Regional Outlook: Southeast Asia 1996-97 9789814414074

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REGIONAL OUTLOOK Southeast Asia 1996-97

l5EA5

Institute of Southeast Asian Studies

The Institute of Southeast Asian Studies was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modem Southeast Asia, particularly the many-faceted problems of stability and security, economic development, and political and social change. The Institute's research programmes are the Regional Economic Studies (RES) programme, Regional Strategic and Political Studies (RSPS) programme, Regional Social and Cultural Studies (RSCS) programme, and the Indochina Programme (ICP) . 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.

REGIONAL OUTLOOK Southeast Asia 1996-97 Editorial Committee Chairperson Professor Chan Heng Chee Editors Daljit Singh Liak Teng Kiat Associate Editor

Tan Kim Keow Committee Members

Nick Freeman Mya Than Leonard Sebastian Sorpong Peou Naimah Talib Tin Maung Maung Than

Southea.s t Asia

1996-97

I5EA5 ·· INSTITUTE.OF·SOUTHEASTASIAN STUDIES

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.

© 1996 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions expressed in this publication rests exclusively with the contributors and their interpretations do not necessarily reflect the views or the policy of the Institute.

Cataloguing in Publication Data Regional outlook : Southeast Asia. 1992-931. Asia, Southeastern. DS50 1 S720 1992

sls91-209988

ISSN 0218-3056 ISBN 981-3055-17-0 Typeset by International Typesetters Printed in Singapore by Prime Packaging Industries

Preface Chan Heng Chee Introduction Daijit Singh Liak Teng Kiat

I

POLITICAL OUTLOOK 1996-97 The Setting

Vll

lX

1

Daljit Singh

The ASEAN Six Asad Latif Liak Teng Kiat, Leonard Sebastian, Naimah Talib Indochina and Myanmar Nick Freeman/ Sorpong Peoul Tin Maung Maung Than

II

ECONOMIC OUTLOOK 1996-97 The ASEAN Six Linda Y C. Lim

43

Indochina and Myanmar Nick Freeman, Mya Than

Appendices

71

The Contributors

83

PREFACE

[R]

egional Outlook was first launched in 1992. Designed for the busy executive, professional, diplomat, journalist, and interested observer under severe time constraint, this annual offers a succinct analysis of economic and political trends in the countries of Southeast Asia and the outlook for the prospective two years. In this endeavour, it is impossible not to be overtaken by events. An analysis such as this serves best when it indicates patterns of development, offers some insight into the unfolding complex dynamics and puts its finger on emerging issues and areas of change. This should provide the necessary background for the reader to interpret new information and data. In 1995 political and security concerns over Korea, Taiwan, and the South China Sea territorial disputes as well as the direction of U.S.-China relations cast some shadow on the economic dynamism of the region. This year's Regional Outlook has been written by a team from within the Institute and without. We thank Daljit Singh, Liak Teng Kiat, Nick Freeman, , Asad Latif, Linda Y.C. Lim, Mya Than, Sorpong Peou, Leonard Sebastian, Naimah Talib, and Tin Maung Maung Than for their contributions.

Professor Chan Heng Chee Director · Institute of Southeast Asian Studies 15 December 1995

INTRODUCTION 1";:;:;;;;;1 he economic outlook for Southeast Asia for 1996-97 continues to be rosy. The prospects for the ASEAN Six look as favourable as the recent _.::-: ..... past, though, except for the Philippines, growth will slow down a little in 1996-97 because of measures to rein in inflation. The transitional economies of Vietnam, Laos, Cambodia, and Myanmar will also continue to show good performance: growth rates are expected to be maintained at roughly the present levels or to improve slightly in the next two years. However, since agriculture constitutes a large component in most of these countries, the estimates are conditional upon favourable weather. However, the political outlook is more uncertain than a year ago . While no adverse political and security developments are expected to arise from within Southeast Asia itself, this cannot be said with confidence for the broader East Asian region in view of the tensions over Taiwan, the difficult U.S .-China relations, and political and security uncertainties on the Korean peninsula. Regional Outlook 1996- 97 consists of two parts: Political Outlook and Economic Outlook. They contain sections on the ASEAN Six and on the Indochinese countries and Myanmar, respectively. The Political Outlook begins with a short ' section on the broader Asia-Pacific setting, for what happens there can have crucial implications for Southeast Asia. Different authors have contributed to this volume and we would like to thank them for their contributions. We would also like to thank Dr Reza Y. Siregar and Dr Mya Than for compiling the basic indicators of the Southeast Asian economies in the appendices. These have been obtained from various published sources and are included merely as background data that readers may find useful.

Daljit Singh Liak Teng Kiat Editors

POLITICAL OUTLOOK

1996-97

POLITICAL OUTLOOK THE SETTING Daljit Singh

[S]

outheast Asian security is intertwined with the overall East Asian/ Western Pacific situation. The East Asian picture today is a mixed one. The optimism about the future of the region based on a number of positive factors is now tempered with some political and security uncertainties. Tensions have built up in the Taiwan Strait which carry risks of military conflict and serious implications for U.S.-China relations. The situation on the Korean peninsula also looks more dangerous than it did a year ago. But first, the positive factors.

Positive Factors

If

., J hese are well known. Most of the East Asian economies continue to

roar ahead and economic interdependence continues to grow. The a .,.. 1 relationship between economics and interstate security is a complex one. It depends upon what forces impinge upon decision-making at any particular juncture. However, the relationship has been a positive one in much of East Asia in recent years. High growth rates also help to keep domestic social and political problems manageable. For instance, sharp declines in economic growth in countries such as Indonesia and China, which have serious underlying social problems, could produce social and political instability. In the political-security field, relations between the major powers - the United States, China, Japan, and Russia- if not always amicable, have not been characterized by enmity, as was the case during the Cold War. The U.S. military presence and the U.S.-Japan defence alliance, widely regarded as the linchpin of East Asian security, continue and their importance was reaffirmed in the February 1995 U .S. Department of Defence document entitled United States Security Strategy for the East Asian Region. ASEAN has been enormously successful as a confidence-building mechanism among its members and will continue to discourage interstate conflict within the Southeast Asian subregion. And in the Asia-Pacific region as a whole there is unprecedented dialogue on political, security, and economic issues at both the bilateral and multilateral levels. 1\vo important region-wide multilateral institutions, the ASEAN Regional Forum (ARF) and the Asia-Pacific Economic Co-operation (APEC) forum, have been established in recent years for dialogue and co-operation on security and economics, respectively.

2

THE SETTING

t the same time, however, the broad longer-term trends point to considerable uncertainty. The chain reactions produced by the end of the Cold War have yet to run their full course. The election of a more inward-looking Republican Congress in the United States in the fall of 1994 and the shifts in Japanese domestic politics in recent years have been reminders of this. In 1995 the public reactions in Japan to the rape of a schoolgirl in Okinawa by American servicemen were a reminder that even though the U.S.-Japan alliance can be expected to continue, its character may eventually have to change to fit a new and more confident Japan that is likely to emerge in the next decade. At the same time the peaceful accommodation of the rising power of China into the Asian and international systems will remain the single most important challenge. To reduce the uncertainties, even risks, inherent in such changes, there has been emphasis on dialogue and confidence building and the building of new region-wide institutions to facilitate this. However, although as a new organization it has made a good start, the ARF is unlikely to be able to replicate for the Asia-Pacific region, at least not for some time, ASEAN's success in the subregion of Southeast Asia because of the much more complex situation in the broader region . Further, the ARF process could incur a serious setback if bilateral relations between the major participants, for instance, U.S.-China relations, deteriorate seriously. Indeed, more immediately, it is Taiwan and U.S. -China relations that have become matters of serious concern. The U.S.-China relationship is crucial to East Asian stability. It was on the skids in 1995 following the U.S. decision to allow Lee Teng-hui, the President of Taiwan, to make a private visit to the United States. Although the relationship improved later in the year from the lows it had reached, it is likely to remain a difficult one in view of the different ways the two countries look at the world and their own role in it and the fact that the relationship gets caught up in domestic factors in both countries. Miscalculation on Taiwan by either side can quickly worsen relations. Below is a brief review of the main potential flashpoints, starting with Taiwan.

[T]

aiwan was in the media headlines in 1995 as China conducted live missile firing tests in seas close to it to drive home the point that it would be prepared to use force to keep Taiwan as part of China. More immediately, this action was intended as a message to both Taiwan and the United States that China was prepared to create a crisis to stop Taiwan from enlarging its diplomatic space (especially with the United States), which China views as movement towards independence. Finally, the missile firing exercises

3

POLITICAl OUTLOOK were part of a psychological warfare campaign designed to influence domestic Taiwan politics in view of the national assembly elections in December 1995 and the more important presidential elections in March 1996. What happens next? It depends in large part upon what China's objective is. Is the objective only to stop Taiwan from seeking further diplomatic space, especially with the United States, without changing the more long-term time frame for unification which China had before Lee Teng-hui visited Cornell? Or have the objective and the time frame changed, as some of China's recent actions and the leaks emanating from Beijing would have the world believe? The maximum position in the latter case could be to pressurize Taiwan through show or even use of force to start negotiations on reunification according to a Chinese road map. Such a course would be fraught with uncertainty and danger. The present indications are that China will keep up its pressure on Taiwan before and after the March 1996 presidential elections, which it expects Lee Teng-hui to win, though it hopes to influence the size of his majority. It is unlikely to try a blockade of Taiwan island itself for that would be an act of war, but it could resort to a sustained strategy of lesser actions designed to damage the Taiwanese economy over the medium term. It is obviously not in the interest of Taiwan to provoke a Chinese use of force and Lee Teng-hui must surely by now have had a salutary learning experience. Nor is it in the interest of China to have to use force or threats of force if its objectives can be achieved by other means. It is also not in the economic or strategic interests of the United States or China to have a fight over Taiwan. But the problem is that there are too many jokers in this pack of cards: Chinese domestic politics, which make it difficult for any post-Deng Xiaoping leader to be soft on Taiwan, accompanied by increasing Chinese nationalism in which territorial and sovereignty issues seem to have become the tests of whether China will be shown the respect it deserves; the vortex of Taiwanese politics and the uncertainty of Lee Teng-hui's response to Chinese pressures; perceptions of Taiwan and China among the American public and Congress, which would be a factor in the decision-making process of the U .S. administration in a crisis- perceptions in which Taiwan would be regarded as a democracy and an underdog and China as the big communist dictatorship and bully which violates human rights, suppresses Tibetans, exports weapons of mass destruction and missile technology to unstable regions, and so forth. Thus there is much potential for miscalculation by all three parties. How China handles the Taiwan issue will affect perceptions of China in Asia and in the international community. Use of force, in whatever form, will reinforce the feelings of unease in Asia about China's rising power and would have important implications for the calculations of other major powers, even though the issue is technically a domestic one.

4

THE SETTING

rn

ensions increased sharply early in 1995 following the discovery of Spratly Chinese structures on Mischief Reef and the arrest of Chinese fishermen and the destruction of some Chinese maritime markers by the Filipinos. ASEAN was obliged to take a united stand with the Philippines. The heightened tensions drew international attention to the importance of maintaining freedom of passage for aircraft and ships in the South China Sea. It is almost certain that the United States and some others would have privately conveyed this to China, apart from making public statements on the matter. Eventually China and the Philippines agreed to a code of conduct to reduce tensions. By the time of the annual ASEAN Ministerial Meeting in Brunei in late July 1995, which was followed by the meeting of the ARF, China's foreign minister was able to issue a statement that Beijing was prepared to deal with the South China Sea issues in accordance with international rules as embodied in the Law of the Sea Convention (LOSC). The deference to international law was reassuring in so far as it indicated that China would not try to impose its own rules but naturally it did not mean that China was willing to compromise on its sovereignty claims. Suspicions lingered that China's statements were only tactical ploys to placate ASEAN in the face of a more immediate and serious problem he disputes will probably simmer for China, namely, Taiwan and the then worsening on, remaining a potential flashrelations with the United States. China has yet to ratify the LOSC and there is no indication yet that the various point in the longer term, because the parties to the dispute are ready to take the necessary political will on both sides to find a action to resolve the problem on the basis of interna- settlement is lacking. tional rules, not to mention the fact that applying the LOSC could produce a very complicated and messy situation. An escalation of tensions during 1996-97 is now less likely and an occurrence of serious conflict improbable because of China's concerns over Taiwan and its desire to cultivate ASEAN . However, the disputes will probably simmer on, remaining a potential flashpoint in the longer term, because the political will on both sides to find a settlement is lacking. China will not abandon its sovereignty claims while the Southeast Asian claimants do not at heart accept China's presence near the strategic heart of the region and are unwilling to seem to legitimize this presence through participation in joint development.

T

lthough the nuclear agreement with the United States had reduced tensions, the situation on the peninsula remains inherently unstable. ~;._..=;;.,:, The North is in economic crisis which has been aggravated by the severe floods of August 1995. There are also leadership uncertainties: more than

5

POLITICAL OUTLOOK a year after Kim Il-Sung's death, the younger Kim has yet to assume the posts of head of state and head of the communist party. The obvious way out of the economic crisis is for the regime to follow the path taken by China and Vietnam, that is, open up its economy. However, because of the North's severe isolation from the outside world, the peninsula's division and the fact that the South is bigger and much more prosperous, the northern regime fears that such an opening up would result in its demise through either collapse of its authority or gradual absorption by the South. It is thus flailing around for a way between continued isolation (which could bring an implosion through economic collapse) and a serious opening up (which could also cause an implosion or ultimate absorption by the South), a way which would ease the economic straits and assure regime security into the future. It may not find such a way out. The main possible scenarios for 1996-97 are more of the same, that is, continuing economic crisis, isolation, and insecurity; an improvement of the situation as steps are taken to open the economy; and an internal implosion which, with its chaos, could bring much instability to the peninsula, including an exodus of refugees from the North . On any rational calculation of outsiders, war would not seem to be a way out of the North's quandary, because it will result in ultimate defeat and probable destruction of the regime. However, given its extremely difficult circumstances, the possibility of miscalculation or of an irrational act cannot be completely ruled out. It is also possible that the North may either renege on its nuclear commitments in order to possess a few bombs or give the impression of doing so in order to extract more aid and concessions from the international community.

Hong Kong

6

[EJ

ong Kong is not a potential flashpoint. However, what happens to it after it reverts to Chinese rule in 1997 is a matter of considerable interest and importance. China's principle of "one country, two systems" will face tests in view of the different political and civic culture in Hong Kong, China's phobias about outside interference, and its fears of Hong Kong being used as a base for subverting the mainland. However, the fundamentals have to be borne in mind. These are the economic importance of Hong Kong to China and China's desire to show that it is sincere about the "one country, two systems" principle because this is what it prefers to use ultimately for Taiwan. Hence China will try very hard to make the principle work. Failure, if any, is likely to arise as much from actions by the people in Hong Kong and by outsiders (actions which unintentionally or intentionally play upon China's phobias) as by anything China does.

THE ASEAN SIX THE ASEAN SIX Asad Latif • Liak Teng Kiat • Leonard Sebastian • Naimah Talib

he Sultanate of Brunei is attempting to integrate itself economically with the rapidly growing Southeast Asian region, while keeping tight ......,=......,. control at home and maintaining the ultra-conservative nature of its politics and government. In order to open up its economy, the Sultanate has recently joined the International Monetary Fund and is also trying to boost its privatization programme. Brunei will continue to promote and give prominence to Islamic values in the running of its government under the aegis of the national ideology, Melayu Islam Beraja (MIB, the Malay Islamic Monarchy), which has been actively sponsored since 1990. This ideology serves a dual function : neutralizing the appeal of externally inspired Muslim fundamentalism and as an instrument of legitimacy for the Sultan's rule by marrying the conservatism of Islamic values with that of Malay culture and the traditional unifying role of the monarchy. There are muted signs of political liberalization as seen in the reappearranee of Brunei's only registered political party, the Parti Perpaduan Kebangsaan Brunei (PPKB, the Brunei National Solidarity Party), which split from the banned Parti Kebangsaan Demokratik Brunei (PKDB, the Brunei National Democratic Party) in 1985. After a long period of inactivity, the PPKB was allowed to hold its first national assembly in February 1995, at which the party president,

Brunei

Land Area:

5,765 sq km

Population:

270,000 (1993 estimate)

Capital:

Bandar Seri Begawan

'JYpe of Government:

Sultanate

Head of State:

HM Paduka Seri Baginda Sultan Hj Hassanal Bolkiah Mu'izzaddin Waddaulah

Currency:

Brunei dollar

US$ Exchange Rate on 30 November 1995:

US$1

=

B$1.41

[

7

POliTICAl OUTLOOK Haji Latif Chuchu, reaffirmed the party's support for the Sultan and the MIB. However, the party's re-emergence should not be taken as a move to open up the political process. Indeed the authorities soon had reservations about the leadership of Haji Latif, a former political detainee, and he had to resign as party president in September 1995. The party's activities will remain circumscribed and closely monitored. Although revisions to the 1959 constitution are being considered, it is unlikely that these changes, or steps to end emergency rule, which was imposed in 1962 after the Brunei revolt, will be announced in the near future. The year 1996 will see Brunei continuing with its attempts at broadening its economic base by expanding its non-oil sector, which has been hampered over the past decade by the small domestic market, low-skilled labour, and high wages. The authorities are encouraging the growth of small and medium-scale industries and intensifying efforts to promote privatization of the public services. Besides being a stimulus for economic growth, privatization is also seen as a way of improving the efficiency of the public services. There are signs that the government is encouraging some of its best talents in the civil service to opt out and join the private sector. This should gather momentum in 1996 and the private sector would continue to register modest rates of growth. The Sultanate is optimistic about the important role it can play in the East ASEAN Growth Area (EAGA), which comprises Brunei, the Philippine island of Mindanao, Indonesia's Moluccas, Sulawesi, and Kalimantan, and Malaysia's Labuan, Sabah, and Sarawak. The EAGA Secretariat will be sited in Brunei, while Labuan will be developed as the financial centre. Brunei will attempt to establish itself as the trade hub and centre of tourism for the growth area, which has a population of 40 million.

Indonesia

8

resident Soeharto has been strengthening his control of the political system ahead of the parliamentary elections in 1997 and the presidential election in 1998 as indications mount that he will seek a seventh term of office in 1998. He wants to ensure that both elections are completed smoothly and, although the outcome is not in doubt, with as high a degree of support for his government and himself as possible. Such a favourable outcome will also provide a conducive environment for leadership selection at a time of his choice. The President's apparent determination to continue in power despite his advancing age (he will be seventy-six in 1998) and his failure to indicate who would be his successor (most observers doubt that he would want the current Vice-President Try Sutrisno to succeed him) have produced uncertainty, even unease, about the leadership succession. This, together with the impending

THE ASEAN SIX

Indonesia Land Area:

1,919,443 sq km

Population:

181.3 million (1991 estimate)

Capital:

Jakarta

Type of Government:

Presidential government based on the 1945 constitution

Head of State:

President Soeharto

Next Election:

1998 (presidential) 1997 (parliamentary)

Currency Used:

Rupiah

Exchange Rate on 30 November 1995:

US$1

=

2,287 rupiah

parliamentary elections, has resulted in sections of the political elite jockeying for position, as shown by the political manreuvrings of leading potential presidential candidates, the Minister for Research and Technology, B.J. Habibie, and the Information Minister, Harmoko. Also, the actions and posture of opposition politicians, the press, student and labour activists, human rights groups, and a plethora of non-government organizations give the impression that the political climate in Indonesia is likely to become more disturbed as the country prepares itself for the parliamentary and presidential elections, the latter by the 1,000strong Peoples' Consultative Assembly (Majelis Permusyawaratan Rakyat [MPR]), of whom 600 are appointed by the President. The President has been exerting tighter control over the political system in 1995. The era of Keterbukaan (openness), encouraged by the President in the late 1980s, ended in rnid-1994 with the banning of three popular news magazines. It was followed by a crackdown in March 1995 on at least five underground publications strongly critical of government policy. In September, three journalists were jailed for publishing a newsletter without a licence. Two legislators from the House of People's Representatives (Dewan Perwakilan Rakyat [DPR]) were expelled. One, from the government-backed Golkar organization, was alleged to have offended several cabinet ministers and reportedly made a number of undivulged "deviations" from Golkar policy, while the other, from the opposition United Development Party (Partai Persatuan Pembangunan [PPP]), was said to have challenged the state ideology, Pancasila. Although political parties repre-

9

POLITICAL OUTLOOK sented in the DPR are given the authority under the Indonesian constitution to "recall" deviant Members of Parliament (MPs), the decision to exercise this right, a common practice in the 1970s, has been used only sporadically over the last decade. Efforts have been made to curb potential political opposition forces such as the Indonesian Democratic Party (Partai Demokrasi Indonesia [PDI)), one of two officially sanctioned non-governmental parties. In May 1995, PDI leader Megawati Sukarnoputri, daughter of Indonesia's charismatic first president, Soekarno, was barred from attending official party functions in East Java, which has 20 million voters and sixty-two out of the 400 parliamentary seats. Concerns that the party's resurgence under her leadership could attract a new generation of voters and precipitate an even bigger swing against Golkar than occurred in 1992 are not unfounded. East Java is also the heartland of the Nahdatul Ulama, the 30 millionstrong Muslim organization led by a childhood friend of Megawati, and vocal government critic, Abdurrahman Wahid. Implicit in the government's political moves against the PDI is the fear that the Nahdatul Ulama will lend support to the PDI in the 1997 elections. The authorities have also encouraged an alternative PDI leadership in East Java under the stewardship of Latief Pudjosakti, a rival of Megawati. The existence of rival boards has effectively paralysed the party's activities there. In May, Abdurrahman Wahid was also barred by the authorities from speaking to members of his own Nahdatul Ulama. The PDI issue is a clear indication of the authorities' latent fear of a revival of populist politics (paham kerakyataan) on a large scale and the associated concerns that they could provide an avenue of advance for militant Islam. Hence, the prospect of any sort of alliance between the PDI and disillusioned Islamic youth conjures up images of instability in the lead up to the 1997 elections. The final and perhaps most significant political action taken by President Soeharto in 1995 has been his initiatives to tighten his hold over the Armed Forces. The situation in the military has been unsettled, as attested by waves of reshuffles every half a year over the last two years. Major reshuffles took place in August 1992, April 1993, August 1993, January 1994, August 1994, and again in January 1995. The last reshuffle was the most significant, involving changes in key positions in the Army central command and some of the regional commands. The rationale for many of the changes was a desire by the President to ease out officers who were part of an informal network within ABRI built around the now retired Armed Forces Commander, Benny Murdani, who remains a potential focus of military opposition to the President. The appointment of General Raden Hartono, a staunch orthodox Muslim, as Army Chief of Staff raised a few eyebrows in political circles. Nevertheless, the appointment is another shrewd piece of political balancing which characterizes the modus operandi of the President. There are two possible reasons for the appointment of General Hartono. First, President Soeharto, conscious of the long-standing unhappiness

