China’s “soft” diplomacy is aimed at increasing the country’s attractiveness and improving its image to increase its influence in the world and create favorable conditions for strengthening its economic positions by means of such political tools as culture, education, ideology, as well as trade and investment. According to the Chinese leadership, the country cannot become a great power without implementing the soft power policy.

However, according to the efficiency index (used to evaluate the impact of one state on other states), in 2016 China only ranked 28th in the world. However the index is much higher in South-East Asia. An opinion poll shows that most citizens (except for the Vietnamese) believe that China has a strong impact on other nations in the region, and a positive attitude prevails.

This fact is largely connected to China’s Soft Power policy, which should demonstrate its intention to secure peace and prosperity in the region by means of strengthening and expanding mutually beneficial cooperation with the neighboring states.

This is surely profitable for China. The country’s interests in South-East Asia are caused by ambitions for political and economic domination in Asia Pacific Region. The mechanisms of the soft power policy that are used for these purposes are dominated by economic tools that are aimed at increasing China’s attractiveness to South-East Asian countries, as well as winning their trust. China has become their major trade partner; it is increasing the volume of its investment in the neighboring countries and becoming their major donor, gradually pushing aside Japan and the USA from the leading positions.

The South-East Asian region has a number of advantages for securing China’s economic growth – it is rich in natural resources, has a large market for Chinese export products, is very profitable for investment and is well integrated into China’s New Silk Way project.

However, the South-East Asian states both enjoy benefits and suffer losses from the soft diplomacy of China. The benefits lie in the presented opportunity to gain access to the Chinese market and advanced technologies, and, most importantly, financial resources. But alongside the benefits gained from the expansion of good neighbor relations with China, the countries face certain risks.

Economic risks. The image of China as a generous sponsor of South-East Asian countries, as it seeks to present itself, can fade amid the loss of the countries’ competitive advantages in the conditions of China’s economic domination in the region. The preferential terms of Chinese loans tie them to buying Chinese equipment supplies, and even to using Chinese labor force when implementing development projects. The economic risks for small and middle-sized national entrepreneurships are growing, and representatives of the South-East Asian states openly declare it.

According to an opinion poll, China’s development pattern is perceived as the least attractive in the region due to the above-mentioned facts.

Political risks. Economic rapprochement with China in the countries with authoritarian regimes such as Cambodia and Thailand contributes to the strengthening of the positions of power structures and causes the growth of anti-Chinese sentiments that are used by the opposition in political struggles in countries with democratic forms of government, such as Indonesia and Malaysia.

At the regional level, the economic “bribery” of power structures, primarily in Cambodia and Laos, has helped China avoid forming a coordinated position of ASEAN on territorial disputes in the South China Sea.

Cultural expansion risks. While the use of economic tools of soft power is focused on states and private businesses, China acts differently to improve its attractiveness among the population – using mainly propaganda methods and live agitation, popularizing its culture. In this respect, the Chinese leadership relies not only on such traditional forms as mass media (radio, television, and print media), but also on Chinese tourists as bearers of Chinese culture and values.

In 2016, 18.6 million Chinese tourists visited the South-East Asian countries. Thailand is the most popular tourist destination. Tourism accounts for 11% of the country’s annual GDP. The question is whether these economic benefits are transformed into a positive image of China in the way its leadership desires.

Chinese tourists have a bad reputation in the South-East Asian countries. Despite the economic benefits, the locals are experiencing a cultural shock due to the mass inflow of Chinese tourists. The tourists are accused of rude behavior, ignorance and disrespect of the traditions of the host country. Thus, Chinese tourists are unlikely to contribute to a favorable attitude towards China.

This task has also been assigned to the Confucius Institutes meant to export the Chinese culture. China’s leadership believes that the country will increase its attractiveness if a greater number of people are acquainted with its culture and language. South-East Asian countries now host 41 Chinese educational institutions (most of them in Thailand: 13 Confucius Institutes and 11 Confucius classrooms), where their patrons are the royal family. Unlike Western countries, where the Confucius Institutes are often criticized by scientists and teachers, they are popular in Thailand, especially among those with Chinese roots, and these make up about 40% of the national population.

However, one should not exaggerate the importance of these educational institutions in the increase of China’s attractiveness in South-East Asian countries. Young people still prefer to receive higher education abroad in Australia, the United Kingdom, and the United States.

