Many Southeast Asian countries’ growth rates have been stripped to near zero by COVID-19, and leaders expect a crisis that could exceed that of the Asian Financial Crisis. The pandemic defined Southeast Asia’s diplomatic relations from March, with high-level meetings moved to video conferences. The US-ASEAN summit, scheduled for March 24, was postponed but no new date has been announced. With US elections ramping up and questions about the COVID-19 pandemic outstanding, a 2020 US-ASEAN summit appears unlikely.

In the early months of 2020 China escalated activity in the South China Sea, apparently taking advantage of the distraction the pandemic offers. Indonesia and Malaysia offered relatively robust responses, while the Philippines continued to be conflicted by President Rodrigo Duterte’s eagerness to forge stronger economic relations with Beijing. The United States stepped up maritime activity in the South China Sea, but Washington’s broader security posture in Southeast Asia could be in flux if Duterte follows through on his intention to terminate the US-Philippines Visiting Forces Agreement. A surprise political transition in Malaysia in February complicates that country’s ability to combat COVID-19; in several other states, emergency powers granted to governments to fight the virus could strengthen a recent upturn in authoritarianism. The virus also defined Southeast Asia’s diplomatic relations from March, with high-level meetings moved to video conferences. The US-ASEAN Summit, scheduled for March 24, was postponed but no date for a new meeting has been announced. With US elections ramping up and questions about the pandemic outstanding, a 2020 US-ASEAN summit looks increasingly unlikely.

China Surges, But Southeast Asia Pushes Back

The final days of 2019 and early ones of 2020 saw developments that could alter, however subtly, the dynamic between China and Southeast Asian countries on maritime disputes. Malaysia petitioned the United Nations Commission on the Limits of the Continental Shelf (CLCS) to extend its continental shelf. The petition was an attempt to stake Kuala Lumpur’s sovereign claims to the northern portions of the South China Sea waters, since Malaysia presently occupies five of the Spratly Islands and claims 12 altogether. Ultimately, it was a direct challenge not only to some of China’s claims in the Spratlys but also to its more sweeping claim of maritime rights according to its Nine-Dash Line.

The move represents a new assertiveness on Malaysia’s part; previously, Kuala Lumpur had preferred to contradict China’s claims in the South China Sea through inter-governmental protest notes that were not made public. The petition was also an attempt to raise the profile on international maritime law in the region and to mitigate the impact of the Philippines’ apparent rejection of its own victory in the 2016 UNCLOS decision. The petition broadsided China, which prefers to deal with Southeast Asian claimants on a bilateral basis. Apart from asserting Malaysia’s rights, Kuala Lumpur’s petition is an invitation for other Southeast Asian maritime nations—Vietnam, Malaysia, Indonesia, the Philippines, and Brunei—to join by acknowledging them as fellow claimants.

The second defining event in this new trend was outwardly more dramatic. In early January a flotilla of Chinese vessels—reportedly 63 fishing boats and two Coast Guard ships—crossed into the Exclusive Economic Zone (EEZ) claimed by Indonesia around the Natuna Islands. Jakarta’s response was brisk, deploying eight warships and F-16 fighter jets. Indonesian President Joko Widodo visited the area, boarding one of Indonesian naval vessels. The Chinese flotilla withdrew; the People’s Liberation Army Navy conceded that the fishing boats had taken fish from the EEZ and reportedly instructed them to withdraw from the zone, at least temporarily.

In the wake of the confrontation, Jakarta made two broad moves. First, Indonesia increased its invitation to major regional powers—specifically Japan, the United States, and South Korea—to invest in the fishing industry on Natuna. Oil and gas resources are also reportedly located in the EEZ. Second, the Indonesian armed forces, specifically the Maritime Security Agency, announced that it will establish a new maritime information unit to track and intercept vessels entering Indonesian waters illegally. This is likely to result in further episodes with China which, despite the outcome of the Natuna incident, will continue to employ gray zone fishing operations and probe for weak spots in Southeast Asian EEZ’s.

