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22/01/2006 | Overview: 2006 - Asia's Year of War and Peace?

WMRC Staff

In 2006, peace and conflict are expected to be the overriding themes for the Asia-Pacific region. High points such as the likely resolution to the centuries-old conflict on the Philippine island of Mindanao and further progress with regard to peace in the Indonesian province of Aceh will be offset by continuing problems in Sri Lanka and Nepal, and simmering tensions between China and Japan. The India-Pakistan peace process will be a particular focal point for regional and international attention, with 2006 regarded as a make-or-break year for the initiative.

 

Peace Prevails...

The region has witnessed a notably quiet few months, and this trend bodes well for a number of peace initiatives. Mindanao stands out as a testament to the peace brokers' efforts (see report below), while continued progress is anticipated regarding another long-standing conflict - that of Aceh.

The year 2005 turned out to be a pivotal one for Indonesia, and especially the formerly restive province of Aceh, which was devastated by the Indian Ocean tsunami of 26 December 2004. The sheer scale of the destruction prompted a fresh round of urgent peace talks between the Free Aceh Movement (GAM) and the government, concentrating on reconstruction and humanitarian aid efforts. Seemingly against the odds - as well as the Indonesian military's aversion to negotiations - peace talks produced a breakthrough accord, offering amnesty, compensation for thousands of GAM fighters, and the demobilisation of over 30,000 Indonesian military personnel. There have been problems, but Global Insight is now cautiously optimistic that the separatist conflict in Aceh has ended. The challenge in 2006 and beyond will be to integrate former rebels into a national political dialogue, while respecting their calls for a high degree of autonomy over their affairs.

With much of South Asia wrestling with conflicts, both localised and national, as is the case in Nepal and Sri Lanka, the international community will at least be looking for progress in the India-Pakistan peace process. Since India offered the hand of friendship in 2003, bilateral relations have stabilised, and confidence-building measures (CBMs) have been pursued. However, the eight key issues that are regarded as being at the centre of tensions have not been effectively addressed; talks surrounding them have been conducted, but have failed to make progress. This deadlock needs to be broken, and although India seems content to continue with CBMs and piecemeal steps, Pakistan is pressing for real change. Inevitably, domestic and international pressures - particularly from the United States - are fuelling Pakistan's stance, but there is also a realistic understanding that the peace process needs to be deepened if it is to endure.

...but Tensions Also Mount

Elsewhere, the forecast is less positive. After a brief outbreak of optimism in September 2005, six-party talks aimed at persuading North Korea to abandon its nuclear weapons programme ended 2005 on a much more familiar downbeat note; after a deal was struck in September 2005, disagreement over its terms hindered further progress. Bilateral relations between China and Taiwan can be expected to remain difficult, while frostiness will continue to characterise China's attitude towards Japan. Public opinion swung against President Chen Shui-bian in Taiwan during 2005, prompting a poor election performance for his Democratic Progressive Party in December's local election. As a result, the power of the pro-independence government is likely to be curtailed, making provocative legislation less likely, and increasing the prospect that the opposition will drive momentum for improved economic links with the mainland.

Fresh tensions are expected in the South Pacific. Elections in Fiji will raise the spectre of violence between the ethnic Fijian and ethnic Indian communities, exacerbated by the nationalist government's moves to push through the Reconciliation, Tolerance and Unity Bill, which critics argue provides amnesty for those involved in the May 2000 coup. Elsewhere, the Papua New Guinean island of Bougainville will continue to face pressure from rogue militant elements intent on disrupting the smooth transition to autonomy.

More of the Same Economically

Asia will remain a powerhouse of global growth in 2006, with momentum slowing only marginally. Aggregate regional growth, excluding Japan, is forecast at 6.2%, against the 6.3% expected for this year. The acceleration of exports, following an end to adjustments in global IT inventories, will sustain into 2006. A levelling-off of fuel prices should boost U.S. consumption demand, while growth in China, though moderating, should continue to rebalance, providing a growing final-stage market for consumer goods exports. Concurrently, import growth should slow, as global oil prices ease and fuel subsidy reform relieves further pressure from the net export position. Buoyant corporate earnings will continue to underpin the long-awaited recovery of private capital expenditure from its collapse in the wake of the 1997-98 Asian financial crisis. In tandem, private consumption will maintain its gradual recovery, supported by firming income and employment prospects. However, that broad overview masks the variations that are inevitable in such a diverse region:

East Asia: Growth in China will moderate and stabilise in 2006, as the investment cycle finally slows. The recovery of private consumption in South Korea will entrench, combining with stable exports to boost growth.

