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The Future of Asia 2021

Duterte says Philippines won't take sides as US and China tussle

Malaysia's Mahathir weighs in on vaccines, Taiwan and aging gracefully

Philippine President Rodrigo Duterte delivers a video address to Nikkei's Future of Asia conference on May 21. (Photo by Kai Fujii)

TOKYO -- President Rodrigo Duterte on Friday said the Philippines will not take sides in the ongoing "big power competition" and urged large countries not to pursue dominance to the detriment of smaller ones.

Speaking on the second day of Nikkei's Future of Asia conference, held in Tokyo and online, Duterte also called for global cooperation in the fight against COVID-19, including equitable access to vaccines.

At the same time, Duterte said the pandemic "impelled, if not accelerated, the de-globalization process," resulting in lost trade opportunities for developing nations.

"We are not blind to the geopolitics of diversification and decoupling. However, the Philippines does not see the need to take sides in the ongoing geo-economic competition among big powers," Duterte said in a recorded speech, clearly referring to the U.S. and China without naming them.

Duterte, who is set to finish his single six-year term next year, has nurtured closer ties with China under an "independent" foreign policy to cut reliance on his country's traditional ally, the U.S.

But Beijing's actions in the disputed South China Sea have prompted Duterte to suspend an earlier move to terminate the Visiting Forces Agreement between Manila and Washington. The 1998 pact is being renegotiated instead.

Duterte also said disputes must be resolved "peacefully according to international law." The president did not explicitly mention the South China Sea, a hot-button issue at home, where he has faced mounting criticism for not taking a firmer stand against Beijing's claims to nearly the entire waterway.

"Great powers must resist the temptation to pursue interests at the expense of smaller countries, in plain defiance of international law," Duterte said. "The pandemic has shown us that zero-sum approaches are self-defeating and ultimately futile. What hurts one ends up hurting everyone else."

Duterte also used the forum to seek investments in his country's agriculture and digital economy sectors, as his administration aims to reverse a record 9.6% economic contraction last year, the worst in Southeast Asia.

"We invite more investments to expand e-commerce and new modes of interaction and exchange in a safe and secure cyberspace," Duterte said.

The Philippine leader also trumpeted the newly signed Corporate Recovery and Tax Incentives for Enterprise Act or CREATE law, which cuts corporate income taxes to 25% from 30%.

"The Philippines is ready to be a competitive actor in an open and fair global economy," Duterte said. "Despite the pandemic, opportunities for growth remain."

Reporting by Cliff Venzon.

Laos leader seeks more vaccine aid as COVID threat rises

Laotian leader Thongloun Sisoulith says his country is optimistic about its post-COVID recovery as technology rises to the occasion, but needs more help vaccinating its 7.1 million citizens.

Formerly the prime minister, Thongloun addressed Nikkei's Future of Asia conference for the first time as president, a post he took up in March. The two-day event wraps up Friday, with speakers including Pakistani Prime Minister Imran Khan, former Malaysian leader Mahathir Mohamad and Philippine President Rodrigo Duterte.

Thongloun's appointment, two months after being named secretary-general of the Communist Party of Laos, came at a challenging time for the land-locked state.

Among the few countries not to record a COVID-19 fatality in 2020, Laos, like its neighbors Cambodia and Thailand, has experienced a recent surge in infections.

"Throughout the year 2020 we have had only 41 confirmed cases of infection and all 41 cases received full recovery, and with no fatality," Thongloun said.

"However, it is shocking that recently, the Lao PDR has experienced a spike of infected cases. As of today we have 1,751 total cases and two cases of death."

Laotian President Thongloun Sisoulith addresses Nikkei's Future of Asia conference on May 21. (Photo by Koji Uema) 

Although its case load remains relatively low, the country's fragile $18 billion economy is vulnerable. It contracted by 0.6% in 2020, according to the World Bank.

While its mainstay agriculture sector stayed resilient last year, growing by 2%, the absence of international visitors left a $500 million hole, while workers remittances, totaling about $100 million, were also hit.

The economic fallout contributed to Laos' growing debt problem, linked to massive loans secured to finance the construction of hydropower dams as part of plans to become a major energy exporter.

Already, the country has ceded control of its electricity grid to a Chinese company to stave off a potential default, Reuters reported last year.

The World Bank predicted Laos' gross domestic product would recover and grow by 4.9% in 2021 under its baseline scenario. But, noting the possibility of risks, such as an inability to control the domestic spread of COVID-19, it estimated just 2.8% under its downside scenario.

