Governance in Transitional Societies in East and Southeast Asia: Governance in Transitional Societies East and Southeast Asia 9819953057, 9789819953059

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Governance in Transitional Societies in East and Southeast Asia Edited by Chi Zhang Binh Thi An Trinh

Governance in Transitional Societies in East and Southeast Asia “In an era of complex and diverse political transformations, understanding the dynamics of governance and democratization becomes increasingly imperative. With the edited volume Governance in Transitional Societies in East and Southeast Asia, a distinguished group of scholars from East and Southeast Asia have come together to shed light on the intricate processes and challenges faced by these societies on their transformative journeys towards democracy and a market economy. This meticulously curated volume breaks new ground by providing valuable empirical insights into the political and economic transitions occurring in East and Southeast Asian countries, which have often been overlooked in existing research. By incorporating a comprehensive conceptual framework, the book explores the interplay between formal and informal authority, public-private coordination, and confrontation within these societies. It examines the interactions between external rules and local arrangements, shedding light on the governance regimes resulting from global and regional economic integration. One of the book’s greatest strengths lies in its examination of the hybridity of neoliberal conditions and authoritarianism. Through captivating case studies, such as the New Economic Policy in Malaysia, the public housing scheme in Hong Kong, and welfare restructuring in Vietnam, readers gain a deeper understanding of the complex dynamics at play. The volume also delves into various forms of resistance and compliance, offering insights into citizen behavior in free markets, adherence to corporate governance platforms, and the rules followed by local actors. Moreover, the book explores the vital role of civil society organizations, labour movements, and regional initiatives, highlighting their actions and impact at both regional and global levels. It also investigates how global rules can benefit new and small states, amplifying their bargaining power with major regional powers. As readers journey through the diverse transition trajectories presented in this volume, they will gain a nuanced understanding of the challenges ahead. The book addresses the ongoing creation of “exceptions” within neoliberal conditions, the reinforcement of ruling elites’ legitimacy and power through new forms of governance, and the emergence of new actors in economic spaces and regional frameworks. Governance in Transitional Societies in East and Southeast Asia is an essential read for scholars, policymakers, and anyone seeking a comprehensive understanding of the political and economic transformations in this crucial region. By providing a rich tapestry of empirical evidence, theoretical frameworks, and insightful analysis, this volume opens up new avenues for research and stimulates critical thinking about governance, democratization, and the complexities of societal change.” —Dr. Xuechen Chen, Assistant Professor in Politics and International Relations at Northeastern University, London

Chi Zhang · Binh Thi An Trinh Editors

Governance in Transitional Societies in East and Southeast Asia

Editors Chi Zhang University of St Andrews St Andrews, UK

Binh Thi An Trinh Independent scholar Hanoi, Vietnam

ISBN 978-981-99-5305-9 ISBN 978-981-99-5306-6 (eBook) https://doi.org/10.1007/978-981-99-5306-6 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Contents

1 Navigating Transitions: Governance in East and Southeast Asia . . . . Chi Zhang and Binh Thi An Trinh Disentangling Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transitional Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Rise of Global Governance and Hybrid Local Accommodation . . . . . Authoritarianism and the Developmental State . . . . . . . . . . . . . . . . . . . . . . . Neoliberal Conditions and Governmentality . . . . . . . . . . . . . . . . . . . . . . . . . Chapter Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The Formation of Civil Society Through a Mode of Governmentality in Post-Reform Vietnam . . . . . . . . . . . . . . . . . . . . . . Binh Thi An Trinh Introduction: Civil Society, NGOs and the New Social in Post-Reform Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The New Role of Civil Society in International Development . . . . . . . . . . NGOisation of Civil Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Governmentality: Shaping a Feminised Workforce for Welfare . . . . . . . . . “We Are People-Oriented Organisations!” . . . . . . . . . . . . . . . . . . . . . . . . . . Building Solidarity Through Acts of Caring . . . . . . . . . . . . . . . . . . . . . . . . . The Civil Society Activism of Carers and Educators . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Labour-Market Flexibility and Digitalization: Challenges to Work Intensification, Employment Relations, and Trade Unions in Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nawawi, Triyono, and Ngadi Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indonesian Workers and Labour Market in the Digital Era . . . . . . . . . . . . . The Implication for Work Intensification . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Implication for Employment Relations . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 5 8 11 15 20 24 29

29 31 33 35 37 40 43 45 46

51 51 54 57 63 v

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Contents

The Implication for Trade Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Civil Society and Regional Connectivity: Governing the Transforming Connectivity at Thai-Laos Border . . . . . . . . . . . . . . . Narut Charoensri Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Civil Society and Economic Regionalisation at the Border in Regionalism Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regional Connectivity and Regionalisation in the Mekong Subregion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Studies: The Mekong School . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 New Economic Policy: Impact of Social and Economic Engineering on Malaysia’s Development . . . . . . . . . . . . . . . . . . . . . . . . . . Julia Roknifard Origins and Results of the New Economic Policy . . . . . . . . . . . . . . . . . . . . State Control Over the Corporate Sector in Malaysia . . . . . . . . . . . . . . . . . The Cultural Underpinning of the NEP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Race-Religion Identity and Civil Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . Post ‘Regime-Change’ Developments in 2018–2023 . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Housing Affordability in Hong Kong and Its Socio-Political Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jun Zhang Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expensive House Prices in Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Extensive Government Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Hardships Faced by the Young Sandwich Layer . . . . . . . . . . . . . . . . . . Developmental-Neoliberal Mechanisms for the Housing Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 How a New, Small and Poor Country Withstands Global Challenges: Timor-Leste’s Three Endowments . . . . . . . . . . . . . . . . . . . . Takeshi Kohno Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Endowment One: Socio-Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . . . Endowment Two: Curse of Offshore Oil and Gas . . . . . . . . . . . . . . . . . . . . Endowment Three: Historical Legacy of Resistance and International Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68 71 72 77 77 80 82 83 87 88 91 95 100 106 110 113 116 117 121 121 122 129 134 137 142 142 149 149 152 154 160

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Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

List of Figures

Fig. 2.1 Fig. 3.1 Fig. 3.2 Fig. 4.1 Fig. 4.2 Fig. 6.1

Fig. 6.2

Hannah’s Three-Bubble Model (Source Hannah 2007, p. 54) . . . . Hours of work in a week of a worker according to age groups . . . Wages of workers according to age groups . . . . . . . . . . . . . . . . . . . A map of Chiang Khong and the Fourth Thai-Laos friendship bridge (Source Google Maps) . . . . . . . . . . . . . . . . . . . . . Kru Thi discusses an idea to organise joint-border city development (Source Author [This photo was taken in 2021]) . . . Property Prices Index by Country 2022 (Source Numbeo 2023a) (Green to red showing the level from high to low affordability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Per capita living area of selected advanced cities (Latest figures collected between 2016 and 2021. Sources Legislative Council, 2022. Regulation on minimum home size in London. ISE09/2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39 60 66 85 86

124

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List of Tables

Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5

Distribution of workers in Indonesia according to internet usage, 2018 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working hours in a week according to main industry and internet usage, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internet use and hours of work in a week according to education attainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average wages of workers by main industry and internet usage, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work status of workers utilizing the internet by sector in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade union membership of workers according to main industry and internet usage (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . The price-income ratio formula of Numbeo and Demographia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property Price Index by City 2022 . . . . . . . . . . . . . . . . . . . . . . . . Proportion of population by type of housing . . . . . . . . . . . . . . . . Proportion of population by tenure of accommodation . . . . . . . . Income and asset limits for White Form applicants in home ownership scheme flats 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55 58 60 64 68 70 125 126 129 134 136

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Chapter 1

Navigating Transitions: Governance in East and Southeast Asia Chi Zhang

and Binh Thi An Trinh

Since the fall of the Berlin Wall in 1989, the world has witnessed considerable transformations. The anticipated outcome of the Soviet Union’s collapse was the dawn of an era known as “the end of history” (Fukuyama, 1989), with liberal capitalist democracy heralded as the ultimate form of governance. While liberal capitalist democracy would reign supreme as the ultimate form of governance, reality has proven to be significantly more intricate. The paths taken by former socialist and colonized states have been influenced by their distinct political and economic frameworks, historical backgrounds, and cultural identities, resulting in vastly diverse outcomes. This diversity has blurred the boundaries between democracy and non-democracy, exposing the limitations of a simplistic, linear approach to comprehending the process of democratization. It has become evident that the evolution of democracy is far from a straightforward journey, with each country following its own unique path to achieving it. These societies face a myriad of challenges, such as the need for institutional reforms, the ascent of nationalist and populist sentiments, and the emergence of oligarchic power structures. Consequently, it has become increasingly imperative to examine and comprehend the multitude of factors that influence political and economic transitions, as well as the strengthening or weakening of civil societies, within different contexts. Nevertheless, it is worth noting that a significant portion of research in this field has predominantly focused on countries situated within or in close proximity to the former Soviet Union, leaving limited attention given to understanding the democratic and economic transitions occurring in East and Southeast Asian societies. C. Zhang (B) University of St Andrews, St Andrews, UK e-mail: [email protected] B. T. A. Trinh Independent Scholar, Hanoi, Vietnam e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_1

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To enhance our comprehension of these complex issues, we have assembled a distinguished group of scholars hailing from Vietnam, Malaysia, Indonesia, Thailand, Japan, and China. This meticulously curated volume incorporates a conceptual framework encompassing governance, transitional societies, structural adjustment, hybrid local accommodation, authoritarianism, developmentalism, and neoliberalism. By employing this comprehensive framework, we delve into the intricate dynamics of formal and informal authority within East and Southeast Asian societies, examining the interplay between public–private coordination and confrontation. The primary objective of this volume is to address a fundamental question: how have these societies sought to foster compliance and confront resistance during their transformative journeys towards democracy and a capitalist economy? In this edited volume on governance, the chapters uncover the dynamics involved in the interactions between external rules and local arrangements, as well as the different governance regimes resulting from the processes of global and regional economic integration. The volume also explores the new forms of compliance and resistance entailed in ongoing neoliberal reforms for global capital production and accumulation. By focusing on transitional societies, this volume is expected to provide valuable empirical insights into the understanding of governance and the political dynamics contributing to the socio-economic and political transformations of East and Southeast Asian countries. This volume encompasses several key themes. It explores the processes and rules of global capitalism, their interactions with local and political institutions, and the resulting development outcomes. The hybridity of neoliberal conditions and authoritarianism is examined through case studies such as the New Economic Policy in Malaysia, the Hong Kong public housing scheme, and welfare restructuring in Vietnam. The book also delves into various forms of resistance and compliance, shedding light on citizens’ compliance in free markets, adherence to corporate governance platforms in Indonesia, and the rules followed by local actors in Thailand. Furthermore, the role of civil society organizations and their actions at regional and global levels are discussed, with a focus on labour movements in Indonesia and the role of non-state actors in the Thailand and Laos friendship bridge initiatives. The volume also highlights how global rules can work in favour of new and small states, such as Timor-Leste, which benefits from liberalization and improves its bargaining power with major regional powers. Throughout the chapters, readers are presented with diverse transition trajectories that involve new resources, actors, and processes at the local, national, regional, and global levels. The book also addresses the challenges ahead, including how neoliberal conditions continue to create “exceptions” that accommodate both capitalist and authoritarian rules. It explores the new forms of governance for global/regional capital production and accumulation, which serve to reinforce the ruling elites’ legitimacy and power. Additionally, the volume explores the growing and potential roles of new actors in new economic spaces and regional governance frameworks, with a focus on increasing their voice and bargaining power. The ruling elites are examined in terms of how they deepen their rule by capitalizing on popular sentiments and the neoliberal conditions for achieving high economic performance.

