How both domestic politics and great power competition will shape Asean’s fortunes in 2016

Many turbulent events of the past year are symptoms of a world lacking optimism and growth, and facing possible change in the global order. Even as social and economic uncertainties continue, major power competition and contention grow, especially between the US and China.

There is not much that smaller countries can do to directly change these tectonic trends. There is every danger, instead, that countries in Southeast Asia, in particular, will face great pressures amid the increasing push and pull among the great powers.

Yet they are not blank pieces of paper on which a great power can write at will. There are domestic politics that matter, and these will be clearly evident in the year ahead in a number of key countries. Consider Indonesia and Thailand, the region’s two largest economies, and Myanmar, which has emerged as a promising “frontier” market.

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Indonesia must hope the year ahead will be better. While economic growth has remained at 4-plus per cent, it has slowed, and the nation’s macroeconomics remain relatively weak, as reflected in the rupiah. Given the flat-to-poor outlook for the resource sector, moving ahead with infrastructure and industrialisation is key to growth and job creation.

Yet political signals have been less than positive. The popularly elected president, Joko Widodo, has struggled to lead effectively, facing opposition as well as a party of different factions. Worse, increasingly assertive and narrow nationalistic voices are putting off many potential foreign investors.