Thongloun unveiled a five-year plan in January that aims for annual economic growth of 4% and to improve infrastructure in the country, one of the poorest in the region.

In his speech, the Laotian leader said that the government had implemented "strict measures" to control the spread of the virus, and that he was optimistic that cooperation and technology would bring the pandemic to heel.

"Most importantly, we can see the light at the end of the tunnel, as many countries are able to develop and produce the vaccines swiftly in many different types and brands," he said.

Laos has received shots of the AstraZeneca vaccine via the United Nations-backed COVAX program. It has also been given Sinopharm shots by China.

Thongloun said Laos was grateful for outside support for its vaccine rollout, which had seen about 10% of citizens inoculated, but more help was required.

"We still need to seek further support on this matter from our friends to continue to inoculate our populations," he said.

Reporting by Shaun Turton.

Pakistan's Khan: Unleashing Belt and Road potential requires peace

Pakistan, the world's fifth-largest country, has traditionally "looked West," but as it moves closer to China and tries to transform into a Belt and Road Initiative success story, it is pinning hopes for the project on conflict resolution and peace across the region.

At Nikkei's Future of Asia conference on Friday, Pakistani Prime Minister Imran Khan championed the BRI, defending the initiative which has been blamed by Washington and its allies for creating debt traps for poverty-struck countries. Moreover, he opened up the China Pakistan Economic Corridor -- the "flagship" project of BRI -- to Asian investment.

"The China-Pakistan Economic Corridor is a flagship project of the Belt and Road Initiative. It has generated economic activity, employment and will enhance bilateral and regional trade," Khan said at the event, held in Tokyo and online through Friday. "Pakistan has invited all friendly countries to join in investing in the several economic and industrial zones being established under the CPEC umbrella."

Pakistani Prime Minister Imran Khan shares his views on regional security, cooperation and other topics at Nikkei's Future of Asia conference on May 21. (Photo by Koji Uema)

As a fervent Cold War ally of the U.S. in the 1950s, a part of the Washington-led insurgency in Afghanistan against the Soviet Union in the 1980s, as well as a "war on terror" era major non-NATO ally in the 2000s, Islamabad has often preferred to lean toward Washington, while giving a nod to Beijing.

However, the Islamic Republic's long-standing rivalry with India, and the loss of its eastern wing in 1971 -- when East Pakistan became Bangladesh due to a civil war -- have discouraged the country from making many inroads in Asia. Looking east, past India, has been difficult for Pakistan. The long war in Afghanistan has bogged it down even more.

West Asia and beyond is where Pakistan tends to gravitate. Most Pakistani expats end up working in Saudi Arabia or the UAE. Most Pakistani trade is conducted with the European Union and the U.S.

Now, Prime Minister Khan wants to change the way Pakistan looks at Asia, and the way Asia looks at Pakistan. "Pakistan looks toward serving as a geo-economic hub connecting the economies of Central Asia, South Asia, West Asia and beyond," he said.

But Khan was quick to warn that without resolving simmering conflicts, the BRI would not achieve its goals.

"This potential cannot be fully unleashed until we resolve the outstanding conflicts and disputes in the region," he said.

As the U.S. military begins its retrograde withdrawal from Afghanistan, the U.S. Senate's Armed Services Committee has been skeptical about China, Pakistan and the BRI's presence in Afghanistan.

"China does have an interest in Afghanistan," said David Helvey, acting assistant secretary of defense for Indo-Pacific security affairs, said in response to a question about China's influence in Afghanistan and Pakistan through the BRI. He acknowledged China's economic interests and concern about extremist groups, but said, "To the extent that China's influence could be used to undermine stability instead of reinforce stability or support stability, obviously is something that we've got to be concerned about."

However, Prime Minister Khan, a long-time critic of the war in Afghanistan, was unequivocal about the necessity of both the U.S. pullout as well as the peace process.

"Pakistan has actively supported the peace process in Afghanistan. As foreign forces withdraw from Afghanistan, it is imperative to redouble efforts to promote the peace process between the Afghan parties. As I have said over the years, there is no military solution to the conflict."

Yet the longstanding concern in South Asia lies in the potential for conflict between the nuclear rivals, India and Pakistan. Born together after gaining independence from Great Britain after the Second World War, they have fought four wars and countless skirmishes, mostly over the disputed Himalayan region of Kashmir.

