WEEK IN BRIEF: Vietnam's pres resigns and EU-Philippines FTA is back on, etc
Plus, round-up of Europe-Southeast Asia relations between March 17-24, and Q&A on how should Europeans respond if Thailand's largest party is forcibly dissolved?
Send tips here | Tweet @davidhuttjourno or @WatchingEUASEAN |
Good morning! Welcome to the latest “Week In Brief” edition of Watching Europe In Southeast Asia, written by journalist and columnist David Hutt.
As well as weekly news briefs about Europe-Southeast Asia engagement, this newsletter also brings you exclusive analysis and in-depth Q&As with leading diplomats and businesspeople from both regions.
If you haven’t already, you can become a supporter of Watching Europe In Southeast Asia.
— VIETNAM PRES RESIGNS; BAD FOR BUSINESS?: On March 20, Vietnamese President Vo Van Thuong announced his resignation for “violations” and “shortcomings”, the Communist Party officially said. This wasn’t unexpected. Vietnam watchers have been forecasting this for weeks, and the apparent giveaway came when the Royal House of the Netherlands suddenly announced that a planned state visit by the Dutch King and Queen was postponed by the Vietnamese side “due to internal circumstances”. Thuong is believed to have been fingered for his role in an ongoing corruption scandal involving the real estate firm Phuc Son Group, which is accused of flagrant corruption in Quang Ngai province, of which Thuong was party chief between 2011 and 2014.
Things aren’t looking good for the Vietnamese Communist Party. Vietnam will soon have its third president in two years. Two deputy prime ministers and another member of the Politburo have also been dismissed over the past year and a half. Instability is rampant. In part, that’s because Communist Party chief Nguyen Phu Trong’s signature anti-corruption campaign (his “blazing furnace”) has laid waste to much of the Party apparatus. Many lower-level apparatchiks are running scared of being caught up in the scandal, not least if they make a spending decision that is later considered a waste of public money, a reason why much of the bureaucracy is now on a go-slow. It’s also because Trong has torn up many of the Communist Party’s informal and formal rules to stay in power, to continue his anti-graft campaign, and to amass far more power than any Party general secretary since Le Duan in the early 1980s. Because of this turmoil, there is now even more confusion about who will take over from Trong at the next National Congress in early 2026 (if he does step down). Aged 79, he’s now well into his third term in office, a feat that hasn’t been seen for decades (and which goes against the Party’s informal codes on retirement ages and two terms for senior leaders). The likely explanation is that Trong has now consolidated so much power into his own office and has invested so much effort into his signature anti-corruption campaign that the stakes are so high as to who will replace him. Get that wrong, and not only could the anti-graft campaign be impaired, but the Communist Party itself could be in a whole world of trouble. Additionally, as I pointed out last week in Radio Free Asia, Vietnam will undergo a painful demographic shift between now and the mid-2030s, when it will become an aged society. So, the next Party chief will likely rule over the most fateful years of Vietnam’s development, which only heightens the problems of choosing a correct successor.
All that said, is this just an internal matter; the sort of turmoil that might be expected in a one-party, increasingly hierarchical and dictatorial system of government? Or will the apparent instability within the Communist Party have a bigger impact on the economy and on foreign, including European, investors? Opinions are split. Le Hong Hiep, a Senior Fellow and Coordinator of the Vietnam Studies Programme at ISEAS – Yusof Ishak Institute, wrote on March 20 that while Thuong’s departure will not result in significant policy shifts, “it has raised concerns among investors. Many of these investors were drawn to Vietnam precisely because of its relatively stable political climate compared to other countries in the region. However, the news of Thuong’s pending departure has added to their unease.” CNN reported that the Ho Chi Minh City stock exchange, the country’s main bourse, shed nearly 3% on Monday after the Communist Party’s Central Committee announced it was convening an emergency meeting, which most pundits correctly understood was about Thuong’s resignation, which has been predicted for weeks. CNN added: “Foreign investors’ net sales [on the stock exchange] in the first two days of the week amounted to about $80 million, according to Mirae Asset Securities, a broker.” It also quoted Florian Feyerabend, the representative in Vietnam for Germany’s Konrad Adenauer Foundation, who commented: “Recent developments raise questions about “predictability, reliability and internal workings of the system” on which investment decisions hinge.”
