The eyes of the world are on Asia and the Pacific islands as never before. This is where the world’s main dramas are being played out, that will set its course for decades to come. The key challenges that emerged last year remain powerfully present: economic nationalism, the contest between democratic and autocratic systems of governance, and the pressing global ambitions of the People’s Republic of China (PRC) incorporated in its Belt and Road Initiative (BRI).

Augmenting these issues, three more have become prominent in 2019:

• Asian and other corporations are reviewing and already, in some manufacturing sectors, rebuilding their production chains to lessen their reliance on China as its rivalry with the US extends from skirmish to trade-war towards “decoupling”.

• The Pacific islands, effectively forgotten by the rest of the world since the wave of independence washed over the region in the 1970s, have been brought into play in the great global United States-China rivalry.

• Beijing, weaponising its economic heft, is setting countries a series of tests or choices to demonstrate their preparedness to behave as true partners—to which Washington is also to a degree responding, as national values and interests start to elide, and as technology platforms take on central roles in this competitive climate, as proxies for alliances that were formerly based only on trade or security.

Two forthcoming events in our region promise to play substantially in to this framework:

• Japan’s hosting of the Rugby World Cup and next year the Olympic Games, amplifying its already rising tourism popularity and cultural clout, which with the massive new Japanese corporate regional investments and the growing détente with China, augur a re-emergence of its influence.

• Taiwan’s elections on 11 January 2020 of its new president and legislative yuan (parliament), which will be watched especially closely in Beijing – with many analysts anticipating that bringing Taiwan in to the PRC is President Xi Jinping’s greatest ambition, guaranteeing his permanent place as a “great” in the country’s history. Taiwan has also been watching closely the protests in Hong Kong and the durability there of the “one country, two systems” formula. The program to “re-educate” the Muslim Uighur population of Xinjiang has also aroused growing international concern.

The neighbourhood, attentive to this mounting list of challenges, has been preparing itself to meet them by maintaining or placing in leadership politicians and parties that appear best equipped to provide stability, and also to guide their countries and economies through the difficult elision of values and interests.

Australia is among these states. The distinguished sinologist John Fitzgerald stressed this latter thrust toward values in the evolution of the country’s foreign policy, in a July lecture for Griffith University’s Asia Institute. He noted that Australia’s 2017 Foreign Policy White Paper marked a shift from formerly dominant folkloric values such as mateship and the fair-go towards universal liberal values. ‘The earlier approach’, he said, ‘left Australia disarmed in dealing with foreign interference on Australian soil’ …

We misled our friends in China by signalling in earlier foreign policy statements that Australians care less for human dignity, freedom, and rule of law than we do for jobs and growth. Leaving values at the door was always a values statement in itself … Australia has every reason to continue engaging closely with China, across as many fronts as possible, partly to sustain trade and investment and people to people ties, but also to keep lines of communication open and to facilitate push-back when China’s actions impinge on Australian values and interests.

The mid-year election result in Australia, while surprising many local commentators, was consonant with regional trends. It cemented in office a centre-right government led by a prime minister accorded greater political capital than any predecessor since Labor’s Kevin Rudd, and thus in a strong position to instil effective Cabinet discipline, including over rhetoric potentially affecting international relations. This will be important as the investment-hungry country—consumption-dominated but dependent on commodity and, to a degree, service exports for growth—faces an economic slowdown following a 27-year expansion.

Australia’s closest neighbour Papua New Guinea (PNG) turned over prime ministers, also in mid-year, with James Marape replacing Peter O’Neill, who had hosted the world’s leaders to an Asia-Pacific Economic Cooperation (APEC) summit in Port Moresby in 2018. But Marape— like O’Neill representing a Southern Highlands constituency—started shakily, within weeks replacing key Ministers after restructuring his coalition, seeking direct funding from Australia and from China to relieve PNG’s growing debt, and risking losing massive new gas investments by insisting on renegotiating recent agreements with Total and Exxon.

New Zealand’s prime minister Jacinda Ardern cemented her own position with her global celebrity soaring following her solicitous response to the Christchurch mosque massacre, although her Labour party slipped in polling below the opposition Nationals as economic challenges increased and the delivery of government promises was postponed.

Indonesia’s President Joko Widodo—centrist but now also accommodating a vice-president closer to fundamentalist Islam—was comfortably returned in April’s elections, but with a considerably less ambitious program than he took to the polls in 2015. Growth has been stuck at around 5 per cent, reasonable but disappointing for an aspirational population. Philippines President Rodrigo Duterte continues to strengthen his domestic position despite international condemnation for human rights abuses. Wins in the May mid-term elections will ensure he can complete most of his legislative agenda including slashing the corporate tax rate from 30 per cent to 20 per cent.

The army-led government that seized power in a 2014 coup cemented its control in Thailand, with former army head Prayut winning the March election despite questions about its fairness. Vietnam’s communist party chief Nguyen Phu Trong, although now aged 74, has finally stepped clearly in front of former rivals—some of whom have been removed by corruption charges—as the country’s paramount leader. Narendra Modi swept to an unexpected landslide win in India’s May elections, with voters hoping that he will now move to implement delayed reforms and boost jobs and productivity.

Looking through the rest of 2019 to the next couple of years, Richard Martin, Singapore-based managing director of business analysts IMA Asia, anticipates:

Those countries capable of political stability, modestly good policies, and a capacity for domestic demand growth will do well. Exporter-driven economies will struggle. Those who score two out of three won’t do well either. Fortunately, quite a lot of Asia has a chance at pulling off all three, so we retain our outlook for sustained growth for Asia in a more difficult global environment.  

Please click here to read the full “One belt, one road, many tests” article published in the 2019 State of the Neighbourhood report, written by Griffith Asia Institute Industry Fellow, Rowan Callick.