Neither Malaysia’s petition nor the Natuna incident appeared out of the blue: both were reactions to steady incursions by China into the two countries’ territorial waters. Chinese assertiveness—and Southeast Asian maritime tensions with China—are spreading beyond the Spratly Islands and into the EEZ’s of Southeast Asian countries (Indonesia, for example, does not make claims on the Spratlys). More Southeast Asian countries could be drawn into maritime conflict with China.

Nor has China abandoned its traditional maritime battlegrounds, particularly as the COVID crisis has spread across the region and governments become more inward-looking. In April Chinese vessels rammed and sank a Vietnamese fishing boat near the Paracel Islands, an action that drew rare criticism from the Duterte administration. China also announced that it would establish new “research centers” on some of the disputed islands it has militarized.

US Alliances: Rollercoaster Relations

In response to greater Chinese maritime activity, in April the United States conducted a series of operations, ranging from deployment of warships into Malaysian waters to fend off Chinese ships tailing Malaysian oil exploration vessels to joint sorties of bomber jets over the South China Sea from the US Indo-Pacific Command and the US Strategic Command Bomber Task Force.

These actions were intended to reassure Southeast Asian security partners, but longer-term alliance management proved more complicated for Washington in early 2020. The annual Cobra Gold exercises in late February and early March, co-hosted by Thailand and the United States, celebrated the return of full US-Thailand security relations after a five-year period of restricted ties after the 2014 coup. Cobra Gold continued during this period at reduced but at reduced strength; full exercises were restored in the 2020 exercises, following Thailand’s return to elected government in 2019.

Figure 1 An amphibious beach landing at Hat Yao Beach, Thailand, during Cobra Gold 2020. Photo: Staff Sgt. Jordan E. Gilbert, United States Marine Corps

However, on February 11 Philippine President Rodrigo Duterte made good on a longstanding threat and announced that his government would terminate the US-Philippine Visiting Forces Agreement (VFA), a major element of the US-Philippine security alliance, although by no means the entire alliance. The proximate cause of Duterte’s decision was his ire over the US visa ban on Ronald dela Rosa, a Philippine senator and former police chief who led Duterte’s infamous war against drug dealers. Tensions were exacerbated when the US Congress passed a resolution in January pushing for sanctions against Philippine officials involved in the detention of Senator Leila de Lima, a noted critic of Duterte’s drug war.

There are, no doubt, deeper reasons for Duterte’s decision, focused more broadly on the US-Philippines Mutual Defense Treaty (MDT). One is continued uncertainty over the extent to which the United States would defend the Philippines in the event of an attack, more specifically if its fishing vessels were attacked by China, a frequent occurence. In addition, Manila has periodically expressed discontent that the terms of the alliance do not mirror the status of forces agreements the United States has with Japan and South Korea, particularly on jurisdiction of US troops on Philippine soil. These concerns are deeply rooted and shared across the Philippine defense community: even defense officials who staunchly support a strong relationship with the United States have recently pressed for a re-examination of the alliance.

President Trump’s response to Duterte’s announcement was one of seeming indifference—primarily that terminating the VFA would be cost-saving for the United States—but Secretary of Defense Mark Esper expressed concern, albeit in low-key terms.

Under the terms of the agreement, the VFA cannot be terminated until 180 days, or six months, have passed after one side files formal notification of intent to terminate. If Duterte stays the course, this would put the end of the VFA at Auugust 11, 2020. However, he can reverse course and withdraw the notice any time before that. His decision to terminate the VFA was the first step in an assumed two-step process, the other step being to build stronger security relations with China and Russia. In mid-February the Philippine government acknowledged that it was discussing a joint military technical cooperation agreement with Russia.

However much they might like to revise the alliance, there is little support for terminating the VFA among most Philippine military leaders. Nevertheless, the working assumption in Manila Philippine government is that the VFA will be cancelled. Its proponents hope that an arrangement similar to the VFA will re-emerge under a new agreement, although it may be necessary to wait until Duterte leaves office in 2023. Most important, the VFA provides authorization for US support to counter-terrorism operations on Philippine territory. The six-week siege of Marawi City in 2017 was a reminder of the active threat of extremist insurgency in Mindanao, which has not abated even as the coronavirus has immobilized other aspects of Philippine life.

