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Politics Security International

CHINA Politics Economics Security International

SOUTH KOREA Politics

MONGOLIA Politics International

Politics

TAIWAN Politics Economics International

INDONESIA Politics Economics Security International

THAILAND Economy Politics International

MALAYSIA Politics Security International

PHILIPPINES Politics Economics Security International

AUSTRALIA Politics Security International

NEW ZEALAND

Politics Economics Security International

VIETNAM Politics Economics Security and International

LAOS

MYANMAR

PAPUA NEW GUINEA

EAST ASIA CHEAT SHEET

JAPAN Japan is the second largest economy in the world and a close ally of the United States. The country is slow in changing – its politics are log jammed, its economy is withering away, its population is withering away – but it is a major economy, a highly technologically advanced country and a key platform for projection of American power in Northeast Asia, and should never be ignored or underestimated. Throughout history it has been an earthquake society, in which change happens dramatically, suddenly, and totally transforms the country. We are essentially waiting for something like that to happen again in the coming decades. But don’t count Japan out in any way – it will continue to be an innovator in technology (cars, environmental products, genetics and pharmaceuticals, robotics), and especially significant is the gradual military rearmament that is taking place in response to security challenges from a rising China.

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Politics Japanese politics have been dominated since 1955 by one party, the Liberal Democratic Party (LDP) until August 2009, when the Democratic Party of Japan (DPJ) won a large majority in the lower house of the Diet. The DPJ was a party that began in rejection of the LDP – it therefore did not transition easily into leadership position. It consists of a relatively small group of politicians together from various backgrounds, most of them lacking leadership experience – therefore its ability to lead and its stability are in question, which was highlighted by its loss of majority in upper house elections in July 2010, though small step to consolidate power are taking place. The DPJ’s attempt has made an effort to create a new national strategy for Japan, which claims it wants to reform Japan’s fiscal situation, political system and international relations. The attempt to make Japan “more independent” from the US appears to have failed with the Hatoyama administration’s failed attempt to revise an agreement on the relocation of US marine base in Okinawa. Public finance reform by Prime Minister Naoto Kan through austerity has so far not been substantial and is likely to fail anyway. Seems more likely that DPJ will ultimately redirect government investment into different sectors rather than reduce it. The political system would be reformed by weakening the power of the career bureaucrats vis-à-vis elected politicians – the DPJ wants to break the “parallel system” by which the LDP bureaucrats ruled the LDP cabinet, and instead create a strong DPJ cabinet. This is a tough sell too, no movement so far despite DPJ being in power for over a year. Also the DPJ wants to increase Japanese influence in East Asia. This means attempting to take advantage of economic opportunities offered by China’s rise, though this reliance has caused downside exposed by political and diplomatic slowdown; form a trilateral free trade agreement and “Northeast Asian community” with South Korea and China; but especially renewing interest in Southeast Asia and other regions, boosting outward investment, exports of high-tech infrastructure, and trying to get momentum for FTA efforts. The fundamental facts of Japan’s politics remain in place: the government would have to make dramatic and decisive move to mitigate Japan’s economic problems and win more freedom of action, but it is far too gone for this to happen. Otherwise, economic and population decline will continue to constrain any party in power. However, the earthquake society theory suggests that Japan will see a renaissance at some point, so we always want to be on watch for it to hit rock

bottom, at which point it will rise in power. The rising strength of China is gradually putting more pressure on Japan and may be the trigger for snapping Japan, eventually, out of its drift.

Items to watch for:Signs of DPJ losing leaders, internal struggles, defectionsLarge protests are notable because they don’t happen too often Liberal Democrat Party (LDP) – watch for LDP revival, attempt to spark early elections.

Likely recovering of popularity will be based on national security grounds, criticizing the DPJ for being ‘weak’ and playing up China threat.

Revolving door prime ministers and cabinets (watch for reshuffles)Ichiro Ozawa – any sign he can recover political power despite mired in corruption scandalsJunichiro Koizumi – anything he says, any indication Corruption scandals - have a big effect on public perception of politiciansNational Strategy Ministry – created in 2009 by DPJ. Look to see if it does anything.Trimming bureaucracy – a DPJ policy cornerstone that, if it materializes, could have a major

impact on Japan’s political behaviorElectoral reform – new changes are possible. Reform was successful in 1990s. to shake up

rigidified districts and old gerrymandering, pave way for more changes to political system

Japanese investment in China – a very important trend in long term (see 2010-20 decade forecast). Watch not only investment, but challenges to Japanese business in China (such as strikes).

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EconomicsSince 1990, Japan’s economy has been in a funk, alternating between recession and miniscule growth, struggling with deflation, and seeing its national debt rise every year due to profligate government spending meant to sustain the economy. Public finances are crushing Japan (interest on the debt itself is one of the country’s biggest major expenses), as the government’s borrowing crowds out funds that could go to the private sector. Meanwhile the population is shrinking rapidly, leaving fewer young people to generate capital and more old people to soak it up in medical and retirement expenses. (And Japan is averse to immigration, a tendency that is particularly damaging in the current situation, though it is just conceivable that reform could happen someday to immigration policy.) As the risks mount of an eventual shortfall of purchasers of Japanese bonds, the government will eventually have to raise taxes and cut public programs, which will create enormous social dissatisfaction (in a country that rarely sees any outward sign of protest). Exports and the trade balance are crucial to watch, as this is the only area where Japan has any room left to grow (consumption maxed out in the 1990s and any change to this trend would be important to notice). If exports are strong, Japan can move along – an extended period of strong trade balances is its best hope. But if exports fail, as they have in 2008-9, then the country teeters on the verge of disaster. Also important to watch for increases in productivity that could counteract the trend of shrinking population, as well as innovation in new areas (particularly technology, health and medicine, education, environment, etc) that could drive new growth.

Economic issues to monitor closely:Monthly quarterly yearly stats and economic indicators Exports – performance of export sector crucial for economyImports – especially mineral fuels, raw materials and food (oil, coal, natural gas, liquid

natural gas, iron ore, other ores). Japan’s dependent on these. Disruptions would be especially important./ Rare earth elements (REEs) and squabbles with China over supplying them.

trade balance – deficits, esp any month other than Nov-Feb, are important. Fiscal policy, public budget -- stimulus packages, allocations to regions, infrastructure

projects, Any sign of moves to raise taxes or cut expenditures and reduce deficitsInterest rates – if they are ever raised, that is notableGovernment debt – bond issues, especially if investors aren’t buying or if prices are rising

dramatically. Pay attention also to new trends among buyers of Japanese government bonds (JGBs), such as China’s rising purchases.

Deflation – Consumer Price Index, etcNon-performing loans – growth rates, ratios, disposal of NPLs, etcLiquidity shortage – anything that suggests liquidity shortage anywhere is a red flagBankruptcies – especially affecting SMEsUnemployment – rising unemployment is also highly significant, Japan tries to avoid itDemographics – any major studies on population change, births, deaths, life expectancy, etc.

Any pro-fertility nation-wide policies enacted by governmentImmigration – any changes further constraining immigration, or promoting it and trying to

become more open to it, are relevantTax increases - consumption tax especiallyForeign currency reserves – increases; expenditures from; relation to US assetsUS dollar assets – buying more or notHigh-technology, green tech, genetics, robotics, etc

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SecurityJapan is constitutionally pacifist due to American demands after WWII and public consensus/culture to stay pacifist from one extreme. But since the 1990s it has been advancing the capabilities of its Self-Defense forces and preparing them for a greater role in international missions, while also becoming more capable of securing Japan’s crucial supply lines and reinforcing its territorial claims and defense against China. Japan provided refueling assistance for American operations in South Asia, and has sent a naval task force to fight pirates in Somalia – these actions require delicate legal juggling to get around the injunction in the constitution not to wage war or maintain armies or have collective self-defense with allies. With the rise of China posing serious challenges to Japan’s perceptions of its own security and defense capabilities (and with North Korea’s provocations serving as a great excuse), Tokyo is on a long term drive to improve its defense and security capabilities. (The fact that Tokyo feels it cannot and should not always depend on the US entirely is also a factor.) Japan and the US are conducting a review of their 1960 Security Alliance and the developments should be monitored closely. Japan has long-

standing quarrels with its neighbors, including Russia, especially over sovereignty claims on islands and atolls and maritime boundaries that could give access to natural resources – for instance, the disputed Senkaku/Diaoyu islands and the East China Sea’s natural gas reserves are a point of contention with China that see flare ups, as are China’s naval exercises in the Nansei/Ryukyu islands and Japan’s plan to bulk up air, ground and sea defense forces there. The major constraint on defense improvement to watch for, however, are legal and fiscal, because of the weakness of Japan’s economy.

Security issues to monitor:US-Japan alliance – ballistic missile capability (SM3, PAC, etc), trade/sharing in other

weapons and weapon systems, removal of US troops, Okinawa base relocation2010 US-Japan security alliance review discussions and developmentsProtests and social tensions over US military presenceMaritime tensions or incidents with China (and to a lesser extent Korea)Tensions with Russia over border, disputed Kuril islands – there have been security incidents

on the northern border with the RussiansRearmament, evolution of Japanese Self-Defense Forces (JSDF) – including maritime, air,

etc.Nuclear is also an issue to watch out for here as Japan has always made sure that they have

the capability to go nuclear very quickly if the circumstances call for it.Space science – legal distinctions long restrained Japan's military exploitation of space, and

despite its technological sophistication, the movement into spy satellites, national independent GPS system, etc., is presenting a certain challenge. Keep an eye on what the Japanese are doing in space.

Legal changes – to enable forces to take on wider range of roles or activitiesConstitutional interpretation, change – relating to Article 9 pacifist clauseOngoing reforms in Self-Defense departments and agenciesDeployments abroad, peacekeeping, disaster relief and humanitarian assistance, non-

proliferation initiatives – like Somalia, Afghanistan, etcMinor security incidents at US military basesKeep a careful eye out for any signs of Godzilla and/or Mothra

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InternationalJapan is a close US ally. It is also a major supporter of the global system and international organizations. If the US economy and the global economy are strong, Japan – an export economy – benefits. Therefore Japan will promote more stability, more trade, more economic growth and opportunities, more globalization, and support for the US-led international system and organizations, etc. But Japan has long-standing quarrels with its neighbors, especially manifesting recently over islands and maritime boundaries that create violent incidents, diplomatic rows and tensions. Japan is highly distrustful of the Russians, has some sympathy, much interdependence, but much animosity toward the Chinese, and will always have a tense relationship with the South Koreans, though that one is slowly improving due to business links and American alliance system. Japan has no leverage over the North Koreans but is wary of their provocations, and fears that the country could become a failed state, casting refugees on its

shores. Fortunately the North Korean threat gives Japan a good excuse to bulk up national defenses without attracting as much suspicion as otherwise. The Japanese also must manage relations with countries that provide it with natural resources, which it depends on entirely – this includes Middle Eastern and Southeast Asian states and some Latin American countries. Japan resists immigration, even though that is a potential cure for its demographic problems, though there are small exceptions to this rule (including Filipina nurses).

US alliance, US economic relations Seriously rising tensions with China, yet continuing economic integration Relations with South Korea, gradual moves to closer coordination because of China/DPRK

threats and US urging them to work togetherNorth Korean provocations, abductees in North Korea, sanctions on DPRK, etcRelations with TaiwanIsland disputes – Russia (Kurils), China (Senkaku/Diaoyutai), South Korea

(Takeshima/Dokdo)Maritime activity – such as Japan’s survey of East China Sea, run-ins with China, etcMiddle East – relations to Japan’s primary energy suppliersmultilateral and international activities, IMF, UN, etcInvestments in Southeast AsiaUS military bases – controversies, security incidents, public criticisms by Japanese

politicians

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CHINA

Politics One of the key drivers of the Chinese leadership is the preservation of the ruling status of the Communist Party of China (CPC or alternately CCP). While there are also several official non-Communist Parties, power is centralized in the CPC (and there is frequent overlap in CPC and Government roles), and concentrated within the Standing Committee of the Politburo, headed by [national] President and CPC General Secretary Hu Jintao. The Politburo Standing Committee also includes (in technical order of heirarchy) NPC Chairman Wu Bangguo, Premier Wen Jiabao, CPPCC Chairman Jia Qinglin, Li Changchun, Vice President Xi Jinping, Vice Premier Li Keqiang, CCDI Secretary He Guoqiand and Zhou Yongkang (former Minister of State Security). Within the top leadership, there are numerous factional affiliations based on age, background, education, family, training, experience and policy leaning.

The CPC Congress in 2012 will see a transition from the current “fourth generation” leadership to the “fifth generation,” spearheaded by Xi Jinping and Li Keqiang. These two are representative of one of the factional splits along not only economic policy lines but also political lines, Xi backed by those still supporting a focus on exports as a way to keep hard currency and technology flowing in to achieve a much more gradual evening of economic disparity in China, Li backed by those advocating more rapid shifts in China’s economic patterns from the export-dependent resource heavy model spawned in the late 1970s to one driven more on domestic consumption and services. That debate is also manifest in the coastal/interior inequalities, and a south/north split (northern China - Manchuria - being now a rustbelt after the

collapse of its oil and heavy industry amid the rise of south China - Shanghai and Guangdong - light industry, technology, exports and banking.

