Globalization and Its Counter-forces in Southeast Asia 9789812304933

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Globalization and Its Counter-forces in Southeast Asia

The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publishing, an established academic press, has issued almost 2,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publishing works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world. ii

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Globalization and Its Counter-forces in Southeast Asia Edited by Terence Chong

INSTITUTE OF SOUTHEAST ASIAN STUDIES Singapore

First published in Singapore in 2008 by ISEAS Publishing Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: 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 permission of the Institute of Southeast Asian Studies. © 2008 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the publisher or its supporters.

ISEAS Library Cataloguing-in-Publication Data Globalization and its counter-forces in Southeast Asia / edited by Terence Chong. 1. Globalization—Economic aspects—Southeast Asia—Congresses. 2. Globalization—Political aspects—Southeast Asia—Congresses. 3. Globalization—Social aspects—Southeast Asia—Congresses. 4. Islam and politics—Southeast Asia—Congresses. 5. Terrorism—Southeast Asia—Congresses. 6. Southeast Asia—Politics and government—1945- —Congresses. I. Chong, Terence. II. Institute of Southeast Asian Studies. III. ISEAS-SSAAPS Winter Seminar Globalisation and its Counter Forces (2004 : Singapore) JZ1318 G562 2008 ISBN 978-981-230-478-0 (soft cover) ISBN 978-981-230-488-9 (hard cover) ISBN 978-981-230-493-3 (PDF) Photo Credit: The photograph used on the front cover is reproduced with the kind permission of Sara Ooi. Book cover designed by Lim Kah Wai. Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Photoplates Pte Ltd iv

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CONTENTS

Foreword

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Preface

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The Contributors

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Introduction 1. Counter-forces: The Politics of Uneven Power Terence Chong

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Part I: The Political Contradictions of Globalization 2. Authoritarian States in Southeast Asia in Times of Globalization: Vietnam, Cambodia, Laos and Myanmar Kristina Jönsson

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3. From Plural Society to Political Pluralism in Malaysia Francis Loh Kok Wah

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4. Indonesia’s Role in the Long-term Prospects of ASEAN Dewi Fortuna Anwar

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5. Civil Society, Accountability and Governance in Thailand: A Dim Case of Participatory Democracy Surin Maisrikrod

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Part II: Economic Regionalism and Global Influences 6. Globalization and the Role of the State in the Asia-Pacific Martin Andersson, Christer Gunnarsson and Fredrik Gustafsson

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7. Economic Nationalism and the Limits of Globalization Helen E.S. Nesadurai

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8. Southeast Asian Perspectives on the Economic Rise of China Tham Siew Yean Part III: Local Security, Global Insecurity 9. Maritime Piracy and Raiding in Southeast Asia: Local and Global Perspectives Stefan Eklöf Amirell

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10. Competing Globalization: The Case of European Cooperation with Indonesia against International Terrorism Timo Kivimäki 11. Radical Islam and Political Terrorism in Southeast Asia Carlyle A. Thayer Part IV: Social Processes: Arrested Development 12. Reluctant Tigers: Economic Growth, Erratic Democratization Processes and Continuing Political Gender Inequality in Southeast Asia Elin Bjarnegård

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13. Women’s Emancipation in the Philippines: A Legacy of Western Feminism? Janet M. Arnado

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14. Moving Story: Transnational Mobility and Chinese Education in Malaysia Yao Souchou

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Part V: Cultural Production in the Global Matrix 15. Measuring Cultural Globalization in Southeast Asia Randolph Kluver and Wayne Fu

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16. The Singaporean Creative Suburb of Perth: Rethinking Cultural Globalization Terence Lee

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17. Thai Magical Realism and Globalization Suradech Chotiudompant

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Index

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FOREWORD

It is a cliché now to talk about a globalized world or that globalization is changing the way we live. It is a cliché because it is an everyday reality which we cannot escape. If globalization is an inescapable reality, then its consequences and side-effects are long-term problems that the academic and policy-making communities have to think our way out of. For it is no longer enough to accept the fact that globalization has stitched the world closer together or that it has forced different creeds and religions to jostle for the same shrinking space. The conflict and contradictions that are part and parcel of the prosperity and progress that globalization bring must demand the attention of our best minds. It is in this context that this volume is presented. A diverse group of scholars on Southeast Asia has been assembled to offer a multi-dimensional perspective and critique of globalization as it entrenched itself deeper into the region. The insightful and original offerings of these scholars will be useful to students of Southeast Asia, globalization and various social science disciplines in the years to come. ISEAS takes pride in presenting this volume. It thanks the Swedish School of Advanced Asia-Pacific Studies for its contribution and the thoroughly enjoyable collaborative experience.

K. Kesavapany Director Institute of Southeast Asian Studies Singapore

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PREFACE

This book is the product of two different workshops on globalization in Southeast Asia held at the Institute of Southeast Asian Studies (ISEAS). The first was jointly organized by ISEAS and the Swedish School of Advanced Asia-Pacific Studies (SSAAPS). Entitled “Globalization and its Counterforces”, the workshop took place from 23–27 February 2004, and was generously funded by SSAAPS. Eleven of the sixteen chapters in this book were from papers presented at this workshop. The second workshop, entitled “Cultural Globalization in Southeast Asia”, an ISEAS initiative, took place a year later on 8 June 2005. Funded by ISEAS, the workshop looked at the social and cultural dimensions of globalization and contributes five chapters to this book. Although the two workshops were conceived and executed a year apart, the rationale for combining selected papers from both workshops quickly become apparent. The first workshop dealt principally with the political and security issues of globalization, while the second investigated its social and cultural dimensions. By placing the intellectual endeavours and original research of the different scholars side by side, it was possible to present a holistic picture of globalization and its consequences in the region. Hence, instead of working towards two separate publications, it was decided that publishing papers reflecting the political, economic, security, social, and cultural dimensions of globalization all in one volume offered the reader a more complex interpretation of globalization. While the workshops sought to cover the region as comprehensively as possible, no papers on Brunei were presented for lack of appropriate scholarship. Furthermore, newer ASEAN countries like Vietnam, Laos, Cambodia and Myanmar are not discussed in separate chapters but studied as a collective. As with any project, this book and its preceding workshops would not have been possible without the help of many people. I would like to thank all ix

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Preface

the chapter contributors for their insightful and stimulating contribution, not to mention their patience as this book underwent the editorial process. The support and encouragement of Mr K. Kesavapany, Director of ISEAS, was instrumental in executing the two workshops and this book. ISEAS Deputy Director Dr Chin Kin Wah also offered sound advice and encouragement. Special thanks must go to Professor Thommy Svensson, Director of SSAAPS, whose interest in the region enabled the first workshop to materialize. I am also grateful to Dr Derek Da Cunha whose expertise and intellectual rigour contributed immensely to the editing process. I thank Professor Chua Beng Huat who kindly agreed to make the opening remarks for the second workshop. Lastly special thanks must go to Betty Kwan whose patience and administrative skills ensured that the workshops ran smoothly, and the ISEAS Publications Unit whose highly professional input made the editing process so much easier.

Terence Chong Editor

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THE CONTRIBUTORS

Stefan Eklöf Amirell is Research Fellow at Sweden’s Royal Academy of Letters, Department of History, Göteborg University. Martin Andersson is Lecturer at the Department of Economic History, Lund University, Sweden. Dewi Fortuna Anwar is Research Professor and Deputy Chair, Social Science and Humanities at the Indonesian Institute of Sciences (LIPI). Janet M. Arnado is Associate Professor at the Department of Sociology, De La Salle University, Philippines. Elin Bjarnegård is a Ph.D. Candidate at the Department of Government and Centre for Gender Studies, Uppsala University, Sweden. Terence Chong is Fellow at the Institute of Southeast Asian Studies, Singapore. Suradech Chotiudompant is Lecturer at the Department of Comparative Literature, Chulalongkorn University, Thailand. Wayne Fu is Assistant Professor at the Wee Kim Wee School of Communication and Information, Nanyang Technological University, Singapore. Christer Gunnarsson is Professor in International Economics, Lund University, Sweden.

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Fredrik Gustafsson is a Ph.D. candidate at the Department of Economic History, Lund University, Sweden. Kristina Jönsson is Lecturer at the Centre for East and Southeast Asian Studies, Lund University, Sweden. Randolph Kluver is Director of the Institute for Pacific Asia, Texas A&M University, USA. Timo Kivimäki is Senior Researcher at the Nordic Institute of Asian Studies, Denmark. Terence Lee is Associate Professor at the School of Media, Communication and Culture, Murdoch University, Australia. Francis Loh Kok Wah is Professor at the School of Social Sciences, Universiti Sains Malaysia. Surin Maisrikrod is Senior Lecturer in Political Science at the School of Arts and Social Sciences, James Cook University, Australia. Helen E.S. Nesadurai is Senior Lecturer in International Studies at the School of Arts and Sciences, Monash University (Sunway Campus, Malaysia). Tham Siew Yean is Professor, Deputy Director and Principal Fellow at the Institute of Malaysian and International Studies (IKMAS), Universiti Kebangsaan Malaysia. Carlyle A. Thayer is Professor at the School of Humanities and Social Sciences, University College, University of New South Wales at the Australian Defence Force Academy. Yao Souchou is Senior Lecturer at the Department of Anthropology, University of Sydney, Australia.

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INTRODUCTION

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1 COUNTER-FORCES: THE POLITICS OF UNEVEN POWER Terence Chong

INTRODUCTION: GLOBALIZATION’S DEMOCRATIZATION OF POWER Even as the world shrinks with each technological and communicative breakthrough, we are still uncertain as to where this much-hyped phenomenon called “globalization” is going to bring us. Over the years it has forced us to re-assess big ideas like the “nation-state” and “community”, needled us into refining their characteristics, and challenged us to imagine them anew. We have accepted that age-old values like sovereignty and national identity have not been rendered irrelevant but, instead, stretched and manipulated by an increasing array of transboundary processes. And yet, while globalization has cornered us into re-thinking how we define ourselves, we are still unsure as to how the human story will unfold. This is because, far from the picture of an economic beast roaming the earth in search of self-fulfilment that many politicians, journalists, even scholars, have painted, globalization, like all social, political and cultural forces, is of man. Globalization, though driven largely by the logic of neo-capitalism, is more than just economic process. Its political, social and cultural dimensions have shown us, through numerous studies, that homogenization and universalism are but some of the possible outcomes. Resistance, hybridity and sheer indifference are legitimate possibilities of globalization, suggesting that as long as it remains impossible to predict how global processes will affect the interests of certain groups, or 3

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how they would react, it will be just as impossible to say exactly where globalization will take us. It is with this understanding that we have moved from the imperialist school of thought towards a more open-ended mode of analysis of globalization. The belief that globalization is imperialistic and homogenizing in nature is premised on the dualistic framework that describes the global political and cultural economy as the sum total of the uneven power relations between the core and periphery, the developing and developed countries, the West and the rest. This imperialist-based analysis is driven by the assumption that cultural capital and power are synonymous with economic capital, and culture, like the logic of capitalism, rapacious and irresistible, flows out from centres of power. With such an analytical mode it is no wonder that we have to conclude that the world is fast becoming one big “homogenized North Atlantic cultural slop”.1 This mode of analysis is not only limited in capturing ethnographic reality but also deterministic in that global processes are, a priori, defined as universalizing agents. Furthermore it fails to account for the increasing cultural flows from the socalled periphery to the core. For while it is undeniable that Hollywood movies rule the global cinemas with its cultural attraction and distributive power, an imperialist-based analysis would not be able to capture the counter-flow examples such as Hollywood’s stylistic borrowing of the Hong Kong triad movies genre, Yuen Woo Ping’s martial arts influence on global products like the Wachowski brothers’ Matrix trilogy or Quentin Tarantino’s Kill Bill, and the re-location of Asian directors like John Woo and Lee Ang in the American movie-making industry.2 On a political level, how do we account for how a group like al-Qaeda can change the tone of global politics and upset the rhythm of globalization from the periphery? As such, one of the most pressing questions in the age of globalization is the conceptualization of power, the different abilities and capacities to express it, the new social actors who can express it, and the ends to which it is expressed for. After all globalization is more than the tale of a shrinking and inter-connected world but also that of power democratization whereby the ability and capacity to act and counter-act is increasingly available to all. Power is still conventionally thought of as expansive in movement, flowing outward as exercised by the dominant classes. In such cases power is synonymous with economic or symbolic capital accumulated by individuals or institutions, and premised on an imperialistic logic that must express itself in a radial manner. Such conceptions of power manifestation do not square with the realities of globalization, that is, communicative technologies like 4

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the Internet, digital streaming and SMS, have greatly enhanced the capacities of global social movements and marginal groups for resistance and sabotage. These communicative technologies have allowed shared identification with regard to a common cause, moral message or enemy. Often, this leads to disparate low-capacity groups rallying together, many times diluting the message, but invariably generating media attention or causing disruption. The ability to draw media attention and cause disruption should be seen as the democratic expression of power to alter and mediate global processes. It thus cannot be denied that the individual has been empowered by the technological advancements and processes of globalization. This is not to say that all individuals everywhere are equally empowered, but that more and more channels and platforms are available than ever before to highlight social, economic and political injustices; a phenomenon that suggests a more widespread and equitable distribution of power. There is a general consensus that the post-industrial state is expressing power differently. The last two centuries saw capitalism inextricably linked to the nation-state as it emerged in the shape of national markets, relying on national territories and on the state for protection. Powerful capitalistindustrial states generated the hegemonic core of capitalism, set the technological pace, defined the rules of trade and production, and imposed the constraints of the world system — largely premised on national interests. Today, neo-capitalism, it is argued, has finally snapped free from its historical national anchors and the demise of the nation-state dovetails perfectly with its universalist characteristics — supra-territorialism, rootlessness, and identitylessness. There are two objections to such arguments. Firstly, such claims are deterministic in character. Globalization and neo-capitalism are seen as synonymous, with the common end result of imposing financial discipline on governments so as to severely limit and influence national economic policies. Secondly, studies have shown that domestic institutions and organizations continue to mediate the socio-economic and political consequences of globalization. Furthermore, states are also resisting and contesting globalization and neo-capitalism as much as they are aligning themselves to fully exploit it. This suggests that states and institutions are expressing domestic interests more and more on the international arena, sometimes in contradiction to market interests. The greater and more honest reflection of domestic interests, especially from national economies lower down the international division of labour, is a strong indication of a global democratic exercise of power; an exercise that is only made possible by greater global awareness, connectivity and common interests. 5

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LOCATING POWER IN THE GLOBALIZATION THEORIES Given the complexities of power in the age of globalization, the intellectual task is to conceptually detach notions of power from the tangible swells of economic capital and dominant social groups. How do we account for individuals, weaker institutions or peripheral sources and movements of culture that operationalize global processes and flows to influence bigger and more centrally located institutions? A Marxist analysis is too narrow for our purpose because of the straightforward link between power and economic class. Weberian notions of power lie in the three types of dominance — traditional, legal, and charismatic, and while this is helpful, power is conceived as the ability of a social actor to carry out his or her will despite resistance.3 This hardly accounts for power-expressions or influence from the periphery. In many cases, global social movements or activists lack the hard power to carry out their will when up against resistance from governments or transnational corporations but what they do, and do well, is to draw negative publicity and media attention to misdeeds. Weber does not capture such forms of democratic power. Perhaps the most appropriate description of power for our purpose is Lukes’ three dimensions of power.4 The first and most straightforward dimension of power is the observable power of one to influence the behaviour of another. The second dimension is the overt or covert power to define the agenda, and thus to control public negotiation and decision-making process. The third dimension is the power to define what counts as a grievance, and to mould perceptions and preferences in such a way that anything other than the accepted grievance is not important. This dimension of power can unfold in processes of socialization or the manipulation of the mass media. Luke’s multi-dimensional concept of power can be neatly reconciled with the way in which globalization studies have attempted to reframe power-relations by re-mapping the global cultural economy. To this end it is now common to envisage globalization as “scapes” and “networks”. Arjun Appadurai’s scapes are “deeply perspectival constructs, inflected very much by the historical, linguistic and political situatedness of different sorts of actors: nation-states, multinationals, diasporic communities, as well as sub-national groupings and movements”, and are inhabited by human “agents who both experience and constitute larger formations”.5 The concept of scapes offers a birds-eye view of the multiple interactions of global processes and its strength lies in revealing the texture of situational cultural politics for a more complex picture of global-local encounters.6 By locating different actors, from nation-states, multinationals to communities, within the scape, expressions of power can be framed with a local-global binary. 6

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However, as a mode of analysis, there are few instructions as to how one might actually apply scapes as a methodological tool in order to verify and isolate the very texture of the global-local relationship that it promises. For example, if a researcher were looking at foreign domestic workers in Malaysia and Singapore, through what lens should these workers be viewed — ethnoscape or finanscape? After all, the cultural intermingling of foreign domestic workers cannot be separated from their participation in the economy of financial repatriation. What theoretical device does the researcher use to pry apart scapes that have collapsed into each other? Even Manuel Castell’s deeply influential “network society” has its limits.7 According to Castells, networks have replaced individuals, communities and national institutions as basic units of society, and it is within networks, not global cities, where real power manifests.8 Like scapes, the network society concept is useful in opening up ethnographic boundaries, allowing researchers to imagine the flows of global processes sweeping in and out of localities. The difficulty with the network society is the limited conceptualization of power in the age of globalization. The “space of flows”, according to Castell, is “the material organization of time-sharing social practices that work through flows” as influenced by the dominant social structures and practices in society at large.9 And it is built around a circuit of electronic and telecommunication technologies, as well as nodes and hubs; or, in other words, centres of economic capital. This brings up two problems. Power is again too closely associated with centres of economic capital, and the spread of networks is seen as a demonstration of power and capital, while the disconnection from networks is a sign of weakness and ineffectualness. This may make intuitive sense but two empirical examples from Southeast Asia may suggest otherwise. First, the ruling junta in Myanmar has been in power since 1988 and, as it stands, remains impervious to the cajoling of the ASEAN network or the sanctions from the global network. Second, former prime minister Mahathir Mohammad’s decision to impose capital controls in 1998 during the Asian financial crisis was a clear dislocation from the global economic network. Both examples, though different, suggest that power is also expressed in the purposeful detachment from global networks and processes. In today’s world, it requires more power to jump off than to jump on the happy shiny globalization bandwagon.

COUNTER-FORCES: THE POLITICS OF UNEVEN POWER This book presents an ensemble of essays that looks at globalization in various parts of Southeast Asia. It has been divided into five sections that delve into 7

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the different dimensions of globalization, namely, politics, economic, security, social, and cultural. Although it is impossible to make clear distinctions between the different dimensions, with each essay offering evidence of complex interfacing, this mode of categorization emphasizes the need for a multidimensional and multi-disciplinary approach to the study of globalization. The different perspectives from scholars around the region offer a comprehensive overview of the complexity of globalization to not only bring home the point that it is an uneven, unequal and sometimes undesired process, but also resists the temptation for easy conclusions. They provide detailed studies of specific locales and transborder processes, encouraging the reader to locate them in the wider tapestry of local-global interactions. It has been suggested that the current scholarly focus on globalization and transnationalism has resulted in diminished academic interest in Southeast Asian area studies. This may be generally true as a statement on the curricular trends at universities and investigative focus in regional research institutions. After all Southeast Asian area studies and country-analysis were originally meant to serve colonial foreign officers, and with the wave of decolonialization in the 1960s and 1970s, interest and funding declined. Even renewed interest in the region during the 1990s as a result of strong economic growth of Malaysia, Thailand, Indonesia and Singapore did not lead to the bolstering of area studies because scholars thought and wrote of these economies as a collective entity, no doubt supported by the discourse of Asian values. Nonetheless, actual ethnographic practices cannot ignore the value of area studies. The conventional binaries that ethnography relies on like localglobal; territorialization-deterritorialization; embedded-disembedding; nativecosmopolitan still require the geographical fixity that area studies can offer. Furthermore, the central role of national societies throughout this collective of essays demonstrates the importance of national boundaries even if they have become almost imaginary in the age of globalization. The conceptual and empirical leitmotif that runs through this ensemble of essays is the notion of counter-force. An idea that is articulated differently by different authors, counter-force can be defined broadly as the contradictory actions, processes and behaviours of different social actors provoked by global processes. These actions, processes and behaviours may be efforts to contradict dominant ideologies like capitalism, feminism, or national identity; institutions like the state or private organizations; or even the process of globalization itself. Social actors may include the state, institutions, social groups, both marginal and dominant, or even creative individuals. It is important to note that not all forms of counter-forces are calculated, planned or expressed as weapons of the weak, even if a good majority are. Counter-forces can result 8

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as the unintended consequences of economic growth, public policy implementation, political interest-bargaining or even manifesting as the contradictions of neo-capitalism. Linking this to the discussion above, the counter-forces of globalization show how problematic power as an analytical category has become. The vastly uneven distribution of wealth in Southeast Asia, the number of domestically strong but internationally weak states, the patchy successes of civil society, the disparity between communicative technology from the city to the rural, and the capacity for mass mobilization or people power, all demand new ways of looking at power. The counter-forces of globalization in Southeast Asia may be seen in two general ways. Firstly, systems or institutions may react to global forces in ways that do not facilitate transborder penetration. These systems and institutions either evolve to find new means or technologies to counter global forces or remain steadfast to the status quo. New modes of adaptation or change work not towards thickening the global networks but to stem them or constrict them in particular ways. Secondly, all types of change solicit political response. Globalization entails the political or territorial displacement of peoples, the erosion of established communities, and the thinning of social groups and associations. The fundamental predicament of globalization and change is that old politics have stronger constituencies while newer politics only have weak ones. To the extent that power and politics are democratic, globalization can be expected to meet resistance. It is this broad view of counter-forces that we should approach the essays that follow.

PART I Beginning with the politics of globalization, Kristina Jönsson’s and Dewi Fortuna Anwar’s separate essays look at national and local interests as counter-force. Looking at the authoritarian states of Vietnam, Laos, Cambodia and Myanmar, Jönsson shows that although there is collaboration between international agencies and local actors, joint-efforts are not always smooth. This is because many of the transposed goals, strategies, practices and time-frames are not always congruous. External factors have combined with longer-standing domestic political currents to produce radical Islamism and its extremist form that embraces political violence in Southeast Asia today. In addition, the concepts of “liberal democracy”, “human rights”, “civil society”, and “national reconciliation” are often being used without discussion about what they really mean or entail, thus resulting in the arrested development of ideology. Dewi, using the case of Indonesia as an 9

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analytical vehicle, argues that the Asian financial crisis prompted many ASEAN members to withdraw and concern themselves with domestic problems. This withdrawal can be construed as a counter-force of globalization and regionalism, or to be more specific, national interests and nation-states continue to be both agents of globalization and its counter forces. However, ASEAN’s High Council has only been successful in defusing tension but not resolving them permanently. This has been the role of the International Court of Justice at The Hague. This suggests that not all ecumenical movements are equal. Francis Loh shifts our attention to Malaysia. According to Loh, the rise of Malaysia’s “new politics” began in the 1980s when articulate middle class individuals began to form NGOs in order to influence specific policies and support marginalized groups. While ethnicity was a trope that hung heavy in Malaysian politics, “new politics” offered a political culture characterized by the participatory politics of individuals, NGOs and informal groups, culminating in the reformasi movement at the 1999 general elections and the fragmentation of ethnic-based and interest-based politics. This movement towards civil society organization benefited from cultural globalization in that it was informed by elements of Western-style liberal democracies, and from economic globalization that has enlarged the Malaysian middle class. However, the enlargement of the middle class has allowed the state discourse of developmentalism to arrest the growth of pluralist politics. This discourse of developmentalism valorises rapid economic growth, the resultant consumerist habits and political stability, and has replaced ethnicity as the new limit to participatory democracy. It thus appears that developmentalism discourse in Malaysia, itself legitimized by economic globalization, has emerged to be a counter-force to the globalization of liberal politics, thus suggesting that the same site may experience many forms of globalizations, some of which will contradict others. Surin Maisrikrod’s chapter on Thailand, written just before the military coup on 19 September 2006, explores the Thaksin era and its politics. According to Maisrikrod, because political legitimacy in Thailand had been based on electoral process, the very act of elections was often deployed to justify the actions of the Thaksin government. And because of its electoral dominance, the Thaksin government could ignore civil society complaints that it was undermining accountability and transparency. Thaksin’s continued emphasis on conforming to international market forces at the expense of the principles of good governance such as transparency and accountability have generated political resistance and opposition from traditionalists and 10

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civil society groups. Such resistance may be interpreted as a counter-force not only to the Thaksin administration’s marginalization of civil society, but also the manner in which the language and logic of business have seeped into Thai politics.

PART II This section examines the economic dimensions of globalization and its consequences. Fredrik Gustafsson et al. argues that the global economy has led to transformations in developmental states. Traditional features of developmental states have been shed as governments adjust to global conditions, while new features are adopted. This refutes the argument that states are on the decline and suggests that they are deploying existing institutions and apparatuses to address globalization in new ways. After all, even though the traditional developmental state may be in demise, the huge influx of private capital has opened up opportunities for new forms of government participation in the economic sphere. Meanwhile, Helen Nesadurai enters the debate by arguing that the relationship between economic nationalism and economic globalization may not be as contradictory as neo-capitalism advocates believe. She suggests that economic nationalism, manifested as liberal nationalism, can potentially strengthen globalization at its most elementary, that is, as a process of worldwide market integration involving trade and investment flows. National policymakers around the world have chosen to internationalize their economies, which they recognize as the best route to national prosperity. As such, if we see globalization as a process of market integration, then economic nationalism does not necessarily always challenge it and may even, paradoxically, strengthen globalization. However, her proposed counterforce to globalization is the very competition and distributional inequalities that globalization itself generates. Unlike the outsourcing trend of the late1990s that saw the shift of lower-skilled backroom services such as call centres and data processing to developing countries, today the increasing displacement of white-collar jobs from developed countries will have significant influence on voting patterns, thus prodding politicians into reviewing their stance on globalization. For Tham Siew Yean however, the global engine that is China may also be counter-productive. There is little doubt that the economic growth of China is one of the world’s main drivers of economic globalization. The rise of China will, nonetheless, be tempered by its uneven domestic development. 11

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Regional disparities and increasing income disparities are potential sources of instability as China attempts to reform its economy. Consequently, the immense challenges faced by China in managing its transition towards a market-driven economy may result in severe implications for Southeast Asia since any instability in China will most likely lead to negative spillovers in light of the increasing trade and investment ties between China and the region. As such, domestic instability and rising social disparities within the engine of globalization, if not addressed satisfactorily, is likely to emerge as destabilizing factor in Southeast Asia’s economic development and may even undermine the globalization process in the long term.

PART III The spread of international crime and terrorism are both counter-forces to globalization as well as its product. Stefan Eklöf Amirell looks at one of the most pressing security issues facing Southeast Asia today — piracy. The rise of transnational organized crime since the 1990s is undoubtedly a factor that has influenced the scope and character of Southeast Asian piracy. The operations of certain forms of piracy in which large commercial vessels are hijacked and equipped with false identity, require access to information and resources that is not available to local petty pirate gangs. For such international crime syndicates, piracy may be only one of many illegal activities, such as cargo fraud, smuggling and human trafficking. In Carlyle Thayer’s essay the link between global communicative technology and Islam is explored. Aided by technological advancements like video recording technology, compact discs, mobile phones, satellite television, and the Internet, the Muslim world has shrunk. Muslims in Southeast Asia are now instantly aware of the plight of their religious brothers in Palestine, Bosnia and Chechnya. This democratization of technologies and power has enabled faraway events penetrate and influence the locale, a phenomenon sociologist Anthony Giddens calls phantasmagoria, resulting in distant politics intermeshing with domestic political currents to produce radical Islamism and its extremist form that embraces political violence in Southeast Asia today. Timo Kivimäki looks specifically at Indonesian and European Union relations as analytical vehicle in the attempt to define a middle ground between the antagonistic positions of the West, as represented by the United States, and the Islamic world, as represented by some of the radical Middle Eastern states. According to Kivimäki, international terrorism is often seen as a counter-force against the Western-led form of globalization. Local terrorists from different places may galvanize by replacing their specific local agenda with common global ones 12

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and start targeting global symbols of the current hegemonic form of globalization. Terrorists form a global constituency by cleverly exploiting the international media, communicating by e-mail, telecommunications, SMS, and MMS services. Similarly, the counter-terrorism effort is also a global one. In short, international terrorism and international counter-terrorism are two parts of a global battle between two very different coalitions applying global opportunities for the promotion of their goals against each other.

PART IV This section explores the social dimensions of globalization. Elin Bjarnegård articulates the discourse of Asian values as a counter-force. Presented as a socio-cultural explanation of civilization, the Asian values discourse, is used by the conservative ruling class to keep the globalization of liberal ideologies, politics and human rights discourse at bay. The Asian values discourse, according to Bjarnegård, is welded politically to carve out a stark dichotomy between Asian communitarianism and Western individualism in the public sphere. Here, culture is seen as inherent and unchanging such that the rejection of Western political institutions is deemed necessary because they are not suitable to distinctive Asian cultures. Interestingly, Bjarnegård also argues that, as demonstrated by the case of Thailand, international pressure behind the democratization process does not always yield social justice. When democratization, or political globalization, is externally induced, as opposed to internal or grass-roots initiation, it can be expected that the views of the marginalized, such as women and children, will not be prioritized in the democratization process. Turning to the Philippines, Janet Arnado presents the historical trajectory of feminism and its discourses as a legacy of Western feminism. Arnado finds Filipino feminist ideology greatly influenced by mainstream or Western feminist theory, with many of its concepts and references borrowed from Western experiences of oppression and emancipation. Seeping into popular discourse are terms such as “patriarchy”, “glass ceiling”, “the woman question”, and “the personal is political”, among others. This intellectual globalization of feminism is, nonetheless, experiencing some resistance. The reaction to dominant Western theories has resulted in the further borrowing of Western concepts like “Third World feminism”. Third World feminism is just one of the many feminist paradigms in the United States, bringing to the centre the ideas of marginalized, minority women, and concepts such as multi-racial feminism, and black feminist thought. However, according to Arnado, what distinguishes Filipino feminism from Western feminism, vis-à-vis Third World 13

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feminism, is not so much the basic ideas of gender equality, but the contextualization of feminist ideals within the Filipino cultural, political, and economic milieu, and also the struggle to make feminism acceptable to many Filipinos. In order to disassociate themselves from popular conceptions of Western feminism such as its threat to traditional Filipino values, and antimen and anti-family values, Filipino feminists have found it necessary to develop a Filipino brand of feminism under the Third World feminism rubric as counter-force to the “Westernization” of the Filipino women. Yao Souchou explores Chinese education in Malaysia. According to Yao, early Chinese education was inherently cosmopolitan for historical reasons. Chinese vernacular schools were influenced by the cultural and political reforms of early twentieth century China, and were characterized by a progressive and modern nationalist vision. In adopting and adapting from the Japan and the West, both the cultural reform and nationalist fervour were easily transmuted into overseas Chinese communities where Chinese education was exported to, most notably in this case Malaysia. Nonetheless, though cosmopolitan in content, Chinese education was a sign of “China”. When set in the post-merdeka political landscape of Malaysia, Chinese education became deeply politicized largely because the state perceived it to be an obstacle to the discourses of national identity. And though globalization has breathed new life into Chinese education vis-à-vis the economic rise of China, state interests are particularly resistant in that they have sanitized early Chinese education of its socialist influences and, instead, married Chinese text with the tenets of accountancy and business management for instrumental purposes.

PART V This last section delves into the cultural aspects of globalization. Randolph Kluver and Wayne Fu explore the possibility of quantitatively measuring cultural globalization, conventionally described in qualitative and anecdotal terms. They have made the most of imperfect data to sketch empirically the extent of cultural receptivity through a cultural globalization index. This chapter stands out as an attempt to present a measurement of global culture. Their essay takes off from their work with the AT Kearney/Foreign Policy Globalization Index, and thus has the advantage of highlighting the strong correlations between cultural globalization and other types of globalization (political, economic, personal contact, and technology) in the various nations. Nonetheless, a study of this nature is not without limitations, as the writers acknowledge. Two limitations include the reliance on incomplete and 14

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mismatched data, and the inability to ascertain personal impact based on import/export data on cultural artefacts. Even if incomplete data can be remedied with better documentation, the meaning(s) of cultural products to individual consumers, how such cultural products make consumers feel, desire and aspire, remains just beyond the scope of indices and datasets. However, the writers offer a useful distinction between globalization, which they take to be the openness to a variety of international sources for media content, and what they call “cultural dependence”, in which a nation, because it has no significant cultural industry within itself, relies primarily, or even solely, on one other source, such as the United States. This cultural and entertainment reliance of one country on another may serve as an unwitting resistance to the openness of globalization. This resistance is easy to overlook because the importation of highly visible cultural products and icons from one or two countries would give the impression of cosmopolitanism when in actual fact, such products and icons emanate from only one or two sources. In this sense, cultural dependence may be an unconscious counter-force to the unpredictability and unfamiliarity of true cultural globalization. Based in Perth, Terence Lee explores the Singaporean diaspora in his essay. Lee looks specifically at the way in which the creative industry within this diaspora continues to engage with Singapore issues and narratives despite being geographically removed from the site in question. These Perth-based Singaporeans, Lee argues, are reflecting global trends whereby like-minded creative individuals in creative centres offers the creative class the opportunity to validate their identities as creative people. Creative “Singaperthians” are moving away from the centre of enquiry and into the suburban frontier, a “new” lifestyle that is made possible by connectedness and proximity. Suradech Chotiudompant examines Thailand’s embrace of global consumer culture and global capital through locally produced literature. Chotiudompant argues that this has made it vulnerable to the trends and processes of globalization. The darker aspects of globalization such as marginalization, poverty and insatiable material desire have spawn a genre of local literature that adopts and adapts the style of magic realism, itself a beneficiary of globalization, in order to address social and moral disjuncture. Magic realism, with its sources and origins not only in Latin America but in mainland Europe, and adapted by Thai writers, can be read as a glocalization phenomenon that serves as a counter-force to the excesses of global capitalism. The vocabulary of magic realism, including surrealism and fantasy, provides for the democratization of power in that it allows 15

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individuals to address and confront the problems of neo-capitalism, materialism and mass consumerism in a parallel cognitive universe without having to resort to the functionalist or rationalist logic capitalism as starting point. The glocalization of magic realism in Thailand then serves as a powerful critique of capitalism without entrapping itself with economic imperatives and developmentalist discourse.

CONCLUSION It is now clear that traditional power structures, though still standing, have been altered and modified by increased levels of mass education, the new media, individual political awareness, and economic empowerment. This has led to many instances where power has been democratized, even if their conventional sources still remain largely stable. With the democratization of power come counter-forces driven by various class, ethnic, religious and ideological interests that challenge the state and the edifice of globalization. These counter-forces are often premised upon and empowered by global processes; a contradiction which is largely in keeping with the logic of neocapitalism and the market economy that have entrenched themselves in the region, offering a common rubric from which to examine the disparate and diverse relations in Southeast Asia. Acts of counter-force and contradictions will only increase with the thorough democratization of knowledge production and information dissemination. Agencies like Wikipedia, blogs, SMSs, YouTube and Metacafe have made everyone global town criers, whistleblowers, high priests and activists, all rolled into one, but with one fundamental difference — the ability to exercise power at a distance. This may result in different outcomes. Without the need to invest the personal and the personality, such people may offer counter-forces that are short-lived, they may lose momentum once their interests are satisfied, or be overwhelmed by state power. Nonetheless, the evidence that structures of power are now fragmented, criss-crossing and continually recreated suggests that globalization cannot help but create and nurture resistance to its own hegemonies, injustices, imperialisms and deepening entrenchment. The study of this resistance and counter-forces in Southeast Asia will require a combination of globalization studies, area studies and traditional social sciences in order to capture the disparate modalities of socio-conflict and manifestations of power in the Southeast Asian landscape where the geographical and psychological proximity between the old and new, rural and urban, traditional and modern still lingers. It is this proximity 16

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that will see a mix-and-match arsenal of weapons used by individuals and groups, often blending the influences of agricultural, religious, civil and popular cultures into a strange blend of reformative and democratic vigour that will be directed as a counter-force to everything from foreign capital, foreign labour, to repressive and corrupt states. It is up to researchers to shed the shackles of their discipline to develop and enter into a free ethnography, that is, the purposeful selection of the vocabularies of the different social sciences and humanities in order to frame and explain the local manifestations of globalization. Such a free-wheeling ethnography should, ideally, have at its disposal the intellectual histories and methodologies of the social sciences and humanities, and will set itself apart from the positivism and grounded theorization that more often than not leads to functionalism. It is only when contemporary researchers of globalization have the array of theoretical devices at their disposal that a richer and more comprehensive narration of localglobal dynamics may be articulated. Lastly, this volume, though multi-disciplinary and multi-dimensional, only offers a snapshot of a complicated system of relations. More research needs to be commissioned and conducted in order to track the unfolding consequences of the engagement between the local and the global. There are many more questions to ask. Which is globalization exacerbating more, the politics of class or the politics of religion? If neo-capitalism is now a proxy for globalization, how soon will ethnicity become a proxy for the local? Will the spread of global culture and mass consumption serve to mediate the agitated interests of religiosity or will they only spur them on? What is the nature and character of a Southeast Asian modernity? How is the traditional Southeast Asian strong state evolving to the rhythm of global processes? Is globalization eradicating the region’s languages as English continues to be the linguistic vehicle for global commercial synthesis? These are questions that need answering. There is still much work to be done.

Notes 1

2

3 4 5

Herbert Schiller, “Electronic Information Flows: New Basis for Global Domination?”, in Television in Transition, edited by Philip Drummon and Richard Paterson (London: BFI Publishing, 1995), p. 19. Chua Beng Huat made this observation in his opening remarks at the Cultural Globalization in Southeast Asia workshop. Max Weber, From Max Weber: Essays in Sociology (London: Routledge, 1991). Steven Lukes, Power: A Radical View (London: Macmillan, 1974). Arjun Appadurai, “Disjuncture and Difference in the Global Cultural Economy”, 17

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in Global Culture: Nationalism, Globalization and Modernity, edited by Mike Featherstone (London: Sage, 1990), p. 296. Arjun Appadurai, Modernity at Large: Cultural Dimensions of Globalization (Minneapolis: University of Minnesota Press, 1997). Manuel Castells, The Rise of the Network Society, 2nd edition (Oxford: Blackwell, 1996). This radical stance is not shared by others who work on the “network society”, like Jan van Dijk, who continue to emphasis individuals and groups as units of society. See Jan van Dijk, The Network Society: Social Aspects of New Media, Original Dutch edition 1991 (Netherlands: Bohn Stafleu van Loghum, 1999). Castells, Network Society (1996), p. 442.

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PART I The Political Contradictions of Globalization

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2 AUTHORITARIAN STATES IN SOUTHEAST ASIA IN TIMES OF GLOBALIZATION: VIETNAM, CAMBODIA, LAOS AND MYANMAR Kristina Jönsson

INTRODUCTION: WHY VIETNAM, CAMBODIA, LAOS AND MYANMAR? This chapter analyses the phenomenon of globalization in relation to Vietnam, Cambodia, Laos and Myanmar.1 These countries are in many ways less exposed to the forces of globalization than others. However, the membership of these countries in ASEAN has indicated a wish to become more integrated in the region as well as in the world economy. This integration is problematic for a number of reasons, such as increasing inequality within the countries as well as between them, coupled with political obstacles. The purpose here is, therefore, to problematize the relationship between globalization and political change using authoritarian and relatively under-developed states as a point of departure. The relationship between state and society will come into focus together with state strategies to cope with on-going changes in society. The chapter is structured around three broad issues: globalization as a process of homogenization; globalization as a process of fragmentation; and changing state-society relations and the importance of context. 21

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“Singapore will do its utmost for Vietnam, Cambodia, Laos and Myanmar to integrate them into the ASEAN economy, and integrate all the economies into an ASEAN Economic Community”.2

This quote by Singapore’s former Prime Minister, Mr Goh Chok Tong, illustrates the observable, but not too much studied, phenomenon of less developed states in Southeast Asia trying to become integrated in a global, or, in this case, primarily regional, economy. The four states — Vietnam, Cambodia, Laos and Myanmar — were the last to become members of ASEAN.3 With the end of the Cold War the initial, non-communist, members of ASEAN welcomed the new members, which had been communist/socialist enemies, into the grouping. Thus, the last four entrants into ASEAN suggested a political shift in Southeast Asia, which may have political effects at a national level in the four states.4 However, an expanded ASEAN has not been without problems and the new members have continuously reminded the rest of the ASEAN members — and the rest of the world — that interference in their domestic affairs is unwelcome. Vietnam, for example, has supported Myanmar on human rights issues on several occasions, probably trying to establish a standard to protect Vietnam’s own interests. In the case of Vietnam, and also Laos, changes in society are clearly visible. The last few years of liberalization have affected the economy, at least in the urban areas, and the new wealth can be seen in new infrastructure, expensive foreign-manufactured cars, and so on. However, at the same time, as inequality has increased, the public has started to voice its discontent. In Laos, protests have been limited, but in Vietnam people have, on occasion, staged demonstrations against corrupt communist party cadres. The question is how much can these economies be liberalized without increased transparency and political accountability or, in other words, without significant political reforms. Reforms have occurred in Vietnam, but they are still relatively marginal from a political/democratic point of view, and the socialist regime is not under serious threat. Political changes in Laos are not very visible, where the communist party is still firmly in control.5 Cambodia took an initial step towards democracy through UN-sponsored elections in 1993 under the UN Transitional Authority in Cambodia (UNTAC). Since then three more elections have taken place. In spite of this, the Cambodian regime still seems reluctant to adhere to democratic ideals and practices.6 Moreover, the legacy of the Khmer Rouge and domestic turmoil is still very much present in Cambodian society. A format for an international tribunal to put former Khmer Rouge leaders on trial was agreed upon in 2004 after years of discussions, but its start is still being delayed.7 The 22

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country suffers from such problems as landmines littering its countryside from past conflicts and a high dependence on foreign aid. Myanmar, which among the four countries may be the least integrated with the rest of the world is actually one that has had a tradition of democratic practice. Before 1962, when the military seized power through a coup, Myanmar was one of the most developed countries in Southeast Asia with impressive recurrent annual agricultural surpluses and an abundance of natural resources. Part of the population was well educated, the country had a lively press, and a framework of democratic institutions existed.8 Now Myanmar is one of the most impoverished countries in the region. In the 1980s a democratic movement started leading to an election in 1990 where the National League for Democracy (NLD), with the charismatic Aung San Suu Kyi as its leader, won resoundingly. The military, however, has never accepted the results. Finally, all four countries have suffered from low levels of development and are economically far behind the rest of the countries in the region, something that the regimes — and their peoples — find increasingly unacceptable. Thus, analysing similarities as well as differences in the four societies will add to the theoretical discussion about globalization. There are several reasons to include as many as four. Their backgrounds and present situation match and complement each other in a number of ways and provide for interesting comparisons.9 Besides being more or less authoritarian and being late-comers in ASEAN, all have been under Western colonial rule. Cambodia, Laos and Vietnam belonged to French Indochina, while Myanmar was under British rule. Laos and Vietnam are authoritarian one-party states, Cambodia is practicing a kind of “electoral authoritarian” rule, and Myanmar has a military regime. Cambodia and Laos are very dependent on external financial assistance, Vietnam is less dependent on such aid, while Myanmar to a large extent is excluded from external support (with perhaps the exception of its long-time friend and neighbour to the north — China). The international critique of the regimes differs as well. Cambodia has been criticized but has at the same time received considerable positive attention from the international community in relation to its efforts at democratization. Vietnam today seems to be in focus, attracting donors and consequently also financial resources (not least the World Bank). The interest in Myanmar primarily revolves around Aung San Suu Kyi. Laos, on the other hand, receives practically no attention at all.10 The four states’ relationships with neighbouring countries are complex as well, ranging from close cooperation to border disputes and fear of external cultural influence and economic dominance. 23

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THEORETICAL FRAMEWORK Globalization, as a catchword of our time, is an all-inclusive but vague concept. It may entail everything from increased financial flows, the proliferation of multinational corporations, to “Americanization” and the spread of neo-liberal ideas. Other associations include the phenomena of increased migration, inter-ethnic tensions and refugee flows. Despite its diversity, globalization serves to give a name to current changes in society highlighting certain features, many of which are associated with qualitative changes in “global flows” in terms of speed, scale and cognition. Everything goes faster these days, largely due to the communications and technology revolution. The quantity of exchange, be it information, goods, people or services, is also increasing considerably. Finally, people’s perception of the world is changing. The world is becoming smaller in the sense that events across the globe affect the local environment.11 This accelerating global trend, with its time and space compressed, is noticeable in the economic, political, social and cultural spheres. Perhaps most importantly from the perspective of this chapter, is that globalization might also lead to potentially major challenges to domestic political situations. Power relations may change not only at the global (or regional) levels but also at the national and local levels. For example, the relationship between state and society may change in terms of governance. By specifying globalization and examining the effects of globalization one can problematize contemporary societal changes in a fairly elaborate way.12 All societies are more or less exposed to the forces of globalization, and the strategies to meet those forces are different. In other words, contextual factors interplay with actors, creating various patterns of globalization. For example, looking at a national or local level it is evident that globalization is not truly global, and that some areas of society are not affected as much as others. Globalization as a phenomenon is perceived in various ways by different governments, with some embracing it while others actively trying to resist at least some parts of it. The economic benefits are often welcomed, but the political reforms that might be needed in the wake of economic liberalization are generally feared by authoritarian regimes. Then again, change does not necessarily mean displacement. New forms can be built upon old ones, and novelty and continuity can co-exist. Authoritarian rule and the legacy of colonialism co-exist with the effects of global forces. The current changes may either reinforce present structures or weaken them.13 There are a myriad of views about effects of globalization. On the one hand, there are those who contend globalization leads to homogenization, 24

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creating a global norm penetrating all societies. Here, the spread of neoliberal ideas and Americanization come into focus. On the other hand, there are those who talk about fragmentation. Globalization can lead to conflict in society along ethnic, religions, and class lines. It can also lead to growing inequalities, making the already advantaged even better off, while leaving the disadvantaged further behind. The reality is that all these arguments have some truth in them. One reason is that context matters and different actors choose different courses of action. Regardless, the effects of increased globalization may result in changes, such as major political reforms, in order for governments to stay in power. The outcome of these changes is, nevertheless, uncertain. Globalization may lead to democratization (or at least increased political liberalization), but the result may also lead to a shift in power to groups in society that are more interested in protecting their economic interests than in democratic reforms.14 Another issue of concern is potential ethnic and national conflicts. Conflicts between ethnic minority groups and major groups already occur. For example, the harassment of ethnic, mainly Christian, minorities in the highlands of Vietnam has led to a flow of refugees to Cambodia. Meanwhile many ethnic Lao live in Thailand, not to mention the presence of camps in Thailand for refugees from Myanmar.15 One way to deal with this problem is to strengthen nationalism. For example, the Lao authorities, by establishing links to a royal past, want to create an identity of their own in order to distance themselves from Thai cultural supremacy. By resurrecting old kings it is hoped that nationalism will be inspired, one that would revive a collective past of myths and heroes from which a “local” modernity may be nurtured.16 Finally, a brief mention of regionalism. It can be argued that regionalism can be treated only as part of globalization and not as something detached from it. One could talk about re-territorialization in the sense that globalization leads to increasing regionalism and localization.17 However, it is also possible to look at globalization as de-territorialization to suggest that territories are not as important as they used to be. In the case of Vietnam, Cambodia, Laos and Myanmar these distinctions make sense. At the same time as they have become members of ASEAN, these countries have borders that are highly porous in remote areas which facilitate trade as well as illegal activities. Further, ethnic groups are spread across national borders in the region upholding old bonds of allegiance and belonging. Simultaneously there is a reverse trend with stricter border controls introduced because of an increase in population movements across borders. It was actually easier for people to cross borders before international trade and tourism started to require regulations.18 25

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Globalization can thus be described as a multi-dimensional process, which generates different influences and consequences, much dependent on historically constituted interaction between the global and the local.