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Disentangling Governance To comprehend governance in East and Southeast Asia, it is crucial to recognize that it encompasses a wide array of practices and processes that extend beyond the traditional realm of government. It includes the involvement of non-state actors, such as civil society organizations, private sector entities, and informal groups. Embracing this broader perspective of governance acknowledges the significant role played by collaboration, negotiation, and consensus-building, particularly in contexts where state institutions may be deficient or ineffective. The notion of governance helps to provide a contextual understanding of the intricate relationships and power dynamics among diverse state and non-state actors. In many East and Southeast Asian societies, the state has historically held a dominant position in governing and regulating society. However, there has been a noticeable shift towards more complex forms of governance, partly influenced by the active and extensive engagement of international organizations in development processes at local, national, regional, and global levels. As these societies engage in the process of global capitalist production and accumulation, they face a multitude of common challenges across the region, such as rapid urbanization, environmental degradation, and social inequality. Effectively addressing these challenges necessitates a deeper comprehension of the various actors involved and their roles in mitigating the difficulties that arise during times of transition. In tandem with the trajectory of capitalist globalization, governance has emerged as a key concept aimed at establishing security and order within the framework of global capitalism. It is essential to distinguish governance from government, as the former entails actions that are driven by shared objectives, which may or may not be grounded in legally and formally defined responsibilities. These actions do not solely rely on the use of police powers to secure compliance and surmount resistance (Rosenau, 1992, p. 4). On the other hand, the notion of government entails “formal authority,” the enforcement of which is upheld through coercive power. The concept of governance possesses the capability to traverse vastly diverse political systems, enabling us to identify commonalities among them (Peters, 2000, p. 50). The utilization of the term ‘governance’ itself implies a departure from the conventional mode of rule, which was predominantly controlled by the state (Hirst, 2000, p. 13). Comparative political scientists make a distinction between ‘old’ and ‘new’ governance—the former pertains to the centralized authority’s hierarchical control over the economy, society, and the state, while the latter denotes the achievement of traditional governmental objectives “through processes of concertation, interaction, networking, piloting, and steering” (Walters, 2004, p. 29). The erosion of traditional political authority can be attributed to two key factors: external economic globalization and the internal emergence of neo-liberalist ideas within advanced democracies (Pierre, 2000, p. 1). According to Jon Pierre, governance, as discussed in public and political discourse, entails political institutions assuming a ‘steering’ role in coordination with diverse non-state actors, including multinational corporations and civil society (Pierre, 2000, p. 2). This shift has

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sparked growing skepticism about the “conceptual centrality and validity of the state” (Walters, 2004, p. 27), prompting political scientists to redirect their focus from state power and capabilities towards the concept of good governance that recognizes the significance of intricate interactions between state and non-state actors (Rose, 1999, p. 168). The concept of good governance carries a significant normative connotation. As Nikolas Rose puts it, Governance tends to be judged good when political strategies seek to minimize the role of the state, to encourage non-state mechanisms of regulation, to reduce the size of the political apparatus and civil service, to introduce “the new public management”, to change the role of politics in the management of social and economic affairs. Good governance means less government, politicians exercising power by steering (setting policy) rather than rowing (delivering services). (Rose, 1999, p. 16)

Similarly, Paul Hirst (2000, p. 14) argues that good governance encompasses the creation of a robust political framework that fosters private economic activity. This framework includes stable regimes, the rule of law, efficient state administration tailored to the roles that governments can effectively perform, and a robust civil society independent of the state. Democracy, multi-party competition, and free elections are seen as favorable conditions for good governance as they provide legitimacy, prevent cronyism and corruption, and garner public support. However, their effectiveness is contingent upon certain conditions that require political parties to eschew extremism and adhere to appropriate liberal rules of the political game (Hirst, 2000, p. 14). William Walters identifies four key aspects that characterize the analytical and theoretical focus of governance. Firstly, there has been a shift from studying “institutions” to examining the “processes” of rule (Walters, 2004, p. 29). Secondly, the study of governance revolves around the management of networks that are presumed to possess their own autonomy and materiality (Walters, 2004, p. 30). Thirdly, governance is embedded within a discourse of change and complexity (Walters, 2004, p. 30). Lastly, governance involves the “declining authority of the nation-state” and the erosion of the state’s monopoly in decision-making processes due to the rise of international, supranational, and private actors as well as representatives of civil society (Walters, 2004, p. 31). The contributors to this edited volume delve into the multifaceted aspects of governance, specifically within the context of neoliberal globalization and the production and accumulation of global capital. The chapters in this volume reflect the perspectives of scholars based in East and Southeast Asian countries, representing various disciplines, with the aim of presenting a nuanced understanding of governance. Rather than presenting governance as an ideal model, the volume examines it as a contested process, where global rules intersect with local and national political institutions in the pursuit of socio-political and economic transformation. The interdisciplinary approach adopted in this volume sheds light on novel forms of resistance and compliance to global rules that are distinctive to the process of neoliberal globalization, characterized by unprecedented movements of capital and labour across borders. As the chapters reveal, new ideas, actors, spaces, and resources

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emerge alongside the neoliberalization process, challenging or consolidating the power of ruling elites at local, national, regional, and international levels. Furthermore, as a scholarly work in East and Southeast Asian studies, it is crucial for this volume to examine governance within the historical development of the regions, which have been profoundly shaped by different waves of globalization and governance regimes. Governance, as an idea and model of governing, cannot be understood in isolation from the trends of globalization that are shaped by dominant socio-political powers exerting their influence and power through governance regimes. According to Hameiri and Jones (2020, pp. 26–27), the account of the “critical juncture” brought about by the regional and global financial crisis falls short in explaining the voluntary compliance of states, particularly those under authoritarian and repressive regimes, with the rules of “good governance” and liberal reforms. Instead, as they suggest, institutional change evolves in tandem with the process of globalization, in which ruling elites (to remain in power) are compelled to adapt to not only the international division of labour but also the “geopolitical circumstances associated with global capitalist power” (Hameiri and Jones, 2020, p. 26). It is noticeable that as China’s economic and political influence grows in East and Southeast Asia, this geopolitical circumstance is overshadowed by the competition between the liberal capitalist West and state capitalist China. This highlights the need for studies of governance to examine the formation and influence of regional and transnational governance frameworks entangled with such tensions, such as the ASEAN Economic Community (AEC), the Trans-Pacific Partnership (TPP), Indo-Pacific Economic Framework for Prosperity, China’s Belt and Road Initiative, ASEAN+ 3, East Asia Free Trade Area (EAFTA), etc. in the regionalization and production of capital and labour (Yoshimatsu, 2023; Hameiri and Jones, 2020). These governance frameworks provide political and economic resources that reinforce the authoritarian power of ruling elites (Hameiri and Jones, 2020, p. 28). Chapters in this volume will consolidate the understanding of regional and transnational governance and its impacts on the transitional trajectories of East and Southeast Asian societies under the study.

Transitional Societies How are the global and regional trends in understanding governance manifested in East and Southeast Asia? Has economic globalization led to the erosion of the state and the diminishing centrality of political power in articulating and pursuing collective interests, as seen in both advanced Western democracies and transitional societies (Pierre, 2000, p. 2)? Have East and Southeast Asian societies experienced distinct impacts due to their vulnerabilities shaped by colonial and socialist legacies? In the process of post-socialist transition (as in the case of Vietnam), power consolidation of the ruling party from the centre (as in the case of Hong Kong), post-authoritarian transition (as in the case of Indonesia), and state-building (as in

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the case of Timor-Leste), the expected efficacy of good governance was hindered by limitations on free choices and exchanges, as well as government control from a distance (as highlighted in Chapter 2). This appears to contradict the World Bank’s prediction that good governance would result in political freedom, judicial efficiency, and low levels of corruption as key indicators of government quality (Huther and Shah, 1998). In the edited volume, the chapters shed light on the distinctive characteristics of East and Southeast Asian countries. However, it is essential to situate these characteristics within the broader context of the globalization process and the local institutions of post-socialist and post-colonial contexts. The fiscal crises of the 1980s had a significant impact on the ability of the state to incentivize compliance in advanced Western democracies (Pierre, 2000, p. 4). The collapse of communist states in the early 1990s fundamentally transformed the political landscape of Eastern Europe. While the transition of East and Southeast Asian societies may not have been as dramatic as the fall of communism in Eastern Europe, the economic transformation of formerly Soviet states, particularly in Asia, provides valuable insights into understanding other transitional trajectories. The experiences of transitional societies provide a crucial lesson: the transition from autocracy to democracy is rarely a linear process that inevitably leads to full democracy. The cases of Poland, Hungary, and the Czech Republic demonstrate that a desirable outcome combining economic prosperity and democracy can be achieved through liberalization. However, this process often involves a trade-off between economic progress and democratic advancement, as exemplified by Kazakhstan and Uzbekistan (Bolesta, 2014, p. 58; Protsyk, 2012). As noted by Linz and Stepan (1996, p. 3), “there can be liberalization without democratization.” The examples of Chile and China further support this argument, as economic liberalization was pursued by authoritarian elites without ensuring political democratization (Sujian, 1999, p. 140). Moreover, it is important to recognize that the transition towards democracy is not always a linear and irreversible process. As highlighted by Alexander Cooley (2019, p. 588), since 2005, “many of the post-Communist governments increasingly view these Western pillars as threatening their domestic authority and regime survival and have actively supported Russian-led initiatives to curtail such organizations and norms’ reach and influence.” This has resulted in democratic backsliding in many post-communist countries. In East and Southeast Asia, political systems that are typically characterized as “elite-centered and politically illiberal” often create challenging conditions for the flourishing of civil society (Acharya, 2003, p. 375). In the Southeast Asian region, while Timor-Leste, the Philippines, and Indonesia have made progress towards a liberal democratic path, the remaining eight regimes in the region fall into various subcategories of non-democracies. These include soft dictatorships, electoral authoritarian regimes, and illiberal democracies. This diversity of political systems presents challenges to theoretical efforts aimed at understanding how democracy is implemented in these culturally diverse societies (Peou, 2014).

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Furthermore, due to the diversity within these societies, it is not feasible to analyze them using a single theoretical framework (Peou, 2014). Unlike Central and Eastern Europe, where the transitions were primarily triggered by the single event of the collapse of the Soviet Union, the transitions in East and Southeast Asian societies have unfolded according to their own distinct timelines, significantly influenced by the processes of globalization and domestic politics. Asian cultures are characterized as being “open to democracy, but not committed to it,” which has contributed to a prolonged process of democratic consolidation (Chu et al., 2008, p. 238). This political climate is accompanied by a widespread movement towards economic transition, shifting from planned to market-based economies. Emerging East and Southeast Asian societies have adopted export-oriented industrialization strategies, aiming to reduce state control in sectors traditionally dominated by the government. The World Development Report 1999/2000 recognizes this trend during the 1990s, acknowledging the success of China’s East Asian-style development path in alleviating poverty while highlighting the challenges faced by some transitional economies in Central and Eastern Europe, including weak legal frameworks and corruption (World Bank, 1999, pp. 16–17). Despite the enduring presence of authoritarianism in the region, the model of “gradual transition” characterized by controlled economies guided toward the market by authoritarian governments has consistently yielded positive macroeconomic outcomes (Shultz and Pecotich, 1997, p. 55). The growth and development strategies that capitalize on trade-based opportunities have propelled Southeast Asian economies to rapid growth, surpassing their counterparts in Northeast Asia (Coxhead, 2014, p. 3). While most East and Southeast Asian societies have prioritized urban industrialization as part of their economic development strategies, they are in different stages of transitioning toward a market economy, each with its own unique complexities. For instance, while Hong Kong is generally considered an advanced market economy, the increasing consolidation of China’s power in the territory raises concerns about the impact on the transition to democracy. This consolidation may lead to a resurgence of state control and suppression in various aspects of political, economic, and cultural life. Recent democratic movements in Hong Kong demonstrate that even in a developed market setting, state control encounters significant resistance. In contrast, in other parts of the region, the state is mandated to adopt a governance approach that involves exerting control from a distance to compel voluntary compliance and gain popular support for restructuring policies, which becomes a source of state legitimacy. Extensive research has been conducted to comprehend the complex dynamics faced by these regimes amidst the ongoing great power rivalry between the United States and China, each embodying distinct modes of governance (Cheng-Chwee, 2008; Kuik et al., 2012; Tan, 2020). The governance model represented by China is seen as a potential challenge to Western democracy in the region to the extent that “unless China embarks on a path of democratization, the prospects for democratic breakthroughs in the recalcitrant states in its orbit appear to be dim” (Chu et al., 2008, pp. 239–40).

