Just as Myanmar’s long-detained icon Aung San Suu Kyi began campaigning for a parliamentary seat, the country’s President Thein Sein made a state visit to Singapore.

Accompanied by a high-level delegation, the President’s visit concluded with an agreement for technical assistance and training in a number of key areas including finance, investment law and trade facilitation.

These two events over the same week demonstrate the ambitious pace of change and growing confidence in Myanmar. Reaching out to Singapore also brings into the spotlight an economic dimension to the ongoing political reform.

Businesses from many countries have been eager to explore investments in Myanmar. Considered the last large and untapped market in Asia, many sectors of the economy have been underdeveloped or else dominated by Chinese firms.

The Association of South-east Asian Nations (ASEAN) – the regional group to which Myanmar belongs – wants to be supportive and so does Singapore, as a major hub for the region. This goes beyond the politics of having Myanmar assume the group’s chairmanship in 2014.

ASEAN’s plan for a more integrated economic community, targeted for 2015, can also gain.

Much, however, depends on whether sanctions put in place by the West for more than two decades are lifted. The European Union has already begun to unwind its sanctions. In Washington, a complex legal process is gaining bi-partisan support.

There is cause for optimism, but is Myanmar ready for business and investment? Can the country follow up on its current political reform with parallel reforms to the economy and boost the country’s development?

A recent publication by the International Monetary Fund (IMF) predicts the economy will grow at a rate of some 5.5 per cent for 2012. Such projections – in line with neighbouring Indochinese economies – are significant given the weak global outlook. But there is potential for greater, sustained growth.

Consider the country’s ample natural resources of oil and gas, as well as forestry products and minerals. Factor in a strategic location that can link China, India and South-east Asia. Add also that Myanmar has a sizeable population of some 54 million, many of whom are of working age and eager for jobs. The economy, among the region’s poorest at present, has the potential to grow.

There are, of course, concerns, many of which are typical of frontier economies – like the need for infrastructure and concerns about corruption and power shifts during this political change. But Myanmar also faces special challenges.

One key issue – as pointed out by the IMF – are exchange controls and currency stability. Officially, US$1 (S$1.26) is exchanged for just six Myanmar kyats. But in the widespread black market, the rate currently hovers around 750 kyats and has been as high in recent years as 1,250 kyats. Only with astute financial management can the country hope to liberalise its currency while maintaining macro-economic stability.

Another issue important for businesses coming in is that investment protection laws need improvement, with stable policies to be put in place. Recall that in the mid-1990s, some companies invested in the country, anticipating its membership in ASEAN. Many investors of that period were, however, left stranded by circumstances and policy changes.

Another issue to watch will be the central government’s effort to settle decades of fighting with different ethnic groups. The recent ceasefire deal with the Karen is a prime example. The Karen have been active in the Dawei industrial zone in the south of the country and this is now undergoing a major overhaul worth US$50 billion as a cornerstone of the government’s revitalisation plan.

As economic opening moves ahead, it will be essential that gains go beyond the circle of those in power. If development is to be sustained in tandem with political reform, the government must give attention to educating and training its people and meeting their basic needs, such as housing.

This sets the context for the agreement between the governments of Myanmar and Singapore. Tapping on Singapore’s expertise in finance, law and providing public services can help Myanmar kick-start economic development. The agreement was in many ways to be expected, given that the countries have long-standing ties in trade, as well as training programmes for public officials.

The spotlight thus far has understandably been on Myanmar’s dramatic political opening. Economic reform is now emerging as a twinned issue and the agreement with Singapore is but an early step on this path. Advocates for human rights and democracy will continue to watch developments in Myanmar but expect that businesses too will increasingly be part of the equation for change.

History may judge this was the year when the 21st Century really began. Back in 2000, continuity seemed assured, with the United States consolidating power and primacy. One decade on, changes potentially upend the global balance.

The financial crisis that began in the West in late 2008 is entering a second and more dangerous phase. The euro zone shows up not only sovereign financial problems but also the difficulties in exercising collective leadership.

The US is not in acute crisis and its economy showed better demand in the last quarter of this year. But Washington DC is gridlocked – witness the failure to agree on ways to cut the budget deficit. From very different ends of the American spectrum, the Tea Party revolution and the Occupy Wall Street movement evidence a welling restiveness.