The Financial Times contended that “Investors have been becoming nervous as the corruption crackdown drags on and expands to private businesses, affecting government approvals of projects and licences. Officials have been reluctant to grant approvals for fear of being investigated for graft.” The FT quoted Nguyen Khac Giang, a visiting fellow at Singapore’s Iseas-Yusof Ishak Institute. It paraphrased him saying that “though foreign companies had not been investigated for corruption as part of the crackdown, a slowdown in bureaucratic processes and the political instability had had an impact on investors”. And it quoted him directly: “This causes hesitancy for foreign companies who want to make big investments in Vietnam.” (Giang wrote an interesting essay last year on the effects of the anti-corruption campaign on Vietnam’s economy.) I also spoke to Giang. He told me:
Vo Van Thuong's exit will not disrupt the country' business-as-usual approach, and the FDI sector will be largely safe in the anti-corruption campaign as Vietnam still will need it to enhance its performance-based legitimacy. The institutions of collective leadership remain largely intact thus the risk of political turmoil is low. However, the incident will likely erode foreign investor's confidence. It also likely exacerbates the problem in the bureaucracy that has gripped Vietnam since the initiation of the anti-corruption campaign.
Members of the European business community I spoke to this week don’t appear overly concerned. “Vietnam has long been a favoured investment destination for European businesses in Southeast Asia, and since the FTA with the EU was implemented we have seen consistently strong growth in trade. The basic fundamentals that make Vietnam an attractive investment destination have not altered and most likely will not alter in the near future,” Chris Humphrey, executive director of the EU-ASEAN Business Council, told me. A number of other European business leaders confided in private that they already accept that this political instability will continue until 2026 when the Communist Party is likely to select a new general secretary. Most reckon the instability will improve after that. Others are content that whatever infighting goes on within the Politburo, Vietnam isn’t about to suddenly tip into anarchy or radically alter its economic policy. Moreover, most investors appear more interested that the downturn Vietnam’s economy experienced in 2023 seems to be over. Indeed, Singapore-based bank UOB (United Overseas Bank) last week forecast growth of 5.5% for the first quarter of this year, up from 3.3% during the same period last year. According to government data, foreign direct investment surged by 38.6% (up to nearly $4.2bn) in the first two months of this year, while exports increased by 19.2%. The latest Business Confidence Index from the European Chamber of Commerce in Vietnam (EuroCham), taken in the fourth quarter of last year, found that confidence was up, but still below levels seen in 2022. EuroCham Chairman Gabor Fluit commented at the time: “The European business community is increasingly optimistic that the most challenging economic period is now behind us.”
— EU-PHILIPPINE FTA BACK ON TRACK: In better news, the EU and the Philippines announced on March 18 that they’re officially restarting talks over a free trade agreement.
Negotiations were actually first launched in 2015, with a first round held in May 2016 and the second in February 2017. But talks stalled in 2017 over EU complaints about then-Philippine President Rodrigo Duterte’s signature and infamous “war on drugs”, as well as other human rights problems. But relations have massively improved since President Ferdinand Marcos Jr entered office in June 2022. He has cut back on much of the drug-war policies, somewhat improved the human rights situation, and has sought to appease foreign governments that his administration is clean and honest. He has also moved Manila back much closer to the West, after Duterte’s dalliance with Beijing. (A recent article of mine in DW considered whether Marcos Jr has emerged as Europe’s best friend in Southeast Asia.) Marcos Jr this month visited Germany and the Czech Republic as part of a European tour. Valdis Dombrovskis, a European Commission executive vice president, commented on March 18 in a press remark:
The last round took place back in 2017, after which no further rounds were scheduled due to the EU's concerns over policies of the former government of the Philippines. We then paused talks, as we are always firm in our conviction that our trade relations cannot be negotiated in a vacuum. Our trade relations must be based on respect for common values and fundamental conventions. So, we warmly welcome the positive change of direction that your government has induced since it took office in 2022. At the same time, we would also encourage further progress on the long-standing issues of EU concern related to human rights and labour rights.
In 2023, the EU and the Philippines launched a stocktaking exercise to assess their readiness to resume negotiations for an FTA, which was concluded at the end of 2023, confirming that a resumption of negotiations would be appropriate. In March 2023, the EU and Thailand also announced that they’re restarting FTA talks. A stocktaking exercise is underway with Malaysia, and talks could start soon. Talks with Indonesia are progressing.