Other factions are divided between those consisting of provincial leaders who prefer loose monetary policies to support their pet projects and promote regional development to those technocrats in the central government that prefer tighter central control of monetary policy. The centralization/recentralization cycle that is constant in China often depends on which factions have the upperhand, and cycles – and economic policies - shift with factional power. Regardless of who is in control at any moment, all factions agree that the center of power is the CCP and do not tolerate groups that could threaten single-party rule.

The National People’s Congress (NPC), though still often referred to in western media as a “rubber-stamp parliament,” has been gaining input and influence in shaping domestic policies and in raising discussions and even criticisms of policy ideas in circulation. When the NPC is not in session, its Standing Committee continues to operate and discuss/debate policy and legal proposals put forward by the Politburo. This often offers one of the first windows into key issues being discussed by China’s top leaders, and reveal some of the alternate policy ideas being circulated. 

The Chinese People’s Political Consultative Congress (CPPCC) is primarily an advisory body where old cadre are retired and ethnic minorities can show off their costumes at annual meetings. It serves little real function. 

Changes in leadership at the provincial or municipal level can often be indicative of economic or political struggles at higher levels (don’t agree with it. Can change to: can often be indicative of preservations or promotion of promising leaderships, and some times reflect power structure at higher level). This includes governors, mayors and local CPC Secretaries. The most significant to watch are usually those along the southeastern coast and one province inland from those, as well as Sichuan, and the municipalities of Beijing, Shanghai, Zhejiang, Guangzhou and Chongqing.

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EconomicsChina has seen years of double digit economic growth based on exports and foreign

direct investment. The Chinese managed to weather the Asian economic crisis and succeeding US slumps, but have been hit hard by the current global slowdown. There is a wide feeling that China is peaking and that the 30-year growth spurt will soon come to an end; that end could be explosive, or it could happen gradually.

Internal debates over the viability and desirability of maintaining the export-focus while slowly altering the domestic economy or using quicker and more wrenching methods continue, but all look at it from the persepctive of the impact on the unity and security of the CPC as the single core leadership, and at the impact of economic policies on social stability. In fact, social stability is a major concern for the leadership in determining economic policies. China sees frequent conflicting economic pronouncements, as well as leaked rumors of policy changes, usually about a week before the actual change occurs (this is particularly true for pricings of commodities and fuel, rebates, taxes, and for government subsidies). 

The main thing to keep in mind now is that growth is being driven mostly by government spending and bank lending, so we have to watch closely the credit quota and banks’ liquidity, bank regulations. Asset bubbles are building, watch to see any signs that they could pop; also

watch the governments attempts to constrain inflation while not constraining it so much as to cause a major slowdown.

Chinese economic statistics are notoriously suspect, but that doesnt mean they arent important. Employment numbers are relatively meaningless, but we should be watching for GDP growth (be very clear on the methodology China uses to calculate, it isnt comparable to US or Europe), exports and imports, electricity consumption, oil and gas imports, raw commodity imports (Iron, aluminum, copper and their components), industrial output, bank loan amounts, rail freight volumes, and the like. Also, we should be looking for signs of shifts in trade patterns, shifts in the contribution to GDP or economic activity by province (is there a movement of activity from the coast to the interior? a slowdown in a particular province or an acceleration in another), and any reports on economically-motivated public unrest (a bit more on that in the security section). 

After the height of the global financial crisis the trade relationship with the US intensified and trade spats proliferated. Neither side is willing to start a trade war due to their tight interconnection and mutual interests, but especially in a time of crisis, we can expect the issue of yuan’s exchange rate and revaluation, China’s trade surplus, tariffs and duties, government procurement, intellectual property and internet/technology issues to define the economic relationship between the US and China. Any shifts that suggest that China is altering policies to appease the US, or not doing so, are important. WATCH the rate of acceleration of the yuan’s exchange rate appreciation, watch trade relations, trade disputes (WTO or bilateral) and trade barriers.

China has been on a binge buying spree around the world, exploiting the availability of credit in China to buy up or invest in companies and commodity producers around the world. This is something to watch - the rumors of bids, active buying tours, completed deals and deals falling through (including nationalistic backlashes in the countries where deals are being struck). The key industries to watch are energy, primary commodities and technology. 

Also it is increasingly important to keep an eye on wages, productivity, profits – essentially China’s industrial economy. Watch for labor strikes and protests, and any labor activity that is spontaneous or not officially managed by China’s state-run labor union (All China Federation of Trade Unions). Watch for labor (or other) problems with foreign companies. Watching for rising costs pushing Chinese manufacturers into the red, causing bankruptcies or forcing them to subsist entirely on subsidies. Watch for key government regulations on regulating regional behaviors, reduce wealth disparities, state owned capitals, etc

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SecurityThere are multiple layers of security issues the Chinese leadership is concerned with. At

the very basic level is the potential of social unrest, triggered by economic instability, corruption, environmental issues, or, perhaps even more troubling, political or religious rights. 

Most incidents of domestic instability are localized , concerned with pocketbook economic issues for a few individuals or small groups, and easily contained by the government, but if ever a protest or similar incident looks to span provincial boundaries or amasses a wide range of people and interests, the government gets particularly nervous. . Any cross-provincial organization with political implications will be seen as a serious security threat by Beijing Also,

Xinjiang (critical in China’s natural resource agenda) and Tibet (an important buffer between India) are hotspots (more below) where the government is particularly sensitive to unrest given the diverging interest of the state and ethnic minorities in the region that look to be more autonomous (at best) or to break away from China (at worst). The economic crisis has lead to an increase in crime and protests that the central government is keen to control.

The second tier is potential domestic unrest triggered by ethnic movements, the two most immediate being the Xinjiang Uighur community (including the East Turkestan Islamic Movement [ETIM], also known as the Turkistan Islamic Party [TIP] - more at http://www.stratfor.com/weekly/china_and_enduring_uighurs and a three-part series beginning at http://www.stratfor.com/analysis/china_shining_spotlight_etim) and the Tibetan movements, both domestic and abroad. China also has some concern about other ethnic problems spilling over its borders, including the struggle in Myanmar, the spread of Islamist militancy from Central Asia and Afghanistan, and to a lesser extent social problems with its ethnic Korean population in the northeast. 

The next ring of concern for China is the neighboring countries. China has resolved most of its land border disputes, aside from the Indian border, which is growing more problematic after New Delhi’s defense reviews determined that India was not prepared should China carry out a surprise attack. India’s repositioning of army units near contested boundaries, and China’s construction of airfields, railways, highways and other facilities near disputed areas, should be monitored. China’s cooperation with Pakistan, especially with infrastructure projects near Pakistan-controlled Kashmir, should be watched closely.

But its maritime border is another story. China has recently launched the Department of Boundary and Maritime Affairs, which will focus on enhancing and actualizing Beijing’s claims on the whole of the South China Sea (http://www.stratfor.com/analysis/20090512_china_beijing_strengthens_its_claims_south_china_sea). Chinese maritime activity is growing more assertive, and confrontations with neighbors and the United States Navy will likely increase. Watch particularly close for any submarine and anti-submarine activity. In addition, however, Beijing is likely to be working toward attempting bilateral and multilateral arrangements to explore the South China Sea and East China Sea floors. The South China Sea is increasingly important in China’s conception of supply line security, power projection – China now officially calls it a ‘core interest’, like Taiwan or Tibet. China’s eager moves to increase influence is likely to be the source of serious frictions with neighbors and strategic competition with the US.

Furthermore, disagreements over maritime boundaries is acute not only in the South China Sea – where it is crucial to watch Vietnam, the Philippines, and neighbors -- but also in the East China Sea between Japan and China that disagree on where the line is drawn in relation to potential valuable natural resources and old sovereignty disputes. Growing aggressiveness with fishermen and fishery patrols has created clashes with Japan (Sept 2010), that led to a large diplomatic row, and with Korea (Dec 2010).

Want to watch for deployments, acquisition, shipbuilding programs but also shifts in training, doctrine and personnel. All developments are worth noting. Watch for both traditional, conventional capabilities (e.g. underway replenishment) as well as asymmetric, unconventional capabilities (e.g. the development of anti-ship ballistic missiles).

In a broader sense, the Chinese military is well advanced in a decades-long process of fundamental reform and modernization. We need to be noting and tracking these efforts – not

just the buying and developing of modern weapons but the shifts in training, strategy, tactics, doctrine, personnel issues.

Chinese Anti-ship Ballistic Missile, testing and the targeting, fire control and C4ISRcapabilities that underlie its utility explicit in the cheat sheet -- and any other new or different Anti-access, Area denial tech/work they're doing.

One of the key Chinese concepts is 'informationalization' a blanket concept for 'wiring' its forces with command, control, communications and intelligence surveillance and reconnaissance capabilities.

Finally, China deals with several international-sort of problems, from its East and South China Sea policies butting up against Japan and the other states along the boundary of the seas to its Taiwan policies. Monitor improvements and setbacks in China-Taiwan relations, including ongoing implementation of the cross-strait free-trade agreement (Economic Cooperation Framework Agreement or ECFA), tensions over US arms sales to Taiwan, any sign that Hu Jintao as CPC Secretary General may arrange a meeting with Taiwan President Ma, who is going to be chair of the KMT, allowing for “party-to-party” dialogue between the two presidents. Also watch China’s mixed dealings with North Korea’s military provocations and nuclear program; monitor new forms of Chinese support and any indication that China will compromise to appease foreign powers’ demands on reigning North Korea in (unlikely). In addition, Chinese projects overseas were, at least briefly, becoming targets of local militants and others. Lets see the reactions on the ground as China takes a more active role internationally, and evolutions of China’s security response. 

PS: Chinese cyber-warfare is a hot topic and China is known to have extensive capabilities to hack into networks to gain intelligence. The recent Google debacle (in which Google claims it was attacked, along with over 30 other American companies in various sectors, by Chinese hackers who struck its network’s inner core) is but one illustration of their capabilities. The Indians claim their government agencies were penetrated by Chinese hackers; an reliable Canadian study called attention to Chinese massive hacking network; and a new German cyber-security unit was justified with explicit reference to China threat. They have a complex “bot” network across the globe and internet security is definitely compromised for those operating within China.

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InternationalThe United States is the primary focus of China’s international attention, and is likely to

remain so for some time. Beijing is both trying to cooperate with Washington to take a role as a global partner/equal, and hedge to provide defense against any potnetial political, economic or military confrontation with the United States. But relations are getting increasingly strained.

In the Asia-Pacific region, where China is establishing itself as the regional power (challenging Japan), Beijing has a two-part strategy - intra-Asian cooperation to reduce US influence, and a second track of Asia-US dialogue to undercut Washington’s ability to exploit bilateral relations in Asia to contain China. Beijing is obsessed with the prospect of the United

States creating an alliance ring around China to “contain” the rise of China. Therefore watch for US actions that could be interpreted this way (such as outreach to Vietnam, Indonesia, and even Myanmar) or Chinese actions designed to counter or preempt this (for instance, its own relations with Vietnam/ Indonesia, and its getting closer with US allies and partners, like Thailand, Philippines or Malaysia).

China sees multilateral institutions, such as the United Nations, as entities that can temper U.S. unilateral power (even if it cant directly challenge or replace the USA). In most cases, the norm is for Beijing to side with multilateral rules and regulations and try to coax Washington to follow along and accept the constraints the multilateral institutions impose. At the same time, Beijing is working to gain greater involvement in the operations of multilateral institutions, to better shape their focus. Also watch for efforts by Beijing to redefine international legal norms. The best example of this is it worknig to shift the understanding of certain concepts in the U.N. Convention on the Law of the Sea in order to make it more difficult for U.S. Navy operations near its shores, and to reinforce its Exclusive Economic Zone (EEZ).

The Chinese-Russian relations is complex, and I’m sure the Eurasia team will cover it in part as well in their guidance document. There is the long-running perception that China’s massive population bordering Russia’s sparsely populated but resource rich far east is a sure formula for a creeping (or not-so-creeping) invasion of the Russian wasteland. History doesnt seem to back this, and Russians reject it. The two main issues that Russia and China deal with are energy (watch for signs of an end to the interminable delays in Russian energy supplies to China – progress is being made on oil shipments and now it is time to watch for them to seal a deal on natural gas) and Central Asia (an issue of energy, resources and regional influence). Watch for signs of China’s influence in Central Asia weakening because of Russian direct or indirect moves; Russia is dominant in CA and the two have a modus vivendi based on China not tampering with security/political issues and focusing on business, but let’s watch it to see if this is challenged. May want to add China’s relation with less developed countries, including African and LatAm countries, of which energy and resource dominate the foreign policy scheme

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SOUTH KOREA

PoliticsSouth Korean politics are convoluted and contentious. After decades of autocratic

military-backed rule, the country finally held its first truly democratic election in 1997, bringing Kim Dae Jung to power (though there was an election five years earlier btringing Kim Young Sam to power, in that case the outgoing military-backed clique manipulated funding to ensure Kim YS, who had joined their party, won against his competitors). But the South Korean Constitution, to avoid any further chance of a return to autocracy, set up a single-term presidency that serves alongside a parliamentary system with a Prime Minister. The president can only serve a single, five-year term, and there is no Vice president, so continuity is effectively eliminated from the system. The current pattern, then, sees a President elected, taking about one or two years to become truly established and battle past the parliamentary barriers, have a year to rule, then go into decline as a lame duck, usually stuck with a parliament that has elected the opposition to lead. 

