Innovation is often viewed as a mindset or something that can be stimulated with the right policies. However, it also has a clear geographical component. Many ancient cities were built alongside rivers. Today’s most innovative regions – Silicon Valley, Boston, New York, London, Dubai, Tel Aviv and Singapore – all look out over an ocean.
The proximity of open water stimulates entrepreneurship, lofty ambitions and risky ventures. In this series in the Dutch newspaper Het Financieele Dagblad, our lead researcher Haroon Sheikh looks into the innovative strengths and developments in seven major coastal regions. This week’s edition is about the waters of Southeast Asia. Coming up next week: the waters of Northeast Asia.
Southeast Asia has always been a busy intersection of civilizations and maritime trade routes. China is highly active there, while India, Japan and the United States are also looking to gain access to this thriving region. Innovative regional hubs are being developed there and new economic tigers are on the prowl.
Southeast Asia has always been a maritime world. Indonesia is the world’s largest archipelagic state. The Philippines and Singapore also consist entirely of islands. Malaysia’s territory is split in two by water and anyone who studies a map of Myanmar, Thailand and Vietnam will mostly see endless coastlines.
These connections to the water have made this region into an intersection of civilizations and trade routes. Many of its peoples originally immigrated from the south of China, bringing their languages, customs and farming techniques with them. Colorful culture and particularly religion came from India: Buddhism can be found in Thailand and Myanmar, while Hinduism is prevalent on Bali and in the name of Indonesia’s airline company Garuda, named after the flying Hindu deity. Traders from Arabia converted a large part of this region to the Islamic religion. The Spanish, meanwhile, introduced Catholicism on the Philippines and named the group of islands after their King Philip II.
Early kingdoms in this region, such as Funan, Champa, Srivijaya and the sultanate of Malacca, were all seafaring civilizations. The “orang laut,” people who guarded the important sea routes, had even stronger ties to the water. They can still be found in this region. Traditional houses in Northern Sumatra are shaped like ships. In Brunei, one can find the Kampung Ayer, the “water village” whose inhabitants still spend their life on water.
Great Wall of Sand
Today, Southeast Asia is still a busy maritime intersection. The region is characterized by a wide diversity of religions, cultures and ethnic groups. Large crowds of tourists visit the region all year round. Above all, the region is an intersection of trade routes. The Strait of Malacca is the busiest shipping lane in the world: a quarter of all global trade passes through this area, as does eighty percent of China’s energy import from the Middle East.
As a result of Southeast Asia’s strategic location, several countries are developing major economic projects in the region. China is the most active in this regard. It claims nearly the entire South China Sea as its territorial waters because of the so-called “Nine-Dash Line,” a vague and controversial sea border that runs along the coastlines of Vietnam, Malaysia and the Philippines, resulting in international tensions with all these nations.
In recent years, China has constructed artificial islands in the South China Sea, dubbed “The Great Wall of Sand” by some, which are to strengthen its maritime presence in the region. At the same time, China steers clear of open conflict. In exchange for investments, it has reinforced its ties with the Philippines, for example.
Infrastructure is a core aspect of China’s strategy in Southeast Asia. The country is currently constructing railroads and energy pipelines that run directly from the Chinese hinterlands to the Indian Ocean: the coastline of Myanmar. This overland connection is sometimes compared to the role that California played for the United States in the past: it made the country a nation of two oceans. In addition to the Pacific Ocean, Myanmar can offer China direct access to the Indian Ocean.
China’s plans for Thailand are the most ambitious of all: a channel through the Kra Isthmus, the narrow peninsula that separates the Indian Ocean and the South China Sea. This 130-kilometre-long “Asian Panama Canal” is an extremely costly project, yet it will offer ships an alternative to the Strait of Malacca and cut three days off their journey through the region.
Singapore leads the way
China is not the only country to invest in Southeast Asia. India and Japan have set up a joint project, the AAGC (Asia-Africa Growth Corridor), that is to reinforce their economic relations with Southeast Asia. The United States are also strengthening their relationships with regional partners. This competition between external powers presents opportunities to countries in the region.
