The Digital Future of Asia – Control or no Control – the Power Game and what you did not know about it

When Xi Jinping strode out in the Great Wall of the People five years ago as China’s new leader, his tight smile barely hid the atmosphere of smoldering crisis.

The Communist Party elite had been battered by infighting and scandals involving power grabs, bribery and even murder. Military commanders and state security chieftains-the guardians of one-party-rule had grown grossly corrupt. Critics openly accused Mr. Xi’s predecessor, Hu Jinato, of dithering as popular ire spread.

On Wednesday, 18th October 2017 Mr. Xi opened another Communist Party congress , this time as the nation’s most powerful leader in decades, all but certain to receive a second five-year team. And after spending his first term tightening control on society, he is expected to enshrine his authoritarian vision for revitalizing the party and perhaps position himself as indispensable to its survival.

So when President Xi spoke at the Chinese Communist party congress, which convenes only once every five years, it was arguably his first major public domestic policy speech since assuming power in November 2012. He made undoubtly the most of it, surprising his congress audience of about 2,300 delegates by speaking for astonishing 3 ½ hours.

Mr. Xi declared that China had “entered a new ear” as he addressed the congress and that he hopes will cement his status as a transformative leader alongside Deng Xiaoping and Mao Zedong.

“The Chinese nation now stands tall and firm in the east,” Mr. Xi said, marking the formal start of his second five-year term as the party leader.

Since taking power in 1949, the party has reinvented itself at critical moments to survive after Mao Zedong’s death and following the Tiananmen massacre, for example Mr. Xi 64, contends that it faces one of those moments now, even as it moves closer to surpassing its Soviet brethren as the longest ruling Communist Party in history.

While Mao promoted class struggle and Deng Xiaoping embraced pragmatic capitalism, Mr. Xi’s vision of the party’s rule centers on restoring China to greatness what he calls the ‘China Dream’ and it draws on both the fervent dedication of Mao’s era and the glories of China’s traditional culture that Mao tried to destroy.

“Under Xi Jinping, the Chinese Communist Party is headed in the direction of strongman rule,” said David M. Lampton, the director of China studies at the John Hopkins school of Advanced International Studies and a longtime analyst of Chinese leaders. “The 19th Party Congress is more likely to look like a coronation than an institutionalized transition to a leader’s second term.”

Yet despite the triumphant stagecraft, Mr. Xi remains driven by a fear that communist rule could collapse in China as it did in the Soviet Union unless the party maintains firm control over an increasingly wealthy and diverse society that now has over a third of the world’s billionaires.

To do this, Mr. Xi has tightened this control over possible competing centers of power, including those billionaires and their business, the internet the military and other arms of state power, as well as over the 89 million members of the party itself.

What Mr. Xi wants to build now, Professor Pei added, is a “disciplinary state”. He continued: “It disciplines everybody. It disciplines the party; it disciplines Chinese Society. And to enforce discipline, you have to have a very powerful security state.”

More than any other recent Chinese leader, Mr. Xi has cast himself as the salvation of both party and nation. Mr. Xi told the congress that his government had “solved many longstanding problems that had remained unresolved, and achieved many great feats that had been left undone.”

As the “princeling” son of a revolutionary, Mr. Xi exudes a sense of inherited responsibility for preserving the party. Since he took office, Mr. Xi has removed officials for corruption and disloyalty more senior than previous leaders dared take on, and overseen investigations of more than 200 officials at the vice- minister level or even higher.

“Now he looks like he’s got all the pieces in place and will start whatever the positive agenda of the Xi Jinping era is.”

The major decision to be unveiled this week was most likely made in advance by a circle of senior party leaders.

“The intense interest in this congress is how far Xi can and will go in reshaping the norms of Chinese politics to get his way”, Professor Fewsmith said.

Me personally, I do not expect I do not expect dramatic changes after the congress. There has been anyways limited momentum in key reforms that were proposed in 2013, in major part because of resistance by vested interests.

But we also have to note that negotiations on everything from the new leadership line-up to constitutional amendments and a possible revised reform blueprint are likely to continue. Despite all the meticulous preparations, many things only get decided at the last minute as no one can predict how the situation with North Korea is going to continue and is going to end.