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Despite the increasing scholarly interest in governance in East and Southeast Asian societies, there has been a notable lack of attention given to the perspectives and agency of scholars from these regions who possess firsthand experience in navigating the intricate dynamics between the state and non-state actors. While many governance theorists primarily focus on whether the classical liberalism found in advanced Western countries can be replicated in non-Western developing societies (Hirst, 2000, p. 15), the growing body of research conducted by scholars from the latter has played a vital role in decolonizing Western knowledge about governance by offering local perspectives and insights into the governance process. In this volume, the contributors’ use of firsthand empirical data gathered from key individuals and organizations constitutes a significant contribution to the ongoing discourse on governance in transitional societies, offering non-Western and regionally-based perspectives. Consequently, this volume moves beyond the conventional view of Southeast Asian states as mere pawns caught in the geopolitical struggle between the United States and China, and instead recognizes their agency, refraining from treating them as mere subjects of great power policies (Ross, 1990). To have an overview of major transition trends and governance forms, it is worth having a retrospective review of the history of the socio-political and economic transformations of the countries in the regions in the process of global capitalist expansion.

The Rise of Global Governance and Hybrid Local Accommodation The fall of the Berlin Wall in late 1989 marked the end of communist regimes in Eastern Europe, symbolizing the triumph of capitalism and the conclusion of the Cold War. This momentous event was swiftly followed by an influx of economists and advisers from the West, armed with transition recipes and promises of economic prosperity through market development. Taking the lead in this ambitious project, the World Bank (WB) and the International Monetary Fund (IMF) became renowned for financing structural adjustment programs in post-war and post-colonial economies since World War II. Despite the controversial outcomes of such programs, which contributed to entrenched debt and poverty crises in Latin America and Africa during the 1970s and 1980s, the WB continued to advocate for these measures in transition economies throughout the 1990s. In the 1996 World Development Report titled “From Plan to Market,” post-socialist economies were advised to pursue rapid market liberalization and sectoral reforms aimed at reducing the role of the state and opening markets to the global economy. These transition recipes were not unfamiliar to post-war and post-colonial economies, many of which had already received assistance from the WB and the IMF since the aftermath of World War II. Originating from the Bretton Woods Agreements, these two institutions were established to provide financial aid and technical support from the United States to war-torn economies in Western Europe and Asia.

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Leaders at Bretton Woods recognized the imperative to enhance the stability and security of their core economies in the face of political and economic uncertainties posed by newly independent post-colonial states and the expanding Communist Bloc (Stiglitz, 2002; Craig and Porter, 2006). To ensure open and accessible markets for capital mobility and security, the WB and IMF, later joined the World Trade Organization (WTO), became key players in shaping the global economy. Through financial and economic instruments, they became rule-makers, exerting extensive influence on post-war and post-colonial economies. Their active involvement was driven by an ideology of market-led growth, emphasizing the dismantling of state intervention and the opening of markets (SAPRIN, 2004; Stiglitz, 2002). Structural adjustment loans became the primary form of assistance provided by the WB to economies in crisis in Africa and Latin America during the 1970s and 1980s. These loans were accompanied by conditionality, an integral part of the WB’s lending to poorer countries, aimed at enforcing the implementation of prescribed restructuring policies outlined by the IMF (Kapur, 2005). The conditions imposed were diverse but primarily focused on economic liberalism and capital deregulation, including the rapid liberalization of trade, capital and labour markets, privatization of state-owned assets and enterprises, and sectoral reforms aimed at reducing state control over the economy (Stiglitz, 2002; SAPRIN, 2004). The Bretton Woods institutions consistently assured borrowing countries that opening markets was a prerequisite for economic growth, promising trickle-down effects that would benefit all. However, these policies failed to deliver the anticipated economic growth and poverty reduction, instead perpetuating debts, fiscal deficits, and political turbulence that became pervasive in Africa and Latin America, undermining the very structural adjustment policies they aimed to implement (SAPRIN, 2004). Protests against structural adjustment policies were ample with critiques pointing out the limitations of rapid market liberalism and its role in perpetuating the entrenched debt crisis in Africa and Latin America (SAPRIN, 2004; Stiglitz, 2002). Economist and former World Bank Chief Economist Joseph Stiglitz argued that hasty liberalization neither guaranteed economic growth nor delivered trickle-down effects that benefited the poor. Instead, it exacerbated poverty by stripping away welfare and employment opportunities, trapping individuals in “vicious cycles” of poverty (Stiglitz, 2002, p. 83). The rapid opening of trade and capital markets also posed risks to domestic producers, who found themselves disadvantaged by global competition on their home turf. Furthermore, austerity measures and privatization policies weakened states, leaving them with limited resources and policy options to mitigate the impact of shocks. Consequently, they became increasingly reliant on the IMF and WB’s restructuring measures for new loans or debt rescheduling. Reductions in public spending shifted the burden onto the poor, exacerbating humanitarian crises and undermining poverty reduction efforts. The failures of states and the inability to deliver on promises

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of pro-poor growth have sparked anger, resentment, and widespread protests worldwide. People, whose welfare has been adversely affected by austerity and restructuring policies imposed by the IMF and World Bank, have expressed their discontent against these institutions. As widely acknowledged, liberalism has historically served as a tool for marketled growth, a concept not new to Western interventions in peripheral economies which have experienced forms of colonial and imperial governance in the past (Bernstein, 2000; Craig and Porter, 2006). Reflecting on the early manifestations of embedded liberalism during colonial rule, Craig and Porter (2006) argue that the efforts of European empires to establish liberalism in their vast colonies neither address poverty nor foster sustainable growth. Instead, these efforts aimed to create peripheral territories that were institutionally, financially, and physically open and secure for the smooth flow of international commerce, ultimately serving the capitalist accumulation of ruling elites in core countries. This pursuit of core states can be traced back to the colonial and imperial eras and has continued in contemporary development interventions. These interventions employ techniques such as “deterritorialization” and “reterritorialization” to dismantle state sovereignty and establish deregulated global capitalist markets. As Craig and Porter point out, these interventions, however, have resulted in hybrid forms of local accommodation rather than the creation of homogeneously open and secure markets for capitalist accumulation. Whether this was achieved by direct or more liberal indirect rule, reinvented tradition, integrated area development programmes, or tough loan conditionalities, the places they colonized and developed were only ever partially transformed into local versions of European kingdoms, developmental states or open economy free trading nations. (Craig and Porter, 2006, p. 31)

This description aptly portrays the diverse landscape of the global economy in the post-Cold War era, characterized by various forms of liberalism. The collapse of the Soviet Bloc signified the end of centrally planned economic models and led to a widespread shift towards market-based economies. The IMF and the WB played a significant role in promoting and implementing transition recipes for economic reform in formerly socialist economies, with the majority of them embracing marketoriented reforms during the 1990s (except for North Korea and Cuba). To some liberal enthusiasts, such as Francis Fukuyama, this movement appeared to signify the culmination of human history, representing the ultimate triumph of Western liberal democracy. Fukuyama argued that it did not mark the end of ideology or the convergence between capitalism and socialism, but rather an unequivocal victory for economic and political liberalism. He viewed Western liberal democracy as the endpoint of mankind’s ideological evolution and the universalization of it as the definitive form of human government (Fukuyama, 1992, pp. 3–4). However, the implementation of economic transition recipes did not lead to the establishment of Western-style democracy in an equal manner across all former socialist societies. The triumph of capitalism did not automatically replace the socialist rule in areas where neoliberal practices unfolded in unpredictable ways, with or without adherence to democratic principles. Caroline Humphrey, a prominent anthropologist, highlights the twists and unexpected reversals observed in the

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societal transformation of post-socialist economies, noting the resurgence of socialist regimes through electoral systems or democratic representation in some former socialist countries (Hann et al., 2002, p. 13). Fukuyama himself eventually acknowledged that liberal democracy was not yet the ultimate form of societal organization, recognizing the persistence and survival of authoritarian rule in significant parts of the world, citing examples such as Russia, China, and the Islamic state of Iran (Fukuyama, 2010). While his prediction accurately reflected the rise of neoliberal globalization, which benefited both liberal and authoritarian regimes in terms of the pragmatic and ideological appeal of market liberalism (Harvey, 2005), it failed to anticipate the emergence of hybrid forms of accommodation (Craig and Porter, 2006) or neoliberal exceptions (Ong, 2006). Neoliberalism neither eradicated nor weakened authoritarian power, but instead consolidated it in specific sites of the global economy. Insights into neoliberal exceptions provide an explanation for the rise of Asia, where rapid economic growth is accompanied by various forms of repressive and authoritarian regimes. Contrary to the narrative of market rationality, the economic miracles of East Asian and Southeast Asian countries were driven by central planning and state investments. Despite significant economic reforms, the state in many countries remains authoritarian, with limited progress or prospects for democratization. Neoliberal reforms have played a crucial role in the rise of China and Southeast Asian tigers and dragons. The rapid development of these economies involves unprecedented forms of global capitalist accumulation beyond national borders. Although these forms of accumulation operate in domains outside direct state control, they are not entirely free from state surveillance, as the government exercises control from a distance. For instance, in China, the state, while removed from direct involvements in individual and private-sector decisions, employs techniques of governmentality to shape citizens as desirable subjects of global capitalism for competitiveness and developmental priorities (Ong, 2006; Zhang and Ong, 2008). At the same time, as legal subjects of the socialist state, people face restrictions on their freedoms which are subject to repressive measures imposed by the authoritarian rule. The chapters of this edited volume will delve into the rise of the East and Southeast Asian tiger and dragon economies and explore the dominant modes of governance that give rise to distinct dynamics of compliance and resistance within the hybrid governance framework.

Authoritarianism and the Developmental State Export-oriented and state-led industrialization has been widely recognized as a successful development model responsible for the economic miracles of the Asian Tigers, namely Japan, South Korea, Taiwan, Hong Kong and Singapore. In contrast to the import substitution industrialization strategies widely deployed in Latin America and Africa, these countries in East and Southeast Asia adopted export-oriented industrialization approaches. These strategies brought significant benefits and advantages

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in terms of rapid technological progress and access to foreign capital from export markets and foreign investments, which helped to boost domestic industrialization and economic growth. After World War II, Japan emerged as an economic powerhouse in Asia, experiencing a high growth rate of around 10% during the 1960s (Tipton, 1998). Building on the state-led modernization efforts of the pre-war Meiji period, the Japanese government continued to play a central role in the country’s post-war economic reconstruction. The Ministry of International Trade and Industry (MITI) spearheaded the planning and allocation of scarce resources to strategically prioritize high-technology industries for comparative advantages in export markets (Johnson, 1982). Exportoriented industrialization strategies were also adopted in other East and Southeast Asian countries and territories, including South Korea, Taiwan, Hong Kong, and Singapore, as a means to achieve rapid economic growth. Unlike the development of liberal capitalism in Europe, authoritarian and repressive states played a key role in fostering export advantages and efficiency as key sources of economic growth in the other four East and Southeast Asian tiger economies. In South Korea, the state employed central planning, state investments, and strict discipline as key measures to enhance domestic productivity for export purposes. Subsidies and protectionism provided by the state were effectively linked to export performance. Resources were directed towards chaebol groups, or giant private corporations, which had personal and organizational relationships with state officials. With access to credit programs, these organizations enjoyed significant organizational growth and became major manufacturers for export markets (Evans, 1989; Tipton, 1998). Repressive states and dictatorships, such as the Pak and Chun governments, played a significant role in fostering export-led growth and achieving economic development targets in South Korea. Military coup d’états and martial law were used to suppress industrial unrest, quell disobedience, and restore order. Confucian values were instrumentalized to instill discipline and obedience, aligning nationalism with state authoritarianism. During Chun Doo Hwan’s presidency from 1980 to 1988, the revival of cultural and ethical values associated with Confucianism, under the guise of “Korean values,” helped to sustain growth and the dictatorial regime (Tipton, 1998). In other parts of East and Southeast Asia, for example, Taiwan, Hong Kong, and Singapore, the state also played a significant role in fostering export-oriented strategies and driving economic development. After the Nationalist Party retreated to Taiwan, the Republic of China leveraged its centralized power and resources to develop key domestic industries and privatize state-owned enterprises. It prioritized attracting foreign capital and high-technology investments by establishing Export Processing Zones that provided tax exemptions and reduced government regulations for foreign-invested companies. Hong Kong and Singapore, both former British colonies, shared similarities in their economic development (Tipton, 1998). They served as strategic entrepôts for the surrounding regions and were characterized by a predominantly Chinese ethnic population. Moreover, both territories were governed by highly centralized and authoritarian states. Both economies have greatly benefited from their ideal locations for

