But even when refugees receive help after they are forced out of their homes, the word can still be applied. There are refugees who receive so-called humanitarian assistance that has a detrimental impact on their wellbeing.

Refugees in this situation, including many who have sought shelter in Indonesia, found themselves in circumstances similar to being held hostage.

There are around 13,200 refugees from 48 countries living in Indonesia, according to a recent report by the United Nations High Commissioner for Refugees (UNHCR). Many have made arduous journeys across countries and over continents to seek refuge in Indonesia. The majority have been away from their homelands and families for almost a decade.

Because Indonesia is not a signatory to the 1951 United Nations convention related to refugee status, nor its 1967 protocols, the country is legally exempt from providing necessary protections like work, education, travel, marriage and property ownership. Refugees cannot even buy phone SIM cards in their own names. Indonesia also does not have a national policy for handling refugees.

That has put refugees in a complicated situation. Those who are denied access to work opportunities rely solely on external aid to survive. A third of refugees live on support from family members outside the country. Two-thirds are supported through the International Organization for Migration (IOM), which receives 80% percent of its funding from Australia.

Asylum seekers willing to receive IOM support were required to endure a rigorous detention for an indefinite time. For years, refugees were locked inside overcrowded cells, separated from the outside world by walls and barbed wire without proper medical care and adequate food.

Indonesian President Joko Widodo released a decree on treatment of refugees and asylum seekers in December 2016, which released refugees from detention. By the end of 2018 almost all refugees were released to open accommodation shelters, also known as ‘open prisons.’ Despite living among Indonesians, refugees have become ostracised from many of the rights associated with normal life.

In the absence of Indonesian government support, UNHCR and IOM provide livelihood support. The agencies also help find permanent solutions, such as resettlement to third countries or voluntary repatriation.

More than 75% percent of refugees in Indonesia are from Afghanistan, Somalia and Iraq, countries with long histories of conflict. This takes voluntary repatriation off the table. While local integration to Indonesian communities has not been attainable, resettlement remains the only permanent protection.

The resettlement window available for refugees in Indonesia is narrow. Each year less than 5% of refugees depart to third countries, a rate that would require 30 years to resettle all refugees in Indonesia. This delayed pace has caused serious protection issues and intensified mental health issues.

Refugees who escaped death in their countries have since chosen death as a way out of their debilitating situations. There have been 16 suicides among refugees in Indonesia beginning in 2014, including deaths by hanging or self-immolation. At the time, the first suicide seemed unjustifiable and could reasonably be tied to personal causes.

The second suicide occurred in late 2017, with the third in early 2018. Throughout 2018 three more suicides completed the darkest year for refugees. Since then, another three to four suicides annually have highlighted the debilitating situation for refugees in Indonesia.

The last person who hanged himself was 40 years old, the father of five young children. Another who attempted to cut his throat before being rescued by other refugees was 60.

There is no official record of deaths caused by a lack of proper medical services, but the number is high. Abdullah Tawasuli, a middle-aged Afghan refugee, died from an undisclosed illness after failing to receive treatment. 

Refugees in Indonesia also have become despondent as a result of chronic concern over their families in the conflict zones of their home nations. Most of the male refugees, accounting for 75% of the total, have left behind wives, children, parents and siblings. The sense of helplessness and uncertainty regarding their families has been the biggest trigger of their distress. 

Afghans account for around 99% of refugee suicides in Indonesia. Approximately 90% of those are from the Hazara ethnic and religious minority. This group has been the prime target for massacres and systematic discrimination by Afghanistan’s governments since the 1880s, including the current regime, the Taliban. 

Amnesty International reported two massacres of Hazara people took place after the Taliban assumed control of Malistan and Dykundy. Recent bomb blasts targeted schools and mosques used by the Hazara residing around Kabul and Mazar Sharif. These acts are only a partial image of the violence suffered by the Hazara under Taliban rule.  

Indonesia’s position as a refugee host nation also has been impacted by its relations with other Asia-Pacific countries including Australia. 

Australia’s anti-migration policy has had a debilitating impact on the state of refugees in Indonesia, though with a deceptively optimistic start. When Australia began combating human smuggling under its 2013 Operation Sovereign Borders mission, the government used the slogan, “Saving lives at sea,” an ostensibly humanitarian effort to prevent refugees from being swallowed by the ocean.

Australia also increased funding to IOM and UNHCR, while upping its humanitarian intake from Indonesia from 180 cases in 2012 to 605 in 2013. However, Australia dropped its humanitarian intake to 241 cases in 2016, 62 submissions in 2020 and zero in 2021. Australia also cut funding for newcomers who arrived in Indonesia beginning in August 2018.

Refugees have found themselves in a limbo approaching the level of humanitarian catastrophe. In response, they have taken their pain to the street. 

Since the Taliban resumed power in August, thousands of Afghan refugees across Indonesia have marched each week to call for an end to a decade of limbo and assistance for their families. In 10 months since the start of peaceful demonstrations by Afghan refugees, there has been no tangible response. 

The word hostage may seem extreme, but is not far from reality. More than ever, refugees in Indonesia need urgent protection as gradual death becomes a tragically normal part of their lives.

Hussain Shah Rezaie is a writer, editor and refugee rights advocate. He is originally from Afghanistan and has lived as a refugee in Tanjung Pinang, Indonesia, for the past eight years.

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Eight months to the day, Cambodia will have the opportunity to shine on the global stage as host of the 13^th Asia-Europe Meeting (ASEM), set to be held in the capital Phnom Penh on November 16-17. In terms of the sheer number and diversity of national representatives who will be in attendance, the coming summit is set to be one of the biggest political events in Cambodia’s contemporary history. 

ASEM provides a multi-level diplomatic platform for governments from 53 states who meet biennially to exchange ideas and views. It promotes diplomatic and economic relations through dialogue and cooperation between two of the most economically dynamic regions in the world through a commitment to globalisation and a rules-based world order.

In this, ASEM runs contrary to current global trends of increasing nationalism, populism and economic protectionism, such as those as reflected in policies of the US administration under president Donald Trump.

This summit, therefore, provides Cambodia a rare opportunity to showcase its culture and economic achievements to a broad audience with global visibility. Often associated with the darker histories of Khmer Rouge and mass international aid, Cambodia can shape a new narrative and present itself to the world as an open, multilateral, competent and welcoming country to investors, business people, journalists and politicians.

The new direction is clear after seeing the ASEM promotion video – Cambodia presents itself as a country that embraces its biodiversity, cultural roots and socio-economic progress. 

The official theme of Strengthening Multilateralism for Shared Growth also underlines both ASEM’s and Cambodia’s efforts to promote a rules-based, multilateral and sustainable development oriented global governance approach to international relations. The theme deeply reflects Cambodia needs currently: access to foreign markets, joint climate action and a strategic partnership framework with the European Union for the time after development support. 

ASEM is an optimal occasion for governments to join hands and overcome differences and develop common interests and values. In 2016, the last time the summit was held in Asia, the host country of Mongolia built a village so leaders from all over Eurasia and Oceania could live together, with the settlement a living symbol of the connections between Asia and Europe, highlighting the importance of personal dialogue between political leaders.

Therefore, this is a chance to portray the Kingdom as an open, multilateral and modern country on the path to improved democracy – an image that is especially important when we consider the current tensions between Cambodia and the EU due to the ongoing Everything but Arms (EBA) trade deal withdrawal. 

The EBA scheme is extended to 49 countries and is a preferential trade programme granting developing countries a quota and duty-free access to the European market. Amid what the EU has described as a worsening environment for democracy and human rights, Cambodia’s EBA status was partially withdrawn for the first time in the programme’s history on February 12, leading to the reintroduction of tariffs on 20% of the Kingdom’s goods exported to the bloc.

Just one example of the challenges that Asia-Europe relations face, EBA has exposed differences in culture, political understanding and societal models, but also some tangible questions of what democracy is and means. 