Although the opinion poll demonstrates the recognition of China’s positive impact on South-East Asian states, this fact does not exclude a similar opinion about other states – the USA, Japan, and South Korea, which are the major competitors of China in the region.

Today, with the new US President calling for a revision of US foreign policy in Asia Pacific Region, China has more chances to dominate in the region by means of the soft diplomacy tools, among other things. Meanwhile, China’s policy on the militarization of the South China Sea, territorial disputes with the South-East Asian states, and their own fears about the rapprochement with China, may prove an obstacle to this.

Natalya Rogozhina, Ph.D. in Political Science, senior research fellow at the Institute of World Economy and International Relations, the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook.“

 

Donald Trump overlooked the ASEAN countries in his pre-election campaign. His disregard of the actively developing region with a population of 625 million people and a total GDP worth 2.4 trillion dollars (the world’s seventh largest economy), which is playing an important role in the Asia-Pacific Region, is in stark contrast to Barack Obama’s policy of strengthening the USA’s position and influence here. The possible economic and geopolitical consequences of the election of the new US President for the region may only be assessed indirectly – judging by his pre-election statements. Considering them from the perspective of national security interests, the ASEAN countries acknowledge the risks of the new priorities of this superpower while hoping for the best.

The economic risks come from Trump’s statements on strengthening trade protectionism and the US refusal to participate in the Trans-Pacific Partnership (TPP), which may negatively affect the economic development of the ASEAN countries that are dependent (to various extents) on trade with the USA (249 billion dollars) and the foreign investment inflow. The possible economic loss is already being calculated in the event of the introduction of protection measures by the new US administration, which will reduce revenues from exports. According to the estimates by Deutsche Bank, Singapore may stand to lose 30% of its export revenues. Economic losses may be faced by Malaysia whose trade turnover with the USA came to 24 billion dollars in 2015, Indonesia whose exports to the USA are estimated at 16.6 billion dollars, and Vietnam whose major export market (30.5 billion dollars) is the USA.

It can’t be excluded that there will be reduced inflow of direct foreign investments into Southeast Asian countries, where the USA has invested 200 billion dollars. According to the report compiled by Credit Suisse, many businessmen and women may suspend the implementation of their investment projects until the US policy is clarified. For Singapore whose restricted domestic market is dependent on the inflow of foreign investments, primarily from the USA (in 2015 the USA investment exceeded Australia, China, and Japan’s combined tally of 11.5 billion dollars), the changes in the US foreign economic policy may have serious consequences. D. Trump, who opposed free trade, globalisation, and immigration in his election campaign, called Singapore one of the Asian countries that “were stealing jobs from the USA”.

Another such country is Vietnam, which, alongside with Singapore, Malaysia, and Brunei, is very dissatisfied with D. Trump’s plans not to join the Trans-Pacific Partnership, which they saw as a new opportunity to strengthen their positions on the global markets and a condition for the attraction of new investments. Therefore, this decision taken by the USA may severely hinder these countries’ economic interests forcing them to search for alternatives. However, these alternatives are not abundant. Firstly, they could expand trade relations with the European Union, Japan, India, and China. Second option would be strengthening intraregional economic interaction. The establishment of the Integrated Economic Partnership made up of 10 ASEAN countries, China, Japan, South Korea, India, Australia, and New Zealand, may contribute to this. This Trade Treaty initiated in 2012 is supported by China.

The strategic risks are related to D. Trump’s intention to cut US military and political presence in the region. Thus, the purely economic agreement Trans-Pacific Partnership acquires a political meaning for the Southeast Asian countries. Singapore’s Prime Minister considers the TPP “an unmistakable indicator of the region’s confidence in the USA.” For the US allies in Southeast Asia, the failure of the TPP agreement symbolizes the USA’s retreat from the region with corresponding consequences for their national and regional security with inevitable changes in the balance of power in favour of China.

Consequently, the Southeast Asian countries are losing their negotiation positions on the South China Sea issue. This may lead to two possible outcomes in the development of the geopolitical situation in the region – either closer interaction among the Southeast Asian states in the framework of ASEAN with development of a common position in the territorial disputes in the South China Sea, or the search for a compromise with China, which the President of the Philippines is already demonstrating. There is a third option that cannot be excluded – the Southeast Asian countries, deprived of the military and political assistance of the USA and fearing China’s dominance in the region, may choose the tactics of strengthening ties with regional players such as Japan and Australia in order to redress the balance.

