IPEF Challenge Dominates APEC Amid Southeast Asia Growth Stakes & Biden-Xi Hype
Plus a big new China-Southeast Asia military exercise; ASEAN defense meeting outcomes; the geopolitics of overseas ports and energy flows; and much more.
Greetings to new readers and welcome all to this edition of the weekly ASEAN Wonk BulletBrief! For this iteration, we are looking at:
Assessing the significance of the APEC and IPEF outcomes and their impacts on Southeast Asia and the wider Indo-Pacific region;
Mapping of regional developments including a big China-Southeast Asia military exercise; ASEAN defense meeting outcomes and more;
Charting evolving trends such as on the geopolitics of overseas ports; Southeast Asia’s energy flow outlook and related issues;
Tracking and analysis of industry developments including a major nuclear pact; new regional crypto inroads; an important China train link and more;
And much more! ICMYI, check out our take on the aspirations and limitations of the new U.S.-Indonesia comprehensive strategic partnership, coming soon after the one inked with Vietnam which we also covered.
WonkCount: 1,835 words (~9 minutes reading time)
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Big New China Drills; ASEAN Defense Meeting Outcomes; Myanmar Genocide Case Update & More
IPEF Challenge Dominates APEC Amid Southeast Asia's Economic Focus and Biden-Xi Meet Hype
While mixed IPEF progress and the Biden-Xi summit meeting dominated the headlines at the U.S.-hosted APEC forum in San Francisco, Southeast Asian leaders also utilized their time to advance new economic opportunities in the continuing race for post-pandemic growth.
What’s Behind It
Indo-Pacific Economic Framework (IPEF) countries announced mixed progress amid the Asia-Pacific Economic Forum (APEC) meetings hosted by the United States in San Francisco. Parties inked a new supply chain deal and declared “substantial conclusion” of talks in two pillars focused around clean energy and tax and anti-corruption1. They also announced new mechanisms such as a ministerial-level council; a critical minerals dialogue; an investment accelerator; an investor forum to catalyze investment; and a project preparation facility2. This was nonetheless overshadowed by lack of progress on the fourth trade pillar amid U.S. domestic concerns3. APEC countries issued the Golden Gate Declaration around the U.S. theme of a “resilient and sustainable future.”4 But engagements were overshadowed by the summit meeting between U.S. President Joe Biden and Chinese President Xi Jinping. There were also signs of geopolitical divisions on certain issues, as evidenced by the issuance of a separate statement by Brunei, Indonesia and Malaysia on the Israel-Palestine issue5.
Indo-Pacific Economic Framework Pillar Progress to Date
The mixed progress on IPEF is part of a broader story of a more challenged economic landscape over the past few years. A confluence of developments frequently cited by Southeast Asian officials publicly and privately — including COVID-19; intensified geopolitical competition; growing populist pressures; and eroding confidence in some countries in multilateral institutions — have raised serious questions about the current and future shape of the global economic order. U.S.-China rivalry has also loomed large, with both sides finding it difficult to even put a floor under the relationship even as Washington struggles to chart a trade agenda and Beijing’s growth rate has slowed despite its economic gains in Southeast Asian countries and the Indo-Pacific more generally. At the same time, Asia, which accounts for about two-thirds of global growth this year, has nonetheless been moving ahead with economic pacts such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)6.
Why It Matters
IPEF’s mixed progress illustrates the challenge for the framework especially on trade, even if some progress is made in other areas and through other pathways by Washington in a difficult domestic environment. IPEF does have some value in some domains, including supply chains where members reached a first-of-its-kind agreement. But the lack of progress on the trade pillar limits its potential, especially with crucial areas such as digital being situated there. The U.S. government in particular is left outside looking in with respect to Asia’s economic story, since it is not party to RCEP, CPTPP or even any of the sectoral agreements in the digital or environmental realms. That said, the Biden team has made some gains in deploying economic statecraft in Southeast Asia amid challenges. These include the Just Energy Transition Partnerships with Indonesia and Vietnam; a semiconductor pact with Malaysia; a tech partnership with Singapore and a nuclear agreement with the Philippines. U.S. companies also continue to invest heavily in Southeast Asia and the Indo-Pacific despite U.S. government constraints, as the Biden team itself pointed out at APEC7.