Across the Middle East, the Arab Spring has turned into a longer season of uncertainty. Some celebrate Muammar Gaddafi’s end and call for resolution in Syria. But beyond old autocracies, the emerging concern is who will next govern, and how. With the landslide win for Islamist parties, Egypt’s December poll brings that question into sharp focus.

How has Asia coped? Growth continued for most for much of the year. Some commentators have predicted that this is the time when the region will soon catch up and then surpass the West. The reality is more complex.

Asia is not unaffected. Markets are in tumult and economic growth rates across the region have been shaved. Prospects for next year are mixed, even for those like China and India with large domestic markets, let alone the smaller economies.

Politically, there is no Asian Spring. But governments across the region deal with new expectations from citizens. In erstwhile pariah state Myanmar, the newly installed government has freed political prisoners and will allow long detained Aung San Suu Kyi to contest elections. Thailand, Malaysia and Singapore too have seen changes that make for greater participation and more complex politics.

For established Asian democracies – Indonesia, the Philippines and India – the challenge goes beyond electoral issues. Demands in this past year have grown for governance that is less corrupt and more effective. Public protests and a number of high profile prosecutions result.

Outside of some copycat demonstrations, the Occupy Wall Street movement has not shown strength across Asian cities. But the political imperative from Singapore to Bangkok and Beijing is to close the stark gap between the Haves and Have Nots. Asset bubbles in housing and inflation in basics of food and energy have been testing governments to make growth more inclusive.

With its economy still running ahead, China has loomed larger this year in the expectations of others. Yet Chinese leaders grapple with many of these same issues, and on a much larger scale. External conditions are becoming more difficult, and domestic issues too.

Measures put in place to keep up growth have distorted the market with too much easy credit. With a dip in growth, social unrest is growing. With its upcoming leadership transition, China’s rulers must do all they can to prevent an economic hard landing and shore up political legitimacy.

As the Chinese military builds up and a more assertive diplomacy is heard, however, acceptability is also an issue with near neighbours.

Global changes in this year have come quick and complex – a political, economic and social vortex. Asian states have not been immediately caught in that swirl. But they feel the pull more than many admit.

This shows up an on-going problem in the region’s relationship to the global system. Despite economic growth, Asians are currently more influenced by global trends than being able to influence what happens. As the US and Europe weaken, gaps in global governance show.

Witness the G-20′s current lack of coordination and the lack of success in the Doha trade talks. Even the acclaimed success in the year-end climate change meeting in Durban only starts off negotiations towards a later agreement and we should expect continuing differences.

The world at year-end is no better than it was at the start. Indeed, conditions – especially in the last quarter – have become increasingly difficult. Asians may make a New Year wish for the US and Europe to put their houses in order. But looking ahead, Asians must consider what they can and resolve to secure peace and prosperity for themselves and the wider global system.

The coming winter looks difficult for China. Beyond the seasonal cold and even the thick air pollution in Beijing, there are concerns about the economy, society and regional politics.

As Western markets stall, the clear priority is to keep the economy going. Chinese exports and manufacturing output have fallen and growth rates have slowed. Housing prices are in decline and, if unchecked, can ripple through the credit system.

When the crisis began at the end of 2008, Beijing pumped in a massive stimulus package and loosened credit policies. Its economy is still grappling with the consequent distortions and that formula cannot now be repeated easily and without cost.

But inflation slowed in this last quarter and, with some room to manoeuvre, the reserve ratio for banks has been lowered. This signals the intention to ease monetary policy, after a period of tightening. The Chinese will do all they can to avoid a crash.

Others should welcome that effort. It is now so integrated into the world economy that China’s struggles are no longer a domestic issue.

Yet even if disaster is avoided, the coming year will likely see slower growth. At the same time, social and political pressures grow across the country.

The local authorities are prompted to stem unrest. But how exactly to respond seems undecided. Old, hardline methods to police street demonstrations and netizens continue. Yet Beijing has legitimised other complaints – like when workers demand higher wages from Foxconn and other companies.

With preparation for their change of leadership, domestic concerns will preoccupy Chinese policymakers. Beijing must, however, also look at the regional picture.