Will the Southeast Asian countries be willing to introduce changes in their bilateral relations with the USA should D. Trump implement his pre-election promises? It seems that they will not. And that despite some countries in the region expressing their criticism of the new President. Malaysia’s leaders have announced that they “will extend cooperation with the new administration in order to ensure the continuation of bilateral relations and to protect Malaysia’s interests in the future.” However, Malaysia’s increasing tendencies towards Islamization in its domestic policy may force Prime Minister Najib Razak to act more carefully in the complex situation of entering into confrontation with the opposition as D. Trump’s anti-Islamic statements cause concern among the Muslim population of the country.

Indonesia’s leadership will have to weigh up economic benefits and political losses as it is trying to cool down anti-Trump feelings in the country that is under the threat of Islamization.

As for Thailand, the cooling in its relations with the USA that emerged after the military coup in 2014 has not affected their trade and economic links. Although Thailand has not joined TPP, it has expressed willingness to do so, which reflects its intention to use this treaty both for trade and economic and political purposes. In spite of the clear rapprochement with China, Thailand is trying to maintain balance in its foreign policy and it will try to normalize relations with the USA as D. Trump is expected to pay less attention to protecting human rights, which had become a stumbling block in US-Thai relations under Barack Obama. According to Thai experts, they should not harbour great illusions on rapprochement with the USA despite the fact that Thailand has historically been its strategic partner. Taking into consideration Trump’s statements on US isolationism in foreign policy, it can be expected that there will be less criticism against the military regime in Thailand.

The Philippines’ reaction to Donald Trump’s victory perhaps was the most enthusiastic as it is another strategic partner of the USA alongside with Thailand. The reason for this is evident – the disregard Rodrigo Duterte has towards the US criticism against his policy on combating drugs. As a consequence, Duterte’s personal enmity to Barack Obama transformed into anti-Americanism. This became apparent not only in his speeches, but in his intention to tighten the visa regime for Americans, and, most importantly, to reduce the US presence on the Philippines and limit bilateral military contacts.

In fact, this anti-Americanism has not affected bilateral trade and economic relations. The Philippines are too tied to the US market and US outsourcing companies. This fact increases the vulnerability of the Philippines’ economy to D. Trump’s possible actions to limit the offshore transactions of American companies, which, in his opinion, means the USA loses jobs. The economy of the Philippines may suffer great losses if there are changes to the US immigration policy. Currently, more than 4 million Filipinos live there (some of them – illegally). They account for one third of all money transfers to the Philippines. Thus, Duterte’s reckoning on Trump as on a guarantee that their bilateral relations will improve may fail to come true. There are also political risks. In an interview with Reuters, D. Trump noted that “the Philippines occupy a very important strategic position and R. Duterte’s to withdraw foreign troops from the country’s territory demonstrates a lack of respect for the USA.”

As of now, only general conclusions can be drawn in respect of the development trends of relations between the USA and the Southeast Asian countries. It will be clear later when D. Trump gives his statements specific content in US domestic and foreign policy. In any case, it is highly unlikely that there will be great changes in the nearest future.

Natalya Rogozhina, Ph.D. in Political Science, senior research fellow at the Institute of World Economy and International Relations, the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook.“

The fight against terrorism is increasingly a key issue for all countries, and it is quite natural that it has drawn the attention of the participants of the 8th BRICS summit. However, India has a particular interest in focusing attention on it after terrorists from the radical group  “Jaish-e-Mohammed” (“Army of Mohammed”) committed attacks on the Indian infantry battalion garrison near the town of Uri, 10 km from the Line of Control in Kashmir on September 18th. India held Pakistan responsible for the deaths of 18 Indian soldiers, and claimed that it supports these terrorists. On Twitter, Rajnath Singh, the Home Minister, described the attack as a cross-border invasion of militants trained and armed by Pakistan, and called it a “terrorist state.” Speaking at the 71st session of the UN General Assembly, the representative of India raised the issue of Pakistan’s support for cross-border terrorism, which has both a regional and global impact.

