ASEAN Archives – ITSS Verona

March 18, 2024 — No Comments

Japan’s OSA: Balancing Security and Stability in the Indo-Pacific

*Authors: Southeast Asia and Oceania Team

Introduction

Amid escalating tensions in the Indo-Pacific region, exacerbated by assertive Chinese actions, in April 2023, Japan declared a new cooperation framework—Official Security Aid (OSA). Positioned as a strategic departure from its longstanding Official Development Aid (ODA) framework, the OSA marks Japan's commitment to strengthening the armed forces of like-minded nations. This move reflects Japan's response to the evolving security landscape, characterized by Chinese assertiveness in the South China Sea (SCS) and other geopolitical challenges.

From ODA to OSA

For decades, Japan stood as a bastion of ODA, considered as the main reliable partner for Southeast Asian nations. Its aid is granted under a request-based system and reflects a commitment to regional stability via non-military means.In the postwar era, Japan utilized development cooperation to establish relations with neighboring countries and subsequently to support the expansion of Japanese businesses in Asia. It played a role in the transition from socialist regimes and, amid China's rise, contributed to the development of legal systems and the consolidation of democracies.

The OSA, however, underscores Japan's proactive stance in gaining a more dominant role in the region, marking its first attempt in the postwar era, in which this country seeks to directly enhance the capabilities of foreign military forces. Under the OSA, Japan aims to provide not only equipment and supplies, but also support for infrastructure development to the military forces of like-minded countries, thereby bolstering their security capabilities.

Japanese Prime Minister Fumio Kishida's 2022 Shangri-La Dialogue address marked a pivotal moment in this new approach, with an announcement on doubling Japan's defense spending, and on the necessity in a departure from Japan's traditional post-war foreign policy, primarily centered on economic contributions. Japan's move towards OSA fits with its long-standing role as a vital ally for Southeast Asia in maritime security, especially during Prime Minister Shinzo Abe's leadership.

The realization of OSA materialized around the Japan and the Association of Southeast Asian Nations’ (ASEAN) 50th anniversary, culminating in a Joint Vision Statement and an implementation plan which emphasized maritime security cooperation. Subsequently, Japan extended its security assistance totaling $13 million to Bangladesh, Fiji, Malaysia, and the Philippines, demonstrating a commitment to fostering stability beyond its borders.

Furthermore, Japan’s International Cooperation Agency (JICA) is set to play a pivotal role in providing maritime security support to Indonesia, Malaysia, the Philippines, and Vietnam. JICA's plan encompasses capacity-building initiatives and the provision of patrol boats, radar systems, and drones. This comprehensive support seeks to address the security needs of nations grappling with regional power dynamics. This move signifies Japan’s intent to forge a broader international coalition, marking a strategic shift in its diplomatic and security engagements.

Strategic Gains

Amid the delicate balancing acts between superpowers, the OSA offers Southeast Asian claimant states an appealing prospect. With territorial disputes and threats from China in the SCS, Japan’s commitment to enhancing defense capabilities might seem to aim to deter Chinese assertiveness .

In this context, and following the ASEAN-Japan Commemorative Summit, Japan has elevated relations with Vietnamand Malaysia to a Comprehensive Strategic Partnership, and a Security Assistance agreement, including maritime equipment provision, was signed with Malaysia. Additionally, although not a claimant state, Japan plans to build a patrol vessel for the Indonesian Coast Guard. Moreover, coastal surveillance radars will be granted to the Philippines, with discussions on reciprocal troop access and joint military exercises. Japan and the Philippines are also working towards a trilateral alliance involving the US. As Japan has its own territorial dispute with China over its southern islands, the OSA aligns with its ambitions to ensure a Free and Open Indo-Pacific and secure regional supply chain resilience.

*Source: AkinoriMatsui "World flags" - https://en.photoac.com/photo/3989789*

Japan also might envision the OSA as a means to reduce Southeast Asian countries' dependence on China. As the Belt and Road Initiative remains a significant diplomatic tool, the OSA introduces new areas of cooperation. For Bangladesh, for instance, which heavily relies on Chinese weaponry (70%), the OSA offers an opportunity to diversify suppliers and mitigate risks associated with the quality of Chinese-made military equipment.

Balancing security and stability

In his address at the Hiroshima G7 Summit in 2023, PM Kishida emphasized the potential parallels between the current situation in Ukraine and future challenges in East Asia. Observing global instability stemming from the Ukraine war, the rise of China, US-China tensions, and the Israel-Hamas War, Japan’s proactive foreign policy aims to foster deterrence and regional security. This change signifies a departure from its conventional stance of following US priorities by shifting towards a Japan-led multilateral security collaboration. It should be asked whether this securitization led to more, or less stability in the region.

While Japan's emphasis on maritime security and support to like-minded Indo-Pacific countries aligns with countering China's assertiveness, extending OSA to the military capabilities of developing countries introduces complexities.

The potential reactions from ASEAN nations, particularly considering their neutrality and non-alignment strive, could lead to heightened tensions and disrupt the delicate balance in the ongoing superpower competition . Moreover, concerns over an arms race in the region emerge; due to ASEAN countries' diverse capabilities and stances in the superpower competition, providing security assistance to certain members might increase tension in the region and undermine the current multilateral system.

