Domestic Political Structures and Regional Economic Cooperation 9789814414234

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ASEAN Political Studies

DOMESTIC POLIDCAL STRUCilJRES AND REGIONAL ECONOMIC CO-OPERATION

The Institute of Southeast Asian Studies was established as an autonomous organization in May 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the multi-faceted problems of stability and security, economic development, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer. The ASEAN Economic Research Unit (AERU) is an integral pati of the Institute, coming under the overall supervision of the Director who is also the Chairman of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political developments in ASEAN. The day-to-day operations of the Unit are the responsibility of the Co-ordinator. A Regional Advisory Committee, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit.

DOMESTIC POLIDCAL STRUCTURES AND REGIONAL ECONOMIC CO-OPERATION

Harold Crouch

ASEAN Economic Research Unit INSTITUTE OF SOUTHEAST ASIAN STUDIES 1984

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the Institute of Southeast Asian Studies.

© 1984 Institute of Southeast Asian Studies ISBN 9971-902-80-X The responsibility for facts and opuuons expressed in this publication rests exclusive~v with the author and his intl_!rpretations do not necessari(v ,·,:flee! the l'inrs or !he polity of the Institute or its supporters.

Contents

Foreword

vii

Preface

ix

1. INTRODUCTION 2. SINGAPORE

10

3. MALAYSIA

24

4. THE PHILIPPINES

39

5. THAILAND

60

6. INDONESIA

75

7. IMPLICATIONS FOR REGIONAL ECONOMIC CO-OPERATION

90 102

About the Author

v

Foreword

In 1981, a research project was launched by a group of political scientists, under the auspices of the Asean Economic Research Unit of the Institute of Southeast Asian Studies, to complement the work of economists in their investigation of the problems and obstacles that stand in the way of economic co-operation in A SEAN. It has been widely recognized that whilst ASEAN has been established since 1967 and received fresh impetus as a regional organization after 1975, very modest progress has been achieved in the area of economic co-operation, although this is one of the primary objectives laid down in the ASEAN Declaration. A team of economists therefore set the task for themselves to focus on specific aspects of economic co-operation in ASEAN, such as industry and trade, investments and finance, commodities and food and energy, to investigate in depth the nature of the problems and obstacles, and to discover possible areas of breakthrough in the process of economic co-operation in an effort to understand the dynamics of economic regionalism. It soon became evident that a similar enquiry directed at the political dimensions of regional economic co-operation was necessary to arrive at a comprehensive understanding of the problem. The Konrad Adenauer Foundation very generously provided the enabling funds for such a study. Thus, nine political scientists came together in two separate workshops in 1981 and 1982 in Singapore to examine the political factors affecting ASEAN economic co-operation. The results of their research efforts are seen in the six monographs in this series entitled ASEAN Political Studies. The monographs examine the institutional factors, both domestic and regional, the bilateral relations, and the decision-making processes which impinge on regional economic co-operation. Hopefully, the monographs listed below will each in their own way throw light on the political dimensions of regional economic co-operation:

1. Domestic Political Structures and Regional Economic Co-operation vii

Harold Crouch

2. Impediments to Regionalism in Southeast Asia: Bilateral Constraints among ASEAN Member States Hans H. lndorf 3. The Institutional Structure of ASEAN: Evolution and Reform Chin Kin Wah 4. Decison-making in an ASEAN Complementation Scheme: The Automotive Industry Seah Chee Meow and Estrella Solidum 5. ASEAN Negotiations: Two Insights Pushpa Thambipillai and J. Saravanamuttu 6. The World of ASEAN Decision-makers: A Study of Bureaucratic Elite Perceptions Zakaria Haji Ahmad and Withaya Sucharithianarugse These studies were completed by June 1983 and do not take into account the entry of Brunei as the sixth member of ASEAN in February 1984. Chan Heng Chee Project Co-ordinator

viii

Preface

This study is concerned with how the domestic political structures of the ASEAN states might affect regional economic co-operation. An attempt is made to compare the different political capacities of the ASEAN states to carry out policies opposed by particular vested interests and to examine possible implications for regional economic co-operation. A comparative study of this sort inevitably lacks proper balance because it is in the nature of things that the author cannot have equal knowledge and experience of the states that he is discussing. In this case, the author is resident in Malaysia and had earlier spent several years in Indonesia, but his direct experience of the other three states is more limited. During the course of this study he was able to spend a month in Indonesia, three weeks in the Philippines and a week in Thailand, while several brief visits were made to Singapore. Much of the discussion, therefore, relies heavily on secondary sources and the Far Eastern Economic Review. The author wishes to express his thanks to the ASEAN Economic Research Unit of the Institute of Southeast Asian Studies for the support given to this project.

H.C.

July 1983 Bangi, Malaysia.

ix

1 Introduction

The purpose of this study is to examine how the contrasting domestic political structures of the countries of the Association of Southeast Asian Nations (ASEAN) might affect the prospects of regional economic cooperation and integration. It is often said that certain governments lack the "political will" needed to implement policies designed to enhance regional co-operation and integration. In this study, an attempt will be made to understand why some governments have more political will-power than others. It will be suggested that the political and administrative capacities of the ASEAN governments are very different from one another and that some are much more capable than others of implementing policies intended to bring about far-reaching social and economic change. Governments with a "high" political and administrative capacity could be expected to be more able to pursue programmes in the interests of regional co-operation which involve major social and economic readjustments, while governments with a "low" capacity are less likely to embark on such programmes. The capacity of the government to implement effectively new policies which tend to disrupt established social and economic arrangements is, of course, only one, and not necessarily the most important, factor which affects regional economic co-operation. It must not be assumed that governments with a "high" political and administrative capacity will necessarily prefer to engage in increased regional co-operation. It is only argued here that they have the capacity to make the adjustments necessary to implement such policies if they so decide, while countries with a "low" capacity are less able to make such adjustments. The actual policies of governments will depend very much on how they perceive their national interests and their assessment of the impact of particular policies on these interests. Many economists in the ASEAN countries seem to believe that regional economic integration is self-evidently desirable and in the interests of all. They ell guc that economic integration lead~ 1u a more rational and

