Straddling or Squeezed: An Increasingly Delicate Southeast Asian Positioning Between Great Powers
By Ei Sun Oh

Straddling or Squeezed: An Increasingly Delicate Southeast Asian Positioning Between Great Powers

Jul. 16, 2023  |     |  0 comments

For a long time, Southeast Asia has straddled some of the busiest trade routes in the world. More than half, and by some accounts up to two-thirds or three-quarters, of the world's shipping volume goes through the South China Sea. Following their respective hard-earned independence from the yokes of colonial rule around the middle of the last century, most countries in Southeast Asia faced the unenviable choice of which national socioeconomic option to impose upon themselves as they tried to manage their burgeoning nationhoods. 

It was at the heights of the Cold War between the Eastern Bloc led by the Soviet Union, which practiced communism or at least socialism, and the Western Bloc led by the United States, which championed–and continues to champion–capitalism. Most Southeast Asian countries may not want to choose to side with which of the two major Cold War camps, but as at most small–not even medium–powers back then, these newly independent nations were, in a sense, squeezed by both confronting camps, and ended up having to choose a side, whether they like it or not.

Back then, most of these Southeast Asian countries chose to side with the US economically and geopolitically. They mainly chose capitalism which relies heavily on the market economy as the dominant mode of their national socioeconomic system, albeit often tinged with heavy doses of centralized planning, a trademark characteristic of communism and, by extension, socialism. 

These Southeast Asian countries realized their geostrategic potential and not only traded heavily with the US–which back then valued and promoted the concept and practice of free trade globally–as well as Europe and Japan but also opened their doors to welcome investments from these relatively developed countries. As a result, most parts of Southeast Asia boomed socioeconomically in the last quarter of the last century and beyond, becoming some of Asia's Dragons and Tigers. At the same time, the US military presence in the region was entrenched and very much became commonplace in the region. Granted, some parts of Southeast Asia sided with the Eastern camp and practiced stricter versions of socialism or even communism. However, their economy did not grow significantly then, and their people's livelihoods were wanting. Their abject experience of choosing the "wrong" side was plain for all to see.

It was coupled with the observation that beyond its support of some revolutionary movements, the Soviet footprint was not as heavily imprinted as that of the US, militarily and economically, in the region. So, choosing to side with the US was a "safe" choice back then. And when the Soviet Union collapsed in the early 1990s, the choice by most Southeast Asian nations to side with the US was, in a sense, "vindicated" and further crystalized by other Southeast Asian nations, which had to move toward a market economy to survive.

Fast forward to this century, the US started to exhibit signs of renewed protectionism, although it still paid lip service to free trade. Tariffs and non-tariff barriers were gradually and sometimes even abruptly raised against many imports into the US, not the least from Southeast Asia. The US famously promoted to great fanfare and then infamously withdrew suddenly from the Trans-Pacific Partnership agreement (TPP), which would have created the world's largest free-trade plus area. That latter, unwarranted act on the part of the US is widely seen as an act of betrayal by most existing and potential signatories to the TPP, including those from Southeast Asia. It would be an understatement to note that most of these countries no longer saw the US as a reliable trading partner, and their overall economic siding with the US was no doubt almost irreparably harmed. This was worsened by dwindling US foreign direct investments in many regional countries. 

At the same time, the rise of China as an economic powerhouse, in a sense, provided a counterweight to the economic vacuum left by the US in the region. China was, and continues to be, eager to trade with and invest in Southeast Asia. China's insatiable appetite for especially raw materials swallows up vast chunks of export from Southeast Asia. China also exported more affordable products to Southeast Asia, which is still at most middle income on average. The result is a considerable trade boom between Southeast Asia and China. China is nowadays the single largest trading partner of each Southeast Asian country, and Southeast Asia is often China's largest trading partner. 

Chinese investments in Southeast Asia, ranging from infrastructure to manufacturing, are also making increasing inroads into Southeast Asia, not the least under the aegis of the Belt and Road Initiative. The formation of the Regional Comprehensive Economic Partnership (RCEP), which involves most of Southeast Asia with China and a few other economies, gives rise to the world's largest free trade bloc. As such, at least as far as the economy is concerned, most Southeast Asian countries are increasingly relying on, if not siding with, China.

But there are undoubtedly still differences between some, at least Southeast Asian countries and China. The disputes over territorial sovereignty and economic interests in the South China Sea remain prickly thorns in the otherwise supple flesh of China–Southeast Asian relations. Some, if not all, South China Sea disputants from Southeast Asia are weary of what they perceive as China's overwhelming military or paramilitary presence at their doorsteps. Some of them also feel that when it comes to countering or negotiating with China, even collectively, they may not match China's strength, not to mention having to deal with China individually. At the same time, the US military presence remains strong in the region, and some Southeast Asian nations welcome US freedom of navigation and other military operations as a counterweight against China. For example, most recently, the Philippines allowed the US to use some military bases, which many foreign observers viewed as a countermeasure against China in the South China Sea. Consequently, when it comes to security, many Southeast Asian countries may be said to continue to side with the US.

But this fence-sitting posture straddling the US and China may become increasingly difficult for many Southeast Asian nations as the confrontation between the two superpowers heated up in recent months. The two ideologically contrasting camps may once again squeeze Southeast Asia. While the US and the West continue to promote their liberal "values," China is also proffering its "shared community for humankind." And as the economies and technologies of China and the US are hurtling toward decoupling, countries in Southeast Asia are increasingly forced to essentially choose sides in areas ranging from operating standards to payment systems. Choosing one side, even on a single subject matter, could be viewed in askance by the other side as having chosen a side in an overall sense.

So, these are once again heady days for many Southeast Asian nations, as they must carefully juggle competing concerns over prosperity, security, and sovereignty in their dealings with China and the US. It would take skilled statesmanship and overarching vision to handle these critical but increasingly mutually exclusive relationships right. And the stakes could not be higher for Southeast Asia.

In recent days, for example, some relocations of factories from China to Southeast Asian countries due to the United States sometimes imposing sanctions or restrictions against goods exported from China. These relocations benefit some Southeast Asian countries, but mainly those with competitive advantages, such as Vietnam, which is many people's darling nowadays in Southeast Asia, the Philippines, and Indonesia. Malaysia, unfortunately, is yet to attract some of these relocated factories. The US sanctions on chips against China increased some of the chip production in Malaysia. For example, the extension of the proton Geely car factories in Malaysia enables these cars to use chips produced in Malaysia. 

As to 5G networks, Southeast Asian countries are not as concerned as the US and the West, for example, the threat of China imposing surveillance through the 5G networks. Malaysia, for instance, is reopening up. It's a 5G network rollout with the possible inclusion of telecommunications companies from China. There's also concern over TikTok in the West, but there is less of such a concern in Southeast Asia. In the recent Malaysian election, there were political parties that made use of TikTok to spread their influence. But that's a domestic concern for Malaysia's prospects while using the more advanced technologies. For collaborations that could be in the agricultural sector, a lot of Southeast Asian countries would welcome the high-tech agricultural practices from China so that they could achieve food resilience or sufficiency. For example, there is room for further cooperation in the new and renewable energy sector. Also, we have opportunities for collaboration in environmentally friendly products and services and the standardization of traditional Chinese medicine between China and Southeast Asian countries, as some of the audience mentioned.