The absolute leader in Southeast Asia at the moment is Singapore. Maritime trade is ingrained in the DNA of this city-state, which was originally founded as a British enclave without a hinterland. Since the sixties, Singapore, led by the visionary Lee Kuan Yew, has focused on attracting trade from foreign businesses with its high-quality infrastructure and a highly efficient – and authoritarian – government. Today, it employs strategies such as Smart Nation in an effort to gain pole position in new technological fields such as autonomous vehicles, telehealth and e-government. Singapore’s model has been adopted by numerous other nations from China to Dubai. However, to preserve its exemplary role, it will have to face challenges such as demographic decline.
After Singapore, the Asian tigers of Thailand, Malaysia and the Philippines grew in prominence. Until the East Asian Crisis of 1997, these were the regional star players, but today they face stagnation. They are all caught in the “middle income trap” of being too wealthy to compete with poorer nations with their cheap labor, while also being insufficiently innovative to compete with more advanced countries.
Malaysia is the most proactive of these nations. It has a “Multimedia Supercorridor” and it is developing “Iskander Malaysia” at Johor Baru, just above Singapore. The goal is to create a second Shenzhen, the innovative production hub that developed near Hong Kong. Earlier this week, Malaysia and Singapore took new steps towards the development of a high-speed cross-border railway line.
China is investing heavily in these “old” tigers, yet all three also face serious political trouble: the fight between the military and the populists in Thailand, the authoritarian rule of President Duterte in the Philippines and the scandals surrounding the government party UMNO in Malaysia.
The expectation is therefore that the major dynamic in the region will not come from the wealthier nations, but from the poorer countries: the new Asian tigers of Vietnam, Myanmar and Indonesia.
Vietnam began a process of economic openness in 1986, the so-called “doi moi” policy, and it is following in China’s footsteps in this regard – albeit a few steps behind. Here, as in China, a Communist regime has resulted in a strong state with a highly educated population. With its low income level, this country of ninety-two million people will become a major outsourcing hub. Vietnam boasts more than one hundred ports along its extensive coastline with which it can be connected to the rest of the world.
Myanmar, once the most isolated nation in the region, is gradually opening up. Opposition leader Aung San Suu Kyi now has a seat in the government. Foreign powers, some of them from the West, are shifting their focus towards this strategically situated nation. However, the poor treatment of the Islamic Rohingya minority illustrates how authoritarian the country’s military regime continues to be.
Without a doubt, Indonesia is the most dynamic tiger in the region. The country’s very existence is a miracle in and of itself. This nation, with more than 260 million people, 18,000 islands and an enormous cultural diversity, was never unified even before its colonization. Nevertheless, it has become a stable and well-functioning nation.
Perhaps because it is still so young, Indonesia maintains a modest international profile. After the East Asian Crisis brought down the dictator Suharto, Indonesia has become a democracy in which different parties peacefully rule together.
Although the country is home to the largest Muslim population in the world, it does not play a leading role in that religious community. Indonesia’s form of Islam is fairly moderate, although the recent controversy surrounding a Christian official in Jakarta, who was accused of blasphemy, demonstrates that conservatism is on the rise here as well.
In terms of its size and potential, Indonesia should be counted among the BRIC nations – perhaps even more so than the volatile economies of Russia and Brazil. Nevertheless, the country has not entered the stage of the rising markets. It continues to act like a silent giant.
Nevertheless, Indonesia’s global ambitions are growing under the rule of President Widodo. A commonly overlooked aspect of his policies is a remark he made on his first day in office. He called on all Indonesians to work together and make the country a maritime nation once more. Its maritime infrastructure is still limited and inferior to that of its neighboring countries.
Since then, Widodo has developed the Poros Maritim Dunia doctrine, which translates as the “Global Maritime Axis.” Instead of focusing solely on Southeast Asia, Indonesia wants to position itself as a central axis between the Indian and Pacific Oceans. It has embraced a new vision to become the leader of a region that, historically, has always been an important intersection of people and goods. The region of Southeast Asia is in for a tumultuous future.
To read the article in Dutch, click here.
About the author
Haroon Sheikh (37) supervises FreedomLab Thinktank, works as a researcher at the investment company Dasym and is part of the VU’s Centrum Ethos as a philosopher.
He earned his doctoral degree with research into the influence of old traditions on modern societies and published two books: De Opkomst van het Oosten and Embedding Technopolis.
A book about new seaside powers will appear in 2018, based on these features in FD Morgen.