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international trade, capitalizing on liberalized trade activities with global markets that have fueled rapid economic growth. Despite the process of economic liberalization, the state continues to play an active role in enhancing national productivity and competitiveness in both Hong Kong and Singapore. In Hong Kong, the government controlled all land and utilized leasing licenses as a revenue source to subsidize public housing and guide industrial development. These housing subsidies were instrumental in driving the sustained economic success of small-scale enterprises between 1950 and 1980. Government support in areas such as healthcare, education, and housing incentivized “low-risk entrepreneurialism” among self-employed individuals, who could rely on public benefits in case of failure (Tipton, 1998). These government subsidies fostered an environment conducive to entrepreneurship and the proliferation of small-scale enterprises, allowing them to capitalize on a flexible and cost-effective workforce that could adapt to changing market demands. In Singapore, the only economic tiger in Southeast Asia, the one-party state has taken a direct and proactive approach to developing domestic industries through the optimization of foreign capital and technology. Following its separation from Malaysia in 1965, the government implemented an industrial restructuring program that shifted the focus of manufacturing from low-cost and labour-intensive industries to technologically advanced and capital-intensive sectors, thereby creating higher value-added goods and services. Playing a pivotal role in attracting foreign direct investment, the state-owned agency, the Economic Development Board (EDB) operates globally with offices in major economic centers worldwide (Schein, 1997). Since its establishment in 1961, the EDB has actively engaged in securing joint deals with multinational companies and facilitating foreign investment by providing customized benefits and assuring control over labour organizations, effectively transforming the country into a significant export-processing zone (Tipton, 1998, p. 439). With centralized control, limited unionism, legal restrictions on industrial actions, and a skilled yet compliant labour force accustomed to long working hours and limited protection, Singapore swiftly emerged as a regional hub for flexible production (Müller, 1997; Wong, 2006). Through industrial restructuring and internationalization strategies, the country experienced a rapid influx of foreign-invested companies, which employed over 50% of its workforce and accounted for 70% of industrial outputs and 80% of manufactured exports (Schein, 1997; Tipton, 1998, p. 439). In addition to the production carried out by multinational corporations, the state exerted significant control over the national economy through direct investment in government-linked companies across key industrial sectors such as maritime, defense, petroleum refinery, transport, and communications (Tipton, 1998). Far from being liberal, the state in Singapore remains authoritarian, governing through an apparatus based on the principles of technocratic efficiency and Confucian discipline (Tipton, 1998). The rise of East Asian and Southeast Asian tiger economies presents an unusual case for development theorists, as it challenges the notion that authoritarian and repressive states hinder economic growth. The state, instead, played a critical role in the late development of newly industrialized economies (NICs) in East and Southeast

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Asia. Authoritarian states in East Asia were able to effectively use centralized power and control over resources and decisions to make strategic and productive investments in export industries, resulting in rapid economic growth. These propositions are common in studies on the “developmental state” which shed light on the crucial role played by the state in late industrialized economies in East Asia (Amsden, 1989; Johnson, 1982; Wade, 1990). For example, Johnson (1982, p. 19) proposed: “In states that were late to industrialize, the state itself led the industrialization drive, that is, it took on developmental function”. The success of developmental states in East and Southeast Asia has posed a challenge to the neoclassical economic model of liberalism, which often downplays the role of the state in the economy (Öni¸s, 1991). This has sparked scholarly debates on the revival of the state’s role in promoting market rationality for optimal efficiency. Scholars such as Wade (1990) proposed the concept of “governed market theory,” which recognizes the state’s guidance and investment as necessary for competing in international markets on a large scale. Amsden (1989) put forth the idea of a “guided market economy,” where market rationality is constrained by the state’s priorities of industrialization for the concentrated and optimal use of national resources for rapid technological progress. Additionally, Peter Evans introduced the concept of “embedded autonomy,” emphasizing the state’s embeddedness in personal and informal networks with autonomous and private actors, enabling informed investment decisions aligned with market rationality (Evans, 1989, p. 130). The end of the Cold War, coupled with the Asian Financial Crisis in 1997, marked the beginning of a new era of unprecedented globalization and the rise of neoliberalism on a global scale. The collapse of the Soviet Union opened up the world economy to post-socialist and independent states from the former socialist bloc, effectively merging this region with the geopolitics of global capitalism. The vision of a flat world with free and borderless commercial activities became more prominent, with the IMF and the WB intervening rapidly and advocating for structural adjustment policies in transitional economies (Friedman, 2005). Structural adjustment measures, with an emphasis on liberalizing and opening up domestic markets, were revived and advocated as the only pathway for the development of transitional economies (World Bank, 1996). The 1997-98 Asian Financial Crisis destabilized the developmental state model as liberalized and deregulated capital markets unleashed speculative capital, and undermined the traditional means of state control. The crisis resulted in growing criticism of failed states and limitations of state sovereignty in the face of free capital movements (Craig and Porter, 2006; Stiglitz, 2002). Under pressure from the IMF and the WB for public reforms, the state came down under scrutiny for corruption and economic failures (Soederberg, 2003, 2004; Stiglitz, 2002). Liberalization and deregulation were called upon as universal remedies for both post-socialist and post-crisis economies. The rise of China and Southeast Asian economies as new Asian dragon and tiger economies is accounted for the neoliberal turn in the Asian development model, whose economic success is accredited to compliance with processes and rules of global markets (Springer, 2017; Zhang and Ong, 2008).

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Neoliberal Conditions and Governmentality Neoliberal conditions have played a crucial role in the economic rise of China and the new Southeast Asian tiger and dragon economies (Harvey, 2005). These economies have witnessed unprecedented forms of capital accumulation that transcend national borders. However, this accumulative behaviour is not exempt from state surveillance. In places where authoritarian regimes remain in power, the state retains significant control over private-sector decisions by establishing specialized spaces and zones for governing purposes (Ong, 2006). On the one hand, the state relinquishes direct control in these spaces, allowing market forces to regulate behaviour of economic actors based on profit maximization and competitive market rules (Ong, 2006; Zhang and Ong, 2008). On the other hand, as the legal authority, the state rules the market actors as its citizen subjects with coercive means and authoritarian rules (Ong, 1999, 2006). Subsequent chapters will delve into the governing techniques employed by post-socialist and post-colonial states to drive rapid economic growth and focus on specific patterns of optimization. Following the economic and political crisis and subsequently the collapse of the socialist bloc in Eastern Europe, major socialist regimes in Asia, except for North Korea, embarked on market reforms to address economic and political challenges. In China, state-led economic reforms were initiated in 1978 under the leadership of Deng Xiaoping. These reforms were a response to a prolonged period of economic stagnation and political turmoil caused by the excessive centralization of power under Mao Zedong and his supporters. Deng’s reforms marked a departure from the Soviet economic model (Tipton, 1998; White, 1993). The post-Mao reforms brought about significant changes in terms of market opening and restructuring policies aimed at developing a market economy (Tipton, 1998). However, these state-led reforms followed neither the path of democratic transition, nor the developmental state model as seen in other parts of East Asia to institutionalize capitalist development. Rather, they encapsulated both capitalist and socialist rationalities. To explain this phenomenon, White (1993) proposes to distinguish state capitalism from state socialism. According to White (1993), the former involves direct state intervention to develop the capitalist private sector as seen in Japan, South Korea, and Taiwan. The latter points to the market socialism projects implemented by socialist regimes in China and Vietnam, where the state relinquishes direct control in the economy but retaining “an integument of socialist political ideas and institutions” (Ong, 2006; White, 1993, p. 6). According to White (1993), the state has developmental and political dimensions, each encompassing a distinct set of ideas, institutions, and policies. Market socialism projects present contradictory changes, with a significant transformation in the developmental but not in its political elements (White 1993, p. 6). The separation of the developmental and political institutions enables socialist states in Asia, namely China and Vietnam, to carry out radical market liberalization and privatization without changing the political regime. However, White (1993, p. 6) argues that the developmental and political aspects are correlated in relation to the economy. Changes in either of these aspects can

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have an impact on economic successes or failures, which in turn affect the state’s legitimacy. The diverse transitional outcomes observed in former socialist economies in Eastern Europe and East Asia are used to illustrate the trade-off between economic and political priorities. White anticipates that economic priorities would prevail by pointing to the post-Cold War transitions being led by the ideology of economic liberalization and a state reduction agenda, which become the dominant development model for both capitalist and socialist states in seeking high economic performance. The moves towards privatization and deregulation of the economy inevitably lead to an uneven distribution of benefits to actors within the state and society. The power imbalance between the state and the market eventually gives rise to social and political tensions that may challenge the authoritarian rule of the state. White argues that the tensions between the state and society, including increased discontent and resistance, brought about by restructuring policies, can be envisaged as the widespread failures of market socialism projects, which can be observed in Eastern Europe (White, 1993). When this analogy is plausible in Eastern European economies, it fails to depict the neoliberal conditions in post-socialist economies in East and Southeast Asia. It is evident that neoliberal conditions have played a significant role in consolidating authoritarian power in China and other parts of East and Southeast Asia. These countries have experienced rapid economic growth, often referred to as the rise of the new Asian tigers and dragons, which has been driven by accelerated economic liberalization and labour market flexibility. The pursuit of market-oriented policies has coincided with the consolidation of authoritarian regimes in the region. From a governance perspective, the transition from a planned to a market-oriented economy can be understood as a restructuring project aimed at promoting neoliberal conditions that enable free entrepreneurial pursuits and maximize economic efficiency. According to Michel Foucault, neoliberalism entails the deployment of governing techniques to promote the exercise of liberalism in order to achieve economic maximization (See The Birth of Biopolitics). Foucault argues that the state utilizes liberalism not as an ideology, but as a practical tool to optimize people’s free choices and rational behaviour in order to achieve maximum economic outcomes on a collective basis (Foucault in Rabinow, 1997, p. 75). In the context of neoliberal conditions, the state employs governmentality as a set of governing techniques to foster practices of liberalism that enhance the efficiency of the private choices and promote self-governance, all in line with national economic priorities. Governmentality involves the techniques of subjectivity and subjection, which aim to reshape people’s economic rationality and calculation through principles of selfdiscipline and self-optimization (Ong, 2006; Li, 2007). Foucault’s view of “man,” in relation to the body and biological system, goes beyond the individual human being and encompasses biopolitics. This perspective views the body and biology as products of people’s calculations, intricately linked to the technology of subjection. This technology involves “an order of knowledgeable practices, norms of conduct, and elaborate protocols of behaviour” (Dillon, 1995, p. 324). The state utilizes the technology of subjection to shape calculable subjects, promoting self-disciplining and self-governing practices. These practices extend beyond legal-juridical frameworks, for claims such as rights, and encompass multiple governing institutions

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embedded in various social domains, such as age, race, religion, gender, and cultural rules. By leveraging these institutions for governing purposes, the state can govern society from a distance without using direct interventions or forces (Dillon, 1995; Ong, 2006). Through the techniques of subjection, the state molds specific calculable subjects within designated spaces, optimizing strategies for accessing and accumulating global capital (Ong, 1999, 2006). According to Ong (2006), these interventions for optimization create conditions that allow neoliberal exceptions to flourish even in authoritarian contexts. Neoliberal exceptions can be observed in the establishment of special economic zones or export processing zones, commonly known as zoning strategies (Ong, 2006). These strategies involve spatial administrative approaches aimed at attracting foreign capital, facilitating technology transfer, and fostering entrepreneurial capacity to prioritize high growth objectives. By embracing the global economy, the pursuit of competitiveness has become crucial for individuals, businesses, communities, and countries throughout East and Southeast Asia, as they increasingly rely on their comparative advantages in global markets. The establishment of economic zones and specialized spaces for global competitive strategies has entailed specific administrative provisions. These provisions include reduced tax duties and tariffs for foreign investors, the relaxation of travel restrictions to facilitate relatively free movement of labour, and the minimization of protectionism and unionism to maximize the flexibility of the labour force. These measures have transformed labour-intensive economies such as China, Indonesia, Malaysia, Vietnam, and Cambodia into regional hubs for flexible production to serve global markets. Zoning strategies were implemented to establish regional networks for the production and accumulation of capital and labour. The creation of special economic zones has led to the emergence of transnational economic hubs or global city-regions, including Hong Kong and Shenzhen, Taiwan and Fujian, and the Singapore-Johor-Riau growth triangle. Despite political differences, these areas facilitate the free movement of capital and labour (Ong, 2006; Scott, 2001). During this process of development, transnational citizenship practices emerge, reflecting the logic of “flexible citizenship” rather than core-peripheral relationships. These practices are associated with governing strategies employed by states to attract foreign capital, expertise, and technology in spaces created for high growth (Ong, 1999). As Ong (2006) points out, in spaces where the territoriality of citizenship is embedded in the territoriality of global capitalism, the components of citizenship, including rights, entitlements, benefits, and nation, become less constrained by the legal-juridical system of the nation-state. Instead, they are influenced by the neoliberal logic of self-reliance and optimization. This allows individuals to make citizenship-like claims in various locations beyond the borders of the nation-state in some cases, while in others, these claims are restricted to within the state territories (Ong, 2006). In this respect, governmentality enables authoritarian states to create conditions that facilitate neoliberal exceptions, allowing for risk-taking behaviour and optimizing strategies to gain competitive advantages in global markets.