10

THE ASEAN SIX in Muslim circles about influential Armed Forces posts going to Christians, is keen to domesticate and dampen the potential for militant Islam by having people in important positions who are seen as being close to Islam. Second, the placement of loyalists such as General Hartono and the current Armed Forces Chief General Feisal Tanjung is crucial to President Soeharto's election strategy for the 1997 general elections and the 1998 presidential elections. Megawati's election to the leadership of the PDI in 1993 was said to be due indirectly to the loosening of controls by some members of the Armed Forces. Any repetition of this in 1997 could have adverse implications for the governing party, Golkar. Significantly, Indonesia's Parliament voted in June to reduce the military's number of appointed seats from 100 to seventy-five. Civilian representation will rise to 425 seats from 400, beginning with the 1997 election. This symbolic gesture was an attempt by President Soeharto to create a softer, more civilianized image for Indonesia, long seen as being dominated by the military. While there might have been grumbling in the ranks regarding the reduction of the Armed Forces presence in Parliament, significantly, no statement was made by any senior officer expressing reservation. The President's desire to reconstitute the Armed Forces' role to fit in with the changing socio-political circumstances prevalent in Indonesia today augurs well for the political development of the country. Major-General Mochammad Maruf, Chief of the Social and Political Staff (Kassospol) of the Armed Forces, has gone on record to state that the military's role now is to play the role of a supporting player to the civilian leadership in the political arena . With Indonesian society still volatile, even though the role of the Armed Forces in non-military affairs is being curtailed somewhat, no one believes that dwi-fungsi (the Armed Forces dual function) is under threat. The military also looks set to remain the final arbiter in the event of any political crisis. In New Order Indonesia, the heavy concentration of wealth in a small number of large companies and families, many of them of ethnic Chinese origin, has for long been a sensitive issue, particularly as the Chinese constitute only 4 per cent of the population. The problem has been compounded in recent years by the perceived links between the business interests of the President's family and those of the ethnic Chinese conglomerates. More broadly, the tension between the rich and the poor, described in Indonesia as kecemburuan sosial or social jealousy, was considered by Defence Minister Edi Sudrajat to be one of the most significant challenges to national security. It can lead to disturbances in which ethnic Chinese can become easy targets, as illustrated by the Medan riots of March 1994 and the brief unrest in Pekalongan, Central Java, in November 1995. The President sponsored a meeting in Bali in August 1995 with the country's top business magnates. This was not the first attempt by the President to get business tycoons to support government initiatives to redress income inequalities. Since past efforts had largely come to naught , the August Bali Declaration

11

POLITICAL OUTLOOK was received with some scepticism. The plans announced by the tycoons in the Declaration included a scheme to start a 50 billion rupiah fund to provide loans to small and medium enterprises (SMEs) to match a government fund of the same amount. A further positive indication of the government's intent to spread opportunities more evenly was the announcement that SMEs will get a bigger share of telecommunications contracts while conglomerates' access will be limited. How effective such measures will be is unclear, but with the bulk of the SMEs owned by pribumi Indonesians, they have at least some political value. Indonesia also made progress in 1995 in the areas of government accountability and the rule of law. Human rights organizations such as the National Commission of Human Rights (Komisi Nasional Hak-Hak Azasi Manusia [KOMNAS HAM]) have been given licence by the government to investigate human rights violations. An unprecedented enquiry by KOMNAS HAM into the Liquica (East Timor) killings together with several investigations by Indonesian civilian and military authorities led to the Armed Forces jailing two soldiers. An investigation is under way in Timika, Irian Jaya, after KOMNAS HAM alleged in September 1995 that "elements of the security apparatus" were responsible for the deaths of sixteen people. In May the State Administrative Court in Jakarta overturned a government decision to revoke the publishing permit of Tempo magazine and ordered Information Minister Harmoko to re-issue a licence for the once-influential weekly. This was the first time an Indonesian court had ruled against the government. When subsequently Minister Harmoko appealed, the State Appellate Court upheld the decision of the Administrative Court. Also in May 1995, the Supreme Court dismissed the convictions of seven people for the murder of young labour activist and watch factory worker Marsinah. All but one of those convicted were employees of the same factory and charged that their confessions had been extracted from them under duress by the military. In October the Supreme Court also threw out the conviction of a labour leader, Muchtar Pakpahan, accused of inciting workers to riot in Medan. He had earlier been sentenced to four years in prison. In a spirit of reconciliation marking Indonesia's fiftieth anniversary, three jailed leaders of the 1965 abortive coup were released. The government also lifted restrictions on more than 1.3 million former political prisoners who had been denied full citizenship rights for many years. In conclusion, developments in Indonesia provide grounds for cautious optimism. There is uncertainty about leadership succession. There is resentment on the ground about corruption and income inequalities, and the danger of outbreak of sporadic violence, targeted especially at the ethnic Chinese, does exist. However, on the other hand, the President seems well in control of the levers of power, even though he seems at times to be out of touch with the ground. The Armed Forces are now more united and they remain committed to maintaining stability. They will probably be able to contain and squelch any

12

THE ASEAN SIX outbreak of disorder on the ground. Meanwhile, with economic growth expected to continue at 6-7 per cent, the trickle down effects will probably keep the lid on social discontent. Hence, as of now, it appears that the President is sufficiently in control to manage succession on his own terms, whenever that is going to be. Many observers of the Indonesian scene believe that apart from competence for the job, safeguarding of his legacy and the interests of his family will be important considerations in the choice of a successor. However, this may not be possible if Soeharto were to suddenly pass from the scene or if his political control is weakened by illness (though at present he appears to be healthy). In the former case, the vice-president (Try Sutrisno until1998) will be president until the MPR can meet to select a new president. In both cases, there could be considerable instability as rival contenders manreuvre for influence and power.

alaysians voted overwhelmingly for continuity when they went to the polls in April1995, giving Prime Minister Mahathir Mohamad's ..-;;.....;-....;=..., ruling Barisan Nasional coalition its best results ever in the nine general elections held since independence. His electoral triumph was reinforced six months later when members of his dominant United Malays National

Malaysia

Malaysia

Land Area:

330,434 sq km

Population:

19.65 million (1994 estimate)

Capital:

Kuala Lumpur

Type of Government:

Federated parliamentary democracy with constitutional monarch

Head of State:

His Majesty the Yang di-Pertuan Agong Thanku Ja' afar

Prime Minister:

Dato' Seri Dr Mahathir bin Mohamad

Next Election:

June 2000

Currency Used:

Ringgit

US$ Exchange Rate on 30 Nov 1995:

US$1 = M$2.537

13

POLITICAL OUTLOOK Organization (UMNO) endorsed his proposal that there be no contest for the party's two top posts at its next triennial election due in November 1996. Although the two developments will not end the politicking in UMNO, nor quell for good the rumours of a power struggle between the seventy-year-old premier's relations with his young deputy Anwar Ibrahim, they all but guarantee that, health permitting, Mahathir will remain as leader at least until 1999, and that his drive to turn Malaysia into an internationally respected, industrialized nation will continue uninterrupted and largely unchanged. The long-anticipated general election, held just six months before the government's term was due to expire, was a tame affair whose outcome was never in doubt. Apart from continuing scandals, particularly over the allocation of shares to relatives of certain UMNO leaders and over acquisition of private land by state governments, there were few issues the opposition could exploit. The government's post-1990 liberalization of cultural, economic, and education policies had removed the main sources of past grievance among Chinese Malaysians, who form about 30 per cent of the population. And while these policies were not embraced with the same enthusiasm by the majority Malays, any resentment they might have felt was largely blunted by the general prosperity resulting from nine years of continuous high economic growth, which showed no signs of spluttering. So it was little wonder that the opposition was demoralized and divided, with the Democratic Action Party (DAP), hitherto the main opposition in Parliament, gloomily predicting defeat well before the 24-25 April poll. What they - and everyone else - did not anticipate was the magnitude of the Barisan victory. It seized 162 of the 192 parliamentary seats, taking a record 65 per cent of the votes cast, more than eight percentage points higher than its 1990 performance and over three points better than its previous best in 1982. The Barisan also swept up in the state elections (held only in the peninsular states, Sarawak and Sabah having already held theirs, in 1992 and 1994 respectively) : it captured 338 of the 394 seats, with nearly 67 per cent of the popular vote. The Barisan's performance in the northern Malay heartland - Kedah, Kelantan, and Terengganu- was mixed. On the one hand, it improved its seat tally, state and federal, in all three states, including Kelantan, where Parti Islam SeMalaysia (PAS) was returned to power, with UMNO breakaway, Semangat 46, as its junior partner. But its victories were almost entirely at the expense of Semangat, whose performance even in 1990 had shown it was not a serious threat to UMNO in the competition for Malay votes. UMNO's only real rival was PAS, whose Islamic programme has always held appeal for significant sections of the Malay populace. Although PAS failed to win more seats than in 1990 (seven parliamentary and eleven state seats, all in the heartland), it was able to increase its share of the overall votes. It made serious inroads even in Kedah, Mahathir' s home state, winning 31.5 per cent of the state votes and 24.9 per cent of the

14

THE ASEAN SIX parliamentary votes, eight and nine percentage points higher respectively than in the previous election. But if Barisan was unable to check PAS, it all but demolished the DAP, the party that had traditionally attracted disaffected non-Malay voters, especially the Chinese. This time, the Chinese swung heavily to the Barisan, reducing the DAP to only nine (from twenty) parliamentary and eleven (from forty-four) state seats, its worst showing since 1982. The party's loss was especially devastating in Penang, the only state with a Chinese majority, where the DAP had won six parliamentary and fourteen state seats in 1990, and into which it now threw its main effort in an all-out bid to win the state government. The gamble failed spectacularly: although it retained three parliamentary seats (two by minuscule margins), it lost all but one of its state seats. The results were a personal triumph for Mahathir, who had been in office for fourteen years and was facing pressure from impatient younger elements in the party to step down early for his 48-year-old deputy. The Cabinet he named after the poll indicated he had no intention of doing so. There were few Anwar allies in the largely unchanged line-up, and then only in relatively junior positions. 'I\vo senior figures regarded as antagonistic towards Anwar, Trade and Industry Minister Rafidah Aziz, and Foreign Minister Ahmad Badawi, kept their positions. There had been rumours that both might be dropped, Rafidah because of allegations that she had abused her powers by allocating shares to her sonin-law and Badawi because of his poor performance in the 1993 UMNO vice-presidential race. There were several promotions, the most notable involving Najib Tun Razak, eldest son of Malaysia's second premier and a possible Anwar rival. He was moved to education, a post commonly regarded as a stepping stone to the premiership. His old portfolio, defence, went to Syed Hamid Albar, who is generally regarded as aloof from Anwar, while the newly created and potentially important entrepreneurial development post went to Mustapa Mohamad, a one-time protege of former finance minister and Mahathir confidante, Daim Zainuddin. But speculation about what the Cabinet line-up portended for Anwar,s prospects was soon replaced by questions about Mahathir' s own position as elections got under way within UMNO to pick leaders for the party,s 165 divisions, who would serve as delegates to its general assembly and vote at its triennial election. Although there were no more contests than usual, these were bitterly fought, and there were numerous allegations of irregularities and candidates trying to buy their way to office. Some candidates evidently claimed to be proxies of either Mahathir or Anwar, reviving rumours of a power struggle between the two men, which both had repeatedly denied to no avail. Among the casualties were several figures considered Mahathir allies, including Ghafar Baba, the man Anwar had deposed as deputy leader in 1993 and who was now attempting a comeback after being persuaded to return to politics just before the

15

POLITICAl OUTlOOK general election. But the most closely watched races were in Kedah, where two Mahathir loyalists were challenged in spite of his express wish that they be retained. The first was Daim Zainuddin, who resigned rather than fight for the seat. Despite Mahathir' s public warning that UMNO would be destroyed if "nonsensical" people were elected, the challenger subsequently managed to garner 161 votes to the 180 won by Daim's deputy and stand-in. The second loser was former agriculture minister Sanusi Junid, widely touted as the prime minister's choice to replace the state's incumbent chief minister, who was being given many hints to resign. Sanusi, a bitter rival of Anwar, lost by twelve votes to his deputy, and complained that he was a victim of outsiders who wanted to destroy his political career. Not surprisingly, the results led to talk that Mahathir was losing control, and that Anwar would challenge him for the party presidency in the 1996 party poll. But if Anwar (or, more likely, his backers) had such intentions, they were effectively quashed after Mahathir flatly declared in September that there would be no contest for the party's two top posts because that was "party tradition". While Anwar himself dismissed talk of a contest as originating from the "politically bankrupt or mentally ill", other party leaders, including Anwar supporter and acting UMNO Youth leader Nazri Aziz, quickly came out in support of the no-contest idea. The chorus culminated at UMNO 's general assembly in late November, when the delegates unanimously assented to a resolution calling for Mahathir and Anwar to be retained at the 1996 leadership election. The resolution, adopted by acclamation, came a day after an extended plea for party unity from Mahathir, at the end of which he publicly acknowledged for the first time that he could not continue in office indefinitely. The time would come, "not long from now", when a new leader would take over the party, he said. His words and the party resolution ensure that there will be at least a temporary cessation to rumours about the Mahathir-Anwar relationship during 1996, when UMNO celebrates its fiftieth anniversary. But these will hardly end politicking within the party: with Anwar's succession now apparently assured, the contest for the three vice-presidential posts will be keener than usual , since the top winner can expect by tradition to become his deputy. It is likely too that there will be moves by younger elements impatient to take their place in high office (and acquire the patronage that goes with it) to keep Mahathir to his word and to persuade him to step down sooner rather than later. The outcome of the internal UMNO manreuvring will have minimal impact on public policies, most of which have wide public support, not just within UMNO but also among the population at large. It might be added that UMNO delegates also endorsed the government's proposals to allow the wider use of English in schools and universities, despite widespread concerns in the Malay community that this would undermine the position of Malay as the sole national language. So, unless Mahathir unexpectedly steps down in the near future,

16

THE ASEAN SIX Malaysia may be expected to proceed in the next couple of years as it has in the past. Even if he were to do so, the changes that Anwar would bring are likely to be limited to tone and emphasis rather than any shift in direction.

hanks to continuing political stability and the economic reforms put Philippines in place in the past few years, the Philippine recovery remains on track, and looks set to continue for the next couple of years at least. But whether this can be sustained over the longer term is open question. Although law-makers generally agree on the need for continuing reforms to consolidate and expand the country's recent achievements, the pace has already slackened, and threatens to stall even further as the 1998 national elections draw nearer. The campaigning has in effect begun, with moves in the House of Representatives to amend the existing constitution, which bars President Fidel Ramos and a large number of legislators from seeking re-election. The mid-term congressional and local elections in May 1995 were supposed to have reduced politicking and given new impetus to Ramos's reform programme. His Lakas party, which dominates the House of Representatives, had linked up with Laban, the main Senate party, to fight the election on a joint platform of promoting development. Despite early fears that the coalition might do badly after a major furore sparked off by the execution in March of a Filipina maid in Singapore, its candidates easily swept the polls at all levels. But expecta-

[T]

Philippines Land Area:

300,000 sq km

Population:

68.6 million

Capital:

Manila

Type of Government:

Republic, with American-style presidency and two-chamber Congress

Head of State:

President Fidel Ramos

Next election:

May 1998

Currency Used:

Peso

US$ Exchange Rate on 30 November 1995:

US$1

=

26.149 pesos

17

POliTICAl OUTlOOK tions that this would make for swifter passage of outstanding legislation were soon dashed by political intrigue in the Senate that saw Majority Leader Edgardo Angara being ousted in August by a vote of 17:6, with one member abstaining. He was replaced by his predecessor in the post and fellow Laban Senator, Neptali Gonzales. The coup has left the Senate in the peculiar position of having both the majority and minority leaders coming from the same party, Laban. But more seriously, it has turned Angara, whose supporters include some of the Senate's heavyweights, from a key Ramos ally into an enemy. Although the plotters seem to have acted primarily out of personal unhappiness with Angara, particularly over his allocation of committee chairmanships, which are seen as useful launching pads for presidential hopefuls, fingers were immediately pointed at Ramos as the mastermind behind them. His motive, supposedly, was to clear the way so that he can run again in 1998. Angara, despite his strong support for Ramos's reform programme, was seen as an obstacle to the president's reelection plans because of his opposition to constitutional change and because he was considered a strong contender for the presidency in 1998. Ramos has denied the accusations, reiterating his past assertions that he has no wish to stay on after his term. However, some of his allies in the House of Representatives, including Speaker Jose de Venecia , are actively pushing for constitutional amendments to remove term limits. It is possible, of course, that they are doing so for themselves rather than for Ramos, since eighty-seven of the 204 elected Representatives would have to stand down if no changes are made to the charter. But their initiative could de-rail Ramos's reform programme, if only by distracting attention away from the country's many unsolved problems. For the moment, things are going better than they have for years. The two main threats to national stability have been effectively defused. The rightist army rebels whose seven coup attempts destabilized Corazon Aquino's presidency in the latter 1980s, have formally renounced violence in return for full and unconditional amnesty. Several of their number contested the May election, their leader, Colonel Gregorio "Gringo" Honasan, successfully winning a seat in the Senate. Government efforts to draw the communists into negotiations have made little headway, but the insurgents are badly split and demoralized, and capable only of banditry and the occasional terrorist attack. The sole remaining security threat comes from Muslim separatists in Mindanao, where breakaway groups from the Moro National Liberation Front (MNLF) have refused to join the parent group in its negotiations with the government. The splinter factions' capacity for damage was vividly illustrated in early April when some 250 heavily armed men attacked and destroyed the mainly Christian town of Ipil. However, without help from the Middle Eastern states which have thrown their support behind the MNLF, the separatists will remain largely a localized nuisance that does not endanger the rest of the country.

18

THE ASEAN SIX The economy, now largely deregulated, is doing well, by standards of the past if not those of the other countries in the region . Foreign investments are pouring in, not just to Metro Manila but also to a host of special investment zones across the country, and local businessmen are more bullish about prospects than they have been in years. The optimism has spread to Filipino professionals abroad, reportedly inducing a good many to return after years of economic exile. But this mood is being threatened by a sharp increase in serious crimes kidnapping, murder, bank and armoured car robberies - that authorities are unable to explain. Ramos has vowed, yet again, strong action and has taken over responsibility for tackling the problem from Vice-President Joseph Estrada, a former action star whose massive popularity has dimmed following accusations in May that members of his Presidential Anti-Crime Commission had executed eleven alleged robbers, rather than killing them in a heroic shoot-out as claimed. Whether Ramos will ultimately do better than Estrada remains to be seen. Initial results were not encouraging; several prominent television personalities and businessmen were among those kidnapped or murdered. Quite apart from the sheer multiplicity of agencies involved in law enforcement (thirty-five by official count), a major cause of the problem is the corruption that pervades the agencies and indeed much of the Philippine public sector, and rooting this out will hardly be easy. The worsening crime situation was only one of several unpleasant reminders in 1995 of the many problems still facing the Philippines and of how much more needs to be done if it is to catch up with its neighbours. At the beginning of the year, the country was made embarrassingly aware of its military vulnerability after China was found to have put up structures on a reef in the disputed Spratly Islands. Although the Philippines reacted defiantly to what it maintained was Chinese violation of its sovereignty by blowing up some Chinese maritime markers and detaining several Chinese fishing vessels in the area, it would have beet?- no match for the Chinese had Beijing decided to retaliate with force, which it did not. A different aspect of Filipino vulnerability came to the fore soon after the initial face-off in the Spratlys, sparked off by the hanging of Flor Contemplacion, a Filipina working as a maid in Singapore who had been convicted of double murder. Her death triggered a furore of several months long over the plight of the estimated 4 million Filipino workers overseas, and the social problems of the families left behind. Among other things, the execution generated calls to ban Filipinas from working abroad as maids. But quite apart from the impossibility of enforcing such a ban, the bottom line is that the country can ill-afford to forgo the US$3 billion to US$5 billion that its overseas workers send home annually. Perhaps more important, the economy is yet unable to accommodate these workers, let alone pay them the kind of wages obtainable abroad. The past two

19

POLITICAL OUTLOOK years of growth have barely made a dent on the unemployment situation; the unemployment rate remains around 9-10 per cent, with underemployment estimated at some 20 per cent. Significant improvements can only come about with sustained high growth, which in turn requires considerable upgrading of the country's woefully inadequate and ramshackle infrastructure. After successfully enlisting the private sector into solving the nation's energy problems in 1993, policy-makers are seeking to do the same in respect of its roads, railways, ports and airports, and water supply. But while investors have shown interest, few schemes are likely to materialize unless the investors can be assured of reasonable returns on their money, which means Filipinos having to pay in full for those services and facilities that they have so far obtained free or at heavily subsidized rates. They can be expected to resist the prospect, with support from the country's many interest groups and from populist politicians. Nevertheless, the positive results of several years of deregulation and economic liberalization have led to a growing consensus against continued regulation and protectionism. This was shown again in late 1995, when Congress approved a bill that would pave the way for full deregulation of the oil industry, hitherto one of the most regulated in the country, by 1997. There is also progress on the judicial front, where parties unhappy with government decisions used to be able to count on a sympathetic hearing from interventionist judges. Of late, however, the courts have been ruling in favour of the government. One decision, delivered in late October, allows the government to finally go ahead with the expanded value-added tax that Congress approved in late 1994. But while the measure will help the government raise badly needed revenues, the most important step, tax reform, is yet to come. While the House Speaker has vowed enactment by January 1996, its passage is by no means assured. For one thing, the tax package would require the legislators themselves, or their relatives and business associates, having to pay more. Also, even if the House might be accommodating, the Senate, always independent-minded, is likely to be less so. The Upper Chamber has always moved much more slowly than the House at the best of times. With the bitterness engendered by the August coup, it could proceed even more slowly as Angara and his supporters scrutinize every proposal line by line. The longer the tax bill and others are delayed, the less likely their chances of approval. Electoral considerations will then have priority over reforms.

l sudden return in 1995 of a former minister as a deputy premier was one of the few political surprises in a year when the People's Action Party (PAP) continued to rule Singapore firmly in the face of some awkward developments abroad. ...

