies in the automotive sector, we are planning - together with MARii - the foundation of an Academy in collaboration with the Motor Valley of Emilia-Romagna. The opening of the Jakarta office is near. Finally, we are working on a Malaysian Ministry of Transport’s project for the improvement of road safety and the reduction of accidents through telematic tools, with the support of the Viasat Group, to introduce Italian technology into the Malaysian economic framework.

The best sectors to invest in Malaysia.

Technology represents Verdevita's core business, but other winning sectors are Oil & Gas, petrochemicals, telecommunications, digital, healthcare, automotive, engineering production, manufacturing sector. Malaysia also for the procurement of raw materials: palm oil, petroleum and derivatives, latex.

In conclusion, what do you recommend to Italian companies interested in internationalization?

Exports affect the performance of companies, which are more proactive and innovative, and increase their entrepreneurial skills. I believe it is necessary to understand and enhance the positive impacts of export projects on the innovation and growth capacities of companies and personnel, as these are the stimulus for the spread of a global culture and healthy competitiveness. Italian companies have a lot to give. We must leave behind distrust and increase curiosity because there are not only obstacles, but also opportunities. Export and internationalization also mean an exchange of cultures and business growth, not just sales abroad. These projects must start from the company leaders and drivers, so the involvement is felt by all the parts of the company. It is essential to be aware of your own entrepreneurial activity and use funding for internationalization, not always put the company in a wait-and-see attitude. In the coming years, also thanks to the funds that will come from Europe, it will be necessary to train companies to export. Let’s make Italian companies be citizens of the world.

The rights of the LGBT+ community in the ASEAN countries

LGBT+ Rights are a controversial topic in Southeast Asian countries. Although in some cases progress has been made, social stigma, homophobia and transphobia remain frequent.

Since the 1990s, ASEAN seems to have become increasingly interested in the issue of human rights. This is also demonstrated by the willingness of its Member States to establish the Intergovernmental Commission on Human Rights (AICHR) in 2009. In addition, in December 2012, the Commission issued the ASEAN Declaration on Human Rights (AHRD). However, this declaration is not binding for the Member States. In fact, the Intergovernmental Commission on Human Rights is a purely consultative body, devoid of any coercive capacity. Secondly, the right to sexuality is not in fact guaranteed in this declaration. ASEAN’s human rights declaration, for example, makes no mention of the term SOGI (Sexual Orientation and Gender Identity). The representatives of Malaysia, Brunei and Singapore strongly opposed the mention of this term in the AHRD going against the opinion of the representatives of Indonesia, Philippines and Thailand, who were in favour of including this term in the declaration.

The rights of the LGBT+ community are a controversial issue in the Association of Southeast Asian Nations; some ASEAN countries do not yet recognise the fundamental rights of the LGBT+ community, while others are making progress in this field. For example, Singapore has a highly organized LGBT+ community, but Article 337 is still present in its penal code condemning homosexual practices. Although in recent years this article has been applied less and less frequently, its presence in the code is used as a justification for not giving protection and for not eradicating prejudice towards the LGBT+ community. A statistical survey carried out in 2019 in Singapore shows that the majority of respondents, 61.6%, believe that a sexual relationship between two adults of the same sex is always wrong or inappropriate and only 5.6% believe that there is nothing wrong. This figure shows that unfortunately a change of pace on this issue is not close.

In contrast, 73% of Filipinos, according to a poll, are convinced that homosexuality must be accepted by society. According to a study by the Pew Research Centre in Washington, the Philippines in 2013 was already in the top 10 of the most gay-friendly countries in the world; in the country, in fact, there are several pride marches and gay societies continue to be established in universities. The Philippines, like other ASEAN members, does not have a national anti-discrimination law for the LGBT+ community. However, the Philippines and Thailand released in 2011 a joint statement to denounce acts of violence against human rights based on sexual orientation and are the only two ASEAN states where, at the local level, there are anti-discrimination ordinances in favour of LGBT+ community. In the Philippines there are approximately 25 local ordinances condemning acts of discrimination against this community. In any case, even if these ordinances are a big step forward, they do not have clear application mechanisms and therefore remain mostly symbolic.

Brunei also criminalizes homosexuality, having become in 2013 the first country in the area to apply Sharia at the national level. In this state, men who are homosexual can risk the death penalty. In addition, according to the Penal Code, any man who dresses and behaves like a woman and any woman who dresses and behaves like a man can face a penalty of $4,000 or a year of imprisonment. People of the LGBT+ community are also subject to severe penalties in Malaysia. In January last year, the ministers proposed to increase criminal sanctions against lesbian, gay, bisexual and transgender people, and moreover, only since June 2021, more than 1,700 Malaysians belonging to the LGBT+ community, have been sent to re-education camp. Also Aceh, an Indonesia’s autonomous region, inflicts severe punishments on members of the LGBT+ community. In this region, which has the permission to follow the laws of Sharia, only nine months ago people were publicly flogged as homosexuals. In the rest of Indonesia, however, there is no law that prevents homosexual relationships and transgender people are allowed to change gender legally, but only after the intervention of sex reassignment. In Myanmar, homosexual and transgender people have no rights and are legally persecuted under Article 377 of the Penal Code. In Cambodia, Vietnam and Laos, homosexuality is legal, but often there is no clear legislation in favour of the rights of the LGBT+ community. 