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The conditions for neoliberal exceptions, characterized by the coexistence of capitalism and socialism, as well as liberalism and authoritarianism, have contributed to the rapid growth of post-socialist and post-colonial economies in East and Southeast Asia. These conditions deviate from the rationale for neoliberalism, which is underpinned by fundamental liberal principles such as legally protected rights. According to Harvey (2005), this dualism observed in the East and Southeast Asian economies does not align with the fundamental principles of neoliberalism, which advocate for the free and secure transnational movements of commodities and capital. Neoliberalism promotes the liberation of these movements from nation-state sovereignty and their adherence to global market rules. This process involves the transformation of the developmental state into a neoliberal one, characterized by the state’s increasing focus on promoting free and private property rights, the rule of law, and the establishment of free market institutions, measures aimed at enhancing the competitiveness of individuals, firms, and various territorial entities, including cities, regions, and national or regional groupings (Harvey, 2005, p. 65). Such unprecedented movements and competitions in global markets are regulated through juridical processes and international laws, primarily governed by international financial and trade organizations such as the WB, IMF, and WTO. In this context, states are encouraged to minimize their direct interventions and instead focus on creating a market mechanism that addresses market failures and ensures an enabling environment for entrepreneurial decision-making. Neoliberalism has become predominant on the world stage due to the increasing interest and influence of ruling elites, who seek the freedom to restore their class power and shape state policies in accordance with neoliberal principles. However, the fundamental tenets of neoliberalism, which are based on individual liberal rights, do not fully align with the rise of newly industrialized countries in East and Southeast Asia. In these regions, the exercise of liberty rights is often constrained by the rule of authoritarian regimes. Furthermore, state authoritarianism does not align with the neo-conservative concept of the developmental state. The developmental state refers to the use of coercive measures by the state for disciplining purposes, whereas state authoritarianism is associated with a governing apparatus aimed at consolidating the authoritarian power of the state (Harvey, 2005, p. 121). Thus, according to Harvey (2005, p. 123), the neoliberal conditions that have contributed to China’s emergence as a global economic power, while also being one of the most repressive regimes towards liberal movements, are considered “an unintended consequence of the neoliberal turn in the advanced capitalist world.” Rather than adhering to a rigid structural description, anthropologists have characterized neoliberalism as a collection of fragmented and inconsistent practices, intertwined with the concept of governmentality employed by the state to shape and mold its subjects (Li, 2007; Nguyen, 2018; Zhang and Ong, 2008). Through various techniques of subject-making, the state governs from a distance, artificially configuring people’s desires towards specific goals, portraying them as their own habits, aspirations, and beliefs to secure their consent and will to improve (Li, 2007, p. 5). Neoliberalism can be viewed as a collection of “malleable governing techniques” that

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can be employed by any state to adapt and reconfigure their optimization strategies without necessitating radical changes to the state apparatus (Zhang, 2010, p. 17). Studies on privatization in socialist China and Vietnam highlight a significant shift in the mode of governance, moving away from strict state control towards a greater emphasis on people’s ability to make choices (Nguyen-vo, 2008; Nguyen, 2018; Zhang and Ong, 2008). The transition from a central planning system to a market mechanism enables the participation of non-state actors in the economy, who are governed by market principles rather than state directives. However, while there is some relaxation of economic freedom, the socialist state retains strict control over the social and political spheres, earning a reputation as a regime hostile to individual rights and freedoms. Furthermore, in the configuration of market socialism, privatization does not openly recognize free rights and private property rights. Instead, it positions private ownership as the responsibility of socialist citizens to uphold collective welfare under the guidance of the state (Nguyen, 2018; Nguyen and Chen, 2017). Despite the presence of the socialist state, privatization holds appeal due to its association with the principles of self-determination and self-reliance, which are entangled with the socialist mandate of ensuring collective welfare rather than being openly acknowledged as a path towards capitalism (Harvey, 2005; Nguyen, 2018; Tipton, 1998; Zhang and Ong, 2008). In the configuration of market socialism, individual liberalism takes on a unique character as it is shaped, reimagined, and redefined according to the state’s discourse and propaganda of what constitutes proper or correct conduct. While people’s economic pursuits are free from direct state control, their choices are still subject to the influence and reconfiguration of socialism by the state from a distance (Leshkowich, 2012; Nguyen-vo, 2008; Zhang and Ong, 2008). Spatial government, also known as government from a distance, is a prevalent form of governance within the context of spatial production and accumulation. This model is characterized by the application of Taylorist managerial techniques employed by multinational companies to exert control and surveillance over their production systems as they relocate to developing countries in search of cheap and flexible labour (Craig and Porter, 2006; Dunn, 2004). The system is intricately designed to monitor workers’ productivity and has evolved to incorporate advanced methods of controlling their body movements and behaviour based on ethnic, cultural, and gender hierarchies. These mechanisms are integrated into the production space to shape compliant bodies that seamlessly align with the exploitative machinery of capitalist accumulation (Dunn, 2004; Ong, 1999, 2010). At the national scale, ruling elites also exert control from a distance by shaping obedient subjects within the context of global capitalism. These subjects are intricately entangled with cultural norms and forms of domination. Under the framework of global governance and the push for neoliberal reforms, ruling elites in East and Southeast Asia maintain their hold on power by increasingly relying on nationalist sentiments rooted in cultural, gender, racial, or ethnic norms. This enables them to exercise their rule with a sense of sovereignty (Ong, 1999; Tipton, 1998). This entails the perpetuation of a nationalistic mandate within the context of neoliberal reforms, exemplified by the Chinese socialist leaders’ promotion

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of “socialism with Chinese characteristics.” This slogan particularly resonates with the diasporan Chinese population, who feel a deep connection to the mainland due to ethnic ties, familial links, or adherence to Confucian doctrines that emphasize their inherent responsibilities and obligations towards the development of their imagined homeland. Similarly, in Indonesia and Malaysia, the emergence of new narratives surrounding Islam appeals to people’s aspirations for a modern nation, largely driven by the imperatives of economic competition in the global economy (Hamayotsu, 2002; Ong, 1999). Thus, it is common to observe a multitude of liberal practices that arise from the cultural reproduction of norms and forms of domination, as well as encounters with hostility and resistance rooted in gender, ethnic, racial, and cultural differences and hierarchies. The tensions between the expanding liberal practices and the resistance and hostility directed towards them expose the opportunities and challenges faced by transitional societies in East and Southeast Asia as they strive to strike a balance between economic development and political constraints in order to sustain the rapid growth of their economies. As revealed by the chapters in this edited volume, these tensions can be addressed through the emerging roles of international organizations, regional governance networks, and civil society actors that have evolved alongside the process of globalization and neoliberal conditions. It is worth exploring these dynamics further through empirical evidence to gain a deeper understanding of the opportunities and challenges related to economic prosperity in the regions.

Chapter Outline The chapters included in this volume do not provide exhaustive coverage of all East and Southeast Asian countries. Instead, the intention is to offer a diverse portrayal of different economies and shed light on the challenges experienced on the ground during times of transition. The geographical scope of the volume encompasses East and Southeast Asia, while some major local powers such as mainland China, Japan, South Korea, and Singapore are not specifically featured. This is not meant to diminish their importance, but rather to recognize that their impact on the selected regions is multifaceted and warrants separate analysis. By emphasizing the agency of scholars based in the selected regions, this volume does not ignore the proverbial “elephant in the room,” but rather focuses on how the ‘elephant’ has affected and is perceived by regional actors, with the aim of offering new perspectives to the broader discourse on governance and transition. Chapter 2 provides key insights into how NGOs provided leeway for an emerging civil society to collaborate with the state in improving the provision of public services. Drawing on her PhD thesis and extensive fieldwork in Vietnam, Trinh highlights the mediating role of women in NGOs between the state and society. In the context of post-reform Vietnam, NGOs do not act entirely independently from the state; instead, they tend to reconcile conflicts rather than agitate against the state. The development in the aid industry has prompted donors to work within institutional,

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administrative, and financial constraints, leading to a process known as ‘NGOisation’, whereby civil activists become less inclined to challenge the state and risk becoming complicit with it. This process is commonly observed in post-socialist countries where the existing social and political order tends to weaken the capacity of civil society activism that may challenge the state. While there has been an unprecedented expansion of philanthropic and issue-oriented organizations in Vietnam, it remains a question whether an independent civil society is possible without a legal framework to support it. Accompanying the post-socialist transition are marketization and privatization processes that provide people with the freedom to choose, seemingly liberated from state control. However, the state configures socialism from afar through the techniques of governmentality that influence people’s choices based on a socialized vision of welfare. This chapter highlights a dilemma that exists in most post-socialist countries, where associations created independently from the state gradually become part of the apparatus that reinforces state control. While these organizations may have different agendas and interests than those of the state, they have to work with, rather than in opposition to, the state. Over time, the interests of working for collective welfare may gradually converge with those of the state. In Chapter 3, Nawawi, Ngadi, and Triyono provide a comprehensive analysis of the impact of flexible labour market policies and the expansion of the digital economy on work intensification, employer-employee relations, and trade unions in Indonesia. The country’s transition from a primarily agricultural-based economy to a more diversified one has been accompanied by the increasing use of information technology and the internet in the labour market. Additionally, Indonesia has undergone a democratic transition since the late 1990s, following the fall of former President Suharto in 1998. From a neoliberal perspective, the labour market plays a crucial role in driving economic growth, with flexibilization and digitalization being important for creating a flexible and competitive labour market. The emergence of business online platforms has altered the traditional governing methods and policies over labour and capital across borders and in real time. As the chapter reveals, the vagueness of labour laws may result in excessive worker exploitation, lack of job security, and limited access to social protections. To illustrate the effects of flexibilization and digitalization on the labour market and workers’ rights in Indonesia, Nawawi, Ngadi, and Triyono use primary data from the National Labour Force Survey 2019 and online interviews conducted in 2021 and 2022. The chapter shows that labour market flexibility and digitalized economic platforms have led to changes in work systems, workers identities, new skills, and employer-employee relations. Additionally, the chapter also presents three approaches to explore novel issues associated with market flexibility and the digitalized economy and societal relationships on these digitalized platforms, such as technological determinism, humanism, and post-humanism. The chapter’s findings reveal that the development of a digitalized economy and flexible labour market policies in Indonesia have had unintended sociocultural costs and consequences, such as increased working hours, changes in working relationships, weakened trade unions and unresolved conflicts associated with ambiguous

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employer-employee relations. These findings highlight the importance of considering the social and cultural implications of labour market policies and technological requirements for this new form of economic platform. In light of this, Nawawi, Ngadi, and Triyono propose measures to enhance worker protection, ensure fair wages, promote freedom to organize, provide job loss guarantees and improve digitalized skills and infrastructure. In Chapter 4, Narut Charoensri, through a case study of Thailand-Laos friendship bridges, presents the role of local civil society actors in regional governance. The chapter reveals a new role of non-state actors and civil society organizations in mitigating the environmental and societal problems arising from regionalization processes. The relationship between civil society and the state, as evidenced by the analysis in this chapter, provides an excellent example of the intricate interplay between compliance and resistance in the process of global economic integration. As revealed by the chapter, non-state actors and local civil society organizations contribute to good governance not by rejecting state-led development projects, but by working with various actors, at local, national, regional and global levels, to facilitate more inclusive, free, fair, and transparent regionalization processes. This case aptly demonstrates that compliance and resistance are not an either/or relationship but are often intertwined in reality. This chapter addresses a conspicuous gap in both the literature on regionalization and the relationship between civil society and development projects in the Mekong subregion. By combining the existing development approach with an International Relations perspective, this chapter underscores the inherent tensions between local, national and regional priorities. Drawing on the example of the Mekong School, the chapter demonstrates how civil society actors helped promoting environmental protection and, in doing so, expanded its advocacy to encompass trade facilitation. Given the Mekong School’s contribution to the regionalization of the Mekong Subregion, Charoensri argues that economic regionalization should not be conceived as mere state-led projects but rather as a collaborative effort involving a range of actors, including the government, civil society, and the business community. In Chapter 5, Julia Roknifard provides a comprehensive analysis of the discourse surrounding the New Economic Policy (NEP) enforced after the ethnic riots of 1969 in Malaysia. She argues that while the policy had some successes in creating a new middle class and poverty alleviation, it did not necessarily carve out a one-way path towards democracy. This point has been repeatedly made by transitologists who have argued against a linear, clear-cut and one-way model of democratic transition. Sketching out the origins and effects of the NEP that was put in place following a particularly violent episode of Sino-Malay sectarian conflict on 13 May 1969, Roknifard highlights that while the NEP did make progress in terms of closing the disparity between the Bumiputera and Chinese, it had other unintended consequences. For example, the NEP inadvertently widened the wealth gap within the Bumiputera, and preferential policy in favour of the Bumiputera in education resulted in general discontent among non-Bumiputeras. The NEP also gave rise to crony capitalism among the Bumiputera.