Mahathir Miscalculates

In February new Malaysian Prime Minister Muhyiddin Yassin came to power unexpectedly, when his predecessor Mahathir Mohamad launched a failed attempt to reshuffle his Cabinet. As his Pakatan Harapan coalition collapsed, the 94-year-old Mahathir abruptly resigned, expecting to return to his ruling position with a new, hand-chosen Cabinet. In doing so, he aimed to avoid handing power over to Anwar Ibrahim—since the 1990s, alternately Mahathir’s political rival and ally—which, as part of an arrangement that brought Mahathir to power in 2018, he had promised to do sometime in 2020.

However, Mahathir’s ploy backfired. To cut short the growing political chaos, Sultan Abdullah Ahmad, polled the Parliament and, by a narrow margin (113 of the 222 MPs), determined that a majority of members were inclined to back Yassin, a former deputy prime minister during the prime ministership of Najib Razak (2009-2015), who is currently under charges of corruption related to the 1MDB scandal. Muhyiddin was duly appointed prime minister and inaugurated on March 1.

Legally, Muhyiddin’s term extends to September 16, 2023, when general elections must be held, but Muhyiddin’s appointed status will eat away at his political legitimacy if he does not call elections before that. Moreover, his tenure could be short if he does not ease major challenges and crises facing Malaysia: slowing the spread of the coronavirus and implementing a quick economic recovery afterward; dealing with the prosecution of top United Malays National Organisation (UNMO) officials for the 1MDB scandal; and maintaining communal equilibrium and security in the face of continued threats from the Islamic State and other jihadist groups.

This last challenge could be undermined by Muhyiddin’s role in race-based politics. He is a sworn advocate of the Malay Muslim community in Malaysia, and his appointment has stirred discontent in more liberal quarters that favor greater ethnic and religious harmony over the embedded racial and religious identities that defined Malaysian political parties. Muyhiddin’s picks for his Cabinet only underscored their uneasiness: the largest Cabinet in Malaysian history with 68 members, it is dominated by ethnic Malay men.

Myanmar Drifts Closer to Beijing

Another major political event in Southeast Asia in 2020, albeit an anticipated one, will be general elections in Myanmar at the end of the year. Aung Sang Suu Kyi’s National League for Democracy is expected to retain its majority, although with a smaller margin. However, in contrast to 2015, Suu Kyi enjoys far less favor in the West, primarily because of the plight of 1 million Rohingya refugees still in camps in Bangladesh.

In January, Myanmar suffered another blow to its international reputation when the International Court of Justice issued a provisional order in the case brought by The Gambia charging the Myanmar armed forces with genocide against the Rohingya in the 2017 crackdown in Rakhine State. The order requires the government to take measures to prevent further genocidal acts against the Rohingya while the case proceeds. In her testimony before the ICJ at The Hague in December 2019, Suu Kyi argued that the government had already taken steps to bring abusers in the 2017 crackdown to account, and that external pressure would be counter-productive. Facing re-election this year, her government is unlikely to make major moves against the armed forces, not least because Myanmar’s Buddhist majority has little sympathy for the Rohingya.

Napypyidaw’s present estrangement from the West opened an opportunity for Beijing, and in mid-January Chinese President Xi Jinping made an official visit to Myanmar, his first-ever visit to the country in his capacity as president and the first Chinese head of state to visit in 20 years. He met both State Counselor/Foreign Minister Aung Sang Suu Kyi and Tatmadaw Commander-in-Chief Min Aung Hlaing. In recent years Xi has made high-profile visits to smaller countries of the region, particularly those with geostrategic positions that are key to China’s sweeping plans to transform transportation networks to their advantage; for example, Xi visited Laos in 2017.

Apart from capitalizing on the political moment, Xi hoped to strengthen Chinese-Myamar partnership on infrastructure development, and more specifically to move some high-profile, stalled projects. In this regard, he scored some successes but also met with disappointment. In all, Xi was able to sign 33 documents—ranging from agreements to MOUs—on infrastruure projects as well as other investments, and on trade. By far, the prize in this process was a pair of documents—one a concessional agreement and the other a shareholders’ agreement—to move forward on the Kyaukpyu Special Economic Zone and the all-important deepsea port project.