Its partial retraction was a clear message from the EU that demands a rethinking of relations between the Kingdom and the 27-member bloc. The Cambodian government has called the decision unjust and based on double standards, insisting on its sovereignty and non-interference in internal affairs.

Democratic principles are a central aspect to European thinking and its foreign and security strategy, with the EBA withdrawal being a case in point. European foreign policy is people-centered and structured into peace, prosperity and democracy. Hence the bloc’s general approach is not just based on pragmatic assessments, but also idealistic aspirations as outlined in the Global Strategy for the EU’s Foreign and Security Policy. This led, and is still leading to, tensions between the EU and Asian states. 

It is in this challenging environment that the Kingdom will host ASEM for the first time in the fall. But with the right approach, through the ASEM summit Cambodia could become a bridge builder between Asia and Europe, gaining in both the long and short term.

ASEM is an Asian-European political dialogue forum founded in 1996. Since then, it has grown in size from 26 participating governments at the first summit in Bangkok to 53 governments from Asia and Europe today. The summit consists of all 27 EU member states, the European Commission, Norway, Switzerland, as well as all ASEAN members plus China, Japan, Korea, Mongolia, Kazakhstan, India, Pakistan, Bangladesh, Australia, New Zealand and Russia. 

The scale and economic importance of the participating members is immense, with Asia and Europe together representing 60% of the global GDP, 55% of global trade, and 75% of global tourism. 

Without addressing structural issues, like a lack of economic diversification, low competitiveness and insufficient solutions for sustainable energy, female empowerment, and infrastructure upgrades, Cambodia will not be able to achieve inclusive growth

The main guiding principles of the platform are mutual trust, equality, an emphasis on equal partnership and a dual focus on high-level and interpersonal, informal connectivity. ASEM is understood as a soft institutional approach to cooperation that most Asian states prefer, as compared to the EU tendency to strong formalised institutions.

Cambodia stands to gain from ASEM by demonstrating its commitment to the 2020 theme, multilateralism and growth. Multilateralism opposes protectionism, zero sum mentalities and isolationism and builds on international treaties and conventions setting common rules. This shows that Cambodia, as a small country subject to rivalries between big powers, respects the fact that only a multilateral approach can confront global challenges like climate change, migration, cybercrime and maritime issues. A greater multilateralism also stands to benefit the Kingdom through a bolstering of its tourism industry and more open access to world-class institutions for its growing population of students in higher education. 

The second big gain for Cambodia is in its ambitions for growth. The Cambodian government intends to be an upper-middle income country by 2030 and a high-income country by 2050. Without addressing structural issues, like a lack of economic diversification, low competitiveness and insufficient solutions for sustainable energy, female empowerment, and infrastructure upgrades, Cambodia will not be able to achieve inclusive growth.

Therefore, Cambodia depends on international investment in its industrial sector and other input factors such as technical vocational training to lift up the workforce from labour-intensive to skill-based, as well as to modernise small- and medium sized enterprise (SME). Western democracies can provide high quality and balanced investment in addition to cooperative solutions for development. 

In a broader context, there are three main arguments why the ASEM summit plays an important role in the current international setting. Firstly, it is a crucial platform to deepen mutual understanding and to strengthen ties between Europe and Asian countries. The US is not part of the ASEM, which could strengthen the European global leadership and constructive collaboration in areas like climate change, cybercrime and connectivity. Secondly, ASEM brings together many levels of personnel, from head of states, senior officials to technical staff, which enables a deeper exchange and bonding. And thirdly, it is a clear commitment to a multilateral and rules-based world order. 

But it’s not all rosy in the ASEM village.

The summit, which depends entirely on the organisation of its host country, is often criticised because of its inherent deficiencies related to institution building and power imbalances between the EU and its Asian counterparts. 

Critics are quick to point out that the achievements of ASEM have not necessarily followed its growth. As such, the summit is often seen as a talk shop, linked to political platitudes lacking in concrete and tangible deliverables. Compared to other summits, media coverage is low and consequently generates little awareness.

Still, Cambodia has been an official member of ASEM since 2004, with prime minister Hun Sen attending all the summits since and expressing his support for these multilateral meetings. This is partly why he seized the chance at the 2018 meeting in Brussels to announce his interest in hosting the next summit.

Besides the challenges described above, the role of host will come with several technical and organisational challenges on the ground, including hosting heads of states or government, their delegations and their airplanes. 

Then there are budgetary issues: For example, the Royal Cambodian Limousine Group had to purchase an additional 452 luxury cars, worth $30 million, to drive the guests from their hotels to the summit location. 

Yet another challenge will be organising and coordinating the summit itself, which means an appropriate location has to be set up, a thematic frame polished, a sequence of speaking countries laid down and a final chair’s statement published, providing more than just political platitudes and lip service.

Additionally, the government organises, or at least coordinates, seven side events, bringing together Asian and European business leaders, parliamentarians, young leaders and journalists. 

ASEM provides a platform enabling Cambodia to show its willingness to play a bigger role in regional and global multilateral settings. It is also one milestone to lay the groundwork to communicate its future development plans and go beyond the perception of being an aid recipient of Europe.

Conversely, the summit also presents an opportunity to deepen existing tensions with the EU, and broadly speaking we can imagine two alternative scenarios moving forward.

The first ASEM scenario is brighter, and features a Cambodian government showing good will and first steps towards genuinely reestablishing credible democratic conditions in Cambodia, including finding a just solution to the trial of opposition leader Kem Sokha.

This would be a strong sign towards the EU, its member states and citizens, and would provide a more meaningful benchmark than mere tallies of how many NGOs or media outlets there are in Cambodia. It would also show that Cambodia is developing its democratic model in combination with a market economy, as stated in its Constitution. 

The second scenario is the bleaker one, and would see an escalation in the unresolved conflict of values and perception between the EU and Cambodia. On the one hand, we would have the EU insisting on the truth of its own analysis of Cambodia’s current political situation; on the other, we’d see the Cambodian government arguing its non-negotiable values of sovereignty and non-interference. 

This scenario doesn’t have to happen. As the ASEM dialogue facilitator, Cambodia has the unique chance to live up the summit values of mutual respect and benefit in the lead-up to November 16, instead of risking critical media coverage and the non-attendance of European head of states or governments. The biggest short term gain might be the chance to shine on a global stage and the improvement of the Kingdom’s public image at home and abroad – the fact is, Cambodia needs this.

The ASEM values of mutual respect and equal partnership might also be guiding points for overcoming the differences in perception and interpretation of democratic values between Europe and Cambodia. The values cannot be limited to the summit itself and have to be taken seriously and with a long term view. Otherwise, bridges between Asia and Europe will become dilapidated and walls will continue to exist.

As Mongolia demonstrated in its own host role, the world is a village – and, for a few days, Cambodia will be village chief. That’s an important, often challenging role. The chief sets the agenda, leads the discussion, listens to participants and tries to make everyone equally happy. This is true multilateralism. Cambodia is in the position to constructively shape ASEM and advocate its own strong interests for a rules-based world order. 

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The ASEAN leaders, in essence, were showing displeasure with what they perceived as the United States’ lack of engagement – the latest example coming only last weekend, with the United States sending a relatively low-level delegation to the ASEAN and related summits held on the outskirts of the Thai capital Bangkok from October 31-November 4 and on the sideline, with Commerce Secretary Wilbur Ross holding a separate business forum event elsewhere in the city.

The meetings are arguably the high point of the year diplomatically – if not for the wider Asia-Pacific region, then certainly for Southeast Asia. But with US President Donald Trump snubbing the summits for the second year in a row, and neither Mike Pence, the Vice President, not Mike Pompeo, the Secretary of State, taking his place, the ASEAN leaders could hardly be blamed for delegating their chief diplomats to meet the Americans who did show up.