GLOBALIZATION AS A HOMOGENIZATION PROCESS? Before looking at the consequences and changes to state-society relations, it is useful to investigate the degree to which these four countries are exposed to globalization. Moreover, to what extent has globalization led to homogenization in Vietnam, Cambodia, Laos and Myanmar? In order to do this, Peter Berger’s perception of cultural globalization as a point of departure will be employed.19 “Culture” in this instance refers to “the beliefs, values and lifestyles of ordinary people in their everyday existence”. Berger has identified four distinctive cultural processes that occur simultaneously. These processes are related to each other and interact with indigenous cultures. The four cultures are the international business culture; a world intellectual culture; a global popular culture; and a popular religious culture. When the forces of globalization intersect with indigenous culture there are a number of possible consequences. Berger has formulated four typologies, namely, the replacement of local culture by a globalized culture; the co-existence of global and local cultures without a significant merging of the two; a synthesis of the universal global culture with a particular indigenous culture; and rejection of global culture by powerful local reaction. The above implies that there may be many kinds of globalization, or alternative globalizations, depending on exposure, context and local responses. Consequently, there may also be different expressions of modernization. So, what kind of globalization can be found in Vietnam, Cambodia, Laos and Myanmar? And what are the implications of uneven globalization? The following will attempt to answer these questions.

INTERNATIONAL BUSINESS CULTURE As pointed out in the introduction, none of the four countries in question are very integrated in the world economy. However, there are differences between the four countries. Vietnam wants to become the next “Asian Tiger” and is working hard on developing its economy, while Laos is suffering from being small and underdeveloped. Myanmar is a controversial country to do business in due to its military regime and its poor human rights record, and Cambodia appears to be more of an aid-recipient country than a potential business partner.20 26

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Vietnam started to reform its economy in the mid-1980s with what has been known as economic renovation or doi moi. The economic liberalization resulted in high rates of economic growth and large inflows of foreign direct investments (FDI). However, structural problems remained, including insufficient infrastructure, a rudimentary banking system, and deficient communications, and as long as the economy was growing the government found no reason to change its development strategy. Nonetheless, when the Asian financial crisis hit East and Southeast Asian in mid-1997, just like other countries, Vietnam was affected. For example, bank credit began to flow out of the country as the largest investors had been Asian. Growth started to slow down. Vietnam’s reputation for being a tough place to do business in, compounded by corruption, a lack of transparency, poor infrastructure together with a prejudice against private domestic business, did not help. Vietnam had some advantages, such as hard working labour and high literacy, but these did not outweigh the disadvantages, and consequently foreign companies were reluctant to invest in the country.21 However, later accounts have been more optimistic and Vietnam has been widely praised as a success story. A growth rate of around seven to eight per cent, healthy exports, successful poverty reduction (poverty has than halved since 1987), improving social indicators and low inflation are some of the positives. Vietnam is currently the second largest borrower from the World Bank, a sign to many of its superior management and prospects. Nevertheless, worries about lack of reforms and corruption remain. Observers have argued for institutional reforms, concentrating on establishing property rights to assets in order to provide a more investor-friendly environment.22 But given the lack of enforcement capacity, these rules need to be simple and transparent giving room for discretion in order to avoid corruption. There is also the view that Vietnam’s problem is the resistance to adopt robust private sector development and export-oriented industrialization.23 Laos initiated its economic reforms in the 1980s, under a policy called the New Economic Mechanism (NEM). Laos is a small country with a small economy and commerce is conducted at a fairly basic level. At the start of the reform period, the majority of foreign investments originated from Thailand. However, inexperience in a market economy led to excessive sale of state property, and after a few years the regime slowed down the reform process. Critics have argued that the problem was not the reforms per se, but that they were not implemented properly. Additionally, policy-making has been extremely slow thus making it hard to keep up with the outside world. Laos was by and large insulated from the effects of the Asian financial crisis due to its relative isolation. At the same time other effects were aggravated by weak 27

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economic management and unsustainable policy responses. Inflation hit Laos hard. Between July 1997 and June 1998 the kip lost 70 per cent of its value vis-à-vis the U.S. dollar and a year later 80 per cent.24 However, there has been an effort to build a legislative framework for overseas trade and investment in order to advance Laos’ accession to the WTO, but most of the businessmen still come from other Asian countries and a true international business culture is not immediately apparent.25 Cambodia too underwent a transition in the 1980s from a command to a (unregulated) market economy. The difference as compared to Vietnam and Laos was that it took place in the context of a civil war, with the presence of Vietnamese troops, with trade and aid sanctions from Western countries, and in the aftermath of the Pol Pot regime.26 Following the 1993 UN-supervised elections, the Cambodian state pursued the goal of modernization through trade, investments and industrialization, to a great extent based on the exploitation of its forest areas to generate revenue. However, the lack of law enforcement together with corruption led to extensive logging and deforestation. Instead of being managed by the central state, the forests became a “logging playground” for domestic and foreign timber barons and influential politicians, officials and members of the military.27 Lately, international donors have made it difficult for the Cambodian government to continue extensive logging, and now donor aid has become more important. The change of policy has affected neighbouring countries as well. For example, Thailand used to do sizeable business in timber and precious stones with the Khmer Rouge, but now the Thais have branched out into tourism and gambling.28 Unlike its neighbours, the effects of the Asian financial crisis were limited in Cambodia due to its undeveloped financial sector. What happened there in mid-1997 was merely a response to a political crisis when Second Prime Minister Hun Sen overthrew First Prime Minister Prince Ranariddh in a coup in July of that year.29 One should also not forget that Cambodia is one of the poorest countries in Asia, and despite opening up to international investment and aid, the Cambodian rural economy is still very much at a subsistence level.30 Myanmar has gone from being one of the most developed countries in Asia to a “least developed country” (LDC) during the years of military rule. Myanmar has tried to attract foreign investment (in the petroleum sector, for instance), but many multinational companies have avoided Myanmar for political reasons. Loss-making state-owned enterprises backed by the military still play a disproportionate role in the economy, and most international investors have to operate in joint venture with domestic, often military, companies. Besides these political difficulties, there are plenty of practical 28

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obstacles as well.31 The regime started to reform from central planning to a market-oriented economy in the early 1990s, but according to critics, its adoption has only been half-hearted.32 The Asian financial crisis hit Myanmar hard as FDI flows nearly vanished and have scarcely recovered since. Exports also stagnated while imports increased leading to a trade deficit. The kyat, the currency in Myanmar, has depreciated, which has hit the population hard and has fuelled the growth of illegal activities.33 It would appear that a widespread international business culture does not exist in any of the four countries, with Vietnam a possible exception. Poverty and the lack of reforms, economic as well as political, are preventing, or at least slowing down, further integration in international trade. Added to this, the countries have relatively recently moved away from command economies and towards market economies. Furthermore, loans, from the World Bank for example, constitute a large part of the inflow of money, possibly substituting for international business. However, there are different kinds of international business, and the official side of business discussed above leaves out important aspects, such as the spread of “the dark side of the international business culture”, that is, the global spread of an international criminal culture.34 It is a well-known fact that a significant proportion of the world’s narcotics are produced in Myanmar, Laos and Vietnam. In Myanmar, the cultivation of poppies has doubled since 1988, and a few years ago Myanmar provided 60 to 70 per cent of the opium to the U.S. heroin market. At the same time the use of drugs has increased inside the country contributing to a dramatic rise in HIV infections in the region as a result of syringe sharing.35 According to U.S. government estimates, Myanmar used to be the leading producer of opium, accounting for about half of the world’s supply and 90 per cent of the production in Southeast Asia.36 (The situation today has changed due to Afghanistan’s increased production). After Thailand decided to fight the drug trade, Vietnam became the major trafficking route for heroin from the Golden Triangle region (the intersection of Myanmar, Laos and Thailand) to global markets. Vietnam’s long coastline makes the country perfect for smuggling. This has also meant that southern Laos and Cambodia, with its ports, are being used as transit points.37 The severe punishments for drug-related crime, including executions, has not deterred this development. Trafficking of women and girls from Myanmar for prostitution in Thailand is another related problem.38 Vietnam, Laos and Cambodia also face increased prostitution and human trafficking. The drug issue is problematic far beyond the health issue. Many of the armed groups in the border regions in Myanmar finance their struggle against the junta through drugs. The authorities in Myanmar are also said to use the 29

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drug trade to generate government revenues, even if officials of the U.S. Department of State and the Drug Enforcement Administration (DEA) say there is no evidence of state-sponsored drug trafficking.39 Apart from the illicit drug trade, timber and mining also generate easy cash. These activities are primarily located in the border areas of the countries concerned. In 1989, Myanmar’s government earned millions of dollars alone from concessions with Thai companies to log in border areas where the military of Myanmar had not yet gained access.40 Thus, the illegal trade is part of a larger problem relating to the control of resources and eventually political power. However, the Thai government has threatened to send in troops over the border unless Myanmar does something about the drug trade.41

WORLD INTELLECTUAL CULTURE “World intellectual culture” refers to ideas, concepts and thoughts with global reach. Vietnam, Cambodia, Laos and Myanmar are exposed to external ideas, concepts and thoughts through a number of ways. Nationals from these countries work and study abroad while professionals from other countries come to work in the countries. This is nothing new, but today, ideas, thoughts and concepts to a great extent come from Western and neighbouring Asian societies through various forms. Earlier, the Soviet Union and its allies were influential through their cooperation, including scholarship schemes, and before that the colonial masters (France and Britain) diffused their way of doing and perceiving things. This change has had practical consequences. For example, there has been a need to learn new ways of working in order to comply with new norms, and much time is spent on how to design and implement projects and policies according to the wishes of new foreign partners.42 Cultural diffusion is dependent on language with English becoming the main language in Asia as a result of international cooperation and the Internet. In Laos, the young have rejected French in favour of English; in the government departments and ministries as well, English is becoming more important than either French or Russian. At the same time one has to remember that Lao are not a reading people. The lack of libraries, bookstores, and an independent press also limit the extent of intellectualism. Higher education is still a rarity and for those who want a master’s degree or doctorate, the best option for them is to go abroad. Cambodia has experienced a rather drastic influx of new ideas, thoughts and concepts through foreign advisers and the requirements of international agencies since the early 1990s. But extensive collaboration notwithstanding, 30

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joint efforts are not always smooth. Some advisers have misinterpreted this as an inability on the part of Cambodians to plan. However, the problem is rather that goals, strategies, practices and time-frames are not always congruous with those of the Cambodians.43 In addition, the concepts of “liberal democracy”, “human rights”, “civil society”, and “national reconciliation” are often being used without discussion about what they really mean or entail. One can even talk about an internationalization of Cambodian democratization as the spread of ideas is very much concentrated in the urban areas and to the elite with close ties to the donor community instead of Cambodia being involved in a nationwide grass-roots democratization project. This illustrates that different ideas and concepts may exist side-by-side in a society (at least to a certain degree and over a period of time). In Vietnam, people are generally better-educated and more exposed to external influences in the form of ideas, thoughts and concepts than in, for example, Laos. There are large numbers of aid agencies and non-governmental organizations (NGOs) in Vietnam. Parts of the aid package also include university cooperation. The Vietnamese are eager to learn, and study tours, for example to Sweden, have been many. However, in Vietnam as well there is scepticism about the West: concepts such as human rights and (liberal) democracy are tolerated in talks with foreign donors but not really put in practice. Thus, the intellectual sphere is restricted because of the political system. At the same time it is possible to acquire banned literature at various bookstores all over Vietnam if you only know whom to ask. Myanmar is different in the sense it has a prominent opposition leader, Aung San Suu Kyi, who is a part of what can be called a world intellectual culture. She was educated in Myanmar, India and Britain and she has also worked for the UN. She is a recipient of the Nobel Peace Prize and has been published internationally. Aung San Suu Kyi has had a great impact on democracy and human rights discussions in Myanmar and in other countries — despite continuous harassment by the military regime. However, the regime has tried to control all thoughts and not only those of Aung San Suu Kyi. The authorities often close down universities and colleges, and many students have been unable to complete their studies. Thus, the intellectual environment is harsh and not very receptive to ideas other than officially sanctioned ones.44

GLOBAL POPULAR CULTURE Global popular culture is perhaps the type of culture that is the most tangible of the four. On a visit to Laos in 1998, one rarely saw women wearing shorts, 31

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Western music was a rarity, few tourists were visible on the streets, and the Internet was still not accessible (a year earlier it was forbidden). Since then there have been many changes. The most notable of which is the quantity of goods available in the country. Luxury shops can be found, at least in Vientiane. People dress more like Westerners, and you can find any kind of music — even if the lyrics have been translated into Lao. Internet cafés have proliferated everywhere, also in provincial towns and villages. Pubs and bars are not for foreigners only as income has risen, and restaurants are less segregated than they used to be. Still, there is scepticism towards foreigners and foreign influences, but that seems to be an official standpoint rather than one emanating from the people. “Thai-fication” is deemed as a bad as Western influences by the authorities — despite the fact that Thai music and soap operas are extremely popular. Nevertheless, the dream among the young appears to be to learn English, to study abroad and to get a well-paid job. At the same time, the differences between urban and rural are still great making the changes in society highly uneven also with respect to popular culture. In Vietnam changes began earlier than they did in Laos. Since the late 1990s a consumer culture has penetrated Vietnamese society. People are eager to earn money and to show off their wealth through new houses, cars, motorcycles or clothing. Western music can be found everywhere and the dress code is increasingly Western-inspired. Internet cafés are very common and many of the bars, cafés and restaurants look like any of those found in major cities around the world. Asian influences are important as well. For example, Chinese and South Korean television series are very popular. As already mentioned, Cambodia began to be exposed to Western influences on a large scale during the UN operation. However, Cambodia is still a relatively complicated country to visit, and tourists are not as many as in Vietnam (with the exception of Angkor Wat). Myanmar is relatively isolated, and although there are tourists in Myanmar, Aung San Suu Kyi’s call for sanctions has probably prevented potential visitors from coming, keeping the total number of tourists a fairly low level. Popular culture is often said to spread easily through the younger generation. However, the authorities do not always like “cultural pollution” and tend to put limits on, for example, music. Instead, ethnic culture is encouraged in order to attract tourism, and minorities’ traditional culture is preserved through schools for dancing, music and handicraft. In Laos, you can find a cultural park showcasing houses and handicraft from different parts of the country, and in Vietnam there are ethnic villages catering to tourists, thus reinforcing the argument that tourism revitalizes ethnic traditions. However, tourism is a double-edged sword, raising income, on one hand, and 32

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creating “cultural pollution” or/and “social evils”, on the other hand. In other words, the money is needed but not the negative side effects — such as increased prostitution and illicit drug consumption leading to an increase in HIV/AIDS.45 Also, when tourism arrives in a major way, tradition tends to fall by the wayside among ordinary people. Many of the consequences of globalization can be found within the sphere of popular culture. To some extent there seems to be a replacement of local culture by a globalized culture. At the same time it is possible to discern a synthesis of the global culture with the indigenous culture in the case of translating Western music into the vernacular. The rejection of popular culture tends to be more noticeable in the official sphere than among the population, expressed through the authorities’ open criticism of so called “cultural pollution” and “social evils”.

POPULAR RELIGIOUS CULTURE Despite the modernization argument, which says that increased modernization leads to secularization, one can witness a rise in religiosity in the developing world. For example, there is a New Buddhist movement in Thailand — and, more generally, in Southeast Asia.46 One can even talk about global desecularization. However, religion is also linked with political activities. For example, Buddhist monks have been at the centre of state-society political conflict in the region for decades.47 Nineteenth-century nationalist movements were overwhelmingly secular and anti-religious, except in parts of the “Third World”. Often religion and secular nationalism were united against colonialism, a union that ended after independence with persecution of religious nationalists by the secular state.48 Today, there is an unanticipated wave of politically oriented religiosity in the “Third World”.49 Religion is a political force in Vietnam and thus a sensitive issue. During the American-Vietnam War various religious groups, often Christian, fought against the communists, something that is not forgotten. Officially all Vietnamese citizens have the constitutional right “to believe or disbelieve” in any faith. However, the law requires government approval for religious groups, and as a result the Unified Buddhist Church of Vietnam and evangelical protestant churches, for example, are banned. Catholicism is legal, but their adherents are harassed and arrested, as are Buddhist monks. However, Christian minorities are the most repressed, and the mass riots in 2001 among ethnic minorities in the central highlands against government corruption had a religious element to it as most of the protesters belonged to evangelical churches with their bases in the United States.50 The authorities continuously 33

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deny that there is a lack of religious freedom — despite reports of violations — and consequently there is not a lot of space for religious movements on any large scale. Laos’ record on religious freedom has improved somewhat in recent years, and the government has showed a willingness to allow foreign Christian organizations to operate in the country. Officially there is religious freedom, but in practice only Buddhism is allowed. Christian groups are viewed with suspicion. Protestants are especially harassed, while Catholics are more or less left alone. In the capital, different religious practices are more or less respected, but in remote areas harassment has been known to be severe. Similar to Vietnam, many religious minorities are also ethnic minorities. For example, Christian Hmongs are especially targeted because of their long resistance to the communist regime and past cooperation with the United States during the American-Vietnam War.51 Buddhism has always been important in Laos, and all men have to be a monk at least for a few days in their lives (often in connection with a period of mourning). In Cambodia there has been a revival of traditional social values together with the national religion Buddhism since the late 1980s. In Myanmar the regime has banned all independent Buddhist sangha organizations. Buddhism and the regime are inseparable and it is paramount for legitimacy that the sangha comply with the regime. A “One nation, one race, one religion” ideology guides the treatment of ethnic and religious minorities.52 However, the religious/ethnic question is complicated in Myanmar: this will be discussed further below.

GLOBALIZATION LEADING TO FRAGMENTATION? One consequence often pointed out in the globalization debate is increasing inequality within societies as well as between societies. Jan Aart Scholte has argued that it is inappropriate policy framework in combination with globalization that has led to not only increased inequality, but also to increased insecurity and to a democratic deficit.53 Another issue worthy of investigation is whether globalization leads to fragmentation.

Social Inequalities, Ethnic Tensions, Migration and Refugee Flows Ethnic tensions, migration and refugee flows are everyday occurrences and concerns in Vietnam, Cambodia, Laos and Myanmar. In combination, these countries are a mosaic of ethnic groups, and domestic and regional turmoil 34

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together with poverty and have created large migration flows and huge waves of refugees over the years.54 Why would globalization lead to heightened ethnic tensions, migration and more refugees? There are a number of reasons. First, globalization has led to increased inequalities, which often coincide with a rural-urban divide. Secondly, very often the less advantaged in rural areas belong to ethnic minorities. Thirdly, increased communication, the Internet, satellite television and so on have made people more aware of the inequalities and thus less prepared to accept various kinds of hardship. Inequalities are noticeable in all four countries. In Myanmar, for example, global trade has by and large not provided prosperity to the general population but rather mainly to the military elite, contributing to an uneven distribution of wealth.55 The difference in standard of living between the privileged and average person is increasing, and the statistics are so stark that the government has ceased publication of the statistical yearbook.56 Myanmar is also known for its policy of forced labour and relocation of poor communities, especially among the ethnic groups, to remote areas. In addition to violence, natural disasters and economic development projects have contributed to the displacement of people.57 Even though Vietnam is perceived as a relative success story in poverty reduction, the differences within its society are increasing — especially between rural and urban areas. Another issue of concern is that the economic liberalization has fuelled child labour, drug trafficking, and prostitution. Internal migration to cities has been one way by which children help families financially in order to survive (cities that are poorly equipped to absorb them). There is also a difference between the north and south of Vietnam, where the south has a more developed entrepreneurial culture and infrastructure together with good links with wealthy overseas Vietnamese communities. In Laos too the gap between rich and poor is increasing, despite poverty reduction.58 And in Cambodia the influx of foreign aid and investment have attracted people to the urban areas, while land reforms and government spending on weapons systems for the military instead of social programmes have marginalized the poor further. Moreover, a new poverty trap has emerged as a result of the privatization in the healthcare sector in these countries. People have not been able to afford medical treatment and are often compelled to take loans out to cover their health costs.59 As already mentioned, the riots against perceived unfair land reforms and corrupt officials in the Vietnam highlands had ethnic undertones as the people more often disadvantaged tended to belong to ethnic (and religious) minorities. Ethnicity was reinforced during the colonial period because ethnographic classification was an important aspect of colonial policy. The 35

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people in the highlands were mapped according to their backwardness, and this attitude towards the rural population is still today very much in evidence. It was only later that ethnic minorities assumed some importance in propaganda portrayals of nation-building and the armed struggle for independence. In Laos there has been a close relationship between ethnic categorization and the government’s nationalistic discourse.60 In 1975, ethnic minority groups were encouraged to join the struggle for the communists, and today the regime has also made an effort to include representatives from different ethnic groups in the government. However, “Lao” designates both the idea of ethnicity and nationality, and this has, in effect, made “Lao” supreme as it includes both an ethnic group and the whole population. In Vietnam, there have been signs that the Communist Party has begun to pay more attention to minorities through its choosing of an ethnic minority to be secretary-general of the party.61 In Myanmar, ethnicity has had more violent expressions. Since 1989, some twenty out of twenty-four insurgent groups have signed ceasefire agreements with the military regime. However, there are still groups fighting and many of the groups which had agreed to a ceasefire still retain their weapons.62 With the risk of being overly simplistic, the ethnic divide concerns who is perceived as a “foreigner” and who is a “native”, and also between “native races” themselves. People are divided by religion, language and cast categories — for example, Burmese Buddhists, Indian Hindus or Muslims, or members of native minority communities.63 Ethnic tensions and conflict lead, in turn, to migration and refugees flows. Estimates suggest as many as two million citizens from Myanmar reside in Thailand. Approximately 125,000 live in camps close to the border of Myanmar. These are not protected by the UNHCR because Thailand is not a signatory to the relevant conventions. There are another half-a-million to one million workers and their families from Myanmar in Thailand who work in textile mills, construction jobs and the like. Many of these are considered illegal immigrants, and this precludes them from legal processes under which they would be entitled to protection if they were classified as refugees.64 Inequalities and ethnic tensions are not new, but today they are noticed in a more pronounced way than ever before. The Internet, for example, has been very instrumental to exile groups (often referred to as America-based exile-groups or hostile forces by the authorities) and others. In Vietnam, the media has been allowed to publish articles about corruption cases, like the ones in the central highlands. Thus, it has been possible to see some changes towards greater openness — even if there are still restrictions and selfcensorship. If the new wealth generated by increased globalization continues 36

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to be unevenly distributed, the tensions will of course grow. Also, ethnicity has made international assistance difficult when donors, focusing on poverty reduction, want to target poor ethnic groups, like the Hmongs who are viewed as especially maltreated.65

STATE-SOCIETY RELATIONS AND THE IMPORTANCE OF CONTEXT Putting aside the economic, social and cultural aspects of globalization, what are its political ramifications for Vietnam, Cambodia, Laos and Myanmar? In what way are state-society relations affected by globalization? Naturally it is hard to pursue a kind of causal argumentation, but there is a point in highlighting some problem areas that are significant from a political point of view.

Vietnam It should be pointed out that it is hard to establish where the state ends and society begins, and vice versa, as the boundaries differ from country to country. In the case of Vietnam one can talk about a dominant state; in other words the communist party, the government and other state agencies have an enormous power over the society. Media, religion and organizations are under tight control and signs of civil society have only just begun to emerge.66 The economic reform, with its privatization programme, has had an impact on the political sphere as well. The dilemma the government has faced as a result of the movement away from central government planning agencies in the economic sector, is that this leads to decentralization and more society-driven political processes as well. The closing of state-owned enterprises will most likely lead to a degree of social dislocation when large numbers of workers are be laid off. The decentralization has also threatened the economic status quo benefiting those who have links with state-owned firms, such as people in the Communist Party and the military. Moreover, the idea of political decentralization threatens the legitimacy of the regime, which is based on the concept of “democratic centralism”.67 Thus, if the present regime wants to stay in power it requires a balancing act between liberalization, without losing too much power, and keeping the population satisfied enough so that it is not compelled to protest in any serious way. There have been political reforms, even if they have been moderate. For example, there has been an attempt to separate the Communist Party from the government; the National Assembly has gained more power; some 37

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grass-roots democracy has been allowed to take hold, and the rule of law has been introduced; and the fight against corruption has been given priority. However, the legitimacy of the regime has constantly to be won and re-won. The younger generations do not care for revolutionary ideals, and the government has to constantly find ways to legitimize its rule. One way is through economic success: but the problem is, of course, that in the long run economic and political matters cannot be separated. Further, an increasingly educated people know what peoples in neighbouring countries have which they do not, and probably there will eventually be a push for change. However, even if the role of the market grows and Vietnam becomes increasingly exposed to various globalization forces, the state is relatively strong and for now there does not seem to be any alternative to the present authoritarian regime.68

Laos For Laos, rumours come and go of a power struggle among the top leaders in the Communist Party, between the younger cadres and the older generation, between the north and the south, and between those favouring a special relationship with China and those favouring one with Vietnam. A wave of bombings hit Vientiane in mid-2000 and, since then, has only added fuel to these rumours. However, much of the political hierarchy has remained intact and the bombings were presumably a way to settle personal scores. Arguably, for now there are no real alternatives to the present regime. Also, according to Pierre Lizée the sheer poverty in Laos does not allow for the same kind of economic dynamism that can be found in Vietnam and that could open up for political reform.69 Political institutions are not well developed and political culture rests on inter-linked family and regional/ethnic patronage networks that are both hierarchical and personal.70 One reason is that socialist institutions have only lasted for a short period of time and left village institutions and religion intact.71 There have been reforms similar to those in Vietnam such as attempts to separate the party from the state, the introduction of the rule of law, the election of non-party members to the National Assembly, and to have more open debate before government decisions are actually taken. At the same time, freedom of expression has clearly been restricted and opposition is not allowed in any way.72 The society is organized through mass organizations leaving civil society embryonic, and, insofar as international NGOs are concerned, they work principally in isolation. Neither the state nor the market is strong, and the prospects for any profound reforms seem distant. 38

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Nevertheless, cracks in the government’s control have begun to appear. For example, in 1999 a peaceful pro-democracy demonstration was held in Vientiane (resulting in twenty-year prison sentences meted out to the five leaders). Younger Vientiane residents have also started to question the regime, not least in connection with a contracting economy.73 It is hard to predict how globalization has affected Laos politically. In a short-term perspective the consequences seem relatively limited. With a longer time-frame there might be more profound changes albeit not necessarily benefiting good state-society relations and democratic processes.

Cambodia Social change in Cambodia since the 1970s has been enormous. Cambodia used to have a Buddhist-dominated monarchy with Sihanouk as a “god-king” and with patron-client relationships (although Sihanouk abdicated kingship to enter politics). The survive-or-die culture of the Khmer Rouge period in the 1970s led to a breakdown in social and family norms. The second communist state was also repressive and secretive despite substantial social improvements. Since the UN-intervention, Western practices have been at the forefront.74 Following the first multi-party elections in 1993, there has been a coup d’état in 1997, an election in June 1998, a communal election in 2002, and in July 2003 the National Assembly election. The grass-roots election and the new Senate (second chamber) are indications that democracy is consolidating.75 However, critics claim that Cambodia is democratic only on paper. Elections may have opened up the political process but it has not fundamentally altered the nature of political power in the country. In reality, one man, Hun Sen, governs the country by virtue of a monopoly on power.76 The reluctance to adhere to democratic practice is a consequence of political polarization. Neutrality is not an option; “either you are with us or against us”. “The winner takes it all” model and the idea of absolute power is a part of this situation.77 Cambodian political culture is thus characterized by elite authoritarianism, narrow vested interests, patronage and clientelism, which must be located in a wider context of external pressures of pluralism and democracy.78 The problem with consolidating democracy is connected with economic power and the relationship between state and society. In the urban areas economic power is diffuse, and domestic and international political activities overlap. In the rural areas, the lack of material resources has hindered independent political action. In addition, the lack of infrastructure has made it difficult for international resources to reach beyond Phnom 39

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Penh, and the state’s ability to monopolize economic resources is consequently the key determinant of power. Thus, it is possible to argue that Cambodia is pursuing a kind of dual-track policy: a democratic track in electoral politics and a less democratic track in the field of economic policy-making. Compared to Vietnam and Laos, one could argue that Cambodia has a thin nature of state-society relations (and a weak state). Caroline Hughes has argued that democracy in Cambodia is a kind of hybrid between or manipulation of the Western model and new interpretations of local traditions, which has worked in favour of some groups and disadvantage of others. The state has managed to co-opt and transform patron-client relations. By portraying it as something traditional it has given legitimacy to new exploitative practices.79 Seen from a globalization perspective, Cambodia presents an interesting case with, on the one hand, great openness for external influences to permeate the society and, on the other hand, an ability to manipulate new ideas and concepts accompanying the globalization opening-up for co-existence of global and local cultures as well as a synthesis between universal and indigenous cultures.

Myanmar Institutional oppression, ethnic fragmentation and political distrust have characterized Myanmar since its independence from the British in 1948.80 Multi-party competition only lasted for twelve years before the army under General Ne Win seized power in 1962 and abolished all political parties.81 A programme called the “Burmese Way to Socialism” was adopted, which eventually led to economic bankruptcy and turmoil in 1988. When the generals agreed to hold free elections in 1990, they were most likely counting on a fragmented outcome making it possible for them to stay in power.82 Although Aung San Suu Kyi’s National League for Democracy won a majority of the parliamentary seats, the military refused to cede power. Aung San Suu Kyi has continuously been holding talks with the regime, but so far there has been no political change, and NLD members continue to be harassed or arrested. Myanmar has suffered from both “vertical and horizontal conflict: the people suspect the government, and the disparate Burmese peoples suspect one another”.83 The junta rules by decree and there is no civilian constitution. A new constitution is being drafted at the moment, but its design is controversial because of the many interests involved. There are actually three constitution-drafting processes: one initiated by the military regime, one by the NLD, and one under the banner of the National Council of the Union of Burma, which is a coalition of groups living in exile. The 1990 40

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election also showed the inherent dangers of plurality voting leaving the generals with hardly any seats at all. A proportional system would have left the government with 100 seats instead of ten, which might have led to a less drastic political outcome. The government has promised a referendum about the constitution, and if the constitution is accepted general elections will be held. However, there are no dates set yet, and the opposition remains sceptical of the promise.84 In the view of one observer, Myanmar bears many of the characteristics of a “strong society” and “weak state”. The different governments have all failed to achieve effective action across all social and ethnic sectors. The state has not effectively penetrated many ethnic minority regions, except as a military force.85 According to Liddell, any move towards civil society in Myanmar can only take place at the local level and as long as there is no threat posed to the regime.86 Aung San Suu Kyi describes in her book Letters from Burma the difficulties of arranging any kind of meeting, even if it is not intended to be political. There are some thirty international NGOs in Myanmar, but they are basically only allowed to work on humanitarian issues. Despite limited globalization in Myanmar, taking into account the existence of ethnic tensions, the drug trade and weak state, any increase in globalization might well lead to a fragmented society.

REGIONALISM Even if the four countries have clear national strategies to cope with changes in society, they are now members of ASEAN and are thus actively partaking in a project of regionalism. What makes these four different from their neighbours is their relative under-development with the gap actually widening between, for example, Laos and Singapore.87 All the four countries have experienced sustained stagnation or decline in human development “due to prolonged war (Vietnam [1945–75]), failed attempts at state socialist development (Laos [1975–86], Vietnam [1954–79], and Cambodia [1975– 91]), economic mismanagement (Myanmar [1962–]), or some combination of these”.88 At the same time, people desire better lives through economic development and modernization, and consequently ASEAN has offered a possible solution to their problems. However, as already noted, regional integration is problematic for a number of reasons such as regional inequalities and domestic political obstacles. Vietnam joined ASEAN in 1995, Laos and Myanmar became members in 1997, and Cambodia was finally accepted in 1999. Interestingly, Cambodia’s entry into ASEAN was delayed due to political turmoil, while Myanmar was 41

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allowed to join in 1997 despite severe human rights violations. Mahathir Mohamad, the former prime minister of Malaysia, who once supported Myanmar’s admission to ASEAN, is now one of its critics. The criticism can be seen as an interesting change from the “ASEAN Way”, which means that the members of ASEAN encourage an informal and incremental approach to cooperation through consultations and dialogue; and non-interference in internal affairs and the non-use of force are paramount principles.89 Myanmar is a good example of the dilemma between commercial and humanitarian engagement. ASEAN has engaged in what it terms “constructive engagement” where the expansion of economic ties is deemed the most effective way to promote economic and political change. Another reason has been to prevent Myanmar forming closer ties with China, which, in turn, could pose a strategic threat to Vietnam.90 However, lately a “two hands” policy has been discussed, namely that the foreign states hold one hand slightly open and the other tightly gripped around instruments of leverage. On the one hand, a limited increase in foreign aid organizations in Myanmar would be allowed, while, on the other hand, pressure would be applied to press for further political talks with important actors retaining the threat of banning all imports from Myanmar.91 The discussion above illustrates the complicated relationships between countries in Southeast Asia. Integration is desired but the discrepancies between the countries are still large. Self-identity and how others perceive the country in question also colour relationships. One should not forget that border disputes and mutual suspicions go back many years. Besides colonialism, the legacy of the Cold War and the role of China have influenced politics in the region. Moreover, the Vietnamese are not popular in Laos and Cambodia, and Thais often view Laos as backward or under-developed. Thai tourists go to Laos to see “traditional values”, and Lao see themselves similarly as protectors of the real Buddhist values which the Lao think that Thais have lost. At the same time, the Lao look up to Thailand in terms of its development and sophistication.92 Still, there is far-reaching cooperation within ASEAN. Laos and Vietnam have a special relationship through their political orientation and the fact that Vietnam acts as a “big brother” on important issues. The relationship between Vietnam and Cambodia has been coloured by Vietnam’s support of the Hun Sen regime after overthrowing Pol Pot in the late 1970s. Laos has, more than the other countries, tried to stay neutral, squeezed in-between several bigger neighbouring countries. The countries along the Mekong River (the four countries together with Thailand and China’s Yunnan Province) have discussed increased road, telecommunications, and electric-power links; and cooperation 42

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in trade, human resource development and tourism.93 But even if collaboration appears to be more important than political disputes, the road to complete integration seems a long way off.

AUTHORITARIAN STATES IN TIMES OF GLOBALIZATION So, are Vietnam, Cambodia, Laos and Myanmar catching up or being left behind in the globalization process? Well, it depends from which perspective you look — from the perspective of the elites or ordinary people, or if you compare with how it used to be twenty years ago, or if the comparison is with neighbouring countries. In other words, even if poverty has been reduced, inequalities are increasing within societies as well as within the region. Also, there are differences among the four countries. Vietnam is doing relatively well while Myanmar has stagnated. The four countries wish to develop economically through regional integration as well as integration in the world economy, but this process has been problematic. Political developments and state-society relations also vary. Cambodia is more or less complying with international demands regarding democracy, allowing for an active civil society. However, international cooperation has created an urban civil society with little contact with the rest of the country.94 Vietnam has allowed for limited political liberalization, such as grass-roots democracy, some kind of embryonic civil society, and a more open press. However, the regime still holds a firm grip on society and does not allow any opposition — despite the opening-up of the country. In Laos, political reforms are minimal and so is the opposition. The main problem in Laos is still poverty and under-development in combination with an authoritarian regime. Myanmar could have been much different if the election results in 1990 had been accepted. Today, state-society relations are worse than ever. The system in Myanmar is repressive, while, at the same time, the state has limited control in many remote areas of the country. It is clear that globalization leads to homogenization in some areas and to fragmentation in others. The effects of globalization can also be very uneven. Vietnam, Cambodia, Laos and Myanmar are elitist countries, and the rural areas are less exposed to some of the globalization forces than are the urban areas. Also, the regimes find globalization useful in some sectors, such as in business, while other kinds of globalization bring problems. For example, popular culture is often seen as “cultural pollution”, and activities that can be interpreted as political should be forbidden or at least firmly controlled. However, even if the regime is authoritarian it is not possible to control everything, and there is ambiguity towards many changes in society. After all, 43

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it is often the elites who have access to the benefits of globalization. This raises interesting questions for further analysis such as the possibility that uneven globalization increases the probability of fragmentation, or if it is the consequences of globalization that determine state-society relations? Globalization of course is neither good nor bad. But if globalization is combined with an inappropriate policy framework, inequality and insecurity may increase. In other words, the lack of appropriate reforms (including political), transparency and accountability make policy-making hazardous in a globalizing world. Another problem with non-transparent societies is the link between free markets and illegal activities. The question is whether the regimes will manage to make policies publicly acceptable enough to uphold their legitimacy. In other words, will the regimes keep pace with the current changes in different segments of society? Economic development seems to satisfy the Vietnamese and Lao. Cambodia has to stabilize its politics, and legitimacy will be provided. But the regime in Myanmar lacks legitimacy. The treatment of Aung San Suu Kyi has focused international, and now also regional, pressure on Myanmar for political reforms. Finally, being less developed countries has meant that the room for manoeuvre has been limited due to dependence on richer neighbours and the donor community. It is both important to comply with ASEAN rules and legislation and with international agencies such as the World Bank. The process of regionalism makes the “ASEAN Way” of doing things increasingly important for the four countries, even if their problems are developmental rather than geographic in nature.

Notes 1

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The official names are the Socialist Republic of Vietnam, the Kingdom of Cambodia, Lao People’s Democratic Republic (Lao PDR), and Myanmar. Myanmar was until 1989 called Burma, when it was renamed by the military junta. The decision has been questioned by civilians as well as by parts of the international community. See Rachel Schairer-Vertannes, “The Politics of Human Rights: How the World Has Failed Burma”, Asia-Pacific Journal on Human Rights and the Law 2, no. 1 (2001): 77–118. “Myanmar” is commonly used in Southeast Asia and accepted by ASEAN. Harish Mehta, “How Vietnam can catch up with Singapore”, Business Times, 4 March 2003. The other members are Singapore, Thailand, Malaysia, Indonesia, Brunei, and the Philippines.

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Mark Beeson, “Southeast Asia and the Politics of Vulnerability”, Third World Quarterly 23, no. 3 (2002): 559. Kristina Jönsson, “Globalization, Authoritarian Regimes and Political Change: Vietnam and Laos”, in Globalization and Democratization in Asia: The Construction of Identity, edited by Catarina Kinnvall and Kristina Jönsson (London and New York: Routledge, 2002). David Roberts, “Political Transition and Elite Discourse in Cambodia, 1991– 99”, Journal of Communist Studies and Transition Politics 18, no. 4 (2002): 101– 18; David Roberts, “Democratization, Elite Transition, and Violence in Cambodia, 1991–1999”, Critical Asian Studies 34, no. 4 (2002): 520–38. O. Wegge, “Cambodia in 2005. Year of Reassurance”, Asian Survey XLVI, no. 1 (2006): 155–61. Naturally there were problems as well caused by civil war, political bossism and corruption. Also, according to Robert Taylor, the outside world was quite happy to see General Ne Win taking over because of the strong Communist Party (e-mail 6 March 2004). See Arend Lijphart, “The Comparable-Cases Strategy in Comparative Research”, Comparative Political Studies 8, no. 2 (1975): 158–77, for an extended discussion on comparable-cases strategy in comparative research. In 2002 Myanmar received two U.S. dollars of international aid per capita, Cambodia US$39, Laos US$50, and Vietnam US$16 (World Bank, 2004 World Development Indicator). The population in Myanmar is approximately 50 million, Cambodia 14 million, Laos 6 million, and in Vietnam 82 million (accessed 9 May 2006). Catarina Kinnvall, “Analyzing the Global-Local Nexus”, in Globalization and Democratization in Asia, edited by Kinnvall and Jönsson (2002). For general accounts of globalization see David Held, Anthony McGrew, David Goldblatt and Jonathan Perraton, Global Transformations: Politics, Economics and Culture (Cambridge: Polity, 1999); Jan Aart Scholte, Globalization: A Critical Introduction (Basingstoke: Macmillan, 2000); Roland Robertson, Social Theory and Global Culture (London: Sage Publications, 1992). See Scott, Alan, ed., The Limits of Globalization (London: Routledge, 1997), for a more critical account. See Anthony Giddens, The Consequences of Modernity (Cambridge: Polity, 1990), for the relationship between globalization and modernity. Catarina Kinnvall and Kristina Jönsson, “The Global-Local Nexus Revisited: Constructing Asia in Times of Globalization”, in Globalization and Democratization in Asia, edited by Kinnvall and Jönsson (2002). Jönsson, “Globalization, Authoritarian Regimes and Political Change” (2002). Ananda Rajah, “A ‘Nation of Intent’ in Burma: Karen Ethno-nationalism, Nationalism and Narrations of Nation”, The Pacific Review 15, no. 4 (2002): 517–37.

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Grant Evans, The Politics of Ritual and Remembrance, Laos since 1975 (Chiang Mai: Silkworm Books, 1998). Scholte, Globalization (2000). Grant Evans, Christopher Hutton and Eng Khua Khun, eds., Where China Meets Southeast Asia. Social and Cultural Change in the Border Regions (Copenhagen: NIAS/Singapore: Institute of Southeast Asian Studies, 2000). Peter Berger and Samuel P. Huntington (eds.), Many Globalizations: Cultural Diversity in the Contemporary World (New York: Oxford University Press, 2002). GDP per capita in 2004: Vietnam US$481, Cambodia US$310, Laos US$362, Myanmar US$179, . Also see for trade. David O. Dapice, An Overview of the Vietnamese Economy after the Asian Crisis (Centre for Business and Government, Harvard University, 2000), . Satish Chand, Ron Duncan and Doan Quang, “The Role of Institutions in the Development of Vietnam”, ASEAN Economic Bulletin 18, no. 3 (December, 2001): 276–84. Carolyn L. Gates, “Vietnam’s Economic Transformation and Convergence with the Dynamic ASEAN Economies”, Comparative Economic Studies 42, no. 4 (2000). Ngozi Okonjo-Iweala, Victoria Kwakwa, Andrea Beckwith and Zafar Ahmed, “Impact of Asia’s Financial Crisis on Cambodia and the Lao PDR”, Finance & Development 36, no. 3 (1999): 48–51. Kym Anderson, Lao Economic Reform & WTO Accession (Singapore: Institute of Southeast Asian Studies, 1999). Caroline Hughes, The Political Economy of Cambodia’s Transition 1991–2001 (London and New York: RoutledgeCurzon, 2003), p. 1. Ruth Bottomley, “Contested Forests: An Analysis of the Highlander Response to Logging, Ratanakiri Province, Northeast Cambodia”, Critical Asian Studies 43, no. 4 (2002): 591. “Thailand Buys Cambodia”, The Economist (20 January 2001). Tony Kevin, “Cambodia’s International Rehabilitation, 1997–2000”, Contemporary Southeast Asia 22, no. 3 (December 2000). Eighty per cent of Cambodia’s close to 14 million population live on subsistence farming. John Bray, “Burma: The Dilemmas of Commercial and Humanitarian Engagement”, Corporate Environmental Strategy 9, no. 2 (2002): 158. Maung Myint, The International Response to the Democracy Movement in Burma since 1962 (Centre for Pacific Asian Studies: Stockholm University, 2000), p. 37. Andrew Reynolds, Alfred Stepan, Zaw Oo and Stephen Levine, “How Burma could Democratize”, Journal of Democracy 12, no. 4 (2001): 100.