2

Domestic Political Structures and Regional Economic Co-operation

efficient distribution of economic resources within the region with the result that the economic production of the region must increase and thus bring about a general rise in prosperity. It therefore seems obvious that regional economic co-operation should be encouraged with the ultimate aim of attaining regional integration. But from the perspective of political science, it must be recognized that policies which bring benefits to a region as a whole do not necessarily bring benefits in equal measure to all its components. In the ASEAN region, it is clear that the primary responsibility of the governments is still to their own nations and not to the region as a whole. National leaders are concerned with regional affairs not because of an intrinsic commitment to the region as such but because developments in neighbouring states impinge on their own states. The political stability and economic welfare of each state depends in part on continuing stability and welfare in the neighbouring states, while political upheaval and economic decline in one state can threaten the well-being and security of the other states in the region. In general, national considerations remain decisive so that policies intended to promote the interests of the region as a whole will only be supported by individual governments when, on balance, they at least do not harm the interests of their own particular state. Within an established regional community such as ASEAN there will naturally be more "give-andtake" between its members than would be the case in the absence of such an association. In the context of an ongoing community of nations, governments will be more ready to sacrifice immediate national interests on particular issues in the expectation that such actions will be reciprocated by other members on other issues. But in the final analysis, the balance sheet remains national rather than regional. That the regional interest does not necessarily coincide with the interests of the individual states is clear when we consider the case of regional economic integration and its impact on industrialization. The creation of a regional free-trade area or a customs union might lead to enhanced rationality in the distribution of regional resources through encouraging greater specialization within the region and thus result in faster economic growth in the region as a whole, but inevitably, the distribution of such growth would be uneven. Economic integration would provide a much larger market for those countries with the more advanced industries, while countries with backward industries would shift resources from industry to other areas, such as agriculture or mining, where they had a comparative advantage. In the case of ASEAN, economic integration would enable the high-technology industries of Singapore to dominate a vastly expanded market and thus block the prospects of such industries from developing in the other four memberstates. Economic integration might also provide increased opportunitie~

Introduction

3

for certain industries in the Philippines, Thailand, and Malaysia, although the benefits from gaining access to a wider market for some industries would have to be balanced against the consequences of opening their own domestic markets to penetration by more advanced neighbours in other areas. In the case of Indonesia, which is industrially the most backward state, however, the opening of its market to the industries of other ASEAN states would be disastrous for its prospects of industrialization. As long as the ASEAN political leaders regard the individual state rather than the region as the basic political unit, economic integration which stimulates development in some states while obstructing industrial growth in others will not be welcomed by those states which stand to fall further behind, even though it might be shown that the region as a whole would be better off. Not all economic co-operation, however, conflicts with national interests. The individual states of a region might find it to be in the national interests of all to engage in particular forms of limited co-operation. They might, for example, decide to hold joint negotiations on trade issues with countries or associations of countries outside the region. Attempts might be made to co-ordinate foreign investment policies so that multinational corporations are less able to play off one regional state against the others. Agreements might be reached to back each other up in the event of international shortages of basic commodities such as rice or oil. And limited project-by-project agreements can be reached on industrial specialization. In cases of this sort, regional co-operation not only enhances the interests of the region as a whole but can also serve the national interests of each of the component states. Even then, such agreements are reached only after the individual states have carefully weighed the advantages with the disadvantages from the point of view of their separate national interests. The main concern of this study, however, is not with an analysis of competing national interests but with contrasting domestic political structures. The states of the region differ markedly in the extent to which government economic policy-makers can make decisions in an environment relatively insulated from immediate political pressures representing special interests. In some countries, political leaders with their technocratic and bureaucratic advisors are able to take a broad and long-term view of the national interest defined according to "rational" economic criteria, whereas in others "irrational" political considerations seem to predominate. The extent to which "irrational" political pressures prevent the pursuit of "rational" economic policies depends on the nature of the political system. All five ASEAN states have adopted political forms in which authoritarian characteristics are to a greater or lesser degree prominent. Four of the five t>xpcrimented with Western-~tyle liheral democracy in

4

Domestic Political Structures and Regional Economic Co-operation

the years immediately after gammg independence while the fifth also passed through brief democratic interludes. But Western-style democracy did not prove to be an enduring form of government in Southeast Asia. Some abandoned democracy and established frankly authoritarian governments; others preserved the institutional structure of liberal democracy while restricting democratic liberties and managing the political process so that the remnant opposition could never succeed in defeating the government. The abandonment or restriction of Western-style democracy was justified on various grounds but the most important was that strong government was needed to preserve political stability and promote economic development. The national leaders in the ASEAN states regarded unrestricted Western-style democracy as inappropriate for the circumstances in which they found themselves. Democracy led to divisiveness, corruption, inefficiency and instability. What was needed was a strong government capable of imposing order on society and implementing policies in the interests of economic development. The ASEAN governments thus attempted to legitimize themselves by promising strong, effective government committed to rapid development and modernization. Under relatively authoritarian rule it was hoped that the government could formulate and implement developmental policies free of the self-interested political pressures to which governments had to respond under unrestricted democracy. Backed by a powerful security apparatus capable of protecting the regime from political challenges, the government could then place economic policy-making in the hands of technocrats and administrators whose policies were expected to stimulate rapid economic growth and industrialization. In place of the politicized and patronage-ridden bureaucracy typical of Third World democracies, authoritarian regimes promised efficient, professional and clean administration. Authoritarian regimes thus aimed to legitimize themselves through effective performance. Public acceptance of the loss of democratic freedom could be compensated for by economic growth and clean, efficient administration. In practice, however, there were big differences between the ASEAN states in the extent to which they conformed to the "modernizing authoritarian" model. The full implementation of the model required that governments to a large extent insulate themselves against political pressures aiming to obtain special benefits for particular groups in society. Such pressures can be examined at two levels - pressure from below and pressure from above. Pressure from Below