After all, there were bigger issues to discuss, such as the fate of the Regional Comprehensive Economic Partnership, a huge trade deal seven years in the making and one that does not involve the United States. The agreement is seen as crucial to promoting free trade in an era when China and the United States are facing off over tariffs and China’s telecommunications giant Huawei – and when protectionism looks to be growing. And although India, the second biggest would-be signatory, withdrew from RCEP, the deal looks set to be sealed next year and will allow China, which has pushed hard for the agreement, to claim that it is now the leading proponent of globalisation ahead of the United States, a potentially crucial point for Southeast Asia, where most economies are trade-dependent.

The view of ASEAN toward the United States has been worsening since Donald Trump’s election win in late 2016. A recent survey of 1,000 Southeast Asian experts, analysts, and business leaders published by the Singaporean ISEAS-Yusof Ishak Institute in January 2019 suggested that 68% of those surveyed showed them doubting the reliability of the United States as a “strategic partner and provider of regional security”.

That President Trump sent the relatively unknown Robert O’Brien – though his position of National Security Advisor is quite important – to this year’s ASEAN get-together, can only be confirmation of those worst fears about American indifference. To make it more jarring, other powers in the region were dispatching their top leaders, with China represented by Prime Minister Li Keqiang, Prime Minister Shinzo Abe there on behalf of Japan – a key United States ally that is also aiming to counter Chinese influence in Southeast Asia. President Moon Jae-in represented South Korea, while India’s re-elected Prime Minister Narendra Modi – who appeared with Trump at a recent political rally in the United States – was also there, but even the memory of Modi’s bearhug at the event was not enough to persuade Trump to fly across the Pacific.

Trump’s apparent who-cares stance is in contrast to Barack Obama, whose signature foreign policy achievement was arguably the Trans Pacific Partnership, an Asia-Pacific trade deal since jettisoned by Trump. Obama began his presidency by announcing a “pivot to Asia” and attended most of the ASEAN summits held during his two terms in office. The only absence came in 2013 when he sent Secretary of State John Kerry to the ASEAN and East Asian Summits held in Brunei – and even then only because of a threatened government “shutdown” by Republicans contesting Obama’s proposed legislation. Trump too, however, can cite distraction, not least as he could be facing impeachment over alleged wrong-doing in a phone conversation with his Ukrainian counterpart and as he gears up for what will surely be a stormy re-election bid next year. 

Still, Obama could be forgiven because he lavished a lot of attention on Southeast Asia. He visited the region thirteen times during his tenure. And should Trump lose the 2020 Presidential Election, he would become the first US president since George H.W. Bush who did not visit Indonesia during his tenure.

No surprise, then, that Trump’s no-show has fuelled concerns about the United States’ inattentiveness to an increasingly fraught region, where China has, of late, adopted a much more aggressive stance, particularly in the contested South China Sea. 

China’s perceived aggression in the sea remains the source of much dispute and consternation in ASEAN, especially in Vietnam and the Philippines. A Chinese oil survey vessel, for instance, stayed within Vietnam’s exclusive economic zone for three months despite Vietnam’s protests. And tension between China and the Philippines remains acute, with hundreds of Chinese vessels regularly seen in waters around islands claimed by the Philippines, culminating in the sinking of a Philippine fishing boat by a Chinese vessel in April.

Moreover, not only due to its actions in the South China Sea, China is deeply unpopular among the populations of Southeast Asia, even in countries that rely on Chinese investment – actual, such as in Cambodia, and promised, such in the Philippines – due to what they perceive as China’s arrogance and lack of respect towards local populations. And despite the fact that the Philippines’ President Rodrigo Duterte is far more accommodating to China’s interests compared to his predecessor Benigno Aquino III, polls show 74% of Filipinos believing that their government should not trust China.

The United States, all the same, has benefitted from most ASEAN countries remaining wary of growing China’s influence in the region – even as they pine for China’s economic investment. The United States is still the most powerful country in the world – the only one with the means to stand up to China and guarantee security in the region, should China become too assertive. So despite the possibility of antagonising China, ASEAN countries remain willing to take part in military drills and exercises with the United States – even in the South China Sea.

Still, it should not be taken for granted that ASEAN member-states will put up indefinitely with American indifference. While that does not mean Southeast Asia will throw its hands up in resignation, accepting Chinese dominance of the region as a fait accompli, there are already attempts by ASEAN to try to defuse tension with China. Most notable is ASEAN countries backing a Code of Conduct for the South China Sea, in the hope that they could at least persuade China to agree to some sort of rules, even though this could come across as tacit acceptance of the de facto dominance of China in the South China Sea, including its artificial islands and military bases.

Another attempt to keep ASEAN relevant is so-called “ASEAN centrality,” which stresses cooperation and trust-building as a way to defuse tensions in the region. This, however, must also be seen as a response to the United States-supported concepts of the Quad and Indo-Pacific, the latter described as an attempt at a rules-based and open order aiming to prevent instability and stopping any one country from dominating the maritime domain.

This concept of “ASEAN centrality” essentially means trying to prevent member-states from being detached and swept into in the US-made Indo-Pacific, and thus being potentially dragged into conflict. And this reflects the feeling that while ASEAN member-states value their security relationship with the United States, Washington should not see itself as the only game in town. Either China will expand its influence or ASEAN itself will try to become more independent or forge closer relationships with other countries seen as more dependable and less troublesome, such as India, Japan, and Australia.

Yohanes Sulaiman is a politics and security analyst and lecturer at Universitas Jenderal Achmad Yani in Cimahi, Bandung.

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Several Southeast Asian nations are among the countries that will bear the brunt of this decision, with Cambodia – which relies heavily on preferential trade agreements to gain access to the UK market – expected to be hit hardest by the impending exit.

The report outlines two potential Brexit scenarios: one “soft” and the other “hard”. In the case of the former, the UK would sign an ambitious trade agreement with the EU that would greatly mitigate the negative economic effects of the Brexit decision. In the latter instance, a “hard” Brexit could see the country revert to World Trade Organisation (WTO) rules of trade, which are restrictive enough to cause significant damage to the local economy and to economies dependent on the UK market.

The UK is officially set to leave the EU on 29 March, but UK Prime Minister Theresa May is still battling to negotiate a deal that would satisfy the demands of both Brussels and the British parliament.

Broken promises

In February 2018, the British trade envoy visited Cambodia to once again assure the Kingdom’s minister of foreign affairs that the landmark Brexit decision would not have an impact on the two countries’ trade relationship.

“Mr Vaizey underlined that after the UK’s exit from the EU, the UK government will continue to strengthen bilateral trade with Cambodia,” a ministry spokesman told local reporters following the meeting last year.

But according to the DIE’s 1 February report, titled “How Brexit Affects Least Developed Countries”, Cambodia is likely to see the greatest negative impacts of the Brexit decision.

It’s no surprise that the countries who fall under the scope of the Everything but Arms (EBA) agreement – a policy that provides least developed countries with preferential access to European markets – should be hardest hit by the Brexit decision. These countries have found a profitable trade market in the UK, where their exports are able to enter duty- and quota-free.

In Southeast Asia, there are currently four countries with EBA status: Cambodia, Laos, Myanmar and Timor-Leste. According to the report, all four of these countries are likely to experience a “strong decrease in bilateral exports to the UK” in any instance of Brexit. As trade barriers go up, Southeast Asia’s trade is doubtless going to take a hit.

But no other country will see as great an impact as Cambodia, which has the highest dependence on the UK market. With 7.7% of its total exports currently going straight to the UK, a hard Brexit scenario could see Cambodia’s overall gross domestic product (GDP) fall by a harsh 1%.

Cambodia is especially vulnerable to the effects of Brexit because the Kingdom still relies heavily on its garment and textiles sector, which is likely to see a decline in aggregate exports of nearly 3%. The food trade is also going to be hit, with an aggregate decline of 4.14% across all least developed countries.

And these predictions, which show economic losses worldwide, are actually fairly moderate.

“These are conservative estimates of Brexit’s negative impacts,” the report read. “They do not take into account the additional implications of uncertainty, depreciation of the pound sterling, reduced aid spending, remittances and investments.”

Poverty implications

The report goes on to explain the poverty implications for countries with EBA status, of which Cambodia is highlighted as being one of the two most affected countries alongside Ethiopia.