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Ann Bernstein, “Globalization, Culture, and Development: Can South Africa Be More Than An Offshoot of the West?”, in Many Globalizations, edited by Berger and Huntington (2002). The Lancet, 25 September 1999. International organizations estimate that at least one million people in Myanmar may be HIV-infected (Journal of International Affairs, Spring 2001). Maung Myint, The International Response (2000), p. 45. Peter Chalk, “Southeast Asia and the Golden Triangle’s Heroin Trade: Threat and Response”, Studies in Conflict & Terrorism 23 (2000): 93. Schairer-Vertannes., “The Politics of Human Rights” (2001): 106. Bertil Lintner, Burma in Revolt: Opium and Insurgency Since 1948, 2nd edition, (Chiang Mai: Silkworm Books, 1999). Steven Lanjouw, Graham Mortimer and Vicky Bamforth, “Internal Displacement in Burma”, Disasters 24, no. 3 (2000): 236. “Thailand hotar Burma”, Sydsvenska Dagbladet, 21 August 2003. Göran, Tomson, et al. “Decision-makers and the Usefulness of Research Evidence in Policy Implementation — A Case Study from Lao PDR”, Social Science and Medicine 61 (2005): 1291–99. Sue Downie and Damien Kingsbury, “Political Development and the ReEmergence of Civil Society in Cambodia”, Contemporary Southeast Asia 23, no. 1 (April 2001). According to Robert Taylor, the intellectual climate is more open today than in the 1970s and 1980s for foreigners and their ideas, also at the universities. The archives are open for those who want to use them. The problem is rather the lack of foreign material because of poverty and the foreign embargoes on trade (e-mail 6 March 2004). See Martin Stuart-Fox, A History of Laos (United Kingdom: Cambridge University Press, 1997), p. 206. Jeff Haynes, ed., Religion, Globalization and Political Culture in the Third World (Great Britain: Macmillan Press Ltd, 1999). Ibid., p. 25. Scott Thomas, “Religion in International Society”, in Religion, Globalization and Political Culture in the Third World, edited by Hayes (1999), pp. 32–33. Haynes, Religion, Globalization and Political Culture in the Third World (1999), p. 7. “Analysis: Vietnam Struggles to Deflect Criticism of Religious Repression”, Deutsche Presse-Agentur, 18 July 2003. Robert James Lee, “Sleepy Repression”, National Review, 23 October 2002. Zunetta Liddell, “No Room to Move: Legal Constraints on Civil Society in Burma”, in Strengthening Civil Society in Burma. Possibilities and Dilemmas for International NGOs, edited by Burma Center Netherlands (BCN) & Transnational Institute (TNI) (Thailand: Silkworm Books, 1999), pp. 66–67. 47

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Scholte, Globalization (2000), p. 7. There are officially 54 ethnic groups in Vietnam divided on five language groups. Eighty-five per cent belong to the main ethnic group. In Laos there are officially 49 ethnic groups distributed between four ethnic-linguistic categories, 60 per cent are ethnic Lao. In Myanmar there are at least eight ethnic communities based on linguistic, religious, and regional divisions. Around 68 per cent are thought to be ethnic Burmans. Though most are Buddhist, the Christians have a leadership role in Karen State, and the Arakan State is home to about a million Muslims and Hindus. In Cambodia the majority of the population belong to the Khmer (90 per cent). The rest are Chinese, Vietnamese, Cham (Islam) and some 30 hill tribes. However, the number of ethnic groups in the various countries is much debated. See Vatthana Pholsena, “Nation/Representation: Ethnic Classification and Mapping Nationhood in Contemporary Laos”, Asian Ethnicity 3, no. 2 (2002): 185. Schairer-Vertannes, “The Politics of Human Rights” (2001): 110. Maung Myint, The International Response (2000), p. 41. Lanjouw, et al., “Internal Displacement in Burma” (2000). Jonathan Rigg, Southeast Asia: The Human Landscape of Modernization and Development, 2nd Edition (London and New York: Routledge, 2003), p. 130. Kristina Jönsson, Translating Foreign Ideas into Domestic Practices: Pharmaceutical Policies in Laos and Vietnam (Lund: Department of Political Science, 2002). Pholsena, “Nation/Representation” (2002): 180. Pierre P. Lizée, “Human Security in Vietnam, Laos, and Cambodia”, Contemporary Southeast Asia 24, no. 3 (2002): 518. Bray, “Burma” (2002): 157; Reynolds et al., “How Burma could Democratize” (2001): 99. Thant Myint-U, The Making of Modern Burma (United Kingdom: Cambridge University Press, 2001), p. 245. “Thailand: Not So Close Burmese Refugee Clinic”, Human Rights Watch, 3 October 2003. According to Grant Evans the harsh judgements of the Lao regime and its treatment of the Hmong minority is unfair. The poor Hmong living in the countryside are no more or no less discriminated than other ethnic groups, although they are often associated with rebels in remote areas and opium. See Grant Evans, “Laos is Getting a Bad Rap from the World’s Media”, Bangkok Post, 8 July 2003. Benedict J.T. Kerkveliet, “An Approach for Analysing State-Society Relations in Vietnam”, SOJOURN: Journal of Social Issues in Southeast Asia 16, no. 2 (October 2001): 238–78. Lizée, “Human Security” (2002): 518–19. Jönsson, “Globalization, Authoritarian Regimes and Political Change” (2002). Lizée, “Human Security” (2002): 520 and 524. Martin Stuart-Fox, “After the Sixth Party Congress”, Lao Study Review 3 (1998/

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99) (assessed 27 August 1999). Grant Evans, Lao Peasant under Socialism and Post-Socialism (Thailand: Silkworm, 1995). Jönsson, “Globalization, Authoritarian Regimes and Political Change” (2002). Joshua Kurlantzick, “Open dissent stirs against Laos’ regime”, Washington Post, 11 April 2003. Downie and Kingsbury, “Political Development and the Re-Emergence of Civil Society in Cambodia” (2001). Roberts, “Political Transition and Elite Discourse” (2002); David Roberts, “From ‘Communism’ to ‘Democracy’ in Cambodia: A Decade of Transition and Beyond”, Communist and Post-Communist Studies 36 (2003): 245–58. “Asia’s Winning Ways; Cambodia’s Local Elections”, The Economist, 9 February 2002. Downie and Kingsbury, “Political Development and the Re-Emergence of Civil Society in Cambodia” (2001). Roberts, “Political Transition and Elite Discourse” (2002). Hughes, The Political Economy of Cambodia’s Transition (2003), p. 1. Contrary to British colonial rule elsewhere, Myanmar was governed under direct rule. British administrative law replaced customary law and the monarchy was abolished partly because the British authorities could not find a suitable king. By 1923 the British government had granted the Burmese the same dual government that had been given to India. However, the Burmese thought it was a little too late and demanded separation from India. In 1937 a new constitution became effective in paving the way to independence in 1948. See Schairer-Vertannes “The Politics of Human Rights” (2001): 82. In 1997 the State Law and Order Restoration Council (SLORC) renamed itself to State Peace and Development Council (SPDC). Kristina Jönsson, “Demokratiska värderingar — universella eller kontextuella?”, in Demokratisering i tredje världen, edited by Goran Hydén (Lund: Studentlitteratur, 1998). Reynolds, et al., “How Burma Could Democratize” (2001): 97. “Demokratiplan presenterades”, Sydsvenska Dagbladet, 31 August 2003. Martin Smith, “Ethnic Conflict and the Challenge of Civil Society in Burma”, in Strengthening Civil Society in Burma, edited by Burma Center Netherlands (BCN) & Transnational Institute (TNI) (1999). Liddell, “No Room to Move” (1999). Martin Stuart-Fox, Buddhist Kingdom Marxist State: The Making of Modern Laos, 2nd edition (Bangkok: White Lotus Press, 2002). Rigg, Southeast Asia (2003): 328. Hiro Katsumata, “Reconstruction of Diplomatic Norms in Southeast Asia: The Case for Strict Adherence to the ‘ASEAN Way’ ”, Contemporary Southeast Asia 25, no. 1 (2003): 104–21. Western governments have, in line with the views of Aung San Suu Kyi, taken 49

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a confrontational approach imposing arms embargo and selective sanctions in the form of travel restrictions for leading members of the regime. See Bray, “Burma” (2002): 158. Joshua Kurlantzick, “Can Burma Reform?”, Foreign Affairs 81, no. 6 (November/ December 2002): 133. Grant Evans, “Introduction: What is Lao Culture and Society?”, in Laos Culture and Society, edited by Grant Evans (Bangkok: Silkworm Books, 1999), p. 30. Medhi Krongkaew, “The Development of the Greater Mekong Subregion (GMS): Real Promise or False Hope?”, Journal of Asian Economics 15 (2004): 977–98. Hughes, The Political Economy of Cambodia’s Transition (2003), pp. 113–14.

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3 FROM PLURAL SOCIETY TO POLITICAL PLURALISM IN MALAYSIA Francis Loh Kok Wah

INTRODUCTION: THE MEANING OF NEW POLITICS IN MALAYSIA Most researchers of Malaysia take off from the perspective that Malaysia is a “plural society” wherein two or more “races” live side by side in one political unit, yet do not mingle with one another. “Primordialism” which refers to strong ineffable sentiments and attachments based on blood relations, kinship, tribe, race, common language, religion, social customs, territory, etc., is a concomitant of the plural society. For Geertz, primordialism is invoked to provide meaning and solace to ordinary people when their societies are undergoing rapid social change.1 However, in multi-ethnic societies, primordialism also threatens to disrupt the nationbuilding process. An “integrative revolution” that ushers in “civic politics” is therefore required to arrest the break-up of these new nations. In the case of Malaysia, this integrative revolution takes the form of “consociationalism”. For Lijphart, it is usually the elites of communal-based political parties, who purportedly share universal values amidst the parochialism purportedly of the masses, who assume the responsibility for preserving political stability and achieving economic development through their moderate and altruistic inclinations.2 In the context of Malaysian studies, it is often argued that the 51

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Barisan Nasional (BN or National Front, previously the Alliance) ruling elites are responsible for maintaining political stability and facilitating economic development. Contrary to these ethnic-tinged perspectives, it may be argued that there now exists a New Politics in Malaysia. A careful analysis of the 1999 general election results provides evidence of this New Politics. To elaborate on this New Politics it is necessary to distinguish between two realms of politics: formal electoral politics involving the political parties and non-formal participatory politics often involving NGOs and other local community groups who do not necessarily focus on winning elections.

THE MEANING OF NEW POLITICS Ethnicity remains a very salient aspect of Malaysian politics. However, whereas ethnicity previously dominated the discourse and practice of Malaysian politics and posed limits on democracy, it no longer does so to the same predictable extent. Recent developments, especially those that occurred since 1998, suggest that a new discourse and practice of participatory politics has gained ground among Malaysians, particularly urban middle class Malays. The emergence of the reformasi movement which contributed towards the formation of an opposition coalition that made the 1999 election uncharacteristically meaningful by offering a real choice to the voters epitomized participatory politics. There were also new non-party voices — individuals, NGOs, informal groups and other organizations — demanding justice, accountability, popular participation and an autonomous public sphere. But in spite of the ferment and excitement, the democratic impulse did not prevail. Some observers have resorted to ethnic factors to explain this lag between Malaysia and certain Southeast and East Asian countries where regime changes have occurred these past years. No doubt, ethnic sentiments were fanned, and ethnic separateness emphasized by the ethnic-based component parties of the BN. There was clear evidence of this in the BN’s electoral campaign — in the speeches made, the posters distributed, and the propaganda in the mass media, which the BN controlled.3 As ethnic tensions re-emerged, the BN projected itself as the only proven and credible coalition capable of attending to the disparate needs and interests of Malaysia’s multi-ethnic, multi-religious society. Accordingly, the new opposition coalition, largely made up of ethnic-based component parties, was depicted as a “marriage of convenience”, its partners as “strange bedfellows”, and ultimately, incapable of ruling a multi-ethnic Malaysia. Nonetheless, the 52

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ethnic factor is at best only one of the reasons why the democratic momentum was arrested. The failure, more importantly, was on account of developmentalism, the cultural by-product of an economic dirigisme, successfully undertaken by a developmental state since the 1970s. It is developmentalism which is principally responsible for limiting democratization in present day Malaysia. Put another way, this new political culture places value on sustained economic growth as well as the political stability which many voters believe that only the BN can guarantee, which then allows for this growth to continue. However, the fact that there are increasing demands for democracy, while ethnic politics still appeals among certain groups suggests that Malaysia’s political culture has become plural and fragmented. In other words, there are contestations between the discourses and practices of ethnicism, participatory democracy and developmentalism, as well as of combinations of them (for instance ethnicism and democracy) as evidenced in the ethno-regionalist movements in Sabah and Sarawak during the 1980s, and political Islam, now in the ascendancy.4 The distinctions between the different discourses are used in this discussion as heuristic devices. In the real world of politics, they overlap with one another and are not mutually exclusive. New politics refers to the ferment which has led to political pluralism and contestation in Malaysia’s political culture.

EVIDENCE OF POLITICAL PLURALISM IN THE BN’S NARROW WIN IN 1999 The narrow victory by the BN in the 1999 election provides evidence of this fragmentation and contestation. The BN won 102 out of the 144 parliamentary seats in the peninsula, and 148 out of the 193 parliamentary seats throughout the country. In the contest for seats in the 11 state assemblies in the peninsula, the BN won 281 of 394 seats contested. Although the BN won 76.7 per cent of the parliamentary seats, it polled only 56.5 per cent of the popular vote (compared to 65 per cent in 1995).5 Leaving aside Sabah and Sarawak, it is useful for analytical purposes to divide the 144 constituencies in the peninsula into 59 generally rural large Malay-majority seats (with more than 67 per cent Malay voters), 24 generally urban Chinese-majority seats (with more than 50 per cent Chinese voters), and 61 semi-urban “multi-ethnic seats” (comprising 22 seats where no ethnic group constitute a majority and 39 small Malay-majority seats wherein Malays ranged from 50 to 66 per cent of total voters). 53

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In the volume New Politics in Malaysia, Loh and others have shown that the Malay voters in the 59 large Malay-majority split their votes: 49 per cent for BN/UMNO and 51 per cent for the opposition Barisan Alternatif/Parti Islam (BA/PAS). The studies also reveal that the Chinese in the 24 Chinese majority seats similarly split their votes between the BN (51 per cent) and the BA (45 per cent). Apparently, there occurred a high percentage of spoilt votes here. (Alas, the Indians do not constitute a majority in any of the constituencies and analysis of the pattern of voting among Indians can only be conducted at the level of the voting district or saluran. Based on a limited number of studies, it appears that a majority of Indians tended to vote for the BN rather than for the BA which is not surprising of a weak minority group. However, this finding should be considered tentative). The BN’s victory was gained essentially because it performed spectacularly in the semi-urban multi-ethnic constituencies where it captured 60 of 61 seats. The BN also won all 28 seats in Sarawak and 17 of 21 seats in Sabah (including Labuan) in sealing its overall victory. Less well known is that 26 parliamentary seats in the peninsula were won by less than 5 per cent majorities, and another 24 seats which were won by 5 to 10 per cent margins. (29 of these cases were won by the BN, 21 of these by the BA). This means that more than one-third (50 out of 144) of the seats in the peninsula were won by slim margins. And if an additional 5 to 6 per cent swing in favour of the BA had occurred, and if the BA had captured all the 29 marginal seats won by the BN — two big “if ’s”, the election in the peninsula might have ended in a dead heat! Ultimately, it was the first-past-the-post (or simple majority) electoral system which is used in Malaysia, and the BN’s ties with the dominant regional parties in Sabah and Sarawak (ties which the opposition BA lacked), which enabled the BN’s victory, and consequently, its regaining a two-thirds majority in parliament. In fact, the BN’s actual victory in the peninsula was a slim one. Also disguised was the fact that both the Malays and the Chinese were actually split down the middle. Although a larger proportion of Malays voted for the BA, and a larger proportion of the Chinese supported the BN than previously, it is wrong to conclude that the vast majority of Malays had swung to the BA and that the vast majority of Chinese to the BN. These findings based on analysis of the popular vote in the three different kinds of constituencies suggest fragmentation of the different ethnic groups, as well as fragmentation of their political cultures. 54

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THE FORMAL REALM OF ELECTORAL OR PROCEDURAL DEMOCRACY It is useful to distinguish between two realms of politics in Malaysia, the formal and the non-formal. Although these two realms often overlap and sometimes converge, they are in fact different. The formal realm is the one involving the executive and the bureaucracy, the judiciary as well as the state legislative assemblies and federal parliament, the electoral process and the political parties. The workings of this formal sector can also be regarded as electoral or procedural democracy wherein political participation is institutionalized and circumscribed by the Federal Constitution, various Acts of Parliament, and by other laws. The BN government and parties dominate the formal realm of electoral/procedural democracy in Malaysia. A major reason for the BN’s domination is because its ethnic-based component parties have been able to forge a permanent coalition. In this regard the BN possesses the most comprehensive party machine in the country. Its access to funds as well as control of the media has further facilitated its victories in all the general elections that have been held in Malaysia since independence in 1957. In office, the BN has amended the constitution more than forty times often to enhance its rule. Not surprisingly, power has become increasingly centralized in the hands of the federal government in Kuala Lumpur. Additionally, within the federal government itself, power has shifted into the hands of the BN executive at the expense of the legislative, the judiciary, the mass media, and civil society more generally. This is so in spite of constitutional provisions for a system of checks and balances and provisions for civil liberties. Nowadays, Malaysia is variously described as a “quasi democracy”, a “semi-democracy”, a “repressive-responsive regime”, or even a “syncretic state”.6 However, the BN leaders have rarely resorted to brute force to defeat their challengers and to maintain political stability. Legal measures shaped to their advantage, like the Internal Security Act (ISA) which allows detention without trial and numerous other coercive laws; perennial gerry-mandering of electoral constituencies with the cooperation of the pliant Elections Commission; manipulation of the mass media which is either owned by the government or the ruling parties; etc. have been used instead, often in accordance with the laws. This is why in Malaysia we often talk of the “rule by law” rather than “rule of law” which connotes a system of constitutional democracy with checks and balances effectively in place.7 55

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THE NON-FORMAL REALM OF PARTICIPATORY DEMOCRACY In spite of the consolidation of the state and centralization of power in the hands of the BN executive, the state is not omnipotent and omnipresent. Ordinary people and communities, sometimes organized as NGOs or informal groupings, can still find room to manoeuvre and to express themselves. This is the realm of non-formal politics, or politics with the small “p”. Although also circumscribed by the constitution, acts and other laws, this realm of politics is characterized by contestation of those very constraints either directly, or more likely indirectly, via other non-formal political terrains thereby facilitating participatory or direct democracy. It is here that the struggle for democracy and for that autonomous public sphere is evident. It is on account of this development that Malaysia has moved away from the old ethnic-based politics towards the New Politics of pluralism, that is, beyond ethnic politics. Since the 1980s, a small but articulate group of the middle class has organized NGOs to promote a new discourse and practice of participatory democracy. In general, the NGOs eschew the electoral process and are not particularly concerned with taking over the government. Instead, they are cause-specific and more focused on influencing specific policies, often in support of marginalized groups. Their impact upon the political process is therefore relatively limited and evident only over the long term. In the face of their limited impact, like-minded NGOs network with one another to enhance their influence. Yet even then, their impact remains limited. Ultimately, participatory democracy refers to the struggle to create an autonomous public sphere that allows for alternative views of development and political participation to be expressed and to be pursued. For instance, these NGOs which are usually multi-ethnic in orientation consciously avoid racial-baiting which is often the raison d’être of the mono-ethnic parties and that circumscribes the formal electoral process. Women groups like AWAM, Sisters-in-Islam, the Women’s Aid Organization, Women’s Development Collective and the Women’s Centre for Change are important components of this non-formal realm of politics and have struggled against the patriarchal structures that characterize the formal realm of politics and insisted that women deserve equal rights. In the mid-1990s, they were particularly successful in working with the women’s wings of the ruling parties engaged in electoral politics to introduce the Domestic Violence Act and to amend various other laws which discriminated against women.8 56

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Human rights groups like Suaram, Hakam and Aliran have lobbied to repeal the ISA and other coercive laws. They conduct seminars, petitions, legal aid and sometimes resort to demonstrations as well. Environmental groups like the Environmental Protection Society Malaysia, Sahabat Alam Malaysia, Malayan Nature Society and the anti-Bakun Dam coalition have lobbied with some success to protect the environment. On several occasions environmentalists have also gone to court.9 The Estate Workers Support Committees have net-worked with one another to struggle for the introduction of a monthly wage scheme while other groups have protested alongside the so-called Peneroka Bandar (urban pioneers) threatened by developers and demanded due compensation or lowcost housing when forcibly evicted.10 The Persatuan Orang Asli Malaysia has highlighted the plight of the indigenous peoples of the Peninsula while the Centre for Orang Asli Concerns, apart from researching the plight of the Orang Asli, has also provided strategic back-up for them in several court cases when the Orang Asli were evicted from the lands they occupied and farmed, without due compensation.11 There are the consumer groups, particularly the Federation of Consumers Associations (FOMCA), Consumers Association of Penang (CAP) and ERA-Consumers who have educated the rakyat about their rights as consumers through signature campaigns, workshops and publications. Finally there are also groups like the Third World Network and JUST who have focused on issues of globalization and injustices in the international system. During the 1980s, this impulse towards participatory democracy led by some of these NGOs gained ground and egged on the emergence of critical groups within the Malaysian Bar and Bench, and even the political parties. In Sabah, a new ethno-regional party led by the minority Kadazandusuns emerged and defeated the ruling party in the polls, while in Sarawak another ethnoregional party representing the minority Dayaks challenged, in this case unsuccessfully, the ruling BN party in the Sarawak polls. The critical mood indirectly contributed towards a major split within UMNO, the dominant party in the ruling coalition, too. However, this momentum was nipped in the bud when the BN government conducted a mass crackdown on dissent in October 1987, codenamed Operation Lalang. In one fell swoop, 106 Malaysians — representatives of NGOs, unionists, opposition party leaders, educationists, church social activists, and even ordinary villagers — were detained under the ISA. Many were incarcerated in the infamous Kamunting Detention Camp without trial for two to three years.12 At that point, several 57

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newspapers also had their licenses to publish withdrawn and were closed. Following the crackdown, several coercive laws were further tightened to close loopholes and so deny the NGOs room to manoeuvre around the laws. More than that, the BN executive even initiated an assault on the conservative, but independent judiciary in 1988. The upshot was the removal of the head of the supreme court and suspension of five other judges.13 Consequently, the momentum towards “participatory democracy”, “alternative development”, “rule of law”, “public accountability” and “justice for all” was halted in its stride. The autonomous public sphere and democratic space which had been patiently claimed by the burgeoning popular movement led by the NGOs in the 1980s was usurped by the state. Thereafter, politics was re-directed towards the formal realm of political parties and elections, which, as noted earlier, was/is dominated by the BN government and parties.

ECONOMIC GROWTH, DEVELOPMENTALISM AND CONSOLIDATION OF THE BN IN THE 1990S The reversal of the democratic momentum was clearly evident by the time the 1995 general election was held. On that occasion, the BN coalition polled 66 per cent of the votes and won four-fifths of all seats in parliament. A year earlier in the 1994 state election in Sabah state, the BN had also performed well replacing the Parti Bersatu Sabah which had been in power since 1995. The Parti Bansa Dayak Sarawak which had quit the Sarawak BN coalition in 1983 rejoined the BN in 1994. Finally, Semangat 46, the Malay opposition party which was created after it had split from UMNO in 1987/88, voted to dissolve itself in October 1996 after eights years in opposition. Its leaders and their followers returned to the UMNO fold. The Islamic movement Darul Arqam which had grown rapidly in the early 1990s, was also banned in 1994, and successfully disbanded. All told, it appeared that the BN had consolidated itself by the mid-1990s, after a hiccup in the mid-1980s.14 No doubt coercive laws and outright repression struck fear in many Malaysians. But the BN’s consolidation was also due to the rapid economic growth which occurred especially from the late 1980s to 1997. With the end of the New Economic Policy (NEP) in 1990, and global trends towards economic liberalization and privatization, the private sector replaced the public sector as the engine of growth under the auspices of Malaysia Inc, that is close cooperation between the state and the private sector. Spurred on by 58

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a massive influx of foreign direct investments, particularly from Japan, following the Plaza Accords 1985, Malaysia’s economy boomed. Malaysia’s average real GDP growth was 7.6 per cent per annum during 1970–80 and 5–6 per cent during 1981–85. Due to a recession, the economic growth rate fell during 1986–87 before averaging 8–9 per cent again from 1988–95.15 Due to this growth, new jobs, business opportunities and improved living standards were made available to most Malaysians, especially the middle classes. Consequently, despite “leakages” and “money politics”, large segments of the population, including the non-indigenous Chinese (and to a lesser extent the Indians) who had been denied affirmativeaction benefits under the auspices of the NEP, nonetheless, shared in that new prosperity. On the eve of the 1997 financial crisis, Malaysia had virtually reduced the index of (absolute) poverty down to about 4 per cent while unemployment rates were down to about 4–5 per cent. An estimated one million foreign workers (legal as well as illegal), mostly unskilled and semi-skilled, were found in Malaysia as well. It was this economic development generally sustained over almost three decades, but especially from the late 1980s to 1997, that facilitated the successful implementation of the NEP, in turn resulting in a dramatic restructuring of the colonial ethnic division of labour wherein the bumiputera (Malays and other indigenous groups) had previously been excluded from the modern sectors of the economy and hence the nation’s wealth. A new discourse of “developmentalism” emerged in the midst of this economic growth and new opportunities, especially during the early 1990s. This new political culture valorizes rapid economic growth, the resultant consumerist habits, and the political stability offered by the BN rule even when authoritarian means are resorted to. Since no other party has ever governed Malaysia, many ordinary Malaysians cannot imagine that political stability can be maintained in multi-ethnic Malaysia without BN rule. A “self-policing” system in support of BN rule which is believed to be essential for maintaining political stability, which then attracts FDIs and allows economic growth to occur, and ultimately for the enjoyment of higher standards of living and consumption, has kicked in.16 Developmentalism, therefore, is the cultural corollary to the dirigiste developmental state when citizens, especially the middle classes, begin to enjoy improved living conditions as a result of economic growth the strong state had brought. Developmentalism increasingly displaced the ethnic political discourse and practice in the 1990s. It is primarily this discourse of developmentalism, not that of ethnicism, which now sets limits to the 59

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discourse of democracy. There are two significant offshoots of this developmentalism, namely, cultural liberalization and the consolidation of a politics of delivering public works and services.

CULTURAL LIBERALIZATION AND UTILITARIAN GOALS IN THE 1990S The BN government endeared itself to a substantial proportion of the middle classes by introducing a series of policies leading towards “cultural liberalization” in the early 1990s, especially when viewed from the perspective of nonMalays. Specifically, UMNO leaders appeared to have de-emphasized or redefined the political significance of the most important emblems of Malay identity — the Malay rulers, Malay language and culture, and Islam — hitherto considered central attributes in the defining of the Malaysian nation. The symbolic and actual powers of the Malay rulers were curtailed as a result of UMNO’s challenges to the rulers in 1983–84 and again in 1994. Indeed, this challenge of the rulers received widespread support, especially among middle class Malays. While re-affirming the status of Malay as the national language, then Prime Minister Dr Mahathir and other UMNO leaders also promoted the use of the English language on utilitarian grounds especially with the onslaught of globalization. This included the use of English as the medium of instruction for certain technical subjects in the local universities, a move that partially reversed the policy of using Malay as the sole medium introduced in 1971. Additionally, the new Education Act 1996 formally empowered the Education Minister to exempt the use of Malay as the medium of instruction for certain purposes deemed necessary, in secondary schools (and later even in primary schools). By introducing other Acts and amending existing ones pertaining to higher education, the government further facilitated the corporatization of public universities and the setting up of private universities and branch campuses of foreign universities in Malaysia. Together with the expansion of the public universities, opportunities were made available to many more Malaysians to pursue tertiary-level education, thereby ameliorating the previously intense competition among the various ethnic groups for limited places in the local universities. The changes further allowed students enrolled in “twinning colleges” (attached to foreign universities) to complete their entire university education locally, thereby saving money for their parents. Since these private colleges and universities were encouraged to recruit foreign lecturers and students, English became the medium of instruction. Other notable aspects of cultural liberalization were the promotion 60

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of non-Malay cultures by the Ministry of Culture, Arts and Tourism as a means to attract the tourist dollar, and the increasing use of English in the mass media especially by the privatized radio and television stations. With the introduction of cable and satellite television, pluralization of the mass media also occurred, and now, offered choices to Malaysian audiences. In response to the resurgence of Islam, the BN government introduced various Islamization policies of its own beginning from the early 1980s. But it has distinguished itself by advocating a more liberal interpretation of Islam which emphasized the promotion of Islamic values in administration and society writ large, rather than the realization of an Islamic state which PAS and other Muslim radicals advocated.17 Taken as a whole, the new policies appeared to stress a more inclusive rather than an exclusive notion of Malaysian nationhood. It also offered choices in the cultural realm as a result of increasing pluralism. Middle class Malaysians, especially nonMalays, welcomed this cultural liberalization for utilitarian goals which, often facilitated economic growth but sometimes caused traditional values, norms and practices to be eroded. However, participatory democracy did not occur in the early 1990s. For although the citizens were offered some measure of choice and even the private space to pursue their ambitions and to express their identities, these individual pursuits did not extend themselves into a common effort towards greater democratization. Put another way, individuals fought for and gained the necessary private spaces for expressing themselves as individuals. But the end result was the “privatization” of freedom not the creation of a strong civil society and expansion of the autonomous public sphere.

EXTENDING BN-LED ELECTORAL DEMOCRACY VIA PUBLIC WORKS AND SERVICES A re-definition of the role of political parties, and even the meaning of politics itself, further accompanied this developmentalism. During this period of economic growth, the BN component parties not only avoided debate over policies, especially when they involved “sensitive issues”, but also de-emphasized political education and mobilization. Instead “developmentalism” extended its way into the quotidian of local areas through the delivery of public works and services.18 In other words, the BN parties transformed themselves into extensions and instruments of the state not merely to assist in the maintenance of the status quo, but to assist in the delivery of public works and services. For example, BN parties like the Malaysian Chinese Association (MCA) established 61

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its own college viz. the Kolej Tunku Abdul Rahman. Through its four campuses KTAR now provides tertiary level education for some 23,000 students annually. The MCA’s Langkawi Project further caters to the educational needs of primary school children (by organizing tuition classes and providing books and other resources) especially in the Chinese new villages. Fund raising has also been conducted on behalf of the independent Chinese secondary schools during the 1990s. Additionally, Kojadi, the MCA’s savings cooperative provides low-interest loans for the children of cooperative members to attend universities and colleges. The BN political parties also established so-called “service centres” and complaints bureaux throughout the country. These are partially financed by the constituency development funds allocated by the government only to elected politicians belonging to the BN. Lower class Malaysians, in particular, have resorted to them, instead of the relevant government agencies, in order to resolve their everyday problems and needs, whether these are of a personal nature or catering for the local community. These problems range from applying for official documents, to getting their children into a school of their choice, to acquiring business licenses, to repairing roads and drains, to equipping the local community with more amenities and facilities. However, it should be noted that there are limits to the kinds of problems that the service centres and complaints bureaux can help to resolve.19 Finally, the BN parties themselves have ventured into business activities and forged close ties with other captains of industry and commerce. Together with them and their associations like the Chambers of Commerce and Industry and other industry-specific bodies like the Federation of Malaysian Manufacturers, the BN parties have initiated various projects in support of the BN government’s post-NEP economic policies which have been friendlier to the private sector in general and beneficial to Chinese business interests in particular. In summary therefore, the BN political parties have assumed very different roles. Ironically, they seem to be encouraging their members to withdraw from active participation in politics. It is economic growth and developmentalism, therefore, and the related offshoots of cultural liberalization and the supplementary delivery of services and goods by the BN parties down to the local level — in the process redefining the meaning of politics — that account for the consolidation of the BN in the early 1990s.

Reformasi It was therefore an unexpected twist of fate when this realm of non-formal participatory politics burst onto the Malaysian scene once again in the late

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1990s. This dramatic turn around had everything to do with the dual crises — the 1997 financial crisis and especially the “Anwar Saga”, beginning with his sacking from the cabinet, his expulsion from UMNO, and his subsequent arrest, prosecution and sentencing to jail. The 1997 financial crisis brought to a head differences between Prime Minister Mahathir and his deputy Anwar Ibrahim, particularly over how the crisis should be managed. Anwar, who was then finance minister, severely cut government expenditure and allowed interest rates to float upwards. Privatized “mega projects” like the Bakun Hydro Electric Power Project in Sarawak, an express railway linking the capital city to the new Kuala Lumpur International Airport (KLIA), a highway connecting peninsula Malaysia’s hill resorts, were shelved. Calls to bail out Malaysian companies facing bankruptcies were rejected. But Mahathir considered these rejections and Anwar’s measures to miss the point. They were no different from the International Monetary Fund’s response to the crisis which, to his mind, failed to recognize that the crisis was not a result of domestic shortcomings. Rather, international currency speculators and the hedge fund managers caused it. By refusing to assist the Malaysian, specifically the bumiputra corporations, Anwar was allowing the gains secured under the NEP, specifically, the development of a bumiputra commercial and industrial community, to become unstuck. Consequently, a different set of policies focusing attention on how to deal with foreign manipulation of the Malaysian economy on the one hand and on bailing out Malaysian corporations via restructuring, debt relief and access to new credit on the other, were proposed by the National Economic Action Council (NEAC), headed by former finance minister and Mahathir confidante, Daim Zainuddin. In June 1998, when the UMNO Youth leader associated with Anwar launched an attack on cronyism and nepotism at the UMNO annual general assembly, Mahathir hit back openly at Anwar and his supporters. With this turn of events, Anwar’s position in government became untenable. And on 2 September 1998 he was ousted. Anwar’s sacking from government, expulsion from UMNO, subsequent arrest, prosecution and being sentenced to six years’ imprisonment, and his black eye caused by a blow by the inspector-general of police while Anwar was detained, galvanized his supporters in and outside UMNO, the opposition parties and the NGOs into a mass movement. Public rallies and street demonstrations in support of Anwar occurred. Anwar’s treatment and the regime’s abuse of power generally were widely criticized in publications, cassettes, video tapes and in numerous websites. Significantly, the demands of the movement quickly moved beyond concern for Anwar’s well-being to issues such as “rule of law”, “participatory democracy” and “justice for all” (including for opposition Democratic Action Party youth leader and member 63

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of parliament Lim Guan Eng, who had been imprisoned while championing the plight of an minor who had been statutorily raped by allegedly high government officials). It also called for the repeal of coercive laws like the ISA, for “accountability” and “transparency” in decision-making so as to put an end to “corruption, cronyism and nepotism”, and ultimately for Mahathir’s resignation. Like the NGOs, the reformasi movement was also multi-ethnic in orientation. It involved women as well as men, the young as well as the old. Indeed the issues which it upheld were the very issues which the NGOs had kept alive throughout the 1990s as developmentalism held sway and the BN consolidated its grip over the Malaysian public. It highlighted the importance of sustaining that counter-discourse of participatory democracy and the autonomous public sphere even when no impact upon the formal realm of politics was evident during the long days and months of the early 1990s.

NGOs IN THE OPPOSITION This counter-discourse was subsequently adopted not only by the leaders of the reformasi movement who reorganized themselves as a political party, Parti Keadilan Nasional, but by the new opposition coalition, the Barisan Alternatif (BA) as well. Apart from Parti Keadilan, the BA included the Islamic party PAS, the small multi-ethnic and leftist party Parti Rakyat, and the secular Chinese-based opposition party the Democratic Action Party (DAP). This is not to suggest that the opposition parties lost their former spots and stripes. Many in PAS continue to maintain a literalist-fundamentalist notion of Islam and understand the party’s goals in terms of furthering Islamic laws, ultimately an Islamic state. They further reject democracy as a western imperialist legacy and as an extension of secularism. There are also many PAS leaders and supporters who are narrowly ethnic in outlook in contrast to Islamic preaching of universalism. However, there are also those within PAS who believe that Islam is not incompatible with democracy. Fundamental Islamic tenets include shura [consultation], ijma [consensus], ijtihad [interpretation], ikhtilaf [divergence of opinion], maslaha [public interest], ultimately, the idea that the ruler occupies a non-hereditary elective office and is equally subjected to the law. Arbitrary rule, therefore, cannot be Islamic.20 Those advocating compatibility between Islam and democracy began to speak out more loudly and were responsible for steering PAS towards support for Anwar’s plight, reformasi and formation of the Barisan Alternatif. The issues of justice and democracy that the BA highlighted, and which PAS supported in the run-up to the 1999 polls, 64

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indicate that PAS, while maintaining its Islamic credentials, nonetheless, supported the democratic momentum. The DAP, while advocating the deepening of democracy, apparently conducted its internal party affairs in high-handed fashion. In 1998–99, several party stalwarts and their supporters, who accused Lim Kit Siang and the other DAP national leaders of authoritarianism and nepotism, were suspended or expelled. In fact, many within the party also harboured strong anti-Islamic sentiments and disagreed with the leadership’s decision to cooperate with PAS in the elections. As well, erstwhile UMNO leaders and supporters, who were now in Keadilan, not surprisingly displayed evidences of UMNOstyled exclusivist ethnic politics too. For instance, some leaders reportedly disagreed with the BA’s proposals towards greater cultural liberalization. The formation of the BA was not merely a “marriage of convenience” among incompatibles. The fact was enough leaders and members of the four parties subscribed to the democratic discourse. And through extended debate and give and take, they reached agreement on the distribution of electoral seats, the contents of a joint manifesto “For a Just Malaysia” (which contained many social democratic features), and on a “people friendly” alternative budget which proposed increased public spending for social programmes. At any rate the spirit of the counter-discourse was evident in the BA’s joint manifesto and in their alternative budget. In fact, the formation of the BA and formulation of its joint manifesto was facilitated to some extent by the decision of several prominent NGO activists to join the opposition parties, especially Parti Keadilan and Parti Rakyat Malaysia, and to promote the democratic agenda of the BA writ large. Several former NGO leaders also contested the election under the banner of one or another of the BA parties. The entry of these NGOs leaders into party and electoral politics was perhaps the culmination of the earlier engagement of the NGOs with the opposition parties to set up two coalition bodies, namely Gagasan and Gerak in 1998 to coordinate joint activities to protest Anwar’s mistreatment and related issues.

CONVERGENCE OF THE FORMAL AND NON-FORMAL REALMS Hence, one of the significant aspects of the 1999 election was the NGOs and other informal groups directly engaging with the formal electoral process. A related development was the proliferation of NGOs and other independent groups which also made their voices heard as the 1999 general election approached. These groups included: 65

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the Women’s Agenda for Change which demanded that the laws be enforced to protect women’s rights and that these rights be furthered through new legislations; the Citizens Health Initiative which mobilized Malaysians from all walks of life to oppose the pending corporatization of the general hospitals and other health services; the “People are the Boss” involving Chinese youths who championed a return to the original meaning of democracy; the seventeen-point “Election Appeals” [Suqiu] which focused on issues of justice and democracy rather than specific Chinese issues yet, was endorsed by more than 2,000 Chinese associations; Election Watch or Pemantau organized by Budi, a new NGO, which rallied forty-odd NGOs to jointly monitor the electoral campaign and to prepare a report of its findings; about 50,000 signatories of a petition coordinated by the Estate Workers Support Committees demanding a monthly wage scheme and better working conditions for plantation workers, several busloads of whom converged on parliament’s doorsteps to deliver the petition; a coalition of NGOs, principally Indian-based, that called for an enquiry into the killing by the police of eighteen Indians (including a pregnant woman) on two separate occasions, whom the police suspected were criminals; an unprecedented march through the streets of Kuala Lumpur in December 1998 by a few hundred lawyers in support of a colleague who was found guilty of “contempt of court” for remarks uttered while defending Anwar Ibrahim in court; environmentalists who protested the continued resettlement of Sarawak natives although the Bakun HEP project had been shelved, as well as the proposed construction of the Selangor Dam which threatened destruction of some pristine forests and required eviction of the indigenous peoples living there; a mass campaign led by FOMCA and the other consumer organizations to encourage parliamentarians to pass the Consumers Protection Act; artistes who parodied the unfolding political events and protested against injustices in their compositions and songs, artworks and installations, performances and skits, verse and in one instance an entire novel; groups of ordinary Malaysians who had purchased into housing development projects which were stalled on account of the economic crisis and now protested collectively against the developers, and pressured the government to look into their plight;

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small groups of urbanites in Kuala Lumpur and Penang in particular who actively campaigned for conservation of historical buildings and the urban habitat; and the emergence of Malaysiakini, Malaysia’s first online news daily and other independent websites.

Most of the groups and initiatives above were not associated with the BA opposition coalition or directly concerned with the outcome of the election. Rather the emergence of these groups, alongside the reformasi movement and the formation of the BA indicated that Malaysia was in democratic ferment. It further indicated the coming together of the formal and nonformal realms of politics. Probably for the first time, significant numbers of the Malay middle classes were also involved in the struggle for participatory democracy. Previously supporters of the BN-UMNO government due to privileges gained under the auspices of the NEP, these Malays now considered the BN government zalim [cruel] and tak adil [unjust] and expressed their anger openly. This change in attitude and orientation was due to Anwar’s mistreatment which for many Malay dissidents was considered to have breached “traditional” norms and practices.21 They also revealed that Malays were now equally concerned with larger issues of justice and democracy. Through organizations like ABIM (Angkatan Belia Islam Malaysia, or Islamic Youth Movement Malaysia) and JIM (Jemaah Islah Malaysia or Reform Movement Malaysia), which reached down to the grass-roots, some lower class Malays were also drawn into this movement. UMNO no longer held the same hegemony over the Malay community as before. Yet at the end, as discussed in the first part of this chapter, the BN emerged victorious in the 1999 polls, albeit with a smaller majority. As stated earlier, it is developmentalism which is the new impediment to more widespread democratization. The following discussion of political attitudes and orientations of Malaysians lend support to my argument.

THE GMS SURVEY FINDINGS The following discussion is based on statistical data culled from the Gallup Millennium Survey (GMS). Covering 60 countries throughout the world including 10 Asian countries, the GMS was conducted during AugustOctober 1999. The sample size for each country ranged from 500 to 1,000 respondents. In a study comparing democratic governance among nine Asian countries, Japanese political scientist Takashi Inoguchi has highlighted an 67

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important discrepancy between the ranking of these countries based on objective indicators of democratic governance derived from Freedom House data on political rights and civil liberties, and that based on subjective indicators derived from the GMS data.22 It is significant that Malaysians (and Singaporeans) have ranked themselves as very democratic (in contrast to the Japanese, South Koreans and Taiwanese) under the GMS schema of subjective indicators, while under the Freedom House schema of objective indicators, Malaysia (and Singapore) are ranked very much lower. In this regard Inoguchi noted: It is those quasi-democratic and semi-authoritarian countries [i.e. Malaysia and Singapore] that are accorded the highest scores for subjective democratic governance along with such seemingly highly democratic countries such as Switzerland, Netherlands, Denmark, Sweden and UK. It is those highly democratic countries such as Japan and South Korea that are given low scores of democratic governance along with Cameroon and Colombia [in the GMS schema]. It looks as if how [they] respond to the questions on corruption, people’s will, justice and governing efficacy made significant differences. Those quasi-democratic and semiauthoritarian countries are given bonuses to their democratic scores despite some illiberal practices.23

Comparison of the GMS data pertaining to Malaysia and three other Southeast Asian countries confirms Inoguchi’s point.24 Table 3.2 indicates that Malaysians (even more so Singaporeans) perceive that their government is relatively efficient, just and responsive to the people’s will. Accordingly, it is not too TABLE 3.1 Country Ranking According to Freedom House Data and Gallup Millennium Survey (GMS) Country Japan South Korea Taiwan Thailand Philippines Hong Kong Malaysia Singapore China

Ranked by Freedom House

Ranked by GMS

13 28 28 33 33 46 53 53 59

53 36 15 22 10 4 1 1 Not available

Source: Inoguchi, “Basis of Democratic Governance”, p. 4.

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TABLE 3.2 Perception of the Government (in Percentages)

Efficient Bureaucratic Corrupt Just Responds to people’s will

Malaysia

Philippines

Singapore

Thailand

44.7 24.9 32.9 44.3 41.1

22.6 25.1 48.3 19.0 18.8

52.6 12.3 1.4 26.3 22.1

22.4 35.7 71.2 6.3 15.1

Source: Compiled by author.

bureaucratic and corrupt. By contrast, Thais and Filipinos perceive their governments to be less efficient, less just and not particularly responsive to the people’s will. Accordingly, the Thai and Filipino governments are regarded as more bureaucratic and more corrupt. Similar high rates of confidence in and trust of the government are registered when Malaysians are asked whether they are “governed by the will of the people” and whether “free and fair elections” occur (see Table 3.3). However, as Inoguchi noted, “such trust and confidence are often based on a procedural notion of democracy which emphasizes the existence of multiparty systems and free and secret elections rather than the prevalence of the rule of law, the formation of independent associations, and joint action on the part of groups and associations for the betterment of civil society”, in other words, participatory democracy.25 It is possible to disaggregate the GMS data according to sex, educational level and religion. The disaggregated data does not readily reveal any major difference between the opinions of males and females. When disaggregated

TABLE 3.3 Attitude Towards Procedural Democracy (in Percentages) Malaysia

Philippines

Singapore

Thailand

Governed by the will of the people?

Yes No Not sure

77.3 17.7 5.0

53.2 42.9 3.9

50.4 31.6 18.0

51.2 47.6 1.2

Free and fair elections?

Yes No Not sure

71.3 18.3 10.4

45.0 51.4 3.6

75.3 11.7 13.0

31.0 66.3 2.7

Source: Compiled by author.