No government can insulate itself completely against "irrational" pressures from below and totally ignore middle-level and mass demands. Even the most authoritarian regimes rnmt take into account minimum

Introduction

5

mass interests in order to avoid rioting, revolts, and revolution. But there are considerable differences between governments in the extent to which they are responsive to demands put forward by particular groups or organizations representing the interests of particular sections of the public. In some political systems there are channels, such as political parties, interest groups and the press, for the airing of popular demands and grievances, while in other systems opportunities for the expression of public discontent are strictly circumscribed. While it is not possible in this study to attempt a complete explanation of the differences between the ASEAN countries in the degree of their authoritarianism and the extent to which their governments are responsive to pressure from below, attention will be drawn to several important factors. Firstly, the degree of authoritarianism is influenced by the level of economic development and the consequent class structure. In a society where the level of economic development is relatively high and the economy growing, the middle class will be relatively large and prosperous, while much of the lower class will also have experienced some advancement. In such a society, the middle class provides a solid base of support for the government which in turn must be at least partly responsive to its demands. At the same time, the capacity of the government to ensure minimum standards of welfare for much of the lower class reduces dissatisfaction and the likelihood of challenge from that quarter, and thus makes authoritarianism less necessary for the government to maintain its grip on power. On the other hand, in societies where the level of economic development is still low, the middle class will remain too small to provide a solid base of support for the regime, while the overwhelming majority of the lower class will get little benefit from economic growth. In these circumstances, the government has little alternative but to rely on authoritarian means of control, and in any case does not have to worry about middle-class demands for a more liberal system. Thus, the higher the level of economic development, the less severely authoritarian the system of government and the more scope there is for pressure from below especially from the middle class, while the less developed the economy, the more authoritarian the regime and the less scope for pressure from below. Authoritarian control, however, is likely to be more severe when the working class makes up a large part of the lower class, even when the system as a whole is relatively highly developed. All governments, whether closed or relatively open to pressure from below, tend to be unresponsive to demands from trade unions. In countries with a low level of ewnnmic develorment, the political influence of the trade union movement is negligible not only because of the authoritarian nature of the govCrlllllC!ll but ahu bt:caU>C uJ" lilc 'll• of certain sections of the local business community and labour. Local industry, ;.vhi~h had jd.-,~ bcguti ~~..~ .:;ru\v luHJcr :he i~rutCl~tion uf i1npurt :)uhsti!ution

20

Domestic Political Structures and Regional Economic Co-operation

policies, was suddenly faced with the competitiOn of an open economy in which the emphasis was on exports rather than production for the domestic market. On the other hand, the new policy required that tight controls be imposed on trade unions in order to maintain labour discipline, and low wages so that foreign investors would be attracted. Despite muted protests from both quarters, the government's policies were implemented. Then, at the end of the 1970s, the government reassessed its strategy. The success of its export-oriented industrialization programme had not only reduced unemployment but also created a growing labour shortage which could only be overcome by importing unskilled labour from neighbouring countries. Moreover, Singapore's labour-intensive industries were facing increased competition from poorer Third World countries where wages were even lower. In these circumstances, the government decided to launch its "second industrial revolution". The low-wage policy was abandoned and a "wage-correction policy" introduced in 1979 which increased wages by about 20 per cent annually for three years. The goal was to force employers to move to a higher technological level by making labour-intensive technology too expensive. Thus, it was expected that Singapore would be able to maintain its level of exports by specializing in higher-technology products while at the same time overcoming labour shortages and its growing dependence on imported labour. In this context, it was also decided to phase out certain industries considered inefficient, such as motor-car assembling on which import duties were imposed. The decision to launch the "second industrial revolution" was taken by the government on the basis of what it believed was necessary for Singapore's future economic development. Although the policy obviously benefited workers, it was quite clear that it was not adopted in response to trade union pressure. On the other hand, the policy had painful consequences for those employers who could not adjust to higher wages and new technology, but their protests were to no avail. The capacity of the government to implement programmes which it regarded as essential regardless of public reaction is also shown in the case of population policy. 24 As long as Singapore saw its future as being part of Malaysia little attention was given to the question of population growth but after 1965 this issue was suddenly seen as crucial. With two million people on a small island and increasing at a rate of 2.8 per cent annually during the 1960s, the prospect of overpopulation seemed to threaten whatever gains were expected from economic development. Despite religious objections and cultural preferences, the government launched a vigorous programme to curb population growth. Abortion and sterilization were not only legalized but encouraged, preference was given in school enrolments to children from small families, and income