However, any mention of the Myitsone Dam project was conspicuously lacking in the final joint statement or in other documents. Public opposition to the dam has, if anything, grown: 40 civil society groups have issued a public statement calling for permanent cancellation of the project. Myanmar is still indebted to China for the partial cost of the Myitsone project, but no discussion on this issue between the two countries has been made public.

Figure 2 Chinese President Xi Jinping meets State Counselor Aung Sang Suu Kyi during his visit to Myanmar January 17-18, 2020. Photo: Damir Sagolj / AFP

The Virus Upends—and Ends?—the ASEAN Growth Spurt

Like many governments, Southeast Asian administrations underestimated the gravity of the COVID-19 outbreak, and their initial responses were hesitant. Although the region still has a low number of cases relative to Europe and the United States, infections are rising. Moreover, governments that historically pride themselves on tight social order—particularly Singapore—are discovering that even their best efforts cannot fend off a second wave of COVID-19.

Statistics across the region fluctuate rapidly, but by the end of April Singapore had the largest number of cases in Southeast Asia, exceeding 17,000, primarily because of its large number of migrant workers. Indonesia was in second place with over 12,000 cases and the Philippines third with approximately 10,000. Malaysia had over 6,500 cases and Thailand half of that, with 3,000.

Only Vietnam appears to have steadily held down their case numbers , with fewer than 300 cases and no deaths as of the end of April. Hanoi was quick to declare a nationwide epidemic and tamp down celebrations for the Lunar New Year. Employing techniques it had developed in the 2004-05 SARS epidemic, the central government stressed public information and mass mobilization against the virus.

But the economic impact of COVID-19 promises to be devastating, and reminds Southeast Asian leaders of the cost of dependence on a single trading partner, in this case China. In both China and Southeast Asia, consumer demand has fallen as populations are sequestered in their homes and, particularly important, not able to travel and support tourism. The closure of borders has greatly slowed border trade; mainland Southeast Asian countries that have borders with China (Vietnam, Laos, and Myanmar) are particularly affected by this loss of revenue. The China-Southeast Asia supply chain has broken down in many places. In Cambodia, for example, garment factories are not able to source raw materials from China. The government estimates that as many as 200 factories could close, with over 100,000 workers unemployed.

The more developed ASEAN countries have followed similar paths in their responses to the COVID crisis in the face of plummeting economic growth rates: stiumulus packages that attempt to shore up businesses (particularly medium and small enterprises); tax incentives; the postponement of debt obligations; lowered interest rates; and central bank purchases of government bonds. The swift outflow of capital has caused markets to fall rapidly and depreciated exchange rates. Stock markets in Indonesia, the Philippines, Thailand, and Vietnam have lost at least a quarter of their value, with Vietnam’s down nearly 30%. Growth rate projections for the year have fallen by as much as 4% in many countries.

Southeast Asian leaders hope to recoup some of this economic loss with greater diversification of international investment away from China to other destinations, the intensification of a trend which began with the US-China tariff war of 2018-19. However, this is a long-term bet, since many of the stimulus packages of the major economies, such as the United States and Japan, are more focused on bringing production back to their own shores. In the near-term, Southeast Asia will have little choice but to hope that it can quickly revive its supply chains with China.

The COVID crisis also calls into question Chinese infrastructure and other investment projects under the Belt and Road Initaitive (BRI). Beijing has currently suspended the BRI because it cannot be assured of the labor force and logistics of continuing projects, adding to Southeast Asian (and Chinese) unemployment. Work on China’s signature project in mainland Southeast Asia, the China-Lao Railway has halted for the time being.

Once the COVID epidemic has abated, it is widely assumed that most projects in progress will resume. However, if the economic damage to China from the virus is significant enough, cash and credit from Beijing will not be as plentiful as it was previously. This would likely lead China to triage projects, ditching those that are less promising and retaining those with greater economic or strategic value.