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Roknifard also discusses the role of government-linked companies in supporting the government and enabling domestic firms. As these companies are owned through the states’ chief ministers, there emerged a fusing of bureaucratic and party apparatuses which exacerbated rent-seeking activities and entrenched patronage networks. This mechanism of control left little space for resistance from a grassroots level. Based on a comprehensive account of various dimensions of the impact of the NEP, Roknifard argues that while it led to the creation of the new Malay middle class, it also resulted in other problems that could offset the impact of the growing size of the middle class on democratic transition. Based on the Gramscian explanation of compliance and Banfield’s work on culture and political capacity, Roknifard stresses that the homo economicus interpretation is insufficient and calls for a constructivist cultural explanation of the effects of the NEP. Non-material factors include institutionalized and legalized discrimination, geographical environment, economic specialization along ethnic lines and colonial legacies. It is interesting to note the parallel across (former) socialist countries in their attempts to facilitate economic transitions, which led to different outcomes politically. The NEP in Soviet partly resulted in the collapse of the Soviet Union and China’s post-1978 economic reforms. Similarities can also be observed in terms of the discontent among other ethnic groups against positive discrimination in favour of a socio-economically disadvantaged group. The case of Malaysia provides a detailed account of problems that a government encounters in democratic transition, based on which comparative insights can be drawn. In Chapter 6, Jun Zhang conducted a detailed study on the long-standing housing crisis in Hong Kong. He challenges the simplistic assumption that social unrest in Hong Kong is solely a result of unaffordable housing, which drives desperate young people to protest. Drawing on a vast amount of empirical data on housing affordability, he rebuts this inaccurate assumption. Sketching out the history of the government’s involvement in the housing market from the 1950s, this chapter contextualizes the debate over the root causes of the housing problem, highlighting different sociopolitical factors that contributed to the social unrest culminating in the 2019–2020 protests. The chapter highlights the limitations of the traditional neoliberalist approach in understanding Hong Kong’s transition from a former British colony to a Special Administrative Region under an authoritarian regime. Instead, a developmentalneoliberalist lens is used to examine the strong presence of the government in an economy shaped by both developmentalism and neoliberalism. Zhang observes that high housing prices are a by-product of developmental-neoliberalism that encapsulates various driving forces accompanying Hong Kong’s economic transition from the existing economic order inherited from the colonial era. While the government seeks to provide more affordable housing to lower-income citizens, it remains heavily involved in the housing market and people’s preference for private ownership. Zhang’s critical reflections on the data reveal crucial inaccuracies resulting from pre-existing stereotypes around housing prices in Hong Kong. By examining the methodologies used in three different sets of data—the Numbeo data, the

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Demographia data, and the E-House data—this chapter highlights that, contrary to conventional wisdom, housing affordability in Hong Kong is not significantly worse than in other megacities in mainland China. Inaccuracies such as these undermine the argument that attributes social unrest in Hong Kong solely to its housing problem. This chapter also contributes to the debate around the compatibility between a developmental state and neoliberalism. The case of the housing market in Hong Kong shows that the hybrid model of developmental-neoliberalism both enables and restricts the government to mitigate the market problems to some extent, but it also allows the government to co-opt some homeowners to refrain from protesting against rising housing prices. In Chapter 7, Takeshi Kohno assesses how Timor-Leste’s democratic struggles are shaped by its historical context and concerns regarding the management of China’s influence. The interplay between its historical legacy of resistance and elite politics has helped the country maintain its democracy while also leading to an ongoing economic struggle. As a young ‘petrostate’ that gained independence in 2002, this study on Timor-Leste’s struggle for independence provides crucial insights into democratic transitions when compared to other petrostates, such as Algeria and Iraq. Unlike many other petrostates, Timor-Leste when taking a liberal route has avoided succumbing to the ‘resource curse’, demonstrating a unique trajectory. Being a small state with a long history of colonization and heavy reliance on natural resources, Timor-Leste is vulnerable to diplomatic maneuvers by regional powers, particularly Australia. Resource nationalism becomes a tool for political elites to fuel public anger towards Western racism, stemming from the legacy of 300 years of Portuguese colonial rule and the subsequent 27-year Indonesian occupation. However, the economic fragility and dependence of Timor-Leste are not solely due to its subordinate relationship with Australia but are also a result of larger international power dynamics at play. The intensifying US-China rivalry is causing a shift in the geopolitical landscape, with Australia and Japan expected to align themselves with the US, and ASEAN potentially providing shelter for Timor-Leste. However, it is important to note that such protection may be limited, as both Australia and ASEAN have their own priorities and agendas to consider. With the unfolding politics in the region, TimorLeste seems to have limited foreign policy options, as aligning with one powerful country over other risks compromising the fundamental principles that support its very existence.

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Chapter 2

The Formation of Civil Society Through a Mode of Governmentality in Post-Reform Vietnam Binh Thi An Trinh

Introduction: Civil Society, NGOs and the New Social in Post-Reform Vietnam The idea of civil society has been revived vigorously with the rise of social movements in Eastern Europe which accounted for the collapse of the Soviet Bloc in the late 1980s. Within the context of a diminishing socialist cluster, the idea of civil society is shifting with the neoliberal doctrine that dominates the vast geography of postcolonial and post-socialist economies (Edwards and Hulme, 1996; Keane, 1998; Howell and Pearce, 2002; Harvey, 2005). This shift is reflected in the new policy agenda for international development assistance, which is to create international conditions for the global order, capital market expansion and free trade (Fowler, 1998; Crawford, 2001). Civil society was identified as a key institution to deliver the goals and policy of this agenda and to promote the neoliberal ideology and “market-based world order” (Fowler, 1998; Howell and Pearce, 2002). For foreign donors, NGOs are recognised not only as a subset of civil society but also as capable partners in the delivery of social services to their constituents at the grassroots level (Choudry and Shragge, 2012; Choudry and Kapoor, 2013b; Lang, 2013; Ungsuchaval, 2022). Thus, when the new agenda is said to focus on civil society development, it tends to invest and develop in a cluster of professionalised and depoliticised NGOs, a process which is widely known as the NGOisation of civil society and which mainly established to serve donors and governments in delivering services to local communities (Choudry and Kapoor, 2013a; Lang, 2013). This cluster becomes indispensable in the development process by filling in the gap for social services, which then become scarce as the state reduces public welfare budgets (Nørlund, 2007). B. T. A. Trinh (B) Independent Scholar, Hanoi, Vietnam e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_2

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A formation of this cluster has also been observed in post-socialist Vietnam with the proliferation of privately owned organisations alongside the process of marketisation and privatisation. Vietnam’s economic reform, often known in Vietnamese as the đổi mới policy, started in the late 1980s, and it is often compared with structural adjustment programmes as it involved extensive measures of market and price liberalisation (Fforde and De Vylder, 1996). However, the socialist state retains a profound and arbitrary role in the economy (Gainsborough, 2010; Hayton, 2010). Although people are freer with the advent of market liberalisation, social and political activities are still strictly controlled by the state under the overall leadership of the Vietnamese Communist Party (Thayer, 1995, 2009). Thus, the formation of a market society in the context of marketisation and privatisation in Vietnam is often compared with a post-welfare society that prevails with self-determination and selfreliance (Nguyen, 2018; Schwenkel and Leshkowich, 2012). In this respect, Zhang and Ong’s (2008) study about China’s post-socialist privatisation also proposes the creation of ‘the new social’ or a social space particularly useful for the state-led strategy of globally economic competitiveness. According to Zhang and Ong, this ‘new social’ should not be equated with the market and civil society in the sense it consolidates private property rights or the free rights of the individual. Rather, the new social, which is formed with a set of governing technologies to maximise the efficiency of autonomous choices, is not entirely independent from state control, which is exercised from a distance. The state, although refraining from direct interference in individual choices in the market, continues a repressive approach towards movements for individuals’ rights (Zhang and Ong, 2008; Leshkowich, 2012). Moreover, governmentality involves techniques for self-discipline and optimisation in line with market rules (Rose, 1996; Li, 2007; Rose and Miller, 2008). Without state intervention, people will supposedly act according to their own interests, observing economic (and political) rationality, which is considered the conduct of conduct (Li, 2007). The new social, therefore, is the space created for private pursuits and entrepreneurial behaviour for global capital accumulation, and is part of the governing strategy to consolidate the legitimacy of the socialist state with market efficiency (Zhang and Ong, 2008). In this chapter, I will present the emergence of an NGO sector formed within the process of marketisation and privatisation in post-reform Vietnam. This chapter is drawn from my PhD thesis on personhood and civil society and includes a sixmonth fieldwork study of life histories and narratives of women working in the NGO sector in Hanoi, the capital city of Vietnam. I argue that the NGO sector, although representing an autonomous social space from the state, is not entirely free from state control as people within the sector are still reliant on the state for a legitimate role to care for other people in local communities. The professional NGO women demonstrate a distinctive position in the middle between the state and society with the socialist ideology and symbols of femininity that are promoted by the state. As carers and educators, they continue to perform their traditional caring function, which tends to reconcile conflicts rather than agitating against the state. The expansion of this cluster demonstrates a pluralisation of social and economic sectors concerned with care, which bears a resemblance to a plural civil society. Nevertheless, as this chapter

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will show, their civil society actions are still limited to caregiving and educating functions and with harmonised and peaceful approaches, which are beneficial to the legitimate leadership of the party-state and its economic reforms.