Its leaders must mull the recent flurry of activities by the United States. The Obama administration has declared its “return” to the region and this affects a range of interests – from the South China Sea disputes to ties with Asian neighbours like Myanmar.

Fears exist that China will push back and that a new “great game” of rivalry will ensue. The recently concluded US-China dialogue held in Beijing among defence officials tried to avoid stirring things up further. But turbulence must be expected.

With US presidential elections coming, China is an easy target. Some American thinkers, like Mr Aaron Friedberg – a former official in the Bush administration – see that the US must contest China for supremacy in Asia or risk losing leadership.

How Beijing responds will be keenly watched. Its leaders cannot cave in to American criticism, given nationalist sentiment at home. But bellicose, tit-for-tat exchanges in trade or other areas will hurt both sides and can estrange other Asians.

Given anxieties over growing Chinese military strength, Beijing needs to consider what many call “soft power” – characteristics that appeal and gain acceptance so others want to follow its lead. Mr Yan Xuetong of Tsinghua University and author of Ancient Chinese Thought, Modern Chinese Power is one proponent of this view, even if he has been known for hardline views.

So far, Beijing’s soft power strategy has focused on ramping up the Chinese media overseas, with steps like state news agency Xinhua taking out advertisements at New York’s Times Square. The spread of Confucius Institutes across Asia and the world is another high-profile effort.

There are, however, mixed results. In this past year, doubts have grown that China will become a democracy, continue to be a benevolent neighbour and support the existing global system. Even as Beijing projects itself more, perceptions of a hardline, arrogant autocracy have grown.

This seems unintended and may be unfair. But perceptions need to be addressed, especially among fellow Asians. Not so long ago, China charmed fellow Asians and many others with assurance about its “peaceful rise”, mixed with economic incentives. Even if these past ideas need updating, they can be a useful foundation for further thinking about China’s image and soft power.

As many struggle, China would do well to ride things out economically and maintain its present trajectory. Yet China must do even better. In tandem with its continuing rise, Beijing must also manage perceptions so that less anxiety is triggered.

Facing a hard winter, another idea of China is now needed and soft power must be part of it. Otherwise, Beijing will find that rising to power is one thing but winning greater acceptance is even more challenging.

US return to Asia may focus on security-centred politics and win-lose economics to contain China.

The historic visit to Myanmar last week by US State Secretary Hillary Clinton climaxes a flurry of American moves in the region.

The Obama administration has proclaimed that they have returned to Asia and their active engagement is remarkable when, facing many domestic challenges, a post-crisis America might easily have turned inward.

Some may feel that an engaged America is better than an isolated one. But many Asians question the nature and intention of the American return. Signals are not all together benign.

Hosting the Asia Pacific Economic Cooperation (APEC) Summit in Hawaii and becoming the first American leader to participate in the East Asia Summit might seem traditional summitry. But controversies with China made headlines and President Obama’s Australian stopover marked establishing a military base with 2,500 marines on the Asian periphery.

Many read American return to the region as being aimed at countering Chinese influence in Asia. The veteran Australian Hugh White calls it the “Obama doctrine”. If that is the American intention, views among Asians will be divided.

Some may welcome this as Beijing has triggered sensitivities in the past year. This is not just in the South China Sea but also on the Korean Peninsula and with Japan over the Senkaku or Diaoyu islands. The Obama administration’s return to Asia is the result of a quite deliberate build-up over the last two years.

On his first 2009 trip, Obama promised to be the first ‘Pacific President’. Yet the American media accused him of being too soft in dealing with Asia. One US commentator likened his visit to Beijing to the young Kennedy being pushed around by hard-nosed Communists.

Since then, the US has reinvigorated old alliances and strengthened political and security ties with India, Indonesia and Vietnam.

Washington DC has also reenergized trade through the Trans-Pacific Partnership. This aims to integrate nine APEC economies, with Japan now keen to join. Yet the initiative has been strongly criticized by Beijing, where many perceive an intention to shut China out.

For Myanmar, the twisting path for Clinton’s visit has been paved over the past two years by Senator Jim Webb and Assistant Secretary Kurt Campbell.

Coming after elections and moves towards a more participative system, the US can help prod the new government into further opening the erstwhile pariah state. But the US interest is also seen as countering Beijing’s influence.