South Korea’s democracy is young and volatile. It isnt going away, but after decades of only knowing how to oppose something, the koreans now have a tough time with open political debate, and instead quickly shift to wideranging street protests, strikes, and parliamentary blockades. The 2009 suicide of former President Roh Moo Hyun, who was accused of corruption, has enflamed protests against President Lee Myung Bak and sparked no end of conspiracy theories about how, actively or incidentally, the current government had Roh killed. 

There is also a geographic split to South Korean politics (though this is finally starting to soften), with the southwest traditionally being the “liberal” base, and stronger authoritarian and industrial power being around Seoul and down the east coast to Pusan. 

The currently ruling Grand National Party (Hannaradang) is normally considered more conservative, closer to the United States, a stronger supporter of national defense an the US defense alliance and less likely to appease North Korea. 

There are other pillars of power in South Korea, including the continued influence of teh Chaebol (major family-run business conglomerates like Samsung and Hyundai), the media (particularly the big three pro-govermment papers Chosun Ilbo, DongA Ilbo and JoongAng Ilbo) and labor. 

Watch for street protests (large scale), crackdowns on “political freedoms” like provocative internet groups and street rallies, and debates over key policies, particularly domestic economic development (and the national canal plans), North Korean policies and the US defense alliance.

Watch for signs of changes to presidential term limits or government style (parliamentary style vs presidential style)

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EconomicsSouth Korea’s economic development is a classic case of an Asian tiger rags-to-riches

story. In the 1960s, North Korea, backed by Soviet industrialization, was far ahead of the South economically. Against US advice to focus on labor-intensive light industry for export, then President Park Chang Hee in the 1970s launched a crash heavy industrialization program for South Korea, working directly with the Chaebol and bringing South Korea racing past the North in a decade. 

South Korea’s economy is fairly quick to shift direction, and still can be shaped by government involvement fairly quickly in times of crisis. In addition, the movement of South Korean investments in Asia has often been a signal of what would come later - so if they go into a country fairly heavily, it often meant others would follow a year or two later. If they bailed, others would a year or two later. 

South Korea is heavily export dependent, with major exports including automobiles, technology and shipbuilding. Any major shifts in their markets for these goods needs watched. ROK is very eager to sign FTAs with foreign states and the progress of these should be monitored.

South Korea is always wary of competition from Japan and China, though it also works closely with the two economically. 

Also: watch South Korean shipbuilding, energy companies’ investments, joint-ventures or ventures abroad (especially nuclear). Watch South Korea’s increasing economic exposure to China, and its movements to limit or move away from this exposure. Watch trilateral trade

discussions between China, Japan and South Korea. Korea appears to be the most likely host for talks and the scene for new developments.

Especially watch ROK’s progress on nuclear and space technology, whether involving US or other countries.

South Korea’s reliance on resource and energy Watch labor issues

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SecurityNorth Korea represents the bulk of South Korea’s security concerns. The status of the

US-Korea defense alliance is always one to watch. There is a planned transition of power in the relationship (wartime operational control or OPCON), now moved back to 2015, as well as movement of US bases within South Korea. Watch the discussions and status of this. The occassional misconduct of US soldiers can create rapid protests.  Keep an eye on indigenous South Korean military developments and purchases of new equipment. Seoul is looking far beyond DPRK, and is looking at longer-range technologies like Global Hawk UAVs. Watch strategic capabilities particularly closely. Watch the development of South Korea’s navy closely, as well as the emerging South Korean space program (the first launch is set for late July). 

US-Korean relations: watch defense ties (esp navy), ROK’s evolving defense capabilities and willingness to expand its operations, including nuclear and space realms.

The most important new development in the security front is the problem posed by the sinking of the ChonAn corvette, in March 2010, on the disputed maritime border with North Korea, and North Korea’s surprise shelling of Yeonpyeong island in the same area in Nov 2010. The fallout has led to tensions between the US and China, since greater US commitment to ROK’s security through exercises and other means has brought more US focus on the region as well as efforts to synch up the US alliance system and counter-balance China. It is important to monitor the process of US-China maneuvers around the Korean peninsula, as well as inter-Korean stability itself, plus the roles of Russia and Japan.

Also South Korea’s recent move to expanding force in oversea missions beyond peacekeeping and humanitarian mission , [such as special forces training in UAE]

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InternationalSouth Korea has expanded its international reach via its state-supported, vertically and

horizontally integrated corporations called Chaebol and more recently its energy companies. The diplomatic and political response to the ChonAn and Yeonpyeong incidents has dominated ROK’s foreign policy, since it is trying to get the US to show maximum support, to put pressure on China for covering DPRK, and to bluster enough to deter DPRK from doing such things. But its attempts have met with limited success. Typically the Six Party process take up a lot of talking time (even though it is largely defunct), if it restarts it will need monitoring only to see if the North makes concrete steps. South Korea maintains a cautious balance between the USA, Japan and China. Traditionally, Korea is squeezed between China and Japan, so ROK wants to

keep the US as a buffer between those two for a while into the future. Investment overseas and relation with resource rich countries

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MONGOLIA

PoliticsIn May 2009, Democratic Party (DP) candidate Tsakhiagiin Elbegdorj defeated

incumbant Nambariin Enkhbayar of the Mongolian People's Revolutionary Party (MPRP) in a close Presidential race. Elbegdorj took office in June. Despite there being two main political parties, Mongolia’s politicans have been known to switch between parties, and both parties form a coalition government, meaning political transition is more about personality than policy. While there has been occassional bouts of violence related to Mongolian elections, protests and demonstrations don’t normally last long. 

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EconomicsMongolian economics is dominated by the mining sector.The Democratic party has

suggested it may try to better distribute mining profits; in other words try to soak the foreign mining interests. Watch for negotiations or adjustments, and any new potential investment from different countries. Particular over its two major mining project, and develop in mineral, including gold, uranium

One other trend in Mongolia since it became un-Communist is a back and forth of nationalization and privatization, often spurred by over-paid foreign consultants. Watch things like the power sector. 

Watch Mining (esp uranium) developments. Foreign investment and involvement.Watch banking system stability (at risk) and for foreign presence or assistance

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SecurityInternal security is relatively stable, though there are politically-motivated protests and

the like occasionally (and some have resulted in deaths). Mongolia’s biggest concerns are its neighbors, China and Russia. Mongolia is afraid to grow too dependent upon either one, and tries to draw in a third power to balance the two neighbors. Currently though the population ranging from elite to mass are more of anti-China and in favor of Russian’s influence The obvious choice is the USA, but Washington remains reticent (largely because you cant get to Mongolia without going through Russia or China). Japan has slowly sought to insinuate itself into Mongolia as a possible substitute, but not with force yet.

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InternationalLargely the same as the security section and a bit of the econ section - look at how

Mongolia deals with its neighbors and with different mining partners. Watch balance of Russia and China. Also watch for Japanese or South Korean expansion of political or economic influence. Also French and others are involved because of uranium interests.

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NORTH KOREA

PoliticsPolitics in North Korea are dominated by Kim Jong Il and his family at the core, with the

main support group being the National Defense Commission, recently expanded to 12 plus Kim (for a lucky 13). In addition, there is the Worker’s Party of Korea (WPK or sometimes KWP) and the Korean People’s Army (KPA) that have their own elements of power (but are both represented on and managed through hte NDC). The Supreme People’s Assembly (SPA) is another, lesser source of power, more often a reflection of existing influence than a place from which it emerges. 

In North Korea, the current center of political debate (well, not exactly debate, perhaps interest) is the succession program. Kim Jong Il has suggested he will step down in 2012, handing power to his youngest son (Kim Jong Un) who will be backed by a collective leadership group comprising the NDC (with Kim Jong Il at the head of the NDC to manage power as his son learns). There are still two other sons, Kim Jong Nam (AKA Fat Bear, who got caught going to Tokyo Disney and spends most of his time in Macau and Hong Kong - recently talking quite a lot to the media) and Kim Jong Chul, the middle son and a one-time contender for succession (but allegedly too “effeminate” for his dad’s taste). Kim Jong Il’s brother-in-law, Jang Song Thaek, has recently been appointed to the NDC as well. In the process of succession, factional conflicts to consolidate power over one another remain a big factor, possibly represented by a sudden heart attack or run into a car.

Other politics revolves around how to deal with South Korea, how to deal with the United States, relations with China, Japan and Russia, and economic policy. Changes in govenrment positions are always important, as are overseas trips of top officials. The ongoing rumors of family and succession struggles are itneresting, but not necessarily vital, as it appears there is a renewed drive by Japan and some others to spread rumors in an attempt to reshape foreign perceptiuon and throw the regime off balance.  

The DPRK’s orchestration of “crisis events,” like nuclear device tests, long-range or ballistic missile tests, and the ChonAn and Yeonpyeong attacks, are part of its strategy for preserving its autonomy, regime, and for dividing its enemies. These provocations alternate with periods of negotiation or attempts to play nice. This process works in cycles, with DPRK increasing tension when it can get an advantage by surprising, confusing or dividing enemies, and decreasing it when others are unified against it. This process was dubbed the “Crazy Fearsome Cripple Gambit” by Stratfor, because DPRK pretends to be crazy to confuse people, fearsome to scare them, crippled to make people think they are weak and on verge of collapse. Monitor this strategy and its cycles.

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EconomicsThere are none.Just kidding.North Korea has a centralized economic system, but has been experimenting with

economic reforms, local markets and even private ownership of houses and land. There is a realization that the current economic system doesnt work well, that the country needs change, but there is a fear that economic openess leads too quickly to challenges to the political order. North Korea has a history of involvement in illicit activities, from drug running to counterfeiting, as well as less savory activities like missile sales abroad for hard currency. 

Reports of North Korea’s economic condition are often skewed, particularly reports about famine. In North Korea, the northern provinces along the Chiense and Russian borders were usually places whjere the less desirable were sent, and are geographically the places where agriculture flourishes the least. Thus reports of food problems from people in this area to interested parties outside is usually misleading. There is a strong motive to make things look worse, the situation in the north is usally worse than the rest of the country, but observers apply northern conditions to the whole country. 

Keep an eye on the movement of funds from north Korean accounts aborad or open resource market. Also for changes in focus domestically (heavy industry, energy, Kaesong).

In 2009 DPRK had a surprise currency change. Domestic currency is not going to affect much, too isolated an economy, but watch this, or similar large scale monetary or fiscal or economic tinkering.

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SecurityNorth Korea’s core security concern is the preservation of the elite, with the Kim family

at its core. This drives both domestic and itnernational security activities. While North Korea has a large army, with plenty of artillery aimed at Seoul (any details or discussion of the precise nature of this threat would be valuable), its biggest cocnern is the United States. Pyongyang has a strong fear of ending up like Iraq - a country attacked and ultimately invaded by the USA. The missile and nuclear programs serve as deterrents to this, as does North Korea effectively holding Seoul as a human shield. Anti-ship and asymmetric/unconventional capabilities are also where we may see meaningful shifts in DPRK military capability. Keep an eye on ways Pyongyang is attempting to hold its adversaries at risk.Tests of North Korean nuclear devices and long and medium range missiles are important to monitor. So are reports of North Korea cooperation/activity with other programs abroad as well as sales of its weapons. 

North Korea has threatened possible military action in the West Sea/Yellow Sea, which may include naval clashes or even action against UN/South Korean controlled islands along teh so-called Northern Limit Line (the western extension of teh DMZ into the sea, which North Korea doesn’t recognize because it limits access to the deep water port of Haeju and to the rich crab fishing grounds around one of the islands.)

In addition to North Korea’s actions, watch the way other countries position themselves to deal with North Korea, especially dealing with anti-missile systems and surveillance.

Watch for changes in numbers of refugees leaving (but be careful to scrutinize source of information since there is so much spurious material on the human rights refugee situation)

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InternationalNorth Korea has the uncanny ability to draw global attention whether it is deserved or

not. This is a critical part of Pyongyang’s survival strategy since the end of the Cold War lost it its sponsor - what we have affectionately dubbed the Crazy Fearsome Cripple Gamut. In short, the regime gives the impression it is crazy and unpredictable, then it adds a level of fearsomeness and danger from weapons, making people afraid North Korea might use them if provoked. That alone would not be enough, though, and would invite forceful disarmament. But DPRK added the cripple element, giving the impression the country is always on the verge of collapse. The bigger fear from the neighbors and others is the fear of collapse and dealing with the aftermath, which would include refugees and the flow of arms and weapons all over the place. Thus the international community does what it can to keep North Korea from collapsing, giving North Korea the leverage it needs to survive. 