The New Role of Civil Society in International Development The new policy agenda turns to civil society’s non-state and market-supporting actors in an attempt to minimise the role of the state in the economy and alternative providers of public services that fit the agenda of public privatisation (Fowler, 1998). Civil society is considered the third sector that takes on the function of service delivery as the state retreats from service and protection functions (Cox, 1999; Howell and Pearce, 2002). As a “third way” and “third sphere”, civil society is highlighted as neither the state nor the market but an associational and pluralist sphere for voluntary and philanthropic activities to foster social cohesion and democratic principles (Giddens, 1988; Cohen and Arato, 1997). The idea of civil society in the Tocquevillian tradition is highlighted in the new agenda for international development through reconciling diversity and differences in society in line with market rules and forging consent to capitalist development (Howell and Pearce, 2002; Chandhoke, 2003). This view of civil society was promoted by governments in the West, which, by means of foreign policy and aid, have disseminated the idea and practices of community-based organisations as ideal for local participation and consensus with the government’s restructuring policies (Howell and Pearce, 2002; Choudry and Shragge, 2012). Although donors often stressed the role of civil society in curbing the state, there was no consensus about the anti-statist theme of civil society. Civil society, on the one hand, is highlighted because of its non-governmental and non-state nature, which is ideal for alternative development models from mainstream and state-led development (Howell and Pearce, 2002). On the other hand, civil society organisations are seen as complementary partners of the state enacting welfare restructuring and privatisation policies as seen in the turn of the discourse of the World Bank (1997, 1999) and other regional development banks about bringing the state back into development (Van Rooy, 1998; Howell and Pearce, 2002). According to Howell and Pearce (2002, pp. 111–115), the ideological appropriation of civil society by the new agenda and aid industry tends to render a civil society concept for specific operational purposes rather than giving attention to the power disparity, compositional diversity and political complexity of civil society. Civil society is often addressed as a selection of inherent “good”, “neutral” and “homogeneous” groups when the good governance agenda is proposed by The World Bank and then UNDP, who stress the need for democratisation, accountability and participation for public services (Van Rooy, 1998; Howell and Pearce, 2002). The good governance agenda focuses on civil society for the constructive involvement or citizen participation in administrative processes rather than a site for confrontational and resistance (Edwards, 1994; Howell and Pearce, 2002; Moore, 2006). The agenda, focusing on the virtue of citizen participation in the government

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processes and public policies, is advocated by the World Bank as a way to “create” good governments (Moore, 2006, p. 52). In using the term “good governments”, it is implied that governments still play a central role in enabling social, political and economic changes for sustainable outcomes (Edwards, 1994). “Good governments” have become the “political conditionality” for recipient countries to be eligible for foreign aid (Moore, 2006). According to Moore (2006, p. 53), donors, by means of aid conditionality and a focus on “good governments”, tend to make pressure on the state, whether it is liberal or authoritarian, to provide assurances regarding aid effectiveness. In other words, in the governance framework, “good governments” are no longer judged by the political regime as a form of government but rather by governmental processes and elements such as the rule of law, communications, accountability and transparency, which are assumed to link to aid effectiveness. With the continuation of the state role being emphasised as important for aid effectiveness, the work of civil society within the good governance framework has increasingly been co-opted into the state-led restructuring policy under the agenda of partnership for development (Fowler, 2000b; Howell and Pearce, 2002). By recognising civil society mainly in the form of community participation and by means of aid conditionality, the good governance agenda has adversely incentivised movements and civic organisations to NGOise, with non-governmental organisations (NGOs) identified by donors and governments not only as a subset of civil society and but also capable partners with whom to deliver social services to their constituents at the grassroots level (Choudry and Shragge, 2012; Choudry and Kapoor, 2013b; Lang, 2013; Ungsuchaval, 2022). Instead of recognising a civil society as heterogenous groups with diverse interests and organisational capacities, donors tend to seek to work comfortably with a cluster of registered, professionalised and institutionalised non-governmental organisations and educated NGO professionals to follow strictly administrative and financial procedures (Fowler, 2000a; Mohan, 2002; Wallace, 2004; Salemink, 2006; Lang, 2013). Influxes of foreign aid into the sector accounted for the rapid expansion of NGOs nationally and globally, with donors and governments increasingly relying on NGOs to deliver foreign funded services (Wallace, 2004; Banks, Hulme and Edwards, 2015). NGOs were the major recipients of foreign aid during the 1980s and 1990s, which made this period the era of NGOs (Tvedt, 1998; Van Rooy, 1998; Howell and Pearce, 2002). Today, NGOs have become one of the largest economic sectors in the world economy with an estimated worth of over one trillion dollars a year globally (SustainAbility, 2003). The formation of the sector is attributed to the process of NGOisation, with civic actors and people from particular groups incentivised by the professional opportunities and funding provided for NGOs from private donors and governments (Lang, 1997, p. 102, 2013; Choudry and Kapoor, 2013b; Ungsuchaval, 2022). As civil society organisations are increasingly drawn into the NGO sector, they tend to give up their roles as sites for activism and movements in exchange for a professionalised function of service delivery in compliance with state regulations and market rules, as some researchers warned (Lang, 1997, 2013; Choudry and Shragge, 2012; Choudry and Kapoor, 2013b; Banks, Hulme and Edwards, 2015). Thus, for some NGO sceptics— for example, Choudry and Kapoor (2013a, p. 2)—NGOisation, with NGOs growing

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increasingly professionalised and depoliticised, has undermined local and national movements for social change as a result of its complicity with state and private-sector interests.

NGOisation of Civil Society As revealed by a large body of NGO research, the expansion of the sector in terms of public services adheres to economic institutions that are outside the state as part of restructuring processes rather than consolidating pre-existing movements such as feminist organisations or trade unions. According to Kamat (2004), “the NGO phenomena should be theorised in relation to the global economic and political process that involves an overall restructuring of public good and private interests”, and its relationship with the state should be seen through “private interest and public good” (Kamat, 2004, p. 156). As Kamat argues, the proliferation of NGOs in the South is less embedded in well-established political associations and movements, considering the weak political civil society situations in post-socialist and formerly colonised authoritarian countries. Rather, this phenomenon adheres to the shifting process in governance from a “state managed or state protected economy” to a “free enterprise economy” that promotes new citizen cultures that advance the liberal values of self-determination and autonomy (Kamat, 2004, p. 164). NGOs, therefore, belong to a new form of civil society that accompanies these economic institutions and embodies the citizen culture of self-enterprise. With the retreat of the state from service provision and protection, civil society actors, regardless of whether they are citizen-led, government-funded or corporate-funded NGOs, are less differentiated from each other but all perform a kind of market liberalism that pluralises economic and social relations around the welfare function (Kamat, 2004). NGOisation illustrates the dilemma of civil society organisations in post-reform Vietnam where an independent civil society is still outlawed by the socialist regime. In socialism, there is no independent civil society. Rather, the state controls social associations through the system known as mono-organisational socialism (Rigby, 1991; Thayer, 1992). Despite the economic transition from a centrally planned to a market economy, Vietnam remains a socialist country under the one-party rule of the Vietnamese Communist Party, which has overall control over political and social associations (Thayer, 1995, 2009). Without a legal framework for an independent associational sphere, recent years in post-reform Vietnam, nevertheless, have witnessed a substantial transformation in the social landscape with a rapid growth of individually and privately owned non-governmental organisations. Several authors—for example, Beaulieu (1994), Sidel (1997), Wischermann (2003, 2010), and Kerkvliet and colleagues (Kerkvliet, Heng and Koh, 2003; Kerkvliet, Nguyen and Bach, 2008) —have written about the rapid expansion of a system of philanthropic and issue-oriented organisations outside the state which enjoy some degree of autonomy to do their own thing, which was unprecedented under Vietnam’s socialism. Many expressed optimism about autonomous civil society in

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Vietnam; for example, Carlyle Thayer envisages such an expansion as a nascent civil society (Thayer, 1992). However, as several scholars, including Thayer (2009) and Sidel (2010), point out, without a legal framework for civil society, these organisations continue to face uncertainty and limitations on their capacity for civil society activism. Vietnam’s draft law on associations, which was first drafted in the 1990s, was shelved. Without a law approving rights to association, such formations of voluntary and philanthropic NGOs are instead enabled by the socialisation policy of the state in an attempt to privatise public services (Beaulieu, 1994; Sidel, 1997; Nørlund, 2007). With socialisation, the state has transferred a variety of public services, including education, healthcare, research on applied sciences, technologies, sports and cultures for community development, to the ownership of individuals and organisations in the private sector (Nørlund, 2007; Bui, 2013). The disruption of traditional welfare provision from the state to society has created a space for philanthropic and voluntary organisations to fulfil this role (Sidel, 1997; Nørlund, 2007). Recalling previous discussion, the formation of civil society in this space should not be seen as a site for movements and resistance. Rather, it is a site opened up by the process of privatisation and marketisation for entrepreneurial forms. Furthermore, the formation of autonomous spaces as part of the privatisation process in postsocialist economies should not be equated with a liberalised civil society or market. As Zhang and Ong (2008, pp. 11–13) point out, privatisation in socialist China has been involved with the creation of new social spaces for variegated entrepreneurial and optimising strategies, which are configured by the socialist state from a distance in order to engender socialism from afar. The new social that is both driven and driving the free-wheeling entrepreneurship in this space is formed from a set of governmentality techniques used to enable privatisation, which consolidates neither individualism nor private property rights but is contingent on the technical configuration of the state in pursuit of a global competitiveness strategy (Ong, 2006; Zhang and Ong, 2008). Although withdrawing from direct interventions into individual welfare, the state interferes in people’s choices through intermediaries such as the marketplace, community-based organisations, NGOs, media and the Internet to shape self-governing subjects for restructuring policies. The transformation in the social sphere as part of the privatisation process does not alter the rule of the socialist state, which continues to suppress undesirable political movements to ensure its monopoly over the political and social realms. It can be said that governing techniques leading to privatisation account for the formation of a nascent civil society in post-socialist Vietnam (Beaulieu, 1994; Kerkvliet, Heng and Koh, 2003; Nørlund, 2007). While these new spaces are opened up for private and entrepreneurial pursuits, state restrictions remain tight over politically oriented NGOs (Thayer, 2009; Kerkvliet, 2015). With these political constraints, NGO actors are operating within “a nascent civil society”, within particular privatised areas, but still face restrictions from the state, whose surveillance and repressions continue to disincentivise activism and resistance (Hannah, 2007; Thayer, 2009).

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Governmentality: Shaping a Feminised Workforce for Welfare Since the collapse of the Soviet economic model, marketisation and privatisation have become the means to generate global economic competitiveness, which is considered an alternative source of legitimacy for the socialist states in Asia, such as Vietnam and China (Ong, 1999, 2006; Zhang and Ong, 2008; Bui, 2015). As mentioned earlier, marketisation and privatisation have changed the mode of control by the socialist state, which must be kept to a minimum to maximise the efficiency of privatesector choices. Research into the late socialist transformations in China and Vietnam widely suggests a shift in the model of governance in which the state has relied on governmentality to govern people from a distance to maximise the autonomous choices of individuals for economic efficiency (Ong, 2006; Nguyen-vo, 2008; Zhang and Ong, 2008; Nguyen, 2018). Governmentality is a concept proposed by Michel Foucault to describe the governing techniques that advance the pragmatic use of liberalism for selfgovernment and self-discipline in line with economic rationality and calculation (Rose, 1996; Rabinow, 1997; Rose and Miller, 2008). The state uses these techniques to exercise governance from a distance that renders a knowledge/power logic that shapes people’s autonomous choices in the free market (Inda, 2006; Ong, 2006; Nguyen-vo, 2008; Nguyen, 2018). Without government intervention, self-governing practices are contingent on the vision of “correct conduct” that is configured by pedagogic means and market-based intermediaries such as universities, expert advice, media, health centres, etc. rather than state coercion (Inda, 2006; Ong, 2006; Nguyenvo, 2008; Zhang and Ong, 2008). In this model, people are supposed to act with the will to improve correspondingly to guidance for productivity and optimisation as if their own beliefs, desires and aspirations (Li, 2007). In Vietnam, people are encouraged to adopt free-wheeling entrepreneurship to maximise welfare provision as the state ceases to afford people everything they need (Nguyen-vo, 2008; Leshkowich, 2012, 2014; Nguyen, 2018). With marketisation, the state has refrained from direct interventions into people’s choices when they are deemed to involve people’s acquisition of productive skills and entrepreneurial knowledge (Leshkowich, 2014). In addition, the state’s retreat from the broadly based provision of welfare has given room for a proliferation of organisations registered as science and technology research centres and philanthropic organisations, alternatively known as Vietnamese NGOs, to participate in providing welfare services as part of the socialisation policy (Beaulieu, 1994; Sidel, 1997; Nørlund, 2007). It is noticeable that the socialisation policy does not explicitly approve of privatisation in terms of private property rights. Socialisation has a historical genealogy in the socialist tradition that allowed the state to force people’s participation in collectivisation projects. According to Nguyen (2018), socialisation evokes the socialist genealogy of collectivisation of the means of production for the welfare of people, a role traditionally taken by the state that has now become an individual and private responsibility. Through socialisation, the socialist state diffused the ownership of this