20

b.,

THE ASEAN SIX

Singapore Land Area:

633 sq km

Population:

3.0 million

Capital:

Singapore

Type of Government:

Parliamentary democracy

Head of State:

President Ong Teng Cheong

Prime Minister:

Goh Chok Tong

Next Election:

By April 1997

Currency Used:

Singapore dollar

US$ Exchange Rate on 30 November 1995:

US$1

=

S$1.412

Tony Tan, a PAP stalwart who had held a number of key cabinet posts, had left for the private sector in 1991 on the understanding that he would return if circumstances demanded it. In July, Prime Minister Goh Chok Tong decided to recall him as a deputy premier and defence minister. Some observers found the return of Tan, whom former Prime Minister Lee Kuan Yew had once mentioned as his initial first choice to succeed him, somewhat intriguing, noting that Goh had not considered it necessary to recall him in 1992 when two deputy prime ministers - Lee's elder son, Lee Hsien Loong, and Ong Teng Cheong, now President - had been struck with cancer. At that time, when Senior Minister Lee said publicly that Tan would rejoin the Cabinet, Goh responded that he had no immediate plans to re-appoint his former colleague because there was no leadership crisis. What could have been the reason for his recall two years later, when Singapore was not facing any apparent crisis? No specific reason emerged by the end -of the year, but Tan's return meshed in with the creation of a stronger governing team to guide Singapore through the vulnerabilities that hobbled it in spite of its successes. And given his seniority and standing in the Cabinet in 1991, it seemed reasonable to offer him deputy premiership on his recall. Furthermore, having a person of Tan's calibre as next in the succession line after Lee Hsien Loong could only strengthen confidence in Singapore's future. It was Singapore's successes that enabled the government to proceed during 1995 with policies such as its popular upgrading programme for public housing estates, where most of the population lives. It also tried to meet young Singaporeans'

21

POLITICAL OUTLOOK demand for increasingly expensive private condominiums by introducing a new category of upper-end public housing comparable to, but less costly than, the private alternative. Older citizens, former MPs, ministers, and some public-sector pensioners - who had laid the foundation for Singapore's progress but had retired before its development had taken off - were rewarded with a S$268 million package which focused on health care, a primary area of concern to the elderly. Such programmes were dividends from Singapore's economic progress. However, there were warnings that progress should not make citizens complacent, for the country was vulnerable to economic changes occurring in the region, international political developments, and challenges to the value system that underpinned Singapore's growth. Indeed, Singaporeans were reminded of their dependence on others for the most basic of resources when the Save Water Campaign returned after an absence of many years. It underscored the country's vulnerability, a frequent theme of official discourse during the year. Goh reiterated it in his National Day Rally speech in August. Singapore, now classified as a developed country, would have to compete in both the super league and with the newly industrializing economies. Singaporeans, he said, should remember that external events could threaten their city-state overnight. However, they could take heart from the fact that its political and economic fundamentals were sound. As were its values, the software of its success. In the same speech, Goh identified attacks on Singapore's system by the Western media and human rights groups as a pressure point that the country would have to respond to. In recent years, Singapore leaders and opinion-makers have been vocal about the excesses of the liberal democracy exemplified in American practice: runaway individualism, enervating welfarism, stalemated politics and an adversarial media. As an antidote to the global encroachment of those temptations, they have espoused a set of communitarian and consensual Asian values which emphasize stability and respect for political institutions and leaders. The critique has not been limited to America but has touched on the Philippines, for example, the Asian country whose institutions are modelled most closely on those of the United States. The engagement on these issues - dramatized by the official and media reaction in the United States to Singapore's caning of convicted American teenage vandal Michael Fay in 1994 - was placed in sharper focus in 1995. Controversy erupted over Singapore's hanging of a Filipina maid convicted of murder; two foreign newspaper commentaries led to court cases; and there was opposition to Goh being commended by his alma mater in the United States. The developments pitted its conservative political system against liberal and human rights groups abroad and, in the case of the maid and the award for Goh, against a domestic opposition scenting political advantage in the fallout.

22

THE ASEAN SIX The hanging of Flor Contemplacion, convicted of the murder of another Filipina domestic and her Singapore charge, led to an outburst of public and media fury in the Philippines. What confounded and dismayed many Singaporeans was that the penalty for murder, which applies equally to citizens and foreigners living in the country, should have caused some Filipino officials and commentators to put not only its legal system but its political system on trial. Indeed, Manila downgraded diplomatic relations. This proved to be temporary, however, as anger petered out after an American expert panel vindicated the findings of Singapore pathologists on the murdered maid, indirectly supporting the grounds for convicting the murderer. Both newspaper commentaries that led to court cases involved the International Herald Tribune (IHT), a Paris-based newspaper jointly owned by The New York Times and The Washington Post. In January, American academic Christopher Lingle and four other parties were found guilty of contempt of court, and fined, for a commentary by him which the paper had published in October 1994. It had alleged that intolerant Asian regimes relied on "a compliant judiciary to bankrupt opposition politicians" as part of their ingenious attempts to suppress dissent. Lingle, who had taught at a local university, had fled Singapore shortly after a police investigation into him had begun. In the other case, the IHTwas ordered to pay S$950,000 in damages to Goh and the two Lees for having libelled them in an August 1994 article alleging that "dynastic politics is evident in 'communist' China already, as in Singapore, despite official commitments to bureaucratic meritocracy". The article, by Hong Kong-based journalist Philip Bowring, also referred to a "battle between the corporatist needs of the state and the interests of the families who operate it". Significantly, what in Singapore was a question of the courts enforcing the law on contempt and libel was viewed by foreign critics as the government's attempts to suppress freedom of expression and the press. Yet, as AttorneyGeneral Chan Sek Keong said in the Lingle case: "Contempt of court is part of our law. This action has been brought to enforce the law and to prevent our judiciary from being scandalized. No more and no less." The challenge at Williams College in Massachusetts, where Goh spoke after receiving an honorary degree for his role in Singapore's economic development, was different. Some faculty members and students opposed the honour because they felt that the city-state suppressed intellectual freedom. Chee Soon Juan, the secretary-general of the opposition Singapore Democratic Party (SDP), was invited to take part in an alternative panel discussion with other critics of the city-state. Chee's controversial decision to accept the invitation enabled the government to accuse him of being opposed to Singapore's success, a charge which he parried by arguing that while his party was against the PAP's policies, it was

23

POLITICAL OUTLOOK committed to the country's strength and prosperity. Nevertheless, his presence in the camp opposing an award recognizing Singapore's economic progress sharpened the government's view of him and his party's manifesto, which it criticized for coinciding with the agenda of Western liberal and human rights groups seen as inimical to Singapore's success. In the event, there was no showdown at Williams. The alternative panel discussion, at which Chee judiciously balanced his credentials as a patriot and an oppositionist, failed to overshadow the official ceremonies. In spite of a boycott by some students and a few sharp questions from the floor, Goh carried most of the audience with him. The episode demonstrated a certain internationalization of Singapore's domestic politics. National issues were aired and argued on foreign soil; and Chee, who had sought unsuccessfully to engage the PAP in such a debate at home, gained a forum for his views abroad. He had done so before, but the Prime Minister's presence at Williams lent weight to his own. What lies ahead? Dramatic as the Williams affair was, Chee' s foreign venture did not make any appreciable dent in Singapore's domestic politics. Indeed, quite apart from his eagerness to use foreign opportunities to score political points, it is not yet clear that his emergence as an assertive opposition figure, the likes of which have not been seen in recent years, will erode the PAP's political hold. True, the SDP' s new confrontational style is something that the ruling party will have to contend with, and the ensuing contest may well contribute to an evolution of the system beyond the "voluntary suspension of partisan realpolitik" which, according to a commentator, began when the opposition Barisan Socialis quit parliamentary politics in 1966, leaving the electoral field open to the PAP and enabling it to fashion Singapore into what a leading political scientist once called an "administrative state". Chee represents an attempt to break with that politically monolithic past. However, demands for political liberalization cannot but continue to be articulated meaningfully only within a larger framework of aspirations which remains primarily economic for the majority of Singaporeans. Here, the PAP 's record of delivering the goods stands it in good stead with pragmatic Singaporeans. They gave no indication during the year that they were willing to exchange the government's record for the opposition's promises. An important reason for this is a double advantage that the PAP enjoys. If the economy continues to do well, it can expect a reiteration of popular support; if growth is threatened seriously, it can expect citizens to rally behind it because of its economic record. In both cases, the majority would be likely to emphasize their economic wellbeing over their political expectations, an outlook that reflects their view of the PAP 's role in transforming Singapore from an economic backwater to a devel-

24

oped nation in three decades. In Singapore, far more than elsewhere, politics is the art of the economically possible. In this context a factor like the cost of living is politically important. It affects, not only lower-income Singaporeans but also others who, even though they enjoy high incomes, find their access increasingly limited to private housing and cars. They compare what their money buys them in land-scarce Singapore with how far it can go in countries where houses and cars are far cheaper. This dual dissatisfaction over the cost of living is a potential cause of worry for the government. Indeed, economic changes in the region and beyond are the source of a danger that Singapore society may become polarized into two economies: an upper crust of professionals and those with a tertiary education, who will benefit from the opportunities created by the regionalization of the Singapore economy; and workers without the necessary educational qualifications and working skills, who are affected by retrenchments that follow when companies relocate lowerend and labour-intensive jobs to places with lower labour costs. The government's repeated reminders of the need for workers to retrain and upgrade their skills underscore the danger. Such problems could become electoral issues if they are not addressed successfully. However, they are unlikely to overshadow the other factors that continue to underpin the PAP's political dominance.

fi:w,G hailand's still fragile democracy passed a milestone of sorts in 1995, with the peaceful election on 2 July of a new government led by political 1-::::!:::_J veteran Banharn Silpa-archa, as the country's third elected prime minister since 1976. But his seven-party coalition has been under seige, from within and without, since before it even took office, and Banharn is unlikely to last anywhere as long as his predecessor Chuan Leekpai, whose 32-month tenure made him Thailand's longest-serving civilian leader. For a time, Chuan had looked as if he might become the first elected Thai premier to survive a full four-year term. In his first two years at least, the opposition was too busy fending off allegations of corruption and drug dealing among its leaders to be able to effectively challenge the government. And while some of his coalition partners were fractious, they obviously preferred to be in government than out. But the situation changed dramatically in late 1994. First, the New Aspiration Party (NAP), the second biggest in the government, defected over a bill to provide for the election of village leaders. In itself, this posed no threat to the government's survival as the opposition Chart Pattana Party (CPP) was only too eager to take the NAP's place. Around the same time, however, revelations emerged of irregularities in the Democrats' handling of a land reform

25

POliTICAl OUTLOOK

Thailand Land Area:

514,000 sq krn

Population:

59.1 million

Capital:

Bangkok

Type of Government:

Constitutional monarchy

Head of State:

King Bhurnibol Adulyadej

Next Election:

1999

Currency Used:

baht

US$ Exchange Rate on 30 November 1995:

US$1

=

25.149 baht

scheme that eventually led to the defection of the coalition's other main partner, the Palang Dharma (Moral Force) Party (PDP). Long divided into two constantly warring wings - one politically pragmatic, the other moralistic and prone to criticizing the government for compromises and alleged moral failings - the PDP was always the shakiest leg of the coalition. Dismayed by what it considered the Democrats' failure to satisfactorily respond to months of opposition - and press - attacks on the issue, the party decided on 19 May, just hours before a no-confidence motion in Parliament, that its forty-six MPs would abstain from the vote "out of righteousness". Rather than trying to form a new coalition, Chuan opted to dissolve Parliament and call for fresh elections. As in the past, the campaign saw heavy vote-buying, especially in the rural uplands where the voters, unlike the middle classes in Bangkok (which has less than 10 per cent of the 391 parliamentary seats), are less impressed by notions of democracy than with the largess and favours given or promised them by politicians or their backers. There was also hectic party-switching by dozens of MPs (who are barred from leaving their parties before parliamentary dissolution), some out of dissatisfaction with their leaders, others allegedly for promise of cash or office. The majority crossed over to Chart Thai (CT), a provincial, patronage-based party that had been in every government but two since it was formed in 1974. It duly topped the poll with ninety-one seats (all in the upland provinces), while the Democrats carne second with eighty-six. The CT victory was greeted with almost universal dismay among the Bangkok establishment, in particular the press that regards itself as the watchdog

26

THE ASEAN SIX of government. The last CT-led government (which was thrown out by a military coup in 1991) had earned the dubious distinction of being the most corrupt in Thai history and it was feared this one would be no different. Although Banharn, a provincial construction tycoon, had sought to change the CT' s image during the campaign by pledging political reforms and a trustworthy government, his appointments merely reinforced critics' suspicions. Several of his ministers, like himself, had served in the previous CT government and were tarnished by charges of corruption, while others were suspected of criminal associations. There was unhappiness even with his non-political appointments, in particular law professor Surakiat Sathirathai, who was criticized as being unqualified for his finance portfolio. From the beginning, the press attacked Banharn as well as individual ministers for everything, from alleged incompetence to failure to keep election promises, and attempts to alter policies and spending plans to benefit themselves, their families, or business associates. The papers also highlighted the disputes that very soon emerged within the coalition, initially in the CT itself, which is essentially made up of several largely independent factions. The squabbles were over government positions, and the factions were not only attacking each other, but also Banharn who, faced with competing claims from three of his lieutenants for the powerful interior portfolio, had decided to hold the post himself. Instead of settling the matter, this provoked open criticism and defiance from some younger followers of the claimants. Not surprisingly, the government's reputation suffered, particularly in Bangkok and its surrounding provinces. Even the King, who marks his fiftieth year on the throne in June 1996, seemed to disapprove, signalling his displeasure in unusually direct and public fashion on two occasions. The first was on 17 August, when he indirectly criticized Banharn for dividing responsibility for Bangkok traffic between the leaders of two Bangkok-based parties, both of which hoped to improve their standing with the city's voters by solving its traffic problems. Instead of working together, the monarch said, the politicians kept "talking and talking and talking, and they keep opposing each other". A month later, as the annual flood waters began to reach Bangkok, King Bhumibol spoke out again, criticizing the lack of preventive measures to protect the city's outlying areas. The revered monarch's unusually blunt remarks possibly stemmed less from exasperation with the government than with fears of what the kind of politics it represents could lead to. He remains the only figure held in universal respect in the country, and hence is often turned to in times of crisis as the mediator of last resort. Although only sixty-eight and in apparent good health, he was hospitalized twice during 1995 for minor heart treatment, raising concerns as to what could happen when he is no longer on the scene. For the immediate future at least, there is little danger of another military coup. In what appeared then to be a risky move, Defence Minister Chavalit

27

POliTICAl OUTlOOK Yongchaiyudh in September effectively defanged the powerful Class 5 group of officers whose members were behind the 1991 coup and had dominated the military hierarchy since. Ignoring the hierarchi s recommendations for the annual military reshuffle, the NAP leader and former army commander appointed a Class 6 officer to the top army post and spread other senior positions among officers from different graduating classes of the Chulachomklao Royal Military Academy. The biggest danger the government faces is from within. Besides rebellion from his own CT lieutenants, Banharn has to contend with coalition leaders with prime ministerial ambitions of their own. His biggest threats are Chavalit, whose previously poor reputation has been dramatically improved by his apparent taming of the military, and Thaksin Shinawatra, a charismatic communications tycoon and political novice who took over leadership of the PDP just before the election. Reckoned Thailand's wealthiest man, Thaksin won early popularity with his energetic and high-profile efforts to ease Bangkok's traffic congestion. But this popularity, and his attempts to distance himself from his tarnished colleagues by publicly calling for a cabinet reshuffle, has earned him the enmity of other government leaders. Although Banharn, who has served in every senior government post in his long political career, has a reputation as an able conciliator and manager, his days in office are likely to be short. His biggest advantage is that most of the parties (in and out of government) would probably prefer not to have another election too soon, the last one having cost them a reported US$600 million collectively. However, while he can prolong his tenure for a time by reshuffling the Cabinet, he can expect more trouble from those left out. A palace coup, with factions of CT joining other coalition parties to oust Banharn, is not out of the question. The only question is whether he will be replaced by Chavalit or Thaksin, assuming the two men do not think they would do better off with fresh elections.

INDOCHINA AND MYANMAR Nick Freeman • Sorpong Peou • Tin Maung Maung Than

Vietnam

28

rn

he year 1995 was an epochal one for the Socialist Republic of Vietnam: celebrating the twentieth anniversary of unification, the sixty-fifth anniversary of the founding of the Communist Party of Vietnam (CPV), and the fiftieth anniversary of the independence declaration; gaining full membership of ASEAN; and witnessing the complete "normalization" of relations with the United States. The latter two events drew a line under the recent history of

INDOCHINA AND MYANMAR

Vietnam Land Area:

330,300 sq km

Population:

72.3 million

Capital:

Hanoi

Type of Government:

Communist people's republic

Head of State:

President Le Due Anh

Prime Minister:

Vo Van Kiet

Party Secretary-General:

Do Muoi

Currency:

Dong

US$ Exchange Rate on 30 November 1995

US$1

=

11,013 dong

regional tension and post-war bitterness that have plagued Hanoi's successful bid to gain international recognition, and remove the last external restraints in Vietnam's bid to enact economic growth. Attention will increasingly focus on the domestic arena, and the extent to which the current programme of economic reforms - known as doi moi- will provide the vehicle by which Vietnam's ambitious growth targets can be met. From now on, failure to achieve economic goals can no longer be attributed to hostile external pressures adversely impacting upon pressing domestic priorities. Political stability, under the supremacy of the CPV, remains the priority for the Hanoi leadership, whilst enacting its wide-ranging economic reform programme, and containing the socio-economic side affects of doi moi. In January 1995, Party Secretary Do Muoi called for "ideological unanimity" in the corning period, intimating that factional disputes within the party and the state structures will not be tolerated. There is scant prospect of the economic reforms being halted, or reversed, but internal debate persists on the extent and pace of economic reform, and the degree to which it can be allowed to alter various aspects of the country's character. As a result, an incremental approach has been adopted, seeking consensus on each forward step, as Vietnam moves towards a more market-oriented, yet state-regulated, economy. The impending Eighth Party Congress, due to be held in the second quarter of 1996, should confirm this chosen approach of enacting economic reform, whilst also focusing on the need to maintain socio-political stability, security, and the primacy of the CPV. In

29

POLITICAl OUTlOOK addition to examining ways in which economic reforms can be advanced further, close attention is also being paid to improving the "mechanics" of reform, and the need for better administrative and legislative structures to govern over Vietnam's rapidly changing business and economic environment. Hanoi's leaders are conscious of the need to accelerate the restructuring of state administration, quicken the promulgation - and enforcement - of new laws, and further refine state policies, if they are to keep pace with the rapid progress of economic development, which has steadily picked up momentum since 1987. The 1996 party congress is likely to witness some changes to the top leadership in Hanoi, with mounting speculation that a number of senior posts will see new faces, resulting from both reshuffles and retirements. Whilst the precise composition of the new leadership cannot be predicted, few doubt that overall development policy will alter radically, but rather, pro-reformists may be able to consolidate their power base. Whilst 1995 was billed by some as the year of administrative reform, this process will prove to be a protracted one, and is something Vietnam will need to pursue vigorously over the coming years if it is to reduce woefully excessive red tape and corruption. In part, administrative reform is being advanced by a streamlining of bureaucratic procedures, and a greater centralization of power within the Office of the Government and key ministries. Rumours abound of ministries being merged in 1996, with the fate of the State Committee for Cooperation and Investment particularly in doubt. In addition to restructuring state administration and streamlining procedures, the reforms are intended to improve discipline within the civil apparatus, and retrain state officials, in a bid to make the executive more responsive to increasing demands. There are indications that potential long-term social threats to Vietnam's development - such as the widening disparity between urban and rural incomes, declining standards of primary health care and education, the worrying extent of corruption, and other less desirable consequences of economic reform -are of increasing concern to the leadership, and recognized as issues that must be addressed. The educational level and abilities of the leadership and bureaucracy will also need to be raised, in order to govern an ever more complex and diverse domestic and international environment. The inter-related problems of red tape and bureaucracy need to be broached with some urgency, if Vietnam is not to undermine the substantial progress it has made to date. Crucially, Myanmar and other pre-emerging markets are beginning to attract foreign investor attention, and will divert much-needed foreign capital inflows (which also bring skills, technology, employment, and so forth) away from Vietnam, if Hanoi is not able to provide a more transparent business environment. Whilst slightly ambivalent about the general course of economic reform, and its implications for national security, the army has begun to diversify its own business activities beyond the

30

INDOCHINA AND MYANMAR basic trade-related activities, to include banking and telecommunications operations, amongst others. On the international arena, Vietnam is harvesting the fruits of an extremely successful foreign policy campaign of recent years. After exchanging diplomatic liaison offices with Washington in February 1995, full normalization of relations was achieved just a few months later. However, Vietnam's desire for MFN (most-favoured nation) trading status does not appear imminent. Full ASEAN membership, secured in July 1995, should bring Hanoi further into Southeast Asian regional dialogue, but will also prove a challenge for domestic business in the coming years, as Vietnam slowly works towards the terms of the ASEAN Free Trade Area (AFTA). Whilst trade relations with ASEAN are sizeable, foreign investment by the ASEAN members is less significant, with Singapore dominating in both trade and investment flows. Membership of ASEAN may also have an indirect impact on Hanoi's relations with Beijing, possibly making the issue of contested offshore claims a more bilateral Sino-ASEAN debate. Despite recent moves towards rapprochement, Sino-Vietnamese relations remain overshadowed by an extended history of distrust. Vietnam's relations with the Economic Union (EU) also seem to be advancing, buoyed by an agreement with Germany on the repatriation of overseas Vietnamese, in exchange for development aid and the resumption of export credits. In mid-1995, a co-operation agreement was reached between the EU and Vietnam, covering a spectrum of issues. And a co-operation agreement between Vietnam, Thailand, Laos, and Cambodia on the establishment of a Mekong Commission funded by the Asian Development Bank (ADB) was signed in early 1995. Looking ahead, the thorny issue of land (its use, lease, and value) will need to be addressed, as will further steps towards state enterprise reform. As the government slowly moves to bring business activity within a more structured legislative and fiscal framework, care will have to be taken to ensure that powerful constituencies, and their vested interests, are not unduly antagonized by these much-needed reforms. As in previous years, we envisage the broad political situation in Vietnam remaining stable, with the leadership opting for caution on most issues, although much will depend on the events preceding and during the Eighth Party Congress.