Beyond IPEF, far from just being passive participants, ASEAN countries actively held a range of sideline engagements illustrating the region’s appetite for economic opportunities. These included bilateral meetings with other countries and concluding pacts or exploring agreements with U.S. companies across areas such as cyber, nuclear energy and petrochemicals (see some illustrative examples below by country). Vietnam, which has transformed itself into a dynamic economy in Southeast Asia, also offered to host APEC in 20278. Hanoi last hosted APEC in 2017, where Trump outlined the U.S. free and open Indo-Pacific vision amid anxieties about aspects of Washington’s role in parts of the region.
Example Southeast Asia Bilateral Activities Amid APEC
Where It’s Headed
Looking ahead, IPEF’s future will continue to be in focus, even as Washington tries to make inroads with Southeast Asian states in the shadow of the 2024 U.S. presidential elections. While expectations are low for the IPEF trade pillar, there will be continued scrutiny on progress regarding the remaining pillars along with announced next steps to translate IPEF into action, including investment forums and a project preparation facility9. Beyond IPEF itself, there will also be an emphasis on the extent to which Washington can advance economic ties with countries bilaterally within ASEAN. Some of this involves building on existing progress — be it realizing commitments made in new comprehensive strategic partnerships with Indonesia and Vietnam, or a road to still unrealized summit meetings with other major ASEAN countries like Malaysia and Thailand. There is also the question of what Washington will do with the four relatively less developed Southeast Asian countries part of neither IPEF nor APEC — Cambodia, East Timor, Laos and Myanmar (Naypyidaw is more of an outlier at this time amid the ongoing civil war). Thus far, while U.S. firms and agencies like the U.S. Agency for International Development continue activities on the ground, there have not been new high-level, major economic initiatives of a similar scale.
Beyond IPEF itself, it will be important to look at overall economic landscape and sectoral developments both in Southeast Asia and the wider Indo-Pacific region. Within Southeast Asia, countries are racing to seize sectoral opportunities in areas like electric vehicles and critical minerals, and incremental framework development in areas like artificial intelligence continue within ASEAN as a grouping. In the wider Indo-Pacific region, there are consequential developments ahead within agreements such as the CPTPP or the Digital Economic Partnership Agreement (DEPA), including China’s pending applications to both pacts.
Southeast Asia in China’s Overseas Ports Strategy; Mapping ASEAN’s Energy Flow Landscape; Malaysia’s View on Superpower Rivalry
“China…has become a leading commercial power that wields significant geoeconomic influence over international sea-lanes and commercial ports,” notes a new interactive tracker that examines China’s control of overseas ports published by the Council on Foreign Relations. Southeast Asian countries account for five of the top twenty investment destinations — Singapore, Cambodia, Myanmar, Thailand and East Timor in that order (link).
Select Top China Port Investments by Country
“The UAE, Saudi Arabia and the US are the main sources of crude oil for ASEAN, accounting for 56% of the region’s total imports…about half of ASEAN’s oil exports are sent outside the region,” notes the crude oil movement portion of the 2023 iteration of the wide-ranging ASEAN Oil and Gas update published by the ASEAN Center for Energy (link).
Visualization of Crude Oil Movements In and Out of ASEAN
“It often seems as if the relationship is destined to hide in plain sight, but thinking so would be a disservice to the long years of collaboration,” Malaysian Prime Minister Anwar Ibrahim said on U.S.-Malaysia relations in remarks on superpower rivalry and rising regional tensions at University of California Berkeley. A transcript is available alongside the video up on YouTube; and the wide-ranging speech and Q and A discussion touched on various issues including the Israel-Palestine issue and disinformation (link).