The pursuit of a competitive armament approach, rather than creating a secure environment, may contribute to heightened tension, prompting a more assertive Chinese stance and a Chinese armament of its allies in the region. Furthermore, given China’s extensive arms sales to the region, and its lenient restrictions on arms exports, it is essential to question whether Japan's OSA will genuinely serve as an effective countermeasure to China.

Conclusion

Japan's adoption of OSA signifies a proactive response to regional challenges posed by assertive Chinese actions. While enhancing defense capabilities for like-minded developing countries brings strategic gains, potential reactions from ASEAN, fears of an arms race, divisions, and China's extensive influence, warrant cautious consideration. As Japan assumes a broader international role, the delicate balance between security and stability in the Indo-Pacific calls for careful navigation and strategic planning to mitigate potential negative repercussions of such security related initiatives.

*Views expressed in the article belong to the author and do not represent any organization or its affiliates.

December 11, 2023 — No Comments

Enhancing Economic Unity in Southeast Asia Through a Regional Payments System

Author: Dejvi Dedaj - South East Asia and Oceania Team

Introduction

Economic unity is a collaborative state whereby different entities, particularly states, work together as if they were a single economic unit, thus contributing to the overall economic stability and development of the states involved. Economic unity is typically pursued at the regional and international levels and can take different forms, ranging from economic, monetary, or customs unions, with notable examples being the European Union or the CARICOM Single Market & Economy. Economic unity can be achieved through different policies and mechanisms, such as the establishment of a shared market, the enactment of common trade or fiscal policies, or the adoption of regional payment systems. In particular, regional payment systems comprise international mechanisms aimed at facilitating payments between the citizens of the various participating countries. Traditionally, cross-border payments are slow and expensive to carry out; however, regional payment systems facilitate cross-border transactions and reduce collateral costs, such as currency exchange costs.

The concept of economic unity is not unknown to the area of Southeast Asia; on the contrary, in 1967, the Association of Southeast Asian Nations (‘ASEAN’) was established to promote economic unity between the participating countries. According to the ASEAN Charter, regional economic integration is pursued by advancing a market economy, adhering to trade rules as determined by different multilateral treaties or ASEAN itself, and eliminating all other existing barriers to economic integration. Recently, ASEAN made another step towards attaining economic integration by implementing a regional cross-border payments system that allows ASEAN citizens to pay in their local currency using a QR code.

Why Should the Regional Payments System Adopted by ASEAN Be Celebrated?

The newly implemented regional payments system by ASEAN will be conducive to the growth of trade and commerce within Southeast Asia as it fosters seamless financial cross-border transactions, streamlines payment processes, and encourages economic cooperation among participating states. ASEAN's endeavour should also be expected to reduce transaction costs, cultivating a more advantageous environment for individuals and businesses alike operating within the Southeast Asian region. Additionally, such an initiative will empower entities to explore new opportunities, thus expanding their market reach and engaging in more diversified trade activities.

In addition, the adoption of QR code payments does not entail the imposition of fees on cardholders that wish to make a payment and offer better conversion rates, in contrast to traditional card-based payments.

The adoption of the ASEAN regional payments system will also reduce ASEAN’s reliance on external currencies for cross-border transactions, particularly the US dollar. The so-called phenomenon of de-dollarisation, whereby states attempt to move away from the US dollar, is premised on concerns that the dominance of the US currency allows the US to exert significant pressure and influence on other countries, “holding them hostage”.

*Source: https://unsplash.com/photos/round-gold-colored-coin-lot-9xJiXHkg-fo*

Lastly, the benefits of the regional payments system for small and medium-sized enterprises should not be underestimated. Although access to the foreign exchange market has traditionally been challenging for such entities due to the high transaction costs relative to their small size, the regional payments system would enable small and medium-sized enterprises to see transaction and currency exchange costs reduced, thus facilitating their access to overseas exchange markets.

What Are the Arguments Against the ASEAN Regional Payments System?

Importantly, several arguments against ASEAN’s initiative have been voiced to challenge its implementation. First, it is feared that economic integration within ASEAN will put pressure on certain currencies, most prominently the Singapore dollar, thus rendering it the de facto reserve currency of ASEAN. This could in turn weaken the purchasing power of other ASEAN currencies, resulting in “higher imported inflation if central banks [do not] intervene”.

Second, the new regional payments system may present novel security and fraud issues, requiring banks to implement strong measures to effectively respond to such risks. Soft security policies are known to catch the attention of hackers who can use such policies to their advantage to benefit financially, thus causing the banks, and by extension the consumers, at the receiving end to incur hefty, and sometimes irretrievable, losses.

Third, as a novel model, the regional payments system will necessarily involve the education of the public to ensure the success of the policy. However, educating the public can be a time-consuming process, requiring the devotion of significant resources to the cause and potentially delaying the successful rollout or implementation of the system.

March 8, 2022 — No Comments

Defense Spending and Procurement in South East Asia

Richard Bitzinger talks about the current dynamics shaping the defense market in South East Asia, notably in light of the South China Sea disputes. He presents the predicted trends of defense spending and procurement putting in perspective recent events such as Indonesia’s Rafale purchase.

Richard Bitzinger is Visiting Research Fellow at the Military Transformations Program at the S. Rajaratnam School of International Studies.

Interviewers: Arnaud Sobrero & Romain Gallix.