Traders stand near a screen showing the Indonesia Stock Exchange Composite Index during the first day of trading for 2012 in Jakarta January 2, 2012. Courtesy Reuters/Stringer.

It’s been a fascinating year for Asia. The region has continued to consolidate its role as the essential player driving global recovery. Developing Asia, including China, India, and the major ASEAN economies, maintained robust growth, in contrast to the advanced economies’ collective anemic growth over the same period.

But 2012 promises to be more fraught as domestic politics take command amid new challenges to growth.

Here are twelve trends I see coming for Asia in 2012—risks, opportunities, and emerging patterns that will shape Asia during the next twelve months, and beyond.

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Women use sparklers to draw "2012" for photographers as they celebrate New Years Eve in Manila December 31, 2011 (Romeo Ranoco/Courtesy Reuters).

The year 2011 saw some of the biggest political developments in Southeast Asia in decades. Burma finally seemed poised for real change, while Thailand continued to move closer to the brink of self-immolation, as political in-fighting worsened. The United States, China, and ASEAN nations continued to raise the stakes in the South China Sea, to a point where, now, it seems unlikely anyone can back off their claims and truly sit down at the table to negotiate some kind of agreement. Singapore had its most competitive election in generations, while in Malaysia massive street protests clearly have rattled the government. Even smaller states faced political turmoil: Papua New Guinea went for weeks with two prime ministers and the potential for civil strife, before the situation was resolved.

What, then, should we expect for an encore? Here are several trends to watch:

1. China will bring back the charm. Over the past two years, Beijing has cost itself much of the gains it made in Southeast Asia in the late 1990s and early 2000s, when it appeared to be a good neighbor, trading partner, and investor. Through its belligerent approach to the South China Sea and, to some extent, the Mekong River, Beijing has scared many Southeast Asian nations enough that they have welcomed back a greater role for the United States in the region, even though their populations have not exactly become pro-American. Read more »

Commuters on a suburban train during the morning rush hour in Mumbai.Danish Siddiqui/Courtesy Reuters.

My latest column is out in India’s financial daily, the Business Standard. I used this month’s column to talk a bit about structural impediments hindering U.S. investment in India. These challenges will grow if, as many economists suspect, India’s growth continues to slow from its restored post-crisis clip of 8 to 9 percent a year to something more on the order of 7 to 7.5 percent. And in that context, it’s worth noting that Indian stocks have just completed their worst quarter since 2008. And of course food price inflation remains as stubborn as ever.

Here’s my argument, which reflects in part a perspective from my new perch in Chicago rather than Washington, DC:

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Founder of WikiLeaks Julian Assange smiles as he arrives for his extradition hearing at Belmarsh Magistrates' Court in east London (Toby Melville/Courtesy Reuters).

The recent releases of new batches of Wikileaks cables, many of which reveal the names of protected sources for American diplomats, has roiled diplomatic relations nearly everywhere in the world, and certainly made potential informants more scared of talking to U.S. diplomats. But the cache of cables available about Southeast Asia is among the largest, if not the largest, of any embassy. And recent weeks have seen the release of cables with major news stories, including:

• A cable interviewing Singaporean Straits Times editors and reporters who claim that the government applies significant pressure on them to take a rosy view of its policies. Some of the finest Straits Times’ reporters, frustrated by what they perceive as government pressure, try to remain in overseas bureaus, where they are much freer (and put out fine work) or simply leave the Straits Times entirely.

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Hutomo "Tommy" Mandala Putra, the son of former Indonesian president Suharto, arrives at the Attorney General's office in Jakarta August 16, 2007. (Dadang Tri/Courtesy Reuters)

Recent articles that Hutomo Mandala Putra, or “Tommy” Suharto, is gearing up to reenter Indonesian politics, might on the face seem shocking. After all, Tommy’s father oversaw numerous brutal campaigns of repression and Tommy himself served a long sentence in jail for allegedly masterminding the murder of a Supreme Court judge. But Tommy seems to have understood the zeitgeist. In a poll released several months ago, residents of Indonesia, the supposed democratic success story of the 2000s, said, by a margin of two to one, that conditions in the county were better during Suharto’s time than under the government of democratically elected Yudhoyono. In significant part, this frustration is due to the continued challenge of graft in Indonesia, as well as to economic growth that, though strong, has not been well distributed. Read more »

A worker stands inside the shell of a wind turbine tower in the assembly workshop of the Guodian United Power Technology Company in Baoding, China. Courtesy Reuters/David Gray.

My latest “DC Diary” column in India’s financial daily, the Business Standard, focuses on Asia’s new geography of manufacturing:

China has unsettled its neighbors with naval displays and diplomatic spats. But could erstwhile Asian strategic rivals end up as big winners from China’s economic success?

In one sense, at least, Asian economies are already winning from Chinese growth: slack global demand has meant that China increasingly powers the growth of nearly every major economy in Asia.

But the question increasingly matters in another sense, as well: Chinese leaders are committed to rebalancing at least some elements of their country’s economy. And while that, in time, will mean a more competitive and powerful China, it will also create new opportunities for those countries in Asia that get manufacturing and investment policies right.

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Indonesian President Susilo Bambang Yudhoyono attends a session at the World Economic Forum (WEF) in Davos January 28, 2011. (Vincent Kessler/Courtesy Reuters)

Along with a group of U.S. editors  taking part in a trip to Indonesia, CFR.org senior staff writer Jayshree Bajoria interviewed Indonesian President Susilo Bambang Yudhoyono. As I noted in a recent post, despite pushing significant reforms and overseeing strong economic growth, Yudhoyono finds his popularity outstripped by that of the former dictator Suharto, largely because the Indonesian public is simply realizing that democratization can be painful and messy. In the interview, SBY reflects on these challenges, and offers his insights about the pain of reforms.

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Hutomo "Tommy" Mandala Putra, the son of former Indonesian president Suharto, arrives at the Attorney General's office in Jakarta August 16, 2007. (Dadang Tri/Courtesy Reuters)

As Asia Sentinel notes today, longtime Indonesian dictator Suharto’s son, “Tommy,” recently won an absurd libel verdict against the magazine of national airline Garuda. In the magazine, an article called Tommy a convicted murderer–a true charge, given that he was convicted nine years ago of ordering the killing of a Supreme Court justice. Nonetheless, the court ordered Garuda magazine to run a full-page apology to Tommy for having allegedly besmirched his reputation.

The Tommy Suharto ruling is one of several signs that the Suharto family still wields enormous power in the country, reflected by the court’s obvious fear of Tommy. The family and its allies still allegedly control enormous sums of wealth, and many Suharto allies are positioning themselves for powerful roles in the next presidential administration.

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