[]J]

uring 1995, Laos celebrated both the fortieth anniversary of the founding of the Lao People's Revolutionary Party (in March) and the twentieth anniversary of the Lao People's Democratic Republic (in December). These events followed the death of Prince Souphanouvong - the "red prince" -in early 1995, who had played a key role in the development of

31

POLITICAL OUTLOOK

Laos Land Area:

236,800 sq krn

Population:

4.5 million (1995 census)

Capital:

Vientiane

Type of Government:

Communist party-led people's republic

Head of State:

President Nouhak Phomsavan

Party Chairman:

General Khamtay Siphandon

Prime Minister:

General Khamtay Siphandon

Currency:

Kip

US$ Exchange Rate on 30 November 1995

US$1

=

920 kip

both the Party and the LPDR. A cabinet reshuffle in March 1995 saw the appointment of new communications and finance ministers, but the prospect of either major leadership changes or major policy shifts, prior to the impending Party Congress in 1996, is remote. Emphasis will continue to be placed on further economic and administrative reform, maintaining macroeconomic stability, and encouraging growth in the small, but blossoming, industrial sector. Whilst the impending Party Congress may lead to a number of senior leadership changes, the possible retirement of some high-ranking officials, and the consolidation of "second generation" pro-reformists, it is unlikely to prompt a seismic shift in government policy. Most observers expect the pace of reform to pick up, albeit slightly. Moves to open up the country to foreign investment and trade were maintained throughout 1995, following the epochal commissioning of the bridge across the Mekong River in late 1994. Despite some guarded concern expressed over the likely consequences of this first road bridge to Thailand, a feasibility study for a second bridge is being prepared. Following Vietnam's accession into ASEAN in mid-1995, Vientiane has expressed a desire to gain full membership of this regional grouping by 1997, having already gained observer status. (ASEAN currently accounts for about 30 per cent of Laos' exports and 40 per cent of its imports.) Although foreign investment flows have been steadily increasing, they remain relatively small, and there is a perceived need to encourage greater diversity of projects, notably in the agricultural processing sector.

32

INDOCHINA AND MYANMAR In continued close relations with Vietnam, Vientiane signed a number of agreements with Hanoi during 1995, covering power transmission, tourism, and border issues. However, recent and impending changes in the Lao leadership may lead to a slight dilution in the relationship between Vientiane and Hanoi, previously the very closest of allies. The Lao President visited Beijing in mid1995, signing a technical and economic co-operation agreement with China, within the context of deepening political and economic relations with Beijing and increased trade flows across the border with Yunnan province. There have been speculations that Lao relations towards China could eclipse those of Vietnam. Relations with Thailand have continued to improve in recent years, particularly with regard to border issues, and the winding up of Lao refugee camps. Although a degree of concern has been expressed as to the significant extent of Thai business penetration, Thailand has consolidated its position as a dominant force in Laos' foreign investment and trade inflows, buoyed by reciprocal visits of senior state officials. Nonetheless, veiled references to potential Thai hegemony persist. Following a trip by the Lao Prime Minister to Tokyo in May 1995, Japan's yen loans to Laos were resumed, with US$46 million pledged for five infrastructure projects. Also in mid-1995 Washington removed Laos from the prohibition of the Foreign Assistance Act, following recent progress on the MIA (missing-inaction) and drug issues, which should lead to funding for humanitarian projects. The United States is currently the second largest investor in Laos, after Thailand. On the domestic front, attention is being focused on administrative reform, combating bureaucratic inertia, tightening monetary and fiscal restraint, and constructing a legal framework pertinent to the economic reforms currently under way. Privatization of Laos' state enterprise sector is also being enacted, with some success, and the development of a more diverse financial sector including a capital market, in the long term - is also now on the agenda. (Public sale of treasury bills commenced in January 1995, partially in a bid to help curb inflationary pressure.) An economic growth rate of approximately 7 per cent will be the target for the corning years, although this will be largely dependent upon the agricultural sector, and particularly the paddy crop. (And a close eye will have to be maintained on inflation, balance of payments, and the current account deficit.) Laos aims to produce 1.7 million tons of rice in 1995. Attention will also be placed on developing the fledgling light industry sector, and - with the assistance of foreign firms - natural resource extraction, including potentially significant reserves of oil and gas. Development of the country's infrastructure is also a priority issue. Preparatory work is under way for several major new hydropower projects, which could add to current electricity exports to Thailand, boosting foreign currency revenues. Standards of health continue to concern this less-developed country, with dengue fever outbreaks a problem during the rainy seasons, and malaria. Also,

33

POLITICAl OUTlOOK concern over HIVI AIDS spreading from neighbouring countries has prompted a stepping up of awareness campaigns. Official figures record just ten AIDS-related deaths, with fifty-nine HIV-positive cases (although the real figure is likely to be higher). This phenomenon, amongst others, has helped underline party fears of importing external social evils and potentially subversive elements, for which the army and security forces remain vigilant. And despite recent moves towards opening up the Lao economy, this high degree of vigilance is unlikely to be reduced by any significant degree. Looking beyond the party Congress, Laos is likely to maintain its gradual reform in the area of economics, and enact administrative change, whilst trying to keep political control solely within the party's exclusive remit. As in recent years, a less ideologically driven approach will be adopted in order to give priority to socio-economic advances, which are much needed in this landlocked, underdeveloped country. In a bid to attract greater investment and lending inflows, Vientiane will probably continue to adopt a foreign policy that is more outward-looking, balancing the competing overtures of neighbouring Thailand, Vietnam, and China, whilst working towards greater subregional co-operation under the new Mekong River Basin agreements, and with an eye towards possible ASEAN membership in 1997. The role of foreign investment and lending inflows will play a crucial role in supporting structural adjustments, developing a business and industrial sector, and improving the country's minimal infrastructure.

Cambodia

34

IT

l he prospects for peace and stability in Cambodia during the next few years do not look as dim as some pessimists have predicted. So far, more .. ._ than two years after the U.N .-organized elections, the coalition government has not collapsed. Despite rumours about coups against the government, nothing serious of the kind has happened. In all likelihood the government will last at least until the next elections (to be held in 1998). The government has taken steps to consolidate its power, apparently in an attempt to maintain a stable political environment for economic development. At the policy level, Phnom Penh has committed itself to better economic performance. During the meeting of the Third International Committee on the Reconstruction of Cambodia (ICORC III) in March 1995, the government pledged to restructure the economy, develop the rural economy, reform state institutions, invest in people, and rebuild the country's infrastructure. Along with its commitments to economic development, the coalition government (made up of three parties: FUNCINPEC or Front Uni National pour un Cambodge Independent, Neutre, Pacifique, et Cooperatif, known as the Sihanoukist Party; CPP or Cambodian People's Party; and BLDP or Buddhist Liberal Demo-

INDOCHINA AND MYANMAR

Cambodia Land Area:

181,040 sq km

Population:

9.8 million

Capital:

Phnom Penh

'I)rpe of Government:

Constitutional monarchy

Head of State:

King Norodom Sihanouk

First Prime Minister:

Prince Norodom Ranaridh

Second Prime Minister:

Hun Sen

Currency:

Riel

US$ Exchange Rate on 30 November 1995

US$1

=

2,520 riel

cratic Party) has taken steps to strengthen national unity and ensure political stability. To some extent, power consolidation has so far been successful. The government has become more cohesive and stronger as First Prime Minister Norodom Ranaridh (FUNCINPEC) and Second Prime Minister Hun Sen (CPP) adopted a more heavy-handed approach towards dissent. For instance, insubordinate Finance Minister Sam Rainsy (FUNCINPEC) was expelled from the national assembly in June 1995, after he had been removed from his ministerial post in October 1994 and from his own party in May 1995. In another instance, the two Prime Ministers' political parties reaped a sweet political benefit when Minister of Information Ieng Mouly (BLDP) succeeded in expelling some of his own party members (including BLDP leader Son Sann and his loyalists) . In November 1995, another dramatic event took place when Prince Norodom Sirivudh, King Sihanouk's half-brother, was arrested and put in jail. He was charged with terrorism, on the grounds that he had plotted to assassinate Prime Minis!er Hun Sen, before being exiled to France. The Prince was an MP and had served as Foreign Minister prior to his resignation as a protest against the government. He was known for his stand against corruption in the government and its defence policy. Threats of further expulsions aimed at new "troublemakers" created some political tranquillity. Rainsy has learned to keep his head down. These political events have made the government structure less fragmented as leaders of the three major parties worked together even at the expense of their own party members.

35

POLITICAL OUTLOOK Moreover, there is some speculation that the two most powerful political parties (FUNCINPEC and the CPP) may become one. Rumours about the two prime ministers wanting to be tied by a possible future marriage of their children may not be true, but they indicate that the political marriage of convenience between FUNCINPEC and the CPP after the elections in 1993 may become a true love affair. Prime Minister Ranaridh recently said he would not rule out the possibility of amalgamating the two political parties into a single political entity (with no real opposition standing in the way). While the emerging authoritarian style of governance under the incumbent power-holders may bring about political stability in the next few years, it is unclear they will be able to keep their house in order over the long term. It is worth remembering that Sihanouk failed in the end. Though a very popular king and authoritarian head of state after Cambodia's independence in 1954, Norodom Sihanouk was overthrown by his own Defence Minister, General Lon Nol, in 1970. And none of his successors did any better. Unless its economy performs well, Cambodia will remain one of the world's poorest countries and the government's political legitimacy will be abraded by popular discontent. Cambodia continued to experience rising national budget deficits. The deficit for 1995 was forecast to be US$183 million, compared with the US$165 million deficit for 1994. With the ongoing war against the Khmer Rouge rebels, the government will be unable to devote its sole attention to economic development. The war has cost Cambodia both indirectly and directly. Because of the prevailing insecurity, foreign investors have either hesitated to bring in their capital or only proposed development projects in the non-industrial sector. The government has continued to give priority to security despite the fact that its leaders promised to cut military expenditure by reducing the number of armed personnel from 130,000 to 90,000 by 1997. Phnom Penh had initially planned to spend US$85 million on defence (out of the US$407 million national budget for 1995) but then increased it to US$123.4 (out of the revised budget of US$513.2 million). Real defence budget figures, however, could be much higher than these official ones. The Ministry of Interior obtained a share of about US$48 million. Together, defence and internal security consumed more than US$171 million (out of US$513.2 million) . Despite the large amount of money devoted to defence and internal security, the government will not be in a position to wipe out Khmer Rouge guerrillas in the foreseeable future. And despite the positive news about Khmer Rouge defections, the real number of defectors may have been exaggerated. The guerrilla army can be estimated to be between 7,000 and 8,000, with an unknown number of new recruits. With no prospect for better economic performance in sight, the government's anti-Khmer Rouge campaign will not forever keep rural communities away from the rebels' anti-government and antiVietnamese propaganda. What is important to keep in mind is the nature of the

36

INDOCHINA AND MYANMAR war. The Khmer Rouge's guerrilla hit-and-run tactics (without clear frontlines) will definitely not bring them back to power as in 1975, but they still have the capability to keep the conflict protracted, thus making the government armed forces vulnerable. This does not mean, however, that Cambodia is doomed to fail or destined to return to its tragic past. For all the domestic foes still facing the leaders in Phnom Penh, the country is not where it had been in the last twenty-five years. It is no longer internationally isolated. At ICORC III alone, it received from the international donor community a pledge totalling more than $1 billion (an amount exceeding the government's formal request) for the next two years. More important is the international recognition Cambodia has enjoyed. Diplomatic recognition from the five great powers (the United States, China, France, Russia, and Great Britain) has added to Cambodia's domestic political stability. These extra-regional powers have supported both Cambodia's economic reforms and its anti-Khmer Rouge policy. Even China (the Khmer Rouge's former best ally) switched sides after the elections by turning its back on the rebels and by lending full support to the government in Phnom Penh. Cambodia's regional integration policy has been supported by the ASEAN members. In August 1995, Cambodia took an unprecedented step by acceding to the Treaty of Amity and Co-operation and has since been working towards becoming a full member of ASEAN. What will the next few years bring to Cambodia? In all likelihood, the Khmer Rouge "die-hards" will not die out and will continue with their guerrilla struggle. No political solution to the conflict is in sight. Not only have the Khmer Rouge been outlawed by the national assembly, but the U.S. State Department has funded a Genocide Investigation Programme in a serious effort to put Khmer Rouge leaders on trial for their past crimes against humanity. The rebels will have no choice but to keep fighting: they will neither surrender militarily, nor will they accept any political agreement that would put them at security risk. Without any external·support, however, the prospect of a Khmer Rouge return to power by military means is dead. Yet without a political solution to the war, the economy will not fare as well as it should. The estimated 12 million mines scattered across the country will still outnumber the entire Cambodian population in the years to come. Without fast economic development to keep the country on its feet, the government's political legitimacy can only be sustained by the international community. If the Cambodian leadership rules increasingly with a touch of the iron-fisted authority of old, chances are it may lose some financial support from Western democracies. But, if the war with the rebels continues, the international community will not completely turn its back on Cambodia. After all is said and done, the emerging authoritarian style of governance should signal some good news to interested foreign investors, provided that it can be more efficient and effective in the administration of the country.

37

POLITICAL OUTLOOK Myanmar

s Myanmar entered the eighth year of military rule by the State Law and Order Restoration Council (SLORC) the stage seems to be set for national reconciliation and induction into the ASEAN community amidst strong signs of economic recovery. Significant developments in both domestic affairs and external relations suggest that Myanmar's political situation has reached a watershed. SLORC has enunciated its political objectives as: • • • •

stability of the state, community peace and tranquillity, prevalence of law and order; national reconsolidation; emergence of a new enduring state constitution; building of a new modern developed nation in accordance with the new state constitution.

In line with these objectives, SLORC has successfully persuaded fifteen insurgent groups to stop fighting and to sign peace accords with the government. This leaves only the largely decimated (through defection by the Buddhist faction) Christian faction of General Bo Mya's Karen National Union (KNU) and the Mong-Tai Army (MTA) of drug kingpin Khun Sa. The former is under considerable pressure to acquiesce in peace talks as war-weariness sets in amongst the rank and file and the latter is weakened by defections to a Shan nationalist faction as well as relentless government assaults. Both have suffered heavily from the

Myanmar

38

Land Area:

678,675 sq km

Population:

43.92 million (1995 estimate)

Capital:

Yangon

Type of Government:

Military

Head of State:

Chairman of State Law and Order Restoration Council (SLORC), Senior General Than Shwe

Next Election:

Not known

Currency Used:

Kyat

Exchange Rate on 27 November 1995:

US$1

=

5.65 kyat

INDOCHINA AND MYANMAR loss of logistics as well as economic links across the Thai-Myanmar border where their enclaves are located. The defiant student groups are also left in the lurch by respective cease-fire accords reached with the government by their ethnic partners in whose territory they operate. The dissident National Coalition Government of the Union of Burma (NCGUB), which lost its base on Myanmar soil with the fall of the KNU headquarters at Manerplaw, is now based in the United States and is mainly engaged in lobbying for international sanctions against SLORC without much success. On the other hand, SLORC seems to be consolidating its hold on the state. The cabinet reshuffle in June resulted in its expansion to thirty-seven members by incorporating six senior military commanders. As such, the current size of the Cabinet is four times its size in 1988 when SLORC came to power. At about the same time, new service chiefs for the navy and the air force were appointed in a promotion exercise that also involved eight out of ten division commanders. This is seen by many observers as an attempt to enhance the corporate solidarity of the military elite. The most significant development in which SLORC surprised its friends and caught its critics off-guard was the release on 10 July 1995 of Daw Aung San Suu Kyi, its most vocal critic. The ardent democracy advocate and 1991 Nobel Peace Prize winner was released "unconditionally" after almost six years of house arrest. This has resulted in a generally positive response on the international front despite the government's media blackout of her release. Both friends and foes of the military lauded it as a significant step in the right direction. This, together with the news that Myanmar presented the instrument of accession to the ASEAN Treaty of Amity and Co-operation on 27 July at the meeting of ASEAN foreign ministers in Brunei has resulted in claims that ASEAN's "constructive engagement" approach is more efficacious than the West's "isolationist" approach. However, SLORC's detractors are also saying that such positive developments are brought about by international pressure and that the latter must be kept up to obtain further concessions from the regime. Except for Japan, which indicated that it is prepared to resume official development assistance (ODA) and increase the tempo of trade and investment, most states which have refrained from giving economic and political support to SLORC are currently adopting a wait-and-see attitude. On her part, Daw Aung San Suu Kyi has indicated that there are no preconditions for "meaningful dialogue" and has clearly stated that "everything is open to negotiations and all political problems can be solved through goodwill and compromise". She has been holding weekly "meet the people sessions" in front of her home with spontaneous gatherings of people who congregate despite the official ban on gatherings of more than five people. The government seems to be showing magnanimity by tolerating this ostensible transgression against "existing laws".