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according to educational level, it appears that those in possession of a university degree are more critical than those with a secondary school education, in turn more discerning than those who only received a primary school education. For instance, 86.4 per cent of those with primary education agreed that they were governed by the will of the people while 77.5 per cent of those with secondary school education agreed, and only 68.6 per cent of those with university education thought so. Similar kinds of differences between these three categories pertain vis-à-vis their perceptions of whether the government was bureaucratic, corrupt and just. Likewise, the better one was educated, the less one thought that the government fully respected human rights (see Table 3.4). The differences in terms of attitudes toward procedural democracy and perceptions towards government are most evident when the data is disaggregated according to religion. Here, religion is used as a proxy for TABLE 3.4 Attitude Towards Procedural Democracy and Perceptions of Government by Educational Level, Malaysia (in Percentages) Educational level Primary

Secondary

University

NA

Governed by will of the people?

Yes No Not sure

86.4 10.2 3.4

77.5 16.9 5.6

68.6 26.8 4.6

75.0 25.0 –

Free and fair elections?

Yes No Not sure

71.0 13.1 15.9

73.6 17.8 8.6

64.4 24.7 10.8

50.0 25.0 25.0

Perception of government

Efficient Bureaucratic Corrupt Just Responds to the will of the people None of the above Not sure

39.8 16.5 33.5 46.0

48.1 23.9 32.0 46.6

38.7 35.6 35.6 35.6

25.0 25.0 25.0

32.4 4.6 10.8

44.8 2.0 6.7

36.6 3.6 3.6

50.0 25.0 –

Fully respected Partially respected Not respected Not sure

35.2 56.3 1.1 7.4

34.8 59.2 3.6 2.3

24.7 67.5 7.2 0.5

50.0 50.0 – –

In general are human rights respected?

Source: Compiled by author.

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ethnic group since all Malays are Muslims, most Indians are Hindus, and the vast majority of Chinese are Buddhists. The data reveals that Hindus are least critical of the government, Buddhists most critical, and Muslims generally fall in between. For instance, 85.6 per cent of Hindus thought that elections were free and fair, 68 per cent Muslims agreed, and 71.4 per cent of Buddhists thought so. Hindus also considered the government to be more efficient, just and responsive to the will of the people; Muslims were more critical; while Buddhists were most critical of all. Finally 47.4 per cent of Hindus thought that human rights were fully respected, 36.2 per cent of Muslims agreed; while only 25.2 per cent of Buddhists thought so (see Table 3.5). The survey data suggests that a majority of Malaysians tend to have very positive attitudes towards their government. However there are groups of better-educated respondents, as well as larger groups of Buddhists/Chinese who tend to be more critical of their government. Presumably, these are the

TABLE 3.5 Attitude Towards Procedural Democracy and Perceptions of Government by Religion, Malaysia (in Percentages) Muslim

Buddhist

Hindu

Others

Governed by will of the people?

Yes No Not sure

84.8 10.7 4.4

66.4 27.2 6.3

82.5 14.4 3.1

70.1 24.8 5.13

Free and fair elections?

Yes No Not sure

68.0 21.7 10.3

71.4 16.3 12.3

85.6 9.3 5.2

71.8 19.7 8.6

Perception of government

Efficient Bureaucratic Corrupt Just Responds to will of the people None of the above Not sure

49.9 25.1 32.4 48.6

36.5 26.6 39.9 36.2

60.8 23.7 26.8 61.9

35.9 25.6 26.5 33.3

43.4 3.2 4.6

35.2 2.7 9.0

52.6 1.0 2.1

38.5 2.6 8.6

Fully respected Partially respected Not respected Not sure

36.2 57.3 3.8 2.7

25.2 68.8 3.3 2.7

47.4 48.5 2.1 2.1

30.8 62.4 6.0 0.9

In general are human rights respected?

Source: Compiled by author.

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Malaysians who egged on the reformasi movement and contributed towards the critical NGOs pushing for participatory democracy. That said, it should be recognized that Malaysians remain very positive in their evaluation of their government when compared to the other Asian countries (except Singapore). A probable explanation is the relative success of the Malaysian government in handling the 1997 financial crisis. In 1998 Indonesia saw an economic decline of more than 13 per cent, Thailand and the Philippines, about 10–11 per cent, Malaysia, a 7 per cent decline, while Singapore registered next to no growth.26 More importantly, Malaysia turned around its economy by mid-1999 emboldening the BN government to call for general elections in November 1999. And whereas the financial crisis led to ethnic conflict and political instability especially in Indonesia, and to some extent in Thailand and the Philippines, political stability ensued in Malaysia, the challenges of the reformasi movement notwithstanding. The Malaysian government was not oblivious of the relatively more favourable circumstances in Malaysia and made much of this in the mass media by comparing itself to its less fortunate neighbours. No doubt, this was part of the BN’s electoral strategy. Accordingly, the reformasi movement and the NGOs were depicted in the BN electoral propaganda as threatening political stability and the capacity of the BN government to further resuscitate the economy. The Gallup Millennium Survey which was conducted in Malaysia in September 1999 must have been influenced by such pre-electoral exchanges and debates. Be that the case, the attitudes and opinions of most Malaysians had probably been shaped in favour of the quasi-democratic and semi-authoritarian BN regime much earlier, due to “developmentalism”.

CONCLUSION Ethnicity remains a very salient aspect of Malaysian politics. However, whereas ethnicity previously dominated the discourse and practice of Malaysian politics, and posed limits on democracy, it no longer does so, or at least not to the same predictable extent. Recent developments especially over 1998–99, suggest that a new discourse and practise of participatory democracy, not merely electoral and procedural democracy, has gained ground among some Malaysians of all ethnic groups. However the democratic impulse has not yet prevailed in Malaysia. Some observers have resorted to ethnic factors to explain this lag between Malaysia and other Southeast and East Asian countries where regime change has occurred. However, the politics of ethnicism, in and of itself, cannot explain this lag. Instead, it is “developmentalism”, the cultural consequence of the 72

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dirigiste developmental state, which is principally responsible for posing the major limits on democratization since the 1990s. The GMS findings indicate that Malaysians do seem to acquiesce with the illiberal political system in which they find themselves. Rather than attribute this attitude to some essentialist “Asian values”, it is argued that these attitudes, in fact, are a result of developmentalism, a recent discursive construct. The fact that the democratic ferment is occurring, and that the politics of ethnicism is still resorted to by politicians and still appeal to some quarters of Malaysian society, suggest that there is increasing contestations between the discourses and practices of ethnicism, participatory democracy and developmentalism. In all probability there will occur further fragmentation. Hence, although regime change has not occurred, I believe that Malaysia has entered a new era of politics characterized by pluralism and contestation. Given this pluralism, the prospects for further democratization in Malaysia augurs well, but only in the medium term, due to developmentalism.

Notes 1

2

On the plural society see John Furnivall, “The Political Economy of the Tropical Far East”, in State and Society, edited by Reinhard Bendix (Berkeley: University of California Press, 1968), pp. 460–74. On primordialism, see Clifford Geertz, The Interpretation of Cultures (New York: Basic Books, 1973), pp. 255–310. Consociationalism, as originally conceptualized by Arend Lijphart, refers to a stable and democratic system that emerges as a result of elite accommodation in multi-ethnic societies. Lijphart suggests four mechanisms/principles for achieving consociationalism: grand coalition governments (involving all major segments of the society); proportionality (in the distribution of positions, goods and services); mutual veto (so as to protect the rights of the minority groups); and some measure of segmental autonomy, especially with regard to questions of language, religion and culture. Although Lijphart discussed the experiences of several developing countries in his later works, his earlier studies focused on the experiences of the more industrialized Western European countries particularly the Netherlands, where democratic institutions had already been in place for some time. By contrast, Daniel Horowitz has highlighted the difficulties of achieving consociationalism in the developing countries still in the throes of consolidating their democracies. He criticizes Lijphart’s notion of consociationalism as too elite-centric, particularly his assumption of altruistically inclined elites, when in fact they very often are not. Instead of building upon the assumption that the elites (contra the masses) imbibed more universal and accommodative values, attitudes and principles, Horowitz suggests the need to introduce a variety of institutions so as to promote accommodation in multi-ethnic societies. See Arend Lijphart, Democracy in Plural Societies (New Haven: Yale University Press, 73

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3

4

5

6

7

8

9

10

11

12

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1969); and Daniel Horowitz, Ethnic Groups in Conflict (Berkeley: University of California Press, 1985). Mustafa K. Anuar, “The Role of Malaysia’s Mainstream Press in the 1999 General Election”, in New Politics in Malaysia, edited by Francis Loh and Johan Saravanamuttu (Singapore: Institute of Southeast Asian Studies, 2003), pp. 53–65. On the ethno-regionalist movement among the Kadazandusuns in Sabah, see Francis Loh, “A New Sabah and the Spell of Development”, Southeast Asia Research 4, no. 1 (1996): 63–84. On political Islam, see Syed Ahmad Hussein, “Muslim Politics and the Discourse on Democracy”, in Democracy in Malaysia: Discourses and Practices, edited by Francis Loh and Khoo Boo Teik (Richmond, Surrey: Curzon Press, 2002), pp. 74–107. The data in this section is drawn from Francis Loh, “Towards a New Politics of Fragmentation and Contestation”, in New Politics in Malaysia, edited by Loh and Saravanamuttu (2003), pp. 253–82. Zakaria Ahmad, “Malaysia: Quasi-Democracy in a Divided Society”, in Democracy in Developing Countries: Asia Vol. 3, edited by Larry Diamond, Juan Linz and Seymour Lipset (Boulder, CO: Lynne Rienner, 1989), pp. 347–81; William Case, “Semi-Democracy in Malaysia: Withstanding the Pressures for Regime Change”, Pacific Affairs 66, no. 2 (Summer 1993): 183–205; Harold Crouch, Government and Society in Malaysia (St Leonard’s, New South Wales: Allen and Unwin, 1996); and James Jesudason, “The Syncretic State and the Structuring of Opposition Politics in Malaysia”, in Political Oppositions in Industrializing Asia, edited by Garry Rodan (London: Routledge, 1996), pp. 128–60. Rais Yatim, Freedom Under Executive Power in Malaysia (Kuala Lumpur: Endownment, 1995). Maznah Mohamad, “At the Centre and the Periphery: The Contribution of Women’s Movements to Democratization”, in Democracy in Malaysia, edited by Loh and Khoo (2002), pp. 216–40. Saliha Hassan, “Political Non-Governmental Organizations: Ideals and Realities”, in Democracy in Malaysia, edited by Loh and Khoo (2002), pp. 198–215; Meredith Weiss, “The Malaysian Human Rights Movement”, in Social Movements in Malaysia, edited by Meredith Weiss and Saliha Hassan (London: RoutledgeCurzon, 2003), pp. 140–64. Jeyakumar Devaraj, Speaking Truth to Power (Ipoh: Alaigal, 2002); and Mohd Nasir Hashim, Peneroka Bandar Menuntut Keadilan (Kuala Lumpur: Daya Komunikasi, 1994). Colin Nicholas, The Orang Asli and the Contest for Resources (Copenhagen: International Work Group for Indigenous Affairs, 2000). Francis Loh, “State-Societal Relations in a Rapidly Growing Economy: The Case of Malaysia: 1970–97”, in Economic Liberalization, Democratization and Civil Society in the Developing World, edited by Remonda B. Kleinberg and Janine A. Clark (London: Macmillan, 2000), pp. 65–87. Loh, “State-Societal Relations in a Rapidly Growing Economy”, in Economic Liberalization, edited by Kleinberg and Clark (2000).

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17

18

19

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21 22

23 24

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26

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Francis Loh, “Developmentalism and the Limits of Democratic Discourse”, in Democracy in Malaysia, edited by Loh and Khoo (2002). K.S. Jomo, Growth and Structural Change in the Malaysian Economy (London: Macmillan, 1990). See Loh, “State-Societal Relations” (2000); and Loh, “Limits of Democratic Discourse” (2002). The following section draws from the latter. Ahmad Fauzi Abdul Hamid, “Reforming PAS?”, Aliran Monthly 23, no. 6 (2003): 11–13. The following section is based on Francis Loh, “Where Has (Ethnic) Politics Gone? The Case of the BN Non-Malay Politicians and Political Parties”, in The Politics of Multiculturalism: Pluralism and Citizenship in Malaysia, Singapore and Indonesia, edited by Robert Hefner (Honolulu: University of Hawai’i Press, 2001), pp. 183–203. For instance, they could not help to prevent the repeal of the Rent Control Act in 2000, which resulted in an escalation of house and shop rentals in various cities, in turn, causing thousands of households unable to pay the new rental rates to move out, under threat of eviction. Nor have these centers and bureaux been able to prevent the privatization of public utilities — like water works, electricity and telecommunication services or sewerage treatment — or the granting of concessions to build and maintain tolled-highway to private corporations. Syed Ahmad, “Muslim Politics”, in Democracy in Malaysia, edited by Loh and Khoo (2002). Philip Khoo, “Thinking the Unthinkable”, Aliran Monthly 19, no. 5 (1999): 2–8. Takashi Inoguchi, “Can the Asian Values be the Basis of Democratic Governance in the Asia-Pacific Region?” Paper presented at the Conference on “Changing Values and Challenges of Democratic Governance in Asia” (Seoul National University, 17–18 November 2000). Ibid., pp. 4–5. The GMS was part of the research project “Globalization and Political Cultures of Democracy” led by Professor Takashi Inoguchi of the Institute of Oriental Culture, University of Tokyo, and funded by the Ministry of Education, Culture, Sports, Science and Technology, Japan, as Grant-in-Aid for Specially Promoted Research for the period between April 1999 and March 2003 (Project Number 11102001). The data, after being “cleaned” was made available to individual researchers, including the author, in late 2001. The author wishes to thank Prof Inoguchi for inviting him to join this Project and for the opportunity to analyse the rich data emerging from this Survey. The discussion that follows, including the Tables presented, have been drawn from Francis Loh Kok Wah “Ferment and Fragmentation in Malaysian Politics”, IOC Discussion Papers No. 23, Institute of Oriental Culture, University of Tokyo, March 2003. Inoguchi, “Can the Asian Values be the Basis of Democratic Governance in the Asia-Pacific Region?”, p. 5. Johan Saravanamuttu, “The Eve of the 1999 General Election”, in New Politics in Malaysia, edited by Loh and Saravanamuttu (2002), pp. 1–22. 75

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4 INDONESIA’S ROLE IN THE LONGTERM PROSPECTS OF ASEAN Dewi Fortuna Anwar

INTRODUCTION: INDONESIA AND THE DEVELOPMENT OF ASEAN Indonesia is by far the largest member of ASEAN (Association of Southeast Asian Nations), both in terms of population size and geography. Indonesia’s population of 210 million is well over two-fifths of the total population of the ten Southeast Asian countries that now make up ASEAN, which currently stands at about 500 million. Geographically, Indonesia is the world’s largest archipelago, covering an expanse of area equivalent to the distance between Moscow and Istanbul. When ASEAN only consisted of five members, Indonesia made up two-thirds of ASEAN in terms of population. Given these attributes, it is generally accepted that Indonesia is an ambient power in Southeast Asia, whose policy towards and in the region, for better or for worse, help to influence and shape regional development. Equally important, happenings within Indonesia to a lesser or greater degree also have an impact on the immediate neighbouring countries. This chapter has two subject matters, namely the long-term prospects of ASEAN and the role of Indonesia in this regional organization. Before one can begin to make prognosis of the future, however, it is clearly important to look at the past and the present, as these may provide indicators for future directions. The chapter is divided into three parts: Indonesia’s role in the early years of ASEAN; ASEAN’s achievements and challenges; 76

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ASEAN’s long-term prospects and the role of Indonesia in influencing its future directions. Its colonial experience, as well as the struggle for nation and state building during the early days of independence, have shaped Indonesia’s foreign and defence policies till the present days.1 There are three central preoccupations of the Indonesian state, namely protecting the country’s hardwon independence, maintaining territorial integrity, and improving the people’s standard of living. Although the underlying influences and national impulses have basically remained the same, however, domestic priorities followed by different leaders over different time have resulted in quite different foreign policy formulations and implementation.2 Firstly, because of its long subjection to colonial rule and the bitter struggle for independence, Indonesia has developed a strong sense of nationalism and an attitude that is generally distrustful of major external powers, particularly those that have a tendency to project their political and military powers beyond their borders. Indonesia has, therefore, adopted a “free and active” foreign policy doctrine soon after its independence in 1945, and became a founder of the Non-Aligned Movement (NAM) in 1961, thus refusing to follow one or the other of the superpowers during the Cold War period. This “free and active” foreign policy doctrine also translates into a belief that countries in Southeast Asia must be masters in their own region, particularly in the security field, instead of being dependent on external military alliances or foreign military bases.3 Secondly, from the early days of independence to the present day, the Indonesian government has been preoccupied with maintaining the country’s territorial integrity and national cohesion. Given the fact that Indonesia is composed of over 17,000 islands, populated by over 700 different ethnic groups with distinct cultures and languages, and practising most of the major world religions (Islam, Protestant, Roman Catholics, Hindu, Buddhism, Confucianism) as well as a number of traditional beliefs, maintaining territorial integrity and national unity are clearly no easy matters. The difficulties have been compounded by the fact that Indonesia is still a developing country with limited resources. The colonial policy of divide-and-rule, as well as the regional rebellions in the 1950s, when the rebels were supported by a number of foreign powers, notably the United States and Britain as well as by certain neighbouring countries, have left an indelible influence on Indonesia’s national psyche, influencing the country’s domestic and foreign policy.4 Indonesia has remained suspicious of the presence of extra-regional powers in its immediate vicinity that may seek to exploit the country’s porous borders and exacerbate incipient conflicts between the central government and its far-flung territories. 77

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Thirdly, the Indonesian government is perennially preoccupied with the issues of development to improve the people’s standard of living. Although Indonesia is rich in natural resources, it still lacks the financial capability, human resources and technological know how to develop the economy. In order to promote economic growth Indonesia needs to cooperate closely with the outside world, particularly with the major industrialized countries that can provide foreign investment, technology and markets for Indonesia’s exports. While these three primary national objectives have remained constant, the way in which they influence the formulation and implementation of Indonesian foreign policy have varied over time. Without ignoring the importance of external dynamics Indonesia’s foreign policy, including Jakarta’s policy towards the region, have mostly been shaped by domestic priorities and forces. During the early days of independence the struggle to complete the decolonization process came into conflict with the needs for economic development.5 The former caused a continuing conflict between Indonesia and the Nertherlands which was a member of the Western alliance, while the latter necessitated that Indonesia develop good relations with the West. President Sukarno, for various personal and domestic reasons, preferred to maintain the revolutionary fervour to economic development. It must be noted that regional cooperation did not at first come easily or naturally to Indonesia. While many of its Southeast Asian neighbours were close allies of the West, such as the Philippines and Thailand that became members of the U.S.-led SEATO (Southeast Asian Treaty Organization), as mentioned earlier, Indonesia was a founding member of the non-aligned movement. Indonesia took great pride in its revolutionary struggle for independence against the Dutch colonial power, an experience similar to that of Vietnam, though unlike Vietnam that became a communist country, Indonesia tried to steer a more independent path in the bipolar politics of the Cold War. Jakarta, therefore, tended to look down on neighbouring countries that received their independence as “gifts” from their colonial masters, and which continued to be dependent on their former colonial masters for their security. The foreign and defence policies of Indonesia throughout the 1950s till the fall of president Sukarno in 1965 were therefore diametrically opposed to its non-communist neighbours that later became its ASEAN co-founders. Between 1963 and 1965 President Sukarno launched a confrontation against the new Malaysian Federation, which included Singapore, seeing it as a neocolonial attempt to encircle Indonesia.6 The establishment of ASEAN was the direct result of a re-orientation of Indonesia’s domestic priorities and external outlook. While Sukarno regarded neo-colonialism and neo-imperialism as Indonesia’s greatest enemies and 78

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thereby flirted with communism and communist countries, Suharto viewed communism as the greatest threat to Indonesian security. The new regime in Jakarta particularly regarded China as an immediate threat due to its support for the Indonesian Communist Party and for communist-inspired national liberation movements in other countries. The New Order government believed that the best means for ensuring security were through political stability and economic development. These objectives could only be achieved if Indonesia lived in harmony with its neighbours so that neighbouring territories would not be used to subvert Indonesia’s national interests. Earlier attempts at regional associations had little success mainly because Indonesia did not support them. A precursor of ASEAN, known as Association of Southeast Asia (ASA), was formed by Malaya, Thailand and the Philippines in 1961 but this association never really took off. In 1963 Indonesia, Malaya and the Philippines established Malindo in an attempt to thwart off the looming dispute about the Malaysian Federation, but Indonesia’s confrontation against Malaysia soon after had doomed this regional grouping from the start. In contrast to the earlier experience, ASEAN has enjoyed the full backing of the Indonesian government from the very beginning, and in fact throughout its development Indonesia took pains to nurture the association, such as by deliberately adopting a low profile in ASEAN interaction. Indonesia’s strong support for ASEAN could be attributed to a number of factors. The New Order government put stability and economic development as its top priorities that necessitated developing friendly relations with other countries, particularly Western countries that were the source of most economic aid and investment. Indonesia, therefore, had to abandon Sukarno’s radical nationalist and overtly anti-Western foreign policy. Indonesia also needed a peaceful and stable regional environment so that the government could focus its attention on domestic issues. Towards that end Indonesia had to develop harmonious relations with its close neighbours, and in the wake of the confrontation it was felt necessary to establish a regional body that would promote regional cooperation and understanding. Equally important was the need to restore Indonesia’s tarnished regional and international image due to its bellicose foreign policy in the past. ASEAN was designed to demonstrate Indonesia’s commitment to a good neighbour policy and remove suspicions of its regional ambitions. In a nutshell ASEAN was seen as a means to “tame” Indonesia and transform its relations with its smaller neighbours.7 It is important to note, however, that the most important factor that made it possible for Indonesia to co-found ASEAN with Malaysia, Philippines, Singapore and Thailand which were all allies of Western powers, was the convergence in the security outlook amongst these countries. From being a 79

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close associate of Beijing, under the New Order government Indonesia became vehemently anti-communist and shared the fears of its non-communist neighbours towards China that supported communist subversions in Southeast Asia. ASEAN was regarded as a shield against possible communist expansion from the north. Despite the shift to the right, however, Indonesia remained committed to its non-aligned foreign policy stance. The doctrine of a “free and active” foreign policy is regarded as sacrosanct and part of Indonesia’s national identity that no government could easily ignore. One of the major political mistakes made by Sukarno was in pushing Indonesia closer to the communist camp, thereby violating the “free and active” foreign policy principle. Although Indonesia cooperated with other non-communist countries in forming ASEAN, the New Order government did not want to be accused of joining the Western alliance and abandoning Indonesia’s foreign policy doctrine. Thus Indonesia exerted influence to ensure that the Bangkok Declaration that established ASEAN encapsulates Indonesia’s reservations regarding the presence of foreign military bases and its aspiration that regional security should be the primary responsibility of regional members themselves. Indonesia firmly believed, and continues to believe, that external powers should not intervene in regional affairs. At Indonesia’s insistence the Bangkok Declaration stipulates that the presence of foreign military bases are only temporary in nature, and that they should not be directed against the other members, as they had once been in support of Indonesia’s regional rebels. One of Indonesia’s cherished long-term objectives for ASEAN is the establishment of an autonomous regional order where regional members become full masters in their own region. Such an autonomous regional order envisages the closing down of all foreign military bases so that regional security truly becomes the responsibility of regional members. Towards that end Indonesia has been very keen to realize the concept of the Zone of Peace, Freedom and Neutrality (ZOPFAN) in Southeast Asia and to push for the acceptance of the concepts of national and regional resilience. Although these concepts have been formally adopted by ASEAN, ZOPFAN in 1971 and the regional resilience concept in 1976, it must be admitted that the enthusiasm and commitment of the ASEAN members towards these key concepts vary. A number of ASEAN countries continue to regard their defence treaties with major external powers as being critical to their security. This means that the idea of Southeast Asian countries becoming more independent of external powers, particularly in security matters, has so far been nothing more than a pipe dream.8 80

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Indonesia’s most important contribution to the advancement of ASEAN has not been so much its ability to push ASEAN to follow a particular course, but rather Indonesia’s willingness to restrain itself when ASEAN members follow policies contrary to Jakarta’s interests. In fact, one can argue that the success of ASEAN has been predicated upon Indonesia’s willingness to be treated as the equal of the smallest member of the association. Given its past history it can be appreciated that Indonesia’s deliberately low posture in ASEAN throughout the Suharto period was not always easy and often invited criticisms at home. Indonesia’s unwillingness to assert its position in ASEAN on issues where it was not in total agreement with ASEAN policy could be seen in the case of the Cambodian conflict. During the Cambodian conflict from 1980 to 1991 ASEAN was very successful in adopting a united stance, which put pressures on Vietnam to withdraw from Cambodia. The problem for Indonesia was the fact that the policy of “bleeding Vietnam” white, as proposed by certain members of ASEAN such as Thailand, would reduce Vietnam’s ability to stand up to China. Thailand was able to set the ASEAN agenda on dealing with the Cambodian conflict as it was considered to be the frontline state. Given that Indonesia viewed China as the greater threat, and that most Indonesians admire the Vietnamese strong nationalism and its ability to resist foreign domination, many in Indonesia were unhappy with the official line taken by ASEAN. The Indonesian government was criticized, particularly by elements in the military and nationalist groups, for allowing “the Thai tail to wag the ASEAN dog”. The Indonesian solution to this dilemma, namely maintaining ASEAN unity and at the same time satisfying its national aspiration, was an interesting demonstration of a non-assertive or indirect leadership. Instead of forcing ASEAN to ease its pressure on Vietnam, Indonesia decided to follow a dualtrack foreign policy on the Vietnam-Cambodia conflict. On the one hand, through the Foreign Ministry, Indonesia followed the official ASEAN line of putting pressure on Vietnam. On the other hand, the Indonesian military opened a dialogue with Vietnam. Indonesia also took the initiative, outside the ASEAN framework, to host informal negotiations between the conflicting parties through the so-called “cocktail parties” and “Jakarta Informal Meetings”. After these unilateral initiatives, Indonesia was then officially appointed by ASEAN to be its official interlocutor with Vietnam, thus formalizing an extra-ASEAN initiative into the ASEAN framework. Together with France, Indonesia then co-chaired the meeting that led to the signing of the Paris Accord, which led to the withdrawal of the Vietnamese forces from Cambodia.9 81

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Indonesia’s role in the Cambodian conflict further strengthened the argument that Indonesia never saw ASEAN as the forum or vehicle for asserting its leadership if such a role goes against the prevailing views. Instead, when it felt the need to do so Indonesia would chart its own course outside ASEAN and allow the other members to decide for themselves whether to follow suit or not. Indonesia feels no such constraints in larger international groupings such as the Non-Aligned Movement, where sensitivities about Indonesia’s role are not really an issue. Indonesia’s policy in ASEAN throughout the New Order period was largely attributed to the leadership style of President Suharto who was very much influenced by the Javanese culture.10 President Suharto proposed the notion of “tut wuri handayani” or leading from behind. Though such a notion of leadership was never really practised in the domestic context where the army led from the top, Indonesia’s role in ASEAN could be said as an exercise in “leading from behind”. Indonesia had mostly avoided being too assertive in ASEAN, but at the same time it would not tolerate other members from playing too dominant a role in the association either. Although Indonesia was careful not to assert its leadership in ASEAN, however, President Suharto was regarded as a senior regional statesman, while Indonesia itself was regarded as a primus inter pares, or first amongst equals. Indonesia’s strong support for ASEAN during the first two decades of its existence, however, was primarily in the area of political cooperation. Although ASEAN was initially established as a forum for promoting economic cooperation, it was quite clear that the main objectives of the association were political and security, namely to improve relations between the member states and promote regional harmony. The economies of all the ASEAN countries have mostly been oriented towards Japan, the United States and Western Europe, while intra-regional trade was initially quite minimal. Indonesia, in fact, was initially not that keen to develop intra-regional trade by opening its large market to products from the other ASEAN members. Until recently Indonesia believed that an ASEAN free trade would only benefit the smaller countries with more developed economies which can flood the Indonesian market with their exports, while Indonesia itself regarded the rest of the ASEAN market as being too small. Given Indonesia’s initial lack of support, it was not surprising that ASEAN’s economic cooperation lagged far behind political cooperation.11 Notwithstanding several earlier initiatives, ASEAN’s economic cooperation only really began in earnest after the end of the Cold War period, as ASEAN faced the prospect of diminishing strategic relevance on the one hand and economic marginalization by bigger economic players on the other. 82

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ASEAN’S ACHIEVEMENTS AND CURRENT CHALLENGES Notwithstanding its many shortcomings ASEAN has undoubtedly become the focal point of intra-regional relations in Southeast Asia, and a major determinant in the region’s relations with the rest of the world. For all members of the regional organization, including Indonesia, ASEAN has become the cornerstone of their respective foreign policy. There are at least four major achievements of ASEAN that have sustained interests in the association. The most important achievement of ASEAN since its establishment has been its direct contribution to harmonious relations among the member countries. One of the fundamental tenets governing intra-ASEAN relations is non-interference in each other’s internal affairs. Observance of this rule has in fact been the key to the relatively peaceful relations among the ASEAN members, in contrast to the pre-ASEAN period when countries sometimes became involved in the conflicts taking place in neighbouring states. The most important legal framework for maintaining peace and stability in the region is the 1976 Treaty of Amity and Cooperation in Southeast Asia (TAC). The inclusion of all ten Southeast Asian countries in ASEAN has further strengthened regional peace and stability. Though still a long way from developing into a full-fledged security community, it has become increasingly inconceivable for wars to break out between the member states of ASEAN.12 Secondly, the presence of ASEAN has enhanced the sense of regional security vis-à-vis threats coming from outside the region. Although ASEAN was not established as a security organization, and so far there is no ASEAN-wide multilateral security cooperation, the maintenance of regional peace and security has in fact been the primary objective of ASEAN. Being co-members of ASEAN has given the member states more self-confidence and a greater sense of security when faced with external threats. ASEAN has been able to create a set of rules of conduct to protect the region from external military threats, such as the Treaty of Amity and Cooperation in Southeast Asia and making Southeast Asia into a Nuclear Weapons Free Zone.13 Non-regional powers with interests in Southeast Asia are invited to sign the Protocol to TAC, thus binding them to the commitment to resolve regional disputes through peaceful means.14 Thirdly, the presence of ASEAN has contributed directly and indirectly to the rapid economic growth that until recently had been enjoyed by most ASEAN countries. ASEAN’s contribution to regional economic development has been due to a number of factors. The presence of ASEAN has freed member countries from concerns about the immediate external threats so 83

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that they have been able to devote their time, energy and scarce resources to internal development. Regional stability and the market-friendly policy adopted by most ASEAN countries helped to attract foreign investment to the region, while ASEAN economic relations with dialogue partners brought in more financial and technical assistance. Although still limited, ASEAN has also helped to boost intra-regional trade and other areas of economic cooperation. Last but not least, ASEAN has given Southeast Asia better international recognition and bargaining position. ASEAN has achieved the international status as the most successful regional grouping among the developing countries and as the second most successful one after the European Union. As such, despite its lack of real power in terms of military capability or economic clout, ASEAN’s voice and role in regional and international fora such as in APEC (Asia Pacific Economic Cooperation), ARF (ASEAN Regional Forum), ASEM (Asia Europe Meeting), and even in the United Nations, has been quite significant. Such international recognition would have been difficult to attain by most of the ASEAN members individually. In the last few years, however, ASEAN has faced a number of serious challenges that have severely tested the famous ASEAN solidarity and put to doubt the efficacy of the “ASEAN Way”. Doubts have been expressed concerning the relevance of ASEAN and its ability to deal with regional crises. There are at least five major challenges currently confronting ASEAN. The regional financial and economic crises that began in 1997 are undoubtedly the most serious challenges that ASEAN has encountered to date. While earlier challenges, such as the communist victory in Vietnam or the Vietnamese invasion of Cambodia, had pushed the original members of ASEAN closer to each other and strengthened ASEAN cooperation, the economic crises hit the core members of ASEAN and have consequently weakened ASEAN as a whole. ASEAN has suffered a diminishing international status, as it is no longer seen as a grouping of economic dynamos. At the height of the crisis the worst hit countries, such as Indonesia, became totally absorbed in their internal problems with little time left to concern themselves with regional affairs.15 ASEAN was sidelined since it was not yet in a position to extend substantial economic assistance, while member countries put much higher priorities on their relations with the traditional donor countries such as Japan, Western Europe and the United States. One of the major weaknesses of ASEAN that has prevented Southeast Asia from becoming a full-fledged security community is the number of unresolved bilateral disputes between the member states. Furthermore, ASEAN has so far been unable to play a role in resolving any of these disputes, despite the fact that the First Bali Concord of 1976 stipulates that a High Council 84

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can be formed to deal with intra-regional disputes. So far ASEAN has only succeeded in defusing tension, but attempts to resolve certain disputes once and for all have been left to bilateral efforts or to the adjudication of the International Court of Justice in The Hague, as had been the case with the overlapping claims over Sipadan and Ligitan between Indonesia and Malaysia. The fact that ASEAN has never been called upon to resolve intra-regional disputes indicate that the members have not yet fully trusted the ASEAN mechanism. Although intra-regional disputes have mostly been defused so that they have not really endangered ASEAN unity as a whole, the recent economic crises undoubtedly tested ASEAN solidarity as national sensitivities became heightened and tempers flared easily. Bilateral spats have become more common. Leadership changes that have taken place in most ASEAN countries clearly contribute to the seeming weakening of the old camaraderie that used to characterize ASEAN. Much of the ASEAN solidarity has been based on close personal relations among the top regional leaders built over many years, such as the special relationship between Singapore’s Minister Mentor Lee Kuan Yew and Indonesia’s former President Suharto. Former leaders who had also been the founders of ASEAN had been through difficult times together, and naturally took a personal interest in the development of ASEAN. Most new leaders emerging in several ASEAN countries, however, did not have any direct interest or experience in ASEAN cooperation before they came to power in the respective member states. In fact the emergence of new leaders in Indonesia at one time affected bilateral relations between Jakarta and Singapore, as then President B.J. Habibie took offence at the disparaging remarks about him made by Minister Mentor Lee. Habibie in turn made dismissive comments about Singapore.16 Of potentially greater cause for intra-ASEAN disagreements, however, are the increasingly divergent values held by the member states, particularly with regards to democracy and human rights. ASEAN is in danger of being split between countries that have embraced democracy and human rights as universal and those that have not. The reaction of several ASEAN countries to the arrest of Malaysia’s former Deputy Prime Minister Anwar Ibrahim in 1998 was unprecedented in ASEAN history, and is clearly a reflection of the new political liberalization that have taken place in countries such as the Philippines, Thailand and Indonesia.17 Debates about the importance of maintaining the principle of non-interference versus the proposal to carry out flexible engagement and enhanced interaction have already been launched, and will likely continue to engage ASEAN members in the forthcoming years.18 While the newly democratizing government in Indonesia may hesitate 85

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to abandon the non-interference principle, the free and vocal media and NGOs have no such hesitations and will undoubtedly air their opinions regarding the happenings in neighbouring countries without much regard to regional solidarity or the government’s foreign policy concerns. Furthermore, given Indonesia’s sheer physical weight in Southeast Asia, the prolonged economic crisis that Indonesia has suffered followed by tumultuous political changes and attendant security problems also have a direct impact on ASEAN. As already mentioned earlier ASEAN has lost some international status as one of the most stable and economically dynamic sub-regions in the world. As it grapples with myriad internal problems, such as restoring law and order, consolidating its democracy and promoting economic recovery, Indonesia seems for the time being to have lost its pre-eminent position in ASEAN. Yet ASEAN without the full weight of Indonesia becomes less credible.19 While Indonesia may no longer be seen as the primus inter pares, or elder brother in ASEAN, it must be admitted that no other country within the association can comfortably fill the role that Indonesia had played in the past.

INDONESIA AND THE FUTURE OF ASEAN At an informal summit meeting in Jakarta in 1996, the ASEAN heads of governments outlined The ASEAN Vision 2020, which is divided into three areas. These are: The Vision of a Concert of Southeast Asian Nations; the Vision of a Partnership of Dynamic Development; and the Vision of Caring Societies. The first vision, a Concert of Southeast Asian Nations, envisions peace and stability in Southeast Asia, where each ASEAN member lives in peace and harmony, and all the causes of conflicts have been eliminated. Such a vision, once realized, will make Southeast Asia into a full security community. It is also hoped that the ASEAN region will be free from the threat of nuclear weapons and all other weapons of mass destruction. A condition of peace and stability, which ASEAN countries have strived to achieve in the past three decades, is not only an end in itself but also a necessary pre-condition for carrying out economic cooperation and development in each and between ASEAN member countries. The second vision, Partnership in Dynamic Development, underlines closer economic integration focusing on sustainable and equitable economic growth in every ASEAN member country, which strengthens national and regional resilience. Through partnership in development the ASEAN countries are expected to narrow the development gap that currently exists between 86

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members, and to free the people of Southeast Asia from the threat of poverty. ASEAN will move forward to reach an equitable standard of living. To achieve this objective, ASEAN countries need to strengthen its cooperation in economic and human resources development. The third vision, a Community of Caring Societies, envisions Southeast Asia to be an ASEAN community conscious of its ties of history, aware of its cultural legacy and bound by a common regional identity. Through this vision, the people will enjoy equitable access to opportunities for total human development regardless of gender, race, religion, language, or social and cultural background. It further hopes that hunger, malnutrition, deprivation and poverty are no longer basic problems, and where the haves look after the haves not. Vision 2020 also envisions ASEAN to be forward-looking and plays a more pivotal role in international fora. A robust relationship with its Dialogue Partners will be improved based on mutual understanding. The Vision 2020 was articulated at the height of ASEAN success, one year before the financial crisis swept the region and destroyed much that had been achieved. The economic crisis had exposed the fragility of ASEAN as a regional institution. The once proud region had suffered a major loss of selfconfidence, while self doubts and pessimism about the future abounded. To most people in the region ASEAN was not seen as the answer to their problems, casting doubt about the association’s future relevancy. The countries hit by the crisis have to look elsewhere for help, as ASEAN was not in a position to provide significant financial assistance. Regional solidarity evaporated as countries pursued their respective national interests. At times relations with neighbours were sacrificed in favour of the domestic agenda. Yet while the economic crisis may have momentarily weakened ASEAN, like so many other regional crises in the past the long-term result for ASEAN may actually be positive. The recent malaise towards ASEAN and the real danger of ASEAN becoming marginalized and irrelevance, have alarmed ASEAN leaders sufficiently enough for them to take action. The recent currency crisis clearly demonstrated the interdependency of the ASEAN economies, for the outside world already views ASEAN as a unit, so that a loss of financial confidence in one ASEAN country quickly spread to other ASEAN members. ASEAN members have come to the increasing realization that they are confronted with a growing number of challenges, be they financial, economic, security or environmental, which are transnational in nature, thereby needing collective efforts to overcome them. After a couple of years in disarray, ASEAN seems to be back on track. ASEAN leaders have introduced new initiatives to strengthen regional cooperation and make the region an important player again. In the economic 87

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field various new initiatives have been introduced in the last few years such as the ASEAN+3, which fosters closer economic cooperation between ASEAN and three Northeast Asian countries, China, Japan and South Korea. ASEAN policy regarding the challenge from China seems to be “if you can not beat them, join them”. Rather than competing head on with China, in 2002, ASEAN accepted the Chinese proposal to develop an ASEAN-China Free Trade Area within ten years. The ASEAN Free Trade Area (AFTA) has been fully implemented since 2003, thus paving the way for ASEAN eventual economic integration. Although Indonesia has accepted the various ASEAN economic initiatives, which have mostly focused on trade liberalization, it must be admitted that Indonesia has not played a leading role in this area. In fact, there are still many voices expressing doubts about the wisdom of opening the Indonesian market to untrammelled ASEAN competition, let alone to the full onslaught of competition from China, when the Indonesian industrial sector has still not fully recovered from the crisis. Leadership in the economic area has mostly come from Singapore, Thailand and Malaysia. On the other hand, it is also recognized that if it refused to participate in regional trade liberalization Indonesia would simply be left behind, so that its economy would lag behind most of the East Asian countries. The prospect of an ASEAN-China Free Trade Area with its prospective market of over two billion people, while undoubtedly daunting to an Indonesia that has suffered from a declining competitiveness, also holds a lot of promise. While these new initiatives have revived interests in ASEAN, it has also been made clear that ASEAN’s economic future lies in its integration with the economies of Northeast Asia. For Indonesia, which used to be the single largest market in ASEAN and could therefore see little benefit for itself within a wholly ASEAN Free Trade Area, the promise of a much larger East Asian market would be much more attractive in the long term, though challenging if not threatening in the short term. While Indonesia is more a follower than a leader in the economic field, in the political and security field Jakarta has again decided to take a leading role. Concerns about the lack of leadership in ASEAN and the fact that when faced with regional and global crises ASEAN members have gone their separate ways, as demonstrated in the lack of a cohesive regional response to the United States’ invasion of Iraq, have prompted Jakarta to revisit the issue of strengthening ASEAN political and security cooperation. As mentioned earlier, Indonesia has also been dissatisfied with ASEAN’s helplessness and inability to act when faced with a regional crisis that demanded collective action, such as in the case of East Timor, thus opening the way for other 88

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actors such as Australia to step in and assumed a leading security role within the ASEAN sub-region. At the same time, the political changes taking place in Indonesia from authoritarian rule to democracy has also influenced the government’s attitude concerning democracy and human rights as universal values. Indonesia’s rigid stance regarding the principle of non-interference in each other’s internal affairs has consequently been somewhat softened when there are issues related to human rights abuses within ASEAN states. One of the most important initiatives to emerge recently is the ASEAN Security Community (ASC) concept, which was proposed by the Indonesian Foreign Minister at the ASEAN Ministerial Meeting (AMM) in Phnom Penh on 17 June 2003. The proposal was made as Indonesia assumed the chairmanship of the ASEAN Standing Committee for the coming year, indicating that under Jakarta’s leadership ASEAN would pay more attention to the political and security dimension than ever before. The ASC has been adopted formally during the Ninth ASEAN Summit, which took place in Bali on 7 October 2003, as one of the three pillars of ASEAN. At the Bali Summit, which produced the Declaration of ASEAN Concord II, an ASEAN Community shall be established by 2020 through the development of three pillars, namely the ASEAN Security Community (ASC), the ASEAN Economic Community (AEC), and the ASEAN SocioCultural Community (ASCC). The ASC proposal is like a breath of fresh air for both ASEAN and Indonesia for a number of reasons. The credibility of the association was badly damaged by ASEAN’s helplessness in the face of the economic crisis that wrought destruction and despair on many of its members. Although it was recognized that ASEAN was never designed or equipped to deal with such a crisis, ASEAN’s image as a successful and vibrant regional organization has been badly tarnished and its relevancy questioned. The crisis had also strained relations between the ASEAN members, not only because most members became more inward-looking as they devoted their energy and resources to solving their internal problems, but also because tempers became frayed under the strain, and maintaining regional harmony no longer became a premium. ASEAN also became rudderless, with no leadership providing direction, as Indonesia, as primus inter pares, practically ignored ASEAN for a while as it tried to grapple with its multi-dimensional crisis and managed its messy transition from authoritarianism to democracy. The changes in leadership in several ASEAN countries have also affected the stable continuity that the association had enjoyed in the earlier decade. The introduction of the ASEAN Security Community concept seems to have given ASEAN a new sense of purpose, particularly as it tries to deal with 89

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current and urgent needs for enhancing regional security in the face of growing security challenges. What is more, this new initiative signals Indonesia’s return to normalcy. Once again Indonesia is making a bid to affirm its position and role as a key member of ASEAN that has always espoused the vision of a truly autonomous regional order, where the regional members take primary responsibility for solving their own problems, particularly in the security field.20 A security community is generally understood to be a condition when a group of countries, usually within a particular geographical boundary, have developed such a high level of mutual trust and inter-dependence, that violent conflicts or wars among them become inconceivable. Within such a security community relations among states are no longer characterized by a zero-sum game, where a gain for one state means a loss for another, which sometimes leads to antagonism and even war. Instead, within a security community complex inter-dependence prevails so that relations among states become a positive-sum game of mutual benefits, and differences that occur are resolved peacefully. A highly developed security community, such as the European Union, has supra-national agencies that regulate relations among its members and adjudicate over differences and problems that may arise. The use of military forces for settling intramural regional disputes within a security community becomes inconceivable and totally irrelevant as inter-state disputes are reduced into technical differences that can be resolved through administrative or legal processes. Countries within a security community do not go to war against each other, not simply because they trust or like each other, but because their social, economic, political and security interests are so intertwined that it is impossible for any one country to break out without harming itself. The European Union (EU) today can be considered to be a full-fledged security community. Members of the EU are at peace with themselves and with each other. The economy of the EU is already so integrated, not just its trade and investment, but also its industry, labour-market and in many countries its currency as well, so that violent conflicts among the EU members are now difficult to envisage as the cost would be too high for every one concerned. In fact, this was the basic philosophy behind the establishment of the European Community, namely to create “functional-linkages” among the members, starting with the steel and coal community between France and Germany, which would bind these countries so closely to each other and thus makes war a thing of the past.21 Compared to what has been achieved by the European Union, ASEAN is clearly still a long way from becoming a security community, though to 90

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some extent it has already developed into some form of quasi-security community. In contrast to the situation before the establishment of ASEAN, which was marked by open conflicts, relations among the ASEAN members have generally been peaceful. While differences have occurred from time to time, the presence of ASEAN has helped to defuse, though not necessarily resolved the conflicts. Through the Treaty of Amity and Cooperation (TAC), ASEAN has in fact succeeded in establishing a regional code of conduct stating that conflicts must be resolved through peaceful means, and that the threat or use of force in settling disputes is forbidden. Nevertheless, ASEAN is still a long way from becoming a full-fledged security community due to a number of factors. These include the existence of unresolved territorial disputes, frequent bilateral tensions due to social, political or economic differences that at times have led to near diplomatic break off, and the lack of a common security outlook, particularly in defining relations with the major external powers. While it is becoming difficult to imagine an ASEAN member going to war against another, it must be admitted that there are still underlying suspicions towards each other. Among others this can be seen from the fact that some members of ASEAN continue to put greater emphasis on their security links with external powers, such as with the United States, presumably as a security guarantee against certain fellow ASEAN members.22 The greatest impediment to the development of an ASEAN Security Community, however, is the low level of functional linkages between the ASEAN members. ASEAN still has limited constituents within the member countries, as the economy is still a long way from being integrated, so that bilateral disputes sometime fan nationalistic and jingoistic sentiments more in line with an anarchical international system than a security community. Moreover, there is still a reluctance to give too much power to the regional system and processes, such as in settling inter-state disputes, as states continue to prefer bilateral dialogues or put greater trust in the International Court of Justice than in the ASEAN High Council. The Indonesian proposal to establish an ASEAN Security Community is meant to address these various shortcomings of ASEAN. In her speech commemorating the 36th Anniversary of ASEAN at the ASEAN Secretariat on 8 August 2003, then President Megawati said that ASEAN had so far only walked on one leg, the economic leg, while politics and security have been neglected, thus impeding its development. The ASEAN Security Community is meant to complement the ASEAN Economic Community proposal that had been put forward by Singapore. According to the concept paper the ASEAN Security Community would include the establishment of 91

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centres for combating terrorism, a centre for cooperation in non-conventional issues, training in peace-keeping and regular ASEAN police and defence ministers meeting.23 These various programmes for enhancing security cooperation would undoubtedly contribute to regional peace and security, by increasing mutual trust, improving joint security capacity and by creating greater interdependence in security maintenance. Nevertheless, for a full-fledged ASEAN Security to emerge would necessitate ASEAN members to move beyond cooperation towards greater integration, particularly in the economic field, in order to strengthen the functional linkages that bind these countries together. The ASEAN Security Community, therefore, cannot be achieved without the realization of the ASEAN Economic Community. Equally important, ASEAN would need to become much more institutionalized than it is at the moment, giving greater authority to regional bodies and processes, including in resolving disputes among the member countries. A regional security community does not automatically mean that the region can become a security actor. For ASEAN to become a security actor, able to act collectively as a unit on foreign and defence policy issues would entail even further integration than can be achieved in the immediate future. Even the European Union has not quite managed to reach this stage due to continuing differences about the desirability of establishing a European military force separate from NATO, and as the differences over the recent war in Iraq demonstrated. Unlike France and Germany, which are more pro-Europe, Britain still regards the United States as its ultimate security guarantor so that it refuses to participate in a fully European military force that does not involve the United States. Nevertheless, ultimately ASEAN should aim to become a security actor as well so that it can play a more effective role in maintaining order, both within its immediate region and in the wider global arena. Only then could ASEAN hope to contribute directly to the strengthening of multilateralism in maintaining global security, and to ensure that it is the primary determinant of security in Southeast Asia. At the ASEAN Senior Officials Meeting (SOM) in Jakarta on 20 February 2004, Indonesia put forward a proposal for the establishment of an ASEAN Peace-keeping Force in the next decade as a component of the ASEAN Security Community. The establishment of an ASEAN Peace Keeping Force, if it is agreed upon, will help to make ASEAN into a regional security actor, for it would enable the association to act as a unit in dealing with emerging security threats whenever needed. A true security community, however, does not only entail peace and close relations between member states within a particular region, but also necessitates 92

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peace within individual states in the region. One of the criticisms levelled against ASEAN by NGOs and democracy activists in the region is that ASEAN is basically an inter-governmental organization, which fosters close cooperation between government officials, particularly between the foreign ministries, while the participation of the wider public has been limited. ASEAN cooperation has moreover primarily focused on state security, rather than on human security as a whole. In the past ASEAN governments had simply turned a blind eye to human rights abuses taking place in fellow ASEAN states, while ASEAN as an institution protected erring members from international criticisms. Given the political changes that have taken place in a number of ASEAN countries, including in Indonesia, an exclusive focus on state security, which is often pursued at the expense of human security, would not be acceptable in the long run and would weaken popular support for ASEAN within some of the member countries. If ASEAN is serious about realizing its Vision 2020 to develop caring societies, it clearly needs to put human security at the top of its agenda. There are two aspects of human security. From a negative perspective human security refers to freedom from fear, such as freedom from arbitrary arrest and from discrimination because of race, religion or gender, and freedom from want, such as freedom from hunger. From a positive perspective human security means possessing the freedom to attain one’s capacity and opportunity to enjoy the most of one’s life, without infringing on the rights of others to obtain the same security. Combined together, human security seeks to enhance the people’s quality of lives. To achieve this end ASEAN will need to pay more attention to issues that engage the attention of the political public in its respective member countries, such as the issues of good governance, democracy, human rights, and environmental protection. As Indonesia consolidates its democracy and embarks on full economic recovery, it is hoped that it will be able to take an active role in promoting human security within ASEAN.24 It was encouraging to note that Indonesia had taken the opportunity of its chairmanship of the ASEAN Standing Committee in 2003–2004, to introduce a number of initiatives that may shape the future direction of ASEAN. One of the most notable departures taken by ASEAN at the ASEAN Ministerial Meeting (AMM) in Phnom Penh in June 2003 was to issue a statement concerning the political situation in Myanmar. In the past ASEAN has always resisted pressures from Western countries to criticize or put pressure on the military leaders in Myanmar to release the political prisoners and restore democracy in the country, arguing that such moves would violate 93

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ASEAN’s cardinal principle of non-interference in each other’s internal affairs. The unprecedented ASEAN communiqué on Myanmar, which calls on the military junta to resolve the long-standing political crisis, is clearly not simply a response to external pressure but also reflects an important shift in ASEAN’s position on the issue of non-intervention. While the principle of noninterference remains important, for it is not just an ASEAN principle but also enshrined in the United Nations Charter as the basis of international relations between sovereign states, ASEAN has also begun to adapt itself to the emerging international norm about universal values and collective responsibilities in the protection of human rights. In the final analysis, however, Indonesia’s position and role in ASEAN is not so much determined by Jakarta’s policy initiatives within ASEAN, but by the success or failure of its domestic reforms. If Indonesia succeeds in overcoming its current problems by ensuring law and order throughout the country, consolidating its democracy and transforming the military into a professional force, making a success of its regional autonomy, and last but not least achieving full economic recovery, Indonesia’s position as the pre-eminent member of ASEAN would be unchallenged. Indonesia’s successes would probably inspire some other ASEAN members to carry out major political reforms towards democracy. If Indonesia fails to achieve its domestic objectives, however, not only would Indonesia be unable to make positive contributions, but it would also become an obstacle to the future development of ASEAN.