Adding this together, when Clinton speaks about a return to Asia, some may wonder if Washington DC expects a return to their old role of dominance.

Strategically, a return to Asia may signal a return to assertiveness, and countering China. On economic issues, a post-crisis America may well assert that Asians have been unfair in trade and push for redress.

Sentiments in the broader American politic can push that way. Look at the Senate law calling China a currency manipulator, or Republican presidential candidate Mitt Romney, who has blamed Beijing for costing the country millions of jobs.

As the US presidential campaign gathers momentum, the region and especially China may come into focus, and not necessarily in a positive way. Finger-pointing politics will be a tempting path to rally a domestic audience.

One central question about Asia’s future has been the nature of China as it grows more powerful. Obama’s moves this November now add another, just as important, question: what is the nature and intention of the American return?

Protecting American interests and asserting its priorities are given. But how the US defines and pursues those interests with China and Asia remains to be seen.

A new engagement with a win-win attitude and giving strategic assurance to the region would be positive. The potential danger is that the American return focuses on security-centered politics and win-lose economics to contain China. This would lead to problems not only for China but for the whole region.

An American engagement with Asia is important to both sides. But the terms of the engagement now matter more than ever to Asians.

Balancing different powers in a rising Asia was never going to be easy, and will now become even more challenging.

This week, United States Secretary of State Hillary Clinton makes a historic high-profile visit to Myanmar even as Asians assess a flurry of American moves in the region. The Obama administration has energetically re-engaged Asia when, facing many domestic challenges, a post-crisis America might easily have turned inwards.

An engaged America is better than an isolated one. But Asians question the nature and intention of the American return to the region. Signals are not all together benign.

Hosting the Asia-Pacific Economic Cooperation (APEC) Summit in Hawaii and becoming the first American leader to participate in the East Asia Summit might seem traditional summitry. But controversies with China made headlines and President Barack Obama’s Australian stopover marked establishing a military base with 2,500 marines on the Asian periphery.

Many – especially in Beijing – read American return to the region as being aimed at countering China.

Some welcome this as Beijing has triggered sensitivities in the past year. This is not just in the South China Sea but also on the Korean Peninsula and with Japan over the Senkaku or Diaoyu islands. The Obama administration’s return to Asia is the result of a quite deliberate build-up over the last two years.

On his first 2009 trip, Mr Obama promised to be the first “Pacific President”. Yet the American media accused him of being too soft in dealing with Asia. One US commentator likened his visit to Beijing to the young John F Kennedy being pushed around by hard-nosed communists.

Since then, the US has reinvigorated old alliances and strengthened political and security ties with India, Indonesia and Vietnam. Washington has also re-energised trade through the Trans-Pacific Partnership. This aims to integrate nine APEC economies, with Japan now keen to join. Yet the initiative has been strongly criticised by Beijing, where many perceive an intention to shut China out.

For Myanmar, the twisting path for Mrs Clinton’s visit has been paved over the past two years by Senator Jim Webb and Assistant Secretary of State Kurt Campbell. Coming after elections and moves towards a more participative system, the US can help prod the new government into further opening the erstwhile pariah state. But the US interest is also seen as countering Beijing’s influence.

Notably, one step recently taken by the Myanmar government was to abruptly halt the Chinese-led construction of a massive dam.

Adding this together, when Mrs Clinton speaks about a return to Asia, some may wonder if Washington expects a return to their old role of dominance. Strategically, a return to Asia may signal a return to assertiveness and countering China. On economic issues, a post-crisis America may well assert that Asians have been unfair in trade and push for redress.

Sentiments in the broader American politic can push that way. Look at the Senate law calling China a currency manipulator. Or Republican presidential candidate Mitt Romney, who has blamed Beijing for costing the country millions of jobs.

As the US presidential campaign gathers momentum, the region and especially China may come into focus and not necessarily in a positive way. Finger-pointing politics will be a tempting path to rally a domestic audience.

One central question about Asia’s future has been the nature of China as it grows more powerful. To this question, Mr Obama’s moves this month now add another, just as important: What is the nature and intention of the American return?

Protecting American interests and asserting its priorities are givens. But how the US defines and pursues those interests with China and Asia remains to be seen.

A new engagement with a win-win attitude and giving strategic assurance to the region would be positive. The potential danger is that the American return focuses on security-centred politics and win-lose economics to contain China.