Singapore

21

tax incentives were provided. The result was a steady decline in the birth rate from 29.5 per cent in 1966 to 17.3 per cent in 1979, while the rate of population growth fell to 1.2 per cent in the late 1970s. As in the case of industrialization, the government's population policy was not adopted as a result of demands from particular interests and in fact caused dissatisfaction in some circles. But the government had decided that population growth had to be stopped and took firm measures to achieve that goal. Another example of governmental effectiveness despite the opposition of particular interests was its urban renewal and housing programme. The PAP government's housing scheme did not initially involve mass evictions of established residents, but by 1962 the expanding programme began to require the acquisition of large tracts of land which were often already occupied. Although the plans included compensation and resettlement, they were usually strongly resented by residents threatened with eviction, who were supported by opposition politicians. After the repressive measures taken against the BS in 1963, however, the reclamation of land for urban renewal proceeded much more smoothly. Although evicted residents were usually unhappy, there was no-one to whom they could turn for protection, so they had little choice but to accept resettlement. 25 Urban renewal nevertheless continued to meet with sporadic resistance, as was shown in 1978 when the planned demolition of an old Chinese temple to make way for a swimming-pool complex in a public housing estate aroused fierce opposition from temple devotees. But in the end the temple, like the central Sikh temple the previous year, was demolished. 2 " Having decided that urban renewal was in the people's interests, the government simply carried out its programme with few concessions to the interests and feelings of those directly affected.

Conclusion The Singapore Government has to a large extent freed itself from the need to respond to day-to-day political pressures from the middle and lower classes on one hand and elite-level vested interests on the other. A united, closely-knit ruling elite extends authoritarian controls over all potential sources of rival leadership and thus limits the channels through which pressures from below can be expressed. At the same time rapid economic development and the government's welfare programmes, while not eliminating dissatisfaction, have brought substantial benefits not only to the large middle class but also to important sections of the working class. In this context, particular demands are not likely to get >vidc.'>fXc:ad act ;,.e 'Upport beynnd those directly involved and can therefore be largely ignored by the government, c~pecially bearing in mind that they cannot be backed hy .'>troiJg pulitical parties, independent

22

Domestic Political Structures and Regional Economic Co-operation

trade unions or the press. Meanwhile, the separation of the government from the business community and the need to meet the general expectations of the large middle class create an environment which allows the government to resist particular vested-interest demands. Government policies are therefore formulated in a relatively insulated atmosphere in which the government has considerable scope to decide what it believes to be most appropriate. The latitude that the Singapore Government enjoys in deciding its policies has implications for its attitude towards economic co-operation and integration in ASEAN. Because it is relatively free from direct pressures, the government has been able to pursue policies based on its own assessment of changing circumstances without being overly forced to take into account particular domestic interests. Thus, for example, in 1976 and 1977 Singapore was strongly advocating the establishment of a free trade zone in ASEAN which would have provided Singapore's industry with a wider market. But when the free trade proposal was rejected by some of the other ASEAN states, the Singapore Government faced few domestic obstacles in reassessing and abandoning its former policy. Instead of being the strongest advocate of regional integration, Singapore has now presented its "four-plus-one" proposal, implying that Singapore, as the "one", will not stand in the way of any agreement between the other four but may remain outside it. The Singapore Government's flexibility and the ease with which it can reverse an earlier policy is due in part to its ability to disregard particular domestic interests which may have had a stake in the continuance of particular policies.

NOTES l. Chan Heng Chee, "Politics in an Administrative State: Where has the

2. 3. 4.

5.

Politics Gone?" in Trends in Singapore, edited by Seah Chee Meow (Singapore: Singapore University Press for the Institute of Southeast Asian Studies, 1975). World Bank, World Development Report 1982 (London: Oxford University Press, 1982), Table l. Chan Heng Chee, The Dynamics of One Party Dominance: The PAP at the Grass-roots (Singapore: Singapore University Press, 1976), p.24. Ministry of Trade and Industry, Economic Survey of Singapore 1981, p.viii. World Bank, op.cit., Table 2, however, gives a lower estimate of 8.5 per cent. World Bank, op.cit., Table 2.

(L ~v1iui~uy

ui' Ttade anJ

lndu~lry, up.cit., p.I.J.

Singapore

23

Singapore, Census of Population 1980, Singapore. Release No. 4: Economic Characteristics, Table 34.

7. See Department of Statistics,

8. Calculated from Far Eastern Economic Review (hereafter cited as FEER), Asia Yearbook 1982, pp. 8-9. The actual proportion of households with cars and television sets may be less because some households have more than one of each. 9. See note 7 above. 10. Ministry of Trade and Industry, op.cit., pp. 5, 59. 11. Ibid., p. 52. 12. See V. V. Bhanaji Rao and M. Ramakrishnan, Income inequality in Singapore (Singapore: Singapore University Press, 1980). 13. See S. Bedlington, Malaysia and Singapore: The Building of New States (Ithaca: Cornell University Press, 1978), pt. Ill. 14. New Straits Times (Kuala Lumpur), 8 August 1981. 15. See Chan, op.cit., pp. 194-201. 16. H. V. Luther, "Strikes and the Institutionalization of Labour Protest: The Case of Singapore", Journal of Contemporary Asia 8, no. 2 (1978) : 226. 17. See Patrick Smith, "The Union Engineers", PEER, 25 June 1982, pp. 57-63. 18. See Chan, op.cit., pp. 205-6. 19. Patrick Smith, "Pressed into Wedlock", PEER, 23 April 1982, pp. 102-3. 20. Chan, op.cit., chap. 6. 21. FEER, Asia Yearbook 1976, p. 271. 22. Calculated from table in Ministry of Trade and Industry, op.cit., p. 15. 23. Kunio Yoshihara, Foreign Investment and Domestic Response: A Case Study of Singapore's Industrialization (Singapore: University of Singapore Press, 1976), p. 6. 24. See Saw Swee-Hock "Too Little Land, Too Many People" in Saw Swee-Hock and R. S. Bathal, Singapore Towards the Year 2000 (Singapore: Singapore University Press, 1981). 25. See Chan, op.cit., pp. 165-80. 26. FEER. Asia Yearbook 1979, p. 289.