India responded to the terrorist attack with surgical strikes on their bases in the Pakistan-controlled part of Kashmir, which destroyed seven militant hideouts and killed more than 35 extremists. Despite protests from Pakistan, the world community has not condemned India’s actions.

Relations between the two countries have entered a new round of confrontation that has also involved the BRICS countries. The problem of terrorism brought up by  Narendra Modi at the summit (which was condemned by Pakistan) turned out not to have such a simple solution as it affects the interests of other members of the organization, especially Russia and China. At the opening of the meeting, N. Modi said: “In our region, terrorism poses a grave threat to peace, security and development. Tragically the mothership of terrorism is a country in India’s neighbourhood. Terror modules around the world are linked to this mothership. BRICS must speak in one voice against this threat.” Earlier at the G20 meeting on September 5th, N. Modi called for the isolation and punishment of those who sponsor or support terrorism.

Thus, when discussing the issue of terrorism, the BRICS countries de facto had to answer the question of who they support more: ­India or Pakistan in their struggle for leadership in South Asia.

In spite of the Russia-Pakistan joint military exercises carried out shortly before the summit, N. Modi decided not only not to focus attention on this issue but put every effort into winning the support of Russia, which he called “old friend” (in Russian), and expressed his appreciation for the unequivocal condemnation of the terrorist attack on an army garrison in Uri. In the
Joint Statement issued following the visit of Russian President Vladimir Putin to the Republic of India on October 15, 2016, the parties  stressed the need to avoid the emergence of ‘safe havens’ for terrorists. Although the wording is rather vague and does not point directly to Pakistan as a ‘safe haven’ for terrorists, India was satisfied with it. While answering the journalists’ questions about military ties between Russia and Pakistan, the Deputy Foreign Minister of India Subrahmanyam Jaishankar said that Russia would not do anything that could harm India’s interests. There is full understanding between Russia and India. At the summit, this was actually proved by the strengthening of the military-technical and economic cooperation between the two countries.

As for China, its position regarding the involvement of Pakistan in the terrorist attack to India, was announced even earlier, when it blocked the Indian proposal to include  Masood Azhar, the leader of the Pakistan-based Jaish-e-Mohammad, into the list of international terrorists, declared illegal by the UN. India considers him responsible for a series of terrorist attacks in the country including the attack of December 13, 2001 on the Parliament and of January 2, 2016 on the Pathankot Air Force Station.

The issue, of course, is not about Masood Azhar. As it was officially announced, “China opposes all forms of terrorism. Double standards in combating terrorism should be abandoned. However, it is also unacceptable to use the fight against terrorism as a pretext for political purposes.”

China is governed by purely pragmatic economic and political considerations underlying its rapprochement with Pakistan. Politically, China wants to use Pakistan as a geopolitical player, able to resist the growing influence of India in South Asia, and as a link with the Islamic world. Expansion of military cooperation between India and the United States also causes concern among the Chinese leadership as it could adversely affect China’s plans in the Indian Ocean. In addition to the geopolitical rivalry between China and India, the fact that India provides protection to the Dalai Lama is a further irritant to their relations. Pakistan is also of economic interest to China in terms of the realisation of its ambitious initiative, “One Belt, One Road”.

Although N. Modi tried to persuade Xi Jinping that India and China, as ‘victims of terrorism’, should not conduct different approaches to counter it; the Chinese leader acknowledged the growing threat of terrorism and condemned all its forms in his 10-minute speech at the summit, however he limited himself to stating the need to strengthen dialogue on security and partnership in the region. China’s position on Masood Azhar remained unchanged.

India’s attempts to politicise the issue of terrorism at the BRICS summit in order to isolate Pakistan politically as a country “which provides havens for terrorists and arms them” failed. The leaders of the five countries reasonably remained neutral and demonstrated political foresight, in order not to aggravate the situation in South Asia which may be used by the terrorists to enhance their activities.