In the hard Brexit scenario, Cambodia will suffer the largest fall in total exports among the least developed nations, triggering a trickle-down effect that could see Cambodia’s household income fall by up to 0.79% as the nation’s production and trade flag.

Cambodia’s poverty rate was 13.5% in 2014, according to a World Bank report. That number was drastically lower than in 2007, when the rate climbed as high as 47.8%. The World Bank report goes on to warn that while Cambodia had taken great strides in recent years to reduce the number of people living in poverty, up to 4.5 million Cambodians are still “vulnerable to falling back into poverty when exposed to economic or other shocks.” Brexit, with its uncertain global economic impact, could well be that shock.

“Brexit poses an extraordinary challenge to the global community as such high-level economic disintegration is unprecedented,” said the report. “The UK must act to mitigate the adverse effects on economically vulnerable countries.”

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The decision, announced by the European Commission this week, follows a month-long investigation that confirmed the increase in Indica imports from Cambodia and Myanmar has been damaging to EU rice producers.

In December, the Commission held a vote on this issue among its 28 EU state members, but did not receive a majority in favour of imposing the tariff measures. In the absence of strong opposition to the proposal, the Commission made the final decision itself on 16 January.

Representatives of European farming groups told Reuters that they are grateful for the Commission’s decision, as the cheap rice imported from Southeast Asia has been contributing to farmers’ abandonment of crops and exodus from rural areas.

Farming group Copa-Cogeca said rice imports from the two Asian countries increased from 9,000 tonnes in 2012 to 360,000 tonnes in 2017, leading to a collapse in prices across the European continent. In 2018, approximately 30% of all EU rice imports originated from countries with duty-free status – with the bulk being shipped in from Cambodia and Myanmar.

“This surge in low-price imports has caused serious difficulties for EU rice producers to the extent that their market share in the EU dropped substantially from 61% to 29%,” the Commission said in a recent statement.

Rice is currently grown across eight southern European countries including Italy, whose government initially requested the launch of the Commission’s investigation in March 2018 in the name of “protecting the Italian and European rice industry”.

Cambodia and Myanmar have enjoyed duty-free rice export to Europe since 2010, when the EU dropped its tariffs on the crop as a benefit of the Everything but Arms agreement, a policy which aims to promote European trade of goods with the world’s 50 least-developed countries. Other more developed countries in Southeast Asia, including Thailand and Vietnam, have long been paying tariffs of around $200 per tonne for white rice exports to the EU.

Impact on Cambodia’s and Myanmar’s Economies

For countries that have long benefitted from free access to the European market, the new tariffs are a steep price to pay: for the first year, the two countries’ Indica rice exports will be charged a duty of approximately $200 per tonne of rice, with the duties gradually dropping to $171 and $142.50 per tonne, respectively, over the course of the following two years.

For both Cambodia and Myanmar, rice is a major export – and Europe has become their most profitable market.

The EU is currently Cambodia’s largest destination for exports, with nearly 43% of all exported rice – or approximately 270,000 tonnes’ worth – going straight to European markets.  But while Cambodia’s exports to the EU have been on the rise in recent years, the country’s overall rice exports suffered slightly last year: the industry took a 1.5% dip in 2018 compared to 2017, with officials citing high production costs, international competition and a potential EU tariff as the cause.

Just under a week before the Commission’s Wednesday announcement of its decision, Cambodia Rice Federation vice-president Vong Bun Heng told a local news outlet that the very threat of an EU tariff on Cambodia’s rice has already proven damaging to overall exports.

“Some international buyers hesitate to place orders when they hear about implementation of the EU safeguard,” he said. “There is a need for our rice, but the choice of buyers is limited.”

Chan Sophal, director of the Centre for Policy Studies, a research unit of the Cambodian Economic Association, told the Phnom Penh Post that the Kingdom could see its rice industry in critical condition in the face of the EU tariffs. In order to offset the additional duty costs, he said, local rice farmers will have to focus on cutting production costs, and may need to switch up their crops altogether.

“The government should consider reducing the electricity cost and port fee to help our rice industry to remain or be more competitive,” he said. “I think [the impact of the tariff] will depend on the substitutability of the Cambodian rice in EU market outlets. If they like Cambodian rice, the supermarkets and consumers in Europe may not mind paying a bit more.”

According to AMRU Rice Cambodia chairman and CEO Song Saran, Cambodian rice exporters should focus on expanding to new markets – but for now, it needs Europe.

“We need the EU market and we cannot afford to lose it. So we will have to find a way to lower our operating costs to improve competitiveness,” he said.

Myanmar is in much the same boat, as Europe has steadily grown to become one of the country’s major markets. Myanmar exported upwards of $320 million worth of rice in 2017, the same year it reached an all-time high of 293,000 tonnes of rice exported to Europe.

At a World Economic Forum in September, Myanmar state counsellor Aung San Suu Kyi noted that Myanmar’s rice exports have been on the rise for years, achieving “pre-war” levels in 2017 thanks to access to foreign markets.

“[Our rice export success] has not affected the rice exports of [neighbouring countries like] Vietnam or Thailand,” she said. “The fact that we have been gaining our position in the world rice market does not mean that other local markets have suffered.”

But this could change now that the European market has set a high barrier for entry to the Indica rice market, forcing farmers to look closer to home as they seek out different buyers.

Last week, general secretary of the Myanmar Rice Federation Ye Min Aung spoke about the potential negative effects of the EU’s decision to impose duties on the country’s rice exports.

“We have seen increased income as we are able to export quality rice to EU market,” he told a local news outlet. “Unless we have [duty free export] rights, we have to compete more with other countries. But to do so, we have much difficulty – we don’t have enough ports and warehouses.”

However, others are for more optimistic about the potential effects of the new tariff, which some Burmese industry insiders – including Myanmar Rice Federation joint secretary Lu Maw Myint Maung alongside several local rice exporters – claim will only affect about 60,000 to 100,000 tonnes of Indica exports. Even if only 100,000 tonnes of Myanmar’s exports were to be affected, however, the new tariff would still result in a loss of approximately $20 million for the country, should Myanmar choose to send its rice to the EU in the upcoming year.

According to Hla Maung Shwe, deputy chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry, it could be worse – the EU could have chosen to target duty-free garment imports, which are the backbone of several developing Southeast Asian economies.

“This decision will not affect us very much on rice exports to Europe, but if it were on our garment exports, it would hurt,” Hla Maung She told Radio Free Asia.

In Cambodia, officials are looking at the new tariff as an opportunity, and a sign from the EU that the Kingdom no longer needs preferential treatment. Cambodia’s Council of Ministers spokesman Phay Siphan told RFA that the government is unconcerned by the tariff, though he admitted it would have an impact.

“Imposing a tax on Cambodia is a positive development, which proves that Cambodia is able to pay duties like other countries,” he said. “We know that imposing the tax will affect us, but we must be ready to compete on a level playing field with other countries in trade.”

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In dire straits, the locals began taking out small microfinance loans to sustain themselves. Leak Sopheap, the community’s representative, told Southeast Asia Globe that up to 90% of families had taken out microloans in a bid to improve their lot. But, without the necessary economic conditions to increase their incomes, the families had instead fallen further into debt.

“Most of the families with loans are struggling to pay them back as it’s difficult to earn enough money from fishing now. Some have had to sell the fishing equipment they bought with the initial loan to try and pay back their debt,” she explained. “Some have even resorted to taking out second loans to try and pay back the first.”

The social entrepreneur Mohammad Yunus first introduced microfinance in the 1970s to help inject much-needed capital into struggling rural communities in Bangladesh. Predominantly centred on offering small, short-term loans to the poor at high interest rates, the novel approach to development was touted as a financial innovation that could lift millions out of poverty. Yunus even won the Nobel Peace Prize in 2006.