With additional punitive measures on North Korea for its latest round of nuke and missile tests, keep an eye out for movement of North Korean funds, for interception of North Korean ships, and the like.

Watch for DPRK overtures to Americans or EuropeansWatch for DPRK’s management of the post-ChonAn/Yeonpyeong environment, whether

it attempts to apologize or make amends, whether it attempts another provocation, whether it alienates allies or seeks rapport with enemies, or vice versa

Watch for Six Party Talks resumption (though remember that for most players this is more about process than actually achieving anything)

Watch China’s willingness and influence to cooperate with DPRK, Six Party Talks, etc

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TAIWAN

PoliticsThe two major parties in Taiwan are the ruling Kuomintang (Nationalist Party, or KMT)

and the opposition Democratic Progressive Party (DPP). The KMT retook the presidency a little over a year ago with Ma Ying-jeou’s victory, ending two terms of DPP leadership under then-President Chen Shui-bian. Internal politics are often dirty in Taiwan, and both sides engage in mud-slinging, street protests and corruption and other legal investigations. One of the biggest issues is always China policy, and the KMT has engaged in a policy of peaceful cooperation with Beijing in order to ease tensions and gain more “international space” for Taiwan, and the DPP is now facing an internal debate over how to respond to a Chinese offer to begin engaging DPP officials. It is important currently to watch the evolution of the debate in the DPP, and the potential for Beijing to use its offers to weaken the ostensibly pro-independence DPP. 

Also KMT’s preparation and position in the upcoming electionWatch for information or incidents relating to the overlap of political and business

interests, as well as organized crime

EconomicsLike much of the region, Taiwan’s economy is heavily tied to exports. Over the past

several years, there has been an increase in Taiwanese economic integration with mainland China, and this has both helped the Taiwanese economy, and contributed to political concerns. The rural farmers traditionally supported the DPP, but Chinese openings to Taiwanese produce weakened that connection. It is hard to seperate economics from cross-straits politics at times, so watch for deals made via political parties as opposed to the govnerment. 

Watch for the progress of the China-Taiwan Economic Cooperation Framework Agreement (ECFA), essentially a free trade agreement. This will expand economic integration significantly now that it has been ratified, but implementation that began in 2011 will take years to complete, and subsequent expansions will be necessary.

Also China-Taiwan ECFA could potentially secure Beijing’s permission for Taiwan to sign FTAs with other states (with Japan at the top of the list). This was a primary impetus for Taiwan to do the deal which it knew would weaken its autonomy vis-à-vis China. Watch for this.

Watch for content of US-Taiwan arms sales, and political fallout (esp fallout between China-US, but also China-Taiwan). The US has a longstanding policy of selling arms, the question is how high-tech and how much it riles China, and whether china tries to do anything about it. China has claimed it would sanction US companies over arms deals with Taiwan. Pay attention to any developments here.

Watch US congress statements on Taiwan for any signs of major US policy actions

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SecurityTaiwanese security revolves around the China-Taiwan-USA triangle. Washington tries to

keep an uneasy balance in the region, backing Taiwan’s defense, but not granting Taiwan access to defense materials that would give Taipei more independence of U.S. security and political influence. Chinese missile numbers are always a major issue. Taiwan’s quest for more submarines or F-16 jets, and any new ASW capabilities or activities are important to watch, as is Taiwan’s potential expansion of security ties with Japan. . Underneath all of this is an intelligence battle with China- spies will continue to be captured on both sides, but these have not turned into major disputes between the two countries.

InternationalAside from the ever-present China issue, Taiwan’s international relations focus now on

gaining “international space” - a euphemism for more representation in multilateral international bodies, particularly various organizations under the United Nations. Two major ones Taipei is focusing on next, after the WHA victory, are the IMO and the ICAO. Also watch for the continued (but much quieter these days) dollar diplomacy as Taiwan tries to keep its few

remaining diplomatic connections, and China counters. Any overseas travel by the president needs watched.

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INDONESIA

PoliticsIndonesia is a product of the anti-colonialism movement following World War II.

Founding President Sukarno harnessed the new nationalism to hold the vast archipelago together, balancing numerous political forces including the Muslims, non-Javanese and communists. It was his flirtation with the latter that gained his successor, Suharto, the opportunity to throw a US-encouraged coup, first putting down a “communist rebellion,” then ultimately seizing power. Suharto held teh island nation together through an invasive bureaucracy (in the form of Golkar - meaning “functional group” - to which everyone on government pay, from the military to school teachers, held membership), a strong military with a regional command system, transmigration policies to mix up the ethnicities (and to ensure continued Javanese dominance) and a strongly centralized economic power (centralized in the person of Suharto himself). 

Suharto’s downfall in the wake of the Asian economic crisis led to a period of political uncertainty as the elite jockeyed for position and tried to avoid massive infighting or loss of territorial integrity (though East Timor did break free during this period). Suharto was replaced in the interim with his VP, Habibi. Abdurrahman Wahid became the next President, representing one of the two largest Muslim organizations in the country (his being less fundamentalist than that of his rival Amien Rais). Wahid never finished his term, his “cabinet of national unity” a dismal failure, and his VP, Megawati Sukarnoputri, daughter of founder Sukarno, took over. Megawati was a relatively ineffective president, and lost in the next election to Susilo Bambang Yudhoyono, the current President. Yudhoyono had ties to numerous pillars of Indonesian elite - the military, the backing of the Muslims, the popular street (previously held by Megawati), Golkar and the economic community. 

Indonesia saw Presidential election in July with Yudhoyono (Democrat Party) elected. He teamed up Boediono, an economist and Bank of Indonesia governor, to take on his former VP Jusuf Kalla (Golkar) and his running mate General Wiranto (Hanura/People’s Conscience Party), and Megawati (Indonesian Democratic party of Struggle PDI-P) who teamed up with former General Prabowo Subiantoro. These are all still leading political figures to watch.

Politics in Indonesia can be violent, and large demonstrations clashing are not unusual in election season. Bomb in Jakarta in July 2009 was recent reminder that security situation is always precarious even in ‘stable’ times. But while threats persist, Indonesia has shown greater anti-terrorism success recently, as it captured a new cell of militants in Aceh and following it captured or killed nearly all remnants of Jemaah Islamiyah. Its counter-terrorism program is expanding, institutionalizing its experience, interacting and learning from more expert foreigners, etc.

Political power is centered in Java, the most populous island, while the further away from Java one travels, the less influence a province has in the center. 

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EconomicsOnce a major oil exporter, Indonesia is now a net importer.Indonesia’s economy has done better in the current global slowdown than some of its

neighbors, registering a GDP growth rate in 1Q09 of 4.4 percent. GDP in 2008 was just shy of $500 billion. 

Java is the power of Indonesia, but Java exploits resources in other islands, adding a bit of tension to the economic policies. The central government has experimented with greater autonomy in economic activity for provinces to alleviate some of this pressure. 

Look for new investments in energy and mining. Watch for developments regarding Japanese, Chinese, US and Australian investments, aid or trade. 

Watch for foreign investment, esp in energy sector. especially the liquefied natural gas (LNG) projects and mining

SecurityA heavy security focus is on the potential for Islamic militancy. Watch for Jemaah

Islamiyah, and its offshoots, which involve the same old militants under new names. These include Tanzim al-Qaedat al-Jihad and Al Qaeda in Aceh, for example. The Jakarta bombings in July 2009 showed that militants still had the capability to attack soft targets seven years after the Bali attacks, but that has been all but eliminated. In late 2009 and early 2010 leaders such as Dulmatin and Noordin Top [See this link and all the embedded links: http://www.stratfor.com/analysis/20100623_indonesia_more_successful_counterterrorist_raids] Its counter-terrorism program is expanding, getting more experience, interacting and learning from more expert foreigners, etc. This progress is necessary to monitor closely. With so much activity on the counterterrorism front, JI and its offshoots are left with very few remaining militants, almost none of whom have the proper training and experience. The main issue to watch will be developments related to the trial of Abu Bakar Bashir (Baaysir) who was arrested again in August ( http://www.stratfor.com/analysis/20100811_dispatch_indonesias_arrest_abu_bakar_bashir).

Also watch for domestic separatist activity. The two potential hot spots are Aceh (where the Free Aceh Movement - GAM - is now partially cooperating with Jakarta, though there are elements still hiding out in the mountains) and Papua (also called West Papua or Irian Jaya, where the Free Papua Movement - OPM - and others are often engaged in small-scale activities, as are rebel soldiers who get stir crazy being stuck out in the jungles of Papua for too long).

Due to its size and dispersion, Indonesia is a hard place to control militarily. Transport aircraft is vital, and the military has seen several crashes recently. Maintenance was delayed for years after the US cut off spare parts. Watch for expanded budgets for new aircraft. 

Indonesia has become more aware of the potential to lose many of its smaller outlying islands to others, and the Navy is trying to step up patrols and get more ships. Keep an eye on these developments, as well as potential clashes or verbal exchanges with its neighbors over counter-claims to maritime territory and resources.

Overall Indonesian modernization/improvement of military capabilities, primarily air and sea oriented, aimed at protecting sovereignty claims and defending maritime borders and island possessions (as opposed to past emphasis of preventing insurrections or protest in ethnic minority or otherwise marginalized areas)

Watch Australia-Indonesia defense relations for signs of increase/decrease cooperation, communication, exercise, etc

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InternationalIndonesia is a key player in ASEAN, and to a lesser extent NAM. It sits astride one of the

most important maritime choke-points - the Strait of Malacca - and has an occasionally cooperative occasionally contentions relationship in dealing with maritime security with its neighbors Malaysia and Singapore. 2011 chairmanship of ASEAN represent an opportunity for Indonesia to resurge as regional power

There is a slow and quiet game for influence over Indonesia among China, Japan and Australia. The United States is coming in a little late to the game but watch for something real to materialize, though this help to give rise of Indonesia’s image in international stage (such as greater US support for Indonesian CT teams, military facilities, aviation sector, etc) since the US had an alliance with Indonesia in the Cold War and it is a logical place for the US to anchor its Southeast Asia policy against Chinese expanding influence. The US fully renewed military relations in 2010.

Watch to see how successful China is at forging better/closer/concrete relations with Indonesia. Watch China-Indonesia tensions (esp over trade) as part of this.

Watch Indonesia-Australia defense relationship for cooperation, communicationIt’s also worth noting how Indonesia works with its neighbors- particularly the

Philippines and Malaysia, where militant networks have been most active- on the counterterrorism front.

THAILAND

Thailand is the core of mainland Southeast Asia, a GDP around $250 billion, an ally of the US, and a popular tourism and travel hub. It was never colonized by a European power, and was one of the first Asian countries (following Japan’s lead) to modernize and westernize in the twentieth century. Thailand is mainly interesting for two reasons: (1) global economic significance as a regional finance center and export powerhouse (2) constant, cyclical domestic social and political disruptions that lead to mass protests and often (19 times since 1932) military coups.

EconomyThailand is the second biggest economy in the sub-region (second to Indonesia) and a leader in the Association of Southeast Asian Nations (ASEAN). Bangkok is a vibrant export and finance hub for the region – crucial enough that the collapse of its currency triggered the Asian Financial Crisis of 1997-8. After recovering from that crisis, Bangkok has not shown itself to be the most stable economy in 2008-9 because it is still highly export dependent, and political impasse has

eroded public finances. The Thai population was humiliated by the country’s borrowing from foreign institutions (like the IMF) to get out of the previous crisis, and the current Democrat Party-led government will incur similar criticism by reaching out to foreign lenders to help in the current recession (though this time, because Thailand’s reserves are deep, there is not a risk of debt default or anything so grave).

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PoliticsRecently the focus falls on Thailand because of its unstable domestic political and social situation. The first thing to know about politics in Thailand is that the country is (1) a highly religious kingdom, in which the monarchy is revered almost on a level with Buddha (2) that big business and free market capitalism has disrupted this old world order, over the past twenty years especially. Essentially the country is divided in half between the old status quo, which consists of members and sympathizers with the civil bureaucracy, military, palace, whose power is centered in Bangkok (where the palace and military are stationed) and in the Southern regions, and the new rich – the big business class that has infiltrated all levels of political power, and often draws its support from the poor rural people in the country’s north and northeast. The new rich is embodied in the form of former Prime Minister Thaksin Shinawatra, who is in exile after the military deposed him in 2006, but who continues to control proxy politicians in the country because of his popularity.

These two sides have given rise to two mass protest movements – the People’s Alliance for Democracy (PAD), or the Yellow Shirts, are broadly the royalists and Bangkok elite, who supported the military coup in 2006; the United Front for Democracy against Dictatorship (UDD), or Red Shirts, are broadly upcountry supporters of Thaksin and his allies. These two sides engage in major protests when the other is in power, in which they attempt to hold disruptive protests and force government dissolutions, and in which extreme members attempt to provoke security forces to crack down on them violently, which would turn public sympathy against the brutal government and towards them and their cause.