After the news of the restart of the FTA talks, Ursula von der Leyen, the European Commission president, tweeted: “I welcome the resumption of trade negotiations with the Philippines. An important deliverable of the shared vision I discussed with President [Marcos Jr] during my visit to the Philippines in August. A trade agreement will deepen our ties, bringing us even closer together.” The Philippines’ Department of Foreign Affairs said on March 21 that it looks forward to crafting a "balanced and modern" free trade agreement. “During the visit of President Ferdinand R. Marcos Jr. to Germany and the Czech Republic, the President emphasized the importance of the PH-EU FTA in achieving shared prosperity, stable economic growth and sustainable development not only for the Philippines but also for the Indo-Pacific region," it said in a statement.
“The recommencement of these negotiations is very much welcomed. It underscores the growing importance of ASEAN to Europe,” Humphrey, of the EU-ASEAN Business Council, told me. He added:
We now have 2 FTAs fully in place with Singapore and Vietnam, and now ongoing negotiations with Indonesia, Thailand and the Philippines. Coupled with the Digital Trade Agreement negotiations with Singapore, and the ongoing work of the EU-ASEAN Joint Working Group on Trade and Investment, these negotiations mean that ASEAN is now firmly at the centre of EU trade policy. We do not expect significant hurdles to come up in the negotiations with the Philippines, not in the same way that there are remaining unresolved issues with Indonesia. Whilst there will, undoubtedly, be difficult areas, as there are in any negotiation of this scale, we do not think these will be insurmountable. It is clear that the level of ambition on both sides is very similar.
According to Joshua Bernard Espeña, a resident fellow at the International Development and Security Cooperation, a Manila-based think tank, “due to the geopolitical openness presented by both sides, Philippine-EU FTA negotiations have arrived at their ripest condition.” He told me:
When I say openness, I pertain to what is happening in Europe—the need to diversify trading sources to strengthen its supply chain away from Russia and to compete with Russia in supporting Ukraine’s attritional war. The Philippine side, meanwhile, intends to diversify from American and Chinese sources of the trade balance to assert its geoeconomic agency in an already volatile region. This moment is critical given how these entities are adjusting to the reality that a wartime economy needs a level of independence from perceived adversaries in a crumbling post-Cold War order in the form of trade creation. As China and Russia are treated as trade losses, the Philippines and EU consider each other as trade creations. In this case, it requires a deep commitment to a mutual understanding what’s what to negotiate. Moreover, the Philippine market’s relatively liberal market provides an opportunity for ASEAN to observe how trade diversion creates opportunities to leverage themselves on the world stage.
Brian Poe Llamanzares, a leading journalist in the Philippines, wrote a sonorous column for the Philstar on March 17, titled “The future is Europe”. “Securing a Philippines-EU FTA,” he wrote, “is evidently vital for our national interests.” On the EU’s Global Gateway, he wrote that it “comes at an opportune time as Department of Finance Secretary Recto explores the potential fiscal and non-fiscal benefits of a carbon tax and emissions trading system, as our own Bangko Sentral ng Pilipinas [the central bank] enhances our Philippine Sustainable Finance guidelines and as we further liberalize our economy to allow advancements in a greener, healthier and more sustainable economy.” He concluded: “for the Philippines, it’s looking like Europe is the future.” That might be a touch too much, but there is every reason why the EU should be focused on the Philippines. In fact, it’s surprising that trade links are so relatively poor at the moment. The EU is only the Philippines' fourth largest trade partner, while the Philippines is only the EU’s seventh most important trading partner in ASEAN (despite being the fifth largest economy in the region). However, the future is bright for the Philippines. It’s projected to have the second-highest economic growth in ASEAN in 2024 (at 5.9%). As the Commission statement also noted: “The Philippines also has major reserves of critical raw materials, including nickel, copper and chromite, which are vital for the manufacture of green technologies. Combined with the Philippines' renewed efforts to harvest its renewable energy potential and recent liberalization for foreign investors in the sector, the Philippines is an important partner in the green transition.” As I recently noted in the Diplomat, the Philippines' demographics are also looking very healthy when compared with other Southeast Asian countries. It won’t become an “ageing” society until 2028, and an “aged” society until 2061, the latest of the ASEAN states. Its workforce is expected to grow from 76.8 million to 104 million between now and 2050. Moreover, European states are increasingly keen on attracting Filipinos as migrant workers, most notably in Germany and Austria’s healthcare sectors.