Southeast Asia: green economy for the relaunch

Green infrastructure development can drive the post-pandemic economic recovery. But huge funding is needed.

ASEAN needs new green infrastructures. Not only to improve the ecological approach of the region, but also to improve connectivity, reduce poverty and increase development. From this point of view, infrastructures are the backbone of the economic growth of each country, but the environmental costs are not low. That is the reason why the Asian Development Bank has estimated that Southeast Asia will need at least 210 billion dollars a year, for the period 2016-2030, to support the costs of green infrastructures.

If in the pre-Covid-19 era investments in that area were far below the necessary levels to get close to a significant ecological-environmental change, the global pandemic caused an economic contraction in the region of 4%, further reducing the infrastructure investments. In contrast, however, it has become even more urgent for ASEAN to engage in this direction, to build a more resilient economy in the medium and long term.

The Asian Development Bank has proposed itself as a platform for dialogue between the countries of Southeast Asia to understand how to mitigate the negative effects of the pandemic, balancing economic growth with the protection of natural capital. How? Making the most of government funds, encouraging private financing and protecting natural resources. In order to do this, national governments can rely on various strategies: imposing a price on environmental externalities, subsidizing products and services with a low environmental impact, financing technological innovation and encouraging virtuous individual behavior.

However, all this is not enough. For an effective green recovery, the actions of governments of the ASEAN bloc must convey a structural change in ecological and energy policies, increasingly integrating green objectives into government policies. In the report prepared by Bain & Company, Microsoft and Temasek, “The Green Economy of Southeast Asia: Opportunities on the road to net zero”, it is highlighted that about 40% of infrastructure investments in Asia will have to come from the private sector. It is then necessary to continue with a series of targeted interventions concerning sustainable agriculture, green urban development and transport models, the transition to clean energy, the circular economy and the protection of the oceans and marine biodiversity. Finally, governments will have to rely on sustainable sources of finance, introducing green taxes such as the Carbon Tax and removing fossil fuel subsidies.

The will for a green recovery is also visible in the regional strategies. The ASEAN Comprehensive Recovery Framework emphasizes environmental sustainability as a key component of the region's post-pandemic economic recovery process.

It will not be an immediate change, much less easy, also because it will require the allocation of huge amounts of resources. It is estimated, however, that in this way over 30 million new jobs will be created, stimulating a virtuous circle that could bring positive results in the long term.

Food e city diplomacy tra Italia e ASEAN

Prosegue la collaborazione tra Associazione Italia-ASEAN, Comune di Milano e Paesi ASEAN sul fronte della sostenibilità dei sistemi alimentari. Grazie alla sinergia con l’Ambasciata d’Italia in Thailandia, anche Bangkok ha aderito al Milan Urban Food Policy Pact

Editorial by Valerio Bordonaro, Director Associazione Italia-ASEAN

Il 19 ottobre si è aperto a Barcellona il settimo Global Forum del Milan Urban Food Policy Pact, un’iniziativa del Comune di Milano, nata come eredità dell’EXPO di Milano 2015. Fanno parte del network del MUFPP oltre 200 città da tutto il mondo e, per la prima volta, quest’anno prenderà parte anche una delle capitali dell’ASEAN, Bangkok. Dalla fine del 2019, l’Associazione Italia-ASEAN, condividendo l’importanza di lavorare al livello globale per la sostenibilità dei sistemi alimentari attraverso la City Diplomacy, ha avviato una collaborazione con il Comune di Milano per sensibilizzare i Paesi ASEAN nei confronti di questa sfida. 

Grazie ad un lavoro sinergico tra Comune, Associazione e Ambasciata d’Italia in Thailandia, si è arrivati quest’anno all’adesione al MUFPP da parte della municipalità di Bangkok, prima capitale di un paese ASEAN a entrare nel Patto. Il tema della sostenibilità dei sistemi alimentari urbani è considerato uno dei più importanti mezzi per la protezione dell’ambiente, come riconosciuto dal prestigioso premio internazionale Earthshot Prize assegnato a Milano per un progetto collaterale al MUFPP. Date le previsioni di crescita dell’area e le dimensioni di molte città del Sud-Est asiatico, l’Associazione continuerà a fare Sistema con Milano e il MAECI affinché nuove città dell’ASEAN sposino il patto e la sua filosofia.

Tensions in the South China Sea urge ASEAN countries to invest in air forces

Beijing's manoeuvres stretch across water and air. The air forces of ASEAN countries require huge investments to balance China's growing air power.

