Rising Political Risk in Asia

As the world continues to gyrate from the political paradigm shift under way with the rise of ‘alternative’ political movements, many countries will struggle to adjust to the ‘new normal’. For developing nations and emerging markets, the stakes are particularly high as, in many cases, their ability to continue to grow economically and maintain social order will depend on the continuation of a delicate balance between the rights of individuals, protection of domestic industries, minimizing income disparity, and maintaining security. Doing so becomes more difficult when the status quo elsewhere is in the process of being disrupted. Those governments that fail to anticipate the pace and depth of change may in the end fall. Several pivotal countries hold the key to how political change manifests itself in Asia in 2017 and beyond. Apart from the obvious influence of China, India, and Indonesia, some of the smaller and hitherto less influential nations may hold the key to just how dynamic political change in the region becomes. The Philippines has already proven that it can punch well above its weight by dramatically altering its political, security and military status quo. Its embrace of China has already succeeded in upending decades of bilateral and multilateral norms. Another country that has the potential to alter the landscape is Malaysia, which has also extended its hand to China. Under Prime Minister Najib Razak, the government’s simultaneous embrace of the country’s Pan-Malaysian Islamic Party raises question about whether it may ultimately adopt some elements of Islamic Law, which Indonesia is also in the process of doing. Will other countries that have had an historical orientation toward the U.S. change that, as the Philippines has done, and shift toward China? Will the embrace of some aspects of Islamic law in Malaysia and Indonesia result in an inexorable move toward Islamic law more broadly with time? Asia faces a number of key risks in 2017. If China were to overstep its bounds while flexing its muscles, widespread condemnation in Asia and beyond could result in heightened tension throughout the region. If the U.S. were to overcompensate for missing the mark in implementing its Asia Pivot and ramp up its military presence in the South China Sea – which the Trump administration threatens to do — that would also naturally heighten regional tension. Should North Korea successfully launch long-range ICBMs, a stern response from the U.S. is likely to result, and the threat of war could spiral out of control. If the Indonesian government fails to successfully manage its Muslim extremist groups, regional terrorism could rise. And if Myanmar’s ‘experiment’ with democracy proves to be a failure, all the progress that has been made could be lost, with the military reassuming control of the government and other democratic movements in the region losing impetus as a result. The continuing rise of economic nationalism is perhaps the biggest threat to cross-border trade, investment and lending in Asia. Since so many Asian nations depend on international trade to maintain economic growth, […]

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