ASEAN Responds

With most national borders in Southeast Asia closed and populations (particularly in urban areas) under lockdown, ASEAN was caught flat-footed by the coronavirus. Until April, member states were primarily content with releasing statements of concern and vows to cooperate. Hanoi, the 2020 ASEAN chair, was forced to postpone the first ASEAN Summit of the year, originally scheduled for April; it has been tentatively scheduled for June, but that date may slip. No decisions have been made on the form and timing of the ASEAN Regional Forum, usually held in the late summer, or the East Asia Summit, the final event of the ASEAN annual cycle, usually held in the fall.

Virtual bilateral and multilateral consultations among ASEAN members states about the virus have been frequent since the outbreak, but the content was confined to information about the spread of the virus and best practices in responding to it. Foremost in the minds of many governments was the need to coordinate short-term fiscal policy so as not to exacerbate economic distress in the region.

But no new initiatives to fight the virus and its economic aftermath were discussed until the ASEAN Special Summit on COVID-19, organized by Vietnam on April 14. The primary deliverable of that meeting was to establish the ASEAN Response Fund (ARF), to enable member states to pool sme resources for collective action and, arguably more important, to provide a vehicle for foreign donors. The immediate aim of the ASEAN Response Fund is to create a regional stockpile of medical supplies.

In the near-term, ASEAN intends to boost e-commerce where possible; strengthen cooperation among defense sectors to facilitate the movement of medical assistance, particularly to remote or border areas; and to improve the exchange of medical data on the coronavirus. This last objective could prove both difficult and controversial, since a lack of transparency on confirmed cases and deaths—particularly in Indonesia, Myanmar, Laos, and Cambodia—led to initial denials that governments were force to walk back.

ASEAN has also looked to its external partnerships and frameworks for assistance in fighting COVID-19. A particular draw is the ASEAN-Plus-Three (APT) group, comprised of the 10 ASEAN member states plus China, Japan, and South Korea. Beijing is a major player in the group, but is more than balanced by Tokyo and Seoul. Thus, Southeast Asian leaders are more safely able to raise issues of concern that may involve (or even cast criticism on) China than they would be if they were dealing with Beijing alone. Moreover, since trade, tourism, transportation routes, and migration connect Southeast and Northeast Asia to an increasing degree, the APT offers an opportunity for ASEAN to extend its own networks and frameworks. For example, ASEAN plans to enlarge its stockpile of medical equipment with an APT Regional Reserve of Medical Supplies.

ASEAN welcomes stronger coordination and assistance from the United States on COVID-19, but not at any price. Thus far this year, the United States has provided slightly over $35 million in aid to Southeast Asia to combat the virus. As it has with the three APT countries, as well as with the EU, ASEAN made its pitch to Washington for a contribution to the ASEAN Response Fund. However, the joint statement of the April 23 virtual ASEAN-US Foreign Ministers Meeting reveals that Washington pressed ASEAN to join it in demanding that China shut down its wildlife wet markets. ASEAN leaders have expressed frustration, even anger, over the possibility that China initially withheld information on the virus outbreak, but they view public efforts to censure or punish Beijing for it as counter-productive, particularly if those efforts are led by the United States. Billed as a special meeting to discuss the coronavirus, the ASEAN-US Foreign Ministers Meeting suggests that, for the time being, US relations with Southeast Asia will be confined to fighting the pandemic and to further iterations of US-China rivalry.

Looking Ahead

Trade dependence on China may be a major contributor to economic pain in Southeast Asia, but the region’s leaders are not sanguine that they will be able to forge a new and more stable path out of that dependence in the near future. For that reason, ASEAN will lean more heavily on the ASEAN-Plus-Three framework, rather than on relations with either the United States or the European Union for economic recovery, unless the outcome of US elections this year enable a move away from the “America first” approach to trade.

Indeed, the elections and the need to manage the COVID crisis in the United States will make Washington even more inward-looking for the rest of the year, and diplomatic relations with the ASEAN region will lag further. That could slow or even suspend the process by which Duterte hopes to terminate the Visiting Forces Agreement, which would be an advantage for the US. However, the events of early 2020 signal a major challenge for the United States and Southeast Asia, post-virus and post-election, to define and possibly reshape their economic, security, and political relations.