Natalya Rogozhina, Ph.D. in Political Science, senior research fellow at the Institute of World Economy and International Relations, the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook.“

There are many facts that prove that the countries of South-East Asia are now facing the threat of the spread of radical Islamism and increased violence as a result. Over the last year, explosions occurred in Indonesia and Thailand, and terrorist attacks were planned in Malaysia and  in Singapore. These acts of terrorism are performed by the followers of ISIS ideology (the terrorist organization prohibited in Russia), which is persistently spreading its influence in the region by recruiting followers that are ready to take up arms, lead a war in the Middle East conflict zone and join ISIS in its fight against its enemies in the region. As the Prime Minister of Singapore Lee Hsien Loong announced in 2015, “South-East Asia has become the centre of terrorist recruitment for ISIS. The threat of terrorism in the region is not a problem of the future, it exists in the here and now. Terrorist groups are taking advantage of every opportunity to obtain, transfer and make use of funds.”

Identifying sources of terrorism financing in South-East Asian countries (Indonesia, Malaysia, Singapore, Thailand and the Philippines) has become the subject of analysis conducted with the support of Australia. It has resulted in a report presented for consideration at the international conference on combating terrorism that took place in Bali in late August 2016.

The most important and  most dangerous source of terrorism financing in the region is “self-financing”. This channel of support for terrorists is expected to be key over the next five years. It is especially of particular significance in cases of financing “lone wolves” inspired by ISIS ideology. They may include both militants who returned from the combat zones in the Middle East, and radical Muslims who carry out acts of terrorism alone without affiliation to a particular terrorist organization. According to the Prime Minister of Singapore, “these lone wolves (individual terrorists) may attack at any moment using any available means.”

Carrying out a terrorist attack is not expensive, thus, the risk is growing that these individuals would use their own funds without being detected. As the Justice Minister of Australia Michael Keenan noted, “Their financial activity may resemble ‘legitimate’ financial transactions or worse, remain virtually indistinct when self-funded.” The act of terrorism in Nice is a clear example.”

Self-financing has sustained the activity of the largest terrorist organization in Indonesia  Jemaah Islamiyah  and its subdivisions in Singapore. Members of the organization donated 5% of their income every month.

Taking into consideration all the difficulties of carrying out preventive measures in order to disclose this source of terrorism financing, the financial intelligence of the region is monitoring any financial operations that arouse suspicion.

Non-profit organizations  are an equally important channel of financing for terrorists. Though the analysis of the sources of terrorism financing conducted by ASEAN has only identified individual cases of non-profit organizations participating in the support of terrorist groups, nonetheless the risk of their interaction is rather high (with the exception of Singapore) as NPOs are able to allocate great sums of uncontrolled funds. Some NPOs in Thailand are financing propaganda campaigns to support extremists acting in the Muslim south of the country. In the Philippines, NPOs are redirecting unused funds donated for the construction of public housing to terrorists.

Taking into account these facts, ASEAN countries face the task of unmasking potentially dangerous NPOs owing to their interaction with terrorists in order to close this channel of financing. Malaysia has conducted a similar risk assessment of NPOs activities. It carries out a tough anti-terrorism policy, which includes monitoring the behaviour of all persons suspected of links with terrorists.

In recent years, terrorists in the region started to use finance channels such as fund raising via social networks and attracting funds from individuals in on-line communities. Shortly before the attack in Jakarta in January 2016, an Australia citizen sympathetic to jihadists sent 500 thousand dollars to Islamist groups in Indonesia. According to the finance intelligence service of Indonesia  PPATK, foreign sources were the origin of the 763 thousand dollars allocated to support terrorists in 2014-2015.

Responding to calls from the jihadists, people sympathetic to them transfer funds to their accounts on-line, which then are collected and forwarded to terrorists via official channels or bank or wire transfers. Indonesia and Malaysia assign these risks of terrorism financing the highest category. Monitoring these financial transactions and the identification of both the sources and recipients of the funds require the exchange of data between the states in the region and their close interaction with private entities. According to experts, this system of terrorism financing in the region has the potential to expand.

Experts also consider donations from individuals in the Middle East countries to charity, for the development of religious education and implementation of the infrastructure projects as potential sources of financing. Part of these legally allocated funds may be re-oriented towards propaganda for a jihad and the support of terrorist organizations.

Terrorists often use legal channels such as banks and money transfers to carry out transactions as in the case of the funds transfer from the Malaysian extremist group to their counterparts in the Philippines. In the Philippines, the ransom payments to terrorists for hostages is often carried out through banking systems. To conceal the true recipient of funds, terrorists use the services of third parties.