39

POliTICAl OUTlOOK Thus far, SLORC has not accommodated her repeated calls for dialogue. It seems that SLORC, which is extremely confident of its ability to control the pace and direction of political change in Myanmar, is in no hurry to enter into substantive dialogue with someone whom it considers an "ordinary citizen" no different from the other 44 million residents of the country. In fact , the Election Commission has reportedly turned down, on procedural grounds, a request by the National League for Democracy (NLD) to approve the reinstatement, in October, of Daw Aung San Suu Kyi as its General Secretary and former Chairman U Tin Oo as its Vice-Chairman. The government has been indicating that since the ongoing National Convention (NC) is more than adequate for expressing views on national political issues there is no need whatsoever for a separate dialogue. Before adjourning in April1995, the NC managed to lay down principles on establishing self-administered areas for the Naga, Danu, Pa-0, Palaung, and Kokang ethnic groups and the Wa self-administered region. Having concluded the deliberations on the contentious issue of self-administered areas which is related to the long-standing question of the autonomy of ethnic minorities, the NC Convening Work Committee seems to be well on its way in guiding the NC towards its goal of laying down a detailed blueprint for a "firm" constitution. When the NC resumed on 28 November 1995, the NLD representatives pulled out after the opening plenary session and were subsequently expelled from the NC for breach of procedural rules regarding attendance. This followed earlier public criticisms of the NC by Daw Aung San Suu Kyi in which she alleged that the meeting was deviating from "democratic principles". In response, the authorities concerned reaffirmed their commitment to the present form and content of the proceedings and warned that anyone attempting to destabilize the country would be "annihilated". The NLD was also accused of disrupting the NC and forsaking "national interests" to promote party interests. In reality, given the present power configuration and resource availability, there is considerable asymmetry in the bargaining positions of the contending sides. This, coupled with SLORC's unflagging determination to maintain its agenda for managed transition to presidential governance, seems to rule out the scenario in which it relinquishes power to those who claim to represent the majority of the people that voted in the 1990 elections. Nor does it seem to entail any concession allowing Daw Aung San Suu Kyi to play a direct role in Myanmar's political future. SLORC is unlikely to change the course of the constitution-formulating process that has already enshrined the military's right to play a leading role in national politics and a powerful executive presidency among its principles. The thrust of these "principles" seem to suggest a minor role for the elected politicians under a system in which the executive branch is effectively de-linked from the electoral process in that the president who is to be chosen by an electoral college

40

INDOCHINA AND MYANMAR has the prerogative to appoint ministers who need not be elected representatives. Nor is SLORC likely to relinquish the unitary state system in favour of the "federal" system advocated by many dissident groups. In fact, the latter is anathema to the military, which view it as a recipe for disaster. Thus the essential points in the agenda for future dialogue, identified by Daw Aung San Suu Kyi in her first press conference as "the establishment of certain principles" and "recognition of critical objectives to be achieved" may be the most contentious as both sides hold on to their fundamental positions. Recent statements by Daw Aung San Suu Kyi cautioning against the "rush" to invest in Myanmar and the immediate resumption of aid as well go against the grain of SLORC, which holds dear its attempts to secure foreign investments and aid and has enunciated its conviction that economic growth must precede political change. Her reference to the "will of the people" with its connotation of honouring the results of the 1990 elections is also a most bitter pill to swallow for the incumbent regime which has gone to great lengths to explain that the mandate has to be sought only after the constitution is instituted. As such, given the extremely weak position of the opposition which seems entirely dependent upon the charisma and international standing of Daw Aung San Suu Kyi and a determined SLORC at the peak of its power and confidence, one cannot discount the possibility of another impasse reminiscent of a classic "prisoner's dilemma". If the freedom of Daw Aung San Suu Kyi turns out to be "nothing else" and "the [political] situation has not changed in any other way" she could well be the biggest loser in this drama as the polity whose appetite for dramatic change has been whetted become disillusioned and resignedly accept their kanna (fate). The state visit to Yangon by China's Prime Minister Li Peng in December 1994 reiterated China's endorsement of Myanmar's irreversible progress towards a market-oriented economy and SLORC's managed political transition. Myanmar's Prime Minister Senior General Than Shwe visited Vietnam in March 1995 and in June conducted a highly publicized tour of Indonesia and Singapore. The acceptance of Myanmar as an observer in ASEAN is just a matter of time, and Thailand, whose new premier publicly announced his intention to visit Yangon, has invited SLORC Chairman and Prime Minister Senior General Than Shwe to the ASEAN summit meeting at Bangkok in December 1995. The embarrassing saga of the Rohingya exodus to Bangladesh is almost over with the repatriation process likely to be concluded in 1996. All these will improve the standing of SLORC in the international arena despite reservations by the United States and the European Union over the extent and character of political change. Despite harsh rhetoric by the U.S. administration which insisted on more substantial "progress" in the "critical areas" of human rights, democracy, and counter-narcotics as a pre-condition for "better relations", the Clinton administration is against both imposing sanctions and further limiting what little funding

41

POLITICAl OUTlOOK has been provided for counter-narcotics efforts. Instead, the U.S. Government is continuing to impress upon SLORC the choice of "two roads" towards better or worse relations contingent upon its performance. This is unlikely to cut ice with SLORC given the past record and the fact that the stick is nowhere to be seen and the carrot is relatively minuscule compared with that offered by the regional states. Nevertheless, Myanmar's economic and political reforms are intertwined and the ODA which is vital for improving Myanmar's extremely poor infrastructure and enhancing the developmental effort of the state in an open-market regime would not be forthcoming until and unless the political impasse between the military and its opponents is resolved. With the economy showing signs of sustained recovery, benefiting from favourable weather conditions and private initiatives, Myanmar appears to be poised for the long-awaited opening in the political arena. A scenario that entail sub~tantive dialogue between SLORC and Daw Aung San Suu Kyi which serves as a catalyst for national reconciliation involving all interested parties seems to be unlikely. As SLORC stands fast in its "business as usual" stance and continues to ignore the "lady's" overtures, the latter's voice is in danger of becoming a voice in the "political wilderness". Thus, it remains to be seen whether Daw Aung San Suu Kyi's personal freedom is the much-awaited breakthrough that would bring forth "peace and democracy in the country" as expressed by Daw Aung San Suu Kyi in her very first statement on the day of her release.

42

ECONOMIC OUTLOOK 1996-97

ECONOMIC OUTlOOK THE ASEAN SIX Linda Y.C. Lim

Slowing Growth

Holds Back Inflation

rn

he year 1996 will see the ASEAN countries struggling harder to maintain the high growth and low-to-moderate inflation that has characterized their economic performance over the past decade. Real gross domestic product (GDP) growth for Indonesia, Malaysia, and Thailand will decline marginally from 1995 levels, constrained by supply-side limitations and policies to hold down inflation. Growth will decline more significantly for Singapore as its economy continues to mature. This overall regional trend of moderating growth will continue into 1997. Only in the Philippines is growth likely to pick up slightly in both years, though it would still be lagging behind that

of its neighbours. A decrease in the superheated growth rates of the recent past is welcome for its contribution to reducing inflation, which increased more rapidly than expected in 1995 due to rising costs, labour shortages, and strong inflows of foreign capital. Fortunately, governments have enacted appropriate fiscal and monetary policies (see individual country reports) that should lead to inflation moderating in 1996 and 1997.

Domestic Demand Drives Growth

olicies to dampen domestic demand will not stop it from being the prime driver of economic growth. Rising real incomes continue to increase the purchasing power of the rapidly expanding middle class,

7.4

7.5

7.0

7.0

9.2

9.0

8.5

7.9

Philippines

5.1

6.0

6.5

6.0

Singapore

10.1

8.0

7.2

7.0

8.5

8.7

8.4

8.2

Indonesia

""

Thailand

44

'

I I

THE ASEAN SIX

Thailand

5.4

5.6

5.2

5.0

which is likely to be boosted in 1996 by the anticipated moderation of interest rates with inflation. Strong domestic demand and continued deregulation of domestic markets attract investment, which in turn fuels future growth. Foreign investment inflows into the region are expected to remain strong as multinationals from industrial and newly industrialized countries seek to stake out positions in the booming regional market. Trends in external demand also look favourable. Slowing growth in most Western industrial economies and China, and continued economic stagnation in Japan failed to dent ASEAN regional growth in 1995. But a recovery in external growth on all fronts projected for 1996 will help offset the marginal decline expected in domestic demand. Commodity prices should pick up slightly, and buoyant world market sales are expected in the dominant electronics industry, which is now expanding in Indonesia, the Philippines, and Thailand, in addition to established bases in Malaysia and Singapore.

r

l he labour shortage in Singapore, Malaysia, and Thailand has worsened at all skill levels, contributing to inflationary pressures and slowing a.....;;;;;;;;;'"";........~ growth. Education and training initiatives in both the public and private sectors will take time to bear fruit, and in the short run an increased reliance on imported labour seems unavoidable despite government efforts to limit it out of a concern for the social costs involved. Other business costs have also risen in all three countries, including rents, housing, transportation, and services, contributing to a discernible loss in competitiveness. For example, Singapore retained its ranking of No. 2 in the World Economic Forum's 1995 World Competitiveness Report, but both Malaysia and I

45

ECONOMIC OUTlOOK Thailand fell three places each, to twenty-first and twenty-sixth, respectively. Indonesia ranked thirty-third, just ahead of China and India. In Thailand, the ever-worsening traffic congestion in Bangkok has become the chief cause of loss in productivity. These constraints are not likely to improve significantly in the next two years, thus increasing pressure on all three countries to accelerate their moves up the technological ladder to higher value-added activities, and to improve efficiency. In the Philippines and Indonesia, infrastructural inadequacies are more severe constraints on growth; and in Indonesia skilled labour shortages are a major problem as well. The return flow of skilled Filipino workers to their home country as its economy picks up will have a marginal negative impact on the supply of professionals in other ASEAN markets.

Regional Integration

[R]

egional trade and investment linkages among ASEAN members are continuing to increase, largely as a result of private sector initiatives in response to market forces. Singapore in particular has become one of

RIDING THE EXCHANGE RATE ROLLER-COASTER

T

he year 1995 was a wild one on international currency markets. It began with the plunge of the Mexican peso against the U.S. dollar, which had temporary adverse effects on capital flows to all emerging markets due to increased risk perceptions on the part of portfolio investors especially. The ASEAN countries escaped virtually unscathed from this turmoil, with the exception of a minor one-day run on the Thai baht early in the year. In part because most of these countries still have capital controls in place, in part because their dependence on short-term foreign capital flows is low (given high rates of domestic savings and investment, and high ratios of long- to short-term external debt and of direct to portfolio foreign investment), the exodus of foreign funds in the first quarter was only a trickle.

46

By mid-year this was quickly reversed by a flood of new capital inflows, attracted by the region's strong growth prospects and stability. But these large capital inflows also pose problems for the ASEAN countries. While necessary to offset large and growing current account deficits, they also contribute to raising these deficits in the short run. New direct investment projects increase imports of machinery and equipment, while the upward pressure on currencies and the inflationary impact on domestic costs may reduce export competitiveness. These and other concerns have led some countries to be more cautious about setting the pace and determining the extent of the liberalization of their financial markets. But such liberalization cannot be avoided, given the longterm need for even larger capital inflows to

THE ASEAN SIX

Singapore Thailand

7.0

7.0

6.5

13.5

14.0

13.0

6.5

6.0

5.5

13.5

13.0

12.0

finance more capital-intensive growth and huge infrastructure projects. Malaysia and Thailand also have plans to develop as international financial centres, for which more open markets are required. Both have recently enacted policies to increase the participation of foreign banks and other financial institutions. The ASEAN countries also seem to have escaped being hurt by wide fluctuations in the yen-dollar exchange rate in 1995, when the yen soared in the first half of the year and then suddenly dipped. This is because their exports and imports are fairly well-diversified geographically, and dependence on the U.S. market in particular has declined. Foreign investments into the region are now motivated mainly by longterm strategic company considerations, rather

than by short-term shifts in national competitiveness induced by unpredictable exchange rate shifts. A stronger yen does threaten wider current account deficits in countries with large yen debt repayment obligations, particularly Indonesia, and raises the cost of imports of machinery and equipment from Japan. But the rebound of the dollar in the second half of the year eased these pressures. In the immediate future, some ASEAN currencies may weaken against both the yen and the dollar as current account deficits widen. But given continued anticipated large foreign capital inflows, the longer-run prospect is for most currencies to appreciate against the dollar, requiring greater efforts at domestic economic restructuring to increase competitiveness.

47

ECONOMIC OUTlOOK

Malaysia Philippines Singapore Thailand

2.50 26.0 1.42 25.1

2.45 27.0 1.40 25.2

2.42 27.0

1.38 25.2

the top foreign investors in its neighbours, and is also receiving investment from them. Unilateral trade liberalization without regional preference continues, most notably in Indonesia's May 1995 package to cut import tariffs on over 6,000 items. At the government-to-government level, a proposal by Brunei to begin the ASEAN Free Trade Area (AFTA) in the year 2000 rather than 2003 has been rejected by Thailand and the Philippines, on grounds that their protected industries need more time to adjust to market opening. However, at the same time both countries have embraced the Thai proposal to establish a South China Sea Economic Zone, with Thailand, Cambodia, Vietnam, China, and the Philippines as members. Details are yet to be disclosed. APEC moves to accelerate trade and investment liberalization within that much larger pan-regional grouping will continue to exert pressure on ASEAN to anticipate or follow suit so as not to "become irrelevant".

Summary: Still Rosy, but ...

48

[OJ

verall, the economies of the region continue to move in tandem, affected much the same way by global economic trends and by similar domestic developments. Their collective future looks as rosy as the recent past has been, with growth dipping only slightly in response to government measures implemented to check inflation. As inflation trends downward, so will interest rates, restraining the appreciation of strong currencies and restoring some competitiveness. But in the longer run, this momentum cannot be sustained without some relief of the supply-side constraints resulting from extended rapid growth.

_THE ASEAN SIX

Selected Basic Indicators of the ASEAN-6 Economies Population

Country Brunei Indonesia Malaysia Philippines Singapore Thailand

Gross Domestic Product

Per Capita GNP

Growth % p.a.

1993 (million)

Growth % p.a. 1980-93

1993 (US$b.)

1970-80

0.3 187.2 19.0 64.8 2.8 58.1

1.7 2.5 2.3 1.1 1.7

144.7 64.5 54.1 55.2 124.9

7.2 7.9 6.0 8.3 7.1

1993 (US$)

1980-93

Growth % p.a. 1980-93

i' ;.li;

5.8 6.2 1.4 6.9 8.2

740 3,140 850 19,850 2,110

4.2 3.5 -0.6 6.1 6.4

SouRcE: World Bank, World Development Report 1995. Structure of the ASEAN-5 Economies, 1993

% Share of GDP Country Indonesia Malaysia Philippines Singapore Thailand

Manufacturing

Exports

Savings

Investment

Government Expenditure*

22

28 80 32 169 37

31 38 16 47 36

28 33 24 44 40

19 27 18 20 16

24 28 28

*As a percentage of GNP. SouRcE: World Bank, World Development Report 1995. The External Sector, 1995 Exports Country

US$b.

Growth % p.a.

Indonesia Malaysia Philippines Singapore Thailand

43.5 69.0 17.0 115.0 55.0

10.0 22.0 30.0 20.0 25.0

Imports 1995 (US$b.)

Current Account (US$b.)

Foreign Reserves (US$b.)

40.5 70.0 27.0 118.0 70.0

-4.5 -6.0 -3.5 7.0 -10.0

13.0 25.0 6.5 65.0 33.0

SouRcEs: Various, 1995 estimates only.

49

ECONOMIC OUTlOOK A slow-down in growth itself will relieve some of these supply-side pressures and the associated inflation, as well as help ease widening current account deficits by slowing import growth until exports emanating from recent new investments can come onstream. The ASEAN governments, now including the Philippines, have a good record of undertaking sound macroeconomic management measures when necessary for the good of their economies. But such an extended period of high growth, and the high expectations it has engendered, may have become politically addictive. It remains to be seen whether the region's governments and peoples will indeed be willing to accept a slightly lower rate of growth for more economic stability in the longer term.

Brunei: Out into the World?

[TJ

Indonesia: Mostly Smooth Sailing

[I]

50

he year 1995 saw Brunei's profile on the world economic stage raised with its hosting of the ASEAN ministerial meeting at which Vietnam became a member, and its entry into the World Bank and the International Monetary Fund (IMF) . Notably, Brunei also initiated the call for ASEAN to move forward the starting date of AFTA from 2003 to 2000, with support from Singapore. Brunei's real economy remains hostage to the fortunes of the oil trade, with petroleum accounting for about 60 per cent of its GDP. Oil prices are not expected to firm substantially in the short run, though medium- to long-term prospects look favourable. Fortunately, overseas investment income continues to contribute significantly to the country's coffers, enabling it to record a current account surplus despite a chronic trade deficit. Domestic savings and foreign reserves are high, the currency is appreciating, and inflation is low. Brunei's membership in international financial institutions calls for greater disclosure of its financial accounts, which will make forecasting easier in the future. However, the problem of how to diversify the economy from its dependence on oil and gas remains intractable, since labour is scarce, wages are high, the skill base is limited, and there is a heavy reliance on foreign workers.

ndonesia seems well on its way towards maintaining a real GDP growth of 7 per cent a year for 1996 and 1997, just under the rates achieved in the previous two years. Strong domestic demand, continued record level of new foreign investment commitments - up to US$30 billion in 1995, and the expectation of further deregulation "packages" are the reasons for this rosy projection. Inflation may moderate somewhat from the double-digit rate of 1995, which was caused by rising rice prices. But it is likely to remain high by other

THE ASEAN SIX ASEAN standards, at around 9 per cent, fuelled by strong demand, rising wages, infrastructure bottlenecks, and a depreciating rupiah. The current account deficit will widen, given the increased imports of machinery and equipment likely to be generated by new investments, which are concentrated in capital-intensive infrastructure and natural resource projects. Export growth may not keep pace if key commodity prices (oil, coffee, timber) remain weak and rising industrial wages increase the cost of labour-intensive manufactures. One bright spot is the recent expansion of the higher value-added electronics industry. The major burden on the current account is the servicing of Indonesia's heavy external debt, which will increase with the anticipated continued depreciation of the rupiah against both the dollar and the yen. Fortunately, the deficit will be covered by foreign investment inflows, which are likely to remain robust, though not necessarily at the record levels of 1994 and 1995, given an increasingly competitive world environment. Indonesia's relatively low wages, abundant labour force and natural resources, and potentially large domestic market are strong attractions which will be enhanced if further tariff reductions (such as the May 1995 package) and investment liberalization measures are undertaken as promised to keep in line with AFTA and APEC (Asia-Pacific Economic Co-operation) goals. While the pace of dismantling domestic monopolies and cartels - especially in the marketing of basic commodities - has so far been disappointing, the anticipated move to divest Pertamina of its monopoly in domestic distribution might signal a policy shift in this direction. If so, that would contribute greatly towards improved efficiency, equity, and lower costs throughout the economy. But Indonesia's history suggests that privatization and deregulation are going to continue in a gradualist rather than dramatic mode. Besides the slow pace of deregulation, labour productivity is a constraint on growth that needs to be addressed on a broad front, including reforms in education, investment in skills training, technology development, and the evolution of modern labour-management relations - none of which appear to be taking place on a significant scale. Unemployment, underemployment, and unequal income distribution remain social problems that could disrupt political stability, especially in the event of unanticipated slow-down in growth or political succession crisis.

[T]

here appears to be no immediate end in sight to Malaysia's remarkable ten-year streak of real GDP growth in excess of 8 per cent a year. The 1995 rate is likely to exceed 9 per cent, fuelled by rising commodity prices and strong expansion in the manufacturing and construction sectors. For

Malaysia: Unstoppable Superstar?

51

ECONOMIC OUTLOOK 1996 the anticipated pick-up in world-wide growth will stimulate exports, there are new and prior investment commitments to be realized, and the massive infrastructural projects already under way are sufficient to sustain growth in construction for several more years. Thus GDP growth is unlikely to fall below 8 per cent until 1997, if at all, even with extreme capacity constraints and official attempts to control demand. With unemployment at a record low of 2.8 per cent, inflation is a serious concern, which if left unchecked may reach 4 per cent in 1996, before slowing slightly in 1997. This is based on official Malaysian figures, which some think are understated. Besides allowing the ringgit to appreciate, which reduces import prices, the government's October 1955 budget contained several measures (for example, higher credit card interest rates and employee provident fund contributions) to cool the economy. It also left open the possibility that some huge infrastructural projects might be rescheduled, and that would signal a bigger drop in inflation. In any case, inflation will eventually be brought down as growth itself slows due largely to the extreme shortage of both unskilled and skilled labour. Foreign workers already account for about 20 per cent of the labour force, and with the government taking over recruitment from last year, their numbers are unlikely to increase dramatically. The abbreviation of university degree programmes from four years to three should provide a once-for-all easing of the shortage of professional labour, as should continued relaxation of bumiputera ethnic employment quotas. But more dramatic changes in the educational system are required to provide the currently scarce skills needed to propel the economy up the technological ladder and to maintain international competitiveness by matching productivity growth to escalating wage increases. The current account deficit may widen to as much as 7 per cent of GDP in 1996, unless stronger external demand increases exports more rapidly than imports of machinery and equipment. But foreign investment inflows should continue to be healthy, mainly because the country's large installed base of export-oriented electrical and electronics manufacturers will continue to require and attract new capital as they automate and move into higher technology. New investments will also be attracted into industries serving the domestic market, such as automotive parts. And the government's ambitious plans and new incentives to develop Kuala Lumpur as an international financial centre should attract some foreign investment into this sector. The economy's immediate overall prospects look good. But its competitiveness has declined with increasing costs, and questions remain about the adequacy of supply-side measures to reduce inflation and increase skills. Slowness or inability to deliver in these areas would constrain growth in the longer term.

52

THE ASEAN SIX

[R]

eal GDP growth in the Philippines will increase to 6 per cent or more Philippmes: An in 1996 and 1997, as the ongoing economic liberalizations of the Ramos Emerging New era continue to bear fruit, and both foreign and returning domestic Tiger? flight capital continue to pour into the country. Growth will be balanced between domestic and external sources. Recovery of world-wide growth, especially in nearby Japan, and the country's recent success in attracting export manufacturing investments to Subic and other industrial zones will spur the growth of exports, while rising incomes fuel domestic consumption. The expanding merchandise trade deficit should be adequately covered by remittances from abroad and by long-term capital inflows. This good performance seems to signal that the Philippine economy is finally emerging as an Asian tiger. But it is still not out of the forest yet. Inflation remains a concern, fuelled in late 1995 by shortages of rice and some other agricultural commodities, and a belated (though anticipated) rise in the oil price. The relaxation of IMF monetary targets in 1995 could add to demand pressures, but with expected continued good financial management, inflation should stay below 7 per cent in both 1996 and 1997. In the longer term, severe infrastructure constraints especially in rural areas could hinder output growth and put persistent upward pressure on prices. Infrastructure needs cannot be adequately met unless the government succeeds in increasing its revenue base, which in recent years has received a once-for-all boost from privatization proceeds. The country's private savings rate also remains low relative to its ASEAN neighbours, though it should rise slowly with income growth and continued financial market reforms. Effective tax reform is harder to come by, due to political resistance. The Philippine economic recovery may yet be held hostage to related social and political problems. Growth itself has not been high enough to reduce unemployment or the dependence of millions of Filipinos on overseas jobs, which put some of them at risk of exploitation. Poverty remains persistent and widespread, especially in rural areas that have been breeding grounds for populist unrest in the past. The high and rising crime rate may eventually dampen investor confidence. And there is political opposition to a comprehensive tax reform and further deregulation, which are necessary to sustain a stable future growth path. Still, things are better than they have been in a long time, and years of structural economic reform are well on their way to becoming politically irreversible. Macroeconomic stabilization and trade liberalization have made particularly impressive progress. That the future looks rosy is confirmed by the return of domestic flight capital and of increasing numbers of highly skilled emigres who are boosting the country's main competitive advantage and investment attraction- its cheap but highly skilled work-force.