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For a good introduction to Indonesian history see Merle C Ricklefs, A History of Modern Indonesian Since c. 1300, 2nd edition (Basingstoke: Macmillan, 1993); and George McTurnan Kahin, Nationalism and Revolution in Indonesia (Ithaca and London: Cornell University Press, 1970). Howard Warshawski, “From Confrontation to Cooperation: The Influence of Domestic Forces on Indonesian Foreign Policy” (Unpublished Ph.D. thesis, University of Virginia, 1974). The “Free and Active” foreign policy doctrine was first introduced by Vice President Mohammad Hatta in 1948 as a response to demands that Indonesia should align itself with the communist forces which were then also fighting against the West. The role of the United States in the Indonesian regional rebellions in the late 1950s can be read in Audrey R. Kahin and George McT. Kahin, Subversion as Foreign Policy: The Secret Eisenhower and dulles Debacle in Indonesia (New York: The Free Press, 1995). For an excellent analysis of the conflict between the desire for independence and economic necessities see Franklin B. Weinstein, Indonesian Foreign Policy and the

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Dilemma of Dependence: From Sukarno to Suharto (Ithaca and London: Cornell University Press, 1969). For the most comprehensive analysis of this period see James Mackie, Konfrontasi: The Indonesia-Malaysia Dispute 1963–1966 (Kuala Lumpur: Oxford University Press, 1974). Dewi Fortuna Anwar, Indonesia in ASEAN: Foreign Policy and Regionalism (Singapore: Institute of Southeast Asian Studies, 1994). Michael Leifer, Indonesia’s Foreign Policy (London: George Allen and Unwin, 1983). Leifer argued that its size and history has given Indonesia a sense of regional entitlement, and that its inability to assert itself in regional affairs has given Jakarta a certain feeling of frustration. Anwar, Indonesia in ASEAN (1994), pp. 306–07. Indonesia’s low-key role in ASEAN and other international organizations was attributed to Suharto’s personality and style of leadership. See Robert E. Elson, Suharto: A Political Biography (Cambridge: Cambridge University Press, 2001). Elson wrote that “Suharto’s unambitious and solid leadership of and support for ASEAN had brought an unaccustomed sense of security and stability to the region as a whole” (pp. 253–54). Harvey Stockwin, “Indonesia: Frustration ASEAN’s Ambition”, Far Eastern Economic Review, 23 January 1976, pp. 47–48, 51–52. Indonesia refused calls for a freer trade from other ASEAN members at the first ASEAN Summit in Bali. The emergence of an ASEAN community already began in the early 1970s. See Estrella Solidum, Towards a Southeast Asian Community (Quezon City: University of the Philippines Press, 1969). The Treaty on the Southeast Asia Nuclear Weapons Free Zone was signed in 1995. ASEAN signed two protocols amending the Treaty of Amity and Cooperation in Southeast Asia (TAC) to enable non-members to accede to TAC. The first amendment was made on 15 December 1987, and the second amendment was made on 25 July 1998. Dewi Fortuna Anwar, “Indonesian Foreign Policy: Losing its Focus in 2000”, in Van Zorge Report on Indonesia 2, no. 21 (December 2000). Before the Indonesian Presidential election in March 1998, Lee Kuan Yew was quoted to say that if B.J. Habibie was chosen by Suharto to be his vice president the Indonesian rupiah would plunge, signifying Lee’s low opinion of Habibie’s leadership. The remark angered Habibie. During one of the interviews after he became president, when asked about his opinion about Singapore, Habibie looked at the map at the presidential office and remarked that “Singapore was just a red dot on the map”. This remark caused a further fissure in the two countries’ relations (This writer was present at the Habibie interview in late 1998). During a meeting between Presiden B.J. Habibie and President Joseph Estrada of the Philippines in Batam on 13 October 1998, the two presidents expressed their concerns about the arrest of Anwar Ibrahim. The foreign ministers of the 95

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two countries then made an unprecedented joint statement about the arrest and calling on the Malaysian authority to release Anwar Ibrahim from his solitary confinement (This writer was present at the meeting). The concept of flexible engagement was introduced by Thailand Foreign Minister Surin Pitsuwan in 1998. Theodore Friend, “Power Vacuum in ASEAN: Indonesia, Regional Security and the USA”, E-Notes, Foreign Policy Research Institute, 2 April 2001. For a discussion of Indonesian foreign policy under President Megawati, see Dewi Fortuna Anwar, “Megawati’s Search for an Effective Foreign Policy”, in Governance in Indonesia: Challenges Facing the Megawati Presidency, edited by Hadi Soesastro, Anthony L. Smith and Han Mui Ling (Singapore: Institute of Southeast Asian Studies, 2003). Writings on the European Integration are plentiful. One of the earliest was Karl W. Deutsch, Political Community and the North Atlantic Area: International Organization in the Light of Political Experience (Princeton: Princeton University Press, 1957). Deutsch was the first to introduce the notion of “functional linkages”. On complex interdependence see Joseph Nye and Robert O. Keohane, “International Interdependence and Integration”, in Handbook of Political Science Vol. 8, edited by Fred I. Greenstein and Nelson W. Polsby (Reading: AddisonWesley, 1975), pp. 363–414. Thailand and the Philippines have had formal defence ties with the United States since the early 1950s. During the visit by U.S. President Bush to Southeast Asia in October 2003, Bush praised both the Thai and the Philippines’ leaders for their support in the U.S.-led ‘war on terror’, including the U.S. invasion of Iraq, and designated both countries as Major Non-Nato Allies. Singapore also has a close security arrangement with the United States. Malaysia and Singapore are members of the Five Powers Defence Arrangement together with Britain, Australia and New Zealand, while Brunei also has a formal defence tie with Britain. At the Ninth ASEAN Summit Indonesia was given the task to produce a more detailed proposal on the ASC concept to be presented at the 2004 ASEAN Ministerial Meeting in Jakarta. Democracy, human rights and human security are clearly spelled out in the draft on ASC being prepared by the Indonesian Department of Foreign Affairs.

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5 CIVIL SOCIETY, ACCOUNTABILITY AND GOVERNANCE IN THAILAND: A DIM CASE OF PARTICIPATORY DEMOCRACY Surin Maisrikrod

INTRODUCTION: POLITICAL TRANSITION IN THAILAND1 This chapter assesses the relationship between political-administrative accountability, civil society and a new form of governance in Thailand, following the implementation of the new constitution in 1997. The chapter begins with the historical context, especially the democratic transition and consolidation that has taken place in the country since 1973, within which the notion of accountability and transparency — or good governance — has emerged as a dominant political discourse in recent years. Secondly, the chapter assesses the extent to which the new system of governance has been developed in light of the government led by Prime Minister Thaksin Shinawatra since 2001. It is argued that the issue of creating a new system of governance — a more responsive, more transparent and more accountable governance — cannot be separated from the issue of democratic consolidation. Thirdly, it notes that globalization provides an impetus for the rhetoric of good governance and democracy in Thailand. But as globalization has at least two parts: firstly, market forces, or the material, with key beneficiaries being capitalists; and secondly, the ideational or “good governance” — accountability and transparency — which to a 97

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considerable degree is a civil society-led counter-force to the increasing corporatization of Thai politics. In Thailand, the pro-market forces and businessmen-politicians are more dominant, resulting in the erosion of accountability and transparency. This chapter thus hypothesizes that the new system of governance in Thailand is not being achieved as envisaged by the constitution because the capitalist class (or rather a key section of it), in collaboration with more conservative/repressive state agencies, especially the police and the Interior Ministry officials — have captured the electoral process, the parliament, and thus the government. These new political forces are less interested in advancing democratic/participatory governance, but more in monopolistic capital accumulation and, at least rhetorically, the country’s international competitiveness. At the same time, the Thaksin government has attempted to curtail the activity of the middle class-based civil society groups by, among other things, rallying its support from the rural areas based on the ruling party’s populist policies. So, instead of participatory governance, Thailand is now developing a “corporatized governance”. The issue of accountability and transparency is now therefore quite problematic, if not totally sidelined.

THE EMERGENCE OF THE NOTION OF ACCOUNTABILITY AND GOOD GOVERNANCE IN THAILAND Although the democratic system was first introduced in Thailand in 1932 when a group of intellectuals and military officers staged a coup against King Rama VII and demanded a constitution, the first democratic change spearheaded by the larger public — intellectuals, bureaucrats, middle class, working class, members of the capitalist class — took place in 1973 when the student-led uprising toppled the military regime of Thanom-Prapat-Narong and ushered in a new era of political pluralism. The 1973 event led to an era of great democratic euphoria, with people in all sections of the society demanding more political space not only at the national level, but also in their places of work and of studies. Freedom, liberty, equality, self-governing, human rights promotion, workers’ rights and peasants’ rights were all part of the day-to-day conversation during the time. Workers were pitted against their employers, peasants their landlords, students their teachers, children their parents, community members government officials. New ideologies proliferated, particularly those which called for equality, an end of exploitation and distribution of wealth. Socialism in particular was very popular. Radicals were calling for further change in society and the political system to bring about a better life for the people. 98

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Strikes and demonstrations were daily events. Clashes between the pro- and anti-change groups were part of the scene between 1973 and 1976. To many, the country was clearly ungovernable; elected government could not bring about political stability. The economy was turning from bad to worse. The business and the middle classes and the bureaucrats felt threatened by what was perceived as a turmoil, rather than a time of newlyfound freedom and democracy. The worsening instability paved the way for the eventual return of the military, after three years of democratic experiment, in a bloody coup in 1976, when scores of student demonstrators were killed. Thai politics once again entered the “vicious cycle”, with a military government taking over after a short period of parliamentary politics. The progressive forces, including intellectuals and members of the middle class, were disillusioned with the euphoria of 1973, and the return of the military-led, bureaucratically dominated governance — the “bureaucratic polity” — ended hopes of developing democracy further. To a lot of them, radical revolution was the only option left. This led hundreds of them to join the then outlawed Communist Party of Thailand (CPT) in the jungle, using the strategy of “forest circling cities” to seize power through armed struggle. The country entered a period of great instability, with political suppression in the urban areas on the one hand, and the increasing threats and influence from the Communist Party in the rural areas on the other. But one benevolent military leader — General Prem Tinsulanonda, who was known for his integrity, honesty and incorruptability — had a different idea. He was an unconventional anti-communist campaigner and advocated using political means instead of armed suppression against the insurgency, by attempting to tackle the root causes of the political discontent including corruption and abuses of power by government officials. Prem also put in place programmes for rural development as a means to gain support from the rural people. He further expanded his political support base by incorporating other non-bureaucratic, non-military forces in society into the policymaking process. Prem effectively presented himself as more open-minded and more democratic than his military predecessors. He brought under his leadership, as a military-backed prime minister, representatives of the business sector, intellectuals and technocrats to work for the good of the country. He did not lump progressive intellectuals and technocrats together with the radical communists, as previously done in the past. Instead he foresaw in these people great potential contributions to the country’s development, helping expanding his political support. This helped enable him to carry out many important programmes not only to 99

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stabilize the country but also to advance the country in key areas, especially economic development. Prem became prime minister under a constitution that did not require a prime minister (PM) to be an elected member of parliament (MP) and allowed the appointed senate to participate in choosing the PM. Even so, Prem saw the virtue of allowing political parties and parliament to function. As the leader of the military, he also retained his power to appoint senior military officers and technocrats to key ministries and prime ministerial advisory positions, thereby bypassing the political parties that gave parliamentary support to him. The manner in which such power was shared was known as Thai “half fruit” or “semi-democracy”. The semi-democratic period nevertheless helped nurture democratic forces. Private sector representatives were allowed to participate at the level of policy formulation — in the form of corporatist structure. Some called what happened in Thailand then a liberal corporatism or a liberal corporatist governance.2 After eight years as PM, Prem was able to achieve political stability and witnessed the end of the CPT — aided by regional and world politics — and promote steady economic growth. The new-found stability weakened the justification for continued militarydominated governance. Many saw the country was ready for another democratic transition. Civil society groups — intellectuals, members of the media and the middle class — again became restless, and when Prem indicated that he would continue as PM after a general election, they put up strong resistance. By that time, it was clear that Thailand’s democratic discourse had become dominant: “democracy is the only game in town”. It was clear that while the radical path was abandoned, a military-dominated government was not welcomed either. Prem stepped down, and when, in August 1988, an elected MP, Chatichai Choonhavan, who was a leader of a largest political party at that point, was chosen by parliament to be PM, it was hailed as the arrival of an era of full democracy. Chatichai became the first elected prime minister in more than a decade. But that proved to be a big disappointment. The Chatichai government was dominated by big businesses, which had bought their way into parliament and who now had the opportunity to break free from the bureaucrats and technocrats and to make their own policies. But conflicts of interests were rampant, which led to widespread corruption among members of the cabinet. Kick-backs involving the capitalists cum politicians, giving concessions to friends and receiving direct monetary benefits, were rampant. Politicians, bureaucrats, and businesspeople alike took advantage of the out-of-date and weak laws governing business practices compounded by the absence of accepted 100

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norms of political behaviour. Although Chatichai was popular with his economic and foreign policies, his ministerial cabinet was sarcastically called a “buffet cabinet”, a take-what-you-like group of government ministers. There was a public outcry against the widespread corruption and abuses of power by politicians under the popularly elected government of Prime Minister Chatichai Choonhavan during 1988–91. The legitimacy of the Chatichai government nosedived, and the military, with tacit support of reformist forces, staged a coup in 1991 to “clean up” the political mess. Thai politics was facing a great paradox: a military coup was staged to remove a democratically elected government in order to bring about good governance. One of the major lessons the public learned from the elected government of Chatichai was that a popularly elected government did not automatically guarantee accountability, transparency and honest public policy making. In other words, a popularly elected government does not equal “good governance”. The understanding was that the coup was only a stop-gap measure — a break from an “abused democracy”, the kind of democracy that was dominated by vested business groups who used political power to advance their business interests. The public consensus was that there must be a kind of democracy that can bring about strong political and bureaucratic accountability, transparency and incorruptability. But matters grew worse before they got better. There were general elections in March 1992. The military, despite its earlier promise not to get involved directly in politics, helped set up a political party — the Samakkhitham Party (STP) — which won the largest number of parliamentary seats. The STP formed a coalition government with four other conservative parties — Chart Thai, Social Action, Prachakorn Thai and Rassadorn — and asked General Suchinda Kraprayoon, then the army’s commander-in-chief who was not a MP, to be PM. The move triggered strong resentment among the public, particularly among the middle class — the mobile phone and Mercedes generation — against the military, which led to huge demonstrations in Bangkok in May 1992. The military responded by shooting at the demonstrators, killing some fifty people while injuring hundreds of others. King Bhumibol Adulyadej intervened to stop the violence and for the second time appointed Anand Panyarachun as an interim PM. So, within the period of about four years (August 1988 – May 1992), the Thai learned many more lessons about their fledgling democracy. Firstly, they wanted an elected PM, as in the case of PM Chatichai Choonhavan, but detested his style of government, which was not transparent and accountable. Parliament was also full of politicians who bought their votes and sought government positions to make a “return on their 101

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investment”. The problems associated with the Chatichai government exposed to the Thais the many flaws in their democracy. The gradual withdrawal of the ‘bureaucratic polity’ and the rapid encroachment of business people into politics had brought about an enormous increase in corruption and abuses of power by politicians for their business gains. At the same time, the term “parliamentary dictatorship” was crafted to describe the situation where a coalition government formulated policy or acted blindly on the basis of its parliamentary majority, without regard to public opinion. The privilege of the parliamentary majority was greatly abused. It became a dictatorship. It was a dilemma that set in motion a political reform movement, aiming to achieve both democracy and good government. These were the circumstances within which the new discourse on accountability and transparency and good governance emerged, and subsequently became accepted in Thailand. In other words, accountability — or good governance, for that matter — became an organizing language for the political reform movement, which culminated in the promulgation of the new constitution of 1997, the country’s sixteenth since 1932. The emergence of the discourse on good governance and accountability was also shaped by two very important events. First was the fact that the military did not rule the country directly after the 1991 coup. Instead, it handpicked a technocrat-turned business executive, Mr Anand Panyarachun, to lead the post-coup government. Anand was aware of the public sentiment and very familiar with the new language of good governance, which was wellpublicized in the West by that time. It was part of an international phenomenon of the post-Cold War era. The United States, the International Monetary Fund (IMF), and the World Bank were also promoting the language of “good governance”. Anand introduced the concept in Thailand during his prime ministership, first between March 1991 and April 1992, and again, further popularized it during his second stint as prime minister between June and September 1992. He was the first political leader who used the term “transparency” and often elaborated how important it was to gain public confidence in government affairs. Anand later explained that he deliberately relied on the concept of transparency — and good governance — as a means to gain political legitimacy in light of the fact that his prime ministership was made by the military.3 Anand defines ‘transparency’ as: 1. public access to information; 2. people being informed about the decision-making process; 3. the government being prepared to tell the people what they think; and 4. people being able to verify the government’s assertions.4 The emphasis here for Anand was clearly to use the concept of transparency as a means to counter corruption and abuses of power by bureaucrats and politicians and to 102

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achieve, in the end, better accountability, which formed the basis for the political legitimacy of his non-elected government. What Anand did was in line with the notion of good governance as promoted by the World Bank at that time — neo-liberal ideology combined with the New Public Management and liberal democracy. In 1993, the people who first tried to articulate the notion of good governance were academics at the Thailand Development Research Institute (TDRI), a prestigious think-tank, which Anand himself once chaired. Two key authors of a research paper at the TDRI, Professor Ammar Siamwalla and Scott Christensen, argued in their 1993 publication that the concept of “accountability” was absent from the Thai language.5 Anand had the good fortune of consolidating further what he propagated during his two stints as appointed prime minister when he was elected the chairman of the Constitutional Drafting Committee, which played a key role in putting together a complete draft of the 1997 constitution. The second event that helped shape and strengthen the language of accountability and transparency was the country’s economic meltdown of July 1997. Corrupt politicians and corporate leaders, who colluded among themselves in granting and obtaining loans illegally from banks and financial institutions for unproductive investments and for political partronage purposes, such as vote-buying, were seen as big contributors to the collapse. In other words, corruption and the lack of accountability on the part of the politicians, bureaucrats and business leaders were the culprits. The economic crisis therefore presented an urgent need for new legal and institutional mechanisms to address those problems. And the proposed constitution, which until that point was attracting a lot of opposition from the conservative politicians, seemed to have provided all the answers to the country’s fundamental ills, political and economic. After the July 1997 crisis, the concept of ‘transparency’, already understood as encompassing the whole idea of good governance, became the organizing language for political reform in Thailand. Theerayuth Boonmi was one of the first public intellectuals who articulated the term “good governance” in the post-1997 crisis as a means to get Thailand out of the crisis and to avoid future crises. In fact, many argue that good governance — of which accountability is a key part — was seen by many scholars and social activists as the means of stabilizing the country. The crisis of 1997 reinforced the term “good governance”, which had become a dominant discourse now, incorporating other terms such as transparency and accountability, participation, predictability and efficiency in government and public administration. 103

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THE ROLE OF CIVIL SOCIETY IN ESTABLISHING NEW GOVERNANCE AND ACCOUNTABILITY Thailand’s phenomenal economic growth in the second half of the 1980s played a key role in entrenching Thai democracy in the 1990s, as the economic boom led to an expansion of the middle/managerial class, who were often suspicious of government restrictions in political, economic and social life. The middle class served as a core element of civil society. During the period of three years of the Chatichai administration, it was obvious that civil society became stronger. This happened on the back of blossoming of new business opportunities and industrial as well as government-owned infrastructure projects which among other things contributed to widespread corruption in government and private sector. The best place to see the extent of the influence of civil society on the establishment of the new governance in Thailand is through an analysis of the drafting of the 1997 constitution, during 1996–97. Some middle class civil society activists tried relentlessly, between 1992 and 1995, to get a new charter written to achieve the agenda of “restructuring the state power, so that people will be able to genuinely have checks and balances…to prevent politicians from abusing their power, and to have a genuine political reform institutionalizing the people’s participation at every stage of political process and from people of different social strata”.6 The three main things that most concerned the drafters of the Thai constitution were: 1. people’s participation in the political and policy-making process; 2. people’s control of political office-holders; and 3. establishing institutions that scrutinize possible abuses of power by political office-holders or high-ranking government officials. The general belief was that politicians cannot be trusted and the system must involve the participation of people at all levels of policy-making. The corruption and abuses of power by the Chatichai government during 1988–91 left people strongly suspicious of political office-holders. It was an uphill battle to implement political reform. Politicians were dragging their feet, until a hunger strike in front of the Parliament building in 1995 by a social critic and a former politician, Chalard Vorachat, heightened the public outcry and triggered a constitutional reform movement. The Committee for Democratic Development was set up, which culminated in the formation of the Constitutional Drafting Assembly (CDA) in 1996. The CDA was chaired by a former MP, Uthai Pimchaichon, who for years fought against the military dictatorship. Incumbent politicians, whose credibility had plummeted because of their alleged corrupt behaviour, were deliberately excluded from the drafting process for fear that they might hijack the new 104

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charter. Instead, the assembly was composed of ninety-nine members, including one member each from the seventy-six provinces, eight experts in public law, eight experts in political science or public administration, and seven individuals with political or public or constitutional drafting experience. These ninetynine men and women (but mostly men) could be broadly categorized as representing civil society. The only role reserved for the sitting members of the National Assembly during the time was to vote on the pool of nominees for the ninety-nine seats in the CDA and to either approve or reject the draft constitution as a whole; they were not allowed to make amendments to the draft. In the event that the House of Representatives rejected the draft, a popular referendum would be called. This ground rule was laid by the CDA’s predecessor, the Committee for Democratic Development, to guard against possible tampering with the draft constitution by politicians who were believed to have already done much damage to Thai democracy. To be consistent with this desire of civil society, the CDA, through its sub-committee, the Constitution Drafting Committee (CDC), chaired by Anand Panyarachun, ensured that the drafting process involved as many people as possible, representing various sections of civil society and professional groups from different parts of the country. According to the Public Relations Sub-committee of the CDC, all in all there were a total of 843,556 people directly participating in the drafting process: 629,232 in the public consultations stage; 122,585 in the public hearings stage throughout 76 provinces; 3,828 in public hearings at a regional level, and 87,912 responding to questionnaires.7 In addition, there were 300 organizations including business, industry, agriculture, mass media, various professional groups, educational institutions, political parties, democracy groups, environmental groups and other non-governmental organizations participating at one stage or another of the drafting process. As the Public Relations Sub-committee said of the drafting process: “It was a process that mobilized brains from all over the country to the extent that has never been done before in Thai political history.”8

THE FOUR KEY ACCOUNTABILITY INSTITUTIONS: AN ASSESSMENT The new constitution reflects public concerns over the failings of elected government and the root causes of the economic collapse in 1997. Politicians, for example, often colluded with the lowly-regulated private sector, such as banks and financial institutions in granting shady loans. Nine key independent accountability institutions were established to address these concerns.9 Of 105

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these nine institutions, four are most crucial in terms of promoting political accountability, checking and balancing the use of powers by the political official holders: 1. Elections Commission of Thailand (ECT); 2. National Counter Corruption Commission (NCCC); 3.Constitutional Court (CC), and; 4. Administrative Court (AC). The Ombudsman, the National Human Rights Commission, the National Economic and Social Advisory Council all play largely advisory, mediating and monitoring roles, while the State Audit and the Auditor-General Offices are largely responsible for bureaucratic accountability. The other very important institution, the Broadcasting and Telecommunications Commissions, whose responsibilities include prescribing regulations, which would prevent the state from having undue power over the broadcasting media, has yet to be set up.

Elections Commission of Thailand The Elections Commission of Thailand (ECT) is tasked with administering the electoral laws including the conducting of all elections for National Assembly elections (House of Representatives and Senate), local assemblies and local administrators, including voting in referendums, registration of parties and candidates, maintenance of the integrity of elections, deciding on disputed returns and challenges to elections and public funding provisions of the law. The establishment of ECT is another breakthrough in the area of electoral accountability. In the past the administration of elections was under the purview of the Ministry of the Interior, which gave an incumbent government an advantage. The minister of the interior could influence provincial governors, and officials in the ministry influenced election outcomes in favour of the government. This power to administer elections is now completely out of the hands of Interior Ministry officials. One of the major concerns of the reformists was the prevention of vote-buying, corruption and abuses of power by politicians. A number of provisions have been made to prevent or minimize such abuses: Firstly, stricter control over expenditure by candidates. The new law on Election of the House of Representatives and Senators of 1998, an organic law of the new constitution, requires political parties to set up election accounts under supervision of qualified accountants, detailing how the money is received and spent and to be submitted to the Elections Commission within ninety days after the election results are announced (Article 43). The Elections Commission is to audit the accounts and make them public (Article 43, paragraph 2). These stipulations are supported further by a provision on donations to political parties of the Political Party Act of 1998. For the first 106

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time in Thai parliamentary history, political parties are required to detail donations including the names of donors and amounts they donate (Articles 45, 48). Furthermore, the Political Party Act of 1998, again the first in Thai political history, requires the state to provide financial support to the political parties (Articles 56–64). Secondly, prohibition of giving promises of rewards to woo voters. Article 44 of the same law prohibits candidates to propose rewards in any forms, either to individuals or to organizations, or to intimidate voters. Thirdly, vote counting is done at one location, such as the district office (there are about 850 districts in Thailand, of 76 provinces), instead of at polling stations at the village level as previously done. This measure under Article 69 of the 1998 Election Law is designed to prevent vote-buying. By previously counting votes at polling stations, which cover a small area, votebuyers can more or less verify whether voters actually voted as instructed. In the event that the latter did not, some form of retribution could then be applied. Under the new system, it is not possible for candidates to check whether their canvassers actually deliver what they promise because all the ballots are mixed together. The change in the election administration also allows for greater participation by the citizenry through the Elections Commission. Civil society organizations and the public in general — in the form of volunteers — have been playing a key role in not only monitoring elections but also disseminating information about elections, educating the electorate since 2000, the first following the promulgation of the new constitution. NGOs, for the purpose of elections accountability, form themselves into Provincial Election Commissions (PEC). Apart from the PEC, there are NGOs throughout the country that help monitor elections. According to the ECT, there are currently 165 provincial NGOs and 12 national NGOs registered with the PEC. The NGOs also form during election times an Election Monitoring Centre. The People’s Network for Election in Thailand (P-Net) is another strong network of NGOs monitoring elections. PEC and NGOs report cases of electoral wrong-doings to ECT, which, in turn investigates. In the 2000 senatorial elections, the ECT disqualified some 78 winning candidates on charges of electoral wrong-doings, including buying votes, donating for charity, creating misunderstanding about his/her qualifications or achievements, impeding their employees from using their right, providing transport to voters in exchange for votes, and rigging the vote-counting. During the 2001 lower house elections, 30 candidates were summoned to answer charges of electoral frauds. In the same elections, the ECT suspended results of 65 constituencies (out of 400) for vote rigging. Since the new charter has been in operation 107

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until the end of 2003, the ECT has organized 20 parliamentary elections, 11 senatorial elections and 49 municipal elections and one tambon (sub-district) administrative election. So far, six criminal lawsuits and four civil suits had been filed against senate candidates, and criminal law suits against 13 candidates for the house of representatives. These actions carried out by both the new ECT and the NGOs are unprecedented, although critics continue to doubt the effectiveness of the organizations in preventing electoral wrong-doings.

National Counter-Corruption Commission and Constitutional Court The National Counter-Corruption Commission (NCCC) investigates, provides opinions and commences actions in the courts concerning the accuracy of declarations of assets and liabilities, and allegations of corruption or gross misconduct in office of public officials (including members of the National Assembly, Council of Ministers and the judiciary) and candidates for office (National Assembly, judges, the military, police and local government officials). The Constitutional Court (CC) determines whether Thai laws and draft laws, resolutions of political parties, status of membership of the house of representatives, senate, cabinet and ECT, actions of the government and its agencies, and questions referred by other courts are consistent with the constitution. The CC may deliberate on impeachment proceedings concerning the PM, other ministers, members of the National Assembly, the president of the Supreme Court of Justice, the president and judges of the CC itself, the president of the Supreme Administrative Court, the prosecutor-general, election commissioners, the ombudsman, members of the State Audit commission, the chief of the Military Judicial Office, other judges, public prosecutors, and high ranking officials covered by the organic laws on counter corruption. Since 2000, the NCCC has investigated and brought charges against a number of high-profile politicians, one of which was against Thaksin, who was in the end acquitted by the CC of falsely declaring his assets when he was deputy PM in 1997. Successful cases in the CC included the one against the then secretary-general of the Democrat Party and interior minister, Sanan Kachornprasart for lying in his asset declaration; a former adviser to a health minister for colluding in taking bribes from a drug company; an MP for falsely declaring his assets; a deputy minister for false asset declaration; and a former minister for health, Rakkiat Suthana, for taking bribes from a drug company. These politicians have been barred from running for political office 108

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for five years by the CC. In the case of the former health minister, because the bribery is a criminal case, he was also prosecuted by the Supreme Court’s criminal tribunal for political office-holders. He was sentenced to fifteen years in jail and some 300 million baht (US$ 8 million) was confiscated. He, however, jumped bailed.

The Administrative Court The Administrative Court (AC) hears and determines disputes between government agencies (including local government organizations) and private individuals and also disputes between or among government agencies. During its two-year operation, there have been some 3,000 complaints being brought to the court, but it has been able to deliberate on only a few hundred cases. However, there were two cases from which the court can be judged as playing a crucial role in blunting power abuses by the government of the day. The first one was in 2002 when the government’s Anti-Money Laundering Office (AMLO), a body created to investigate drug dealers and other criminals, asked for the financial records of journalists from The Nation and another critical daily, the Thai Post following a series of their critical reports on government. The journalists filed their complaints with the AC, which quickly issued an injunction calling the probe illegal and ordering the AMLO to suspend the investigations. The second case was in early 2003 when the court upheld a ruling by a lower court that nullified the selection of fourteen nominees to the National Telecommunications Commission (NTC). The main contention was that the nominees were not true representatives of the industry but cronies of the government. As Thaksin owned the country’s largest telecommunications company, the Shin Corp. PLC, the PM was alleged to have manipulated the selection of members for the commission, who would play a key role in such issues as conversion of state concessions and the privatization of state telecommunications agencies.

WEAKENING ACCOUNTABILITY MECHANISMS IN THAILAND? Public expectations of the new constitution to enhance both political and bureaucratic accountability and transparency were understandably high. The new accountability institutions have now been largely operational and, so far, the results have been mixed. In the area of electoral politics, vote buying and other forms of abuses and frauds persist. Allegations of corruption against 109

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politicians continue, but only a handful of cases have resulted in prosecutions. This has led to the perception that these institutions are not effective enough in cleaning up Thai politics or preventing abuses of power by politicians. However, the fact that these institutions have been vigorous in their pursuits of political wrongdoings demonstrate, among other things, how far Thailand has come in terms of promoting political and bureaucratic accountability. Equally significant is the fact that these proceedings against political office holders are great contributions to public education. The media interest in each case has been enormous. Furthermore, these organizations need more time to strengthen themselves in terms of personnel and expertise. For example, the NCCC has a staff of about 500 but it has to deal each year with about 10,000 financial reports and thousands of complaints about politicians and bureaucrats at all levels. Most of these accountability institutions are currently relying on officials on secondment from other government agencies. Obviously, there is no balance between the public expectation and the reality and capacity of these institutions. Moreover, the attitude of the government of the day is crucial to the promotion of accountability and transparency, or good governance. During the Chuan Leekpai government between 1997 and 2001, there was much vibrancy in the business of promoting accountability, particularly in the area of corruption suppression. This reflected the kind of political leadership on the part of Chuan Leekpai, known as one of Thailand’s “Mr Clean”, and a persistent democratic fighter over the past thirty years. Under Prime Minister Thaksin Shinawatra, who was elected in January 2001 and formed the first government under the new charter, the atmosphere has changed dramatically, as far as the promotion of accountability is concerned. Thaksin, a telecom business tycoon and one of the country’s richest persons, has been perceived as lacking an interest in promoting political transparency and accountability. Thaksin is not able to shake off — or to prove beyond doubt — the public perception that he uses political power to serve his business interests and those of his political colleagues. In fact, as mentioned earlier, Thaksin brought with him to the high office of PM the stain of fighting against a National Counter-Corruption Commission charge of falsely declaring his assets. He won the case by a very slim margin of 8–7 in the Constitutional Court but with great controversy. Thaksin’s popularity and strong electoral mandate, based on his populist policies, have made it possible for him to dodge accusations over conflict of interests or lack of transparency and accountability. Under Thaksin, the language of accountability seems to be going through a rough time competing with the language of economic growth, nationalism and international competitiveness. Thaksin pays little 110

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attention to, if not having total contempt of, promoting accountability and transparency in government. He especially ignores the kind of accountability as envisioned by the new constitution, which is horizontal accountability.10 There have been numerous incidents to substantiate this. Firstly, Thaksin, with an overwhelming majority and being popular, is alleged to have tried to influence the accountability institutions, including the Constitutional Court, the Elections Commission and the Senate. Somkiat Onwimon, one of the senators who are critical of Thaksin says, The parliament is weak. The House of Representatives is under the control of political parties. The Senate is very fragmented. In fact, the Senate is increasingly encroached on by the government. This is evidenced in the way the Senate votes. It is clear that the number of Senators who vote in favour of government keeps increasing between 50 and 80 (out of 200), especially when the government is determined to pass a bill which is favourable to the telecommunications businesses (owned by Thaksin and his cronies).11

Secondly, the National Broadcasting and Telecommunication Commissions have not yet been set up by this government as required by the constitution. The agencies are to regulate the allocation of frequencies and other telecommunications operations. Thaksin, being the largest owner of the telecommunications business, is clearly seen as blocking the creation of commissioners who might go against his business interests. In the later part of 2003, the government decided — through an Emergency Decree, not by an act of parliament — to change the arrangement between the state telecom agencies and private concessionaire from concession fees to excise tax. Excise tax is fixed at a particular rate whereas concession fees would be determined by the rate of profits. The arrangement benefits Thaksin’s mobile phone companies. Thirdly, another conflict of interest was the case of a concession Thaksin’s family received from the state to run a television station, iTV. In fact, the PM’s Office, the concession granting agency, decided to reduce concession fees to the television station, thus handing huge business benefits to Thaksin’s family. Fourthly, controlling the media. Through advertising money from Thaksin’s business empire and his colleagues and the huge budget various ministries allocate for public relations work, there is great financial gain for the media to be on the side of the government. Self-censorship in the Thai media community is quite commonplace now. Owning a television station is, of course, a form of media control. 111

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Fifthly, Thaksin’s concept of CEO-governors, who are keys to the country’s regional administration (there are seventy-six provinces), to promote efficiency and the country’s international competitiveness, goes against the participation and promotion of horizontal accountability. This undermines the efforts to decentralize powers and responsibilities from central — and regional — bureaucracies to local people. Decentralization is seen as an integral part of promoting accountability and transparency, in the sense that local people are empowered to participate more directly in policy-making affecting them. Sixth, the Thaksin government has a low level of tolerance for criticism. Thaksin tends to dismiss criticisms as damaging and irresponsible and to promote his views as the only right ones. He has said that democracy is not his goal. His main concern is to produce prosperity for the people. This is not about their participation in political or policy-making. Lastly, there is an over-emphasis on economic growth. There is no balance between democratic development and economic development. Evidence of new economic governance includes the creation of the SME bank, the People’s Bank, the Office of Capitalization, the transforming of underground businesses — illegal lotteries — into mainstream business, taking money into the government coffers. Thaksin is a strong believer in economic performance as a basis for political legitimacy. And to some degree, he has been successful in using economic growth to pacify middle class discontent.

LEAVING PARTICIPATORY GOVERNANCE, RETURNING TO AUTHORITARIANISM The Thaksin government is dominated by seven large corporate empires, which accounted for about 20 per cent of all the share value in the Thai stock market in 2002.12 This is a government that is formed and run by big businesses. In addition, with a background as a former police officer who still maintains strong links with former classmates in the police force and the military, Thaksin occupies a very strong and enviable political position. Furthermore, he also enjoys the backing of more conservative bureaucratic force of the Ministry of the Interior that maintains strong bureaucratic network countrywide. Even more significantly, the two most politically influential pillars of big businesses and conservative bureaucratic forces are brought together under Thaksin’s CEO-style of management — a top-down, quick and decisive administration. Thaksin is therefore unavoidably perceived as more authoritarian than democratic. 112

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The flip side of this governance style under Thaksin is the fact that civil society organizations (some 17,000) are more or less stifled. They are not able to play a more significant role in the furthering consolidation of democracy in the post-1997 period. Simply put, they have lost out to the abovementioned coalition of capitalists and conservative bureaucratic/repressive forces. The main vehicle for the new political coalition in capturing the power of the Thai state is the electoral process. Civil society groups have become bystanders in the politics of electioneering, the very thing that matters the most in a parliamentary system. Civil society groups have been brushed aside by the PM as troublemakers. At the same time, the role of technocrats — particularly in planning agencies — has been reduced.

The Emergence of a One-party Government The Thaksin government is overwhelmingly strong. Thaksin’s Thai Rak Thai Party has an absolute majority in the house of representatives, the first such majority in the political history of Thailand. But Thaksin is attempting to make his party even bigger and stronger through mergers with and acquisition of other political parties. The PM has already absorbed a few political parties into his Thai Rak Thai Party since taking over power, with 337 of the 500 seats in the lower house. He expelled a coalition partner who refused to amalgamate with his party. As the constitution requires a minimum of 200 votes in the parliament to launch a no-confidence motion against the PM, the opposition is effectively powerless. Thaksin’s position as PM is unassailable. This has contributed to strong executive and weaker legislative, rendering ineffective the system of checks and balances in government. For Thaksin, this is a kind of “still politics” that he wants in order to forge ahead with economic growth, and any political opposition is branded “unconstructive” or “unpatriotic”.

Heavy Reliance on Repressive State Apparatuses Thaksin’s one-man, top-down and decisive style of administration goes well with repressive state apparatuses, such as the police force. This has led to a major problem in terms of public accountability. For example, the case of the government campaign against drug trafficking in the early part of 2003 that led to some 2,500 suspects being killed by extra-judicial means. Thaksin brushed aside protests from the National and Human Rights Commission and an international one. 113

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Deepening Marketization and Commercialization of the rural areas Thaksin, through village funds and easy credits from the People’s Bank and the Bank for Agriculture, has also been able to incorporate the rural areas and their people into one whole national market and, in fact, the global market. Effectively, the rural areas have now been re-organized into supporting or helping expand capitalist production. The ideology of consumerism is replacing democratic/participatory ideology. The marketization or globalization of the rural areas is also a very effective means to isolate NGOs who would traditionally rely on the rural people for their legitimacy. As NGOs are key players in checks and balances against government actions, the isolation NGOs from the grassroots people has weakened political accountability.