An American engagement with Asia is important to both sides. But the terms of the engagement now matter more than ever to Asians. Balancing the region’s different powers was never going to be easy and will now become even more challenging.

Leaders from Asia will soon be hosted by United States President Barack Obama for the Asia-Pacific Economic Cooperation (APEC) Summit in Hawaii. The gathering comes on the heels of the G-20 Cannes meeting, preoccupied with the euro zone crisis. The East Asia Summit will soon follow, convened by the Association of South-East Asian Nations and including, for the first time, Russia and the US.

What can this season of international summits do about the looming global downturn? Can Asia and the US, sans Europeans, cooperate to tackle worsening economic conditions? Can Asia find ways to continue growth?

Expect no cure-alls. Policy options have narrowed since the first coordinated efforts at end-2008 to pump in money and loosen credit. Those policies have run their course, with mixed results and increased political backwash.

In America, joblessness and inequalities run high and the Occupy Wall Street phenomenon shows the restive mood. Asia suffers problems of overheating with inflation and mounting bad debts from loose credit. While relatively well, the region will be impacted by the European crisis and poor American prospects.

At the APEC Summit, a centrepiece will be the Trans-Pacific Partnership (TPP). This aims to reinvigorate trade and economic cooperation and, while only nine countries are involved, American participation has renewed energy and ambition. Japan wants to join future TPP negotiations and the TPP aims to include most other economies.

Not all about the TPP has, however, been positive. Some parties have resisted American initiatives to integrate more deeply and align regulations. Others outside the negotiations, especially China, have been critical of the effort.

A full agreement will not be ready. Instead, leaders are expected to sign off on a more limited declaration or framework text, with further negotiations to come. Nevertheless, the TPP can be counted as an achievement, buttressing Mr Obama’s promise to be a “Pacific President”.

Yet beyond Hawaii, the future focus for American leadership in Asia is uncertain. Come early next year, Mr Obama faces the long and quite uncertain election trail. Attention will necessarily shift, given erosions in his approval ratings. This APEC and the following East Asia Summit may prove something of a high point in Mr Obama’s efforts to engage Asia.

American domestic politics is raising issues that run counter to positive engagement. Free trade and closer ties with Asia will be an increasingly hard agenda to push with so many still jobless at home. The recent Senate Bill naming China as a currency manipulator shows up this sentiment.

Although the Bill is unlikely to pass, the accusations have spread to a number of presidential candidates. Leading Republican contender Mitt Romney has, for instance, called for the US to clamp down on China, blaming the mainland for millions of lost jobs.

Positions on Asia and especially China are intertwining with domestic, electoral politics. Prepare for a bumpy ride.

This is especially as Beijing seems unlikely to smooth things over. There is a growing confidence and assertiveness among the Chinese people and some of the political elite. Beijing seems keen instead on finding its own place, driving the Asian economy, while asserting first rights in disputes like the South China Sea.

Combined with an impending change in leadership, while moderates talk about working with the US, few would gain from ceding ground to Washington. Some might indeed gamble on sounding hawkish in the name of nationalism.

The US can no longer lead on its own and neither can China. Yet prospects of a joint US-China leadership – once proposed as a G-2 – looks like hopeless idealism. With leadership contests in both capitals, things may in fact soon get worse.

Other Asians thus face something of a tension at the coming summits. They gravitate to China as just about the only remaining hope for continuing economic growth, while looking quite anxiously to the US for strategic assurance.

Leaders may make grand statements but they can neither address the questions about global problems nor settle on the leadership to address such problems.

Diplomacy will dictate that the American and Chinese leaders will be photographed, smiling with their counterparts across the region, and shaking hands. They would do well to do so while they can. Coming events will soon test their smiles and handshakes quite severely.

Fears about Europe have rippled through the global economy and Asian markets are not immune. At times, assurances are given and the euro rallies but the euro zone crisis is far from over. The rescue of Greece is just one issue. Far larger greater risks are posed from spillovers to other economies and European banks.

United States Treasury Secretary Tim Geithner has warned against catastrophic risks and called for stronger measures. European finance ministers have met and leaders pledge to present how they will deal with their crisis to the G-20 by early next month.