Linking peace with India to a prosperous and connected region, Khan noted that resolving the Kashmir dispute would be key for the BRI to reach its maximum potential.

"Pakistan desires peaceful, cooperative relations with all its neighbors, including India," he said. "It is essential that an enabling environment is created for dialogue to peacefully resolve the Jammu and Kashmir dispute in accordance with the [U.N. Security Council] resolutions and the wishes of the people of Kashmir."

Reporting by Wajahat S. Khan.

New Zealand minister aims to support Asia's COVID recovery through trade

New Zealand is determined to help build momentum for recovering from the COVID-19 pandemic as this year's Asia-Pacific Economic Cooperation host, Trade and Export Growth Minister Damien O'Connor told Nikkei's Future of Asia conference on Friday.

Another priority at the summit later this year will be spurring digital transformations across trade and public services, he said. And he stressed that New Zealand's prospects for prosperity are very much intertwined with Asia's.

"Our heritage is bound with Asia, and so too is our future," he said. "That is why we must preserve stability and focus on supporting the region's economic recovery through trade."

Damien O'Connor, New Zealand's minister for trade and export growth, speaks during the Future of Asia conference on May 21. (Photo by Koji Uema)

O'Connor noted that 15% of New Zealand citizens are of Asian descent -- the country's second-largest ethnic minority.

Regarding protectionism and challenges to international trade, O'Connor said: "Even before the pandemic arrived on our shores, the international system of trade rules that we rely on for our economic well-being was under pressure."

This is likely to remain a challenge.

"Unfortunately, some of the [World Trade Organization's] key functions have stalled, and talks to get those functions moving again are happening at a slower pace than we would like."

Reporting by Nana Shibata.

Mahathir urges sharing vaccine tech -- and shares own health secrets

Advanced countries should offer the technologies used to produce COVID-19 vaccines to less developed peers to help control the global health crisis, Malaysia's former Prime Minister Mahathir Mohamad urged on Friday.

But the 95-year-old elder statesman and trained doctor also sounded a note of caution, tamping down hopes that vaccines will immediately restore normal life.

Mahathir was speaking to Nikkei's Future of Asia conference, in a Q&A session that covered everything from his thoughts on Taiwan independence and the Myanmar coup to his secrets for staying healthy -- physically and mentally.

"The formula [for vaccines] should be given to other countries with the capacity," Mahathir said. "India has a capacity to produce vaccines."

He said he had received two Pfizer jabs to inoculate himself and allay public fears about side effects, adding that he experienced "no side effects at all."

Malaysia's former Prime Minister Mahathir Mohamad shares his tips for staying healthy at 95 and other insights at the Future of Asia conference on May 21. (Photo by Kai Fujii)

Mahathir conceded that drug companies should be rewarded for their breakthrough technology but stressed this is not the time. "Pharmaceutical companies have spent a lot of money and want to get back some of the money. But they should not think about profit now. They should just transfer the formula to other countries for minimal fees."

The pandemic has derailed emerging economies, including Malaysia, which now reports nearly 7,000 new cases a day. And Mahathir highlighted the gap in vaccine access between wealthy nations and less-affluent ones.

But even in rich countries like the U.S. and U.K., which have inoculated significant portions of their populations, Mahathir said restoring normalcy is not that simple because the virus is rapidly evolving. He argued that pooling information on variants is critical.

"We know some people who have been vaccinated can still get the disease. We need to have data on all that. Then we can plan and [determine] which vaccine would be most suitable to which country."

Mahathir, who led Malaysia for a total of 24 years over two separate periods as prime minister, also touched on key questions of security and democracy.

On Taiwan, he warned against insisting on complete independence.

"Taiwan, as it is now, is practically independent of China, although a part of 'one China,'" he observed. But he suggested that "Taiwan should be a special area in China, but Taiwan should be allowed more freedom than usual."

"This also applies to [Hong Kong] because the situation is quite the same. But to have total independence is not a very good strategy. Accept being part of China, but accept certain special rights for Taiwan. They should give it more independence than other provinces in China."

He also condemned the military government in Myanmar for killing more than 800 citizens since it took power on Feb. 1.

"They see some instability in the country and think, by taking over power from the people, they can solve problems," Mahathir said of military regimes like Myanmar's. "Of course, that's a wrong assumption. Once they take power, power corrupts."

Nevertheless, he said there is little outside countries can do to restore democracy in Myanmar.