3 Malaysia

Compared ro Singapore, the government in Malaysia is more open to political pressures from both below and above. But at the same time, the government has succeeded in maintaining a considerable degree of autonomy from such pressures. In Malaysia, like Singapore, a relatively democratic political system in the early 1960s increasingly acquired authoritaria n characteristi cs with the result that the scope for opposition political activity narrowed and the government became less subject to pressure from below. But in Malaysia, this process was far less advanced than in Singapore so that the government still had ro take account of the specific interests of particular sect ions of the community even if these imeresrs were less forcefully supported than in the past. Similarly, the !\ l alay~ia•~ Go' crnment "as les~ insulated against pressure from above than "a~ the Singapore Go,·ernment although, a we shall see later, it was much more able to resist dite-Je\·el vested-interest pressure than were the go' ernments of the Philippines, Thailand and Indonesia. Economi c Development a nd the Social Structure The relat iYel~ ope n nature o f \lalay ia's political system is panly due ro tlw le,el of economi.:: pro periry \\hich has blunted mass dissatisfaction!and thu made o;even~ authoritarian ism less necessary for lire go•ernment. \Ll!ay-,ia'o; high rM c of economic gro" th during the 1970s brought a ''cady increa'-e in the .,;l.t· ~,f the middle cia~ in all communirie'>. ''hile the in,·idcnc.: of extreme po,eny !>eem!-. to ha'e been reduced. During 11:~ Brit ish perilonial model a~ an c.xponer "hi!e local manu f:1-:t uring was in-;igniti..:ant. After independen('e. an industrializa tion strateg~ based on impon-sub.t it ution wa launched, but in the late 1960s the cmpl.asis changed to export promot ion. During the 1970s the Malaysian economy grew rapidly at an average real rate

24

Malaysia

25

of 7.8 per cent. The fastest growing sector was manufacturing which expanded at a rate of 12.5 per cent, and by 1980 was contributing 20.5 per cent of the gross domestic product (GOP), an increase in its share of nearly 50 per cent, compared with 1971. 1 In 1980, Malaysia's per capita GNP (gross national product) was US$1 ,620.z The rapid economic growth of the 1970s was accompanied by a farreaching programme of social reform designed to reduce the economic imbalance between the communities which was seen as the root cause of the 1969 racial rioting. During the colonial period, the immigrant communities had mainly entered the modern sectors of mining, plantations, and commerce while the Malays had remained in their traditional fields of agriculture, fishing, and administration. This imbalance had not greatly changed by 1969. In the aftermath of the riots, the government introduced the New Economic Policy with two major goals- the reduction of poverty, and the restructuring of society to eliminate the identification of economic function with race. The emphasis in practice was on the upliftment of the Malays among whom the incidence of poverty was highest and who were least represented in modern occupations. Economic growth in the 1970s brought about a gradual increase in the size and prosperity of ihe middle class. In terms of occupational categories, th ose in professional, technical, administrative, and managerial occupations in I 980 made up 7 per cent of the peninsular work-force, while another 17 per cent were in clerical and sales occupations, making a total of 24 per cent in the upper, middle, and lower-middle class occupations, compared with 20 per cent in 1970. Of particular importance was the communal make-up of these occupations. While the proportion of the non-Malay work-force in these categories rose slightly during the decade from 27 to 30 per cent, the proportion of Malays in such occupations rose sharply from 13 to 18 per cent although non-Malays continued to outnumber Malays by a ratio of 61:39. 3 The rise in middle and lowermiddle class prosperity was shown in the huge expansion of housing estates in most Malaysian towns and the increase in ownership of durable consumer goods. In 1980, 19 per cent of peninsular households had cars, and 53 per cent had television sets. 4 The proportion of private cars to households in peninsular Malaysia, however, rose from 14 per cent in 1970 to 33 per cent in 1980, indicating that many middle-class families had more than one car, while the proport ion o f television sets to households rose from 12 to 67 per cent. 5 The growing size and prosperi ty of the middle and lower-middle c lasses provided the government with a substantial base of political suppor t. The new Malay recruits to urban, middle-class life, whose rise up the social ladder had been due largely to government policies after 1969, had many reasons to feel grateful to the government, and in genera l supported it strongly. On the o ther hand , the increasing prosperity of the no n-Malay

26

Domestic Political Structures and Regional Economic Co-operation

middle class made it easier for them to accept the discrimination that the government practised against them. The rapid economic growth of the 1970s "trickled down" to some extent to the lower classes who, in the peninsula, were more or less equally divided between predominantly Malay agricultural workers (35 per cent) and a "working class" of production, transport and other workers (33 per cent) among whom non-Malays outnumbered the Malays. In the agricultural sector, the government's land development programme (FELDA) continued to expand, the price of rice was increased through government subsidies, and small-holders enjoyed rising prices for such commodities as rubber and palm-oil (although these prices fell at the beginning of the 1980s). On the other hand, the rapid growth of manufacturing and the other modern sectors provided increased employment opportunities outside agriculture and resulted in labour shortages in some localities. According to the government's official estimates, the incidence of poverty in the peninsula fell from 49.3 per cent of households in 1970 to 29.2 per cent in 1980. The incidence of poverty remained high in the agricultural sector where it had fallen during the decade from 68.3 to 46.1 per cent, while in the non-agricultural sector it fell from 27.8 to 16.8 per cent. 6 Not surprisingly, the incidence of poverty among the Malays, who were predominant in the agricultural sector, was much higher than among non-Malays. The rapid growth of the 1970s has clearly had a significant impact in raising the living standards of the lower classes but major areas of apparently intractable poverty remain. In the rural areas, an important cause of poverty is lack of access to land so that many poor peasants and small-holders operate uneconomic holdings or rent land from landlords. Another ubstacle to the eradication of poverty is the dependence on commodities '>uch a-; rubber and palm oil, the prices of which are determined by fortuitous movements on the \vorld market. 7 The high degree of dependence on foreign markets inherent in !\lalaysia's industrialization strategy has also made the working class vulnerable to changes in \\orld economic conditions. !\Joreover, wage rates for unskilled labour ha\c been held in check by the steady inflow of labour from the rural area'i and by what appears to be officially tolerated illegal i mm igrat ion from 1nclunesia. [conomic gru\\lh a;td gme!·nment policy tlim brought about substantial changes in \lalaysian c,ociety during the 1970s. The middle class grT\\ steadil\ and c\pericnced a c,harp ri.,c itt its prosperity. At the .~arne time, it appL'ar' th~il many ~llllOIJg the [,n\Cr c!a-,,e-, aho C\pericnced i!1lpicl\Cll1Cilh, ef p '>tilt i'L'illitiitCd. ()f j;t..tfli(u!~l~- i:11p~..d-!d:t . .:c ·-.\~;, :h~_, :·:l:'ic! .- . . :r~H 1 '·:in'l nf the r\-1al;:lv role in rhe