But as microfinance developed into a multi-billion dollar industry, the fragile alliance between the financial and the development worlds has been thrown into sharp relief, especially in Cambodia, where the amount of outstanding loans provided by microfinance institutions (MFIs) increased from $916.3m in 2011 to $3.63 billion in 2016 – a significant sum for a population of just over 15 million people.

“It seems that these MFIs have a plan to take advantage of the people”

Hun Sen, Prime Minister

“It seems that these MFIs have a plan to take advantage of the people,” Prime Minister Hun Sen lamented at the National Summit on the Development of the Microfinance Sector in Cambodia in March last year. “Which MFIs are doing this, and why haven’t we taken action?” he later asked the crowd, citing examples of people’s homes being taken from them after they failed to pay back their loans.

Since then, with one eye on the upcoming commune elections in June, the increasingly populist leader has been eager to be perceived as a champion of the poor, locking horns with what he has portrayed as a mercenary, opportunistic industry.

First came the ostensibly independent National Bank of Cambodia (NBC)’s order on 15 February 2017 that all financial institutions would need to visibly declare that they were a ‘private institution’ and not state-owned. The NBC said in an announcement that the decision was made because it had “observed that there are some bad people who do propaganda by cheating the public, and who say that financial institutions in Cambodia are state-owned institutions, telling borrowers that they are not required to repay their debts”.

Then came the government’s call for certain banks to change their logos to help differentiate themselves from government ministries. Among those forced into a rebranding exercise – at a cost of $3.5m – was Cambodia’s largest commercial bank, Acleda, whose mythical bird insignia was said to be too similar to the Ministry of Economy and Finance’s logo.

And finally, on 13 March 2017, the NBC delivered the killer blow. From April onwards, it announced, the entire microfinance sector would be subject to an interest rate cap of 18%, an amount that analysts said would make the majority of MFI loans loss-making activities.

While he said it was too early to assess the full extent of the interest rate cap’s impact on the sector, Yun Sovanna, general secretary of the Cambodia Microfinance Association (CMA), said that all MFIs would have to reassess their business models and strategies.

“Going down to remote areas and offering small loans to people with low incomes has huge operational costs – for some MFIs, these costs alone can be [equal] to 20% or 30% [of interest]. Continuing to operate like this under an 18% interest rate cap would not make business sense,” he said. “MFIs will have to completely re-evaluate their
business model.”

Ultimately, analysts say, it is the poor – the intended beneficiaries of the interest rate cap – who will be hit the hardest as MFIs will no longer be able to afford to provide the small loans that this demographic requires.

“The big problem in Cambodia has been loan refinancing… All of a sudden, a client that started with a $500 loan now has a $1,000 loan, which is far too much debt for them to be able to repay.”

Daniel Rozas

The move could also affect the interest rates offered to customers that have savings accounts with MFIs as the institutions look to cover their losses. This could have wider ramifications for the industry, according to Daniel Rozas, a microfinance consultant that helped establish the Microfinance Index of Market Outreach and Saturation (Mimosa).

“I imagine that they would push the deposit interest rates lower, which would create the extra margin on the loan portfolio size. That hurts the savers, which is not what you want,” he said. “The last thing you want to do is discourage people from saving or encourage them to save abroad.”

Nevertheless, Anton Simanowitz, director of the consultancy Social Performance Solutions and author of The Business of Doing Good, a detailed case study of the Cambodian MFI Angkor Microfinance Kampuchea (AMK), said that while the cap was “a populist move driven by the elections” that he believed would bring a lot of negative impacts to clients, the experience in other countries suggests that the “MFIs would most likely continue to operate reasonably well”.

“In other countries where an interest rate cap has been introduced, MFIs have found ways to maintain the same income by replacing interest with fees [such as] administration charges, processing charges and service charges, or by increasing charges on unregulated products [such as] credit life insurance… this is likely to be the case in Cambodia,” he wrote in an email.

On 23 March, Hout Ieng Tong, the current chairman of the CMA, told reporters that the NBC  had “agreed in principle” to reduce the annual licence fee of affected MFIs and to offer riel-denominated loans directly to lenders to make it feasible for MFIs to continue operating with the interest rate cap in place.

While the cap is likely to damage the profitability of MFIs, greater regulation is necessary. The rate at which the sector had grown up until 2016 had, by all accounts, been unsustainable. As more players moved into the market, enhanced competition increased pressure on MFIs to take risks and offer greater loan sizes to customers in a bid to capture their business.

“The big problem in Cambodia has been loan refinancing, where, let’s say I have a loan with an MFI, and then a new MFI comes to me and says: ‘Listen, I’ll give you a bigger loan than you currently have and you can repay that first loan and become my client instead.’ All of a sudden, a client that started with a $500 loan now has a $1,000 loan, which is far too much debt for them to be able to repay,” Rozas explained. 

A circular produced by Mimosa in June 2016 demonstrated that loan sizes in Cambodia had, in fact, grown four times faster than client incomes between 2003 and 2014 – from 54% to 220% of per capita gross national income.

But after the International Monetary Fund voiced its grave concerns over the Kingdom’s explosive credit growth in a 2015 report, the NBC began to introduce policies aimed at reducing the amount of lending by MFIs. As a result, the Kingdom’s credit growth had already slowed to 23% in 2016, down from 45% in 2015.

While Sopheap’s distressing tale of a village trapped by insurmountable debt is not unique in Cambodia, the full extent of over-indebtedness in the Kingdom is still unknown. What’s more, the share of loans overdue more than 30 days, or the ‘portfolio at risk’, remained a respectable 1.41% in 2016, bringing into question Hun Sen’s motive for introducing the cap.

But the cap also brings with it opportunities. Not only does it make the industry ripe for consolidation – with Hong Kong’s Bank of East Asia and Sri Lanka’s LOLC already acquiring a majority stake in Cambodia’s largest MFI, Prasac Microfinance since the announcement – it may also benefit the financial technology industry.

In a report released before the interest rate cap had been announced, the Asian Development Bank (ADB) argued that low bank account usage together with increasing smartphone penetration meant Cambodia’s banking sector “could boost GDP by 6%” if it sped up its integration of financial technology, or fintech. This would equate to a 30% increase in income for those earning less than two dollars a day.

Fintech, such as branchless banking and mobile banking, dramatically reduces operational costs by reducing the need for staff to travel to remote areas or decreasing the costs associated with excessive paperwork. Given that the interest rate cap will require MFIs to reduce their costs, many could therefore turn to local companies such as fintech startup Morakot and mobile payment provider Wing as they strive to remain competitive in the years to come.

Acleda bank has already begun tapping into the myriad opportunities fintech offers MFIs. Recognising that large swathes of microloan repayments are made through remittance payments, the bank made it possible for Cambodians without bank accounts to send and receive money via their Unity ToanChet mobile application. Those without bank accounts are sent one-time passwords in a text message, which they can then use to withdraw money from ATMs.

“Fintech is very important for financial institutions, but [firstly] we must familiarise people with the technology,” So Phonnary, Acleda bank’s executive vice-president told Southeast Asia Globe. “We develop fintech to make banking and microfinance more convenient to our customers.”

Yet adopting fintech takes time and money – luxuries that many smaller MFIs do not possess, according to Sovanna. “Innovations in technology could help, but it’s not the only remedy to the interest rate cap. The industry will have to apply many solutions,” he said. “At this moment, I think that many MFIs do not have the capital to invest in technology and mobile banking, even though it is in their long-term interest.”

But as it does away with “the personal contact that allows for good lending”, Simanowitz warned against the sector hedging its bets on fintech. MFIs make up a significant section of the country’s banking industry so, whichever path the sector takes, the new direction is likely to have far-reaching consequences.

Whether or not the government will listen to what the industry is saying is another matter entirely; the fact that it implemented the cap even after the NBC had publicly derided the policy in November suggests it will not.

“Just as a healthy person doesn’t go to the doctor, a rich person doesn’t need loans from microfinance institutions,” said Bun Mony, former chairperson of the CMA. “That’s why they don’t properly understand their importance.”