South-East Asia: Momentum will accelerate in 2006, after an easing of the factors that blunted growth in 2005 - high oil prices, cyclical slowdown in the global electronics sector, and a serious of endogenous shocks.

South Asia: Growth in South Asia has accelerated markedly, as reform has borne fruit. Growth in Pakistan is expected to moderate from the two-decade high hit in fiscal year (FY) 2004/05, as cyclical factors such as good harvests wear off, while the export sectors of Nepal and Bangladesh will begin to feel the effects of the abolition of textile quotas. However, India will retain significant momentum, as the diversification of its economic base continues.

Australasia: Growth will slow in Australia and New Zealand, as aggressive monetary tightening by central banks in both countries compounds a steady deceleration in private consumption, while the net export position remains weak.

 

Islamic Extremism Continues to Pose a Problem

Less positively, Islamic extremism will continue to be a significant problem, particularly in South-East Asia, but also notably in Bangladesh. It is difficult to envisage the Bangladeshi authorities making headway against the country's recently acknowledged - though long-suspected - extremist element, and the problem can be expected to multiply. The situation will also be of concern to the country's neighbours - especially India, which has long battled with Bangladesh over the Indian separatist militants hiding and training inside its border areas. Given India's myriad problems with militancy, already fuelled by Nepalese Maoism, its government will not welcome any further manifestations. Elsewhere, Indonesia will be under pressure to curtail the activities of Islamic extremists within its borders. The death of Malaysian bomb-maker and terrorist mastermind Azhari Husin has given the Indonesian security services a major psychological boost, while also increasing pressure on Azhari's accomplice, Noordin Mohammed Top, who remains on the run. However, the threat stemming from Islamic militancy in Indonesia remains serious, although there are indications that future terrorist attacks may be smaller in scale and more sporadic than they have been in the recent past. 

Alongside this, the spread of extremism will remain a key concern. In addition to Bangladeshi-Indian tension over this issue, fears will continue regarding unrest in southern Thailand and the contagion of Islamic extremist sentiment to countries such as Australia, which is now seeking to combat its own 'home-grown' extremist threat. In response, regional security co-operation will have to increase. Thailand needs to better address its troubled relations with Malaysia, while Australia will continue to forge a role as 'regional policeman', seeking to further security ties with Indonesia and, particularly, the Philippines to counter the extremist threat. Plans to allow the presence of Australian troops in the Philippines will meet with considerable domestic opposition, while a tightening of counter-terrorism legislation can be expected across the region, potentially raising the hackles of civil society and human rights groups.

Snap Elections Likely

After a relatively quiet year on the election front, 2006 may well herald a series of snap elections. Polls are scheduled for Fiji and Bangladesh, with Nepal expected to conduct municipal elections in February, despite the threat of Maoist violence hanging over the process. Parliamentary elections are not set but may occur in a number of South Asian nations. Although parliamentary and presidential polls are not due in Pakistan until 2007, there is talk of snap polls in 2006. These will become all the more likely if, as expected, President Pervez Musharraf makes a deal with the civilian parties to ensure that the Muttahida Majlis-e-Amal (MMA), a six-party Islamic alliance, fails to develop further within the political mainstream. In addition, positive developments in the peace process with India would also bolster the government's prospects, and its re-election would place Musharraf in a strong position ahead of presidential elections. The U.S. Congress is likely to become increasingly vocal in its calls for Musharraf to give up his dual role as president and military chief, with the latter being the most likely to go. 

Elsewhere, snap elections in India cannot be discounted; this possibility became a topic of speculation in 2005, and much depends on events during 2006. If the main opposition Bharatiya Janata Party (BJP) remains in disarray, the government may seek a fresh poll in the hope of securing a stronger majority. Meanwhile, given the fragility of the government's majority in Sri Lanka, it is entirely possible that the country will again find itself going to the polls in 2006, as the government seeks to salvage its position amid competing entities. However, with no guarantee of success, this would be a desperate and costly exercise. Finally, there is speculation that 2006 may herald some form of vote in the Maldives. President Maumoon Abdul Gayoom announced after the January 2005 election that the country would have full multi-party democracy within a year, suggesting that some form of election may take place.

Contact: Raul Dary

24 Hartwell Ave.
Lexington, MA 02421, USA
Tel: 781.301.9314
Cel: 857.222.0556
Fax: 781.301.9416
raul.dary@globalinsight.com

www.globalinsight.com and www.wmrc.com

WMRC (Reino Unido)

 



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