Hulm•sill

27

modern sectors of the economy and especially the increase in the size of the Malay middle class. The Malaysian political system had turned to methods of rule in the 1970.\ which were more authoritarian than those in the 1960s in order to deal \\ith the crisis caused by the 1969 racial riots and to cope with the political tensions associated with the implementation of the New Economic Policy. However, the rapid growth of the middle class, both l'vlalay and non-Malay, provided the government with a solid base of support, while economic advancement experienced by many in the lower classes, as \veil as communal divisions between them, undermined potential mass opposition. The social structure, there fore, did not necessitate extreme!) authoritarian rule and to some extent held authoritarian tendencies in check.

Pressure From Belo\\ The Malaysian Government gradually enhanced its capacity to resist pressure from below, especially after the racial rioting in 1969. Nevertheless, although the government increasingly adopted authoritarian measures, the trend to authoritarianism remained limited. This was partly due to the communal nature of 1\lalaysian society. On the one hand, the trend to authoritarianism was a response to communal conflict but on the other, communal divisions limited the power of t!le government and the extent of its authoritarianism. The trend to authoritarianism wa-, also restrained because rapid economic development had provided benefits to an expanding part of the population so that the government was able to maintain its political support without resorting to extreme measures. Despite certain authoritarian characteristics, the system still provided scope for the application of pressure from below. Malaysia's political system was largely democratic when the country obtained independence from Britain in 1957. A parliamentary system of government was established in which the government wa~ responsible to a parliament which was elected at least once every five years. Although the Communist Party was banned and varions restrictions on political freedom were imposed, elections were contested by various political parties, while pressure groups continued to operate, and the press was not directly controlled by the government. Despite the government's w,e of emergency powers in response to armed communist opposition until 1960 and Indonesia's confrontation policy bet ween 1963 and 1966, the democratic features of the system remained prominent and only began to fade after 1909 when racial rioting led to the imposition of a ne\\ >tate ol etttcrgcnc). During the I97(b, tile -,;,-.tctn t1ccatttc tllotc autlmntarian a-; the scope of public clchate ''a' natTO\\Cd and opponunities for·

28

Domestic Political Structures and Regional Economic Co-operation

organized political opposition were restricted. 8 Nevertheless, compared with the other ASEAN states, the political system in Malaysia remains relatively democratic and the government continues to be relatively responsive to issues raised by the opposition. Unlike the government in Singapore which by the early 1960s was controlled by a single, united and homogeneous party, the Malaysian Government has always been a coalition consisting of disparate parties representing different racial communities. Initially in the form of the Alliance made up of the United Malays National Organization (UMNO), the Malaysian Chinese Association (MCA), and the Malaysian Indian Congress (MIC), the governing coalition was transformed in the 1970s into the National Front (NF) with the addition of several opposition parties in the peninsula as well as parties from Sabah and Sarawak. While the parties of the Alliance, and later the NF, were united in upholding the general structure of the existing political, economic and social order, they were sharply divided on communal issues. Although the coalition was in fact Malay-dominated, and became increasingly so after 1969, the terms of the understanding between the partners meant that the interests represented by the non-Malay parties had always to be taken into account together with Malay interests. The multiracial composition of the government inevitably impaired its unity of purpose and served as a powerful brake on the trend towards authoritarianism. At the same time, the influence of each component party in the coalition was dependent on the support it could garner from its own community which made each of them relatively responsive to pressure from below. The persistence of relatively democratic institutions was aided by the nature of the party and electoral systems which made it virtually impossible for opposition parties to win power in elections and therefore made authoritarian measures less necessary from the point of view of the government. In practice, the parties which took a moderate stand on communal issues and were able to co-operate with parties representing other communities tended to join the governing coalition, while parties which emphasized communal issues and found it difficult to agree on a common platform with parties representing other communities remained in opposition. Thus, the major Malay opposition party, Parti Islam Se-Malay>ia (PAS) tries te outbid UMNO by appealing to Malays on communal issues and therefore is unable to ally itself with the major non-Malay opposition party. The Democratic Action Party (DAP) likewise tries to outbid the non-Malay NF parties in appealing to non-Malay voters. The opposition parties are, therefore, by their very nature, rrcchtded from forming an effective opposition front against the government. On the other hand, the governing coalition, by agreeing on cummou cvhere all the land suitable for agriculture had been opened up by the turn of this century, with the result that the population increase since then has been absorbed on a land area that has not expanded. In Java, it is generally estimated that one-third of the rural work-force is landless (compared with about 10 per cent in the Outer Islands). Of the two-thirds who have some land in Java, it was estimated that in 1973 some 57 per cent had less than half a hectare, the bare minimum for ~ubsistence (compared with 20-30 per cent in the Outer Islands). 6 Thus, some 70 per cent of the rural work-force in Java had either no land or such small plots that they were forced to seek extra income by working as labourers on other peasants' land, working outside agriculture, or renting out their own land to more prosperous neighbours. There seems to be no question that agrarian conditions in Java will worsen as population growth causes even greater pressure on the land. It has been estimated that the population density of Java by the year 2000 will be I, I 05 people per square kilometre, a density greater than that of any West European city today. 7 Thus, rapid economic growth has brought great benefits to a small Clitc, ~omc benefits to certain non-elite classes, and hardly any for