CONCLUSION The new constitution of 1997 aimed to establish a stronger participatory democracy and hence strong accountability and transparency in government. But the charter seems to have failed to produce the desired outcome because capitalists and corporate elites have captured the means by which state power is achieved, that is the electoral process. And because the basis of political legitimacy in Thailand has now been based to very large degree on electoral process, elections are often used as a means to justify the actions of the Thaksin government. Because of its electoral dominance, the Thaksin government tends to ignore claims from civil society that the government is in fact undermining accountability and transparency, and in fact condoning actions that go against the principles of good governance. Thaksin’s government emphasizes on conforming to international market forces at the expense of the principles of good governance such as transparency and accountability. This, in turn, generates political resistance and opposition from traditionalists and civil society groups, which could lead political instability in Thailand, yet again.

Notes 1

The chapter was written before the coup that toppled the government of Prime Minister Thaksin Shinawatra on the 19 September 2006. The military group, called the Council for Democratic Reform (CDR), gave a number of reasons for the takeover. First, the coup was to restore democracy and accountability, which will entails investigations of cases of corruption and abuses of power allegedly committed by Thaksin and former members of his cabinet. Secondly, the coup

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was claimed to help prevent possible violent clashes between pro- and antiThaksin groups, something that had gradually fermented for over ten months prior to the coup. Whether one believes the rhetoric of the coup leaders or not, it was clear that the military seizure of power did help break a political stalemate between Thaksin government and his opponents prior to 19 September. This stalemate had cost the Thaksin government political legitimacy and, if prolonged, would have damaged Thailand even more. The key source of the political stalemate is in fact central to my argument in the chapter: 1). Thaksin’s capture of the electoral process that had resulted in his domination of the parliamentary politics, and; 2). The system of accountability was to a large degree undermined by the deposed prime minister. The junta’s appointment of a former army commander-in-chief, General Surayud Chulanont, signals a clear departure from the image of a corrupt government under Thaksin. Surayud is known for his professionalism, integrity, honesty and incorruptibility. But this may not be enough for the military leaders to convince Thais that they did not intend to cling on to power. Even though there was popular support for the coup, it would be wrong to assume that Thais equate support for the takeover with support for long-term military involvement in politics. Some might argue that a clean government appointed by a military would still be more credible than the electoral politics that elects a corrupt government. In the meantime, Thaksin’s electoral mandate — the main criterion on which a government’s legitimacy is judged, particularly by the West — can never be totally discredited, even if one questions the ways he won it. Thaksin is a friend of globalizers, not only in Thailand but also abroad. He may be down, but by no means is he out. Laothamatas Anek, Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism (Boulder: Westview Press, 1992). Anand Panyarachun, “Sitthi seri parp kong prachachon kab krabuan karn yuthitham tam rattathammanoon chabbab patchuban” [Rights and Liberties of the People and the Justice Process under the New Constitution], in Tit tan krabuan karn yuthitham thai nai satawat mai [Directions of Thai Justice Process in the New Century], edited by Kittipong Kittayarak (Bangkok: Thailand Research Fund, 2000), pp. 50–62. Prasarn Maruekkapitak et al., Anand Panyarachun: Chewit khwamkit lae gnan kong ardeet nayok rattamontri song samai [Anand Panyarachun: Life, Thoughts, and Achievements of the Twice Prime Minister], 4th edition (Bangkok: Amarin Press, 1999), p. 172. Michael Connors, “Framing the People’s Constitution”, in Reforming Thai Politics, edited by Duncan McCargo (Copenhagen: Nordic Institute of Asian Studies), p. 45. Public Relations Subcommittee of Constitutional Drafting Assembly, Draft, Constitution for the Kingdom of Thailand: People’s Version (Bangkok: Bangchak Plc, 1997), p. 163. 115

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Ibid., p. 170. Ibid. These nine institutions are 1. Elections Commission of Thailand (ECT); 2. National Counter Corruption Commission (NCCC); 3.Constitutional Court (CC); 4. Administrative Court (AC); 5. The Office of Parliamentary Ombudsman (OPO); 6. National Human Rights Commission (NHRC); 7. State Audit Commission and Office of the Auditor-General (SAC/OAG); 8. The National Economic and Social Advisory Council (NESAC); 9. Independent Broadcasting and Telecommunications Commissions (NBC and NTC). See Guillermo O’Donnell, “Horizontal Accountability in New Democracies”, in Comparative Politics: Notes and Readings, edited by Bernard E. Brown, 9th edition (Fort Worth: Hartcourt College Publishers, 1998). Somkiat Onwimon, “A One-Party Government: Feasibility, Implications on Thai Politics, and Some Concerns”, Sor Sor Ror Newsletter of the Club for the Former Members of the Constitutional Drafting Assembly (First Volume, 2004): 9. Rattapong Sornsuparb and Prachak Namprasarnthai, The Economic System under Thaksino’s Model (Bangkok: U-Express, 2003), pp. 91–93.

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PART II Economic Regionalism and Global Influences

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6 GLOBALIZATION AND THE ROLE OF THE STATE IN THE ASIA-PACIFIC Martin Andersson, Christer Gunnarsson and Fredrik Gustafsson

INTRODUCTION: QUESTIONING THE EAST ASIAN MIRACLE AS A UNIVERSAL MODEL The so-called economic miracle in the Asia-Pacific region is clearly the most spectacular development experience the world has seen during the second half of the twentieth century. It has provoked scholars in the social sciences, development economists in particular, to rethink theories of economic development and social change, and has urged policymakers to reconsider and reformulate strategies and policies. The experience of the Asia-Pacific region has rightly been held up as a case of development worth studying and learning from. It has been the case in point for numerous empirical studies and it has generated an abundance of theorizing, not least about the role of political institutions in economic development. This chapter looks at the new role for the state and the changing policies that have emerged with globalization among some of the ASEAN states since the mid-1980s. The uniqueness of the Asia-Pacific economic transformation is that it has three, beneficial, interlinked characteristics. First, extremely high rates of economic growth have been maintained over a period of several decades. Second, economic growth has been associated with a process of large-scale 119

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industrialization and structural transformation and modernization of society. Third, the gains from economic growth appear to have been shared by the population in a reasonably equitable manner. The challenge to conventional development theory, and theory of social change in general, posed by the Asia-Pacific experience has been considerable. In short, the main controversy in the debate has been over the question of whether the Asia-Pacific growth experience confirms or challenges the universality of a “Western” road to industrialization and modernization, which boils down to the question of whether institutions normally associated with the market economy (ranging from regulatory frameworks, which enable impersonalized exchange, to financial and marketing institutions) have been implemented in the region or whether they have been substituted for by “Asian institutions”.1 These propositions have, however, been put to serious test after the regional financial crisis of 1997/98, after which it has become fashionable to declare the end, or death, of the East Asian “model”. The crisis, and the major changes in policy which resulted from it, signalled the ideological demise of all strategic industrial policy that used to constitute the core of the Developmental State model. Influential policymakers (one of whom being Alan Greenspan) have tended to equate the Asian crisis with the crisis of this alleged Asian model. A major problem with such an approach is, however, that it tends to put undue emphasis on the immediate economic and societal effects of the financial crisis. Clearly, economic recovery has been troublesome in some countries and the socio-political effects of the crisis have been considerable in others. However, it is too early to say whether these changes will have a lasting effect or whether the crisis actually deserves to be taken as a watershed in the course of development in the Asia-Pacific. A more obvious effect of the crisis is that it has brought about a rethinking of the causes and effects of the transformation in general.2 Three aspects are of particular importance. First, the crisis has necessitated a rethinking of the economic transformation as a regional process. Before the financial crisis an overwhelming majority of studies were concerned with explaining an uncontested fact, the economic miracle, as if there was a universal model that needed explaining. Against this we would suggest that there is a need to emphasize the complexity and variation in development patterns between countries depending on how and when they entered into the modernization process. Secondly, the crisis has incited a reformulation of the subject matter for analysis beyond the realm of economics. The focus on explaining the economic 120

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miracle model tended to overlook or disregard political processes. Clearly, the role of politics for explaining the miracle has always been placed high on the research agenda, but far less has been done in terms of studies of political development and political organization. The disruptive effects of the crisis have changed the course of events also in the political arena (notably in the case of Indonesia), but more important is that the diversities in the political processes after the crisis reveal differences in underlying social and political structure between countries in the region. Thirdly, fundamental changes in terms of both macro-economic management and economic development and political organization have taken place not only after the crisis, but in fact since the mid-1980s, in the period of increasing integration and globalization of the region. In this period the fundamental politico-economic parameters have been drastically altered, but the outcomes in terms of both economic and political development have varied greatly between countries depending on how and when external forces have combined with underlying internal socio-economic structures and processes.

THE DEMISE OF THE NATION-STATE It is a well-established fact that up until the 1980s the economic miracle in the Asia-Pacific had, to a large degree, rested on strong government-business ties and various forms of state regulation of national markets. This is why controversies over explanations for the economic miracle have centred largely on the role in the economy played by the state, whether in the form of policies (trade regimes and industrial policy), institutional and organizational arrangements (the financial system or bureaucratic capacities) or more fundamental institutions (legal arrangements and forms of governance). However, since the mid-1980s the pressure towards globalization has been signified by a process of integration of markets for goods and capital, which has fundamentally altered the scope and content of governmentmarket relations. During the last two decades the tendency has been to dismantle existing national regulatory frameworks and to open up to free capital movements. The globalization forces after the mid-1980s not only threatened the government-business balance, in the NIEs (Newly Industrializing Economies), but also provided latecomers in the region (first Malaysia, Thailand, Indonesia and the Philippine and, thereafter, China and Vietnam) with alternative development paths. This means that, in case there was something called a uniform development model practised by the Asian NIEs in the period 1960 to 1980, it was of little relevance in 121

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the speeding-up of the process of industrialization in the ASEAN states in the 1980s and in China in the 1990s, and it is certainly of little or no relevance today. Thus, with respect to periodization, the industrialization phase that lasted some thirty years, from the 1950s to the early 1980s, was characterized by economic nation-building programmes formulated and carried out within national borders and with national governments as leading policy actors. In this so-called Developmental State model of development, government control over national financial systems and a relative immobility of productive capital were major characteristics. The main purpose was to mobilize domestic capital and, with the assistance of protective tariffs, to set up domestic industries and nurture local capabilities. During the phase that began evolving from the 1980s and came to full bloom in the 1990s, the role of national governments changed dramatically as private international financial markets developed and manufacturing capital turned global. Instead of mobilizing domestic capital, governments now had the option to take advantage of the huge amounts of FDI available on liberalized international financial markets; and instead of establishing national industries through vast volumes of domestic subsidized capital and protective tariffs they could concentrate on managing the FDI and cooperating with MNCs to achieve a creation of domestic capabilities. These forces placed significantly different demands on government institutions and capabilities. First, the world financial system underwent revolutionary changes as national systems were being gradually deregulated and partly privatized and restrictions on cross-border capital movements were being eased. Given a supply of capital, this signalled a major change with important implications. The specific combination of policies for accumulation and allocation of domestic capital that had been characteristic of the Developmental State model was now threatened and, perhaps, made redundant. Secondly, the Plaza Accord of 1985, which forced Japan, Korea and Taiwan to appreciate their currencies and accept voluntary export restraints (VERs), was to have a dramatic effect on the division of labour within the Asia-Pacific region. Japanese, Korean and Taiwanese export firms, which had already begun to experience lower profitability and declining comparative advantages due to rising domestic production costs were now given a direct reason to seek production location elsewhere. To move production to the ASEAN region was, in this context, a reasonable alternative as product lifecycles could be prolonged. This had an enormous impact on the economic structure of the AsiaPacific region and the scope for national economic policy-making, as funds 122

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from the East Asian NIEs became widely available. In case the governments continued to play a leading role, it is decidedly neither through control of the financial system nor by regulation of FDI. The conditions for industrialization were thus changed for the Southeast Asian economies in comparison with East Asia. As the capital constraint eased, the traditional function of the state as an accumulator of capital became obsolete. However, although the traditional Developmental State may be in demise, the huge influx of private capital has opened up opportunities for new forms of government participation in the economic sphere. One thus finds the new regional division of labour with new forms of government participation in the economic sphere arising, as well as the simultaneous dismantling of the traditional Developmental State after 1985 to be a rather important aspect of the development process in the region. Lamentably, these aspects have been largely ignored by the standard explanations of the economic rise of Asia-Pacific. An inclusion of these aspects will also have a bearing upon the analysis of the relationship between economic development and political change.

NEW MEANS, OLD IMPERATIVE In order to understand why the traditional function of the Developmental State is no longer directly relevant, the drive towards modernization needs to be put into its historical context, that is, one needs to grasp how the problem of backwardness can be surmounted by the means available in each historical period. For instance, when Taiwan and South Korea took off on their growth paths, the transformation of the agricultural economy was as much a viable option as an imperative for the governments to win legitimacy and popular support in over-populous and poverty-ridden rural areas. Although agricultural productivity in these economies emerged as a result of technological changes, redistribution of land became a central pillar of the East Asian Developmental State. At the same time as real and potential social unrest among the peasantry could be checked, the privileges of the traditional elites were curtailed. Under these circumstances the policy of socialization of the accumulated savings originating from the rise of agricultural productivity proved acceptable because living standards continued to rise. This was made possible by the rise of the industrial sector, which was stimulated, in a virtuous circle, by increasing demand from the internal market and government initiatives encouraging labour-intensive industrial activities. In this way the industrialization process, initiated in the nascent domestic market, was stimulated by government action and facilitated by the dramatic rise in world trade in the 1960s. As 123

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demand for East Asian products increased in the relatively high-cost West, East Asian economies could swiftly meet the requirements as labour was in abundance and the agricultural sector already in relative decline. As compared to Taiwan and South Korea, economic development in, for instance, Malaysia and Thailand is characterized by a different pattern of income in equality related to the process of industrialization and the role of government in this process. Whereas Taiwan and South Korea have had a relatively equal pattern of distribution, as a direct function of early rural development, Malaysia and especially Thailand have not. After the land reforms, the question of unequal distribution was, therefore, never of burning importance to the Developmental States in East Asia. For Malaysia and Thailand, the situation has been different and to gain legitimacy those states have been forced to tackle the question of income distribution during their economic modernization process. For Malaysia, this issue had become acute by the late 1960s resulting in the New Economic Policy (NEP) in the early 1970s. In this sense, the Malaysian case is somewhat akin to what occurred in South Korea and Taiwan two decades earlier, but, in contrast to these, Malaysia’s industrialization process gained momentum in a considerably more globalized era and with a much more unequal distribution of income. Malaysia and Thailand were both in a position to take advantage of the global economy given by their comparative advantage in the international markets and the increasing flows of regional capital. The share of manufactured goods in total exports rose dramatically in the mid-1980s and foreign direct investments to the two countries grew strongly in the late 1980s, both in relation to GDP and as a share of total capital formation. In conjunction with this inflow, manufacturing became the dominant sector. This means that with the inflow of capital, both economies were able to produce and export goods of higher sophistication and value-added content. Openness in terms of attracting foreign investment and financial capital and a strong orientation towards export markets are thus central factors for explaining the high growth rates of Malaysia and Thailand. Openness also constitutes the context in which government action has its raison d’être. International dependence is important to consider when taking into account the recession in the late 1990s, since this very dependence is believed to have contributed to the crisis.3 In 1998, both economies experienced negative growth and, after the crisis, growth figures turned positive, but have not reached as high as in the pre-1997 period. In terms of capital formation, FDI plays a more substantial role than ever and the share of exports in total GDP is now higher than in the pre-1997 period. This indicates that the dependence on global markets has risen, but that is, perhaps paradoxically, not to suggest 124

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that the scope for proactive state intervention is impossible or that such intervention would necessarily be destructive.

NOVEL INDUSTRIAL POLICIES IN ASEAN In a broad sense, the task of the governments entering the scene of modernization at this later stage was the same as for the previous (developmental) states: to accumulate or attract capital that could be used in the industrialization and modernization process; and see to it that this capital was allocated in a beneficial way to develop local capabilities and produce sustained economic growth. The way in which this may be accomplished has, however, changed dramatically, and there exists widespread scepticism over the long-run prospects for sustained economic growth in the SEANIEs (Southeast Asian Newly Industrialized Economies). As already mentioned, the SEANIEs and Singapore have deviated from the perceived “Asian” (Developmental State) model as they had relied heavily on FDI early on in their industrialization strategy. The government control of the financial system, perhaps the defining feature of the Developmental State, is no longer there, and the role of development banking has been taken over by FDI. Using Amsden’s division of developing countries, Malaysia, Thailand, Indonesia and Singapore seem to fall into the category of “integrationists”, seeking to “clone themselves to foreign investors as a national growth strategy”4 as opposed to creating “national leaders”. Malaysia and Singapore are, for example, among the stars of the electronics industry, but unlike other stars in this sector, such as Taiwan and South Korea, they have not built up any large domestic firms. At the same time, they have also clearly deviated from the “Western model” of free markets since most governments in ASEAN have intervened heavily in certain areas of the economic sphere to target certain activities and guide resources to desirable uses. Perhaps the most clear-cut important institutional novelty, besides the liberalized capital markets, accompanying globalization and directly explaining the alleged “death” of the Developmental State as a model for development, has been new restrictions governing international trade or, put differently, the introduction of free trade. Governments no longer have the option of building “national champions” and local capabilities with the help of protective tariffs, local-content requirements or production subsidies to the same extent as before, since these are outlawed under current WTO and APEC agreements. It could be argued that many of the control mechanisms and policy instruments of the Developmental State are, for example, finding ways around trade agreements, still available, but the point is that the comprehensive approach 125

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is no longer possible. The Developmental State model was more than the sum of its individual policy instruments and the fact is that a vital part, the control over the financial system, is missing. This does not however mean that the only option left is a perceived “Western” model or that state intervention should be deemed neither unnecessary nor feasible. Rather, globalization and new institutional settings have, as hinted above, given rise to novel ways for the government to intervene in the economy, something that a study of the SEANIEs clearly illustrates. Currently, it seems to be possible to identify two broad trends in the design of industrial policy in the SEANIEs reflecting these developments — trends that can both be explained by the new institutional setting, as well as development within the region. The first trend is a strong tendency for governments to move away from negative restrictions and regulation, such as entry barriers, towards positive incentives and support activities. This is, of course, a result of the banning of many of these restrictive measures, but it also reflects a change in strategy resulting from the fact that the external conditions have changed and that the ASEAN countries have reached a higher stage in their development where policy priorities are different. The problems facing Malaysia, for instance, are in many ways slowly starting to resemble those found on the agenda of developed countries. There is also a need for the ASEAN countries, in a time of globalization, to portray themselves as generally investment friendly regimes, while at the same time they may be continuing with proactive intervention. This is, of course, better achieved by offering incentives for investment, not by restricting it; both can be used to target certain industries, but the latter is perceived as more market friendly, something that they obviously have been very successful at, since especially Singapore and Malaysia are generally portrayed as more hands-off than they actually are.5 The second trend is a move away from broad incentives and sector-wide actions towards more directed ones. Previously, the SEANIEs promoted FDI at a general level, but currently some governments are moving towards a more selective investment and R&D regime — encouraging growth of industrial clusters and more skilled and technology intensive activities with greater spillover potential. As previously argued, on a general level, the economies are going through a phase of liberalization and deregulation since the mid-1980s, but since interventions are lingering and sometimes even escalating, in some restricted sectors the distortion could in fact be growing. This, of course, takes the form of providing more specific investment incentives for R&D (that is, unlike direct production subsidies, still legal under WTO rules) and production with higher value-added content as well 126

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as the targeting of particular sectors to develop clusters with high externalities and complementarities. It can also involve engaging in a dialogue with MNCs or cooperation with them to develop local suppliers, in return giving the foreign investors tax reliefs and favourable treatment in general. All this has the potential to send signals to international investors of what type of investment will receive favourable treatment, and it represents a step away from the rather blunt control mechanisms of tariffs and local content to a more focused one with more follow-up activities instead of merely ex ante screening and regulation.

SINGAPORE AS A FORERUNNER — MALAYSIA FOLLOWING SUIT These new trends in industrial policy in some of the ASEAN countries, where more nationalist strategies give way to alliances with foreign capital and efforts centring on maximizing spillovers from FDI, deviate significantly from the perceived idea of a general “Asian model”. If one were to look for an immediate forerunner, Singapore of course comes to mind, rather than the Developmental States of East Asia, and especially in Malaysia, the term “Look South” definitely seems more appropriate than “Look East”. Singapore has relied heavily on FDI and state-MNC cooperation in its industrialization. After a period of heavy FDI inflows, factor prices began to rise and the government moved away from general investment incentive schemes and introduced a wide range of targeted incentives encouraging MNCs to upgrade their local activities to include product design and so on, and to relocate low value-added activities to other countries in the region.6 The city-state targeted FDI in very specific sectors: for example, several specialized industrial parks catering to the unique requirements of wafer fabrication plants were established.7 Prima facie, the results of this strategy have been very successful as an increasing number of firms started carrying out R&D and advanced production processes locally. The Singaporean version of the Developmental State was thus dependent on cooperation with MNCs from the very start of the industrialization process and throughout it seems to have retained its ability to cooperate and bargain with foreign capital. Thus, being an economy largely in absence of an agricultural sector or other primary resources the means of domestic capital accumulation were limited to the income earned by manufacturing industries and basically from the revenue derived from taxation of labour via the pension scheme, the Central Provident Fund (CPF). The symbiotic relationship between the CPF as a major source of government capital formation and the 127

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MNCs as providers of taxable earnings is the core element of the Singaporean version of the Developmental State. It seems that reliance on cooperation with MNCs has not fundamentally weakened the capacity of the Singaporean government to set up and carry out effective industrial policies. Of course, the analogy between Singapore and the SEANIEs should not be overstressed: industrial policy in Thailand, Indonesia and Malaysia builds on the premise that the countries have vast natural resources. Policy is thus, to a large extent, concentrated on upgrading resource intensive exports into more value-added activities (Malaysia’s export tariffs on crude palm oil and timber, and Indonesia on plywood). However, the experience of Singapore is important because it clearly illustrates how a pro-active industrial policy can be conducted in an open and investment friendly economy. Especially Malaysia, but also Thailand and Indonesia, have embarked on large-scale efforts trying to incorporate some aspects of this Singaporean type of industrialization strategy based on FDI and MNC-state alliances as their economies are, much in the same way as the Singaporean economy two decades earlier, losing in competitiveness to other emerging economies in the region. A well-known example in Malaysia is the establishment of the Multimedia Super Corridor (MSC) and the Multimedia Development Corporation that runs the project and screens applicants according to detailed criteria set by the Corporation itself. Among other things, companies have to employ a certain percentage of highly skilled workers, provide technology transfers, and all manufacturing activities in a traditional industry-like setting are banned. Currently, around one thousand companies, most of them small and mediumsized Malaysian firms and many of them directed towards the local market, enjoy MSC-status and employ some twenty thousand people, mostly highly skilled Malaysian nationals. The whole project revolves around a small number of flagships, the smart-card perhaps being the most interesting one. Hailed as the most successful project of the corridor, this effort is an interesting example of Malaysia’s strategy of targeting semi-conductor-related industries (which is at the fore of industrial efforts in all of Southeast Asia) and the incentives offered together with early demand from the government has the potential of producing dynamic spin-offs as the Malaysian smart-card companies are already starting to penetrate export markets like Indonesia, for example. Another example is the ongoing restructuring of Malaysia’s very massive array of investment incentives under MITI and MIDA to instead target certain desirable sectors and activities — trying to transform import — dependant assembly-style export industries into industrial clusters with stronger backward linkages.8 Malaysia has since long devoted huge amounts of resources 128

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to lure investment by offering generous investment incentives and in various ways indirectly subsidize exports. There has, however, been a major shift in the structure of these schemes towards promoting investment and exports on a general level and rewarding investment in R&D and higher value-added activities more generously. Malaysia’s Vendor Development Programme, and the Malaysian Incorporated project in general, is another area where Malaysia, in a sense, follows in the footsteps of Singapore by opting for state-MNC alliances, and it also illustrates a way for national governments to circumvent the WTO prohibition of local content requirements. This is accomplished by arrangements with MNCs to, in their capacity as “anchor companies”, provide guaranteed purchasing contracts to local companies, with the government providing technical support and capital. Reluctant at first, MNCs in Malaysia have come to learn that participation in the programmes often guarantees them favourable treatment in other administrative decisions and hence, they have become more willing to partake. The SEANIEs have long been criticized for their lack of efficient performance standards and insufficiency in terms of technology absorption and diffusion, both of which are seen as the trademarks of the East Asian forerunners. Perhaps with the newly observed trends in industrial policy in a large part of ASEAN, this problem is finally being addressed. However, the outcomes, as well as the detailed composition, of these new policies pursued by Malaysia and other ASEAN countries are so far largely unknown. The effects of the policies need to be studied in a broader context of economic development, structural transformation and political change. There is also a widely-felt scepticism, despite the apparent success of Singapore, about the efficiency of government technology transfer programmes9 and about the prospects of an FDI-led development strategy in general.

SOME THEORETICAL IMPLICATIONS If we approach the phenomenon of the Developmental State in an institutional and evolutionary context, we should regard it as a gadget of substitution to be used in specific historical circumstances rather than as a universal and fixed exogenous factor, that is, its logic should be related to the function it embodies in terms of providing and encouraging a factor of production that is scarce and deemed “necessary” for development in each specific case. Therefore, the Developmental State should not be regarded as an alternative to the function of the market, but rather as a complement to the market filling a void that the market cannot automatically provide 129

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alone. If the problem at hand is shortage of financial means for industrialization, new ways of appropriating capital funds must be set up through whatever institution or circumstance that allows for an enlargement of the capital supply. As long as nations are the natural boundaries of the market, the state will inevitably be an important actor in the working of this market. The Developmental State will, therefore, continue to be a potentially important player. But it is equally important to recognize that its role in this process (especially as the global markets are gaining strength) must be adjusted to the realms of global conditions. Contrary to what one might intuitively think, it would therefore not be too bold to argue that together with overall liberalization, there is a tendency towards increasing selectiveness in the ASEAN countries. And as such, it is a very important area of study, primarily because the development strategy — leaning on FDI and MNCs and devising various incentives and support programmes to accomplish technology transfer — is, still, in contrast to the original East Asian Developmental State model, highly relevant for developing countries. The World Bank had already in 1993 identified the model practised by the SEANIEs as a more viable option10 (in contrast to the Developmental State model) for other developing countries, but it did so for all the wrong reasons. It is of course important to ask: where do these more selective and sector specific investment and R&D policies and support activities belong in a theoretical context? How can they be legitimized using theory and what problems do they address? These questions touch at the heart of the role of the state in open economies, that is, economies such as Singapore, Indonesia, Thailand and Malaysia under globalization, as well as the prospects of sustained economic growth in open economies in general. Recently, this issue was most clearly expressed by Amsden in her dichotomy between “integrationists” and “independents”. Amsden’s study is basically a long infant industry argument, and it clearly points out the scourge of open economies where FDI and MNCs both crowd out local investments and is negatively correlated with both R&D into new materials, novel product design, production technologies as well as patents, scientific publications and so on. On the whole, the FDI-led strategy results in few national firms, weak linkages, low value-added production, and in the end no productivity growth, and hence no sustainable growth. All these negative labels have been attached to the ASEAN economies, especially Malaysia. In his now famous study, Young compared the productivity growth of Singapore to that of the Soviet Union.11 Taking the new trends in industrial policy in ASEAN and seeing them in the light of these theoretical considerations, as responses to problems 130

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facing open economies, provides clues of how this new role of the state should be treated in a theoretical context. Given these problems, industrial policy either incorporates more nationalist policies, trying to build local capabilities, or “target and guide” policy instruments (a la Singapore) trying to maximize spillovers and attain a favourable position in the international division of labour through a continued alliance with foreign capital. The arguments in favour of more nationalist strategies are well developed, in Amsden’s study to name one, but the extent to which such policies are currently pursued in ASEAN, and there are signs that this is the case, the discussion needs to be checked by the new conditions for this type of policy under globalization as discussed above. A comprehensive strategy is no longer possible, and it needs to be remembered that these policies are being implemented in a later stage of development. A successful example of such a policy is the way Malaysia has created a palm oil processing industry through export tariffs on crude palm oil, and Indonesia has done the same with its plywood industry. A well-known, although some claim unsuccessful, example has been Malaysia’s national car project, Proton.12 The current scope of such policies, however, needs to be properly studied. As far as targeting and guiding is concerned, it is possible to initially separate policies that support certain activities in general, for example R&D, and those that are directed towards particular sectors. The underpinnings of R&D grants are quite well-defined as they are part of mainstream economics: the idea is simply to promote activities that, due to positive externalities, suffer from under-investment. Scientific research at the basic level is a classic example. Hence, most quarters agree that government promotion can sometimes be warranted in this respect and most countries do indeed promote R&D at a national level. However, the theoretical context of targeting specific sectors and taking an active part in the process where the economy is being upgraded, as the case has been in Singapore, is more controversial and complicated. From a theoretical perspective, it seems clear that the problems of linkages and confinement to low value-added activities can be successfully addressed. But if there is a theoretical rationale in this type of targeted policies and in what ways they actually enhance sustained (in a dynamic sense) growth, which is at the heart of the issue here, they remain unclear. A majority of the targeting policies in Malaysia and Singapore is directed at creating so-called clusters. It is, however, unclear what role the state can play in creating such dynamic entities: Porter, who coined the term, was for example very sceptical about the prospects for governmentcreated clusters.13 However, there does seem to be some scope for state 131

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participation, and a study of industrial policy in Southeast Asia could contribute to important theoretical issues. The role of the state in the creation of clusters, technological and geographical, is poorly understood. Even Porter acknowledges that early and sophisticated government demand can be very important, and the cases of Singapore and Malaysia seem very interesting, as both their governments are major clients for pioneering technologies, and it also seems as if Malaysia’s Penang state government has played an important coordinating role in the emergence of a competitive machine-tool industry supplying foreign electronic firms.14 From an analytical point of view, a way forward could perhaps be to incorporate aspects of more dynamic growth models when studying these policy efforts, something that one can find elements of in both Amsden’s and Porter’s works, but also in the so-called Swedish “growth school”, where Erik Dahmén’s “development blocks” and technological complementarities have much in common with the concept of technological clusters. 15 Using insights from these different scholars, policies in ASEAN could be studied further in terms of how much they (through control mechanisms) push firms and sectors to innovate locally, in order to break the negative correlation (as noted above) between FDI and the foundation of growth, innovation, in addition to upgrading industry. The Southeast Asian governments, through a strategy of an investment-friendly regime in combination with a proactive industrial policy in response to changing global conditions, are seemingly trying to accomplish this. It is too soon to tell if they will succeed. But as opposed to what the orthodoxy might suggest, the attempt should not be dismissed prematurely.

Notes 1

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Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975 (Stanford: Stanford University Press, 1982); Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989); Robert Wade, Governing the Market (Princeton: Princeton University Press, 1990); World Bank, The East Asian Miracle: Economic Growth and Public Policy (New York: Oxford University Press, 1993). Martin Andersson and Christer Gunnarsson, eds., Development and Change in Asia-Pacific: Globalizing Miracles or End of a Model? (London and New York: RoutledgeCurzon, 2003). Ajit Singh, “Asian Capitalism and the Financial Crisis”, in Global Instability: The Political Economy of World Economic Governance, edited by Jonathan Michie and John Grieve Smith (London: Routledge, 1999); Robert Wade, “The Asian Debt-and-Development Crisis of 1997: Causes and Consequences”, World Development 26, no. 8 (1998): 535–53.

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Alice Amsden, The Rise of The Rest: Challenges to the West From LateIndustrializing Economies (New York: Oxford University Press, 2001), p. 14. Fredrik Gustafsson, Malaysian Industrial Policy 1986–2002. Unpublished Master’s thesis (Department of Economic History, Lund University, 2003); K.S. Jomo, ed., Southeast Asian Paper Tigers? From Miracle to Debacle and Beyond (London: RoutledgeCurzon, 2003); Linda Low, The Political Economy of a City-State: Government-made Singapore (Singapore: Oxford University Press, 1998). Sanjaya Lall, Learning from the Asian Tigers: Studies in Technology and Industrial Policy (London: Macmillan, 1996), pp. 69–70. Leo Van Grunsven, “Achievements of the Industrial ‘High-Road’ and Clustering Strategies in Singapore and their Relevance to European Peripheral Economies”, European Planning Studies 7, no. 2 (1999). Greg Felker and K.S. Jomo, “New Approaches to Investment Policy in the ASEAN 4”, in Southeast Asian Paper Tigers?, edited by K.S. Jomo (2003). OECD, Southeast Asia: the Role of Foreign Direct Investment Policies in Development (Paris: OECD, 1999). The World Bank, The East Asian Miracle (1993). Michael Hirsch, “The State Strikes Back”, Institutional Investor 27, no. 9 (1993): 123–27. Rajah Rasiah, “Manufacturing Export Growth in Indonesia, Malaysia and Thailand”, in Southeast Asian Paper Tigers?, edited by K.S. Jomo (2003). Michael E. Porter, The Competitive Advantage of Nations (London: Macmillan, 1990). Rajah Rasiah, Foreign Capital and Industrialization in Malaysia (London: Macmillan, 1995). Erik Dahmén, Svensk industriell företagsverksamhet: kausalanalys av den industriella utvecklingen 1919–1939 [Entreprenurial Activity in Swedish Industry during the period 1919–1939] (Stockholm: Industriens utredningsinstitut, 1950).

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7 ECONOMIC NATIONALISM AND THE LIMITS OF GLOBALIZATION Helen E.S. Nesadurai

INTRODUCTION: ECONOMIC NATIONALISM AND ECONOMIC GLOBALIZATION Events since the closing years of the 1990s seem to indicate a turn to what is popularly termed economic nationalism, an approach that is said to privilege individual state interests and the adoption of interventionist or illiberal economic policies, particularly trade protection, to fulfil the state’s declared developmental goals. Economic nationalists who endorse such protectionist and self-serving policies, it is claimed, have little regard for the interests or well-being of other states and communities that may be harmed by these policies. Economic nationalism has been blamed for the failure of the World Trade Organization (WTO) to initiate a new round of global liberalization at the 1999 Seattle Ministerial Meeting as both industrial and developing countries sought to safeguard their respective national interests and were unwilling to compromise for the good of the multilateral trading system as a whole. Global trade talks have been in limbo since then, with no agreement reached either in 2003 at the Cancun Ministerial or at the 2005 Hong Kong Ministerial. Latin America is currently posing deep concern, especially to economic and financial circles due to the “wave of nationalizations” in countries like Venezuela, Bolivia and Ecuador.1 Resistance by developed country governments, in France for instance, to foreign purchases of domestic/ national firms even when national security considerations are minimal is 134

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another disturbing trend emerging in the world economy that is attributed to the rise of economic nationalism.2 Post-millennium actions of the United States have also caused some concern for the world political economy, with the seemingly nationalist George W. Bush administration introducing tariff protection on imports of steel and clothing and imposing anti-dumping duties on Vietnamese catfish imports in order to protect U.S. industry and jobs. The debate over the outsourcing of high-skilled knowledge-based jobs from the United States, which featured as a central election issue during the 2004 Bush-Kerry presidential campaign, was also informed by a degree of nationalist concern about the long-term strength of the U.S. economy if the latter continued to experience a hollowing out of high-technology activities.3 These developments raise a crucial question in the context of globalization: do these trends indicate a worldwide turn towards economic nationalism, and if so, does this shift in economic ideology and policy practice portend growing limits to globalization of the world economy? As Shulman notes, most scholars take it as a matter of faith that nationalist sentiments must be weakened if global integration is to make headway.4 Yet, economic policies of the sort described thus far, often characterized as economic nationalist policies, are not novel and have been all too common in the post-1945 world political economy. Their adoption did not appear to hinder the growth of global economic integration since the end of World War II seen in the expansion of trade and investment links worldwide. This alone suggests that the relationship between economic nationalism and economic globalization may not be as contradictory as critics of protectionism and adherents to economic liberalism would propose. It is clear that we need to sharpen our analytical understanding of both economic nationalism and globalization to better understand the relationship between these two phenomena. Following this introduction, the section below reviews the literature on economic nationalism, focusing on recent calls in the literature to reconceptualize the term to emphasize its nationalist content rather than to simply associate it with interventionist or illiberal policies by definition. Although reformulating the concept of economic nationalism does not adequately help us distinguish economic nationalist policies from policies that may stem from more particular interests but are simply framed in terms of benefiting the national community and economy, the exercise, nevertheless, offers us added purchase on the link between globalization and economic nationalism. The analysis is supplemented further in this chapter with a more comprehensive understanding of globalization that captures its multi-faceted nature. Here, the chapter offers a three-pronged conception of globalization, which also reveals the historical continuities 135

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and discontinuities associated with it. While globalization at its most basic represents a process of worldwide economic integration reflected in the movement of goods, services, capital and money across countries, late twentieth century globalization has unique spatial consequences through its capacity to disaggregate production across space and time, perhaps even taking us closer to the “end of geography”. Most importantly, late twentieth century globalization is also an inherently political project whose proponents aim for a single self-regulating global market with universal standards and none or few barriers to the free movement of goods, services and capital across borders. Using the conceptual insights from these two sections, the discussion will then proceed to examine how economic nationalism relates to each of these three dimensions of globalization.5

CONCEPTUALIZING ECONOMIC NATIONALISM Although economic nationalism is one of the three core theoretical perspectives in the field of International Political Economy (IPE), far less attention has been devoted to studying it compared to the other two perspectives, namely economic liberalism and structuralism/Marxism. Our understanding of economic nationalism is for the most part simplistic, with nationalist behaviour more often than not associated with “offensive and aggressive policies”.6 This is largely due to the polemical use of the term by liberals to characterize the autarchic, protectionist and aggressive policies adopted by Germany, Italy and Japan during the inter-war period.7 Part of the blame for the pejorative connotations associated with economic nationalism must also fall on those who emphasize the malignant outcomes of nationalism such as racism, xenophobia and violence.

Recent Critiques Not surprisingly, economic nationalism has commonly been associated with protectionist or other policies that deviate from liberal economic principles. This particular understanding of economic nationalism is evident not just in popular discourse but in scholarly work as well. Liberal economists tend to use the term to describe policies that do not fit in with the liberal definition of economy and development.8 Noted international relations scholar Robert Gilpin similarly emphasizes the link between economic nationalism and protectionism, arguing that governments driven by economic nationalist sentiments tend to adopt industrial and other protectionist policies in an attempt to defend domestic interests, attain political autonomy and build 136

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power for the state in an anarchic, competitive international system.9 He further suggests that nationalists “emphasise national self-sufficiency rather than economic interdependence”.10 The prevailing view among scholars is that nationalists, or those subscribing to nationalist sentiments are “inherently hostile to free trade, foreign investment, inter-dependence and globalization”.11 Such a conceptualization of economic nationalism has come under increasing criticism in the scholarly literature. Critics question the tendency amongst these scholars to conflate economic nationalism with illiberal and protectionist policies without offering a theoretical connection between the two. The relationship is merely assumed, or given by definition.12 Moreover, there is little attempt to clarify why many of these illiberal policies should be termed “nationalist” since they are equally likely to have been inspired by other ideologies, socialism for instance, or more instrumentally by particular sectoral interests.13 Justification by politicians that such policies benefit the nation is no reason to label them economic nationalist policies. Part of the reason for the conflation of economic nationalism with protectionism stems from the selective reading or misinterpretation of the classical nationalist writings, notably of the German thinker Friedrich List (1789–1846) and American statesman Alexander Hamilton (1755–1804). Both men are considered to have made seminal contributions to economic nationalism as philosophy and policy. Those analysing economic nationalism have, unfortunately, chosen to stress the industrial policy and infant industry aspects of these economic nationalist writings to the exclusion of key liberal elements in these works.14 Moreover, the literature has also ignored other nationalist policymakers and thinkers of the nineteenth century who advocated other types of policy programmes, including free trade.15 A more fundamental criticism is that prevailing scholarly and popular usage of the term links it to classical mercantilist practices, which were about boosting state power and the interests of a narrow group of commercial elites allied to state elites, thereby ignoring the wider “nation” or national community.16 Mercantilism basically involved an intertwining of trade and conquest as twin strategies adopted by states and empires of the sixteenth century to maintain their security and build wealth for the absolutist state.17 While List and Hamilton borrowed a number of ideas on economic development from mercantilist thinking, neither of them subscribed to its aggressive core, which was to enhance the power of the absolutist state and a narrow commercial elite through trade, often in readiness for war.18 The statist and inherently aggressive ideology of mercantilism is quite distinct from, and pre-dates nationalist ideas that emerged in the nineteenth century, 137

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which were essentially centred on the nation, national self-determination and a shared national identity.19

Re-Conceptualizing Economic Nationalism: Emphasizing the ‘Nation’ Many scholars of IPE have, therefore, called for the “nation” and “nationalism” to be made the central focus when conceptualizing economic nationalism.20 In this formulation, no particular type of economic policy is presumed a priori to be central to economic nationalist behaviour; instead, it is the nationalist sentiment that is central in the concept. This preferred approach makes the nationalist sentiment or national goals as central and prior to identifying the economic policies that nationalist-oriented policymakers adopt to realize their nationalist goals. This approach, however, begs two questions: what is the relevant ‘nation’, and what are its nationalist goals? In general, there can be a large variety of nations, defined as a “group of people who feel they form a distinct community bounded by shared culture, history, territory, ancestry, and destiny”, as well as different kinds of nationalism ranging from ethnic or cultural nationalism, civic nationalism and postcolonial nationalism, the last often incorporating multiple nations.21 Such forms of nationalism are often expressed through the state — the nation-state — that remains the ultimate aim of many nationalists clamouring for national self-determination.22 We can, therefore, assume an existing or desired congruence between nation and state in the contemporary era and thus refer to the economic nationalism of [nation]-states.23 As for goals, all forms of nationalism, irrespective of their diversity, generally share a number of core goals — the promotion of the autonomy, identity, prestige, and prosperity of the nation. For some of the leading scholars of nationalism, a nationalist doctrine that emphasizes collective self-determination and the desire to be as independent as possible leads logically to economic policies of protectionism and autarchy.24 The nation seeks to minimize extra-national influence over its affairs and to gain control of its own destiny. Such views have, however, been challenged on theoretical and empirical grounds. Shulman has developed a theoretically rigorous argument to explain why economic nationalists might support economic integration even if their primary goal is national autonomy.25 First, autonomy can be gained through material wealth, since an economically strong nation is more likely to withstand external threats and coercion than an economically weak nation. Today, many scholars and policymakers worldwide recognize that free trade and economic integration delivers better prospects for growth and wealth creation than 138

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protectionism.26 The autonomy or control over national life gained through economic insulation may, therefore, be more illusory than real. Second, autonomy is gained when the economic interactions of a nation are diversified so that it is not vulnerable to any one external actor. Again, this leads nationalists concerned with autonomy to consider policies that support economic integration. Wealth can also be employed to offset lingering cleavages and build national unity in multi-ethnic states. These arguments suggest that the nationalist preoccupation with autonomy and unity, rather than favouring only autarchic or protectionist policies, also provides incentives to adopt liberal policies favouring integration. Shulman’s analysis based on case studies of India, Quebec and the Ukraine further suggests that the balance of incentives lies in favour of integration.27 In short, economic nationalism generates inconclusive or ambiguous economic policy preferences. This revised understanding of economic nationalism is also consistent both with historical experience and the writings of List and Hamilton. List is best known for his advocacy of infant industry protection, arguing that agricultural countries should actively engineer the growth of industry through the use of selective tariffs and only move to free trade once industry becomes internationally competitive.28 Hamilton, likewise, advocated state support of manufacturing, which he argued would bring greater economic gains to the nation compared to agriculture.29 Neither was an ardent protectionist, however. Although both men accepted the liberal case for free trade, they believed that free trade in the presence of already industrialized states would not yield the expected benefits for economically weak, non-industrialized countries. List and Hamilton, therefore, advocated selective protectionism in order to promote industrialization in these countries before full international integration could be contemplated. Nevertheless, both men placed fairly stringent conditions as to when protectionism could be employed.30 Both also rationalized the need for temporary and limited protectionism on nationalist grounds, to develop young and rising nations,31 while explicitly rejecting protectionism for already industrialized, advanced nations.32 The ambiguous policy position in the revisionist conception of economic nationalism is reflected in nineteenth century economic nationalist practices. Helleiner identified at least four distinct strands of economic nationalist policy practices during this period.33 While economic autarchy and infant industry protection (or Listian economic nationalism) constituted two variants, a third variant actually endorsed classical liberal policies of free trade and the gold standard as a means to strengthen the national economy — he terms this liberal nationalism. The fourth was macro-economic activism. All four types of policy constitute distinct instruments through which to help a given 139

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nation obtain prosperity, and autonomy as well as build a sense of national pride, identity and community. Interestingly, a careful reading of the classical economic liberals such as Adam Smith and John Stuart Mill reveals a substantial degree of overlap of their ideologies and economic policy positions with those of economic nationalism. Both Smith and Mill echoed the economic nationalists in endorsing infant industry protection for building national prosperity as well as for national security.34 List’s differences with the economic liberals were less over policy matters than over the latter’s individualist and global/cosmopolitan ontology. He disagreed with the classical liberal practice of evaluating economic policy in terms of its implications either for individual choices or for “global” welfare. Instead, List maintains that in a world where individuals are members of nations, economic policy needs to be considered from the standpoint of the prosperity, identity and prestige of the nation as a collective community.35

Economic Nationalism: Normative Considerations One of the main reasons for rejecting economic nationalism as a progressive economic philosophy was its association with mercantilism, self-serving behaviour and conflict.36 Increasingly, however, scholars have successfully demonstrated the analytical distinctions between the two, as the preceding discussion has revealed. Although both mercantilism and economic nationalism emphasize the well-being of the collective, the interests of the absolutist state (plus a narrow elite group of commercial actors) are primary in mercantilism while economic nationalism theoretically privileges the interests of the broader national community.37 Nevertheless, these analytical distinctions may not translate too well to the empirical world as a way to distinguish between mercantilist and economic nationalist behaviour, or between desirable and undesirable economic nationalism. Economic nationalism may be easily employed in the service of aggression and exclusion, sometimes unintentionally, if the privileging of one nation or nation-state involves the discrimination of other nations and nation-states. It could also mask internal distributional conflicts. Internal and international conflict is likely in such instances. It is on these normative grounds that economic nationalism remains discredited. One way to address the normative impasse is to make a distinction between benign and malign economic nationalism.38 Cohen suggests that benign economic nationalism “lies in the willingness of a country to identify its own national interest with an interest in the stability of the overall international system… acknowledges a connection between self-interest and 140

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systemic interest”.39 Benign economic nationalism, though appreciating the inter-linkages between national and systemic interests, does not preclude international conflicts, however, as each nation-state seeks to promote its own prosperity and autonomy. Nonetheless, it does involve a willingness on the part of the government concerned to address contentious issues, including through compromise. This type of economic nationalism is fundamentally not aggressive. We can apply a similar approach to the national level and deem a benign economic nationalism as one that emphasizes a shared fate amongst the national community as a whole, involving shared responsibility for the well-being of different groups and consequently, for the overall nation.40 The economic compromises between different social groups in welfare states and corporatist states, as well as between different ethnic groups in multiethnic states, may be regarded as manifestations of a benign form of economic nationalism at work — to enhance the well-being of the national community as a collective. We should acknowledge, however, that privileging the national community through economic policy could well have external effects and detract from the welfare of other national communities in an integrated world economy. This is especially likely if illiberal or protectionist policies are employed. In this context, we can draw on insights from List who offers some guidelines on the conditions under which such behaviour may be acceptable.41 First, List was emphatic that industrial protection should only be available to countries at the early stages of industrialization — developing states. Liberal economic policies were to be the norm for already industrialized, developed nations. Second, he advocated protection on a selective and temporary basis for developing nations, aiming for those sectors that contributed most to knowledge and experience, as well as linkages to other sectors. Third, he called for the introduction of competition and free trade only after the attainment of a certain stage of development, cautioning that premature liberalization would damage infant industries. Finally, List saw protection as only one instrument in a comprehensive package that included socio-economic, industrial, financial and educational policies, as well as emphasized the importance of domestic institutions of governance. These guidelines give us some basis for determining whether economic nationalist behaviour in the present time is justified.