53

ECONOMIC OUTLOOK Singapore: Slower but Steady

54

[S1

ingapore's real GDP growth will continue to slow down in 1996 and 1997 to below the 8 per cent estimated for 1995, itself a significant drop from the double-digit increases of the previous two years. Rising labour and other business costs reflect the small country's extreme capacity constraints, with unemployment at 1. 7 per cent and foreigners already accounting for nearly 20 per cent of the work-force. But inflation is projected to slow to 2 per cent in 1996 and less than that in 1997, as the once-for-all effect of the 1994 GST (goods and services tax) introduction subsides, and the ever-appreciating currency reduces import prices in the highly import-dependent economy. Domestic demand should recover slightly in 1996. But as in previous years growth will be largely sustained by buoyant external demand, particularly in the electronics and information technology industry, which dominates the manufacturing sector and continues to attract large new multinational investments. Construction should do well given the infrastructure projects under way, while financial and business services will continue to benefit from the establishment of regional operations and some relocation of activities from Hong Kong. Regional growth will also buoy the commerce, transport, and communications sectors. The overall balance of payments will remain in surplus. For a mature and already high-income economy, this picture would seem to indicate a robust future. Instead, the expressed attitudes of Singaporeans towards their economic future are sober. Asset inflation in recent years has eaten into disposable incomes, leading to much talk, including official "warnings", that rising expectations of private housing and car ownership "cannot be met". There is concern that rising costs will eventually erode Singapore's competitiveness even as a regional business centre, especially as its lower-cost neighbours like Malaysia and Thailand try to develop themselves as competitive sites for financial services, for example. Indigenous educational and technological assets and attainment still lag behind those of developed countries such as Taiwan and South Korea, holding back productivity increases in manufacturing especially. And there are doubts that the legions of Singapore businessmen now investing mainly in trade, property development, and low-end manufacturing in neighbouring Asian countries, possess any enduring "competitive advantage " internationally. These self-doubts will probably propel Singaporeans to ever greater efforts to maintain their competitive edge, aided by proactive and ever more finely tuned anticipatory government policies, and spillovers from the more rapid growth projected for their larger, less-developed regional neighbours. In the long term, deviation from a stable but slightly lower growth path seems unlikely, barring major disruptions to world or regional growth.

THE ASEAN SIX hailand's real GDP growth in 1996 and 1997 will continue on the 8 per cent-plus path that has become routine for the economy in the 1990s. ..........._ __. Both domestic and external demand will expand strongly, given rising domestic incomes, the anticipated pick-up in world-wide growth, and continued high growth in neighbouring Asian countries. Inflation should moderate in 1996 and 1997 to around 5 per cent, given the government's likely continued implementation of inflation-fighting measures such as high interest rates, credit controls, and bond sales. Food prices in particular should ease, but other drivers of 1995's higher-than-expected inflation will remain. They include a strong demand leading to labour shortages and rising wages, large inflows of foreign capital, and the financial aftermath of the 1995 general election victory of the Chart Thai-led coalition. There is concern that the new government's plans to increase budgetary expenditures - especially on infrastructure construction projects concentrated in the constituencies of the new government's leaders - will add to inflationary pressures. But it is unlikely that these developments will be allowed to override sound macroeconomic management by Thailand's experienced technocrats. The widening chronic current account deficit, now running at over 6 per cent of GDP, is of greater concern. Its underlying cause is the import of machinery, equipment, energy, and other raw materials required by the investment boom of recent years, which is expected to continue with the country's fast-paced industrialization, accelerated infrastructure construction, and ongoing shift into higher value-added production. Thus the deficit is unlikely to narrow significantly unless growth and investment decline, which is undesirable. Indeed, large inflows of foreign capital are needed to cover the deficit. These should be readily forthcoming as industrial deepening takes place, especially in the important electronics and automotive sectors - unless fears that the new government may be less enthusiastic about continued trade and investment liberalization turn out to be justified. Efforts are also under way to increase invisible exports, especially incoming tourism, which has declined in recent years, and to further raise the already high domestic savings. The main economic challenge that Thailand faces is how to achieve a successful transition to higher value-added activities as it inevitably loses cost competitiveness in agriculture and labour-intensive manufactured exports. The country's woefully inadequate infrastructure - symbolized by the extreme traffic congestion in the Greater Bangkok Area - and its very low educational attainment levels remain major hurdles that will take a long time to overcome, though starts have been made in both areas. Regional income disparities and increased short-run reliance on imported foreign labour may also give rise to political problems along the way.

Thailand: Prospering Despite

55

ECONOMIC OUTLOOK INDOCHINA AND MYANMAR Nick Freeman • Mya Than

Vietna1n: Keeping Reforms on Track

56

uch of the economic reform programme over the last nine years has been a gradual process of removing central planning techniques, ......,...._.............,....... and attempting to harness new efficiencies from the existing economic system, whilst ushering in both a fledgling domestic private sector and a foreign investment sector. Looking ahead, no more efficiencies can be gleaned from the existing economic system, and only new initiatives will ensure that economic growth maintains its current momentum. Whilst recent history gives room for optimism in this regard, it is not a foregone conclusion that Vietnam will be successful, and a degree of measured caution should be maintained. In conformity with the administrative reform programme instigated in 1995, economic decision-making is being increasingly streamlined and centralized, particularly within the Office of the Government and a few key ministries. Notably, the Ministry of Finance has gained increased powers over the capital and assets of all 6,300 state-run enterprises; it has become solely responsible for drafting the state budget; and it has gained control over the customs authority. Although monetary restraint since the late 1980s has been commendable, there were signs of slippage in 1994 and 1995, with the threat of inflationary pressures impacting on economic growth. Periodic supply shortages and dislocations in such essential inputs as rice, paper, and construction materials (notably cement), helped lead to double-digit inflation in both these years, despite a stated bid to keep the price index in single digits. This phenomenon has been exacerbated by increased consumer spending, buoyed by popular reluctance to use bank accounts, and the dearth of domestic investment vehicles, prompting many to speculate on land and property prices. Whilst inflation does not yet represent a major danger, it might imperil future structural adjustment loans extended by the IMF. The dong has held fairly steady against the U.S. dollar throughout 1995, although the State Bank has given vague signals that a slight depreciation in the value of the dong may be enacted in the future. Agricultural production continues to be the mainstay of the Vietnamese economy, with rice as a major export-earner. Vietnam's largest foreign currency earnings stem from crude oil production off its southern coast, with the prospect that both oil and gas production (and exports) will increase markedly over the corning decade. Other major contributors to export earnings include coal, textiles, marine products, footwear, coffee, rubber, and other agricultural products. Official figures suggest that industrial production enjoys the greatest growth rates, with a blossoming services sector also impacting markedly on GDP growth, particularly in the tourism and hotel industry, and a burgeoning financial

INDOCHINA AND MYANMAR sector. This trend is likely to continue, buoyed by sustained increases in foreign investment inflows. The government is currently grappling with the thorny issue of state sector reform, in a bid to wean its substantial community of state-owned enterprises away from subsidies, and make them the vanguard of economic growth and reform. Vietnam has already reduced the number of state enterprises from over 12,000 in 1990 to around 6,300 by early 1995. A Law on State Enterprises was approved by the National Assembly in mid-1995, after an extended period of debate. The law aims to consolidate a leading role for state enterprises and improve their management and productive efficiency, partly through the granting of greater autonomy, and less state control. And a new breed of sectoral conglomerates are to be established, unifying state enterprises in key sectors such as telecommunications, shipping, aviation, cement production, and so forth - under single state corporations in a bid to bring greater efficiency and policy co-ordination in areas deemed crucial for economic development. One further method by which some state enterprises are being encouraged to change is to "equitize", divesting the majority of shares in the enterprise to employees and outside investors. This has proved to be a slow process since its inception in 1992, with just five state enterprises having fully undergone the process. A spectrum of anxieties and practical hurdles have deterred many state enterprises from attempting to divest. But the pace of equitization is likely to pick up in the corning years, with tangential progress on establishing a capital market also moving ahead, albeit slowly. 1995 saw the first series of treasury bill auctions in Hanoi, and a secondary market in fixed-income securities may emerge in 1996. An equity securities market could then follow, listing a proportion of the shares of state enterprises that have become equitized. Some observers noted a slight anti-foreign investment mood during the year 1995, citing frequent recent press reports of tax evasion, over-charging, labour code abuses, insincere loan pledges, and inflating capital contributions by foreign investors. But stricter policing of foreign investment, and greater enforcement of business legislation in general, should not be viewed solely as signals of possible reform slow-down. Rather, they may also indicate that Vietnam is becoming more adept at monitoring its business environment, and better at detecting infringements of a maturing business legislation framework. (It is important that domestic firms are also seen to abide by new laws, and that a level playing field is achieved.) However, the withdrawal of both French oil company, Total, as leadmember of a consortium preparing Vietnam's first oil refinery project, and P&O Australia from an approved port project near Ho Chi Minh City, intimate that a series of misguided political and bureaucratic hurdles continue to have an adverse impact on foreign investment. Nonetheless, total foreign investment inflows since 1988 exceeded US$17 billion in late 1995, with no immediate prospect of a slow-down. Taiwan, Hong Kong, Japan, Singapore, and South Korea

57

ECONOMIC OUTlOOK are becoming established as the major sources of foreign investment for Vietnam.

Outlook

58

s new business laws are promulgated, and more stringently enforced, we are likely to see the current opacity of business practices diminish, albeit slowly, and a more transparent structure of economic environment may develop. Any bid to eradicate bureaucratic inertia and cronyism will be welcomed by many domestic and foreign business people alike. The financial sector is likely to continue to mature, with the prospect of capital markets slowly becoming a reality. Whilst exports are increasing markedly, a parallel rise in import levels will ensure that a trade deficit will continue to pertain, and possibly widen, thereby impacting adversely on the current account deficit. But as long as foreign investment inflows continue to accelerate - as they have done consistently since 1988 - then this will mitigate in part the trade imbalance. Indeed, as more foreign investment pledges begin to reach the production phase, those exportoriented and import-substituting projects should have a positive impact on Vietnam's trade figures in the medium-long term. Although increased competition from other emerging markets, notably Myanmar and China, may divert some potential foreign investment inflows, the broad fundamentals of Vietnam are likely to ensure that foreign investment continues to rise. With the unlikelihood of political unrest, we suggest that the major perils to this forecast of increasing foreign investment will stem from continued or rising corruption, bureaucracy, and monetary laxity. We forecast GDP growth to continue at around 8 to 10 per cent over the coming two years, with the industrial sector continuing to lead the way with double-digit growth, and Ho Chi Minh City acting as economic pace-setter. The 1996-2000 five-year plan is expected to confirm Vietnam's desire for relatively rapid economic growth, although such constraints as inadequate infrastructure, occasional shortages of key inputs, relatively low domestic investment rates, and other inhibitors to fast-track growth will pose challenges for Hanoi in achieving this aim. For example, frenzied construction led to a series of cement "fevers" in 1995, with price hikes compounding increases in the overall price index. If monetary restraint can be imposed, inflation may be contained below 18 per cent over the coming years, but a short-term return to single figures seems unlikely given the priority placed on growth. A better harnessing of domestic savings for investment and the introduction of a capital market would do much to boost economic growth figures, and contain Vietnam's increasing exposure to foreign investment flows and external lending. The recent blossoming in the private

INDOCHINA AND MYANMAR sector is forecast to grow at an increased pace, posing a formidable challenge to state enterprises across a number of industries and services. Gaining full membership of ASEAN should help Vietnam in increasing both its trade outflows and investment inflows with the surrounding region in the long term. But it will also pose some serious challenges to the country's industry as . tariffs are gradually brought in line with AFTA guidelines. The normalizing of relations with the United States should also be a fillip for economic growth, particularly if improved trading terms - such as MFN status - follow.

Selected Economic Indicators of Vietnam 1992

1993

1994

1995*

1996*

1997*

GOP (%change) Agricultu're Industry Services

8.3 6.3 12.0 8.7

8.1 3.8 13.1 9.0

8.8 3.9 14.1 9.9

9.5 4.5 13.5 11.2

10.0 4.0 14.1 12.1

7.0 3.5 10.0 7.6

Gross domestic investment (%of GOP)

12.0

19.8

22.0

23.5

25.0

25.0

Exports US$ billion %change

2.5 19.0

2.85 14.0

3.6 26 .3

4.5 25.0

5.7 26.6

6.5 14.0

Imports US$ billion %change

2.5 18.8

3.5 40.0

5.1 45.7

6.5 27.4

8.2 26.1

8.9 8.5

Debt/service ratio (% of export goods, services, and income)

10.3

9.0

5.6

5.8

5.8

6.0

Current account balance (US$ million)

(76)

(766)

(1 ,282)

(1 ,700)

(2, 100)

(2,500)

11 '1 00

10,650

11 ,000

11 '1 00

11,500

11,750

Exchange rate (dong/US$)

* Forecast: The Institute of International Finance; EIU; Freeman .

SouRcEs: The Institute of (Hanoi).

lnternationa~

Finance; The Economist Intelligence Unit; General Statistical Office

59

ECONOMIC OUTLOOK

RECENT FINANCIAL REFORMS IN VIETNAM

0

f the US$ 50 billion investment capital Hanoi has declared is necessary to meet its stated aim of doubling per capita GDP by the year 2000 , half is expected to come from domestic sources. Given the popular distrust of banks, and the continued propensity for most citizens - and many enterprises - to secrete earnings away from the watchful gaze of government (and its revenue inspectors), generating this substantial amount of capital will be quite a challenge for the financial sector in Vietnam. Throughout the process of doi moi, the banking and finance sector has been under pressure to perform the arduous task of funding economic reform, despite being hampered by the legacies of central planning. Most notably, the country's four state-run commercial banks remain burdened by considerable non-performing loans, largely extended to the state enterprise sector. The World Bank estimates that overdues from state enterprises account for close to 100 per cent of the capital and reserves of state-run commercial banks. At the fulcrum of economic reform, Vietnam's finance sector has witnessed seismic changes in recent years. Since 1991 the State Bank of Vietnam has adopted the more conventional role of central bank, acting as monetary manager as opposed to active banking participant. Under the State Bank's tutelage are four state-run commercial banks, which dominate

60

the domestic banking sector in Vietnam. Also in 1991, the first joint stock (private) bank was established, and has since been joined by thirtyfive more. The joint stock banks display varying degrees of acumen, and all remain relatively small in scale. Nonetheless, recent surveys suggest that the top fifteen appear to be performing better than state-run commercial banks, and enjoy a greater rate of profitability. In a potentially important move, one joint stock bank has gained State Bank approval to issue 30 per cent of its shares to foreign entities, and is currently being wooed by a number of suitors. Other joint stock banks are likely to follow, in a bid to help raise their capitalizations. Over fifty foreign banks now have a permanent presence in Vietnam, largely as representative offices, although some fifteen have been granted approval to upgrade to branches. In addition there are four joint-venture banking operations formed between each of Vietnam's state-run commercial banks and regional finance houses. Recent legislation also permitted the establishment of popular credit funds, which now number over 150. Despite the arrival of a domestic private banking community, and an increasingly large number of resident foreign banks, credit remains scarce in Vietnam , making debt an expensive source of capital investment. The opacity of accounting in Vietnam, the dearth of

INDOCHINA AND MYANMAR

collateral, a skeletal business law, and the relatively high risks of lending all act to compound this problem, particularly for long-term financing. This inhibits Vietnam's investment and economic growth, prompting even greater reliance on FDI and other sources of overseas funding. Partly as a result of this, attention is turning towards the establishment of a capital market in Vietnam in a bid to find alternative means of raising funding, to harness the not inconsiderable domestic savings that remain out of reach of conventional banking methods, and tap blossoming foreign portfolio flows. In 1994 a small series of domestic bond issues were enacted by three state-run commercial banks, a state enterprise, and a municipality. Reaction to the issues was mixed. And in mid1995, Vietnam began a regular series of treasury bill auctions. Looking ahead, we are likely to see the establishment of a secondary market for these fixed-income securities (bonds and treasury bills), perhaps within the next year or so. Located in Ho Chi Minh City, this market will later mature into a full bourse, also trading equity securities (stocks), possibly by 1998 or 2000. Depending upon its operational ability, transparency, liquidity, and supporting legislation, this securities exchange could eventually provide a useful source of capital for Vietnam's industry, particularly if foreign investor participation is permitted. We may also witness

Vietnam's first international bond issue in 1996, once the country's commercial debt is restructured at the London Club. In the medium term, we are likely to see growing popular confidence in the banking sector and a widening spectrum of financial products enacted. This is within a broader context of new services evolving, in order to meet the demands of a market economy, such as private insurance firms and the introduction of leasing companies. Within the banking sector, the joint stock banks - less burdened by bad debts are forecast to increase their market share, aided by a more level regulatory playing field, which currently favours state-run commercial banks. Both the State Bank and state-run commercial banks are probably destined for restructuring and rationalization, possibly in tandem with a bid to resolve the latter's considerable outstanding loans to the state enterprise sector. This would also greatly benefit the tangential aim of reforming Vietnam's 6,000-plus state enterprises, permitting some to divest under the country's fledgling "equitization" programme, and eventually given the option to list on the securities exchange. 1\vo priorities for 1996-97 will be the "fleshing-out" of the current legislative structure, and bringing greater auditing discipline, which should help induce a more transparent financial sector.

61

ECONOMIC OUTLOOK Laos: Bigger Role for Private Sector

Outlook

he New Economic Mechanism has been remarkably successful in moving the Lao PDR towards a market-oriented system and achieving ~~...o.;;;;;;;;;;......~ economic development in recent years. The year 1994 has been the most outstanding year in terms of economic growth; GDP grew 8.4 per cent while maintaining inflation rate at the single-digit level. This achievement can be attributed to economic reform measures in general and good performance in the main economic sectors such as agriculture, industry, and services in particular. The output of the agricultural sector increased 7.6 per cent in 1994 compared with less than 3 per cent in 1993 mainly because of relatively good weather. The private sector played a very important role in the industry sector's growth of 8. 7 per cent despite the decline from double-digit growth in the previous year because of the strong performance of the textile industry then. Also, although the services sector showed an impressive growth of 7.5 per cent, it was slightly lower than the 7.7 per cent growth registered in 1993. This was because of the significant liberalization of the banking sector in 1993, which slowed down in 1994. Some even suggest that Laos might become a tax haven or export-processing zone since its resources and market are limited and it is located next to richer neighbours where taxes and costs of production are high. The foreign trade sector also performed well although in terms of growth rates it lagged those of 1993. Exports and imports grew at 20 per cent and 29 per cent respectively and, as a result, the trade deficit increased by about US$237 million. At the suggestion of the IMF, the government managed to increase revenues significantly to 13 per cent of GDP in 1994 compared with about 8 per cent in 1989. The overall fiscal deficit was reduced from about 11 per cent of GDP in 1992 to below 8 per cent of GDP in 1993 and 1994 (Asian Development Outlook , 1996 and 1997) . Another piece of good news was that inflation was kept at less than 7 per cent as money supply was reduced from 65 per cent in 1993 to 21 per cent in 1994 and the economy became more monetized. Moreover, according to the Foreign Investment Management Committee, approved cumulative foreign direct investment (FDI) reached a record level of about US$5 billion compared with US$92.6 million in 1990. More than 70 per cent of the FDI was in the energy sector and Thailand remained the largest investor in Laos (US$ 2 billion) followed by the United States, South Korea, and France. Although the external debt rose to about US$2 billion, the debt service ratio fell to 4 per cent from 9.6 per cent in 1993 as export revenues increased in 1994.

T

1 he government as well as international agencies such as the IMF and the Asian Development Bank (ADB) are optimistic about Laos' economic outlook for 1995. As the agricultural and industrial sectors are expected to grow at 4-5 per cent and 9 per cent respectively, the ADB has

~:.=!::-1

62

INDOCHINA AND MYANMAR projected the 1995 GDP growth to be 6-7 per cent. In view of recent floods in the South, the ADB forecast seems to be a little over-optimistic as the economic performance of Laos depends mostly on growth in the agricultural sector. Currency depreciation is threatening inflation. Since the local currency is pegged to the baht and the U.S. dollar, the depreciation of the U .S. dollar earlier in 1995 led to an appreciation of the baht, which in turn depreciated the kip. According to the Economist Intelligence Unit (EIU) , as more than 50 per cent of imports of Laos come from Thailand and a significant portion of its exports are sent to Thailand, there is a danger of imported inflation.

Real GOP (kip billion) Growth rate(%) Agriculture Industry Services

637.2 4.0 -1.7 19.9 6.5

681 .8 7.0 8.3 7.5 3.9

721.8 5.9 2.7 10.3 7.7

779.5 8.0 7.6 8.7 7.5

n.a. 7.0 n.a. n.a. n.a.

n.a. 8.0 n.a. n.a. n.a.

Exports US$ million Growth rate (%)

96.6 22.8

132.6 37.3

205.6 55.1

245.9 19.6

n.a. n.a.

n.a. n.a.

Imports US$ million Growth rate(%)

228.0 13.1

265.5 16.5

375.7 41.5

483.2 28.6

n.a.

n.a.

13.4

9.8

6.3

6.7

15.7

49.0

64.6

20.5

n.a.

n.a.

External debt (US$ billion)

1.9

1.9

2.0

n.a.

n.a.

n.a.

Debt service(%)

6.3

4.9

9.6

n.a.

n.a.

720

n.a.

Money supply (%growth)

Exchange rate (riel/US$)

703

716

717

4.0

726

9.0

10.0

* Forecast by Regional Outlook. n.a.- Not available.

SouRcEs: Bank of Lao PDR; Asian Development Outlook, 1995 and 1996; EIU Report, 2nd quarter, 1995.