What you most probably did not know about North Korea:

When North Korean hackers tried to steal 1Billion US-Dollar from the Federal Reserve Bank of New York last year, only a spelling error stopped them. They were digitally looting an account of the Bangladesh Central Bank when bankers grew suspicious about a withdrawal request that had misspelled “foundation” as “fandation”. Even so, Kim Jong-un’s minions still got away with 81 Million US-Dollar in the heist.

Then only sheer luck enabled a 22-year-old British hacker to defuse the biggest North Korean cyber attack to date, a ransom ware attack last May that failed to generate much cash but brought down hundreds of thousands of computers across dozens of countries and briefly crippled Britain’s National Health Service.

Their track record is mixed, but North Korea’s army of more than 6,000 hackers is undeniably persistent and undeniably improving, according to American and British security officials who have traced these attacks and other back to the North of Korea.

Amid all the attention on Pyongyang’s progress in developing a nuclear weapon capable of striking the continental United States, the North Koreans have also quietly developed a cyber operations program that is stealing hundreds of millions of dollars proving capable of unleashing global havoc.

Unlike it weapons tests, which have led to drastic international sanctions; the North’s cyber attacks have faced almost no pushback or punishment, even as the regime is already using its hacking capabilities for actual attacks against its adversaries so far in the West.

And just as Western analysts once scoffed at the potential of the North’s nuclear program, so did experts dismiss its potential cyber warfare only to now acknowledge that hacking is an almost perfect weapon for a Pyongyang that is isolated and has very little to lose.

The country’s primitive infrastructure is far less vulnerable to retaliatory cyber attacks, and North Korean hackers operate outside the country, anyway. Sanctions offer no useful response, since a rafts of sanctions are already imposed. On top of that Mr. Kim’s advisers are betting that no one will respond to a cyber attack with a military attack, for fear of a catastrophic escalation between North and South Korea.

Mr. Inglis, speaking at the Cambridge Cyber Summit this month added: “You could argue that they have one of the most successful cyber programs on the planet, not because it’s technically sophisticated, but because it has achieved all of their aims at very low cost.”

A South Korean lawmaker last week revealed that the North had successfully broken into the South’s military networks to steal war plans, including for the “decapitation” of the North Korean leadership in the opening hours of a new Korean war.

There is evidence Pyongyang has planted so-called digital sleeper cells in the South’s critical infrastructure and its Defense Ministry that could be activated to paralyze power supplies and military command-and-control networks.

But the North is not motivated solely by politics: Its most famous cyber attack came in 2014 against Sony Pictures Entertainment, in a largely successful effort to block the release of a movie that satirized Mr. Kim.

What has not been disclosed, until now, is that North Korea had also hacked into a British television network a few weeks earlier to stop it from broadcasting a drama about a nuclear scientist kidnapped in Pyongyang. Intelligence officials estimate that North Korea reaps hundreds of millions of dollars a year from ransom ware, digital bank heists, online video game cracking and, more recently, hacking of South Korean Bitcoin exchanges.

The question now is: “How can such as isolated, backward country have this capability of computer science? Well, how can such as isolated, backward country have this nuclear ability?

Kim Jong-il, the father of the current dictator and the initiator of North Korea’s cyber warfare operations, was a movie lover who became an internet enthusiast, a luxury reserved for the country’s elite. When he passed away in 2011, the country was estimated to have 1.024 IP addresses, fewer than on most New York City blocks.

The elder Mr. Kim, like the Chinese, initially saw the internet as a threat to his regimes ironclad control over information. But his attitude began to change in the early 1990s, after a group of North Korean computer scientist returned from travel abroad proposing to use the web to spy on and attack enemies like the United States and South Korea, according to defectors.

North Korea began identifying promising students at an early age for special training, sending many to China’s top computer science programs. In the late 1990s, the Federal Bureau of Investigation’s counterintelligence division noticed that North Korea assigned to work at the United Nations was also quietly enrolling in university computer programming courses in New York.

The North’s cyber warfare unit gained priority after the 2003 invasion of Iraq by the United States. After watching the American “shock and awe” campaign on CNN, Kim Jong-il issued a warning to his military: “If warfare was about bullets and oil until now”, he told top commanders, according to a prominent defector, Kim Heung-kwang, “warfare in the 21st century is about information.”

