Cybersecurity and geopolitics: why Southeast Asia is wary of a Huawei ban
Originally posted by Huong Le Thu @ aspistrategist.org.au
‘The race to 5G is a race America must win’, US President Donald Trump said on 12 April. Just over a month later, on 15 May, he issued an executive order banning Huawei equipment in US networks. That decision has since been rippling well beyond Sino-US relations and will have an impact on the digital future of many other countries.
The US ban fuelled the already lively debate about the world facing a possible ‘digital iron curtain’ The implications go beyond wireless providers and could lead to a division of countries between ‘Team America’ and ‘Team China’ in terms of technology.
The fear of an unwanted digital bipolarity is already present in Southeast Asia, where some countries have military-cooperation or intelligence-sharing arrangements with the US, forcing them to make what some see as an impossible choice between Washington and Beijing.
US concerns about China on such issues as unequal market access, forced technology transfer, human and cyber-enabled state-supported theft of intellectual property, currency manipulation and state subsidies—as well as China’s expansive conception of state security and its belief that individuals and organisations should support state espionage—are all legitimate. But Trump’s ban on Huawei doesn’t address these concerns effectively, nor has it been communicated sufficiently to other countries, such as those in Southeast Asia.
US security concerns about Huawei, ZTE and other Chinese technology companies are shared by its closest allies in Asia—Australia and Japan. But while the debate has spread globally, the ban has also created a rift with other allies and partners, making the picture in the Indo-Pacific region, as well as Europe, more complicated.
Countries in Southeast Asia can be divided into three categories: allies and partners of the US with a strong sense of strategic convergence; countries with some convergence with the US in strategic interests; and countries that are distant from the US in the traditional sense of alignment. Put in the language of international relationships, there are those who side with a major power of their choice, those who hedge between two or more major powers, and those who balance against a major power that is seen as threatening.
In the controversy surrounding the 5G rollout and future digital technology, we see a similar pattern in how countries are reacting to US pressure over Huawei. It is a palpable dilemma in some Southeast Asian countries.
Among those that have embraced Chinese tech companies are two US treaty allies, Thailand and the Philippines, along with Cambodia and Myanmar.
In February, the Thai government launched a test of 5G and is promoting 5G infrastructure investment in its planned ‘eastern economic corridor’. According to a report in The Diplomat, the Thai government’s Digital Economy and Society Ministry has convened a committee on 5G with 29 members, both local and international, including Huawei.
In the Philippines, market leader Globe Telecom has confirmed a partnership with Huawei to develop 5G. On top of improving relations between Manila and Beijing since Rodrigo Duterte became president, Huawei has also supported the Philippines’ controversial public safety campaign related to Duterte’s so-called drug war, which the government claims is about cleaning up drug-related crime. A US$383 million deal was signed last year with China Telecom and Huawei to create a video surveillance system in Metro Manila and the city of Davao with a view to reducing crime rates.
Cambodia’s Smart Axiata announced in April that it had partnered with Huawei to develop a 5G solution. Prime Minister Hun Sen has said he wants Cambodia to be the first ASEAN country to launch 5G—with the help of Huawei and ZTE. While the state of Cambodia’s telecoms doesn’t suggest it would be an early adopter of 5G, the political will of Phnom Penh—whose relations with Beijing are increasingly good—is behind the effort to leapfrog into the new technology.
In Myanmar, ZTE has signed a memorandum of understating with the country’s Ooredoo to launch a 5G mobile network. In fact, all four mobile carriers in Myanmar are believed to use equipment made by ZTE or Huawei, mainly because of its accessibility and affordability.
Huawei representatives, meanwhile, have confirmed they are supporting digital transformation in Laos. With a market share of 15%, the company is the country’s third-largest mobile vendor, after Samsung (37%) and Apple (22%).
Among those that are more hesitant about adopting Chinese technology are Malaysia, Singapore and Indoneisa, which have signed up for 5G trials with Huawei, but are still cautious about considering a 5G network involving the company.
