US and Southeast Asia: A Dysfunctional Romance

Last week, Southeast Asia scored a long overdue diplomatic victory. The US-ASEAN (the Association of Southeast Nations) Summit was finally held in Washington, DC and hosted by the White House – the first time in ASEAN’s 55-year history.

Symbolic victory aside, what the Southeast Asian leaders walked away with was rather meager – a $150 million “economic engagement” package. 150 million may sound like a lot, but averaging that amount to the roughly 680 million people living in Southeast Asia gives the region less than a quarter per person.

This amount is even more laughable when comparing to how much capital Southeast Asian tech giants are attracting. GoTo (the merged company between two Indonesian tech unicorns, Gojek and Tokopedia) raised $1.1 billion USD last month in its IPO. Grab, the Singapore-based SuperApp, raised $4 billion USD last year from the largest SPAC-IPO to date. (For more on Grab, please see my previous post “SPAC-ing the Southeast Asia Story”.)

Why is the United States so “cheap” when it comes to supporting Southeast Asia, even though the region is a seemingly obvious strategic ally to balance China’s rise?

A Dysfunctional Romance

The historical relationship between the US and ASEAN can feel like a dysfunctional long-distance romantic relationship. The dysfunction can be broken down into four phases.

The first three phases are well-articulated in the book, “The ASEAN Miracle”, by seasoned Singaporean diplomat, Kishore Mahbubani. The fourth phase is, in my opinion, what we are going through now. Here’s a short historical overview of these four phases – honeymoon, rejection, reunion, envy:

Phase 1 (Cold War “honeymoon”): ASEAN was created in 1967 during the Cold War with a clear objective to resist the spread of Communism. Because of this anti-Communist orientation, in Mahbubani’s words, “ASEAN was born pro-American”. ASEAN would much rather “date” the US than any other “single” country, and the US was more than willing to “dance”, in order to push back Communism’s global spread at the time. George Shultz, the secretary of state during the Reagan Administration, showed up regularly at the annual ASEAN meeting. The US-ASEAN alliance started out strong; the romance was hot and steamy.

This “honeymoon” phase stopped when the Berlin Wall came down and the Cold War ended.

Phase 2 (Post-Cold War “rejection”): as the global hegemon, the US was the hottest person in the club post-Cold War. The spread of communism was no longer a concern, history was apparently “ending” in favor of liberal democracy, and every country wanted to strike up a romance with America. The US became more judgmental and arrogant of the partners it used to need during the Cold War, like ASEAN, and started to reject them. Secretaries of State Christohper Warren and Madeleine Albright began leaving the ASEAN meetings early or skipping them altogether. The US did relatively little to help any Southeast Asian countries during the 1997 Asian Financial Crisis.

This “rejection” phase changed again when 9/11 happened.

Phase 3 (9/11 “reunion”): after the 9/11 attack, the US all of a sudden needed more friends again, especially friends with a large Muslim population. Indonesia is the largest Muslaim country in the world. Malaysia and the Phillippines also have sizable Muslim populations. By and large, the Muslim population in Southeast Asia is quite moderate, which makes it once again a strategically valuable ally to the US in carrying out its global War on Terror. To this end, the US sought to rekindle its romance with ASEAN. And ASEAN, being pro-America at birth and lacking in good local dating alternatives (e.g. India, China), was willing to return to America’s embrace.

This “reunion” phase evolved yet again, as China rose to economic prominence, while the US got stuck in the Middle East quagmire.

Phase 4 (China “envy”): China and Southeast Asian countries have always had a complicated relationship dating back centuries. (A good book on this complexity is “In the Dragon’s Shadow”.) China was not initially a fan of ASEAN, given its anti-Communist, pro-American roots. As China became more wealthy, it began to woo ASEAN closer to its orbit and was actually helpful in stabilizing many Southeast Asian economies during the Asian Financial crisis, around the same time that America decided that ASEAN was no longer that “attractive”. As China’s economic, trade, and investment relationships deepened with ASEAN, the US decided to “Pivot to Asia” after the War on Terror, out of concern for China’s growing wealth, power, and clout in that region. The current phase of the US-Southeast Asia “romance” is less out of “true love” and more to keep a new “suitor” from getting what America has always so easily had and taken for granted.

For the US, a relationship with Southeast Asia has always been transactional and a matter of convenience, just like a friend with benefits – except the benefits have only gone one way.

Friends Without Benefits

Relative to the amount of geopolitical balancing that Southeast Asia can offer for the US, the US has not given the region much in return (as is often the case in a dysfunctional romantic relationship). As discussed above, the Biden administration’s $150 million package is paltry. The Trump administration’s Asia Reassurance Initiative Act of $1.5 billion is more, but the package is split between East Asia and Southeast Asia, so still not that much.

The US government’s lack of commitment to supporting the region seems to have affected private tech companies’ pace of investment as well. One measurement I like to track is cloud computing data center investment, which I see as a marker of true long-term investment. (Other forms of investment, whether it is VC deals or local hiring, are more ephemeral and can be easily written off or reduced. But once you build a data center, you are stuck with it forever.)

Because of Southeast Asia’s location, its strategic importance has grown in the cloud industry. (For more on this topic, see my previous post “Southeast Asia and the Pacific Light Cable Network”.) Among the top five cloud providers with global scale, three are American (AWS, Azure, Google Cloud Platform), two are Chinese (AliCloud, Tencent Cloud). Here is a breakdown of their current Southeast Asian data center locations and future plans (if any).

AWS:

- Current: Singapore, Indonesia

- Future: N/A

AliCloud:

- Current: Singapore, Malaysia, Indonesia, the Philippines

- Future: Thailand

Azure:

- Current: Singapore

- Future: Malaysia, Indonesia

Google Cloud Platform (GCP):

- Current: Singapore, Indonesia

- Future: N/A

Tencent Cloud:

- Current: Singapore, Indonesia

- Future: Thailand

Singapore is a table stakes location. Beyond Singapore, however, GCP was first among the American cloud providers to open a data center in Indonesia in 2020. AWS’s Indonesia data center just came online last year. By contrast, AliCloud’s data centers in Malaysia, Indonesia, and the Philippines were released in 2017, 2018, and 2021; its Thailand data center was quietly released earlier this year. Tencent Cloud is trying to match AliCloud’s expansion in Thailand, but won’t face any American competition.

At a glance, it looks like American tech companies are playing catch up to their Chinese counterparts, much in the same way that the US government is trying to do the same and “win back” Southeast Asia’s heart.

Talking the Talk, But Not (Yet) Walking the Walk

In the official White House Joint Vision Statement of the US-ASEAN Summit last week, there were some encouraging sections on technology and innovation. Areas of potential mutual benefit included both traditional elements (e.g. trade) and more cutting-edge elements (e.g. smart manufacturing, fintech, even blockchain applications).

These mentions are encouraging because in order for a US-Southeast Asia relationship to be consistent, sustainable, and mutually beneficial for the long-term, jointly investing in cutting-edge technologies, which all take a long time to mature, must be at the center. That level of alignment and commitment, I believe, is what’s missing in anchoring this relationship, allowing it to wax and wane as a bellwether of the geopolitical wind.

In a sense, the Biden administration is talking the right talk. But of course, we all know that talk is cheap. Near the end of the book, “In the Dragon’s Shadow”, the author Sebastian Strangio cited this line from the historian, Wang Gungwu, when discussing the difference between the US being in Southeast Asia versus China doing the same:

“The Americans have to justify being here. The Chinese on the other hand are just here! It’s their backyard.”

It will take more than a fancy White House state dinner and $150 million bucks to justify America’s commitment to Southeast Asia.