Militants from South-East Asia heading to the Middle East or returning to their motherland use the “automatic teller” system to withdraw cash with the help of a smart-card (a.k.a. electronic purse), which can be remotely topped up by a third party, and the funds can be withdrawn from any place where the corresponding terminal is available. As a rule, terrorists use legal financial channels to carry out small sum transactions.

The Hawala system, which is found widely throughout the world, serves as an alternative. It allows terrorists to transfer funds between countries without using a bank and the risk of being detected. The security bodies of South-East Asian countries do not know the exact sum of funds transferred by extremists using this method as the system is not transparent. There are instances that confirm the use of this system by terrorists to transfer funds to Indonesian students who study in the Middle East. It is reasonable to believe that a ransom for hostages held by radical Islamists in the Philippines would be paid in the same way.

Express delivery service is another popular way to deliver funds and valuables (gold, precious jewels) from one terrorist organization to another. The efficiency of this terrorism financing system is secured by the low level of risk of the funds allocation channel being detected. A courier who delivers a small sum of money is not obliged to declare it while crossing the border if this sum does not exceed 8-20 thousand dollars.

The free cross-border movement of funds between the countries in the region is facilitated by their territorial proximity, transparent borders, and the existence of a network of smugglers that smoothly operates. According to the authors of the report “Regional risk assessment of the financing of South-East Asia and Australia region. 2016.”, “terrorist groups in the region use verified networks of financial smugglers and, apparently, this channel of terrorism financing in the region will only continue to expand.”

Criminal activity generates the highest income for terrorists in the countries of South-East Asia today. In Indonesia, ­ this primarily means bank robbery, cyber and hacking attacks, ­ in the Philippines – illegal arms and drugs trafficking, human trafficking. But most funds are obtained by terrorists in the form of ransoms for hostages. Islamists acting in the south of Thailand sell stolen cars and oil, but they often restock their finances by extorting money from other criminal groups.

As for the direct financial support of terrorists in South-East Asia by ISIS, there is no data that confirm the financial interaction between them. Nonetheless, we may suppose that the act of terrorism in Jakarta in January 2016 was carried out under the financial support of this international terrorist organization. The probability that it will invest more and more funds in the creation of its terrorist base in the region remains rather high.

As history of its development demonstrates, the peculiarity of the modern terrorism in South-East Asia is the use of various channels of financing, which complicates the fight against it. It requires the strengthening of collaboration between the countries and the establishment of close cooperation with private entities.

Natalya Rogozhina, Ph.D. in Political Science, senior research fellow at the Institute of World Economy and International Relations, the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook“.

The recent referendum on Britain’s exit from the EU has caused concern around the world, including the countries of Southeast Asia. This is not surprising, given the high level of their integration into the world economy, which was stirred up by the results of the last vote. This prompted ASEAN countries to evaluate the possible consequences of this event from the point of view of their national and regional security interests, while maintaining caution in predicting the development of the situation.

Indonesian experts are of the opinion that Brexit will not have a direct impact on the country’s economy in the near future, taking into account the small volume of trade turnover between the countries, which amounted to USD 2.35 billion in 2015 compared to USD 31 billion with Japan and USD 24 billion with the United States. Indonesian exports to the UK in the same year were not higher than 1% (USD 1.5 billion) of their total exports, which amounted to USD 150 billion. That same year, British investments in the country amounted to USD 503.2 million. However, the protracted political crisis in Europe can have a serious impact on Indonesia’s economy, particularly in terms of reducing the export of raw materials to the EU and the inflow of foreign investment. Possible risks for the stock market are also being evaluated. According to the country’s Minister of Foreign Affairs Retno LP Marsudi, much will depend on the outcome of the pending agreement between the UK and the EU, including the fulfillment of a number of agreements relating to Indonesia, such as the Comprehensive Economic Partnership Agreement (CEPA), Forest Law Enforcement, and Governance and Trade Action Plan. Indonesian economist Winarno Zain believes that the forecasts made in the country’s budget with regards to the growth of GDP, currency exchange rates and oil prices will require adjustments given new political realities in the world.

The Prime Minister of Singapore Lee Hsien Loong called the vote in the UK “a turning point” and urged the government to closely monitor the development of the situation, since nobody can currently imagine all the implications of the decision made by the people of the UK. Singapore’s greater focus on Brexit is due to the fact that it is linked to the UK economy to a much greater extent than the other ASEAN countries. The exports to the UK, mainly services, generate 2% of GDP. Singapore is the largest trading partner of the UK in Southeast Asia, ranking fifth in the list of the countries that are not members of the European Union, and the fifth largest market of service exports outside the EU.