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the overwhelming majority of the people. In such circumstances, mass discontent is never far from the surface and breaks out from time to time in riots and demonstrations in the cities and occasional upheavals in the countryside. The social structure of Indonesia is such that the elite can only maintain its power and privileges by authoritarian means. The result has been a political system very unresponsive to pressure from below. Pressure from Below During successive political eras, the Indonesian Government has become progressively less responsive to non-elite demands. 8 During the liberal democratic period, political parties competed for popular support and were thus forced to some extent to take into account popular interests. During the Guided Democracy era, the role of the political parties was restricted, martial law regulations were in force, and elections were never held, with the result that the government was under less pressure to respond to non-elite demands. Under the New Order government, the influence of the political parties was reduced further, the role of the military's security and intelligence apparatus became more important, and the government embarked on a deliberate policy of depoliticization. The New Order regime has been dominated by the military. The President himself is a former commander of the army and commander of the armed forces, and many key ministries in the Cabinet have been held by military men. Although the number of ministers from the armed forces declined from 12 out of 27 in 1966 to only 4 out of 22 in 1973, it rose again to II out of 24 in 1978. Apart from positions in the Cabinet, military officers have been appointed to high posts in the bureaucracy so that even when the minister in a particular department is not from the armed forces, at least some of the senior officials are. Military representation in regional administration is also high. Even during the Guided Democracy period, the number of regional governors drawn from the military was 12 out of 24 in 1965. By 1971, the number had risen to 22 out of 26 but then fell during the 1970s to 19 out of 27 in 1980. At the district (kabupaten) level, about two-thirds of the district bupatis and town mayors were from the armed forces. The domination of the armed forces in the government is supported by its security apparatus. The Indonesian army is organized on a "territorial" basis with units spread throughout the country, more or less parallel with the structure of government administration. In each major province there is a military command (KODAM), although some KODAM cover several small provinces in the Outer Islands; at the district level, there are district commands (KODIM), the territory of which usually coincide~ with that of a kabupaten or town; and in Java there are

HO

Domestic Political Structures and Regional Economic Co-operation

rayon command~ (KOR i\l\1 IL), enverine the territory of subdistricts (kecamatan). These military units, spread throughout the country, act as

agents for the KOPKAMTIB (Command to Restore Security and Order) which was set up immediately after the 1965 coup attempt to hunt down communists but has since been made responsible for the preservation of order in general. The KOPKAMTIB, which is staffed by military officers, has wide powers to seek out and detain those considered to be threats to security. The KOPKAMTIB is assisted by the intelligence body, BAKIN (State Intelligence Co-ordinating Body), which is also headed and largely staffed by military officers. In maintaining its authority, the Suharto regime has relied heavily on direct repression. After gaining power in the wake of a massacre, which claimed about half a million lives, the regime, through the KOPKAMTIB, detained a further half million opponents and potential opponents who were accused of having links with the banned Communist Party. While most detainees were held for fairly short periods, some 30,000 were still in prison or detention camps by the mid-1970s, and the last untried prisoners were released only at the end of 1979. Although the main focus of KOPKAMTIB's attention was directed towards supporters of the Communist Party in the late 1960s, during the 1970s it took action against a wide range of non-communist and anticommunist dissidents, including students, journalists, former Socialist Party and National Party activists, and members of Muslim organizations, many of whom were held for long periods, some after trial but most without. Backed by its repressive capacity, the regime nevertheless attempted initially to gain legitimacy by permitting limited party participation in the government and by inrroduci:1g some forms of democracy. But, in fact, these measures were intended to initiate a process of depoliticization rather than popular participation. 9 In the 1960s, Suharto attempted to win popular acceptance by including selected representatives of the main political parties in his Cabinet, but as his authority increased during the 1970s party representation declined and was finally eliminated altogether in 1978. In 1971, an election was held for the first time since 1955. The government sponsored its own "party", GOLKAR, which received strong support from the bureaucracy, the police, and the army, while the remaining parties were forced to campaign under very restrictive conditions. Candidates had to be approved by the KOPKAMTIB, criticism of the government was prohibited, and party campaigns suffered from military harassment, including the breaking up of meetings and the arrest of activists. Not surprisingly, GOLKAR won an overwhelming victory with 63 per cent of the vote. During the following years, further pressure was applied, and the nine parties (apart from GOLKAR) were forced to dissolve themselves and form two new parties,