Will this be effective? Given the possible global impacts, what should Asians expect? What, if anything, can the Asians do?

Some Europeans hope that Asians would mobilise their considerable reserves to buoy them up. When Chinese Premier Wen Jiabao toured Europe last month, offers were plentiful to sell government bonds and open up to investments. In the private sector, European banks need capital and are touring Asia to attract wealthy individuals and cash-rich companies.

The Asian response has been less than forthcoming. Mr Wen believes European “countries must first put their own house in order” and not rely on China.

Some other Asian voices flatly refuse to help. Irked by European attitudes of superiority, they see the crisis as confirming Europe’s irrelevance. They contrast the sharp reforms administered in the Asian crisis of 1997 to 1998 and wonder whether Europe’s heavy representation on the IMF excuses special treatment.

Yet, Asia should not sit on the sidelines, grumble about past mistreatment and feel somewhat gleeful about the turn in circumstances. Even if it is an understandable sentiment for some, that would not be the best policy.

Despite talk of euro-irrelevance, a considerable interdependence remains. As the crisis has deepened, Asian growth expectations have been trimmed. While China and India have their own domestic dynamics, developed Western markets remain a significant factor for Asian exports.

Since the middle of this year, exports from South Korea, India and Thailand have slowed. So have European investment flows and lending from banks. Europe continues to matter.

Asia probably has enough momentum and regional drivers to ride out a slow growth period. But a prolonged and deeper recession in the West holds substantial risks. Falling exports to the West could force firms in Asia to cut jobs and capital expenditure. This could then combine negatively with falling asset prices and capital outflows.

Some predict a slow-motion political crisis and a decade of downturn. A European problem that big and that protracted cannot but affect Asia.

Yet, while such possibilities loom, Germany and France have sent positive signals. The European project faced crisis before and emerged reinforced. European leaders are expected to do enough to avoid sure disaster, even if not to immediately and decisively solve the problems. Asians should avoid being overly pessimistic.

There are real limits to what Asians can do. Their priorities continue to be domestic and regional. Beijing cannot provide a safety net. After the huge stimulus effort at end 2008 and a flood of credit, China’s banking system needs reinforcement.

But China and other Asians need be involved. One way is to lend their voice to encourage effective and timely European action. Active Asian participation in the relevant international fora such as the IMF and G-20 is needed. There have been long-standing calls to better reflect Asia’s growing part in the world economy. Now is the time not only to claim a seat but to show what Asians can bring to the table.

What of Asia’s own regionalism? Many Europeans used to parade the superiority of their system and even proposed an Asian common currency a la the euro. The crisis will increase scepticism about European approaches.

But this should not put Asian regionalism on a pedestal. Asia must find its own ways to provide safeguards against crisis and increase regional cooperation. In that search, European experiences will still be useful to examine, even if not to imitate blindly.

Even if Asians will not emulate the euro zone, Asians should expect Europe, with some confidence, to do what is needed. Europeans have prided themselves as responsible stakeholders in the global system and their project for union, while currently under stress, has gone further than anyone else. Writing off Europe is not in Asia’s interest.

Although part of a trend toward more political openness in the region, developments in Myanmar and other Asian countries have been driven mostly by governments or through elections, rather than a replay of the Arab Spring.

Recent changes in Myanmar appear to have been driven by the government, rather than any popular sentiment, as could be said about Singapore, Malaysia and Thailand, says Simon Tay, chairman of the Singapore Institute of International Affairs.

“Ground up policies do matter, democracies which we called autocratic or elite before are having to recognise the ground elements much more,” he said. “The question is whether people outside those elites can use those sentiments against the established elites in all three countries.”

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Singapore’s dependence on foreign labour is currently the highest among East Asian economies.

This came through at a two-hour discussion on Tuesday among employers, union leaders and economic experts at the Singapore Institute of International Affairs (SIIA).

They met to discuss issues regarding Singapore’s foreign labour policy as part of an ongoing research project by Senior Research Fellow Dr Chia Siow Yue.

The project is funded by the International Development Research Centre of Canada.

The discussion noted that increased foreign labour in Singapore has resulted in growing discontent among the resident labour force, which has voiced concerns over the large number of foreign workers entering the job market as well as the overcrowding of transport and housing services.