The Association of Southeast Asian Nations, to which both Malaysia and Myanmar belong, held a summit last month and reached a "consensus" on five points, including an immediate end to violence. But ensuring Myanmar complies with the agreement has proved difficult.

Sanctions hurt ordinary people, not the military, which has special access to everything they need, he argued. "How we deal with this problem is through very careful planning that will affect only the military," such as an arms embargo.

As he approaches his 96th birthday in July, Mahathir was asked how he stays in good health. "I am a very disciplined person," he replied. "I control food, I control things. I look after my health."

Staying on the move is crucial, he advised. "One of the important things when you are old is that you must be active."

Too much sleep, on the other hand, is a bad idea. "You mustn't go to bed. You go to sleep, then your muscles will shrink and become weak."

But he stressed brain activity is as important as the physical kind.

"If you don't use your brain, it will also become weak, so always keep active, read a lot, talk a lot, argue a lot. Use your brain all the time, then you wouldn't become senile and incapable."

Reporting by Mitsuru Obe.

Nepal PM committed to 'ever-lasting friendship' with China

Nepal's Prime Minister K.P. Sharma Oli says he is committed to maintaining an amicable relationship with China, even as he faces political instability at home after losing a crucial confidence vote in parliament amid worsening COVID-19 infections.

"Nepal and China agreed to augment these historic relations to a level of strategic partnership during President Xi Jinping's state visit to Nepal in October 2020," Oli told Nikkei's Future of Asia conference on Friday. "This is a partnership for ever-lasting friendship, for development and prosperity," he continued, adding that Nepal has joined the Belt and Road Initiative and is negotiating with China on implementation plans.

Nepal Prime Minister K.P. Sharma Oli speaks during Nikkei's Future of Asia conference on May 21. (Photo by Kai Fujii)

China has enhanced its presence in Nepal, increasing investment over the last decade in the neighbor that shares the Himalayan frontier. The Trans-Himalayan Multi-dimensional Connectivity Network, a BRI project, is considered "one of the major projects to this end," Oli said.

Under this endeavor, he said "we wish to focus on railway, road, tunnel, energy and [other] infrastructure so as to make Nepal truly land-linked with both of our neighbors [including India]," he said.

Nepal's tilt toward China is partly explained by heightened tensions with India, however. In May 2020, India virtually inaugurated a new 80 km road in the Himalayas, connecting to the border with China at the Lipulekh Pass claimed by Nepal.

Nepal protested immediately, accusing India of changing the status quo without diplomatic consultations. Kathmandu soon afterward published a new map that includes a stretch of disputed land with India.

The relationship is not purely confrontational: Oli has also sought to work with India in recent years, asking for cooperation in improving infrastructure, including hydroelectric power stations.

But Oli himself is now in political trouble. Earlier this month, the confidence vote he sought was rejected. Oli's moderate Communist Party split from former Maoist rebels in March after differences cropped up over a power-sharing deal, wiping out their governing majority.

"Overall, I would say that this time Nepal has got a stable government," Oli said when he was asked how to settle the ongoing political turmoil. "In democratic constitutional processes, there are certain issues and processes that may come up and we must sort them out."

He said he sought the confidence vote to ensure political stability "as per the wishes of Nepali people."

"Now, a minority government is formed under my leadership. I sincerely hope that this government will complete its full mandate," he said.

The political turmoil comes as the country suffers from record-high COVID-19 cases -- apparent spillover from India's severe wave.

"The second wave has turned out to be more infectious and lethal. The positivity rate has been sharply rising and so is the number of infected people," Oli said. "Over 8,000 new cases daily for the past several weeks is too high for a country with a moderate-size population and too burdensome given the constraint of our resources and health care infrastructure."

Oli urged the international community to consider "some sort of COVID response fund" to help vulnerable countries. "It will be difficult for them to stand [up] in the absence of a robust, meaningful and enhanced global partnership."

Reporting by Eri Sugiura.

Asia can turn COVID crisis into inclusive growth: experts

Asia needs to use the economic crisis caused by the COVID-19 pandemic as a springboard toward more inclusive development, experts from key multilateral bodies said Friday.

Developing Asia's economy shrank 0.2% in 2020, the first negative growth in 50 years or so, according to Yasuyuki Sawada, chief economist at the Asian Development Bank, who joined a panel discussion at Nikkei's Future of Asia conference. The region's economy is projected to grow 7.3% this year, but the recovery is likely to be uneven due to a sharp and persistent digital divide.