Indonesia

8/

one representing the old Muslim parties and the other, the nationalist and Christian parties. This move weakened the parties further as the government insisted on both being led by pliant leaders, while the enforced merger of previously rival parties ensured that they were more concerned with internal factional struggles than with opposing the government. In addition, the government prohibited the parties from establishing branches in the rural areas where the mass of the voters lived. In the 1977 and 1982 elections, GOLKAR won further victories, its share of the total votes varying only slightly. Despite the moves taken against the two parties, the Development Unity Party (PPP), the successor to the old Muslim parties, obtained 28-29 per cent of the votes in the two elections, while the other party, the Indonesian Democratic Party (POI), suffered heavy defeats. In facing non-governmental organizations, the regime adopted a strategy that was in part corporatist. Previously independent bodies were forced to merge with others in the same area of activity, given government recognition and sometimes financial assistance, and placed under leadership that was pliant or at least well disposed towards the government. The formation of GOLKAR and the enforced mergers of the old political parties followed this pattern. Similarly, the government sponsored the Indonesian Labour Federation (FBSI) under a progovernment leadership in place of the old party-affiliated trade union organizations, and the Indonesian Farmer's Association (HKTI) was formed as the sole representative of peasant interests. The Indonesian Chamber of Commerce and Industry (KADIN) was established to coordinate and control the business community; although dominated by retired military officers, KADIN began to show signs of discontent with some government policies in the late 1970s, with the result that its leadership was replaced by a more government-oriented group in 1979. In 1976, the Majlis Ulama (Islamic Scholars' Council) was established, headed by a respected but relatively non-political ulama, in order to provide Muslims with a channel of communication to the government and thus attract at least some Muslim support while dampening part of the remaining antipathy. The press was also brought under increasing control. Press freedom had been restricted under the Guided Democracy regime but many newspapers representing a wide spectrum of views continued to be published, and almost every political group had its own newspaper, including the army, the Communist Party, Muslim groups, Christian groups, nationalists, and others. After the establishment of the New Order government, leftist papers were banned but others continued to appear. During the Guided Democracy period, newspaper editors had become adept at making subtle and devious criticisms of their opponents and these skills contmued to be used in the New Order period. In

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the 1970s, however, the government took measures against newspapers whose innuendoes and insinuations were directed against the regime itself and in 1974 the most consistently critical newspapers were banned. In later years several more newspapers were banned or suspended, with the result that the intimidated press, despite occasional indirect criticisms, did not usually bring public discontents into the open. The military-dominated regime had thus taken a series of steps aimed at depoliticizing the society and eliminating organized opposition. The process of depoliticization was facilitated by the absence of a strong middle class able to exert pressure on the regime, although some of the political parties, especially the Muslim parties, had deep roots in the society. To the extent that the goal of depoliticization was achieved, it virtually eliminated the expression of open dissent by organized groups in society and effectively insulated the government from pressure from below. But in fact, there was still a strong sense of alienation and resentment beneath the surface which manifested itself from time to time in the form of petitions, demonstrations and riots, which often took the government by surprise. Pressure from Above Although the Indonesian Government made itself fairly impervious to pressures from below, it was very open to influences from above in the form of elite-level business pressures. Many of the members of the military elite were deeply involved in private business, while the relationship between the military bureaucrats on the one hand and the local Chinese and foreign businessmen on the other was cemented through corruption. The regime took the form of a giant patronage machine with a network extending from Jakarta to the provinces. The top of the patronage pyramid was dominated by senior military officers and their bureaucratic and business partners. Military officers and their bureaucratic associates used their control over the administrative apparatus to obtain commissions and bribes as well as to provide special favours to private business enterprises with which they were personally associated. As foreign capital responded to the new atmosphere established in the late 1960s, most investments took the form of tripartite joint ventures in which foreign investors joined IndonesianChinese businessmen and their military patrons. No major enterprise could grow without a military patron who normally contributed neither capital nor managerial skills but performed the vital service of dealing with the bureaucracy in order to get licences, credit, contracts, monopoly concessions, and exemptions from the full application of onerous regulations such as those involving taxation. Similar practices were found at the provincial and district le~eb where Illilitaiy ufflu:b ..tiH.l ..:ivilian

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83

officials were often involved in business arrangements with local Chinese businessmen. Many military officers and their civilian associates thus had a deep financial stake in the continuity of the regime, while middlelevel and junior officers could look forward, provided they remained Joyal, to eventual appointment to a post either in the military hierarchy itself or in the civil administration that would enable them to acquire wealth. 10 The military leadership, however, had quickly realized that it lacked the expertise to deal with the enormous economic problems that it had inherited from the Sukarno era. In addition, it knew that the government would not be able to get the economic aid it needed from the Western nations unless it placed economic management in the hands of men who had the confidence of the aid-givers. Initially, General Suharto recruited a team of Western-trained economists from the University of Indonesia as members of his personal staff and later, as President, appointed most of them as ministers in his Cabinet. They quickly succeeded - with the assistance of foreign aid - in stabilizing the economy and creating conditions favourable for foreign investment which they considered essential for future growth. The technocrats then attempted to regularize the administration and allocate funds according to rational criteria in order to promote rapid growth. The power of the technocrats to implement rational policies which conflicted with the interests of military-associated firms, however, remained very limited. Major economic institutions, such as the national oil company, Pertamina, and the rice trading agency, Bulog, were managed by army officers who used them to siphon off funds for the patronage machine. Many important developmental projects had to be allocated to firms with military connections which often failed to meet the technical criteria, while foreign investments usually took the form of joint ventures in which the local partner had military ties and influence so that conditions imposed by the technocrats were often waived in practice. The scope for rational economic policy-making usually expanded only when the regime faced an economic crisis but always narrowed again once the crisis was passed. 11 The limited scope for technocratic policy-making was in part a product of the socio-economic environment in which the government operated. Firstly, the necessity for technocratic control is less in an economy in which the modern industrial and financial sectors are small. In Indonesia, the modern industrial sector remains tiny. Despite rapid growth, the contribution of manufacturing to GOP rose only slightly from 8 to 9 per cent between 1960 and 1980. 12 In terms of employment, only 3.6 million or about 7 per cent of the work-force was employed in manufacturing in the mid-1970s but of these only 900,000 or less than 2 per cent of th