Governments come and go quickly in Thailand, and military coups happen frequently. King Bhumibol is much revered, but is in his late 80s and will soon die, and the prince that will succeed him has not always been popularly admired and is only gradually fitting into his role. There are fears that after the king dies the military could seek to seize control, or anti-monarchical forces could push for a republican revolution, or simply that the monarchy will be weakened with the prince on the throne and other forces will contend even more violently for power. So WATCH King’s health, succession politics (who is around the prince, the prince’s public appearances and statements, etc)

Watch the army closely when it intervenes directly in political events. The army took a lead role in squashing the March-May 2010 mass protests and only in December was the emergency decree lifted. Watch annual army personnel changes after General Prayuth Chan-Ocha took over the top position of the military in October 2010, as he attempts to consolidate power.

Elections will be called sometime before end of year 2011 and this means the whole year will be heated with campaigning and could see higher frequency of political intimidation

bombings. Politicking will be extreme in this environment. But after the elections is when the real trouble will start since whoever wins the mass protests to topple the new government will begin.

Watch development of China relations, including naval/military exercisesWatch for US alliance, and any increase in US activity or interest

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SecurityThailand is a long-time American military ally, though the alliance has become far less relevant since the US withdrew from Vietnam in 1975 and China opened up to the world in the late 1970s (and Beijing helped stopped Vietnamese communists from funding Thai communist rebels). Because it is lodged in the center of Southeast Asia, Thailand is constantly struggling with its neighbors over borders (as it has for its whole history). Border disputes are important to watch.

Chaos in Myanmar (Burma is Thailand’s number one ancient rival) sometimes results in shootings or even shelling and skirmishes on the Thai side of the mountain border – even without fighting the waves of refugees from the Burmese side (not all of which arrive in the north and west, since the Rohingyas come by boat to southern Thailand) present social problems for poor Thai communities on the borders.

Thailand and Cambodia also have about a thousand years of tensions behind them, evident in border skirmishes and military flare-ups. The root of the problem is that Cambodia has a influence in Thailand’s northeastern region. Tensions have gravitated lately around the disputed Preah Vihear Temple, which a UN cultural body granted to the Cambodians in the 1960s but which the Thais still claim. Also, Cambodian leader Hun Sen has been friendly with Thaksin and even sheltered him in exile – while exiled Thai politicians typically go to Cambodia, they usually do not attempt, as Thaksin has done, to pull strings to change the internal situation. This is not specific to Thaksin, but indicates Cambodia’s geopolitical interest in destabilizing Thailand. The two countries also have maritime boundary issues in the Gulf of Thailand, where there could be hydrocarbon resources worth fighting over.

A Muslim insurgency that has its roots back in the 1950s was revived in the post-9/11 era and has resulted in a constant pitter patter of bombings in the far southern provinces bordering Malaysia and over 4,000 deaths since 2003. Thailand’s handling of the southern situation has been problematic (with Thaksin pulling the military out of the province, declaring return to civil life and installing the police, which emboldened the rebels and antagonized the southern Thai people and the military). The current government has overhauled strategy for dealing with the south, created a cabinet level military advisory board to deal with the insurgency, and is attempting to reduce military presence and create a set of political incentives to reduce tensions and encourage militants to abandon their guns. It remains to be seen whether this will work. Malaysia is often accused of providing sanctuary and financing for Muslim rebels in Thailand.

Watch for signs of Red Shirts recovering in strength after their massive protests in spring 2009 and 2010, and the heavy military and police crackdown on them in 2010, which killed over 80 protesters. There have been a few incidents of low-level insurgency arising in the North and

Northeast strongholds of the Reds, since the crisis in spring 2010. Watch the governments pursuit and prosecution of Red Shirt leaders, freezing their assets, imprisoning them, etc.

Keep an eye on any Yellow Shirt activity for sake of fairness, though they are unlikely to cause much trouble under current Democrat Party-led government. They have founded their own political party and are putting pressure on the Democrats however. Moreover they will be more likely to turn out in mass protest style if any form of pro-Thaksin government returns to power.

Watch for signs of continued, deepening army interference in political affairs (which has been happening and will likely continue as the monarchy weakens)

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InternationalThailand is a member of ASEAN and other major international groups, and has good relationships with the US, Europe, China, Japan, South Korea and others. Thailand needs energy and raw materials from Myanmar, and generally agrees not to interfere with its internal politics (as with other ASEAN countries who generally try to avoid criticizing each other for their own domestic political issues). Bangkok is thought to not get along well with Singapore, and border disputes with Cambodia and tensions with Malaysia over the southern insurgency are always simmering. An attempt by the US to revitalize ties with Thailand would be interesting given the US attempt to reengage Southeast Asia, but hasn’t happened yet. China has been improving economic and military relations step by step so watch this process, esp signs of railway going through China, Laos, Thailand, Malaysia, to Singapore.

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MALAYSIAMalaysia is a notable Southeast Asian state because of its relatively strong economy, with a GDP of around $200 billion. (1) It is an exporter of oil and natural gas (2) it is an exporter of manufactured goods, highly linked into the East Asian supply chain. Malaysia is geographically challenged – it is the only country to be both a peninsula and an island, with the mainland a peninsula and two large provinces (Sabah and Sarawak) on Borneo island.

PoliticsMalaysian politics have been dominated by the United Malay National Organization (UMNO) since independence in 1957. The UMNO is the biggest party in the Barisan Nacional (BN) or National Front ruling coalition. The problem for Malaysia is that ethnic tensions run deep between the Malay majority and the Chinese and Indian minorities. Ethnic Malays have a privileged position in society and the country’s legal system contains the notorious bhumaputra set of laws, which are essentially affirmative action for the majority Malays.

Politics have gotten rockier since the retirement in 2003 of former Prime Minister Mahathir Mohamad after ruling the country with a tight grip for twenty two years. Various opposition groups have formed to oppose both the one-party domination of the country and to oppose the

ethnically biased status quo, as well as more general class disparities, and the opposition has been increasingly successful (denying the UMNO of a 2/3rds super-majority in 2008 elections).

The problem for the opposition is that it is divided ethnically (and along religious lines) among Malays, Chinese and Indians, and therefore has trouble uniting (though Anwar Ibrahim, the opposition leader, has been increasingly successful in doing so). Moreover every possible institutional structure favors the incumbent party, including the controversial Internal Security Act which enables police to snuff out dissent with few or no restraints.

The current government, led by Najib Razak, is in trouble because (1) the opposition has gathered momentum since the last parliamentary elections in 2008, and proved it in successive symbolic local elections (2) the economic crisis is pounding the export-reliant economy, and high budget deficits are easily associated with Najib, a former minister of finance (3) the ruling coalitions attempts to undermine and stifle opposition have suffered some embarrassing exposures, hardening resistance to its rule (4) efforts to appease the opposition with legal reforms (especially relating to Malay privilege) will provoke the wrath of factions within Najib’s own party.

Watch the weakening or factionalization of the ruling UMNO/BNWatch opposition party PAS and its dealings with UMNO and the other partiesAny sign of Anwar Ibrahim gaining real popular strength; or his party, Pakatan Rakyat

(PR)Watch the role of the Chinese swing vote politicallyWatch the Indian community for swing vote, and also signs that it could grow more

unified and politically coherent Heightened Ethnic tensions – the government maintains pro-Malay policies that

disadvantages the minorities. The ethnic Chinese are increasingly frustrated with these.Heightened Religious tensions: Christian church burnings and community tensions;

controversy over use of word “allah”. Watch for any major incidentsWatch for business or other powerful support behind UMNO to either enhance or

diminish its supportWatch Petronas (state energy giant) and its relations with governmentWatch Petronas activities abroad (esp trying to convert into major competitive international energy player)Watch Iranian relations, esp dealing gasoline to Iran or assisting with finance or violating

US sanctions/proposed sanctionsWatch development of China relations (not good in past but now some signs of

improvement)

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EconomicsMalaysia is one of the countries that is most heavily dependent on exports in the region (exports make for about 100 percent of GDP), so the economy is highly sensitive to shifts in global consumption patterns. Not only does the country export manufactured goods (like electronics and parts) but also raw materials, from oil and natural gas to foodstuffs. Malaysians are also

attempting to compete with Singapore and Bangkok in financial services, especially Islamic-style finance. The state energy firm Petronas, which handles Malaysia’s petroleum production, refinement and export, alone contributes a significant portion of the country’s GDP and of the government’s tax revenues. But state taxes and legal interference with the firm threatens its international competitiveness and its ability to transition to a global player. Economic woes amid the 2008-9 crisis are serious in Malaysia, creating high budget deficits and income losses and layoffs adding to social unrest.

SecurityMalaysia has a tight grip on the internal security situation due to the colonial era Internal Security Act, which has never been repealed and gives authorities sweeping powers, and also due to Mahathir’s heavy hand in managing internal situation during his 22 year premiership. However protests emerge from ethnic minorities and political groups frequently and sometimes turn violent. Malaysia has also had Muslim militants from all over the world seek to hide, plan or gather funds inside its borders, creating tensions with neighbors like Thailand and other interested players, such as the US after 9/11. Malaysia has played an active role in fighting piracy in one of the world’s most important maritime transit points (the Straits of Malacca on the southern tip of the Malay peninsula) and has been attempting to upgrade its naval capabilities to defend its maritime boundaries (and resources) in the South China Sea and Indian Ocean.

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InternationalMalaysia is a member of ASEAN, a predominantly Muslim country with ties to the Middle East, an energy exporter with ties to energy consumers, and thorough links with other states in the East Asian manufacturing and supply chain. Kuala Lumpur, especially under Mahathir, has occasionally been a harsh critic of the west, after having successfully avoided the IMF’s strict fiscal prescriptions during the Asian Financial Crisis (and come out the better for it).

PHILIPPINES

PoliticsPolitics in the Philippines is often characterized by Cronyism and Corruption. The May

2010 election brought “Noynoy” Aquino of the Liberal Party (PLP) against Manuel Villar of the Nationalist Party (PNP), to replace president Gloria Macapagal Arroyo. Watch the shaping of policies on fiscal (taxes), domestic security, and mining.

There is a long-running attempt at Constitutional reform (Charter Change or Cha-Cha) to move away from the current presidential system to a Parliamentary system. Resistance to cha-cha was based on suspicions that Arroyo could use it to become Prime Minister and thereby extend her term. This may remain an issue even, though less pressing since she is stepping down. Keep an eye on the Cha-Cha debate; it seems to never die.

The Philippines has a history of “people power” movements to overthrow governments. These are also sometimes referred to as EDSA movements, after the Epifanio de los Santos

Avenue (EDSA), the major road in Manila. While there are numerous attempts to oust the governments, in general a successful People Power movement must have the Church and the Urban Poor, and buy-in from the Business community and the military. 

Coup plots, coup warnings and coup crackdowns are always circulating, and sometimes may even involve a few military folks. But more frequently are political PR tools.

Watch to see how the government manages (or notably fails to manage) dangerous debt levels (above 60% of GDP) and budget deficits.

EconomicsThe Philippine basically never recovered from the Asian Economic Crisis, and few would

lump Manila in with any list of resurging Asian Tigers. The administration is placing priorities on PPP and encourages foreign investment, aiming to reinvigorate the economy. Efforts are also made to increase tax revenue and alleviate poverty, though the current fiscal and economic structure make it a very difficult task. Watch for regulations on PPP, tax, social wealth, etc., and also the government’s targeted countries and targeted project,

A significant portion of the Philippine economy is remittances from overseas workers. Watch for changes in the pattern amid the economic problems as well as new arrangements to send more Filipino workers abroad (like nurses to Japan). The new administration is calling for increasing domestic employment to reduce OFWs, and anything on regulations, heightened qualification for foreign countries, and policies on domestic employment need to be watched

Watch to see how the government manages (or notably fails to manage) dangerous debt levels (above 60% of GDP) and budget deficits.

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SecurityThe Armed Forces of the Philippines (AFP) faces numerous insurgencies and militant

groups domestically. The largest active insurgencies are the Moro Islamic Liberation Front (MILF), which operate primarily in Mindanao, and the New People’s Army (NPA), the armed wing of the Communist Party of the Philippines, which operates throughout the archipelago, but more heavily along the western edge. The MILF is a split-off from the Moro National Liberation Front (MNLF), which has been in a peace accord with the government since the late 1990s, and holds nominal control over the Autonomous Region of Muslim Mindanao (ARMM). The Abu Sayyaf, originally founded as an Islamist insurgency, has devolved into largely a militant kidnap-for-ransom and extortion gang, and operates primarily in the Sulu archipelago (including Basilan and Jolo) and around Zamboanga City on Mindanao. 

The United States has a series of military training and exercises with the AFP (including the annual Balikatan) that sometimes draw domestic opposition. The US bases were kicked out of the Philippines several years ago, but the near constant presence via training ops restarted after Sept. 11, 2001. 

The Philippines has a running dispute with China over control of parts of the Spratly islands. 

Watch the US-Filipino defense relationship. Will the US maintain “Balikatan” counterterrorism military and security assistance and exercises with Filipino forces? Will the US seek to upgrade its defense relations to a more strategic level? Will the Filipino government push

for more or less American presence? Watch Status of Forces Agreement (SOFA) with US. Currently as the VFA review is underway, we need to watch how the government is to balance relations with U.S, who is ambitiously moving to engage Southeast Asia and therefore its military presence in RP is of big help, and other countries, and how it to maximize the benefit from the process.