Economic Nationalist Policies and Globalization One key issue that arises from adopting a revisionist conception of economic nationalism is the latter’s policy ambiguity. Four possible policy types have 141

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been identified from historical experience that policymakers have used to attain nationalist goals — economic autarchy, Listian nationalism (infant industry policy), macroeconomic activism and liberal nationalism. Helleiner argues that, with the exception of economic autarchy, the other three policy practices are prevalent in the current era and pose some challenge to the economic liberal ideology and its creed of the self-regulating market and the minimal state.42 We need to ask, therefore, whether they all pose equal limits to globalization. In addition, we should consider a fifth economic nationalist policy practice that has become a growing phenomenon amidst growing integration of the world economy — economic regionalism, to be discussed in greater detail below. How does regionalism serve the national economy and community, and what does its ascendance imply for globalization? Before addressing these questions, the chapter takes a closer look at the phenomenon of globalization.

GLOBALIZATION AND THE WORLD ECONOMY Globalization, defined by Webster’s dictionary as the process of “making worldwide in scope and application” is a multi-dimensional phenomenon comprising the economic, political, social, and cultural. This chapter focuses on economic globalization, which is regarded as causally primary by many scholars through its central feature of re-organizing production and consumption on a worldwide scale.43 Although numerous specific definitions of globalization abound, each emphasizing some aspect or other of the complex outcomes of globalization for states and societies,44 many of these definitions nonetheless share as their central core the notion of globalization as a process whereby trade, capital, finance, information and to a lesser extent, people, move across national territories.45 The outcome is the creation of trans-regional and/or trans-continental networks of economic, ideational and human interactions that transcend territorial boundaries.46

Globalization as a Secular Process of Market Integration Seen in this way, globalization represents a continuing historical process of worldwide economic interaction. In this formulation, globalization is not a novel phenomenon since such economic interactions are not historically unprecedented.47 This does not, however, imply that it is an inexorable process driven by purely technological and market forces. Instead, the process of worldwide market integration was also the result of the political actions of state elites consciously promoting the internationalization of 142

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their economies.48 That task is also shared with key multilateral institutions such as the International Monetary Fund (IMF), the World Bank and the WTO, as well as other regulatory actors such as the Bank for International Settlements (BIS), which together underwrite the growing integration of individual national markets. However, this particular conception of globalization as a secular, historical continuity does not capture two other dimensions of the phenomenon that impart a novelty to late twentieth century globalization. The shift to more flexible or post-Fordist modes of production in a wide range of sectors has altered the dynamics of wealth creation in ways that make trade and especially foreign direct investment (FDI) central to prosperity.49 It has led to a majority of developing country policymakers accepting the need for integration into global markets as the route to wealth creation.50 This shift in the microeconomics of production also drives the spatial re-organization of production, a novel feature of late twentieth century globalization. In addition, the 1980s saw the emergence and consolidation of a simple (neo-liberal) recipe for prosperity — liberalization, deregulation and privatization that constitutes the present development paradigm. Where previously the World Bank had defined development as industrialization and had also advocated an importsubstitution strategy as the means to this end, the World Bank re-defined development in 1980 as “participation in world markets” in its 1980 World Development Report.51 The re-definition of development in terms of market integration is part and parcel of the political project of globalization to create a single integrated world market with universal standards. This inherently political aspect of late twentieth century globalization renders it a historically novel phenomenon.

Globalization: Changing Dynamics of Production and its Spatial Re-organization The growing turn to more flexible modes of production has had two effects. First, it has emphasized the importance of “created” assets, defined to include information, technology and management/organizational competencies.52 These assets tend to be the property of firms, especially the transnational corporations (TNCs), therefore making FDI a key means to wealth creation in the world economy. Consequently, competition for FDI, especially among developing countries, has intensified.53 This suggests that globalization itself reinforces incentives in favour of liberalization. As will be discussed later, it also provides incentives for states to engage in regional economic cooperation, which is employed as a tool through which to attract foreign investors seeking 143

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larger, integrated regional markets within which to organize their production and/or sales. Second, changes in production technology, especially in information and communications technologies (ICT), have facilitated the disintegration of production, leading to myriad forms of outsourcing both within the national economy and abroad. Paul Krugman calls this “slicing the value chain”, a trend that has been evident since the 1970s.54 Initially, the fragmentation of production allowed the relocation of labour-intensive and low-skilled, screwdriver operations to offshore sites, especially in the developing world. Increasingly, that trend is seen in higher value-added manufacturing processes and more recently, in services and the information economy.55 The disintegration of production provides an avenue through which developing countries are integrating into the global economy. However, skilled workers in the industrial world increasingly have to contend with competition from their skilled counterparts in the developing world.56 These trends have considerable social and political implications, and could trigger a protectionist response, a point the chapter returns to in the concluding section.

Globalization as a Political Project As a political project, late twentieth century globalization involves attempts to install a self-regulating single market on a world-scale, revealing a historical discontinuity in how the world economy is managed.57 This project is backed especially, though not solely, by the industrial states and transnational economic forces, particularly financial capital, normatively justified by a set of neoliberal/neo-classical economic ideas (the Washington Consensus and Augmented Washington Consensus)58 that are in turn institutionalized in the form of global rules through the key multilateral institutions. In policy terms, the project aims at reducing and eventually removing all policy-related border and non-border barriers to the free movement of goods, services and capital across states, as well as harmonizing or standardizing existing national regulations and institutions worldwide. This accounts for the preoccupation of the WTO with new agreements in services, investment, and government procurement that, by reaching deep into areas of domestic policy-making, have the potential to markedly weaken the discretionary authority of governments on key aspects of domestic policy. By doing so, they also have the potential to guarantee global firms maximum freedom of operation in as many national economies as possible.59 To appreciate the novelty of this dimension of globalization, we should contrast the globalization project with the development project of the post144

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World War II era, a project closely associated with nation-building that followed decolonization. Its primary goal was to maximize national welfare by reproducing the Western development and modernization experience — industrialization — across the Third World using “nationally managed economic growth”.60 Three characteristics of the development project are salient in the context of this chapter. First, the system of nation-states was the crucial institutional framework that helped stabilize the world capitalist economy. Second, the task of the nation-state to manage national economic growth was supported by the Bretton Woods institutions (IMF and the World Bank) and the GATT. Third, the entire system was premised on the “embedded liberal compromise”, which combined “nationalist” goals of maximizing national prosperity, employment and rising living standards with a liberal external trade regime. Embedded liberalism thus allowed governments to intervene in the domestic economy to safeguard domestic social stability provided border barriers to international trade were progressively reduced.61 Its architects were state managers responding to the growing demands for economic inclusion by the working classes of the developed world, and the colonial and post-colonial movements of the developing world. Although one should avoid romanticizing the development project given some very conspicuous development failures in practice and the intellectual shortcomings of what was essentially a Euro-centric approach to development/ modernization,62 its real-word successes should not be discounted either.63 Import substitution was not the dismal failure its detractors have made it out to be, raising domestic investment and enhancing productivity in a very broad range of countries, at least until the mid-1970s.64 Both national and international institutions helped to stabilize the capitalist economy, as well as underpinned its gradual extension across national boundaries. National stabilization of wages and the labour market ensured sufficient demand to sustain capitalist expansion, while international institutions provided the stable monetary relations that enabled this process to extend across national boundaries.65 The project collapsed, however, due to a combination of factors in the 1970s: the ending of the Bretton Woods system of stable currencies, two major oil shocks, a number of commodity boom-and-bust cycles and the shock rise in U.S. interest rates in the early 1980s. For Rodrik, it was macroeconomic maladjustment to these external shocks that led to the economic collapse in many developing states rather than import substitution industrialization per se.66 As a result, the development project gave way to the globalization project as monetarists and economic liberals gained ascendancy over Keynesian demand managers in the United Kingdom and the United States, and debt-stricken developing states became subject to the “new” 145

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development paradigm of the international financial institutions and their structural adjustment programmes. The globalization project departs from all three key features of the development project. The development project sought to stabilize the world capitalist economy through nationally managed economic growth and industrialization that also paid attention to social goals. In contrast, the globalization project seeks to create the conditions for transnational capitalism through global economic management based on universal rules and standards, specialization according to market-driven comparative advantage, and guided by the goal of market efficiency and international competitiveness.67 The globalization project has, thus, adopted a set of new criteria by which to define development. First, as already noted, development is now re-defined to emphasize integration into the world economy. States can only develop if they insert themselves into the world economy following a set of purely market-based comparative advantages. Second, a comprehensive neo-liberal economic policy programme of liberalization, deregulation and privatization is required to ensure successful integration in the world economy. Third, development is best left to the workings of the self-regulating market. The state is deemed to be an inefficient manager of national economic growth, and worse, liable to engage in rent-seeking, which therefore requires a minimization of its role in accordance with the neo-liberal creed of the nightwatchman state. It also implicitly accepts liberalism’s “trickle-down” arguments. While we should avoid exaggerated criticisms of globalization, it is clear that the globalization project imposes a neo-liberal understanding of development based on a “one-size-fits-all” model of liberalization and universal market standards, including that of a minimal state.68

ECONOMIC NATIONALISM AND GLOBALIZATION: CONTEMPORARY TRENDS How do these three conceptions of globalization, which are not mutually exclusive, help us define the relationship between globalization and economic nationalism? As a starting point, it is important to keep in mind that globalization does not make the ideology of economic nationalism irrelevant given that nation-states and nationalism remain dominant facts of international life. Even liberal policies are more often than not adopted because they promise to enhance the wealth and prosperity of nation-states. Additionally, economic discourse remains firmly rooted in the nation-state, reflected in conventional economic indicators such as gross domestic product (GDP), gross national product (GNP), per capita income, national trade balances, 146

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national debt, and national competitiveness, to name a few. Moreover, the state remains crucial to the neo-liberal globalization project, albeit as a “regulatory” apparatus, the vehicle through which global regulatory rules and the new goals of economic governance — efficiency, competitiveness and credit-worthiness — are conveyed to domestic populations.69 If globalization does not render economic nationalism irrelevant, what are the implications of economic nationalist thinking and behaviour for globalization? The preceding discussion showed that placing the nation at the centre of economic nationalism, even if aiming for the goal of national autonomy, provides considerable incentives in favour of integration in the present era. The worldwide shift in the attitudes of policymakers towards closer participation in the global economy, especially in the developing world and the former communist economies comes from their desire to generate prosperity for the national community. If we see globalization as a process of market integration, then clearly economic nationalism as a motivating force does not necessarily always challenge it. Paradoxically, it may even strengthen globalization, as the following discussion shows.

Liberal Nationalism Prevails There is considerable evidence that the state has been important in furthering globalization processes worldwide. In parts of the industrial world, public policy has shifted from a previous emphasis on welfare goals to nurturing the “competition state” in order to maintain a favourable environment for transnational capital, in the process strengthening market integration.70 Even in social democratic polities where re-distributive welfare goals have not been rejected in toto in favour of the competition state logic, the role of the state has been crucial in navigating a middle-ground between free market liberalism and managed markets.71 The salience of the state in globalization is also evident in the former communist world. Marketization of previously command economies has been led by the state as it created markets in goods, services, capital and labour where none or only rudimentary markets existed previously. In addition, by adopting policies of trade and investment liberalization as well as the decision to join the World Trade Organization (WTO), state authorities have facilitated the integration of the transition economies into the capitalist world order. Developing states as well have made conscious policy choices to integrate their economies more closely with the global economic order. Much liberalization has taken place in the developing world’s trade and investment regimes, leading to substantial market access to these economies 147

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although average tariff and non-tariff barriers remain higher than in the industrial world.72 Average tariffs in the developing world fell from 30 per cent in 1980 to less than 15 per cent in 2000.73 By this time, about half the trade of developing countries was with other developing countries. Moreover, investment liberalization has led to their growing participation in global investment/production networks, which is also reflected in the shift in their trade structures. Compared to the period before the 1980s when developing countries were mainly exporters of primary commodities, by the end of the twentieth century manufactured exports constituted about 80 per cent of their exports, up from 25 per cent in 1980.74 Even though developing countries continue to impose tariffs on industrial products, trade economists expect governments to liberalize these eventually.75 Their changed sentiments on integration with the world economy are also reflected in the large developing country membership of the WTO, the foremost institutional agent of globalization. To date, two-thirds of the WTO’s 149 members are developing states, with at least ten least developed economies awaiting accession. Despite the near worldwide acceptance of liberal economic policies since the mid-1980s, it is perhaps more accurate to interpret this commitment in instrumental rather than ideological terms. This is true of the developed world as well where economic policy choices reveal significant departures from the theoretical world of liberal economics. For instance, infant industry policy informs part of competition state behaviour in the industrial world and not just in high-income developing states.76 In the “competition state”, governments not only set out to provide an environment attractive to international production by providing sound physical infrastructure, human capital (a skilled workforce) and macro-economic stability, they often also adopt industrial and technology policies to the extent that these are permissible under global trade rules.77 Helleiner suggests that even the U.S. embrace of liberal economic policies needs to be seen as partly instrumental, to enhance the competitive strength of the U.S. national economy and by extension the dominance of the United States in world politics.78 Liberal policies do not harm, and certainly benefit, American businesses that are already world competitive and leaders in many fields.79 But, neither have U.S. policymakers been averse to imposing tariffs on American products hurt by global competition, as has happened in agriculture, the automobiles sector in the late 1980s and more recently in steel80 and textiles/clothing. The nationalist impulse is further reflected in the U.S. embrace of industrial policy despite its rhetorical commitment to liberal economics, with many new federal projects undertaken primarily for their potential contribution to U.S. economic competitiveness.81 In the past, virtually all industrial 148

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projects had been aimed at non-commercial or military applications although they may have had commercial spillover benefits and helped to raise national competitiveness.82 The liberal nationalist impulse is especially clear in the developing world where the turn to liberal economic policies83 has not muted their criticism of the WTO and their collective refusal to endorse the new liberalization agenda of the WTO. These trends are best seen as constituting a nationalist challenge to the neo-liberal globalization project by countries newly integrating themselves into the world economy and unwilling to accept a purely marketbased position in the global division of labour. Shulman’s argument, discussed in the previous section, that economic nationalism prompts the adoption of integrationist policies did not discuss the possibility that policymakers driven by nationalist considerations might attempt to negotiate the terms and conditions of their integration into the world economy. In short, how they integrate also matters to policymakers preoccupied with ensuring national development and prosperity as well as national pride and strength. These challenges could take a number of forms, including resistance to further entrenching neo-liberal rules in the multilateral institutions as well as the use of activist economic policies to build dynamic comparative advantage, including through regional economic cooperation. Both these nationalist responses are discussed below.

Economic Regionalism in the World Economy Many studies point to the growing use of regional economic cooperation since the mid-1980s as a policy tool through which states, on a collective basis, are attempting to enhance their global competitiveness in order to attract investment to their respective economies.84 The EU is only one example of this prevalent trend in world politics, which is also evident in the developing world. Although the members of a regional project might themselves be competing with each other to attract globally mobile investment, they are, nonetheless, prepared to cooperate in pooling their individual markets together through regional cooperation. Because many TNCs are realizing their global corporate strategy through transnational production and sales organized on a regional basis — termed the regional logic of global capital — an activist policy of regional economic cooperation offers small economies the means to help redirect global capital to their economies.85 Otherwise, they could well lose much-valued foreign capital to other sites, especially to large sites such as China and increasingly India, to which much global capital is flowing today.86 149

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Contemporary regionalist projects, therefore, help national economies insert themselves into global investment/production networks. For this reason, they are often termed projects of open regionalism, which contrasts sharply with the closed regional projects of the 1960s and 1970s that were aimed at insulating their members from the global economy.87 Found in virtually all parts of the world,88 open regionalism may be regarded as a form of economic nationalism, a project undertaken collectively with other states to generate prosperity for the national community. While a liberal instrument is employed — trade or investment liberalization — that instrument is generally used on a preferential basis for the project’s members. An additional form of regionalism, developmental regionalism involves slightly different goals and policy practices, although it too is ultimately aimed at facilitating integration with the global economy.89 In this case, regionalism is employed to nurture the development of emerging domesticowned firms to eventually become internationally competitive using two instruments: one, the expanded regional market and two, temporary protection or privileges for domestic-owned capital in the expanded market. Both measures can theoretically help secure benefits for domestic firms over their foreign competitors. Although less prevalent in practice, developmental regionalism was adopted in ASEAN between 1998 and 2001 through the ASEAN Investment Area (AIA) project.90 A similar regionalist impulse, although assuming a slightly different form, was also evident in Latin America.91 Developmental regionalism, perhaps more than open regionalism, is an unambiguous expression of economic nationalism, aiming to engineer the capabilities of domestic-owned firms using the regional instrument. It also represents an attempt to challenge the hegemonic position of foreign firms associated with globalization. In the ASEAN case, developmental regionalism was triggered by concerns that a free investment regime would eventually prevail in the WTO, which made nurturing domestic firms before TNCs were allowed full reign in the domestic economy a national (and therefore, regional) imperative. The ASEAN experiment with developmental regionalism is also instructive for what it says about developing country concerns with the neo-liberal form of globalization advocated by the multilateral economic institutions, notably the WTO.

Challenging the WTO: Fairness in Global Trade and the Neo-liberal Globalization Project The developing country challenge to the WTO is directed less against free trade per se. Rather, it is aimed at the perceived unfairness of the global 150

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trade regime to developing states, both in terms of procedural fairness and in substantive, equity terms.92 To be sure, some of these criticisms may well help to rationalize protectionist policies in these countries. The point remains, however, that the bias against developing states in the global trade regime is well documented and has been a consistent theme of developing country responses to the global trade regime since its inception following World War II.93 First, developing countries face continued protection in precisely those sectors where they, with their large, especially rural populations are theoretically expected to specialize on the basis of comparative advantage — agriculture, primary commodities, primary products processing, and labour-intensive manufactures.94 Total agricultural protection against developing countries amounts to 34 per cent in the United States, 100 per cent in the EU, 230 per cent in Japan and 65 per cent in Canada.95 Some estimates show that 200 million people overall could be lifted out of poverty if all forms of agricultural protection were dismantled.96 Processed primary products face similar barriers that hamper developing country prospects for industrialization. For instance, chocolate product exports from developing states to the industrial countries face tariff barriers up to eight times higher than tariffs for unprocessed cocoa.97 The trade regime as it stands, thus, locks many developing states into low value-added activities, which impede their prospects for moving up the development ladder.98 Even the simple labour-intensive activities with which most countries begin their industrialization, notably textiles, clothing and footwear, continue to remain protected in the industrial world.99 Second, developing states face constraints on their attempts to develop dynamic comparative advantage in higher value-added sectors. These constraints take the form of the new agenda items favoured by the industrial world, notably investment and services liberalization and restraints on government procurement. They have had the effect of “shrinking … the development space” available to developing countries.100 Previous agreements such as the Trade-Related Intellectual Property Rights (TRIPS), TradeRelated Investment Measures (TRIMS) and the General Agreement on Trade in Services (GATS) limit the policy instruments available for development. Interestingly, these are precisely the same instruments successfully used by many industrial countries and the Asian developmental states in their respective development processes, especially to build internal linkages within each national economy and to gear up domestic firms to eventually compete on the world market. 101 It is, therefore, unsurprising that developing countries are hugely suspicious of, and resistant to the new trade agenda now advocated by the Quad countries (the United States, EU, 151

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Japan and Canada). While developing states are not resisting the process of internationalizing their economies when they contest the new trade agenda, they are, nonetheless, challenging the terms and conditions of their participation in the global economy. Specifically, they are challenging the denial of their right to adopt development strategies that may depart from the neo-liberal orthodoxy, including the use of infant industry protection to nurture the growth of domestic firms. There is clearly an element of economic nationalism at work here as developing states clamour for the requisite “policy space” that will aid the growth of their domestic firms as part of national developmental agenda. Many economists writing from the strategic trade perspective, among them Krugman, and Gomory and Baumol, have demonstrated that infant industry protection remains an economically rational policy due to the presence of increasing returns to scale, productivity growth and learning economies.102 Because a country’s static comparative advantage is indeterminate under these real-world conditions, infant industry protection is a viable means to develop productive capacity in a wider range of sectors than allowed for under the Ricardian model of comparative advantage upon which the current free trade agenda is premised.103 Although infant industry protection remains a legitimate exercise under WTO rules,104 its scope is limited by other WTO rules on subsides and countervailing measures and on TRIMS. These prohibit the use of subsidies paid to firms conditional on export performance and/or the use of domestic inputs, while there are moves to limit local procurement by public agencies. In fact the United States and EU are keen to ban all performance requirements on TNCs, including for joint ventures and technology transfer, areas that are of interest to the developing world as they seek to diversify and upgrade their industrial capabilities.105 While the industrial countries and the East Asian tigers once employed performance-based instruments for their industrial development, today only subsidies for R&D directed towards the development of new technologies, products and processes are considered legitimate. While these R&D subsidies are of considerable utility to industrial countries and their firms at the cutting edge of technology, they are of little immediate relevance to the needs of developing countries more concerned with the successful exploitation of existing technology, a task that infant industry protection could facilitate.106 As Wade notes, the end result of such a shift in the trade policy paradigm is to restrict the choice of policy instruments available to developing countries to accomplish their development tasks.107 The attempt by the United States and the EU to remove references to “policy space” in the 2003 UNCTAD XI pre-Conference negotiating text108 reflects the 152

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considerable resistance by powerful industrial countries to departures from the neo-liberal policy paradigm.

Economic Nationalism: Normative Considerations and Theoretical Justifications While it may be comforting to note the, albeit, instrumental acceptance of global market integration by policymakers worldwide, a number of additional issues need to be debated. First, even if developing countries are only rejecting the neo-liberal globalization project rather than their insertion into the global economy, we need to ask whether there are any adverse implications for the world political economy from such sentiments and policy behaviour. Second, we must evaluate the distinct policy positions of the industrial and developing world on normative grounds other than whether they pose limits to globalization. We also need to ask whether these can legitimately be termed economic nationalism. The discussion below offers some guidelines towards this end. Third, we need to ask whether the limits to globalization come from economic nationalism per se, or from other sources. Of the many issues now on the WTO agenda, agricultural protection in the industrial world constitutes the primary stumbling block to closing a global trade deal. Such protection is often justified in terms of protecting the livelihoods of poor, rural populations and environmental sustainability. The continued protection of textiles, clothing and other labour-intensive sectors in industrial countries is likewise rationalized in terms of securing domestic employment. Similarly, the three major acts of protectionism in the United States highlighted in a previous section, namely steel tariffs, anti-dumping duties on Vietnamese catfish, and quotas on clothing imports from China, were rationalized on the grounds that they were introduced to protect “American” jobs or producers. It would be difficult, however, to label these acts, which protect longstanding industries or firms in the industrial world from overseas competition as instances of economic nationalism since they benefit narrow special interests. More to the point, they cannot be justified even on economic nationalist grounds. First, economic nationalist thinking rejects the use of protection by already industrialized countries. Even if their initial adoption, during the period of the “embedded liberal compromise”, could be justified on the grounds of securing domestic employment and social stability, these acts lose their legitimacy fifty years on. This is especially the case if more efficient producers exist elsewhere. Europe, for instance, produces sugar at three times the price of more efficient producers in Malawi and Zambia.109 153

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Second, agricultural protection in particular serves very narrow interests even if they are rationalized on broader nationalist grounds. The Common Agricultural Policy (CAP) of the EU is often presented as part of the European “social model” while the United States defends its high levels of agricultural support by reference to the interests of small family farms. In reality, the main beneficiaries of agricultural support in the United States and the EU are the largest and the richest farms.110 Domestic taxpayers finance the farm subsidies that generate substantial windfall gains for their recipients. It would be difficult to justify this sort of domestic re-distribution in terms of a sharing of the national burden by the national community. Even if domestic society is favourable to such redistributive policies in the name of safeguarding the national community and identity, actions such as these also need to be evaluated for their external effects in an inter-dependent world. In this context, a third point to note is that continued industrial country protection of labour-intensive manufactures and especially of agriculture generates substantial adverse spillover effects on other countries, particularly in the developing world.111 To the extent that these instances of protectionism represent economic nationalist behaviour, they cannot be regarded as benign economic nationalism. For instance, the elimination of all forms of agricultural protection in the industrial world would benefit developing country agricultural producers through higher prices and greater access to new export markets, with estimates suggesting that about 200 million people worldwide would be lifted out of poverty.112 That the resultant higher prices would hurt the existing large number of developing country food importers and the urban poor should not alter our judgement that industrial country agricultural protection is more malign than benign. It is, in fact, quite possible that developing countries have ended up as food importers due to the distortions in the world agriculture market caused by industrial country protection/ subsidization of agriculture, which has reduced the incentives for domestic food production in developing states. Such acts of protection deny developing countries the very economic activities that even neoclassical trade theory would point to as suitable for their stage of development and based on their existing endowments. These activities also formed the initial stages in the development success of the industrial and high-income developing countries. It would seem that the industrial countries are not only attempting to create competitive advantages in new, high-technology and high valued-added industries, they also wish to retain older industries through protectionism. In what seems rather contradictory, developing countries are expected to specialize according to their “natural” or market-based comparative advantage under the globalization 154

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project on the one hand, while on the other hand they are being hampered in this exercise by industrial country protection. By objecting to such actions at the WTO, developing countries are claiming their rights to fair trade rather than rejecting the principle of free trade; they are, in effect, contesting the neo-liberal globalization project. We should not, however, be comforted by this reading of recent WTO ministerial meetings, which have all ended in stalemate. Conflicts between the Quad and much of the developing world reflect the deeper flaws that exist in the neo-liberal globalization project. The latter is generating considerable resentment on the part of a wide variety of groups and countries against the WTO and the other multilateral institutions. Although these institutions are not perfect and clearly would benefit from further reform, institutions like the WTO do provide valuable governance functions for the world economy and ensure some degree of predictability for international trade and an avenue for redress, especially for the less “powerful” members.113 It is, therefore, unwise to undermine the legitimacy of the WTO by expanding its agenda with new tasks that are rejected by the majority of its members for sound practical and theoretical reasons. Unfortunately, the stalemate continues, with powerful agricultural interests in the United States, EU, Japan and South Korea making it difficult for their respective governments to offer concessions on agriculture so vital to close a deal on the protracted Doha Round.114 The worry is that the bilateral free trade agreement (FTA) will become entrenched as the next-best alternative to the more difficult task of reaching a consensus on multilateral free trade. If we follow the arguments of List, we have to acknowledge that developing states are theoretically justified on economic nationalist grounds in using industrial policy, including infant industry protection and restrictions on trade to develop the national economy. Recognizing that there may be practical difficulties associated with adopting and implementing such policies by states displaying weak governing capacity does not, however, justify throwing out the baby with the bathwater. In any case, high governing capacity is required to successfully implement both liberal as well as interventionist economic policies.115 The often-made argument that developing countries with their generally weaker governing capacity should only confine themselves to liberal economic policies is, therefore, flawed. While List provided clear guidelines and conditions under which interventionist policies could be adopted, as outlined above, the case for industrial policy and restrictions on free trade does not rest solely on the arguments of nineteenth century economic nationalists. They also rest on the theoretical investigations of twentieth century economists who challenge 155

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the assumptions behind David Ricardo’s theory of comparative advantage and, consequently, some of its free trade conclusions.116 Paul Samuelson, the founder of the modern theory of international trade makes it very clear that the “trade is good” conclusion from neo-classical trade theory derives from a set of prior assumptions that may not hold true in reality.117 While conventional trade models may be internally consistent and thus acceptable in academic theorizing, Samuelson points out the folly of ignoring the fit between neoclassical trade theory’s basic assumptions and the present reality if its conclusions are employed for policy-making. To put another way, the Ricardian world of perfect competition does not approximate real world conditions of increasing returns, industrial concentration, linkage effects and external economies, as well as technological learning economies. The considerable work by economists in the field of “strategic trade theory”, investigating the implications of precisely these features yields theoretical support for selective and temporary protection — infant industry policy — as a way to build industrial and technological capabilities.118 This also applies to agricultural development. Strategic trade theory can also be used to support the notion of developmental regionalism discussed above.119 Moreover, modern trade theory upon which the case for free trade is based has also been misinterpreted. Samuelson cautioned against drawing clear policy conclusions from the theoretical fact that trade is a “potential boon” since theory also makes clear that free trade is not necessarily the optimum for all countries at all times.120 To acknowledge these points is not to argue against free trade; it is, however, a call to pay closer attention to the conditions under which trade occurs. As the development economist, Max Corden, a proponent of free trade, points out, theory does not say, as is often asserted by the ill-informed or wrongly taught that “free trade is best”. It says that given certain assumptions [original emphasis] it is best.121

These points suggest that the neo-liberal globalization project rests on somewhat shaky theoretical foundations. Even if we ignore the arguments from strategic trade theory and from nineteenth century economic nationalist writings, this project can also be questioned once we engage in a more careful reading of the conventional trade theory on which it is based.

CONCLUSION In examining the implications of economic nationalism for globalization, this chapter adopted a revisionist conceptualization of economic nationalism, 156

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which rejected the latter’s conflation with protectionism and instead viewed economic nationalism as a commitment to the prosperity, autonomy and pride of the nation-state. The revisionist approach to economic nationalism offers us new ways to interpret the relationship between economic nationalism and globalization. One outcome of this exercise is the appreciation that economic nationalist behaviour is consistent with a wide range of economic policies, including liberal economic policies, so long as these policies are perceived to enhance national prosperity and economic strength, and consequently the identity and sovereignty of the nation-state. However, the revised understanding of economic nationalism does not address the question of how the observer can know when the nationalist sentiment is merely being used to legitimize economic policies, liberal or otherwise, that benefit only a narrow elite group rather than the national community.122 Notwithstanding these caveats, the re-conceptualization offers a degree of analytical precision to a term that has often been used pejoratively to depict any economic policy that departs from economic liberalism. This, together with better characterization of globalization that takes into account its multi-faceted nature, allowed the following conclusions to be drawn. Economic nationalism, manifested as liberal nationalism, has the potential to strengthen globalization at its most basic, namely as a process of worldwide market integration involving trade and investment flows. National policymakers across the world have chosen to internationalize their economies, which they recognize as the best route to national prosperity. However, the commitment to liberal economic policies is sometimes more rhetorical than real, even in the developed world where departures from liberal principles are evident and more properly regarded as policies aimed at securing the interests of special interest groups. Nevertheless, the shift in the attitudes of policymakers towards closer participation in the global economy in the developing world and the former communist economies is real, stemming from their desire to generate prosperity for the national community. If we see globalization as a process of market integration, then clearly economic nationalism as a motivating force does not necessarily always challenge it. Paradoxically, it may even strengthen globalization, as illustrated by the discussion in this chapter. Nevertheless, economic nationalism in the developing world clearly challenges the neo-liberal political project of globalization, which these states see as undermining their autonomy to pursue national development strategies that depart from the neo-liberal orthodoxy. The seven-year impasse and associated tensions in the WTO reflect these dynamics, as developing states express their unwillingness to accept a purely market-driven position in the 157

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global division of labour. The more protracted these conflicts, the more likely the WTO starts losing its legitimacy, especially since the current Doha Round has been explicitly framed as a “Development Round”. Increasingly, countries are resorting to alternate negotiating mechanisms, notably the bilateral free trade agreement with all its attendant shortcomings, especially for weaker developing countries at a disadvantage in bilateral negotiations with their more powerful developed country counterparts.123 Aside from this, the main challenge to further integration of the world economy will come from globalization itself as policymakers respond to the intense competition globalization generates as well as to its distributional consequences. Many critics charge that globalization has led to ambiguous outcomes in terms of its overall gains for states and societies, generating substantial dislocations between and within states as market integration generates winners and losers even as global trade and investment has increased.124 Even arch free traders such as Jagdish Bhagwati, while insisting that globalization is an unambiguously good thing, nevertheless acknowledge that it does have its downsides, including its distributional effects.125 There is substantial empirical evidence that globalization has had a particularly deep impact on unskilled or low-skilled workers in the industrial world since the 1970s through lower real wages, increasing income gaps and increasing job insecurity.126 This was especially true in the United States, raising fears of a protectionist backlash.127 Although public opinion in the United States during the 1990s was in favour of greater protectionism to save American jobs, U.S. trade policy did not shift in that direction largely because elite opinion was firmly on the side of free trade.128 However, it is the novel trend of whitecollar outsourcing, which has affected a number of industrial countries that underlies the current apprehension about a future protectionist backlash. Since 2000, the outsourcing of services has affected middle-class, skilled/ trained workers and professionals in the information and communication technology (ICT) sectors, banking and finance, architecture, engineering, pharmaceuticals and even medicine.129 An outcome of the spatial reorganization of production that is a characteristic feature of twentieth century globalization, its adverse outcomes on white-collar jobs are novel for the United States and in Western Europe. This form of outsourcing is quite distinct from the outsourcing trend of the late-1990s that saw the shift of lower skilled backroom services such as call centres and data processing to developing countries, especially but not exclusively to India. Although it is too early to predict with any degree of accuracy the political implications of white-collar outsourcing in the industrial world, it has already generated adverse publicity in the EU130 while there is now state and federal legislation in the United States that seeks 158

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to restrict or even ban state and federal agency outsourcing to developing countries in an effort to save jobs. Private U.S. firms began voluntarily ceasing some of their outsourcing activities due to growing political sensitivities over the trend.131 The displacement of white-collar professional workers, which industry analysts predict will increase considerably in the next few years, could well have a greater impact on the manner in which politicians view globalization.132 Aside from the fact that outsourcing is affecting middle class professionals, a significant voting base, an additional reason for the growing disquiet is that the usual means of adjustment to job displacement — education and retraining towards higher-level skills — seems less workable since it is precisely these skills that are being outsourced. The outsourcing issue took centre stage at the 2004 U.S. presidential elections, with Democrat challenger John Kerry reprimanding the “Benedict Arnold” (or traitorous) companies for transferring jobs offshore.133 Although Kerry lost the elections and the political backlash against outsourcing has since waned, protectionism remains a highly visible quick-fix remedy that politicians might turn to should the problem return to the political agenda.134 Recent trends in Latin America reveal a similar picture of globalization’s distributional consequences. The region’s recent embrace of leftist politics is unsurprising in the light of the “extreme inequality, poverty and concentration of wealth” that characterize countries in South America.135 The backlash follows a decade or more of neo-liberal market reforms following the 1980s debt crisis, which have come under considerable criticism for the social dislocations they have caused. While the leftist shift in countries such as Chile, Uruguay and Brazil largely involves a stronger emphasis on social policy albeit within a broad market framework, the “leftist turn” in countries like Venezuela, Bolivia and Argentina embraces a strident populist, nationalism that has so far seen a wave of nationalizations in the oil and gas and minerals sectors.136 It feeds on a swell of discontent, particularly amongst economically marginalized indigenous groups, that is then exploited by politicians seeking power.137 The armed uprising by indigenous people in the southern state of Chiapas in Mexico that began in 1994 is linked to the loss of indigenous land rights as a result of structural adjustment conditionalities imposed by the World Bank, which were later incorporated as part of the conditions for Mexico’s accession to NAFTA.138 Similarly, social conflict and violence witnessed in parts of Indonesia, southern Philippines and southern Thailand are deeply rooted in strong perceptions and experiences of economic marginalization despite their religious/ethnic overtones.139 159

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The point to emphasize is how globalization, even if it has not directly caused them, has the potential to worsen conflicts and tensions over the allocation and distribution of economic rights and resources between different groups in society. The danger is that politicians will be tempted to reach for the easiest and most visible policy tools to address such pressures — protectionism — to help those left behind by globalization. With the worldwide turn to democratic political systems, politicians’ responses to globalization will likely be shaped by electoral considerations. As one observer of globalization has so trenchantly argued, unless the losers of globalization in both the developed and developing world are adequately taken care off, the average gains from globalization will be insufficient to “persuade governments that the game is worth the candle”.140 The broader lesson is also for the international community to rethink the neo-liberal globalization project in favour of a more measured approach to globalization, as advocated by the Harvard development economist Dani Rodrik, that allows liberalization to proceed along different tracks for countries at different levels of development and importantly, one that respects national developmental priorities of developing countries.141

Notes 1

2 3

4

5

6

7

8

Nick Louth, “What Latin American Nationalism Means for Miners”, Money Week, 19 June 2006, (accessed 28 June 2006). “Colbert was Here”, Economist, 23 March 2006. Bob Herbert, “Outsourcing Jobs is a Threat to the US Economy”, International Herald Tribune, 27 January 2004. Stephen Shulman, “Nationalist Sources of International Economic Integration”, International Studies Quarterly 44 (2000): 365–90. The analysis in this chapter on the impact of economic nationalism on globalization can only be indicative, however. The detailed case studies that are needed to offer a more conclusive evaluation of economic nationalist trends in the world political economy are beyond the scope of this chapter. John Breuilly, Nationalism and the State, 2nd edition (Chicago: University of Chicago Press, 1985), p. 10. Eric Helleiner, “Economic Nationalism as a Challenge to Economic Liberalism? Lessons from the 19th Century”, International Studies Quarterly 46 (2002): 307–29. Jan Koffman, “How to Define Economic Nationalism? A Critical Review of Some Old and New Standpoints”, in Economic Nationalism in East-Central Europe and South America, edited by Henryk Szlajfer (Geneva: Libraire Droz, 1990).

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15 16

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Robert Gilpin, The Political Economy of International Relations (Princeton, NJ: Princeton University Press, 1987), pp. 31–34; Robert Gilpin, Global Political Economy (Princeton, NJ: Princeton University Press, 2001), p. 14. Gilpin, The Political Economy (1987), p. 34. Shulman, “Nationalist Sources” (2000): 365. Helleiner, “Economic Nationalism (2002): 309. Those inclined towards socialist thinking often endorse state intervention in the economy or even protectionism as a means towards more egalitarian economic outcomes for society. For sectoral interests see Shulman, “Nationalist Sources” (2000): 367. Christine Margerum Harlen, “A Reappraisal of Classical Economic Nationalism and Economic Liberalism”, International Studies Quarterly 43 (1999): 733–44. Helleiner, “Economic Nationalism” (2002): 314. Rawi Abdelal, National Purpose in the World Economy (Ithaca, NY: Cornell University Press, 2001). Robbie Robertson, The Three Waves of Globalisation: A History of a Developing Global Consciousness (London and New York: Zed Books, 2003), p. 105. George Crane and Abla Amawi, The Theoretical Evolution of International Political Economy: A Reader, 2nd edition (New York and Oxford: Oxford University Press, 1997), p. 35. Mercantilist doctrine was most closely associated with the traditional states system in Europe of the sixteenth to nineteenth centuries that comprised absolutist states and multinational empires. On the traditional states system and the contrast with its successor system of nation-states. See James Mayall, Nationalism and International Society (Cambridge: Cambridge University Press, 1990), pp. 18–49. See George Crane, “Economic Nationalism: Bringing the Nation Back In”, Millennium 27, no. 1 (1998): 55–76. These criticisms of conventional accounts of economic nationalism should be seen as part of the broader critique of statist approaches in IR that fail to open up the black box of the state to ask how state interests are defined in relation to domestic society. Mayall, Nationalism and International Society (1990), p. 2. Tom Bottomore, Political Sociology, 2nd edition (London: Pluto Press, 1979/ 93), pp. 85–88. Nevertheless, it is necessary to maintain an analytical distinction between state and nation and to keep in mind that some forms of nationalism are directed at gaining greater autonomy from the nation-state of which it is a part. Quebecois nationalism, for instance, is expressed through policies and behaviour that encourages a distinction from the majority Canadian nation-state, and aims for greater autonomy from it through economic integration with the rest of the world. See Anthony Smith, Theories of Nationalism, 2nd edition (New York: Holmes and Meier, 1983); Breuilly, Nationalism and the State (1985); and Mayall, Nationalism and International Society (1990). 161

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27 28

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30 31

32 33 34 35 36

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38 39

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Shulman, “Nationalist Sources” (2000): 368–75. See John Stopford and Susan Strange, Rival States, Rival Firms: Competition for World Market Shares (Cambridge: Cambridge University Press, 1991). Shulman, “Nationalist Sources” (2000): 374 (Table 1). See David Levi-Faur, “Economic Nationalism: From Friedrich List to Robert Reich”, Review of International Studies 23 (1997): 359–70; and David Levi-Faur, “Friedrich List and the Political Economy of the Nation-State”, Review of International Political Economy 4, no. 1 (1997): 154–78. Jacob Cooke, ed., The Reports of Alexander Hamilton (New York: Harper & Row, 1964). Harlen, “A Reappraisal of Classical Economic Nationalism” (1999): 734–35. Helleiner, “Economic Nationalism” (2002); and Levi-Faur, “Economic Nationalism: From Friedrich List to Robert Reich” (1997). Harlen, “A Reappraisal of Classical Economic Nationalism” (1999): 741–42. Helleiner, “Economic Nationalism” (2002): 314–22. Harlen, “A Reappraisal of Classical Economic Nationalism” (1999): 738. Helleiner, “Economic Nationalism” (2002): 312. Gilpin makes an interesting though inaccurate distinction between the analytical attractiveness of economic nationalism and its unappealing normative propositions (of relative gains seeking, protectionism and state intervention). See Gilpin, Global Political Economy (2001), p. 14. Levi-Faur, “Economic Nationalism: From Friedrich List to Robert Reich” (1997): 370. Ibid. Benjamin Cohen, Crossing Frontiers: Explorations in International Political Economy (Boulder, Colorado: Westview Press, 1991), p. 47. Robert Reich, The Work of Nations: Preparing Ourselves for 21st Century Capitalism (Hemel Hempstead: Simon and Schuster, 1991). See Mehdi Shafaeddin, “Free Trade or Fair Trade? An Enquiry into the Causes of Failure in Recent Trade Negotiations”, UNCTAD Discussion Papers no. 153 (Geneva, United Nations Conference on Trade and Development, 2000). Eric Helleiner, “Economic Liberalism and its Critics: The Past as Prologue?”, Review of International Political Economy 10, no. 4 (2003): 685–96. For a useful discussion on these points, see Steve Chan and James Scarritt, “Globalisation, Soft Hegemony and Democratisation: Their Sources and Effects”, in Coping with Globalisation: Cross-National Patterns in Domestic Governance and Policy Performance, edited by Steve Chan and James Scarritt (London and Portland OR: Frank Cass, 2002), pp. 1–33. See also Jan Aart Scholte, “What is Globalisation? Another Draft of a Perennial Essay?”, CSGR Working Paper no. 109/02 (Centre for the Study of Globalisation and Regionalisation: University of Warwick, UK, 2002). For a list of these definitions, see Jan Aart Scholte, “The Globalisation of World

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47 48

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50 51

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53 54

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Politics”, in The Globalisation of World Politics, edited by John Bayliss and Steve Smith (Oxford: Oxford University Press, 1997), pp. 14–30. James Mittelman, The Globalisation Syndrome: Transformation and Resistance (Princeton, NJ: Princeton University Press, 2000), p. 5. David Held and Anthony McGrew, “The End of the Old Order? Globalisation and the Prospects for World Order”, in The New Political Economy of Globalisation (Vol. II), edited by Richard Higgott and Anthony Payne (Cheltenham, UK: Edward Elgar, 1998), pp. 544–68. Robertson, The Three Waves of Globalisation (2003). On the role of states in driving globalization, see the following: Eric Helleiner, States and the Re-emergence of Global Finance: From Bretton Woods to the 1990s (Ithaca, NY: Cornell University Press, 1994) and Linda Weiss, “Globalisation and the Myth of the Powerless State”, New Left Review 225 (1997): 3–27. Charles Oman, Globalisation and Regionalisation: The Challenge for Developing Countries (Paris: Organisation for Economic Cooperation and Development, 1994), pp. 83–99; and Peter Dicken. Global Shift: Transforming the World Economy, 3rd edition (London: Paul Chapman Publishing, 1998), p. 175. Stopford and Strange, Rival States, Rival Firms (1991). Ankie Hoogvelt, The Third World in Global Development (London: Macmillan, 1987), p. 58. John H. Dunning, Globalisation: The Challenge for National Economic Regimes (Dublin: Economic and Social Research Council, 1993): and Dicken, Global Shift (1998). Stopford and Strange, Rival States, Rival Firms (1991), p. 1. Paul Krugman, “Does Third World Growth Hurt First World Prosperity?”, Harvard Business Review 72 (1996): 113–21. Christopher May, “The Political Economy of Proximity: Intellectual Property and the Global Division of Information Labour”, New Political Economy 7, no. 3 (2002): 317–42. Robert C. Feenstra, “Global Production Sharing and Rising Inequality: A Survey of Trade and Wages”, in Handbook of International Trade, edited by Kwan Choi and James Harrigan (Oxford: Basil Blackwell, 2001). Philip McMichael, “Globalisation: Myths and Realities”, Rural Sociology 61, no. 1 (1996): 25–55. See Dani Rodrik, “Development Strategies for the Next Century”, Kennedy School of Government, Harvard University, 2000, (accessed 10 July 2006). Elizabeth Smythe, “State Authority and Investment Security: Non-state Actors and the Negotiation of the Multilateral Agreement on Investment at the OECD”, in Non-State Actors and Authority in the Global System, edited by Richard Higgott, Geoffrey Underhill and Andreas Bieler (London: Routledge, 2000), pp. 74–90.