In the Philippines and in South Asia, for instance, in-person lessons at schools have been suspended for much of the past year. This has resulted in students missing 55% of the education they were supposed to receive, Sawada warned, as many do not have internet access or own a computer.

The fear is that this will result in lower levels of education and reduce opportunities to land better-paying jobs.

Panelists discuss how Asia can foster more inclusive economic growth after the pandemic during the Future of Asia conference on May 21. (Photo by Koji Uema)

Asia, however, can turn this challenge into an opportunity, stressed Yumiko Murakami, head of the OECD Tokyo Centre.

"COVID," she said, "has laid bare the light and shadow" of Asia's digital economy, including cashless payments and e-commerce. But if governments move to strengthen social safety nets and help the private sector create new businesses, the light can shine brighter.

Asia has bounced back from major crises before -- and learned from them.

After the 1997 Asian financial crisis, countries in the region improved their ability to deal with financial downturns. They developed currency swap lines with one another under the Chiang Mai Initiative; established an institution for macroeconomic surveillance, called AMRO; and developed domestic bond markets to mobilize domestic savings for investment.

Such efforts helped the region withstand subsequent calamities such as the global financial crisis of 2008.

This time, "inclusive growth and green recovery will be the key focus for Asia," said the ADB's Sawada.

As for the digital economy, he added that Asian governments have many roles to play in managing its challenges. They could develop infrastructure for affordable internet access, ensure fair competition among digital players, provide online security and personal data protections, and help promote mobile finance.

Development of physical infrastructure like roads for deliveries will also be important, Sawada said, if people are to benefit from the e-commerce boom.

Reporting by Mitsuru Obe.

Oyo uses downtime for company 'redesign' as startups keep 'cautious optimism' 

Asian startups and entrepreneurs are hoping that the world's digital pivot and ongoing vaccination drives will mitigate the impact of the pandemic, maintaining "cautious optimism" for their businesses.

Ritesh Agarwal, founder and CEO of SoftBank Group-backed Indian hotel unicorn Oyo Hotels & Homes, and Teruhide Sato, founder and CEO of Singapore-based venture capital firm Beenext Capital Management, explained how startups are adapting to the new reality during Nikkei's Future of Asia conference on Friday.

"We had some issues with our merchants, even pre-pandemic. So we use the pandemic to improve the [customer loyalty] to really make sure that we bring the best features, to ensure that our [hotel] owners fall in love with us," said Agarwal. "The intent was using this as downtime to redesign the company to what it should look like if technology had accelerated a few years."

Future of Asia guests discuss how COVID-19 has affected the startup scene on May 21. (Photo by Kai Fujii) 

Agarwal's comments come as Oyo attempts to tune the speed of growth, which accelerated to a stunning pace before the pandemic, with billions of dollars of funding provided by SoftBank Group's Vision Fund and others. This pushed the startup to claim to be the second-largest hotel chain in the world after Marriott International, just a few years after its foundation in 2013.

The hotel chain suffered from a dramatic drop in profit amid the pandemic, as its gross margin dropped by 66% from January to April last year, following two years of double-digit percentages of revenue expansion.

However, guest numbers are starting to increase significantly in countries like the U.S. and U.K., where vaccinations have made significant headway, the founder said. The chain has also opened its hotel rooms as quarantine centers for repatriated people and frontline workers, as well as vaccination centers.

As shown by companies that recently went public, like Airbnb late last year, "the fundamental need of people to travel exists," Agarwal said, adding that the question is when vaccinations reach the necessary threshold.

Beenext's Sato also stressed startups under his portfolio are quickly adapting to changes in demand. "Startups are not only surviving but thriving further by maximizing their creativity and executing with a great level of ability," said Sato, who invests mainly in startups located in India and Southeast Asia.

He pointed to ventures that have shown resilience and adjusted to the new normal, including ones offering medical services through smartphones, and mobile wallet services disbursing government financial aid.

"Of course, we don't know what happens next, but keeping this cautious optimism is key," added Sato. Still, he also acknowledged that funding was one of the hardest tasks amid the disruption of cross-border travel.

"The pandemic has clearly fast-forwarded the digital transformation," illustrated most recently by the merger of Gojek and Tokopedia, two Indonesian unicorns that do business with over 11 million local merchants and over 2 million drivers, he added.

Reporting by Eri Sugiura and Kana Watanabe.

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