Huawei has a long history and strong foundations in Southeast Asia. It entered the region some 20 years ago—relatively early on and with competitive financial assistance. Its presence goes beyond wireless communications. The company provides funds for disaster relief, for example. In Malaysia, it has collaborated with Telekom Malaysia and Celcom Axiata to provide US$121,000 in assistance to communities affected by floods. Few other telecom giants have offered that.
Malaysian Prime Minister Mahathir Mohamad said at an event in Tokyo in May, ‘Malaysia is too small to have an effect on a huge company like Huawei, whose research is far bigger than the whole of Malaysia’s research capability, so we try to make use of their technology as much as possible. Yes, there may be some spying, but what is there to spy on in Malaysia? We are an open book.’
Days later, Singaporean Prime Minister Lee Hsien Loong noted in a speech at the Shangri-La Dialogue that Singapore is carefully studying the impact of 5G. However, he downplayed the security challenges posed by Huawei, emphasising that it’s not a ‘black-white’ issue, but rather a matter of degrees: ‘I would also say from the technical point of view, it is quite unrealistic to expect 100% security from any telecoms system you buy. Even the hand phone you buy is not 100% secure, much less the entire telephone network. It does not matter whom you buy it from; it can be a friendly country, it can be a hostile country, or you can design it yourself—every system will have vulnerabilities.’
Indonesia’s minister of communications, Rudiantara, has also seemed to defuse fears of Huawei-enabled espionage, telling Reuters in February that Indonesia cannot be ‘paranoid’ about curbing Huawei. There are some 300 base transceiver stations in Indonesia that use foreign technology already, so excluding one foreign company would be a political decision rather than a practical one, he said.
Another important factor is the drive for smart cities. Southeast Asia is urbanising at one of the world’s fastest rates. Thailand and Malaysia are exploring the benefits of 5G broadband in building their Smart Cities networks and Smart Government initiatives, as well as disaster management preparedness. With Indonesian President Joko Widodo’s recent announcement of a project for a new capital city, as well as ongoing efforts to upgrade Jakarta, there are likely to be plenty of new opportunities for both ‘hard’ and ‘soft’ infrastructure investment.
Southeast Asian leaders are clearly downplaying the US government’s security arguments about the trustworthiness of Huawei’s 5G network. But given China’s ranking in the World Justice Project Rule of Law Index—82nd out of 126 countries ranked—Southeast Asian countries, many of them ranking in similar brackets, are also less alarmed at the prospect of using technology from Western liberal democracies.
Vietnam is the only country in Southeast Asia that is avoiding Huawei technology based on security concerns, although without an explicit ban. Instead, Vietnam wants to be among the very first in the world to develop its own 5G technology. State-owned telecom Viettel, in cooperation with Sweden’s Ericsson, has developed a network that was successfully tested earlier this year in Hanoi. Planned to be launched by 2021, if successful, it may be a model for other countries.
It’s worth noting that Chinese state companies have had access to Vietnamese telecoms before. ZTE partnered in the past with Viettel in developing 3G. But in developing 4G, Viettel already relied on its own self-produced base stations.
Vietnam’s plans for wireless communications aren’t purely based on rejecting the Chinese Communist Party–linked Huawei. It is also an integral part of the country’s national strategy for succeeding in the fourth industrial revolution—a key focus of Prime Minister Nguyen Xuan Phuc. It fits in with Vietnam’s efforts to reform its economy and make the high-tech manufacturing sector a key pillar of economic development. Hanoi’s decision has little to do with Trump’s ban, but rather comes from a long-term strategic awareness of security challenges coming from the big northern neighbour.
There’s no doubt that the young, vibrant population of Southeast Asia will remain one of the most dynamic markets in the internet economy, which was estimated at US$50 billion in 2017 and is expected to quadruple by 2025 to US$200 billion. According to Huawei estimates, Southeast Asia provides opportunities worth US$1.2 trillion, with a potential 80 million 5G service subscribers. This is an attractive region worth competing for.