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64 65 66 67 68

69

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73 74

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77 78 79

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McMichael, “Globalisation: Myths and Realities” (1996): 25–26. John Gerard Ruggie, Constructing the World Polity (London: Routledge, 1998), pp. 72–76. Richard Higgott, Political Development Theory (London and Sydney: Croom Helm, 1983). Susan George and Fabrizio Sabelli, Faith and Credit: The World Bank’s Secular Empire (Boulder, CO: Westview Press, 1994), p. 147. Rodrik, “Development Strategies for the Next Century”: 5–7. McMichael, “Globalisation: Myths and Realities” (1996): 29. Rodrik, “Development Strategies for the Next Century”: 6. McMichael, “Globalisation: Myths and Realities” (1996): 31. Dani Rodrik, “Governing the Global Economy: Does One Architectural Style Fit All?”, Kennedy School of Government, Harvard University, 1999, (accessed 10 July 2006). Philip McMichael, “Globalisation: Trend or Project?”, in Global Political Economy: Contemporary Theories, edited by Ronen Palan (London and New York: Routledge, 2000), pp. 100–13. Phil Cerny, “Structuring the Political Arena: Public Goods, States and Governance in a Globalizing World”, in Global Political Economy, edited by Palan (2000), pp. 22–35. Sven Steinmo, “Bucking the Trend? The Welfare State and the Global Economy: The Swedish Case Up Close”, New Political Economy 8, no. 1 (2003): 31–48. See World Trade Report 2003 (Geneva: World Trade Organization, 2003), pp. 22–26. World Trade Report 2003 (2003), p. 23. Dilip Das, “Trade and Global Integration”, CSGR Working Paper no. 120/03 (Centre for the Study of Globalization and Regionalization, University of Warwick, UK, 2003). Arvind Panagariya, “The Millennium Round and Developing Countries: Negotiating Strategies and Areas of Benefit”, G-24 Discussion Paper no. 1 (March) (Geneva: United Nations Conference on Trade and Development, 2000). David Levi-Faur, “The Competition State as a Neo-mercantilist State: Understanding the Restructuring of National and Global Telecommunications”, Journal of Socio-Economics 27, no. 6 (1998): 665–85. Cerny, “Structuring the Political Arena” (2000). Helleiner, “Economic Nationalism” (2002): 325. Friedrich List made a similar point when he suggested that had he been born English, he might not have challenged the liberal economic writings of Adam Smith, since these worked to Britain’s interests by reinforcing British economic dominance. See Friedrich List, The National System of Political Economy, translated by G.A. Matile (Philadelphia: J.B. Lippincott and Co, 1856), pp. 69–70. Steel tariffs, which were imposed in March 2002 for a three-year period, were

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85 86 87 88

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90 91

92 93 94

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removed in December 2003 following the decision by the EU and Japan to impose retaliatory tariffs on a wide range of U.S. exports after a November 2003 WTO dispute panel found the tariffs illegal. See International Herald Tribune, “US Retreat on Steel Gives Boost to WTO”, 5 December 2003. Glenn R. Fong, “Breaking New Ground or Breaking the Rules: Strategic Reorientation in US Industrial Policy”, International Security 25, no. 2 (2000): 152–86. A similar economic nationalist impulse accounts for U.S. congressional loan guarantees to the shipbuilding industry, aimed at regaining the competitiveness in this sector lost to foreign players for some time now. International Herald Tribune, “US project to revive shipbuilding jobs is foundering”, 30 January 2004. Narlikar argues that developing countries came to adopt liberal economic policies out of necessity during the mid-1980s rather than strong conviction. Amrita Narlikar, “Fairness in International Trade Negotiations: Developing Countries in the GATT & WTO”, paper presented to the Conference on Fairness and the Political Economy of Globalisation, organized by the Leverhulme Centre for Research on Globalization and Economic Policy and the Murphy Institute of Political Economy, Tulane University, United States, 1–2 April 2005, . Andrew Gamble and Anthony Payne, “Conclusion: The New Regionalism”, in Regionalism and World Order, edited by Andrew Gamble and Anthony Payne (London: Macmillan, 1996): 247–64. Mittelman, The Globalisation Syndrome (2000), p. 133. World Trade Report 2003 (2003). Gamble and Payne, “Conclusion: The New Regionalism” (1996). Mittelman, The Globalisation Syndrome (2000); and Helga Hveem, “Explaining the Regional Phenomenon in an Era of Globalisaton”, in Political Economy and the Changing Global Order, edited by Richard Stubbs and Geoffrey R.D. Underhill (Oxford: Oxford University Press, 2000), pp. 70–81. Helen E.S. Nesadurai, Globalisation, Domestic Politics and Regionalism: The ASEAN Free Trade Area (London and New York: Routledge, 2003), pp. 41–43. Nesadurai, Globalisation (2003), pp. 99–127. Nicola Phillips, “Governance after Financial Crisis: South American Perspectives on the Reformulation of Regionalism”, New Political Economy 5, no. 3 (2000): 383–98. Narlikar, “Fairness in International Trade Negotiations” (2005). Ibid. Ronald Mendoza and Chandrika Bahadur, “Toward Free and Fair Trade: A Global Public Goods Perspective”, Challenge 45, no. 5 (2002): 21–62. These figures represent the consolidation of all forms of agricultural protection, which include tariffs, quantitative restrictions, price and direct income support, and input subsidies. See William R. Cline, “Trading Up: Trade Policy and 165

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103 104

105

106 107 108

109 110

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Global Poverty”, CGD Brief 2, no. 4 (Washington, D.C.: Centre for Global Development, 2003). Cline, “Trading Up” (2003): 2–3. In the interim, however, food prices are likely to rise before new production comes on-stream. UNCTAD, Opening Doors for LDC Exports (Geneva: United Nations Conference on Trade and Development, 2000). Oxfam, “Running into the Sand: Why Failure at the Cancun Trade Talks Threatens the World’s Poorest People”, Oxfam Briefing Paper no. 53 (Oxford: Oxford Famine Relief, 2003). Although all quotas on textiles and clothing will be come to an end in 2005, these products could remain protected beyond 2005 through non-quota instruments. See Shafaeddin, “Free Trade or Fair Trade?” (2000), p. 22. Robert Hunter Wade, “What Strategies are Viable for Developing Countries Today? The World Trade Organisation and the Shrinking of ‘Development Space’ ”, Review of International Political Economy 10, no. 4 (2003): 621–44. Shafaeddin, “Free Trade or Fair Trade?” (2000); and Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem, 2002). Paul Krugman, “Import Protection as Export Promotion: International Competition in the Presence of Oligopoly and Economies of Scale”, in Monopolistic Competition and International Trade, edited by Henryk Kierzkowski (Oxford: Clarendon Press, 1984), pp. 180–93; and Ralph Gomory and William Baumol, Global Trade and Conflicting National Interests (Cambridge, MA: MIT Press, 2000). Shafaeddin, “Free Trade or Fair Trade?” (2000), pp. 5–18. GATT Article XVIII allows, under certain conditions, ‘protection of particular industries in their early stages of development. Wade, “What Strategies are Viable for Developing Countries Today?” (2003): 627. Shafaeddin, “Free Trade or Fair Trade?” (2000), pp. 23–24. Wade, “What Strategies are Viable for Developing Countries Today?” (2003). South Centre, “Operationalizing the Concept of Policy Space in the UNCTAD XI Mid-Term Review Context”, South Centre Analytical Note, May 2006, (accessed 29 June 2005). Oxfam, “Running into the Sand” (2003), p. 12. According to Oxfam, the poorest 50 per cent of U.S. farms received only 5 per cent of government agricultural payments while the richest 7 per cent received half of these payments. In the EU, about 5 per cent of farms receive half of CAP subsidies. See Oxfam, “Running into the Sand” (2003). Mendoza and Bahadur, “Toward Free and Fair Trade” (2002): 38; and Oxfam, “Running into the Sand” (2003), pp. 11–18. Cline, “Trading Up” (2003), p. 2. The United States, for instance, has a litany of complaints against the WTO

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dispute settlement process, which has often ruled against it. See Alan Wolff, “Major Problems with WTO Dispute Settlement”, presentation to the Global Business Dialogue, Inc. (Washington, D.C., 26 September 2002). New Straits Times, “No Headway in Doha Round Talks”, 3 July 2006. See Natasha Hamilton-Hart, Asian States, Asian Bankers: Central Banking in Southeast Asia (Ithaca, NY: Cornell University Press, 2002). On this point, see Shafaeddin, “Free Trade or Fair Trade?” (2000); Mendoza and Bahadur, “Toward Free and Fair Trade” (2002); and Wade, “What Strategies are Viable for Developing Countries Today?” (2003). Paul Samuelson, “Welfare Effects in International Trade”, American Economic Review 28, no. 2 (1938): 261–66; and Paul Samuelson, “The Gains from International Trade Once Again”, Economic Journal 72, no. 288 (1962): 820–29. See, among others, Elhanan Helpman and Paul Krugman, Increasing Returns, Imperfect Competition and International Trade (Cambridge, MA: MIT Press, 1985). A comprehensive survey of the strategic trade literature, as well as empirical cases from East Asia, are discussed in Trevor Matthews and John Ravenhill, “Strategic Trade Policy: The Northeast Asian Experience”, in Business and Government in Industrializing Asia, edited by Andrew MacIntyre (Sydney: Allen & Unwin, 1994), pp. 29–90. Nesadurai, Globalisation (2003), p. 176. Samuelson, “The Gains from International Trade Once Again” (1962): 827–29. Max Corden, Trade Policy and Economic Welfare (Oxford: Clarendon Press, 1974), pp. 7–8. Latha Varadarajan, “The Life and Times of Economic Nationalism”, International Studies Review 8, no. 1 (2006): 90–92. On these shortcomings, see Robert Scollay and John P. Gilbert, New Regional Trading Arrangements in the Asia-Pacific (Washington, D.C.: Institute for International Economics, 2001), pp. 10–18. Andrew Hurrell and Ngaire Woods, “Globalisation and Inequality”, Millennium: Journal of International Studies 24, no. 3 (1995): 447–70; and Caroline Thomas, “Developing Inequality: A Global Fault-Line”, in The New Agenda for International Relations, edited by Stephanie Lawson (Cambridge: Polity Press, 2002), pp. 71– 90. Richard Cooper, “A False Alarm: Overcoming Globalisation’s Discontents”, Foreign Affairs (January/February 2004). Adrian Wood, North-South Trade, Employment and Inequality (Oxford: Oxford University Press, 1994), p. 10; and Ethan Kapstein, “Winners and Losers in the Global Economy”, International Organisation 54, no. 2 (2000): 359–84. William R. Cline, Trade and Income Distribution (Washington, D.C.: Institute for International Economics, 1997). Kapstein, “Winners and Losers in the Global Economy” (2000): 362. Radiologists are among the most vulnerable, as X-rays and imaging scans can be beamed to cheaper sites abroad to be interpreted by equally qualified but 167

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cheaper radiologists. The American College of Radiology has set up a task force to study the offshore migration of radiology services. See International Herald Tribune, “Radiologists join US critics of outsourcing”, 17 November 2003. Straits Times, “EU to Probe Outsourcing of Work to India”, 13 December 2003. Straits Times, “Lehman the Latest to Pull Jobs from India”, 17 December 2003. Peter van den Besselaar, “The Future of Employment in the Information Society: A Comparative, Longitudinal and Multi-Level Study”, Journal of Information Science 23, no. 5 (1997): 373–92. Straits Times, “Democrats Smell Blood over Outsourcing Furore”, 12 February 2004. Nayan Chanda, “Outsourcing Debate — Part II”, YaleGlobal Online, 27 February 2004, (accessed 28 June 2006). Jorge Castanda, “Latin America’s Left Turn”, Foreign Affairs 85, no. 3 (May/June 2006): 28–43. Louth, “What Latin American Nationalism Means for Miners” (2006). Castanda, “Latin America’s Left Turn” (2006). Keith Krause and Michael C. Williams, “Broadening the Agenda of Security Studies: Politics and Methods”, International Studies Quarterly 40, no. 2 (2003): 229–54. Helen E.S. Nesadurai, “Conceptualising Economic Security in an Era of Globalisation: What does the East Asian Experience Reveal”, in Globalisation and Economic Security in East Asia: Governance and Institutions, edited by Helen E.S. Nesadurai (London and New York: Routledge), pp. 3–22. David Dapice, “The Losers in Globalisation must be Helped”, YaleGlobal Online, 1 March 2004, (accessed 28 June 2006). Dani Rodrik, “The Global Governance of Trade as if Development Really Mattered” (New York: United Nations Development Programme, 2001).

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8 SOUTHEAST ASIAN PERSPECTIVES ON THE ECONOMIC RISE OF CHINA Tham Siew Yean

INTRODUCTION: THE ECONOMIC RISE OF CHINA The economic rise of China is usually linked to phrases such as “factory to the world” or “an awakening giant”. Many view China’s rise with trepidation and fear. Even a developed country like Japan has expressed fears that industrial upgrading in China with the assistance of Japanese multinational corporations (MNCs) will keep moving continuously upstream until China has acquired a full industrial structure, at the expense of Japan. It is, therefore, not surprising to sense increasing uneasiness among Southeast Asian countries which are using foreign direct investment (FDI) and the path of export promotion to further their development goals as Chinese exports flood the world. This chapter will assess the rise of China and its impact on the countries of Southeast Asia in order to see whether such fears are realistic or not. The economic rise of China is generally associated with its rapid economic growth, the growth of its manufacturing sector and exports as well as the large flows of foreign direct investment (FDI) that have surged into the country since the early 1990s. Although China recorded relatively high growth rates from the late 1970s to the early 1990s (Indonesia, Malaysia, the Philippines, Singapore and Thailand) (referred to here as the 169

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ASEAN-5) also registered spectacular growth rates over the same period.1 Hence, the rise of China was not viewed as such a formidable threat before the advent of the Asian financial crisis. However, since the crisis affected the economic performance of the ASEAN-5, there has been an increasing perception that the economic rise of China is a threat, as shown by the following comparison of the economic performance of China and the Southeast Asian economies since 1997.2 Between 1997 and 2007, Gross Domestic Product (GDP) in China grew at an average of 8.4 per cent, which was higher than the average achieved in the Southeast Asian countries (Table 8.1). Significantly, China’s growth rate did not falter when the growth rates of five crisis-hit Southeast Asian economies plummeted in 1998 and again when the growth rates of some of these economies dipped in 2001 due to unfavourable external circumstances. In per capita terms, China’s average growth rate since 1997 has also exceeded that attained by the Southeast Asian economies, shown in Table 8.2. China’s GNP per capita in 2003, exceeded not just that of the CLMV countries (Cambodia, Indonesia, Laos, and Vietnam), but also that of the Philippines. However, it is still far lower than the other Southeast Asian economies. The robust growth in industry contributed to the strong economic performance in China, with its industry value added accelerating to 12.7 per cent in 2003 from 9.8 per cent in 2002 before slowing down to 11.1 per cent in 2004. It is expected that the growth of this sector will continue to decelerate in 2005 and 2006 as the government continues to apply policies to reduce over-heating of the economy. However, despite the projected slowdown, the growth of this sector in China still exceeds the projected growth of the same sector for the other Southeast Asian economies, with the exception of Vietnam. Fears of China’s growing manufacturing might are therefore rooted in the high growth rate of this sector, especially when it is compared with the growth rate of the older ASEAN-5 economies. This sector is also the largest in China at 68.0 per cent in 2003, as compared with the Southeast Asian economies (Table 8.3). According to the Marubeni Research Institute, by 1998 China was the world’s largest producer of coal, textile fibre and steel, and the world’s second largest producer of electric power and cement.3 Correspondingly, the service sector in China was the smallest at 24.3 per cent in 2003, as compared with the other Southeast Asian economies (Table 8.4). The sterling performance of the manufacturing sector of China has been accompanied by an equally strong export performance that grew by an average of 12.4 per cent for the period 1997–2001 (Table 8.5). Between 2002–04, China’s merchandise exports grew at an average of 30.8 per cent, thereby overtaking the export rates of most of the Southeast Asian economies, 170

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4.4 4.3 4.7 6.5 7.3 5.7 5.2 8.5 –1.4 8.2

Southeast Asia Cambodia Indonesia Lao People’s Dem. Rep. Malaysia Myanmar Philippines Singapore Thailand Vietnam

Notes: – Not available * Forecast Source: Asian Development Outlook 2003 and 2005.

8.8

China, People Rep. of

1997

–6.6 2.1 –13.1 3.0 –7.4 5.8 –0.6 –0.1 –10.5 4.4

7.8

1998

4.1 6.9 0.8 6.8 6.1 10.9 3.4 6.4 4.4 4.7

7.1

1999

6.7 7.0 – 5.8 8.9 13.7 4.4 9.7 4.8 6.1

8.0

2000

1.8 5.6 3.8 5.8 0.3 11.3 1.8 –1.8 2.2 5.8

7.5

2001

4.5 5.5 4.3 5.9 4.1 12.0 4.3 3.2 5.3 6.4

8.3

2002

TABLE 8.1 Growth Rate of GDP (% per year)

5.0 5.2 5.0 5.9 5.3 13.8 4.7 1.4 6.9 7.1

9.3

2003

6.3 6.0 5.1 6.5 7.1 12.6 6.1 8.4 6.1 7.5

9.5 5.4 2.3 5.5 7.0 5.7 – 5.0 4.1 5.6 7.6

8.5 5.6 4.1 6.0 6.5 5.3 – 5.0 4.5 5.8 7.6

8.7

5.9 4.7 6.5 5.8 5.8 – 5.0 4.4 6.0 7.5

8.9

2004 2005* 2006* 2007*

3.9 4.9 2.6 6.0 4.4 7.8 4.0 4.4 3.2 6.6

8.4

Average 1997–2007

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2.4 –1.1 3.2 4.3 5.0 3.9 2.9 5.2 –2.3 4.1

Southeast Asia Cambodia Indonesia Lao People’s Dem. Rep. Malaysia Myanmar Philippines Singapore Thailand Vietnam –8.6 –2.4 –14.6 0.9 –9.7 2.0 –2.8 –3.5 –11.5 2.2

6.8

1998

2.5 4.2 –0.7 2.6 3.7 8.9 1.2 5.7 3.4 2.3

6.2

1999

Notes: – Not available * Forecast Source: Asian Development Outlook 2003 and 2005.

7.8

China, People Rep. of

1997

5.0 5.1 – 3.9 5.2 11.5 2.0 7.9 4.6 4.6

7.2

2000

0.1 3.7 2.4 3.8 –1.8 9.1 0.9 –4.5 0.5 4.2

6.8

2001

2.9 3.6 2.8 3.8 2.0 9.8 2.0 1.8 4.5 5.3

7.7

2002

3.6 3.5 3.4 3.8 3.1 11.6 2.3 1.4 5.9 5.6

8.7

2003

4.9 4.2 3.7 3.8 4.8 – 3.7 7.0 5.7 5.8

8.9

2004

TABLE 8.2 Growth Rate of Per Capita GDP (% per year)

3.8 0.5 4.0 3.8 3.5 – 2.6 2.6 4.7 6.3

7.8

2005*

4.0 2.2 4.5 3.7 3.1 – 2.6 3.0 5.0 5.3

8.1

2006*

4.3 2.8 5.0 3.0 3.6 – 2.6 2.9 5.2 6.2

8.3

2007*

2.3 2.4 1.2 3.4 2.0 5.2 1.8 2.7 2.3 4.7

7.7

Average 1997– 2007

310 810 320 3,780 – 1,080 21,230 2,190 480

1,100

Per Capita GNP, $, 2003

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21.3 5.2 8.1 7.5 8.9 6.1 7.6 –1.8 12.6

Southeast Asia Cambodia Indonesia Lao People’s Dem. Rep. Malaysia Myanmar Philippines Singapore Thailand Vietnam

8.9

1998

7.3 –14.0 9.2 –10.6 6.1 –2.1 0.6 –13.0 7.3

Notes: – Not available * Forecast Source: Asian Development Outlook 2003 and 2005.

10.5

China, People Rep. of

1997

13.2 2.2 8.0 –0.2 13.8 0.9 7.1 9.6 7.6

8.1

1999

30.8 – 8.5 13.6 21.3 4.9 11.1 5.3 9.6

9.4

2000

13.3 2.7 10.1 –3.8 21.8 –2.5 –8.9 1.7 9.7

8.4

2001

17.7 4.4 10.1 4.1 35.0 3.6 3.2 6.9 8.9

9.8

2002

6.6 3.8 11.5 7.2 20.7 3.8 0.5 9.4 9.6

12.7

2003

TABLE 8.3 Growth Rate of Value Added in Industry (% per year)

16.9 3.9 11.4 7.9 – 5.3 9.9 8.2 10.2

11.1

–2.0 4.2 11.9 6.2 – 4.0 4.9 8.0 10.1

9.3

2004 2005*

2.9 4.8 11.5 6.1 – 4.0 5.1 7.0 9.9

9.8

2006*

4.0 5.4 9.8 6.4 – 4.0 5.0 7.5 9.7

10.1

2007*

28.1 45.0 25.9 42.2 13.6 33.5 31.1 45.8 38.7

68.0

Sector Share 2003, %

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–2.6 5.6 5.9 11.1 6.7 5.4 9.5 –1.1 7.1

Southeast Asia Cambodia Indonesia Lao People’s Dem. Rep. Malaysia Myanmar Philippines Singapore Thailand Vietnam

8.3

1998

0.7 –16.5 1.8 –1.1 7.0 3.5 –0.2 –10.0 3.0

Notes: – Not available * Forecast Source: Asian Development Outlook 2003 and 2005.

9.2

China, People Rep. of

1997

7.1 –1.4 4.9 11.9 9.2 4.0 6.1 0.4 2.1

7.7

1999

5.6 – 4.9 6.0 13.4 4.4 7.9 3.7 4.5

8.1

2000

4.2 5.0 5.7 6.2 12.9 4.3 2.7 2.4 4.4

8.4

2001

4.3 4.7 5.7 6.4 14.8 5.1 3.0 4.8 6.0

8.7

2002

2.1 6.5 7.5 4. 3 14.5 5.8 1.4 4.0 6.8

7.3

2003

TABLE 8.4 Growth Rate of Value Added in Services (% per year)

7.3 6.9 7.3 6.6 – 7.3 7.2 6.2 7.4

8.3

5.0 7.5 7.3 5.7 – 7.0 3.8 4.0 7.6

8.5

2004 2005*

5.5 8.0 7.0 5.5 – 7.0 4.3 5.0 7.6

8.3

2006*

6.0 8.5 6.0 5.7 – 7.0 4.1 5.0 7.5

8.2

2007*

35.3 39.6 25.5 49.8 34.5 46.7 68.8 44.0 40.2

24.3

Sector Share 2003, %

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4.5 81.0 12.2 –1.4 0.7 8.7 22.8 –0.2 3.8 24.6

Southeast Asia Cambodia Indonesia Lao People’s Dem. Rep. Malaysia Myanmar Philippines Singapore Thailand Vietnam –7.4 13.0 –10.5 6.4 –7.3 4.3 16.9 –12.0 –6.8 2.4

0.5

1998

Notes: – Not available * Forecast Source: Asian Development Outlook 2003 and 2005.

20.9

China, People Rep. of

1997

9.2 17.9 1.7 1.5 17.2 36.0 19.1 5.4 7.4 23.2

6.1

1999

19.4 24.1 27.6 9.6 17.0 35.8 9.0 20.1 19.5 25.2

27.9

2000

–10.0 12.1 –12.3 –3.3 –10.6 35.2 –16.2 –10.5 –7.1 6.5

6.8

2001

5.0 11.4 3.1 –5.9 7.2 9.8 10.0 2.9 4.8 7.4

22.4

2002

TABLE 8.5 Growth Rate of Merchandise Exports (% per year)

12.8 16.9 7.2 11.6 11.3 3.0 2.8 15.1 18.2 20.4

34.6

2003

20.2 21.7 9.4 7.6 20.5 – 9.6 24.2 23.0 30.3

35.4

2004

9.1 –9.1 6.0 27.4 12.0 – 8.0 8.0 10.0 11.4

20.4

2005*

7.9 1.7 7.0 17.8 10.2 – 8.0 8.0 5.0 8.9

14.8

2006*

9.0 5.2 8.0 3.0 12.6 – 7.0 8.0 8.0 8.6

12.5

2007*

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as shown in Table 8.5. Again, the strong export performance of China has led to growing concerns from the other exporting economies in the region, especially from the much smaller Southeast Asian economies, that have depended on exports in fuelling their high growth rates before the onset of the Asian financial crisis. Domestic producers within the region are also fearful of the loss of domestic markets besides the loss of third-country markets to the growing strength of China’s exports. China’s exports as a share of world exports has grown 2.8 times, from 1.8 per cent in 1990 to 5.0 per cent in 2002 and even further to 6.5 per cent in 2004 (Table 8.6). China’s rank in world exports has increased from number 15 to 3 over the same time period. The share of world exports for each of the ASEAN economies, as shown in Table 8.6, increased noticeably between 1990 to 2000, but stagnated between 2000 and 2004. Since the strong export performance in the Southeast Asian economies is mainly attributed to multinational corporations (MNCs), which moved to produce in the region especially after the mid-1980s, inflows of FDI to the region as compared with the inflows to China, is another area of concern. In particular, FDI inflows to ASEAN dropped, as a consequence of the Asian financial crisis, from an average of US$16.9 billion between 1990 and 1995 to US$11.1 billion in 2000: this is contrasted to the robust FDI inflows into China for the same decade (at around US$40 billion per annum), and indicates that these more mature economies were losing their relative attractiveness as host economies as compared to China (Table 8.7).4 While TABLE 8.6 Share of World Exports by Country Region (%) Share

China ASEAN Malaysia Thailand Indonesia Philippines Singapore Vietnam

Rank

1990

2000

2002

2004

1990

2000

2002

2004

1.8

3.9

5.0

6.5

15

7

5

3

0.9 0.7 0.7 0.2 1.5 0.1

1.5 1.1 1.0 0.6 2.1 0.2

1.5 1.1 0.9 0.6 1.9 0.3

1.4 1.1 0.8 0.4 2.0 0.3

26 32 28 50 18 69

18 23 26 33 15 50

18 24 28 35 15 47

18 24 32 39 16 50

Source: International Trade Statistics 2003, World Trade Organization (Accessed on 14 January 2004). International Trade Statistics 2005, World Trade Organization (Accessed on 9 May 2006).

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386,140 219,908 152,685 40,180 29,370 654 586 6,194 128 7,296 310 1,520 8,608 2,271 1,803

33 4,655 180 1,028 5,782 1,990 947

1996

225,321 145,019 74,288 19,360 16,932 102 80 2,135

1990–1995 (Annual average)

86 6,324 879 1,261 13,533 3,882 2,587

481,911 269,654 193,224 44,237 30,369 702 168 4,678

1997 1999 2000

45 2,714 684 1,718 7,594 7,491 1,700 52 3,895 304 1,725 13,245 6,091 1,484

34 3,788 208 1,345 12,464 3,350 1,289

686,028 1,079,083 1,392,957 472,265 824,642 1,120,528 191,284 229,295 246,057 43,751 40,319 40,772 18,504 19,691 11,056 573 748 549 243 230 149 –356 –2,745 –4,550

1998

24 554 192 982 10,949 3,813 1,300

823,825 589,379 209,431 46,846 13,241 526 148 –3,279

2001

25 3,203 191 1,792 5,822 947 1,200

716,128 547,778 155,528 52,743 14,505 1,035 145 145

2002

2004

19 2,473 291 347 9,331 1,952 1,450

17 4,624 556a 469 16,060 1,064 1,610

632,599 648,146 442,157 380,022 166,337 233,227 53,505 60,630 17,359 25,657 2,009 103 84 131 –597 1,023

2003

Note: a Estimates Source: UNCTAD, 2002. World Investment Report 2003: FDI Policies for Development: National and International Perspectives, Annex Table B. World Investment Report 2005: Annex Table B.1. FDI flows, by region and economy, 2002–2004.

World Developed economies Developing Economies China ASEAN Brunei Darussalam Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Singapore Thailand Vietnam

Host region/Economy

TABLE 8.7 FDI Inflows, by Host Region and Economy, 1990–2004 (US$ million)

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the inflows of FDI into ASEAN have rebounded steadily since 2000 and grew to US$25.7 billion in 2004, inflows into China have continued to grow to strongly to US$60.6 billion in the same year.

THE IMPACT OF THE ECONOMIC RISE OF CHINA The growth in China’s manufacturing and export capabilities have fuelled fears that while China’s exports are increasingly penetrating the Southeast Asian countries, exports from these countries to China are hindered by tariff and non-tariff restrictions. Tables 8.8 and 8.9 illustrates that the average tariff rates and non-tariff barriers (NTBs) of the ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) on China’s products are

TABLE 8.8 Tariff Rates for China and ASEAN ASEAN applied to China

China applied to ASEAN

Fruits & vegetables Coal Food products Electrical goods Drinks/tobacco Machinery Average

5.0 9.4 5.0 4.8 6.2 3.4 2.3

Fruits & vegetables Oil seeds Petroleum products Rice Chemical, rubber & plastic products Electrical Goods Average

27.4 21.4 8.4 112.8 19.2 16.6 9.4

Source: Suthiphand, C. and Sothitorn, M., 2002. (Accessed on 15 March 2004).

TABLE 8.9 Tariff Equivalents of Non-Tariff Barriers for China and ASEAN ASEAN applied to China

China applied to ASEAN

Other commodities Milk products Drinks/tobacco Textiles Mineral products Average

13.6 17.0 51.2 7.3 9.6 9.2

Other commodities Rice Metal products Leather products Forestry products Average

76.6 100.0 83.7 76.8 96.8 69.1

Source: Suthiphand, C. and Sothitorn, M., 2002. (Accessed on 15 March 2004).

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The Economic Rise of China

179

low as compared to the tariff rates and NTBs of China on ASEAN products.5 Southeast Asian economies also face stiff competition from domestic entrepreneurs within China and other countries in the world when they penetrate the domestic market of China. Contrary to these expectations, Table 8.10 shows that the share of total exports of each of the Southeast Asian countries accruing to China has grown progressively from 1985 to 2001, demonstrating the increasing importance of China’s market for the exports of these countries. The average annual growth rate of China’s imports from the Southeast Asian economies, between 1997 and 2001, exceeded ten per cent per annum, with the exception of Singapore (Table 8.11a). Moreover, China’s imports from Indonesia, Malaysia and Thailand exceeded its exports to these countries for each of the years shown in Tables 8.11a and 8.11b, and for the year 2000 and 2001 in the case of the Philippines. It is only Vietnam that registered a trade deficit with China for all the years shown in the same table while Singapore’s trade deficit with China emerged after 1998. While China is well known for its labour cost advantage and its revealed comparative advantage in labour-intensive products such as textiles and clothing and footwear, there has been a marked change in its trade structure, especially with the East Asian region. Recent studies by Ng and Yeats6 and Lemoine and Unal-Kesenci7 highlight the growing importance of trade in intermediate goods for China, especially in parts and components that are imported for further assembly in the country. In particular, Lemoine and Unal-Kesenci noted that China’s increasing participation in international processing activities is facilitated by its selective trade liberalization policies that have provided duty exemptions for selected categories of imports in export-promotion industries. Concessional import duties were also granted to equipment imported by foreign firms manufacturing in China. Consequently, exports resulting from assembly and processing of imported materials and components constituted 46 per cent of China’s exports in 1996 and increased to 55 per cent in 1996 and it was still more than 50 per cent of its exports in 2000. Imports for processing in China display a similar pattern, increasing from less than 40 per cent in 1992 to almost 50 per cent in 1997/98 although this has dropped to slightly more than 40 per cent by 2000. Lemoine and Unal-Kesenci further showed that trade from the foreign firm affiliates (FFAs) accounted for 70 per cent of China’s processed exports and three-quarters of its imports for processing in 2000. Therefore, it is the substantial presence of MNCs in China that has facilitated the integration of China into the international fragmentation of the production process. 179

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1985 1995 2001

1985 1995 2001

1985 1995 2001

1985 1995 2001

1985 1995 2001

1985 1995 2001

1985 1995 2001

1985 1995 2001

Indonesia

Laos

Malaysia

Philippines

Singapore

Taiwan,

Thailand

Vietnam

407 6,222 14,894

7,787 54,837 72,746

33,610 122,940 151,981

17,199 88,629 93,268

6,112 19,780 42,870

17,947 86,288 111,429

22 345 364

19,684 47,885 63,149

31,356 232,623 415,879

44.9 30.8 29.2

25.4 32.0 33.5

14.9 39.9 41.1

35.1 44.0 44.8

17.5 23.5 34.4

38.1 43.6 42.0

76.6 55.1 60.3

9.9 25.1 27.2

34.7 39.0 30.7

Global Exports East Asia* ($ million)

Source: Ng and Yeats, 2003.

1985 1995 2001

Year

China

East Asian Country

0.0 5.3 6.8

3.4 2.9 6.5

0.0 12.0 18.0

1.4 3.8 5.5

1.6 1.4 4.5

1.1 2.4 5.6

43.8 1.9 2.0

1.7 4.3 6.2

0.0 0.0 0.0

China

20.3 15.2 15.3

14.4 19.7 17.0

5.9 12.2 11.1

22.1 23.0 22.4

8.4 11.4 13.4

26.5 30.6 24.4

30.0 47.7 56.9

2.0 5.9 7.6

10.5 4.5 5.0

ASEAN

Of which

16.1 27.6 17.5

13.3 18.5 14.2

10.2 11.7 9.3

9.3 7.7 5.8

20.5 17.7 15.0

24.2 12.2 11.5

5.5 8.6 1.9

51.8 29.7 23.6

20.8 15.4 13.9

Japan

5.8 24.5 26.8

22.4 16.6 15.7

10.2 13.5 14.7

10.8 14.8 14.7

16.5 15.5 16.1

13.1 13.1 12.9

5.1 29.6 32.7

7.5 16.9 15.6

10.0 13.9 15.3

0.4 4.4 8.8

21.1 23.4 24.0

55.9 27.0 27.1

26.8 22.9 18.6

39.6 39.6 31.2

14.1 22.8 23.9

3.2 3.9 1.7

25.5 18.0 19.2

14.7 22.7 29.5

EU (15) NAFTA

2.0 3.9 8.2

1.9 1.7 2.4

2.9 2.0 1.3

5.0 2.4 2.7

1.9 1.1 0.8

1.6 1.8 2.4

4.7 0.0 0.3

1.5 2.6 3.7

1.2 1.6 1.6

Australia/ New Zealand

Share of Total Exports Destined For (%)

1.7 0.3 0.5

2.5 1.1 1.5

0.5 0.4 0.9

4.7 2.3 5.1

0.5 0.2 0.2

4.1 2.4 2.3

0.3 0.0 0.1

0.6 1.4 2.9

1.4 0.9 0.9

South Asia

TABLE 8.10 The Geographic Destinations of Selected East Asian Export; 1985, 1995, 2000

1.0 0.7 1.1

3.9 1.4 1.7

0.5 0.3 0.2

0.5 0.9 1.2

0.0 0.0 0.1

0.5 0.3 0.5

0.7 0.0 0.0

0.0 0.4 1.3

1.2 0.5 1.1

28.0 7.8 7.8

9.5 5.3 7.0

5.0 5.1 5.3

7.7 5.0 7.1

3.4 2.4 2.2

4.2 3.8 4.6

3.9 2.7 3.0

3.1 5.9 6.7

15.9 6.0 6.9

Sub-Sahara Rest of Africa World

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181

TABLE 8.11a Imports of China from Selected ASEAN Countries, 1997–2001( US$ million) Country/Year

1997

1998

Indonesia

2674

Malaysia

2495

2461 (–8.0) 2674 (7.2) 514 (57.2) 4235 (–5.2) 2414 (19.9) 217 (–39.2)

Philippines

327

Singapore

4465

Thailand

2014

Vietnam

357

1999 3051 (24.0) 3606 (34.9) 908 (76.7) 4061 (–4.1) 2780 (15.2) 354 (63.1)

2000

2001

Annual Average

4402 (44.3) 5480 (52.0) 1677 (84.7) 5060 (24.6) 4381 (57.6) 929 (162.4)

3888 (–11.7) 6204 (13.2) 1945 (16.0) 5128 (1.3) 4714 (7.6) 1011 (8.8)

3295.2 (12.2) 4091.8 (26.8) 1074.2 (58.6) 4589.8 (4.2) 3260.6 (25.1) 573.6 (48.8)

Note: Rate of growth (%) in parenthesis Source: COMTRADE data, 1997–2001.

TABLE 8.11b Exports from China to Selected ASEAN Countries, 1997–2001(US$ million) Country/Year

1997

1998

Indonesia

1841

Malaysia

1922

Philippines

1340

Singapore

4323

Thailand

1501

Vietnam

1080

1170 (–36.4) 1596 (–17.0) 1512 (12.8) 3944 (–8.8) 1258 (–16.2) 1028 (–4.8)

1999 1779 (52.1) 1674 (4.9) 1379 (–8.8) 4502 (14.1) 1435 (14.1) 964 (–6.2)

2000

2001

Annual Average

3062 (72.1) 2565 (53.2) 1464 (6.2) 5761 (28.0) 2243 (56.3) 1537 (59.4)

2836 (–7.4) 3221 (25.6) 1619 (10.6) 5791 (0.5) 2337 (4.2) 1798 (17.0)

2137.6 (20.1) 2195.6 (16.7) 1462.8 (5.2) 4864.2 (8.5) 1754.8 (14.6) 1281.4 (16.3)

Note: Rate of growth (%) in parenthesis Source: COMTRADE data, 1997–2001.

Processing activities have accounted for about 80 per cent of the exports of the FFAs and 60 per cent of their exports. Moreover, the growing interdependence of trade between China and the other East Asian countries as manifested by the “trade intensity” indices, indicate that the destinations of the exports and sources of imports of these FTAs are very much tied to the East Asian region.8 181

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Nevertheless, there are some distinctive country differences among the Southeast Asian countries in the relative importance of intermediate goods and natural resources in their exports to China due to the differences in their natural endowment and their respective stages of industrialization. For example, comparing the top ten exports of Indonesia and Singapore to China shows clearly the relative importance of natural resources such as petroleum, wood, palm oil in Indonesian exports to China while the top ten Singapore exports to China constitute mainly electrical and electronic components and chemical products (Table 8.12).9 The Philippines and Thailand lie in-between these two contrasting countries as each country has a share in the trade in intermediate goods, natural resources and agricultural products trade with China. Malaysia’s top ten exports to China consist mainly of primary commodities, and parts and components. All these three countries exhibit an increasing number of parts and components exports in their top ten exports to China in 2001 as compared to 1997. However, it is not just the import of parts and components that occupy the trade in intermediate goods between China and the Southeast Asian countries in the top ten imports from China to these countries (see Table 8.13). The import of fabrics also appears in the top ten products imported from China in the case of the Philippines and Thailand. This reflects the relative importance of the textile and clothing sector in these two countries as compared to Malaysia and Singapore. Indonesia’s top ten imports from China also differ from the rest of the Southeast Asian economies as parts and components were absent from its top ten exports to China in 1997 (Table 8.13). However, by 2001, it constituted one of the top ten Indonesian imports from China.10 Therefore, unlike the other Southeast Asian economies, shown in Tables 8.12 and 8.13, Indonesia’s top ten exports and imports with China reveal that this country is relatively less involved in the growing importance of parts and components trade between China and the Southeast Asian region.11 However, imports of parts and components constitute the top ten imports of Singapore from China with the exception of cigarettes in 1997. Similarly, these imports also figure prominently in the top ten imports of Malaysia, the Philippines and Thailand from China. Some agricultural products are also among the top ten imports of these countries while some textile and textile products are also included among the top ten imports of the Philippines from China. Overall, aside from resource-based and agricultural products, components and parts occupy an increasingly significant part of the trade (both exports and imports) between the ASEAN-5 and China. 182

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Top 10 Total Total Export %

Malaysia

Top 10 Total Total Export %

Indonesia

Country

4222 6343 6341 2475 7599 2312 3330 3425 7761 4312

3330 4222 6343 2515 6413 9310 0342 0361 6412 2671

Product Code

Palm oil, fractions Plywood,solely of wood Veneer, plywood sheets Wood, non-conif, rough, unt Parts, data proc. etc. mch Natural rubber exc. latex Crude petroleum Butanes, liquefied TV picture tubes, CRT, etc Fat, oil, an, vg. prtly, prcd

Crude petroleum Palm oil, fractions Plywood, solely of wood Chem. wood pulp, soda, blch Paper, paperbd, coated, etc Special trans not classd Fish, frozen ex. fillets Crustaceans, frozen Paper, paperbrd. uncoated Artificial fibr, spinning

Product

1997

562 248 82 56 48 47 44 35 34 31 1187 1839 64.5

858 204 200 164 86 55 53 39 38 27 1724 2219 77.7

Value

7599 7764 4222 7649 3330 7722 7527 2475 7643 5138

3330 2515 6413 4222 3344 2312 5138 6343 6353 2485

Product Code

2001

1/28/08, 12:27 PM

647 417 325 155 147 131 83 80 76 72 2133 3781 56.4

453 237 99 82 74 69 67 66 57 54 1258 2175 57.8

Value

continued on next page

Parts, data proc. etc. mch Electronic microcircuits Palm oil, fractions Parts, telecommun. equipt Crude petroleum Printed circuits Storage units, data proc. Wood, non-conif,rough,unt TV,radio transmittrs etc Polycarboxylic acids, etc

Crude petroleum Chem. wood pulp, soda, blch Paper, paperbd, coated, etc Palm oil, fractions Fuel oils, nes Natural rubber exc. latex Polycarboxylic acids, etc Plywood, solely of wood Buildrs. joinery, wood etc Wood, non-conif. wrkd, shpd

Product

TABLE 8.12 Top 10 Products Exported to China (US$ Millions) The Economic Rise of China 183

183

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Top 10 Total Total Export %

Singapore

Top 10 Total Total Export %

Philippines

Country

7599 3340 1222 7764 6821 8985 9310 7649 7812 5711

3442 3344 0573 3343 6821 6341 5223 4223 7764 2312

Product Code

Parts, data proc. etc. mch REST OF 334 NOT DEFINED Cigarettes contg.tobacco Electronic microcircuits Copper; anodes; alloys Oth. blank recordng media Special trans not classd Parts, telecommun. equipt Pass. transport vehicles Polyethylene

Gas. hydrocarbon, liq., nes Fuel oils, nes Bananas, fresh or dried Gas oils Copper; anodes; alloys Veneer, plywood sheets Inorganic acid, oxide etc Coconut oil, fractions Electronic microcircuits Natural rubber exc. latex

Product

1997

547 528 447 160 153 132 110 107 94 75 2353 4040 58.2

44 29 26 21 20 11 7 6 6 5 175 225 77.8

Value

7599 7764 7527 7752 5743 7763 9310 5711 7649 5122

7764 6821 7599 7722 0573 7768 7763 3344 4223 3442

Product Code

TABLE 8.12 — continued

Parts, data proc. etc. mch Electronic microcircuits Storage units, data proc. Dom. refrigeratrs, freezrs Polycarbonates, etc. Diodes, transistors etc. Special trans not classd Polyethylene Parts, telecommun. equipt Oth. acyclic alcohol, derv

Electronic microcircuits Copper;anodes;alloys Parts, data proc. etc. mch Printed circuits Bananas, fresh or dried Elctrn comp pts, crystals Diodes, transistors etc. Fuel oils, nes Coconut oil, fractions Gas. hydrocarbon, liq., nes

Product

2001

839 520 229 130 126 105 99 98 93 87 2326 5033 46.2

269 88 79 47 42 27 23 22 16 14 627 772 81.2

Value

184 Tham Siew Yean

184

1/28/08, 12:27 PM

08 G&CForces Ch 8

185

2312 7599 0423 0361 3442 0342 5138 0611 7161 0579 Natural rubber exc.latex Parts, data proc. etc. mch Rice, milled, semi-milled Crustaceans, frozen Gas. hydrocarbon, liq., nes Fish, frozen ex. fillets Polycarboxylic acids, etc Sugars, beet or cane, raw Electric. motors