The South China Sea is one of the most concerning hotspots on the planet and tension does not seem to be scaling down soon. The disputes between some ASEAN countries and China over the control of the waters around the Spratly Islands, an archipelago of micro-islands of high strategic value, have pushed all the players to increase their military spending, especially on the navy. The more suitable pieces for this chessboard, we might think, are ships, submarines, or even artificial islands. In fact, what is at stake are access to seabed resources and control over the maritime trade routes. The most recent development from the Indo-Pacific region seems to confirm this idea: the much-debated AUKUS Agreement made to the headlines for a multi-billion dollar procurement contract for submarines. However, we cannot forget that influence over the South China Sea also means projecting power over its sky, not only its waters. A recent contact between Malaysian and Chinese aircraft was a wake-up call for the region, effectively putting the air arms race back at the centre of the ASEAN governments' agendas. 

The waters of the South China Sea are disputed between some ASEAN countries (Vietnam, Malaysia, Brunei, the Philippines), China and Taiwan. More specifically, these states declare to varying degrees their sovereignty over the Spratly Islands, in order to extend the perimeter of their territorial waters into the open sea. The contested features are small reefs and cays, unsuitable for human settlement. Yet their strategic value is immense. In 2016, $3.37 trillion worth of trade and almost 40% of global liquefied natural gas transited through these waters. However, the importance of the South China Sea to the world's energy supply is not limited to its transit: at least 7 billion barrels of oil and approximately 25 trillion cubic metres of natural gas lie on its seabed. Fisheries represent another resource of the area.

The stakes are high. For several decades now, the states bordering the South China Sea have been challenging each other by building new outposts, claiming uninhabited atolls, or organising naval exercises in the waters under their control. Vietnam controls the most features (21), followed by the Philippines (9), China (7) and Malaysia (5), while Brunei and Taiwan occupy one island each. Some of these geographical features have been transformed into artificial islands to host military bases, in particular by China and Vietnam. The growing presence of military fleets in the area has also led to exchanges of gunfire between China and ASEAN countries’ boats in the past. The confrontation with Beijing over the Spratlys is an interesting case study in understanding the evolution of ASEAN. Taken individually, each state of South-East Asia would have little negotiating power with the much larger China - indeed, the Chinese have always tried to negotiate bilaterally, without success. The ASEAN countries have always opposed China's divide et impera strategy and agreed to negotiate with Beijing only multilaterally, as a bloc. These diplomatic exercises made possible in 2002 to define an ASEAN-China Code of Conduct for the South China Sea

Chinese manoeuvres are closely followed by the US, which is determined to reinvigorate its presence in the region. Other actors are Japan, India, the EU (more recently) and Australia. The latest piece of news in the Indo-Pacific scenario comes precisely from Canberra – whose relationship with Beijing is currently strained, after a phase of convergence: the AUKUS strategic agreement with the US and the UK. The Agreement has caused concern among ASEAN governments, as it could push Beijing to increase its military presence in the South China Sea. The new Malaysian Prime Minister, Ismail Sabri Yaakob, has commented harshly on AUKUS, expressing the fear that it could ‘provoke other powers to act more aggressively, especially within the South China Sea region’ and pave the way ‘towards a nuclear arms race in the Indo-Pacific region’. Kuala Lumpur's alarm can be explained in the light of some recent incidents with Beijing's vanguards. On 31 May, there was a contact between Malaysian jets and a squadron of Chinese aircraft, which was carrying on a training manoeuvre at the border of the Malaysian airspace. This incident reminded all ASEAN governments that the dispute over the South China Sea involves a strong air force, too - and that China holds a sizable lead.

Efficient air defence requires the development of an integrated system of modern aircraft, detection networks, missile installations and trained personnel. And significant investments, too. According to analysts, Singapore and Vietnam are the only ASEAN countries with an adequate air force. Hanoi is also investing heavily in modernising its fleet. Malaysia, on the other hand, maintains a reduced air force, armed with obsolete aircraft - and in its budget, still struggling due to the Covid crisis, does not offer the needed resources to strengthen the sector. Even the Philippines seem unprepared. Indeed, Manila is putting its own military procurement rules in order to prepare for future investments. Indonesia seems better equipped, although investments are still insufficient and not much effective. The country has no demands over the Spratlys, but the nine-dash line that delimits Chinese claims passes close to Indonesian territory and is not looked upon favourably by Jakarta.

Considering these elements, it is possible to expect large investments in the air forces by ASEAN countries in the years to come. However, it is difficult to make predictions about the scale and effectiveness of this effort by each state. As we have seen, while some governments have managed to achieve good results in the past, others seem ill-prepared to allocate efficiently the huge resources needed and build up their military capacity alone. Other international actors interested in balancing Chinese influence - the United States, the EU, Japan - could support these governments in capacity building. The defence industry will also play an important role since ASEAN countries will necessarily need reliable partners in their arms race. Italian companies in the sector already collaborate with ASEAN governments. To give a few examples: Leonardo with Singapore, Malaysia, and Thailand; Fincantieri with Indonesia.