63

ECONOMIC OUTLOOK

THE STATE OF PRIVATIZATION IN LAOS

A

s part and parcel of its economic reform programme under the New Economic Mechanism (NEM), in 1988 the government of Lao PDR announced the privatization programme for most of its state-owned enterprises (SOEs). Compared with other transitional economies of mainland Southeast Asia, such as Vietnam, Cambodia, and Myanmar, this was the most far-reaching step towards the marketoriented system. The size of the state sector in the industrial area was relatively small and hence manageable, compared with other formerly centrally planned economies of the region. Before the privatization programme started, there were about 600 SOEs out of which 260 or 42 per cent were medium- and large-scale manufacturing industries. The rest were small-scale enterprises. Only 30 per cent of these SOEs (mainly the larger ones) were under the direct control of central government ministries while the rest were under the control of provincial

authorities. Most of these enterprises were small in size with fewer than thirty employees, but a few modern manufacturing plants and utilities were of relatively large size. Actual implementation of the privatization programme started in 1989 through the transfer of designated SOEs partly or wholly to the private sector through contracts, leases, establishment of joint ventures, or direct sale. The liberal foreign investment law encourages investors to invest in the country in various forms: by contracting with local firms, by forming joint ventures with private or state-owned firms or by establishing wholly owned firms. Private and foreign firms are encouraged by the government to compete with SOEs. As a result, above five hundred investment projects of more than US$5 billion have been approved by the government. In terms of per capita foreign investment, Laos has become the top country among the former centrally planned economies.

However, there are strong positive trends in the economy of the Lao PDR. FDI is flowing in swiftly. The government has continued to introduce more reforms to achieve macroeconomic restructuring and stabilization together with expansion of infrastructure (both hard and soft) construction with the help of international agencies. Therefore, it would be safe to say that the economic outlook for Laos in the short-term perspective is good.

Cambodia: On the Right Track

64

[T]

he bright outlook for Cambodia's economy in 1994 was somewhat marred by natural calamities. Due to floods in late 1994, the government had to revise its original estimate of a GDP growth rate of 7 per cent to 5.2 per cent. The floods, followed by drought, affected most the agricultural sector which, according to the ADB, grew only 1.4 per cent and rice

INDOCHINA AND MYANMAR

The pace of privatization was slow in the early stages of the programme. It gained momentum only after 1992. To speed up the process, the government used a decentralized approach which made provincial authorities responsible for the divesture of small and medium enterprises urtder their control while the central government handled the limited number of larger enterprises. At the provincial level, privatization was to be carried out mostly by direct sales. At the central government level, however, most SMEs were to be transferred to workers and managers while the larger SOEs began to establish joint ventures with the private sector, mostly foreign investors. By 1992, some ninety state-owned SMEs had been privatized and only twelve of the about 260 larger SOEs had been released through lease or workers' contract agreements rather than outright sale. This was because the government did not have the technical expertise to

evaluate state enterprise assets and preferred to give opportunity to workers and managers to buy their own enterprises. Most of the privatization of SOEs has been done at the provincial level because these enterprises are small and low-value ventures and can be easily divested. By mid-1995, as a result of the speed-up of privatization measures, only sixty-five SOEs were left in the government sector. The government plan is to privatize all SOEs within the next two or three years except for thirty to thirty-five, which will remain under full state ownership. According to the Department of Privatization, under the Committee for Planning and Cooperation, steps are being taken to divest some SOEs through privatization and liquidation. Currently, the government prefers outright sales of property and equipment, and leasing arrangements are now limited to land and buildings. It is still early to assess the results of the privatization process.

production fell 11 per cent (loss of about 300,000 tons of rice). As a result, the government banned rice exports until December 1995. However, the forestry sector grew significantly by 50 per cent, at the cost of deforestation. Because of illegal logging, forest areas have been reduced to less than 40 per cent of total land area from 73 per cent in 1970. The industrial sector expanded by 14.1 per cent, mainly because of expansion in the construction sector, and the growth rate in services was 4. 7 per cent. Although the foreign trade sector also performed very well, the balance of trade has been going from bad to worse. The trade deficit for 1994 was US$291.4 million, as against US$184.8 million in 1993. This is because exports increased from US$219.1 million to US$302.7 million (an increase of 38.2 per cent) while imports grew from US$403.9 million to US$594.1 million (an increase of 47.1 per cent). This has resulted in a higher current account deficit- 7.5 per cent of GDP in 1994 compared with 1.8 per cent in the previous year, despite a large inflow of 65

ECONOMIC OUTLOOK foreign assistance. However, overall balance of payments remained in surplus at 1.5 per cent of GDP level, although there has been a slight decline from 1993. The surge in foreign trade can be attributed to trade liberalization measures, especially in the import tariff structure, which started in 1993. Exports grew significantly as a result of increase in log exports while the import surge can be attributed to an increase in external financing . As a result of the increase in exports, FDI, and foreign assistance, gross foreign reserves rose to the equivalent of two months of imports, which more

Real GOP (riel billion) Growth rate(%) Agriculture Industry Services

262.2 7.6 6.7 8.8 8.5

280.6 7.0 1.9 15.7 11 J

291.6 3.9 -2.0 15.0 7.2

306.8 5.2 1.4 14.3 5.6

n.a. n.a. n.a. n.a.

n.a. n.a. n.a.

Exports US$ million Growth rate(%)

212.5 147.6

264.5 24.5

219.1 -20.7

302.7 38.2

240.7 -25.8

n.a. n.a.

Imports US$ million Growth rate (%)

245.0 49.4

350.7 43.1

403.9 15.2

549.1 35.9

630.5 14.8

n.a. n.a.

87.9

176.8

31.0

26.1

10.0

n.a.

28.6

209.0

31 .7

32.6

20.0

n.a.

External debt (US$ billion)

0.4

0.4

0.4

n.a.

n.a.

n.a.

Debt service(%)

0.0

0.7

0.7

n.a.

n.a.

n.a.

Exchange rate (riel/US$)

703

1,253

2,470

2,585

2,000

n.a.

Money supply(%)

* Forecast by Regional Outlook. n.a.- Not available.

SouRcE: The World Bank, February 1995.

66

6.7

n.a.

8.0

INDOCHINA AND MYANMAR than covered an increasing current account deficit. In 1994 the FDI reached the level of US$2 billion. The promulgation of the Investment Law in August of that year contributed to the increase. On the other hand, the budget deficit remained very high in 1994 at 6.2 per cent of GDP compared with 5.7 per cent in 1993 as current expenditure rose from 6. 7 per cent of GDP to 9.6 per cent. The inflation rate was better, declining from 31 per cent in 1993 to 26 per cent in 1994. Moreover, in 1994 a lack of confidence in the country's economy caused large amounts of bank funds to be transferred offshore rather than being lent to local customers. A central bank report, according to the Economist Intelligence Unit, EIU, suggests that as little as 38 per cent of bank funds, or some US$116 million, were lent to Cambodians. The exchange rate of the riel to the U.S. dollar increased significantly after the United Nations Transitional Authority in Cambodia (UNTAC) left the country but it is estimated to fall to the 2,000 level in 1995.

ccording to the Cambodia Development Council, the outlook for 1995 is good. The FDI in 1995 is expected to reach US$1 billion and foreign trade is expected to be boosted by strengthening industries such as the garment industry and fisheries. The GDP is estimated to grow around 7 per cent, inflation would be under 10 per cent, and the currency is expected to be stable. The outlook for 1996 and 1997 seems better in view of the reforms being carried out to maintain macroeconomic stability, the pledge of some US$1.35 billion over two years in aid from the annual International Conference on Reconstruction of Cambodia (ICORC) held in March 1995, the attainment of observer status in ASEAN, and the approval of Cambodia's MFN status by the U .S. Senate. However, as usual, there are two provisos: that the weather is clement, producing no significant flooding or drought; and political conditions do not deteriorate.

Outlook

[M]

Wyanmar: The Rise of Rice

yanmar's economy seems to have recovered since 1992/93 after a long- spell of economic stagnation in the second half of 1980s. The fiscal year 1994/95 (ending 31 March 1995) has been the third successive year of good economic growth. According to official reports, the real GDP growth rate for 1994/95 was an impressive 6.8 per cent compared with the planned target of 6.3 per cent. However, the ADB has estimated Myanmar's GDP for the same year at 6.4 per cent against the previous year's 6.0 per cent. According to the Economist Intelligent Unit (EIU), the government's estimate is rather high because the deflator used to arrive at it is based on the official

67

ECONOMIC OUTlOOK _ consumer price index. Nevertheless, the growth rate probably lies between 6 and 7 per cent. The main factors contributing to this achievement were the economic reform process introduced six years ago and good weather. In particular, liberalization in trade, price controls, foreign investments and, to some extent, agricultural marketing, played an important part. The mobilization of the public sector by designating 1994/95 as the "All-Round Development Year" also played a significant part in this success. Sectorwise, a 7.2 per cent increase against the planned target of 6.9 per cent in agriculture is attributable to expansion of "summer paddy" areas, partial liberalization in marketing, and relatively good weather compared with neighbouring countries. A strong growth of 8.9 per cent has been achieved in the processing and manufacturing sector largely because of private sector involvement. At the same time, the export and import sectors grew at 17.2 per cent and 26.3 per cent respectively. This would have been made possible by significant increases in rice exports and booming cross-border trade. The record rice export of 1.2 million has been the outstanding performance of the year ending on 31 March 1995. It was the first time in thirty years that the once famous rice bowl of Asia managed to export more than 1 million tons of rice. In 1965/66 the country exported 1.17 million tons of rice and rice products and since then exports of rice have averaged about half a million tons per year. Also , a surge in FDI played a very important role in the country's good economic performance. The volume of FDI (approved) more than doubled within a year, from US$1.23 billion on 15 June 1994 to US$2.60 billion on 17 May 1995. More than half of the FDI was in the oil and gas sector and about threequarters of the total flows went into extraction of natural resources. France, Thailand, Singapore, the United Kingdom, and the United States are the five top foreign investors in Myanmar. On the other hand, the forestry sector declined about 14 per cent, compared with the 0.2 per cent decrease in 1993/94, due to the government's deliberate policy to prevent over-exploitation. Prices of essential goods such as rice, cooking oil, meat , poultry, shrimps, and fuels have gone up rapidly although the official inflation rate (CPI) for 1994 was 24.1 per cent only. The parallel exchange rate remains eighteen to twenty times as high as the official rate of nearly six kyats per U.S . dollar. There has been some improvement in the financial sector during the year. Some twenty-six foreign banks from twelve countries were given licences to open representative offices in Myanmar. For the first time since 1992 the Central Bank interest rate was raised from 11 to 12.5 per cent in January 1995. Commercial banks are restricted to setting their rates between 9.5 and 18.5 per cent whereas the official inflation rate has been in the range of 20 to 30 per cent. The foreign exchange certificates (FECs) issued in 1993 seem to be going well

68

INDOCHINA AND MYANMAR because out of the 65 million units issued within two years, 58 million units have been deposited with banks. These certificates serve as an instrument that provides a market rate of exchange for certain groups of people and thus it has to a certain extent become a de facto devaluation of the local currency. Despite many obstacles, Myanmar has managed to continue its strong growth for three years in sucession mainly because of economic reforms and good performance in the agricultural sector. The question is whether the present momentum of growth can be sustained. Its long-term sustainability will depend upon whether the government will continue to carry out more reforms in a consistent and coherent manner, especially reforms relating to macroeconomic stabilization.

or the short-term outlook, there are both plus and minus factors. The Outlook growth rate of currency in circulation is still high although it has declined slightly from 26.2 per cent in 1993/94 to 23.4 per cent in 1994/95. The surge in inflow of FDI and issuance of FECs along with the high money supply may push the inflation rate to a higher level. The prices of basic goods such as rice, cooking oils, and fuels are increasing. The state budget deficit has been around 3 per cent of GDP for three successive years because of the government's tranfer of part of the cost of infrastructure development to the public in an effort to control capital expenditure. This can be regarded as indirect taxation. Hence fiscal problems are not really solved. The share of revenues to GDP continued to decline, as illustrated by tax revenues as a percentage of GDP. Moreover, the gross domestic investment level is still below 20 per cent of GDP. Although all interest rates are still under government control and remain negative in real terms, public borrowing is not encouraging and instead public saving is increasing. This is not a good sign for the business environment. On the other hand, prospects for the agricultural sector are very bright because of the year-round cultivation of paddy and expansion of the cultivated area. Although productivity (yield/acre) is not expected to rise in 1995/96, the government has estimated a 12.5 per cent increase in paddy production and hence rise in rice exports. Since the growth of the country's economy is strongly correlated with growth in the agricultural sector, the prospects for macroeconomic performance remain good. The increase in international trade and a steady flow of FDI as a result of continued economic reform measures will surely boost the economy although its spillover effect to the rural sector is yet to be seen. There are also encouraging signs that public investment is increasing. Moreover, the designation of 1996 as the "Visit Myanmar Year" may to some extent also contribute to the economic growth of the country although the government's target of half a million tourists appears to be too optimistic. As fiscal year 1995/96

69

ECONOMIC OUTLOOK is the last year of the First Four-Year Plan of the present ruling State Law and Order Restoration Council (SLORC) , there is no doubt that the government will do its best to meet its growth targets. In sum, given the fact that favourable conditions seem to override the negative factors to some extent, Myanmar's growth rate for 1995/96 should be around 7 per cent, as against the government's target of 7.7 per cent. The prospect for 1996/97 is also good provided stabilization reform measures and good weather continue.

Revised 1993/94

1991/92

1992/93

GOP(%) Agriculture Manufacturing Services

-0.6 -3.9 -4.0 5.1

9.7 12.4 10.8 6.1

5.9 4.7 9.7 6.9

Money supply (%growth)

34.4

26 .2

23.4

Inflation (%)

32.3

21 .9

Exports (US$ million) Growth(%)

513 -1.0

Imports (US$ million) Growth(%)

871 -3.5

Exchange rate (kyat/US$) Official Market

6.01 84

Provisional 1994/95

1995/96 7.2 7.5 9.0 10.5

6.0 7.0 9.0 9.5

n.a.

25.0

25.0

31.8

35.0

35.0

30.0

608 18.7

679 11.7

795 17.1

n.a. 15.0

n.a. 9.0

894 0.5

1,321 47.6

1,520 30.5

n.a. n.a.

n.a. n.a.

6.00 100

6.00 100

6.24 120

6.01 110

6.8 7.2 8.9 6.1

6.00 110

SouRcE: Ministry of Planning and Economic Development, The Review (Yangon, 1995). n.a. - Not available. * Forecast by Regional Outlook.

70

1996/97

APPENDICES

TABLE A-1 Particulars

1982

SELECTED ECONOMIC INDICATORS: BRUNEI DARUSSALAM 1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

4,609.3

4,747.6

4,890.0°

5,041.6°

n.a.

100.0

100.0 1.1

100.0

100.0

100.0 n.a.

NATIONAL ACCOUNT (at constant 1985 prices) Gross domestic product STRUCTURE OF PRODUCTION GDP by industrial origin Agriculture Industry• Services

3,027.5

3,418.6

3,500.4

3,535.3

4,951 .0

Million Brunei $ 4,493.5 4,664.6 4,486.2 Per Cent

1.2

1.2

100.0 1.1

76.9

76.0

71.9

100.0

21.9

100.0

22.8

27.0

100.0

100.0

Imports, c.i.f.

100.0

1.2

1.4

1.4

1.3

1.2

1.2

71.4

68.8

65.3

62.7

60.6 38.2

57.5 41.3

45.3

1.0° 50.7° 48.3°

1,925.9

2,251.8

2,615.5

2,98o.oc

1,030.9

1,126.0

1,238.0°

27.4

29.8

33.3

36.0

53.6

0.9° 51.2°

n.a. n.a.

3,367.0° 1,362.0"

n.a. n.a.

47.9°

Million US$

INTERNATIONAL TRANSACTIONS Exports, f.o.b.

100.0

100.0

3,075.8

1,819.1

1,992.3

1,770.7

3,841.4 740.5

3,357.1 722.0

3,116.4 609.0

634.8

661.2

672.0

765.5

878.3

93.7

94.8

97.7

100.0

101.8

103.1

104.3

105.7

PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 =100) Money supply, M2 (million Brunei $) EMPLOYMENT Employmentb

1,941 31 .9

2,583 32.4

2,926 34.3

3,621 32.5

3,126 30

4,446

4,163

Thousand 43.9 33.7

4,178 50.0

• Includes mining as well as manufacturing, utilities, and construction. to employment in the private sector only. c Estimates. dBase year: 1990 =100. n.a. - Not available.

b Refers

SouRcE: Statistics Division, Economic Planning Unit, Ministry of Finance, Brunei Darussalam Statistical Yearbook(various issues).

107.9 4,519 51.0°

101.6d 4,445.5 52.0°

102.9d 4,696.4 53.0

107.3d 4913 53.0

109.9d 5,446 n.a.

TABLE A-2 Particulars

SELECTED ECONOMIC INDICATORS: INDONESIA

1982

1983

1984

1985

1986

1987

Gross domestic product

77,849

88,554

94,666

96,997

102,695

107,754

Private consumption

54,400

54,442

56,616

57,201

60,385

1989

1990

1991

1992

1993

1994

113,983

122,580

131 ,614

140,038

148,860

158,535

169,315

62,727

65,331

71 ,783

74,511

77,342

80,588'

n.a.

1988

NATIONAL ACCOUNT (at constant 1985 prices)

Government consumption Gross fixed capital formation

Billion Rupiah 58,453

8,919

9,786

10,120

10,893

11 ,196

11 ,177

12,024

13,285

13,736

14,918

15,783

16,415'

n.a.

17,581

22,198

20,863

22,367

24,426

25,766

28,735

32,575

37,836

41 ,809

43,439

50,932'

n.a.

STRUCTURE OF PRODUCTION GDP by industrial origin Agriculture and mining

PerCent 100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

37.4

43.5

42.9

40.9

40.1

38.7

37.1

36.1

34.8

34.6

33.9

17.6b

43.6 39.8

100.0

Industry

22.4

19.1

20.2

21 .5

21 .9

22.8

24.0

24.5

25.7

25.4

25.8

42.1b

Services

40.2

37.4

36.9

37.6

38.0

38.5

38.9

39.4

39.5

40.0

40.3

40.3b

INTERNATIONAL TRANSACTIONS

100.0 16.6

Million US$

Balance of payments Merchandise exports

19,747

18,689

20,754

18,527

14,396

17,206

19,509

22,974

26,807

29,430

32,502

35,752

38,576

Merchandise imports

17,854

17,726

15,047

12,705

11 ,938

12,532

13,831

16,310

21 ,455

24,626

26,481

29,129

32,333

Current account balance

-5,324

--{),338

-1 ,856

-1 ,923

-3,911

-2,098

-1 ,397

-1 ,108

-2,988

-4,080

-3,679

-3,000

-3,100

Foreign exchange reserves

2,593

3,639

4,702

4,838

3,919

5,483

4,948

5,357

7,353

9,151

10,181

10,988

11 ,820

1,797

1,901

1,992

2,062

2,110

2,200

Rupiah/US$ Exchange rate (end of period)

693

994

1,074

1,125

1,641

1,650

1,731

PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 = 100) Money supply, M2 (billion rupiah)

77.3 11 ,075

86.4 14,663

95.5 17,937

100.0 23,153

105.8 27,615

115.6 33,905

INTEREST RATE Bank deposit rate (6 months)

--

42,073

133.0 58,526

142.9 84,630

156.1 99,410

168.1 119,075

184.3 145,599

201.30 174,319

PerCent 6.00

19.77

18.40

16.88

15.35

18.42

EMPLOYMENT Employment

124.9

18.99

17.70

19.63

22.83

17.34C

12.26C

12.82c

Thousand 57,803

57,811

60,084

62,458

68,338

70,403

72,518

73,425

76,061 C

77,8ooc

79,589C

81 ,420C

83,292C

• Forecast. b Asian Development Outlook (1994 ). c Estimates. n.a. -Not available. Sources: Asian Development Bank, Key Indicators of Developing Member Countries ofADB (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade Statistics, Yearbook (various issues); International Labour Office, Yearbook of Labour Statistics (various issues).

TABLEA-3 Particulars

1982

1983

1984

SELECTED ECONOMIC INDICATORS: MALAYSIA 1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

NATIONAL ACCOUNT (at constant 1985 prices)

Million Ringgit

Gross domestic product

68,449

72,707

78,351

77,470

78,361

82,586

89,967

98,247

107,779

117,104

126,238

136,337

147,925

Private consumption

36,548

37,712

40,145

40,283

36,251

36,997

42,965

49,064

55,489

61,000

61,163

63,579

68,538

Government consumption

12,014

12,563

11,948

11 ,844

11 ,994

12,170

12,765

13,727

14,482

16,271

18,125

19,573

22,254

Gross fixed capital formation

22,968

24,811

25,545

23,124

18,875

18,038

20,792

27,421

33,445

40,400

45,083

50,485

55,533.5

STRUCTURE OF PRODUCTION GOP by industrial origin

PerCent 100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Agriculture and mining

31.7

31 .1

30.6

31.2

32.4

32.2

31 .3

30.6

28.4

27.9

24.9

23.7

22.80

Industry

25.8

26.3

27.0

26.2

26.8

27.8

29.4

30.6

32.4

33.4

32.8

34.0

37.30

Services

42.5

42.6

42.4

42.6

40.8

40.0

39.3

38.8

39.2

38.7

41.9

44.0

39.80

INTERNATIONAL TRANSACTIONS

100.00

Million US$

Balance of payments Merchandise exports

11,966

13,683

16,407

15,133

13,547

17,754

20,852

24,667

28,877

34,445

39,600

45,900

57,000

Merchandise imports

12,719

13,251

13,426

11 ,556

10,301

11,919

15,306

20,754

26,967

34,615

36,200

42,500

57,800

Current account balance

-3,601

-3,497

-1 ,672

-£13

-122

2,635

1,810

-212

-1 ,630

-4,606

-1 ,600

-2,100

-£,400

Foreign exchange reserves

3,509

3,509

3,470

4,621

5,697

7,055

6,134

7,393

9,327

10,421

16,784

26,814

24,888

Ringgit/US$ Exchange rate (end of period)

2.321

2.338

2.425

2.427

2.603

2.493

2.715

2.703

2.702

2.724

2.612

2.702

2.560

PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 =100) Money supply, M2 (million ringgit)

92.7 37,900

96.2 42,264

99.6 47,733

100.0 50,412

100.7 56,097

101.4 59,772

INTEREST RATE Bank deposit rate (6 months)

64,072

106.8 74,393

110.2 83,903

115.0 96,093

120.4 114,350

125.1 133,789

129.86 163,088

PerCent 9.94

8.25

9.52

9.06

7.17

3.97

EMPLOYMENT Employment

104.0

3.57

4.58

6.38

7.30

7.9

6.3

n.a.