But those who attended also emphasised the need to recognise the importance of having foreign workers in a resource-scarce economy.

“Having agreed that foreign labour is important for Singapore, it is now about understanding how it can be managed to ensure the needs of resident Singaporeans are not neglected while making certain that foreign workers are not exploited either,” said chairman of the SIIA, Professor Simon Tay.

The meeting concluded with parties discussing ways to increase labour productivity so that foreign labour dependency can be reduced, and relations between resident and non-resident workforce can be improved.

A 2009 study showed that the highest levels of foreign worker dependency was in the construction industry, at 71 per cent, followed by the manufacturing industry, at 48 per cent.

Controversy surrounds the near-US$6-billion (S$7.85 billion) deal signed recently for the United States to help Taiwan upgrade its air force.

Beijing has protested strongly and reportedly asked Washington to reconsider or else it will downgrade military ties. American arms sales to Taiwan have always been more than a commercial decision. But the current situation may signal more.

Amid talk about American decline, there are signs of Chinese assertion. The dynamics around the Taiwan arms deal may have implications for others in Asia.

Many economies hub around China for growth, and yet wonder whether having closer ties with Beijing helps or hurts. Under current President Ma Ying-jeou, Taiwan has courted better cross-strait relations and entered into an Economic Cooperation Framework Agreement (ECFA). This caps the long-standing reality that so many Taiwanese companies do business in China. Mr Ma’s cross-straits stance contrasts to the preceding Chen Shui-bian administration, which the mainland accused of seeking independence.

If leaders in Beijing seriously extend themselves to stop the sale or step back from the ECFA, observers would take the lesson that there is little gain from being cooperative. In Taiwan, Mr Ma’s standing could be adversely affected. More assertive voices might gain ground in the run up to presidential election, due next year.

Mr Ma’s chief opponent, the Democratic Progressive Party’s Ms Tsai Ing-wen, has shown moderation and is gaining ground. But the mainland still regards her with some suspicion and seems to favour Mr Ma.

Beijing has sent increasingly explicit signals that if the next President in Taipei that does not embrace the 1992 Consensus to affirm “one China”, business ties will suffer.

They should calibrate protests on the arms sales and contain strident nationalists. Otherwise, they risk a replay of 1996, when they lobbed missiles across the straits just before the island’s presidential election. This signalled Beijing’s position against incumbent Lee Teng-hui but that message backfired, so Mr Lee won the election with a higher vote than previously.

In that same crisis, the Americans were roused to send naval ships into the Taiwan Straits to signal their strength and commitment. This is another issue to look for amidst this arms controversy: To see the balance between Beijing and Washington.

In this past year, many in the region have strengthened security ties with the United States; not only long-standing allies like Japan, South Korea and the Philippines, but also newer friends like India and Vietnam. This is fed by controversies about Chinese assertiveness over islets in the South China Sea and the Diaoyu islands (Senkakus to the Japanese), and Beijing’s support for a provocative North Korea.

Yet even as Asians have turned to the US for strategic assurance, there have been concerns about American capacity and will to remain in the region. The Obama administration has made the right moves. But the continuing economic weakness and huge public debt cause concern. To some Americans, their military presence in Asia will seem like an expensive luxury that should be cut back. As America enters its presidential election cycle, some may wonder why and how long more their country should expend money to be so strongly present in Asia, while others spoil for a fight with China.

It is, therefore, not just the Taiwanese who should watch how Washington responds. Other friends across Asia will take lessons about the value and dependability of ties with the US in dealing with China.

Notably, the current deal is already watered down, agreeing only to refurbish Taiwan’s existing F-16s, rather than allowing them to buy new planes. Moreover, even after the refurbishment, most analysts agree the mainland will retain the clear military advantage. Having made such compromises, the Obama administration cannot afford to blink on this, without eroding credibility.

On their side, Beijing should circumscribe their responses within diplomatic norms, rather than getting too shrill or worse, ushering in retaliatory actions. Beijing should be confident enough and also consider not if they like the deal, but whether they can live with it.

Looking to America for strategic assurance while deepening economic engagements with China is a stance that has inherent tensions and contradictions. Yet that is the current reality, not only for Taiwan but for just about all in the region. Few Asians, if any, are ready for this to change abruptly.