During election seasons, watch for election-related violence – there was intense violence in Maguindanao province in Nov 2009 for instance. Violence often targeting candidates or their prominent supporters, or involving clan-based violence or regional rebellions.

Watch negotiations with MILF and other militants. Especially notice the rise in New People’s Army (NPA) militant activities since the election, and watch for how government attempts to handle them.Also watch Philippines military modernization and the development to strengthen military capability to protest disputed islands

InternationalAs a country having a history of swinging between big powers to achieve benefit, Issues

with China, and the relationship with the United States remain significant (says above)Problems often arise with the treatment of overseas workers. Watch Philippines role in ASEAN, as well as some regional affairs including Thai-

Cambodia tensions, Myanmar democracy

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AUSTRALIAAustralia is an island continent unto itself between the Indian Ocean and southern Pacific, the sixth largest country in the world by landmass with a population of merely 20 million. It is a member of the British Commonwealth, an American and NATO ally. 80 percent of the population is concentrated within 6o miles of the coast, mainly in three east-coast cities – Sidney, Melbourne and Brisbane. The rest of the vast continent is mostly desert, and the costs of developing infrastructure on such a landmass are forbidding, though it has been necessary to gain access to far-flung patches of resource deposits and arable land.

PoliticsThe country is currently led by Prime Minister Julia Gillard’s Labor Party. Gillard toppled Kevin Rudd in an intra-party squabble after his policies brought trouble to the entire party, in particular his blunt attempt to rule by himself with a few advisers rather than through cabinet, and his failed bid to impose a major “resources super tax” on windfall profits of mining companies. Labor faces the strongest opposition since it rose to power after it defeated PM John Howard’s Liberal-National Party in elections in 2007. Rudd was seen as a leader that attempts to lead Australia in a more internationally focused way that does not depend on following the United States’ lead on every issue . Gillard has yet to develop a style but is on the left of Labor, and focused on social and domestic issues almost entirely in her career. Rudd’s attempt to cultivate stronger ties with

China was a flop, really just showed the ambivalence in the two sides’ about their increasingly important relationship and economic interdependence yet their security fears. Australian domestic politics are often insular, but currently evolving policies on free trade (including FTAs), foreign direct investment and defense and security are important to watch.

EconomicsAustralia is a resource rich liberal economy – exports amount to roughly $200 billion per year, about 20 percent of GDP, and Australia is broadly open to foreign investment (and is an active investor in foreign countries as well). Australia has therefore experienced ups and downs following fluctuations in global commodity prices and capital flows in 2007-9, but it is relatively self-sufficient and not in the same financial troubles as other developed nations. Australia produces mineral and agricultural commodities, the most notable of which are coal, uranium, iron ore, zinc, tin, beef, wheat, sugar and wool, though there are many others, including petroleum and natural gas (which Australia exports as LNG). The goings on in Australia’s resource production and export sectors are important to watch – including the ongoing debates about passage and implementation of new mining tax. Also watch for the effect on resource production and export due to natural disasters (such as Queensland floods in 2010-11). Top trading partners are China, Japan, the US, Britain and Singapore, ROK, all key relationships to monitor.

Relations with China are a crucial area to watch in terms of Australia’s economy – the Chinese have sought to invest in resource deposits and production sites in Australia in order to secure their own needs, and while Australia recognizes that China is one of its most important trade partners, a public backlash against Chinese presence (which is often seen as baldly exploitative without benefiting local Australians) has had a hand in nixing major deals (such as Chinalco’s $20 billion bid for Rio Tinto assets in 2009). Subsequently the Chinese have managed to pull off lower profile deals. In other words, WATCH for China’s progress in investing in Oz or purchasing Oz assets, and watch for nationalist responses to Chinese bids.

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SecurityAustralia is firmly part of the US alliance system in East Asia and the Pacific, along with its neighbor New Zealand. The US alliance will always be primary in a geopolitical sense, but in a regional sense the United States has gradually handed more responsibility over to its allies since the Cold War ended, expecting them to manage situations that the US would prefer to avoid. The relative retreat of the US has been an important factor in Australia’s developing security goals, which range from counterterrorism to international peacekeeping, as well as fighting international crime like smuggling. Australia’s developing security policies and defense strategies are important to watch. Australia has deployed forces in Afghanistan and East Timor, and its international deployments should be monitored.

Australia’s navy will seek greater definition in its role in the Indian Ocean, South China Sea and Pacific as China’s navy expands its range of operations and the region’s seas become more crowded generally. The government has recently released an ambitious modernization plan for

the military that focuses in particular on the navy, but at the moment, there is a real crisis in the navy – especially the submarine fleet. Keep an eye on this. Australian is also the primary guarantor of security for Pacific islands like the Solomons, Fiji and Papua New Guinea, where occasionally incidents will flare up to take note of.

The East Timor deployment highlighted the sometimes tense geopolitical relationship between it and Australia, and Australia and Indonesia, which is also important to monitor. East Timor sought independence from Indonesia for decades, resulting in intermittent fighting and refugee scenarios. In 1999 Australia intervened to secure the island’s transition to an independent nation after a public referendum and the deployment of the Indonesian army. Australia will seek to get along with Indonesia, its sprawling northern neighbor but would prefer for it not to be too strongly unified or assertive, since Indonesia’s geographical position could enable it to interfere with Australia’s critical sea lanes and supply lines to the rest of the world. Australia deployed in East Timor ultimately to ensure its own security and to appease the United States, which expected Canberra to put out the flames.

Australians are highly wary of rising immigration levels from countries in South Asia, and have established detention centers (such as the one on Christmas Island) to manage entry of asylum seekers. This issue has become a tense topic domestically, and regionally as Canberra has sought regional support for a processing site for the asylum seekers / refugees. International smuggling, especially narcotics, is another issue that concerns Australian security forces.

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InternationalAustralia is a member of the British Commonwealth, an ally of the United States and NATO, and a member of the WTO and numerous Asia-Pacific regional groupings, including APEC, the East Asia Summit, the ARF (ASEAN Regional Forum, and the Pacific Islands Forum (PIF). Canberra is attempting to prove its international credentials to gain a non-permanent seat on the United Nations Security Council in 2013. In addition to Australia’s generally supportive role in going along with US-led international initiatives, PM Kevin Rudd is an outspoken supporter of China and has sought to maintain good relations with Beijing. This is a result of the developing geopolitical dynamic in which China’s growth is increasingly beneficial to Australia’s economy, but must be balanced along with Australia’s position in the US economic, political and security sphere (including Australia’s substantial partnerships with Japan and South Korea).

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NEW ZEALANDNew Zealand is an isolated island east of Australia. Its primary importance is its economic relationship with Australia, which is probably the most liberal of any bilateral partnership in the world. In addition, New Zealand seeks free trade agreements (FTAs) with East Asian neighbors and other states. New Zealand acts as a financial center for a number of countries, and has extensive financial relations with Japan (including being the primary target of the yen carry trade, and hence the exchange rate of the New Zealand dollar is an indicator that finance in Japan is about to get interesting). New Zealand is an active negotiator and political participant in

events up in Southern Pacific island states, which occasionally rise to the level of regional importance.

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SINGAPORESingapore is a city-state on the southernmost tip of the Malay Peninsula and the most important city in Southeast Asia. It is a sound and smoothly run commercial center with strong relations to the West as well as centrality in Southeast Asia. It overlooks the Malacca Straits, which is one of the world’s crucial maritime chokepoints, seeing about one-fourth of seaborne trade transit through each year, so it is geopolitically significant.

PoliticsThe People’s Action Party (PAP), the party that won Singapore independence from Malaysia in 1965, successfully squelches potential opposition – the political consolidation is evident in that the first Prime Minister, Lee Kuan Yew, now advises his son, Lee Hsien Loong, who is the current prime minister. Any signs of a rising opposition, of increased factionalization within the PAP, is important to watch, in case it could affect policies that would touch on Singapore’s trade or foreign relations.

EconomicsEconomics and trade are the primary reason to pay attention to Singapore. Singapore’s geographic location makes it well positioned to benefit enormously from shipping and transportation industries and finance – meanwhile its own manufacturing industries are globally competitive. Singapore is an export hub, with domestic-made exports roughly equal to its GDP, but it is also a transshipment hub, with re-exports also equaling GDP (making its total export dependency close to twice the size of its GDP). Singapore has benefited commercially from centuries of Chinese business and from British colonial presence, but it has largely come into its own as an independent country.

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SecuritySingapore secures its national interests by using its geography and trade know-how to make itself indispensable to the interests of various world powers. Singapore has strong relations with the US, for which it serves as a port. It is also has its own powerful navy to secure its commercial interests, for instance by stomping out piracy in the straits that were once the most pirate-infested in the world. Singapore’s navy is worth watching as naval activity across the region picks up in coming years.Watch US and Singapore cooperation on this front.

InternationalSingapore is an active member of ASEAN, APEC, the WTO, and has FTAs with more than a dozen countries and economic groupings, plus numerous other preferential trade agreements. Free trade is a priority, and trade barriers and financial regulations that could affect Singapore’s trade with neighbors or international players are important to monitor.

Watch Chinese influence and domestic response. Watch for US influence, to see if it is growing in any way beyond the standard

institutional good business/security relations.

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VIETNAMVietnam comprises the long narrow coastline of the Southeast Asian landmass, with fertile coastal plains on the eastern edge and mountains and jungle separating it from western neighbors Laos and Cambodia. The great Mekong River forms the western border.

PoliticsThe country is split culturally and economically between the north and the south, a split that was intensified during the US Vietnam war and that is still evident today. The North is where political power is held in the capital Hanoi, but it is poorer, more insular, less developed due to its Communist history. The South, with its greatest city Ho Chi Minh, has more economic and commercial power and therefore seeks closer international ties and relations with Western nations.

The opening-up of economic policies have sown the seeds for political tensions. The communist leadership and political elite fear that influential pro-western capitalist-oriented persons could eventually create a direct opposition, and will wield the full might of the state security apparatus to prevent this from happening and ensure that they remain firmly in control. Particularly the recent global financial crisis gives rise of status of the conservative elites who fear the pro-western would hurt the country. Nevertheless change is happening, since lucrative trade and communication with the outside world has created generational differences within the communist party that will result in contests for power in coming years as the elders die off.

Watch for legal or regulatory changes that could affect business, either in terms of liberalizing more, or restricting or rolling back liberalization.

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EconomicsVietnam is a commodities exporter, the second biggest rice exporter in the world and one of East Asia’s few oil and natural gas exporters (with oil and gas fields off the southeastern coast). As with modern China, Vietnam’s communist leaders have partially reconciled themselves to the global economy, attempting to attract foreign corporations to invest heavily in manufacturing and resource production in Vietnam. Vietnam’s rapid growth, as a result of these open economic policies, has occurred despite rampant corruption and heavy-handed state presence that often appropriates private enterprise only to mismanage it. It is important to watch developments in economic policy, foreign direct investment, energy policy and any changes in direction towards or away from liberalization.

Watch energy sector (oil and gas, especially offshore)

Watch foreign investors China’s economy and improving ties. Watch Vietnam’s special trade relationship with

China’s Guangxi Province.Watch progress of Mekong Initiative. Watch growing Japanese investment. Watch the demographic situation in Vietnam -- it has a high population, especially high

female population compared to males. This can lead to Vietnam exporting workers and women to different countries, especially demographically declining countries like Japan, South Korea and even China. Watch for policies that encourage or react to this trend.

Security and InternationalVietnam has long had a rough relationship with its northern neighbor China, over sovereignty along their shared border in the north (they fought a war as recently as 1978-9, though the land border has largely been resolved, at least for the time being) and boundaries in the Gulf of Tonkin and South China Sea. These bodies of water are vital to Vietnam’s interests because they form its eastern horizon (which Beijing and the rapidly evolving Chinese navy hope to exercise indisputable supremacy over). The disputes with China over the South China Sea, and the Spratley and Paracel islands, are particularly important, as they will have an impact on China’s attempt to assert its influence over the sea, and the US attempt to reinsert itself as a direct player in Southeast Asia over time. And this represents an opportunity for Vietnam to show muscle to China in its territorial claim. In fact, China’s growing assertiveness in South China Sea has promoted a more defense conceptual Vietnam and any direction on developing its navy and defense capability need to be watched Vietnam dominates Laos and Cambodia politically and economically, but as Cambodia develops on its own (and as Thailand ramps up investments in along its border with Cambodia) there could be some tug-of-war, though it will mostly take place within Cambodia.

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CAMBODIACambodia is a small kingdom positioned between Vietnam and Thailand. The Mekong River runs through it, and it has a coastal strip on the Gulf of Thailand. It has been opening up recently, but isolated for decades before that under the Khmer Rouge, and hence underdeveloped. This makes it a target for investment from the outside, so watch for foreign investment from states like Thailand, Japan, China, US, et al. Tourism, economy, any sign of energy development (especially offshore in Gulf of Thailand) are important.