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But soon this could all change. In July, the International Labour Organisation (ILO) released a study warning that automation could be the future of Cambodia’s garment industry, posing significant risks for 88% of workers employed in the textile, clothing and footwear (TCF) industry. The effects on employees would be calamitous. “For some countries like Cambodia, where TCF production dominates an undiversified manufacturing sector and makes up around 60% of manufacturing employment, the impact will be felt more strongly than others,” the report stated.

According to an owner of a garment factory just outside of Phnom Penh, who requested anonymity, the desire for automation is a logical one, given the sector’s woes: increasing wages, low-value production and increased regional competition. The result, as he put it rather directly, was that many of his fellow business owners (often non-Cambodians, like himself) are more willing to “invest in machinery than people”. Machines do not strike, and machines can be taken away, he said.

A later report by the ILO, published in August, came to similar conclusions as this anonymous source. It found prices being paid by foreign brands, mostly from the US or Europe, were stagnating, chiefly because of increased supply from countries such as Vietnam, Bangladesh, and, a future concern, Myanmar. Between 2006 and 2015, the cost of garment produce exported by Cambodia rose by just 5.4%. At the same time, wages for garment workers increased by much more: from $61 per month in 2010 to $140 this year. In September, annual negotiations over minimum wages for garment workers began once again, though no announcement has been made by trade unions as to how much of an increase they desire.

“Investors require a certain return on their invested capital – if they do not obtain this, they may reconsider further investments in the Cambodian garment sector,” the report stated. Indeed, Ken Loo, president of the Garment Manufacturers Association in Cambodia, told local media recently that 70 of its members have closed factories this year, compared to only 35 opening, an indication of struggling investment. 

The August ILO report concluded that to retain industry competitiveness, owners could either raise the costs charged to global brands for production or increase productivity remarkably – a third option of cutting wages was not discussed and seems highly unlikely. And for many, the best way of increasing productivity is through automation: from robotic machines that can perform the same cutting and stitching as workers, to the latest in 3D printing and computer-aided design.

For Ath Thorn, president of the Coalition of Cambodian Apparel Workers’ Democratic Union, employers’ talk of low productivity is self-seeking. He says that if productivity is low, it is the result of employers treating their workers poorly, reducing their motivation, and that it is the workers, not the employers, who are really suffering. The fact that revenue for the industry increased by 14.5% during the first quarter of the year, worth $1.8 billion, according to the ILO, might justify his position. 

“When there are no violations of the right of workers, the workers will be confident and help make this sector work as smoothly as possible,” he said.

As well as the better treatment of workers, and respecting their rights, Thorn added that employers could also boost productivity by providing better training, longer contracts and, most likely not to the same extent as many factory owners desire, the introduction of more modern machinery. 

However, the path to automation appears an uncertain one for Cambodia. William Conklin, Cambodia country director at workers advocacy NGO Solidarity Centre, says that the industry’s current concerns stem partly from its lack of evolution. “It really hasn’t changed in 15 years,” he said. Conklin puts this down to a lack of vision by the industry players. For example, everyone has recently been looking nervously at Vietnam, especially if the Trans-Pacific Partnership (TPP) comes to fruition, which would open Vietnamese exports up to significant new markets. “But Vietnam said it would be part of TPP in 2009,” he said, adding that a long-term strategy to deal with this has yet to be put in place.  “Nobody is thinking of how to compete. Maybe, they can’t compete. Vietnamese garment factories are huge, with 5,000 to 10,000 workers each, and much local, Vietnamese investment.”

Aside from perspectives, there are also logistical problems. First, automation would require significant capital investment, but investors and factory owners (95% foreign, Conklin estimates) have “shown no inclination, with a few exceptions, to really do much investment in the industry itself”. Secondly, energy costs in Cambodia are the highest in Southeast Asia, ranging from $0.18 to $1 per kilowatt-hour, according to a 2015 report by the ADB. Automation, therefore, would no doubt drive up costs significantly, most likely requiring long-term government investment in energy production, Conklin added. Third, the introduction of new machinery would require more training of workers, which again would require more investment and improved relations between employers and employees, which might require another raise in the minimum wage.

Nevertheless, a paradigm shift needs to take place, with every stakeholder engaged, Conklin said. Exactly what that shift is remains to be seen. However, there is a simple choice, he said: “Away from low-wage, low-cost…to a higher-end, where workers are not just commodities but assets? Or, continue to scrape-by, without anything to set Cambodia apart?” 

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The monks emerge shortly after six in the morning, smudges of flame in the predawn gloom. Alms bowls in hand, they walk silently through the town past Western-style cafés and restaurants. They pass boutique hotels with frangipani trees and soft white curtains covering the windows. Eventually, they turn onto Sisavangvong Road, Luang Prabang’s main drag, where a throng of tourists eagerly awaits.

As the monks begin taking offerings from a line of Buddhist devotees, cameras are primed and the pack converges. One European man lights up the pavement with a huge flash on a tripod, filming monks as they step off a curb. Another walks up and down the line with a huge camera, pointing its black snout into the stream of saffron-clad novices and firing off machine-gun shutter-bursts.

For centuries, Luang Prabang’s monks have filed through these streets at dawn to collect alms from the local community. In more recent times, however, the morning ritual known as tak bat has ceded ground to another, noisier ritual – one of shutters and flashes and frenzied jostling for position along the crowded streets.

Each morning, tourism operators set up signs and tables, hawking coffee and overpriced sticky rice for tourists to ‘donate’ during the procession. Signs in six languages ask visitors to “respect the alms giving” and keep their distance from the monks, many of whom are novices, but these are routinely ignored.

“Like a Disneyland”

For many, the tourist circus surrounding the tak bat encapsulates the negative side of a boom in visitors that has transformed the character of this Unesco-listed former royal capital. “It’s like a monkey troupe, it’s like a Disneyland,” says one prominent Laotian involved in cultural preservation efforts, who requested anonymity due to recent controversies over mass tourism and heritage issues. “We have [taken] action, we have made brochures, but I think it’s not enough.”

Luang Prabang’s old town, a temple-filled peninsula embraced by the Mekong and Nam Khan rivers, was once the capital of the Lan Xang kingdom, the fabled “Land of a Million Elephants”, and has remained the spiritual and religious centre of Laos in the centuries since.

Since being listed as a Unesco World Heritage Site in 1995, the town has gone from an impoverished settlement with a stuttering electricity supply to one of Southeast Asia’s prized boutique travel destinations. In 2015, this town of 50,000 attracted more than 445,000 international visitors, according to provincial tourism authorities, an increase of more than 10% on the previous year.

That figure may soon rise further following the opening up of new international air routes to the city. In March, the cut-price carrier AirAsia commenced regular flights from Bangkok, and HK Express has announced that it will add a flight from Hong Kong. Two additional airlines are awaiting approval for direct flights, according to recent media reports.

Now, two decades on from Luang Prabang’s Unesco listing, a milestone the city marked with a lavish street parade in December, many wonder whether it can maintain its traditions under the intensifying pressures of mass tourism.

As early as 2004, Unesco noted in a report that tourism development had already put a “critical stress” on the town’s environmental and cultural resources. Without proper management, it warned, Luang Prabang could well become “another tourist town where soft-drink billboards dominate the landscape, where the sound of tour buses drowns out the soft temple prayers and where the town’s residents are reduced to the roles of bit-players in a cultural theme park.”

This dystopian vision has yet to come to pass, but there’s no denying the transformative effects of the tourist dollar. Gabriel Kuperman, the founder and director of the Luang Prabang Film Festival, now into its seventh year, says one effect of the boom has been families selling their houses in the old town to be converted into guesthouses and hotels.

“On one hand, it’s a positive thing that those families benefitted from a major injection of funds into their households,” says Kuperman. “On the other hand, now that there are fewer and fewer Lao families living in the heart of Luang Prabang, a certain amount of charm has been lost.”