If the estimates of the distribution of subscribers worldwide by 2023 are correct (see Figure 1), then the market will be shared, rather than dominated, by Huawei. The digital future of Southeast Asia will most likely be very competitive. But one thing is certain: a viable US alternative is missing from the picture. Unless countries are willing to invest in developing their own networks, either on their own or in cooperation with other global providers as Vietnam did, there are few options to consider. Currently, Huawei has an advantage because it is available now, offers competitive rates and is easily accessible.
The deciding factor for the future of 5G in Southeast Asia is not political alignment or even security concerns; it’s about the practical needs of these economies.
The level of development, infrastructure and connectivity among Southeast Asia’s economies is very unequal. There’s also a vast disparity between cities and remote areas. Given the region’s young population and large proportion of mobile networks, most capital cities boast good connectivity and network coverage.
For many in the region, Huawei’s technology is more advanced than its Western competitors’ offerings, but it also comes at a fraction of the cost. Huawei is certainly bearing the fruits of Chinese government subsidies, and the security argument is often dismissed not because of a lack of awareness, but because, as one analyst says, ‘Huawei is the most efficient and cost-effective platform available to us.’
Will the US pressure backfire? Even America’s long-term European allies and liberal democracies such as the UK and Germany have resisted the ban. Out of the 10 ASEAN countries, two of which are treaty allies of the US, no one is willing to blindly follow Washington’s ban on Huawei.
The implications of how Southeast Asia responds is beyond just 5G technology, or even Huawei’s services. It is ultimately about the technological dominance and the success of China’s digital silk road. While infrastructure is the main area of competition, the soft infrastructure is no less crucial.
Individual Southeast Asian countries will of course make their own decisions. But so far no country in the region, including US treaty allies, is willing to support the ban for political reasons.
The hyper-focus on 5G is counterproductive. Security concerns are legitimate and need to be addressed in the same way as concerns about privacy protections related to internet applications. At the same time, Southeast Asian nations should treat seriously the possibility that China-linked technology that penetrates their critical infrastructure could be used for coercive purposes in the future.
The conversation about 5G choices in Southeast Asia is not divorced from the larger issue of Sino-US competition and the debate about choosing one side or the other. But, can the issue of high-speed internet connections be disconnected from the wider context of cyber norms and cyber laws in the region?
The cybersecurity warnings coming from the US are too focused on Huawei. Online restrictions and recent cyber laws across a number of countries, including those in Southeast Asia, legitimise censorship, restrict data flows and certain content, allow for the collection of personal information or constrain foreign companies from storing data offshore. These also should be part of the debate.
Recent regulations and cyber laws in Malaysia, Thailand and Vietnam reflect this trend. Cyber-enabled authoritarianism, in fact, seems rather attractive to many Southeast Asian governments.
The political implications of the presence of US companies, or pressure from the US government, in the telecoms sector in Southeast Asia go much further than the ability to block Huawei. 5G is another key example of a standard-setting opportunity that was missed. As with the Trans-Pacific Partnership—the trade deal that involved 12 Pacific Rim economies before Trump pulled the US out of the deal—the decision by the US to withdraw from the agreement has been held up as one of key examples of a lack of US commitment to the region.
The TPP wasn’t only about trade and economic benefits. It was also about the ability to set and enforce standards. An example is Vietnam, which had to go through a number of economic reforms—including workforce rules and regulations on specific industries—in order to join the TPP. But once the US pulled out, it no longer had the ability to influence that sphere.
A similar logic applies to high-speed internet in Southeast Asia, or anywhere. If American technology providers are not offering an alternative to Huawei—the two other major players are Nokia and Ericsson—the US won’t have a say in setting standards of cybersecurity. To avoid a repeat of the TPP lesson—where the US withdrew for the sake of domestic interests—the US 5G strategy needs to go beyond banning Huawei and asking partners and allies to do the same. It needs to have a horse in the race.
Most Southeast Asians are not comfortable choosing sides in the great-power competition between China and the US. So, if this is a race where the US has to work harder to find partners in Southeast Asia, Washington needs to remind itself that much of its global primacy has been based on its technological prowess and that the innovation imperative is the only way to sustain its position.
A version of this piece was published in Global Asia’s September 2019 issue; it has been republished with permission.