Cambodia has sour relations with Thailand historically, with the two vying for influence over the large population (ethnically part Khmer, part Thai) and resources of the Khorat Plateau (which is northeast Thailand). Border disputes (symbolized by the dispute over the Preah Vihear Temple) on this border have led to army mobilization and shootings throughout 2008-10. Cambodia has supported Thailand’s internal political chaos; and it has hosted ousted former Thai prime minister Thaksin (as it has hosted many exiled Thai politicians throughout the years), whose trips to Cambodia should be watched for potential to stir up trouble between the two states and in Thailand. Thai investment is nevertheless growing, and Thai politicians and businessmen

cross over to Cambodia to do business deals. Despite those fluctuate relations, this often followed by improved relation that avoids the tension to go too far

Watch for violence on the border. Watch for volatile mixing of the Thai-Cambodia border dispute issue and Thailand’s internal political troubles, as this could cause harsher reaction from Thailand. There are also maritime border disputes in the Gulf of Thailand, where energy resources could be at stake – so watch developments on talks between the two sides and exploration for resources.

In general Cambodia is seeking to take the advantage of Thailand’s chaos, to gain more attention (and investment) for itself to foreign powers, esp China, US, Japan. Watch this developing trend closely.

Watch Sam Rainsy, an exiled opposition figure and former Minister of Finance in Cambodia who stirred things up on Vietnamese border demarcation issue (by stirring up protests against Vietnam for encroachment). He was caught up in numerous corruption scandals and is currently wanted by Cambodian government.

Watch land reform and property rights issues. These could cause social instability.Watch for dealings with Singapore, for instance over using Cambodian agriculture for

Singapore food security. Watch for China’s influence in the country and how the country manages to gain certain benefit from U.S engagement while maintaining high level relation with China

LAOSLaos is a small, underdeveloped Southeast Asian mountain and jungle state that is dominated by its neighbors Thailand to the west and Vietnam to the east (both of which are investing in the country). But business is beginning to develop (Beerlaos, for instance, is being exported globally) and foreign investors are making a wider entrance. China is showing an interest in investment opportunities in its near abroad, and Laos is no exception (especially if China hopes to make use of the Mekong River). China has invested in Laos farmland (though there is not much of it), as part of an attempt to gain food security. Domestic The United States in June 2008 removed Laos from a list that prevented US businesses operating in the country from receiving financing from the US, which should increase investment there.

MYANMARMyanmar, formerly Burma (and still called so by some English-language media) is a large country comprising the westernmost edge of the Southeast Asian landmass, with Bangladesh and India to its west, China to its north, and Thailand and Laos to the east. It is ruled by a military government that oversees the chaotic mess of jungles and hills that shelter various ethnicities, tribes and rebel groups.

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Politics A military junta, the State Peace and Development Council, has ruled Myanmar since 1962 (under various names). The junta's power was challenged by mass protests in 1988, which were

suppressed, An outpouring of supporters for pro-Democracy opposition leader, Aung San Suu Kyi, led to her arrest in 1989 and a victory for her party in elections in 1990, but the junta refused to recognize the results and has imprisoned Suu Kyi ever since. A new constitution was passed in May 2008 (after much devastation caused by Cyclone Nargis) by referendum. Opposition is systematically suppressed. The central government moved the capital from Rangoon (Yangon) in 2005 to Nyapyidaw, the official capital since 2006. The long expected election was held Nov.2010, in a large part of Junta’s move to demonstrate certain process of democratization and opening up to the world. Though the election only saw the installation of majority of junta-backed officials, it made progress as allowing small portion of civilian officials take part in the decision making process. More significantly, the opposition leader Aung San Suu Kyi was freed soon after the election, providing a channel for junta to dialogue with western countries. Meanwhile, military government is moving to consolidate power to clear the remaining rebel force along the border. Watch for Suu Kyi’s function, junta’s further step in democratization while consolidating power, peace or war scheme with rebel groups.The junta’s power is far from absolute: the combination of ceaseless insurgency by rebel groups and thriving black markets prevents the military leaders from maintaining full control, which in turn justifies their repeated attempts to clamp down on the country.

Myanmar held elections in Nov 2010, first time since 1989, which did not replace the military government but gave it the semblance of normalized democracy and civilian, reform-minded leadership. A similar symbolic move was releasing democracy activist Aung San Suu Kyi, which was meant to give the appearance of a less repressive environment to improve the junta's image. The government remains the same military junta at heart. All of this is in preparation to stabilize the domestic situation and bring in foreign investors and try to open up a bit more for economic reasons. So Burma is trying to open up, though cautiously and incrementally.

Watch for divisions in opposition movements.

EconomicsMyanmar does not have a normal functioning economy, but it is rich in natural resources, primarily oil and natural gas, rubber, timber and metals like tin. Energy is the biggest focus in the twenty-first century: China is conducting an all-out acquisitions campaign to make sure that Myanmar affords a constant supply, through infrastructure that the Chinese help build – very important to keep an eye on. India is also attempting to gain a better investment position in Myanmar for its resources, and South Korea has a presence too. Thailand is cooperating with Myanmar for natural gas reserves and hydroelectric power as well. Goods from China, India and Thailand dominate Myanmar’s thriving black markets. The holding of election at the same time creates a door for junta to open up its economy. Junta has long been seeking for economic growth to boost legitimacy while this was always hampered by western sanctions and the close economy. This potentially attract other countries which see Myanmar as resource abundant and geopolitical significant to add a foothold in the country while helping to shift Myanmar’s economic development mode. But this would add concern to China and India which already have strong relations and considerable influence that the move would dilute their power, though the process will not come anytime soon.

Watch development of transnational infrastructure such as oil pipeline and railroad, namely going into China but also to India or other developments. Any move to ease sanctions by

western countries, any energy or resource related countries in a move to invest in Myanmar. And China’s strengthening ties with the country in a bid not to lose the existing influence

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SecurityMyanmar has never been a stable state -- its territories are divided violently between military rule and long-running insurgencies. The military junta that took control in 1962 has waged numerous campaigns against minority rebel groups, most notably the Karen hill tribe, and has had trouble consolidating power. One third of the country is part of an ethnic minority, and the variety of ethnic groups has been a constant source of tensions and factionalism. Campaigns by the military to pacify the various rebel groups leads to skirmishes on most of Myanmar’s borders. As junta is moving to consolidate power in the border, violence or wars are expected. Two big rebel groups should be watched, one is USWA and KIO. Both have strong relations with China who always concerns about border instability. Meanwhile, border with Thailand and India will also be hotspot, but to a less degree A few attacks seemed directly targeted at the military regime in 2010, particularly at the water festival. These have not demonstrated high capability, but we should watch for more of there kind. InternationalInternationally Myanmar is a member of ASEAN and has commercial ties with its neighbors, but it is overall a pariah state, with countless United Nations resolutions imposing economic sanctions. The regime survives attempts by foreign powers to punish it for not meeting international standards of governance. Refugees from Myanmar create problems for neighbors like Thailand and India. China continues to bolster the regime in order to meet its needs for natural resources and gain access to ports along Myanmar’s lengthy coastline. China is looking to expand naval operations and needs friendly ports. India is uneasy with increasing Chinese presence and influence in Myanmar. North Korea and Myanmar have a relationship which is not particularly important but obviously attracts attention because of their bad reputations and rumors of Myanmar importing nuclear assistance. But China is essential.

The US reviewed its Burma policy in 2009 and re-initiated diplomatic ties with Burma/Myanmar, partly for its own sake and as part of the process of deeper US involvement in Southeast Asia generally. US officials have visited since the elections and there are negotiations ongoing. It is a distinct possibility that we will see the US deepen engagement, and eventually ease sanctions. However it has not yet reached the point where we can say that that is in the process of happening. The US has a much bigger political hang-up than states like India or Thailand who are hoping to get more access into Burma as a result of the government's shifting policy.  China is heavily entrenched and trying to protect its status, resisting the entrance of competitors. The US will therefore continue the process of engagement, and it is even possible we could see some surprising small successes along these lines, but we are not at the verge of a sweeping opening up and a whole-scale US embrace of Myanmar. Not least because the government will not compromise on human rights and democracy issues that the US will demand.

Watch Myanmar’s bids to bring in foreign investors, to gradually open economy, etc. Watch India and Thailand moving in for instance.

Watch carefully the US diplomatic engagement policy, to see how it progresses and whether the US (or Europe) moves to ease sanctions or create new avenues of operation.

Watch to see China’s response to US engagement. Watch China very carefully to see if it deepens its entrenchment and increases influence.

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PAPUA NEW GUINEA

Papua New Guinea (PNG) shares the island of New Guinea with Indonesia. Its next nearest neighbors are Australia (directly to the south) and a number of island states in Oceania. The island is notable for some resources, in particular mining and natural gas. Exxon is investing $15 billion in a liquefied natural gas (LNG) facility in Port Moresby, PNG’s capital. The Grasberg mining complex, run by Freeport-McMoran, is one of the largest gold mines in the world and has been the target of political controversy and some security breaches. PNG was an important battleground in World War II because of its proximity to Australia; like Indonesia, though to a much lesser extent, it will continue to be a focus of Australia’s. However in recent times, China has taken an interest, and has been especially active lately in buying up friends and expanding its influence there, which Australia will be wary of. Watch Chinese construction, business and political activities. Watch to see who invests money in PNG. Watch to see if Australia shows interest in returning attention. Also China’s interest in the country, energy, security or political influence

EAST ASIA Cheat Sheet (for quick reference)

Japan US-Japanese relations – especially security alliance review; ballistic missile capability

(SM3, PAC, etc), trade/sharing in other weapons and weapon systems, moving or re-moval of US troops; Okinawa base relocation; financial and trade relations

Economic decline – watch deflation (consumer prices, CPI), exports; watch for a strengthening or falling yen; watch “carry trade”; watch industrial production, unemploy-ment, corporate profits, credit availability (esp for small-medium sized businesses), bank/financial stability

Govt deficits and debt – any improvements, or just worse and worse? Tax changes, govt spending cuts, bond sales, credit rating downgrades; Quantitative easing; Any sign of se-rious fiscal reform; consumption tax increase

Demographics -- aging, population shrinking, low fertility rates, little allowance for im-migration; any policies to boost fertility or immigration

Defense -- Rearmament and Evolution of Self-Defense forces – developing air and naval capabilities, international operations, peacekeeping; pay special attention to mili-tary policy for Southwest islands (Nansei islands or Ryukyu island chain), more troop de-ployments in Nansei islands; increases to submarine fleet; coordination with US and ROK; Any Japanese Coast Guard developments; any easing of legal/policy restraints on military action;

Maritime disputes – East China Sea (Senkaku/Diaoyu islands, Chunxiao natural gas re-serves), DPRK vessels, trade sanctions on DPRK and Iran, illegal fishing, China’s naval exercises. Island disputes – Russia (Kurils), watch Russian top officials visiting the is-lands and Japanese responses; China (Senkaku/Diaoyutai) and potential for clashes like Sept 2010; South Korea (Takeshima/Dokdo)

China relations – economic integration, investment in China, trade, Chinese labor strikes at or criticisms of Japanese companies, military-political-economic tensions with China; Rare Earth Elements (REEs); anti-Japanese protests in China; watch relations very closely.

Democratic Party of Japan (DPJ) – party incoherence, inexperience, personnel changes. Falling popularity. Criticism from the Liberal Democratic Party (LDP). Watch for defections, resignations, updates on Ozawa’s corruption scandal, any sign of calling early elections.