Thousand 5,247

5,429

5,565

5,625

5,707

5,881

6,088

6,351

6,621

6,849

7,060

7,265

7,618

n.a. -Not available. SouRCEs: Asian Development Bank, Key Indicators of Developing Member Countries of ADB (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade Statistics, Yearbook (various issues) ; International Labour Office, Yearbook of Labour Statistics (various issues).

TABLE A-4 Particulars

1982

1983

1984

SELECTED ECONOMIC INDICATORS: PHILIPPINES 1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

NATIONAL ACCOUNT Billion Pesos

(at constant1985 prices) Gross domestic product

653.5

665.7

617.0

571 .9

591.4

619.7

658.5

698.4

715.2

710.2

710.2

724

755

Private consumption

422.1

424.6

425.8

420.8

434.8

452.4

480.6

504.6

531 .8

543.0

560.3

577.1

598.45

45.8

49.9

52.8

57.6

54.1

51 .8

48.2

48.15

105.1

119.1

146.2

157.0

166.6

179.1

197.2

217.12

Government consumption Gross fixed capital formation

52.3

49.9

44.0

43.5

43.7

177.6

191 .8

144.6

99.8

99.7

Per Cent

STRUCTURE OF PRODUCTION 100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Agriculture and mining

24.3

23.1

24.7

26.7

26.7

26.1

25.4

24.5

24.0

28.4

28.2

22.7

22.3

Industry

39.1

39.0

37.1

33.0

32.6

33.1

33.5

34.4

34.3

31 .5

31 .7

34.4

34.8

40.8

41.1

41.1

41 .7

40.1

40.1

42.9

42.8

GOP by industrial origin

Services

36.6

37.9

38.2

40.4

40.7

Million US$

INTERNATIONAL TRANSACTIONS Balance of payments Merchandise exports

5,021

5,005

5,391

4,629

4,842

5,720

7,074

7,821

8,186

8,840

9,824

11 ,375

13,400

7,667

7,487

6,070

5,111

5,044

6,737

8,159

10,419

12,206

12,051

14,519

17,597

21,200

Current account balance

-3,200

-2,750

-1,116

-103

954

-444

-390

. -1,456

-2,695

-1 ,034

-999

-3,289

-3,000

Foreign exchange reserves

885

746

574

550

1,675

913

951

1,365

868

3,186

4,283

4,546

5,866

Merchandise imports

Pesos/US$ Exchange rate (end of period)

9.171

14.002

19.760

19.032

20.530

20.800

21 .335

22.440

28.000

26.650

25.096

27.699

24.42

PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 =100) Money supply, M2 (million pesos)

50.1 78,703

55.5 97,105

82.8 111 ,156

100.0 125,531

105.3 139,474

112.4 158,271

14.5

13.4

20.1

18.8

11 .0

7.4

155.8 297,307

185.1 344,057

201.6 392,913

216.8 442,027

236.3 548,113

11 .8

14.2

20.3

18.8

14.3*

10.2*

n.a.

Thousand

EMPLOYMENT Employment

135.6 251 ,091

Per Cent

INTEREST RATE Bank deposit rate (6 months)

123.7 195,921

17,371

19,212

19,673

19,801

20,595

20,795

21,498

21 ,849

22,532

22,979

23,439*

23,954*

n.a.

• Estimates. n.a. - Not available. SouRcEs: Asian Development Bank, Key Indicators of Developing Member Countries of ADB (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade Statistics, Yearbook (various issues); International Labour Office, Yearbook of Labour Statistics (various issues).

TABLE A-5 Particulars

1982

1983

1984

SELECTED ECONOMIC INDICATORS: SINGAPORE 1985

1986

1989

1988

1987

1990

1991

1992

1993

1994

NATIONAL ACCOUNT Million Singapore $

(at constant 1985 prices) Gross domestic product

33,772

36,537

39,573

38,924

39,641

43,372

48,203

52,657

57,049

60,884

64,416

70,793

77,943

Private consumption

16,086

16,852

17,712

17,553

18,255

20,053

22,758

24,654

26,312

27,614

28,740

30,229

32,042

5,654

5,339

5,621

6,234

6,716

6,802

6,584

Government consumption Gross fixed capital formation

3,864 15,406

4,236 17,068

4,457 18,677

5,549 16,425

5,607 14,503

15,028

Agriculture and mining Industry Services

18,611

21 ,190

24,329

26,592

30,847

· PerCent

STRUCTURE OF PRODUCTION GDP by industrial origin

16,260

n.a. 34,456

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

1.2

1.2

1.1

1.0

0.9

0.8

0.6

0.5

0.5

0.4

0.4

0.2

0.2

38.2

38.8

39.4

36.3

35.4

35.8

36.5

36.2

36.5

36.8

36.6

36.5

37.4

63.3

63.1

62.7

63.1

63.3

62.4

60.6

60.0

59.5

62.6

63.7

63.5

62.9 Million US$

INTERNATIONAL TRANSACTIONS Balance of payments Merchandise exports

19,435

20,429

22,662

21 ,533

21 ,336

27,464

37,993

43,239

50,684

56,818

61 ,568

73,882

89,200

Merchandise imports

26,197

26,252

26,733

24,361

23,402

29,910

40,338

45,686

55,803

60,946

66,468

80,426

99,200

Current account balance

-1,296

-610

-385

3

318

-157

889

2,486

1,743

3,306

2,929

1,500

6,500

33,931

39,661

48,066

57,890

Foreign exchange reserves

8,351

9,130

10,291

12,686

12,751

15,000

16,861

20,136

27,535

Singapore $/US$ Exchange rate (end of period)

2.109

2.127

2.178

2.105

2.175

1.999

1.946

1.894

1.745

1.631

1.645

1.608

1.46

PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 =100) Money supply, M2 (million S$)

95.9 22,804

97.0 25,526

99.5 27,121

100.0 28,148

98.6 30,955

99.1 37,089

7.56

6.49

7.03

5.23

4.06

3.11

51 ,544

106.6 61 ,845

110.2 69,542

112.7 75,729

115.45 80,272

119.80 92,312

3.33

3.86

5.37

4.13

2.69

2.51

n.a.

Thousand

EMPLOYMENT Employment

42,088

103.0

PerCent

INTEREST RATE Bank deposit rate (6 months)

100.6

1,141

1,167

1,175

1,154

1,149

1,193

1,239

1,278 -

1,325

1,524

1,576

1,686

1,762

n.a. -Not available. SouRcEs: Asian Development Bank, Key Indicators of Developing Member Countries of ADB (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade StatistiCS, Yearbook (various issues); International Labour Office, Yearbook of Labour Statistics (various issues); Department of Statistics, Singapore, Monthly Digest of Statistics (August 1993).

TABLEA-6 Particulars

SELECTED ECONOMIC INDICATORS: THAILAND 1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1982

1983

1984

Gross domestic product

852,932

914,777

979,973

1,014,399

1,064,270

1,165,028

1,319,028

1,477,908

1,625,687

1.750,865

1,883,930

2,030,876

2,203,500

Private consumption

566,821

606,436

649,646

662,665

691 ,129

752,052

818,372

907,649

990,461

1,074,650

1,140,203

1,212.D36

n.a.

Government consumption

115,938

124,718

133.719

142,917

143,190

144,523

149,533

149,408

153.785

158,552

168,065

176,804

n.a.

266,764

324,956

396,314

491 ,617

584,533

610,252

687,144

n.a.

NATIONAL ACCOUNT Million Baht

(at constant 1985 prices)

Gross fixed capital formation

202,698

228.753

253,777

240,283

231 ,173

Per Cent

STRUCTURE OF PRODUCTION GOP by industrial origin

100.0

Agriculture and mining

22.7

Industry Services

100.0

100.0

100.0

22.0

21.9

22.4

27.9

28.4

28.5

27.4

49.4

49.7

49.6

50.1

100.0 21.4

100.0

100.0

100.0

100.0

100.0

100.0

100.0

18.7

17.2

14.7

13.1

12.2

100.0 11.10

19.7

19.4

28.4

29.4

30.4

31.5

33.0

34.6

35.9

40.9

42.10

50.2

50.9

50.2

49.8

49.8

50.7

51 .0

46.9

46.80

INTERNATIONAL TRANSACTIONS Balance of payments Merchandise exports

Million US$ 6,835

6,308

7,337

7,077

8,829

11 ,609

15,858

19,938

22,881

28,245

32,114

36,224

42,800

7,566

9,169

9,237

8,383

8,417

11,965

17.799

22.737

29,479

34,405

36,469

41.757

47,200

Current account balance

- 1,006

-2,882

-2,111

-1,491

300

-290

-1,498

-2,375

-7,112

-7,762

-6,400

-6,900

- 7.400

Foreign exchange reserves

1,513

1,561

1,890

2,157

2.736

3,906

5,997

9,461

13,247

17,287

20,012

24,078

28,884

Merchandise imports

Baht/US$ Exchange rate (end of period)

23.00

23.00

27.15

93.1

96.2

96.9

26.65

26.13

25.07

25.24

25.69

25.29

25.28

25.52

25.54

25.09

PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 =100) Money supply, M2 (billion baht)

364

451

538

100.0

101.8

104.4

593

673

809

INTEREST RATE Bank deposit rate (6 months)

956

115.2 1,207

122.8 1,529

129.4 1,832

134.7 2,118

138.8 2.468

145.74 2,862.8

Per Cent 11.00

11 .00

13.00

13.00

9.50

7.00

8.20

9.50

14.20

12.25

10.0

10.0

n.a.

Thousand

EMPLOYMENT Employment

108.4

24,831

25,184 .

25,999

25,853

26,612

27,516

29,274

30,612

30,844

31 ,137

32,384

33,280

33,839

n.a. - Not available. SouRcEs: Asian Development Bank, Key Indicators of Developing Member Countries of ADB (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade Statistics, Yearbook (various issues); International Labour Office, Yearbook of Labour Statistics (various issues).

TABLEA-7 1985

SELECTED ECONOMIC INDICATORS: MYANMAR

1986

1987

1988

NATIONAL ACCOUNT (at constant 1985-86 prices) Gross domestic product Private and government consumption Gross fixed capital formation

55,986

55,397

53,178

47,141

49,532

49,053

47,629

41,065

8,646

8,272

7,556

5,399

1989

Million Kyat 48,883 50,260 41 ,826 6,453

STRUCTURE OF PRODUCTION GDP by industrial origin Agriculture and mining

1990

1991

1992•

1993•

19W

49,933

54,757

58,001

61,950

42,199

40,315

43,543

46,755

8,852

9,188

9,250

10,236

49,632 11,936

Per Cent 100.0 49.1

100.0 49.9

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

49.4

47.9

48.2

47.8

47.0

47.3

46.6

47.2

Industry•

12.1

11 .5

11.4

11.5

12.8

13.1

13.4

13.8

14.5

13.9

Services

38.7

38.7

39.2

40.6

39.0

39.1

39.6

38.9

38.9

38.9

530.9

585.2

795.4d

1,519.5d 422.0

INTERNATIONAL TRANSACTIONS

Million US$

Balance of payments Merchandise exports

302.8

Merchandise imports Current account balance

566.6

Foreign exchange reserves Exchange rate (end of product) PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 = 100) Money supply, M2 (million kyat) INTEREST RATE Bank deposit rate EMPLOYMENT Employment

-205.5 33.9 7.842 100 19,417

288.0

219.0

304.0 -294.0

268.0

33.1 7.040 109.3 22,015

-349.0 27.1 6.110 136.4 16,276

164.4

210.3

321.4

4,190

244.0 -176.0

194.0 -67.0

604.0 -345.0

623.9 -341 .0

631.4 -213.0

801.7 -223.0

77.3

262.8

312.0

258.2

280.1

308.8

6.410 158.3 20,688

Kyat/US$ 6.494 210.3 28,403

6.080

236.8 38,406

6.014 313.2 51 ,298

6.241 381 .9 69,409

6.051 572.9 84,872

-322

6.0 711 .0 n.a.

Per Cent 1.5

1.5

1.5

1.5

1.5

9.0

9.0

9.0

9.0

12.5

Thousand 1,530

1,541

1,540

1,514

1,522

1,574

1,601

1,647

1,691

1,723

• Revised estimates. b Estimates. • Includes processing and manufacturing. d converted Into US$ from kyats. n.a. - Not available.

Sou~es: Asian Develop~ent. Bank, Asian Development Outlook (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade StatiStics, Yearbook (vanous Issues); Union of Myanmar, Review of the Financial, Economic and Social Conditions (various issues); Central Bank of Myanmar, International Labour Office, Yearbook of Labour Statistics (various issues).

TABLEA-8 Particulars

SELECTED ECONOMIC INDICATORS: LAO PEOPLE'S DEMOCRATIC REPUBLIC 1985

1986

1987

1988

1989

1990

212,768

222,981

220,529

245,795

262,017

24,546

26,295

21 ,695

216,559 26,722

31,729

162,929

179,005 71,411

181 ,960

155,978 65,426

201 ,997 75,259

34,507 227,533

1991

1992

1993

1994"

283,398

300,969

325,046

244,030

38,168 261,188

n.a. n.a.

n.a. n.a.

84,240

87,906

n.a.

n.a. 100.0 57.4

NATIONAL ACCOUNT (at constant 1988 prices) Gross domestic product Private consumption Government consumption Gross fixed capftal formation

Million Kip

67,976

65,197

Per Cent

STRUCTURE OF PRODUCTION GDP by industrial origin Agriculture lndustryb Services

100.0 60.4

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

60.3

59.0

59.4

60.3

55.1

57.3

21.1

20.7

17.5

19.0

23.5

19.5 20.2

17.8 25.7

17.8 23.5

60 17.5

18.5

18.4 22.3

58.0 16.7 25.3

22.5

Current account balance Foreign exchange reserves

17.9 24.8

Million US$

INTERNATIONAL TRANSACTIONS Merchandise exports Merchandise imports

80,715

272,498 36,302

53.7

55.1

62.1

57.8

63.3

79

97

133

232

278

193.2

185.7 -90.5

162.4 -72

210.7

-93.7 25.3

216.2 -117.7

185 -102

210 -78

244 -117

378 -144

31.8

20.6

16.1

486 -193 n.a.

-135 41.4

60.6

53.4

81.0

151 .0

Kip/US$ Exchange rate (end of period) PRICE INDEX AND MONEY SUPPLY Consumer price index Money supply, M2 (million kip) INTEREST RATE Bank deposit rate EMPLOYMENT Employment

35 65.3 2,280C

388

453

714

695

711

n.a.

n.a.

3,876

15,842

11.9 21 ,715

59.6 41 ,113

35.7 50,253

13.4 45,958

14.0

14.0

95

705 9.8 68,477

717 6.3 80,529

719 6.7 98,245

Per Cent 9.6 1,757

9.6 1,705

9.6 1,833

1,874

14.0

Thousand 1,912 1,956

14.0 2,026.

14.0 2,100

14.0 2,993

14.0 n.a.

• Estimates. b Includes mining as well as manufacturing, utilities, and construction. CM1. n.a.- Not available. SouRcEs: Asian Development Bank, Key Indicators of Developing Member Countries of ADB (various issues) and Asian Development Outlook (various issues); International Monetary Fund, International Financial Statistics (various issues); IMF, Direction of Trade Statistics, Yearbook (various issues); Economist Intelligence Unit, Indochina: Vietnam, Laos, Cambodia, Country Profile (various issues); International Labour Office, Yearbook of Labour Statistics (various issues); Committee for Planning and Co-operation; State Statistical Centre, Basic Statistics about the SociaEconomic Development in the Lao P.D.R., 1992.

TABLEA-9 Particulars

SELECTED ECONOMIC INDICATORS: VIETNAM 1991

1992

19938

1994

Billion Dong 29,515

31,286

33,991

36,735

39,982

1986

1987

1988

1989

23,044

23,820

24,748

25,929

28,083

NATIONAL ACCOUNT (at constant 1989 prices) Gross domestic product Private consumptionb Government consumptionb

1990

1985

n.a.

n.a.

n.a.

n.a.

18,576

28,238

60,867

81,619

93,652

n.a.

n.a.

n.a.

n.a.

3,900

5,221

8,092

23,067

Gross fixed capital formationb STRUCTURE OF PRODUCTION

n.a.

n.a.

n.a.

n.a.

n.a.

13,695 19,498

GDP by industrial origin

100.0 51.4

100.0

100.0 48.5

100.0

100.0

100.0

100.0

100.0

100.0

50.7

100.0 49.2

49.8

40.8

31.3 17.3

31.5 17.8

32.9 17.9

33.7 17.8

50.4 32.0 17.5

32.3 17.9

23.6 35.6

34.5 27.5

36.4 24.7

38.0

38.9

32.3 25.3 42.4

Agriculture Industry< Services INTERNATIONAL TRANSACTIONS Balance of payments Exports, total Imports, total Current account balance Exchange rate (end of period) PRICE INDEX AND MONEY SUPPLY Consumer price index (1985 = 100) Money supply, M2 (billion dong) DebVService ratio

--

34,020

43,375

Million US$ 733 1,412

1,320

1,731

1,670

1,760

3,850

-163

3,505 -766

-1 ,282

9,750

11 ,500

10,510

10,995

610 1,184

-655 250

-624

-751

-586

-253

350

1,000

4,500

4,000

5,200

100 n.a.

590 112

2,650 471

110 2,569

195

252 11 ,347

461 20,301

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

27,399

27,968

903 -453

n.a. n.a

26,025

28,122

37.8

8.5 32,289 26.8 0.7

29.9

20.2

27,144 22.4

2.4 5.0 Thousand 30,295 28,940

2.1

1.0

8.575

42.3 Per Cent

3,600 5,166

2,425 2,300 -17

2,041 2,101

494 1,121

497

EMPLOYMENT Employment

11,506

PerCent

INTEREST RATE Deposit

n.a.

n.a. n.a.

30,974

31,819

32,718

10.2 n.a. n.a. 0.7 n.a.

a Estimates. bAt current prices. c Includes mining as well as manufacturing, utilities, and construction. n.a.- Not available.

SouRcEs: ADB, Asian Development Outlook (various issues); International Monetary Fund; Economist Intelligence Unit, Indochina: Vietnam, Laos, Cambodia, Country Profile (various issues): Statistical Publishing House, Statistical Year Book 1993 (Hanoi).

APPENDICES SELECTED SOURCES OF DATA Asian Development Bank, Asian Development Outlook. Asian Development Bank, Key Indicators of Developing Member Countries. Asian Wall Street journal. Asiaweek. Business Times (Singapore).

Economist Intelligence Unit, Country Reports. Far Eastern Economic Review. Forum Keadilan Uakarta) .

International Monetary Fund, World Economic Outlook . Kompas Uakarta). Manila Bulletin (Philippines).

Merrill Lynch, Asian Economic Commentary . Naya, Seiji and Joseph L.H. Tan, eds., Asian Transitional Economies (Singapore: Institute of Southeast Asian Studies, 1995). New Straits Times (Malaysia) . Philippines Daily Enquirer. Phnom Penh Post (Cambodia) . Straits Times (Singapore). The Bangkok Post (Thailand). The Nation (Thailand) . The New Light of Myanmar (Myanmar) . The Star (Malaysia) . Tiras (Jakarta).

U .S. Department of State, Country Reports on Economic Policy and Trade Practices. Vietnam Investment Review (Vietnam) .

World Bank, World Development Report.

82

THE CONTRIBUTORS Political Outlook 1996-9 7 Nick Freeman is a Research Fellow at the Institute of Southeast Asian Studies. He contributed the sections on Vietnam and Laos. Asad Latif is a Senior Leader/Feature Writer with The Straits Times. He contributed the section on Singapore. Liak Teng Kiat is a Fellow at the Institute of Southeast Asian Studies. She contributed the sections on Malaysia, Philippines, and Thailand. Sorpong Peou is a Research Fellow at the Institute of Southeast Asian Studies. He contributed the section on Cambodia. Leonard Sebastian is a Fellow at the Institute of Southeast Asian Studies. He contributed the section on Indonesia. Daljit Singh is a Fellow at the Institute of Southeast Asian Studies. He contributed the first section, that is, "The Setting". Naimah Talib is a Fellow at the Institute of Southeast Asian Studies. She contributed the section on Brunei. Tin Maung Maung Than is a Fellow at the Institute of Southeast Asian Studies. He contributed the section on Myanmar.

Economic Outlook 1996-97 Nick Freeman is a Research Fellow at the Institute of Southeast Asian Studies. He contributed the section on Vietnam. Linda Y C. Lim is Associate Professor of Business Administration and Director of the Southeast Asia Business Program at the University of Michigan, USA. She contributed the entire section on the ASEAN Six. Mya Than is a Fellow at the Institute of Southeast Asian Studies. He contributed the sections on Cambodia, Laos, and Myanmar.