There’s a security angle, too, as my friend Alfred Gerstl, an expert on Indo-Pacific international relations at the University of Vienna, explained in a conversation. “Both parties have also a strong interest in deepening their relations, including security. It can be expected that European nations such as France and Germany will further deliver weapons, provide training to the Philippine army and navy, and participate in joint naval drills,” he told me. Dombrovskis, of the European Commission, commented on this as well when speaking about the FTA talks:
Let me say one last word on geostrategic aspects. The Philippines is a key partner for the EU in the Indo-Pacific region. With this FTA, along with similar agreements underway with India, Indonesia and Thailand, we are strengthening our strategic engagement with this key region. I would also like to pay tribute to the Philippines steadfast position in support of international law, through its continued solidarity with Ukraine in the face of illegal Russian aggression.
Both sides will meet for FTA later in the year (likely sometime between July and September). The question, for now, is whether they agree to consider it a continuation of the second round that was held in 2017 or an entirely new round of talks.
IN BRIEF
— EU WADES INTO SCS: The EEAS released a statement on March 23 after Chinese Coast Guard vessels and Maritime Militia clashes with Philippine vessels. “The succession of repeated dangerous manoeuvres, blocking and water-cannoning from [the Chinese side] constituted a dangerous provocation against the Philippines vessels. These acts put human lives at risk, undermine regional stability and international norms, and threaten security in the region and beyond,” it stated. Most embassies of EU states have jumped on board to send the same message. The Swedish embassy in Manila, for instance, tweeted: “The Embassy of Sweden reiterates its grave concern regarding the repeated aggressions in South China Sea, causing heavy damage on Philippine vessels & needlessly endangering lives. We emphasize that disputes must be resolved peacefully in accordance w/ UNCLOS & int’l rule of law.”
— UK’S POST-BREXIT GOALS BEGIN IN BANGKOK: David Cameron, the UK foreign minister, arrived in Bangkok on March 20, his first visit to the Indo-Pacific region, to sign a new Strategic Partnership with Prime Minister Srettha Thavisin, who tweeted about the meet: “We reached a milestone in 🇹🇭 🇬🇧 relations by elevating them to a Strategic Partnership. UK is the very first country in Europe to do so with Thailand.” The UK’s talking points can be found here.
— PARTY TIME FOR EU BIGWIGS: Iwona Piórko, the EU ambassador to Singapore, hosted the “biggest ever” gathering of EU and member states ambassadors. Some 19 resident and 5 non-resident ambassadors took part in the annual retreat, which included a “cordial working lunch with our 11 colleagues from Southeast Asia”.
— EU’S HUMANITARIAN PLEDGES: The third edition of the European Humanitarian Forum finished on March 19, at which EU Member States and the European Commission announced the planned humanitarian funding of more than €7.7 billion for 2024. Janez Lenarčič, commissioner for Crisis Management, said in a statement: “This is a solid initial pledge for this year, reflecting both global solidarity and the EU's outstanding position in humanitarian action.” It waits to be seen how this is divided.
— FISHING FOR PROBLEMS WITH BANGKOK: The Telegraph has reported on how draft legislation in Thailand’s parliament could weaken protections for the fishing industry. This could be a big deal since most of the EU’s complaints about Thailand revolve around illegal, unreported and unregulated (IUU) fishing, which is also going to be a big issue in the now-restarted FTA talks. Watch this space.
— RED SEA CONFLICT TO SCUPPER TRADE?: The VNExpress reported that Vietnamese exports to Europe could decline in the coming months due to worsening Red Sea shipping disruptions and rising freight hikes. It reported: “Transport costs from Vietnam to Europe have also increased, with freight to Hamburg, Germany, nearly tripling between December 2023 and January 2024, according to the Vietnam Maritime Administration.”
— KUALA LUMPUR EYES FTA: There’s growing momentum in Malaysia to officially restart FTA talks with the EU. Former Deputy International Trade and Industry Minister Ong Kian Ming waxed lyrical about its benefits in an interview with local media. “The restart of the Malaysia-EU FTA talks would provide a boost of confidence to those who have invested in Malaysia and to those who are interested in investing in Malaysia,” he noted.
The speaker of Finland’s parliament, Jussi Halla-aho, and a high-ranking delegation of the Finnish parliament arrived in Hanoi on March 24 for a three-day official visit.
Malaysia’s plantation and commodities minister, Johari Abdul Ghani, gave an interesting speech in parliament on March 21 in which he opined that “Malaysia should not have filed a complaint with the WTO” against the EU, and that it should have followed Indonesia’s lead, and not have gone it alone.
Richard Tibbels, EU Special Envoy to the Indo-Pacific, spoke about the bloc’s Indo-Pacific Strategy strategy while in Australia.
The UK-ASEAN Business Forum will take place on March 26. Find more info here.
