Foreign Affairs Minister Mélanie Joly’s trip to Southeast Asia in April 2022 was a diplomatic foray intended to foretell our Indo-Pacific strategy. But that’s only half the story. The subtext is about making friends in the dynamic region, home to 650 million people, that is also China’s backyard, at a time when the world is preoccupied with the war in Ukraine. As the centre of the contest of power between the U.S. and China, Southeast Asia holds the key to augmenting Canada’s clout to deal more effectively with the rise of China.
And while Canada may not have the massive financial resources that the developing economies of Southeast Asia need, it can assist in other ways to bolster their ability to engage with China on a more equal footing. As I have argued in my recent book, The Street and the Ballot Box, strong civil society can be instrumental in mobilizing large segments of society to bring about better investment outcomes through a more robust opposition.
Geographically, the Indo-Pacific region encompasses the nations and islands between the Pacific and Indian oceans, stretching from the western coast of North America to the eastern shores of Africa. While the meaning of the term “Indo-Pacific” is ambiguous, and its use has evolved over time, the confluence of trade and politics in the region has come to symbolize the growing influence of China and the relative decline of the U.S. The term is often linked to the Quad – an informal alliance of democracies consisting of the U.S., Japan, Australia and India – with the common objective of countering the rising influence of China. The Biden administration has continued to promote this Indo-Pacific strategy that was first adopted by the Trump administration.
At the heart of the Indo-Pacific region is the Association of Southeast Asian Nations (ASEAN), which consists of 10 member states. Joly visited two of them that are of strategic importance to Canada – Indonesia and Vietnam. Indonesia plays a significant role in the region as the largest economy in Southeast Asia, the world’s third-largest democracy and its most populous Muslim country. ASEAN as a bloc is Canada’s sixth-largest trading partner in the world while Vietnam has been Canada’s single-largest trading partner in ASEAN since 2015.
Southeast Asia is tremendously diverse in terms of the level of prosperity, degree of democracy, ethnic composition, religious beliefs and attitudes toward China. While Singapore leads in terms of the level of economic development with a per-capita GDP of $106,000, Cambodia, East Timor and Myanmar are at the bottom of the pack with per-capita income of only $5,000-$7,000. Most ASEAN member states are middle-income (Malaysia, Indonesia, Thailand) and lower-middle-income (the Philippines, Laos and Vietnam). Their degree of economic engagement with or reliance on Chinese investments also differs accordingly, and so do their views on the nature of China’s influence in the region.
Recent surveys conducted by the ISEAS-Yusof Ishak Institute of elite respondents in think tanks, governments and private sectors across ASEAN found an overwhelming majority believe that ASEAN can avoid siding with either the U.S. or China. In other words, ASEAN elites have a strong preference for a balancing strategy. There is, however, considerable divergence across the region – while Myanmar, the Philippines, Singapore and Vietnam register the highest degree of distrust of China, a large majority of the respondents from Cambodia and Laos trust China. It is also unambiguously clear that the elites in Southeast Asia prefer greater alignment with the U.S. than with China. Most are worried about China’s growing influence and have little confidence it will contribute to global peace or prosperity.
Contrary to popular belief, China ranks only fourth, behind the EU, Japan and the U.S., in terms of the sources of foreign direct investment (FDI) in Southeast Asia. Between 2005 and 2018, Indonesia, Malaysia and Singapore were among the top recipients of Chinese FDI, followed by Laos, Vietnam, Cambodia, the Philippines and Thailand. Not all the Chinese investments are perceived favourably by the host countries in terms of the contribution to domestic economies.
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What does this mean for Canada in the context of its Indo-Pacific strategy?
As I have argued in my recent book on Malaysia, The Street and the Ballot Box, strong civil-society capacity that enables social movement organizations to mobilize a broad coalition of actors can go a long way toward auguring democratic changes. This in turn enables the societies to put pressure on their governments to negotiate deals with their Chinese counterparts on more favourable and transparent terms. As research has shown, Chinese business transactions abroad tend to be opaque and crony-istic, taking on the same characteristics as they do domestically. Chinese corporations often make under-the-table payments to the political elites in the host countries to secure investment deals on favourable terms. Under-the-table payments that line the pockets of political leaders are more likely when politics in the host countries lack transparency, media freedom, or checks and balances.
The implication is that while Southeast Asian governments welcome Chinese investments, there is considerable discordance at the non-elite levels, which often lack the capacity to organize themselves or voice their opposition. A case in point is the 1Malaysia Development Berhad (1MDB) corruption scandal for which the former Malaysian prime minister, Najib Razak, is currently on trial, and which is intrinsically tied to Chinese investments.
Fortunately, despite government repression, civil society in Malaysia was able to mobilize widespread societal support over a decade to help build a strong opposition coalition that brought down the long-ruling United Malays National Organization regime in 2018. When the democrats came to power, they pushed to renegotiate – on fairer and more favourable terms to Malaysia – a high-profile Chinese infrastructure project that was negotiated by the former prime minister.
Canada can play a positive role in improving the robustness of civil society in Southeast Asia. The emerging economies of ASEAN often need Chinese investment to build infrastructure, extract natural resources or power a labour-intensive manufacturing industry, leaving them with limited options to decline any investment offer. While Canada does not have the financial resources to compete with China in that area, it has the capacity – along with other western democracies – to assist with institution-building in terms of human capital investment and institutional architecture to bolster the region’s capacity to engage with China on a more equal footing. This deserves a prominent place in Canada’s soon-to-be-announced Indo-Pacific strategy.