Indeed, pockets of Luang Prabang are akin to portals into a sort of transnational Asian tourist space – a generic zone of souvenir shops, cheap travellers’ cafés, and the sort of gimmicky exotica encapsulated by the sight, on one recent evening, of an orchestra entertaining a crowd of foreigners with a rendition of “Auld Lang Syne” played on traditional Lao instruments. “There’s a point where it sort of kills the local life,” says Andrea Vinsonneau, the director of EXO Travel in Laos.

Locals express satisfaction at the influx of cash that tourism has brought, but also worry that the character of the city and its people have changed. “Some is good, some is bad,” says Chanthanom Soulatda, the owner of Villa Ban Lakkam, a guesthouse on the banks of the Nam Khan river. “Luang Prabang people are very calm, but now they run to make business,” the 71-year-old adds, standing on the street outside the guesthouse, which stands on the site of her childhood home. “Before they walked slowly, but now they run.”

The living aspects of the site are the really indispensable part of what makes Luang Prabang so distinctive.

Montira Horayangura Unakul

Despite the accretions of global tourist culture, Luang Prabang has generally adhered to Unesco’s regulations, which include bans on demolitions within the heritage zone and the use of pane glass on buildings. The town remains low-slung and quiet, characterised by a delicate blend of Lao urban architecture and French colonial forms.

The difficulty, says Montira Horayangura Unakul, a national programme officer at Unesco in Bangkok, is that Luang Prabang’s most valuable heritage extends beyond the physical buildings to include “intangible” cultural practices and traditions – like the tak bat ceremony – which are not officially listed by Unesco.

This explains local anger at the touristification of the alms-giving ceremony – the central part of a living Buddhist culture. Phonesavan Bilavarn, 70, a retired English teacher whose childhood home still stands just off Sisavangvong Road, is livid: “They use the flash,” she says, miming the ‘chk, chk, chk’ of the shutterbugs, “and very close to the monks.”

Of course, some argue that Unesco is itself to blame for the changes that happen to World Heritage Sites such as Luang Prabang. The Italian writer Marco d’Eramo has argued that whenever a city is listed by Unesco, it “dies out, becoming the stuff of taxidermy, a mausoleum with dormitory suburbs attached”. Has World Heritage status saved Luang Prabang, only to rob it of its soul?

Rik Ponne, a former Unesco staffer and advisor to the Lao Ministry of Information, Culture and Tourism, says that such views oversimplify the complex challenge of balancing economic growth with cultural preservation. Taking a fundamentalist view on heritage issues, he argues, runs the risk of romanticising the poverty that allowed Luang Prabang to remain so “untouched” for so many decades.

On the whole, Unakul says that in response to past criticisms from the World Heritage Committee, the Lao authorities have been “very proactive” in taking action to address its concerns and extending the development buffer zone around the old town. One of the current strategies for handling rising visitor numbers is to draw visitors away from the old town by promoting attractions further afield. “It’s definitely an issue that’s on a lot of people’s minds, and an issue that’s getting attention,” she says.

Vinsonneau, who has been living and working in Luang Prabang since 2000, says tourism operators also have a duty to educate their clients. EXO Travel provides each of its visitors with a handbook instructing them how to dress appropriately, how to interact with monks and how to behave during cultural events.

But she says that despite all the negative effects of mass tourism, the death of Luang Prabang’s soul has been greatly exaggerated, at least when compared with some of the other tourist hotspots of Southeast Asia.

“There’s still an incredible ambience,” Vinsonneau says of the town. “It’s good to remind people it could be much worse than this. It could be better, but it could be much worse.”

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The TPP is one of the biggest trade deals in history and, once ratified, signatory nations will enjoy lower tariffs on exports to member countries and have access to an investor-state dispute settlement system.
Four countries in Southeast Asia – Singapore, Malaysia, Vietnam and Brunei – inked the deal, along with the US, Japan, Australia, New Zealand, Canada, Mexico, Chile and Peru.
“The signing of the TPP agreement marks an important milestone for regional trade liberalisation,” said Singapore’s Minister for Trade and Industry, Lim Hng Kiang, in a statement. “The TPP signatories comprise nearly 40% of world trade, and account for over 30% of Singapore’s total trade.”
“We look forward to the TPP’s ratification as soon as possible, so that our businesses can benefit from increased trade and investment opportunities,” he added.
US President Barack Obama also welcomed the deal. “TPP allows America – and not countries like China – to write the rules of the road in the 21st century, which is especially important in a region as dynamic as the Asia-Pacific,” he said in a statement.
The deal is not without its critics, particularly as the negotiations were carried out behind closed doors. Provisions concerning intellectual property have been criticised for their expected erosion of freedom of expression, due process and the right to privacy.
And patients in signatory countries may experience a dramatic increase in the prices of the generic medicines as a result of the deal. “[In Vietnam] medicines are the single largest expense for patients, accounting for 58% of all out-of-pocket costs for healthcare,” Andy Baker, then-country director of Oxfam Vietnam told Southeast Asia Globe in 2014. “Thus, high medicine prices have serious direct impacts upon patients, many of whom have to go without or find themselves and their families forced to make impossible sacrifices to pay for treatment.”
Others, such as US Senator Bernie Sanders have panned the deal, contending that it favours big corporations over ordinary workers. Academic Noam Chomsky rounded on it in an interview with HuffPost Live in January, saying: “It’s designed to carry forward the neoliberal project to maximize profit and domination, and to set the working people in the world in competition with one another so as to lower wages to increase insecurity.”
And as for the much-touted economic benefits for member countries, Adam Hersh, senior economist at the Roosevelt Institute, believes these will not be as large as some claim. “In general, the macro-economic impact is going to be a lot smaller than anticipated,” he told Southeast Asia Globe in November. “It covers 40% of the world’s GDP, but most of those countries already have agreements with one another so the incremental amount of trade opening up is not that big.”
Other countries in the region may join the TPP in the future, with Cambodia, Indonesia, the Philippines and Laos expressing an interest in recent months.

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The name Thorstein Veblen might not be up there with the likes of Coco Chanel and Louis Vuitton, and he certainly didn’t have their eye for design, but this late 19th-century economist made some telling contributions to the world of luxury. The Norwegian-American not only coined the term ‘conspicuous consumption’, he also noticed that certain goods actually became more popular as they got more expensive – a direct contradiction to the law of demand. These products would be forever known as Veblen goods.

In the century or so since Veblen’s time, the world’s obsession with luxury goods has exploded. In the past 20 years alone, the number of luxury consumers has trebled to about 330 million people, who spent an estimated $300 billion in 2013 according to Bain & Company, a global management consultancy. Interestingly, that money was not solely concentrated in traditional luxury strongholds such as Europe and North America. Most analysts agree that emerging markets are becoming the new darlings of the luxury industry.

Sales in Asia reached $90 billion in 2014, about the same as North America, according to London-based market intelligence firm Euromonitor International. Meanwhile, a study released in 2013 by Bain & Company stated that Indonesia and other Southeast Asian nations, including Malaysia, Vietnam and Thailand, are the “new engines of luxury growth within Asia”.

“More and more domestic people in Southeast Asia are becoming capable of entering the luxury market,” said Jean-Christophe Babin, CEO of luxury giant Bulgari. “Indonesia is a hugely populated country, then Vietnam, Thailand, Malaysia – all together we’re talking about hundreds of millions of people going through economic development… This is one reason why Bulgari has added six new boutiques [in the region] in just eight months.”

Large numbers of incoming Chinese tourists is another key driver of luxury demand in the region. Partly due to inflated prices at home, Chinese consumers are renowned for doing much of their shopping outside of the country, with the Economist reporting that some spend 73% of their holiday budget on shopping. Southeast Asia welcomed more than 10 million Chinese tourists last year, according to figures from the Centre for Aviation, a research company based in Hong Kong. “The large numbers of Chinese arriving on holiday is certainly adding to the luxury market,” said Babin.

Southeast Asia is following in China’s footsteps in other ways too, with the region’s growing middle class experiencing income growth that is changing their spending priorities. In many urban centres, lifestyles are being completely redefined. Better employment opportunities have even had a direct impact on luxury sales in the Philippines, for example.