DPJ cutting back the bureaucracy – any sign of actual cuts taking shape More independence from US in foreign policy? – mostly rendered null / pipedream but

watch for any sign of Japan trying to diminish US influence More East Asia focus in foreign policy? -- trilateral relations with Korea and China; Ja-

panese relations with ASEAN, Japanese investment in ASEAN development; resources from ASEAN; Japan-Vietnam, Japan-Indonesia ties; coordination with ROK in military, intelligence, and investment in Southeast Asia, etc

Large protests -- notable because infrequent Electoral reform Nuclear and space science and technology

Technology/innovation -- cars, environmental, genetics, pharmaceuticals, robotics

China Fundamental Debates – pay attention to news items that point to fundamental divisions

in China, including Center versus Periphery, centralization versus decentralization, Rural versus Urban, Coastal versus interior, private enterprise vs state owned, Hu Jintao vs Jiang Zemin or people connected to Jiang, Wen Jiabao vs his critics, Xi Jinping versus Li Keqiang, Economic restructuring to boost domestic demand/consumption versus export-driven growth; growth vs stability; Han majority vs restless minorities; national unity vs breakaway regions (xinjiang, Tibet, Taiwan, etc); migrant workers vs factory owners or authorities, government or CCP officials versus private citizens; China vs the West, etc

Social stability – unemployment; protests, land disputes strikes, riots, crime; separatism; Xinjiang, Tibet, Uighurs Tibetans and Zhuang minority or others, Dalai Lama, East Turk-istan Islamic Movement (ETIM), Rebiya Kadeer or other Uighur activities; Falun Gong, etc; minority or human rights issues; especially look for coordination of protests or move-ments across regions, or anything involving evil foreigners

Economy – exports, imports, trade balance and politically sensitive surpluses, investment in China and threats to it, China’s outward investment drive and global resource hunt, household consumption and any signs it is rising, savings rates, bank lending, inflation, foreign exchange reserves and their management, US treasury bill purchases, SOEs and SMEs, farm sector, food prices, real estate prices and regulations, construction, urbaniza-tion, migration, demographics, worker-dependent ratio, labor shortage in certain regions or certain skill sets

Financial stability – bank lending; annual credit quota, credit availability (esp for SMEs); bank’s capital; bank reserves requirements; Non-performing loans; currency ex-change rate; foreign direct investment (FDI); stock and bond market development; local government debt and local government finances; bond issuances; real estate regulations, experimental property tax …

Energy and Raw materials security – iron/steel/aluminum and other metals sectors, en-ergy sector coal, oil, natural gas, hydropower, water dam politics, nuclear energy, alterna-tive energy (windpower, clean coal), LNG

Foreign Acquisitions strategy – purchasing foreign resources or assets in companies, es-pecially in energy, raw materials, strategic commodities; Central America, Africa, Latin America, Southeast Asia, Australia. Watch also for purchases of stakes in US or Euro-pean companies or purchases of their tangible assets; watch China’s quest for high tech-nology, dual-use technology, etc

US-China relations – currency value and exchange rate, bilateral trade disputes, protec-tionism and WTO disputes; intellectual property rights and enforcement; pro-domestic in-dustrial policy (‘buy china’ and ‘indigenous innovation’); China’s pro-export policy; Chi-nese purchases of US treasury debt; military tensions (esp naval); intelligence and cyber-security; US “encirclement” of China, esp in Southeast Asia; human rights; US-Taiwan alliance and arms deals

People’s Liberation Army (PLA) – evolution; deployment, acquisition, shipbuilding, training, document, personnel; conventional capabilities; asymmetric capabilities; infor-mationalization, communications, surveillance, reconnaissance; new tech like aircraft

carriers or stealth fighters; also very important is the PLAs political involvement or in-fluence Chinese Anti-ship Ballistic Missile, testing and the targeting, fire control and C4ISR capabilities that underlie its utility explicit in the cheat sheet -- and any other new or different Anti-access, Area denial tech/work they're doing.

Maritime – evolution of PLA Navy; South China Sea, as a ‘core’ Chinese interest; con-tested sovereignty over islands and maritime disputes in South China Sea or East China Sea; Paracel or Spratly Islands; expansion of coast guard roles or fishing authorities roles and patrols around disputed areas; UN Convention of Law of Sea; Exclusive Economic Zone (EEZ); visits or disputes with other South China Sea states (Vietnam, Philippines, Taiwan, Indonesia, Malaysia); negotiations with ASEAN states or others over disputes

Border tensions –Aside from maritime issues, there is also India, Aksai Chin, Arunachal Pradesh; Any Chinese involvement with Kashmir; Chinese cooperation with Pakistan that upsets India; Myanmar refugees and battles that spill onto Chinese side; Central Asian militancy or risk of Islamist militancy spreading from Central and South Asia into China.

Foreign deployments – peacekeeping, anti-piracy, China as responsible stakeholder, dis-aster relief or humanitarian assistance deployments

Land issues and development – real estate bubble, rapid development, protests and vio-lent resistance to land evictions, land rights reform, construction of welfare housing, etc

Price controls – price changes and subsidies in energy, exports, food prices; taxes, ex-port rebates, etc

Communist Party Congress 2012 – succession to 5th generation leadership.

South Korea Canary in the coalmine – what ROK does, many others tend to follow. Makes it impor-

tant to flag new trends, in economics especially, if you see them in ROK Economy – exports, cars, shipbuilding, energy companies (esp activity abroad), exposure

to China, FTA with China and Japan, nuclear tech, space tech; Chaebol (business con-glomerates)

Defense -- naval development; space program; expansion of deployments and operations abroad; indigenous ROK military hardware; arms purchases

US-Korea alliance – new exercises, military-military contacts and responses to ChonAn incident and heightened DPRK tensions; transition of responsibilities (ongoing until 2015), moving US troops; KORUS Free Trade Agreement ratification; joint exercises

China relations – economic integration, exposure to risks, investment in China and trade, Chinese strikes at Korean factories, tensions over North Korea and China’s support for or restraint of the North;

Korea-Japan-China relations – Northeast Asian Community, trilateral trade agreement, North Korea – post-ChonAn and post-Yeonpyeong tensions, security and defense is-

sues; economic cooperation zones; maritime border skirmishes and Northern Limit Line (NLL); bilateral negotiations and 6 Party Talks; Demilitarized Zone (DMZ); various ar-eas of cooperation such as Kaesong or Mount Kumgang ;

Northern Limit Line (NLL) and disputed islands – disputed maritime border with DPRK; naval skirmishes (esp during blue crab fishing season, June-Nov). Plus there was the shelling of Yeonpyeong island. Watch this area closely, since DPRK has targeted it.

Democratic politics volatility Constitutional reform – current one-term presidential system or change to parliamentary

North Korea Kim Jong Il – leader; preparing to step down in 2012, watch transition of power, watch

his health, and appearances, especially visits to China Kim Jong Un – next in line for leader position; any appearances or references to his

preparations and grooming to become leader; any travel Shuffles of government officials -- can give clues into regime, watch for these, esp

ousting of military, Worker’s Party or state officials China relations – Chinese support, esp with aid and investment, joint development zones

on the border, Korean attempts to limit dependence on China; China’s willingness to co-operate with US alliance in pressuring North Korea over its belligerent acts; nuclear pro-gram, including uranium enrichment, and (false) claims to take steps on denuclearization; 6 Party Talks; border tensions or violence with Chinese citizens (happens with traders go-ing back and forth over border)

South Korea – ChonAn/Yeonpyeong aftermath, bilateral relations, naval skirmishes, border closures, joint economic projects like Kaesong or Mount Kumgang; Demilitarized Zone (DMZ), military-military talks, ROK’s willingness to do 6 party talks

Northern Limit Line (NLL) – disputed maritime border with ROK; naval skirmishes, shelling islands etc

International relations– secrecy, surprise, vulnerability; ratcheting up tensions then re-leasing them so as to improve bargaining power; fear of US attack; international diplo-macy, attempts to split US, Japan, Russia, China, South Korea in 6 Party Talks; use nu-clearization/denuclearization or threat of attacks or missile program as bargaining chips; attempts to call attention to armistice and need for peace treaty; watch for DPRK over-tures to Americans or Europeans or other states that could be partners

Six Party Talks – the point is the process rather than the end/goal; this is how DPRK manages foreign powers; watch for resumption of talks or cessation of talks. In the after-math of the ChonAn and Yeonpyeongdo incidents, watch for other negotiations, bilateral or otherwise, that happen parallel or in relation to 6 party

Economic experimentation – slight openings versus internal control; external trade; heavy industry focus; currency revaluations

Drug running, counterfeiting, arms sales – watch for NorKor crime, as well as NorKor boats apprehended around the world, esp after ROK and Japan tightened rules

Food security – potential famines, foreign aid; Refugees, defectors – watch China border; South Korea; Japan, remittances from Japan;

scrutinize source carefully on refugee reports (lots of lies)

Taiwan President Ma Ying-Jeou – his policy of “warming up” with China, esp Economic Coop-

eration Framework Agreement (ECFA); econ policy with China; his maintenance of US and Japanese relations; his popularity and whether his Kumintang (KMT) party remains popular in local elections;

Democratic Progressive Party (DPP) – signs of staging a comeback, such as winning small elections, holding major protests, etc

Politics/Organized Crime/Business nexus – watch for overt signs, corruption scandals, court trials, high profile arrests, etc

Economy – exports, esp high tech sector Cross-Strait relations – relations with China; warming up; cooperation in tourism, fi-

nance, trade, etc. Economic Cooperation Framework Agreement (ECFA) – the China-Taiwan trade

agreement – signed in 2010 and takes effect in 2011. Watch for ramifications. FTAs -- indications of whether Taiwan will be able to seek FTAs with other states

(Japan, Singapore, ROK; US?) after forging a trade agreement with Beijing US-Taiwan military alliance – US arms sales to Taiwan; Beijing’s threats to sanction

US arms manufacturers as a result. Watch especially for news of US sale of F-16C/D fighters

US Congress – much grandstanding on Taiwan. Watch for US policy shifts or moves on Taiwan relations here

Indonesia Economy – commodities exports (energy, including LNG, and mining), foreign direct

investment (FDI), deregulation and liberalization, protectionism, etc Military – shifting emphasis to air and sea power, naval evolution and improvements,

defending the islands, maritime boundaries and sovereignty (rather than focusing solely on counterinsurgency, counter-separatism, and internal security). Transportation and mo-bility between the islands is a major challenge. Also watch progress of US-Indonesian co-operation, after US restarted relations with Kopassus the human-rights-tainted special op-erations unit, and Indonesian-Australian cooperation and training.

Political stabilization – political parties have stake in the system; anti-corruption drive; Java as predominant island (and any threats to this status); separatism in regions like West Papua and Aceh

Ethnic/Religious tensions – watch for protests, strikes, riots, skirmishes, etc Islamic militancy – a number of militant groups, not list of which is Jemaah Islamiyah,

and also the Aceh cell that was discovered and broken up in 2009-10. Monitor ongoing crackdowns and arrests.

Terrorist attacks -- Attacks possible even in “stable” times, such as July 2009 attacks. Separatism – Aceh (Free Aceh Movement), West Papua and Irian Jaya (Free Papua

Movement), etc. Border disputes -- watch for land and sea territory disputes with Malaysia especially

(on Borneo land border and the Ambalat block offshore) etc Australian relations – watch to see how these develop, esp in defense/security Chinese relations – Chinese economic influence expanding, Indo’s response US relations – US is likely to pick Indonesia as the focus point for its “return” to South-

east Asia; liasson between US and ASEAN; etc Japan and ROK – Japanese and Korean investment, esp in energy and raw materials but

also infrastructure, is important Association of Southeast Asian Nations (ASEAN) – Indonesia is a leader of ASEAN

Thailand Economy – exports (esp rice), foreign investment, Bangkok financial sector, etc

Political Crisis – rolling political crisis, mostly contained within Thailand. Mass protests, internal security forces deployment, frequent dissolutions of parliament, military coups at least every decade, ANY sign of military intervention in politics.

King Bhumipol Adulyadej – revered figure, important for stability. The military and civil bureaucracy in Bangkok attempt to align with King. His approaching death is al-ready encouraging socio-political unrest, watch for death.

Thaksin Shinawatra – ousted former prime minister. Orchestrates massive Red Shirt protests, attempting to destabilize government and save his assets frozen in banks, or re-turn to power.

Red Shirts (United Front Democracy Against Dictators UFDD or UDD)– loyal to Thaksin, based in northern and northeast provinces, held massive violent protests in Bangkok in April 2009 and April-May 2010 disrupting the city. Support the Puea Thai party, but the party has to try to succeed politically despite the extremism of the Red movement.

Yellow Shirts (People’s Alliance for Democracy or PAD) – Royalists, middle class Bangkok and bureaucrat class, claim zealous loyalty to king; pro-military; extremely anti-Thaksin; The PAD held huge protests before Thaksin’s ouster in 2006, and also held huge protests in 2007-8 to overthrow the ruling several parties that were pro-Thaksin, in-cluding overrunning Suvarnabhumi international airport in 2008. Went quiet in 2009 when the anti-Thaksin Democrats became ruling party. However, PAD then created their own political party and have grown more independent, which means they don’t perfectly align with the Democrat Party

Southern insurgency – always ongoing, main thing is to watch for any sign that it could leak into areas beyond the three provinces of the Malay Pattani region in the far south. Also, any change of roles between police and military in managing the situation would be important (when Thaksin tried to restore ‘civilian control’ and put police in charge, that created a backlash by military)

US relations – the US’ oldest formal military ally in region. Cobra Gold annual exercises are a big event. The US has avoided Thailand for most of the past decade, but as US reen-gages with Southeast Asia, we should watch for any attempt to revitalize ties, especially because of the next bullet

China ties improving – Thailand and China have shown signs of improving ties. Royal family maintains good relations with China. The Democrat Party tends to be pro-China, and was responsible in the 1970s for normalizing ties with China. Military exchanges have become more frequent. The proposals for a massive China-SoutheastAsia railway that would run through Laos/Thailand/Malaysia to Singapore are an important barometer of whether this relationship can grow in a serious way.

Mongolia Chatter – lots of foreign powers with a presence in Mongolia, good place to listen/watch

for rumors Mining sector – tons of new foreign investment and involvement; uranium especially;

new laws, redistribution of wealth, management of politics over resources Banking system stability – at risk; watch in case worsens to the point of bank failures,

bailouts, foreign assistance Balancing China and Russia

Foreign presence – watch any outside players that Mongolia can use to counterbalance China and Russia; namely France (interested in uranium), Japan, etc.

MalaysiaPhilippinesAustraliaNew ZealandVietnam Cambodia LaosMyanmarPapua New GuineaEast TimorFiji and Pacific Islands