A National Intelligence Estimate in 2008 wrote off the North’s hacking prowess, much as it underestimated its long-range missile program. It would be years before it could mount a meaningful threat, it claimed. But the regime was building that threat.

When Kim Jong-un succeeded his father, in 2011, he expanded the cyber attack mission beyond serving as just a weapon of war, focusing also on theft, harassment and political-score settling.

“Cyber warfare, along with nuclear weapons and missiles, is an ‘all-purpose sword’ that guarantees our military’s capability to strike relentlessly”, Mr. Kim reportedly declared, according to the testimony of a South Korean intelligence chief.

And the array of United Nations sanctions against Pyongyang only incentivized Mr. Kim’s embrace. “We’ve already sanctioning anything and everything we can”, said Robert P. Silvers, assistant secretary for cyber policy at the Department of Homeland Security during the Obama administration. “They’re already the most isolated nation in the world.”

By 2012, government officials and private researchers confirmed that North Korea had dispersed its hacking teams abroad, relying principally on China’s internet infrastructure. This allowed the North to exploit largely non-secure internet connections and maintain a degree of plausible deniability.

A recent analysis by the cyber security firm Recorded Future found heavy North Korean internet activity in India, Indonesia, Kenya, Malaysia, Mozambique Nepal and New Zealand. The internet activities in these countries are currently exploding, especially in India and Indonesia where global firms like Alibaba bet on Indonesia as the next start-up frontier, which makes the usage of the internet and the control of the internet much more challenging. In some cases, like that of New Zealand, North Korean hackers were simply routing their attacks through the country’s computers from abroad. In others, researchers believe they are now physically stationed in countries like India, where nearly one-fifth of Pyongyang’s cyber attacks now originate.

Intelligence agencies are now trying to track the North Korean hackers in these countries the way they have previously tracked terrorist sleeper cells or nuclear proliferators: looking for their favorite hotels, lurking in online forums they may inhabit, attempting to feed them bad computer code and counter-attacking their own servers.

We are observing these markets as well; especially Indonesia has seen a surge of cash into its technology sector over the past two years, helping support dozens of home-grown start-ups ranging from ride hailing apps to e-commerce firms. And with a population in Indonesia of more than 250 million, a swelling middle class and growing availability of cheap mobile devices, firms from across the world are piling in. We even believe that Indonesia is poised for a huge leap forward for its digital economy, following China’s growth and becoming the leading tech destination in the South-East Asia region.

Last year 631 Million US-Dollar in disclosed venture capital was ploughed into the country, according to research firm CB Insights, up from 31 Million US-Dollar in 2015. But that figure has already been shattered in 2017, with 3 Billion US-Dollar worth of deals clinched as of September 2017.

Internet use is growing faster in South-East Asia than any other region in the world, with 124,000 users coming online every day over the next five years, according to a 2016 report from Google and Singapore’s Temasek Holdings.

By 2020 an estimated 480 Million people are expected to be connected to the internet, up from 260 Million in the region last year. Indonesia’s mobile-first market will comprise more than half of Southeast Asia’s e-commerce market by 2025, with an estimated value of 46 Billion USD, the Google report said.

From our experiences we can confirm, that when you do start-up business in Malaysia, Singapore, Thailand and Indonesia, the cost, the effort and time that you spend is almost even. But when you go to Indonesia growth is unlimited the market is so big for early-stage investments.

Indonesian President Joko Widodo has been a vocal supporter of digital innovation, most notably in his plan to create 1,000 local tech start-ups worth 10 Billion US-Dollar by 2020. But the sector in our opinion-apart from the current tension in regards to North Korea still faces a number of challenges which we don’t face in the GCC.

The South-East Asian market still has a limited pool of engineering talent to draw from, low rates of internet penetration outside densely populated Java, bureaucratic delays and poor quality infrastructure are all obstacle to growth in our opinion.

For e-commerce companies, the large number of “unbanked” Indonesians limits the scope of online transactions, and logistics problems make it hard to more goods.

While young entrepreneurs and small business are flocking to co-working spaces springing up in major centers, it is a decidedly different scene in most parts of the country.

Therefore, we will most probably enter this market not before 2020 to 2021 as we believe that this time is needed to convert the challenges into opportunities. We also have to note, that the region is far from homogenous- different languages, religions and cultures- but what the countries have definitely in common is an “exploding middle class”, comparable to China a decade ago.