“Improved employment rates encouraged consumers to look their best at work. As such, the majority of consumers who bought luxury goods in 2014 did so to accentuate their status, with priority placed on conspicuity of brands to ensure high brand recognition among their peers and the public,” stated Euromonitor’s report, Luxury Goods in the Philippines.

Even as much of the world moves away from logos and toward ‘codes’ – understated ways of conveying brand identity, such as the red soles of Christian Louboutin shoes – a large group of Southeast Asian consumers still places value on goods that noticeably reflect their status. Broadly speaking, there are two types of Southeast Asian consumer in terms of taste.

“I would clearly differentiate between sophisticated luxury customers and customers in the emerging stage of exploring luxury. And you can find these types of customer in many different countries in Southeast Asia,” said Chris Neff, Asia managing director of Swiss luxury watchmaker Chopard. “The established luxury customer has a very good understanding of the quality of the product. So this segment is clearly very well informed and needs a different approach to be nurtured and excited further in terms of luxury consumption.

“Then you have the emerging group of luxury customers, the growing middle class that have attained an income level that allows them to buy quality, branded products. There, you need to invest a lot of time to educate them on what luxury is all about, because this group buys for two reasons: because customers trust the brand in terms of quality, and the bigger the brand or more famous the logo, the higher the trust; second, it shows society that this specific person can now afford luxury products, which is very, very important in most Southeast Asian markets.”

A key characteristic of the Southeast Asian luxury consumer is their overwhelming preference for face-to-face retail experiences. The personalised service offered by knowledgeable staff, the desire to see and feel a product before spending a relatively large amount of money, lingering doubts over counterfeit goods and even the simple desire to shop in a mall to escape the heat are all factors that push the region’s consumers toward boutiques.

Babin, however, is adamant that Southeast Asian consumers should not be afforded atypical status. “They are not so different from what we observe in the rest of the world. Global brands are communicating very evenly across all four continents. People follow the same websites and the same social networks. I think we have to forget the times when we’d say: ‘The Chinese taste is so different from the American taste, which is totally different from Europe.’ No. There is probably the same taste difference between Shanghai and Chengdu as there is between Shanghai and New York.”

Yet research by Agility Research & Strategy, presented at Retail Congress Asia-Pacific 2015, seems to paint the opposite picture. They identified four distinct categories of affluent Asian shoppers, from the “exclusivity seeker” to the “indulgent traveller”. The firm also branded a set of ambitious and affluent young consumers as “Generation AAA”, a key group for brands to focus on. This group spends equally across jewellery, tech, travel and fashion and has embraced digital technologies.

“Luxury brands can reach out to AAA consumers by first understanding their demographics and psychographics. Who are they? Where do they spend? What are their hobbies?” Amrita Banta, managing director of Agility Research & Strategy, told luxury marketing website luxurydaily.com. “One of the most common misconceptions about affluent Asian consumers is that they are all the same.”

One way that global brands have reached out to regional consumers is through events, where brands seek that elusive connection with customers and aim to woo them with their potent synthesis of timelessness and modernity. Gregoire Blanche, regional managing director for Southeast Asia and Australia at Cartier, details the company’s recent Etourdissant Cartier event in Singapore, where, in a sign of Southeast Asia’s growing status, more than 600 pieces made their world debut.

At Bulgari, Babin cites the company’s luxury hotels, currently open in three locations, including Bali, which he describes as “ultimate experiential temples of the brand”.

In luxury brands’ battle for hearts, minds and wallets, nothing can be left to chance. Yet a delicate balance is required. Some consumers aspire to the luxury lifestyle with every inch of their being; others find it shallow, particularly in regions where millions live in poverty. The challenge for brands is to continue satisfying the former while deftly wooing the latter.

“In this journey of educating emerging luxury customers you always lose some clients along the way. That’s natural,” said Neff. “But there is a great opportunity by coming [into markets] early and being the first to offer luxury products… That’s one of the ways. But by doing that you have to be very authentic in the way you promote your brand. It’s not an approach where you can implement the same luxury strategy in any country. It requires patience; you have to invest a lot of time in understanding the local market and the mindset of the customers. That is how you build loyalty.”

Offering an exquisite product is also rather important. Most Southeast Asian consumers’ first interaction with a brand will be through an entry-level product such as perfume, accessories or lower-priced jewellery. “Luxury brands cannot afford to offer an entry-level product which is not of excellent quality,” Neff pointed out. The most successful companies not only retain the lustre of their $3,000 handbags, they also bathe their $30 mascaras in its iridescence.

For most luxury brands, the first step is increasingly taken digitally. Live streams of catwalk shows, web-only videos and endless interaction on Facebook, Twitter, Pinterest and Instagram are now the norm. Famed British department store Harrods even created a game named Stiletto Wars, not so loosely based on Candy Crush, to promote a shoe sale.

“The digital component is sometimes the first touch point we have with our clients,” said Blanche. “It is a key part of the storytelling behind our creations and also offers readily accessible details about them. In fact, Cartier was one of the first players in the digital world, with our L’Odyssée de Cartier digital film in 2012. That is an example of how we used technology to really bring our creations to life with immersive storytelling.”

The film has rightly gone down in luxury marketing history. Comments such as: “It’s the most enchanting advertisement I have ever come across,” are indicative of the response it has received on YouTube, where it has been viewed 18.1 million times.

However, experiencing and buying are two very different things. Engaging with customers online is widely seen as the first step – albeit one that requires a great deal of effort – in a sequence that ends with someone actually entering a store and buying a luxury product.

“Chopard and many other luxury brands have a strong online presence and are working on strategies to reach new clients and help them get attached to the brand before they’ve even purchased it,” said Neff. “How do we turn that attachment into sales in Southeast Asia? Well, the emotional attachment to the brand is the first step. You create that with marketing, making the brand relevant to certain consumer groups by linking it to regional celebrities. Then you provide additional information about the credibility, authenticity and history of the brand to give customers confidence that they are buying a product that has a soul.”

Babin, however, sounds a note of caution: “Digital advertising is a new way to invest in media and has far more possibilities than ever before. But it also has far more question marks. In traditional media we know exact information such as the reach, the frequency and the efficiency… I’d estimate it took about a century to master traditional advertising, so with digital we’re going to have to go much quicker.”

One area where the region is certainly swimming against the tide is e-commerce, a key space for marrying up online interaction with instant gratification through purchases. Consumers in more mature luxury markets are turning to the likes of Net-A-Porter, a high-end fashion website with a customer base of six million, according to the Economist. But in Southeast Asia, e-commerce for luxury goods is simply not taking off, despite the fact that, according to Neff, “Southeast Asian customers are among the most social media savvy in the world”.

A number of factors are in play here, including Southeast Asians’ aforementioned fondness for malls, a relative lack of credit cards and secure payment systems, the counterfeit conundrum and, according to Babin, a lack of websites in local languages, something he says is “fundamental” for e-commerce. Perhaps the biggest limiting factor, though, are the logistical challenges posed by poor infrastructure and a lack of trust in delivery systems.

“In the US there are three or four delivery companies, the likes of FedEx or UPS, that are very reputable, so for people there it’s normal to buy a $2,000 Bulgari ring online and have it delivered without ever worrying whether it’s counterfeit or that it might never arrive,” said Babin. “In Southeast Asia, sophisticated private delivery companies aren’t as widespread or accessible.”

It seems that, even as some brands tailor their approaches to individual markets and others adopt sophisticated digital strategies, luxury companies know that for the foreseeable future there is no substitute for shopping in a boutique, particularly in Southeast Asia.

“It is clearly the expectation that it will be a long time before e-commerce is up and running in Southeast Asia,” said Neff. “The craftsmanship, the materials being used, the sophistication of design being implemented – which are the fundamental decision-makers when purchasing – can only be seen by the naked eye, by feeling the product. At the end of the day, you buy with emotions. We are selling emotions. We are selling dreams.”

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