Nikkei Asia reported on how Indonesian furniture makers are trying to diversify away from Europe in anticipation of the deforestation regulations.
Dutch high-tech firm VDL will build a new factory to make semiconductor manufacturing components in Vietnam.
On March 21, Dutch firms, including Philips, signed 18 investment deals as a Dutch trade delegation visited Ho Chi Minh City.
It’s Francophone week, so the French embassies in Southeast Asia have been rather busy, including with some cross-EU action, such as this cooperation between the French and Polish embassies in Manila.
Luc Veron, the EU ambassador to Manila, penned an op-ed in the Philstar about Europe’s role in supporting gender equality and women’s empowerment. “The EU is… always exploring new ways to make sure that gender is at the forefront of its foreign and security policy, by infusing a gender perspective into our political dialogues, diplomacy and initiatives through solid gender analysis,” he wrote.
Walter Brenno Colnaghi, of the Australian National University, wrote a rather good critique of European industrial policy in the East Asia Forum on March 21.
Q&A
On March 13, Thailand’s Election Commission announced that it would seek the dissolution of the country’s largest Party, claiming there is evidence that it “undermines the democratic system with the king as the head of state”. The Move Forward party won 151 seats in parliament and almost 38% of the vote at last year’s general elections, but it was blocked from forming a government after the election, chiefly because it (successfully) campaigned on a program to reform the military and the monarchy. For a primer, I strongly recommend this opinion piece by Lynn Sasinpong (“A dirty game and a dirty system”, March 18). But the forced dissolution of the country’s largest Party as well as the aforementioned draft legislation that could make the fisheries issue even more combustive between Bangkok and Brussels—this isn’t a great look when the EU has just agreed to restart trade talks and Prime Minister Srettha Thavisin reckons negotiations can be wrapped up by the end of next year. In that vein, I spoke with Mark Cogan, associate professor of Peace and Conflict Studies at Kansai Gaidai University in Japan and an expert on Thailand, about what the Move Forward party’s likely dissolution could mean for relations with the Europeans.
On March 13, Thailand’s Election Commission announced that it would seek the dissolution of a pro-reform Move Forward Party, claiming there is evidence the party “undermines the democratic system with the king as the head of state”. First of all, what do you make of this?
This is completely expected due to the recent Court ruling, which set vague guidelines as to what constitutes an attempt to overthrow the monarchy. This ruling set into motion this Election Commission announcement, which will bring about the end of the Move Forward Party. This does not mean that it will not continue in some other form, but it will upset the balance of the Parliament in the short term and down the road. That is the biggest consequence if there is no judicial reform at some point. The impact on opposition political parties will remain a key liability, as the ruling effectively eliminates healthy checks and balances in Parliament. Move Forward will just be the first, but not the last.
Given that the EU and European governments have greatly improved relations with Thailand since the 2019 elections, and especially since the new civilian government entered office last year, should European governments see the potential dissolution of the Move Forward Party as a step back in Thai democracy?
In some circles, European countries will see it as a setback to Thai democracy, but the question is, will they see it as a barrier to engagement with the Srettha government? Absolutely not. There are too many other security and trade-related concerns that pragmatically take priority over normative ones, such as the ongoing EU-Thailand free trade agreement negotiations. Europe also needs to make better inroads in the region—especially Thailand—to counter Chinese dominance both politically and in terms of security.
This month, Prime Minister Srettha Thavisin toured several European capitals to try to drum up economic support and investment, especially for his pet infrastructure projects. And, in Paris, he said he wants the EU-Thailand Free Trade Agreement to be wrapped up by the end of 2025. In general, do you think Thailand-Europe relations are so much on an upward trajectory that the Move Forward Party’s potential dissolution won’t impact relations?
This will not impact the EU-Thailand FTA, but Srettha is far too optimistic about completing it by 2025, as there is a huge minefield of issues that could derail the agreement. One of which is Srettha’s move to appease local fishermen by weakening regulations that were set in place to curb migrant human rights abuses in the fishing and seafood industries and to be in compliance with the yellow card warning issued in 2014.
Lastly, how do you think European governments and the EU should respond if Move Forward is dissolved?
Unfortunately, European governments will not change their relationship with Thailand as democracy promotion is secondary to entry into Southeast Asian markets, as relations with China have soured and the US Presidential election has worried leaders about a possible second Trump term. There will be cautious statements issued by select governments, certainly, but I’m not confident it will interrupt bilateral or multilateral EU-Thailand relations.