The impact of Brexit on its economy may manifest itself in a reduction in the cost of the local currency, a slowdown in exports to Europe, and a loss of profitability of local companies. The UK accounted for three quarters of Singaporean investments into the European Union, mainly in property, infrastructure and regulated assets. However, in general, the loss of Singapore will depend on the damage inflicted on the European market by a British exit from the European Union.

Recognizing the importance of economic and trade relations with Singapore, British High Commissioner Scott Wightman tried to put local businessmen at ease, assuring them that both countries will remain important business partners. He stated that “there is no reason to think that the decision made by the people of the UK would affect the country’s attractiveness for Singaporean investments, as well as the attractiveness of Singapore for English investments.” Currently, 1000 UK companies are operating on the Singaporean market.

And yet the attitude of Singapore towards the referendum is not unequivocal, as evidenced by the comment made by Prime Minister Lee on Facebook: “We all live in a globalized, interdependent world. The desire to disengage, to be less constrained by one’s partners, to be free to do things entirely as one chooses, is entirely understandable. And yet in reality for many countries disengaging and turning inwards will likely lead to less security, less prosperity, and a dimmer future.”

The position of the Philippines regarding Brexit was clearly formulated and announced by Sergio Ortiz-Luis, President of the Chamber of Commerce: “If Brexit affects the US, it will affect the Philippines.”

The Prime Minister of Malaysia Najib Razak made an official statement following the results of the referendum held in the UK, having called the decision “historic”, but with “unpredictable consequences”, and assured the business community that relations between the countries would not be changed. Malaysian economists believe that the national market is able to adapt to changing external economic and political situation, but the long-term consequences of Brexit today are difficult to be assessed in their entirety, despite the fact that Malaysia trade turnover to the UK accounts for only 1%. According to the Minister of Trade Mustapa Mohamed, Malaysia, which has been conducting free trade negotiations with the European Union for a long time, might use the situation in its own interests and expedite the signing of the corresponding Treaty with the UK. What entrepreneurs in Malaysia fear the most is a possible split from the European Union and reduction in the rate of economic growth should other European countries follow the UK’s example. The consequence could be a reduction in Malaysian exports by 10.1%.

In Thailand, experts believe that Brexit may lead to a reduction in the number of tourists from the UK and European countries as a whole within the next three months in connection with the change in the exchange rates. Last year, Thailand was visited by 5.6 million Europeans, of which 946,000 were residents of the UK. As for a decline in the value of securities and the exchange rate of the baht, according to Veerathai Santiprabhob, Head of the Bank of Thailand, this process will be stabilized in the near future, and the government is keeping the situation under its full control. Experts do not foresee major changes in the field of foreign trade, since the UK share in the trade turnover of Thailand amounts to only 2%.

For Vietnam, which is an active trade partner of the European countries (the second largest export market after the United States), the British exit from the EU could lead to a decrease in its exports. The reason being the change in the exchange rates and reduction in the competitiveness of Vietnamese exports. The volume of exports made to the UK could decrease by 10%, or by USD 460 million (in 2014, it amounted to USD 4.6 billion). Vietnam’s foreign economic position may be worse off should Brexit bring about a deterioration of the financial market of China, which the economy of Vietnam is strongly tied to. In this case, as noted in the report prepared by Vietcombank following the results of Brexit, the Central Bank may not have enough funds to maintain the exchange rate of the Dong. As a result, Brexit may damage the country’s investment and stock markets.

However, according to some experts in the region, the British exit from the European Union may provide the ASEAN countries with a number of advantages in terms of creating favorable conditions for the conclusion of agreements on free trade and attracting investments from the UK that will strengthen economic and trade relations. Even today, most Southeast Asian countries consider the UK as their strategic partner. Nevertheless, it is currently only possible to give rough estimates of the impact of Brexit on the economy of the Southeast Asian countries, which will be adjusted to reflect the new relationship between the EU and the UK.

Natalya Rogozhina, Ph.D. in Political Science, senior research fellow at the Institute of World Economy and International Relations, the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook“.