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role to individuals and private organisations, which are deemed to work alongside the state for collective welfare. With the state removing itself from the broad-based provision of welfare, actors participating in the production and provision of welfare are inseparable from state-led collectivised efforts. The state, while ceasing to be the main provider of welfare, retains a legitimate role in the collectivised efforts for collective welfare (Nguyen, 2018). With socialisation, a notion of ethical citizenship is developed alongside a new vision of socialist personhood, which idealises people capable of optimising welfare provision while stigmatising those who failed to fend for themselves (Dinh, 2003; Gammeltoft, 2014; Leshkowich, 2014; Nguyen, 2018). This citizen classification motivates people to develop a sense of a higher or lower class status with symbolic values from the accumulation of distinctive goods and welfare services (Drummond, 2004, 2012; Leshkowich, 2014; Nguyen, 2019; Trinh, 2022). As I argue elsewhere, this idea has gendered implications for women, who in particular find market opportunities ideal for a form of voluntarism and optimisation for care with the symbolic values embedded in the Vietnamese socialist and Confucian traditions (Trinh, 2022, 2023). In this chapter, I will demonstrate there is an autonomous space for women’s voluntary association for caring activities by looking at the case of women working in the NGO sector in Vietnam. Rather than wealth, women working in the NGO sector have accumulated ideological and symbolic value from acts of care, especially for the welfare of others. In the positions of caregivers and educators, they have demonstrated a role in society, particularly through the provision of social services to the poor, the unprivileged and marginalised people who were unable to access public welfare that was substantially reduced as part of the country’s marketisation and privatisation processes. It is noticeable that these women have increasingly engaged with economic resources and feminised talents to demonstrate the caring tradition of Vietnamese women (Trinh, 2022). As carers and educators, they tend to harness their skills to reconcile social conflicts and mend social relations rather than forging resistance and opposition against the state. This type of caring workforce is considered to represent the moral and relational labour essential for restructuring projects as it promotes neoliberal ethics in terms of self-government and self-reliance regarding welfare while mending social relations through caring acts (Muehlebach, 2012). As reported elsewhere, people working in this role often demonstrate their middle-class status with the distinctive privileges and power enjoyed by some particular groups, particularly women who tend to lose economic power from market competition, to generate a sense of belonging and of playing a role in society (Bornstein, 2012; Malkki, 2015; Trinh, 2022). As I will show, a nascent civil society that is regulated by market rules and subjugated with ethical citizenship continues to work alongside the state for collective welfare rather than forging resistance and opposition to the state, as those political organisations remain subject to state suppression.

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“We Are People-Oriented Organisations!” After a decade of the NGO boom, recent years have witnessed a sharp reduction of foreign funding for NGOs and funding priority for Vietnam, especially after the country was recognised as a lower middle-income economy in 2010. This trend has had an enormous impact on the NGO community, with many organisations going idle or downsizing. Many people I talked to told me about the poor prospects of a long-term career in the NGO sector. Some said that they had thought about changing their jobs to work in for-profit organisations, while many others still wanted to work for philanthropic and non-profit organisations. While it is common for people to move back and forth between the sectors, many said that they prefer working for NGOs, which were usually thought the best place to work to contribute to society. I talked to an informant who had worked in the business sector and recently returned to work in a foreign NGO. She said that she was not suitable for the business sector because it only concentrates on maximising profits in an individualistic way rather than the benefits of society. Although earning less in the NGO sector, she was satisfied with the good work she did for the wellbeing of local communities: Honestly, when I returned to the NGO sector, I had a peaceful feeling. First, I feel peaceful from helping someone. You don’t have to worry about money because you know how much you earn every month. You don’t have to think about the extra income. Besides, when you do something good in a project, you will have a feeling that at least I am helping someone or contributing something to society. (Nhung, interview)

It is common to hear women in the NGO sector talking about aspirations to work for the benefit of society, whether they are from state-owned or privately owned organisations. I talked to Vy,1 who worked in the Vietnam Women’s Union (VWU), and she explained to me how VWU has helped women in the microcredit projects, advocating for the correct ratio of women representatives in the National Assembly and the government’s system, or influencing the government’s policies on women. VWU is a mass organisation in the traditional form of association from the socialist political system (see Kornai, 1992), established and funded by the state to carry out state policy regarding women. Rather than contrasting organisations within and outside the state, Vy talked about the complementary roles these organisations might play in defending women’s rights and benefits. She highlighted the distinctive position of the VWU within the state apparatus as desirable as it maximises the political support for women. According to Vy, NGOs and the VWU need to work together to maximise social resources from different sources for the work in the area of gender equality and women’s empowerment: NGOs make tremendous contributions. Not all but many organisations working in the area of gender have mobilised resources and cooperated with the Vietnam Women’s Union in this area… because each organisation has its own strengths or resources mobilised from different sources. Considering the role of the VWU in the constitution or its special legal position, the VWU wants to use that position to connect with other organisations to consolidate its strength in the gender area. It is our strategy in the coming time. (Vy, interview) 1

Pseudonyms are used to protect the informants’ identities.

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Encountering an ongoing and endless debate about which one is more useful to society, it seems there are no clear boundaries between state-owned and privately owned organisations. When it comes to caring, state-owned mass organisations and private NGOs do not contradict each other but both seem to work toward the same goal: people’s wellbeing. While there is no correct answer regarding which of them is a civil society organisation, informants often demonstrated that they are more similar to civil society in responding to people’s needs than others are. In this respect, some informants suggested that some mass organisations are also civil society organisations because they are more responsive to the needs of local people than other organisations in the same state system. For example, Cuc, who was working in an international NGO, said that she used to collaborate with mass organisations at the local level because they were close and responded to people’s needs. According to Cuc, even in the system of state-owned mass organisations, there are organisations closer to the people than the state: There is ‘no one-fits-all’.2 We cannot say in general, like, “All farmer’s unions in Vietnam are all alike”. We have to say that, “The farmers’ union in this district is like this”. We cannot say that one [mass organisation] represents all because they are different. I certainly can work with more progressive mass organisations [because] they are closer to the people. (Cuc, interview)

I talked to Mai, who used to work for the Vietnam Union of Science and Technology Associations (VUSTA), a state-owned organisation under the umbrella of the Fatherland’s Front of the Vietnamese Communist Party. According to Mai, VUSTA is more a civil society-like organisation for it represents the interests of its members, the majority of which are local NGOs, and defends the work of these NGOs for the benefit of local communities. From the 1990s, under the VUSTA licencing system, hundreds of private science and technology organisations, which are commonly seen as local NGOs, were registered: VUSTA is one of the ‘cradles’ that gave birth to our local NGOs. People have to acknowledge the role of VUSTA for hosting that [large] number of organisations. (Mai, interview)

Despite varied, sometimes conflicting, propositions about what a civil society organisation is, the informants tended to associate civil society with the caring function of an organisation. Rather than articulating the ambiguity of a civil society’s autonomy in legal terms, they often highlighted civil society organisations that represented and cared for people’s needs. It is noticeable that when civil society organisations are mainly highlighted for the caring function, they are not separated from but part of the social sector fulfilling the welfare function of the state. As identified by one researcher, Vietnam’s civil society tends to be conflated with the public realm controlled by the socialist state (Hannah, 2005, 2007). As pointed out by Joseph Hannah (2005, 2007) with the “Three Bubble Model” (see Fig. 2.1), the people’s realm represents one of the three powers of the socialist state: the Vietnamese Communist Party, the Government, and the People. These powers are controlled by 2

The English phrase used by the informant during the interview when she tried to prove that that mass organisations are not all the same.

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Fig. 2.1 Hannah’s Three-Bubble Model (Source Hannah 2007, p. 54)

the state, which is responsible for the collective interest of the proletariat mass, which is known through the slogan “the state of the people, by the people, and for the people” (Kornai, 1992; Tran, 2018). To ensure the totalitarian control of the socialist state over the social sphere, people’s associations are organised into the state apparatus within the system of mass organisations (Rigby, 1991; Kornai, 1992; Thayer, 1992). With marketisation, this realm has been opened up for privately owned organisations to deliver services, but they do not replace the unique position of mass organisations and the state control of the associational system (Rigby, 1991; Thayer, 1995; Sidel, 2010). Apart from lacking legal status, NGOs have also encountered ambiguity resulting from the Vietnamese translation “phi chính phủ” or “xã hội dân sự”, respectively, for the terms “non-governmental” or “civil society”. During my interviews, informants often expressed ambivalence about the NGO identity, which was often misinterpreted as anarchist or un-governmental (vô chính phủ). Especially when the term NGO is still restricted in formal use for local NGOs, these inferences regarding NGOs as un-governmental or counter-governmental organisations tend to exacerbate their undesirably negative reputations (Kerkvliet, Nguyen and Bach, 2008). It seems clear that these problems come not only from the misinterpretation of these terms but also from the government, which remains hostile to NGOs, especially politically oriented organisations (Kerkvliet, Nguyen and Bach, 2008; Thayer, 2009; Kerkvliet, 2015). A recent study suggests that NGOs, which are organisations with a registered status, often avoid being associated with these groups to protect their registered titles (Vu, 2017). Despite the legal and political constraints, NGOs are considered by many women with the desire to help as the best workplace in terms of the freedom to work for the wellbeing of the less privileged or marginalised people. Compared to state-owned mass organisations, which remain dependent on public funds, those working in these privately owned organisations often highlighted that they were freer and better able to mobilise external resources for their caring work. However, aside from their financial

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independence from the state, NGOs are still reliant on the socialisation analogy to perform a caring role, for which they are no different from the mass organisations that still have a formal role in this respect. Although the proliferation of NGOs in Vietnam corresponds to the process of marketisation and privatisation, they are not entirely autonomous from the state. Rather, they are considered part of the collectivised efforts for welfare encouraged by the state but regulated with market principles. Through the market, NGO professionals develop a sense of solidarity that accentuates the logic of self-reliance and optimisation for welfare. As I will show in the following section, this spirit of solidarity when helping NGOs to survive the funding crisis has pulled the work of NGOs closer to the state through their shared interests and shared resources for collective welfare.

Building Solidarity Through Acts of Caring During the fieldwork, I was invited to attend some NGO public events in Hanoi. These events were often organised by groups of organisations and individuals known as NGO coalitions. Several earlier studies have already reported on the phenomenon of NGO coalitions, which are a kind of network between foreign and local NGOs, often required by donors as assurance of aid effectiveness and sustainability (Salemink, 2006; Wells-Dang, 2013). To be eligible for NGO funding, foreign and local NGOs are required to form a coalition to co-implement a foreign-funded project (WellsDang, 2013). Apart from coalitions created or facilitated by foreign organisations, there are coalitions voluntarily formed by local organisations to respond to the recent reduction in foreign aid for NGOs in Vietnam. Many informants emphasised the need for forming coalitions to build a stronger local NGO community. Coalitions were often highlighted by the informants as an optimal way to mobilise available resources among NGOs to sustain their activities in the context of donor retreats and funding crises. For example, Thien, the founder of a local NGO and also a member of several coalitions, emphasised the need for NGO coalitions to cope with resource constraints that threatened the survival of many organisations. According to Thien, rather than competing for individual projects, NGOs must come together to form coalitions with shared visions, passions and resources for work-together projects, which have also become scarce: We [coalition members] have shared visions and shared activities in a shared project. We get together to bid on a project. In this context, everyone understands that it is difficult to apply for a project individually. We need coalitions. I think there will be more coalitions in the coming time. (Thien, interview)

Another informant also shared concerns about the uncertain future of NGOs in the context of the funding crisis and donor withdrawal. Duong, a deputy director of a

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local NGO, stressed the necessity for NGOs to form coalitions to cope with the funding scarcity: If we are working separately, none of us gets anything. Instead, we are now working together to gain a little. It is better to get something small [rather than nothing]. We will then share the work or work together. It is a natural trend in this situation. (Duong, interview)

The recent funding crisis seemed to have strengthened the networks of local NGO leaders, who became more conscious about securing the limited resources to survive in the sector. Noticeably, the formation of recent coalitions seems to reflect a different cause than that of the earlier forms of networking, which were usually urged by foreign donors or foreign NGOs. Some coalitions I know were formed by a group of local NGO leaders, who voluntarily got together to mobilise each other’s internal resources or expertise to enhance their capacity to bid for larger or longer-termed projects. This form of coalition seems to address the priorities of local NGOs rather than those of foreign donors, unlike the earlier forms of network or coalition. People’s Power3 was one of a few working groups set up by foreign donors since the 1990s which remained active. The working group is currently chaired by a local NGO. My informant, Thao, the coordinator of this group, said that the Vietnamese NGOs have now replaced foreign NGOs and lead most of the group’s activities. According to Thao, two active local organisations were in charge of the budget for the group’s regular activities. Without a reserved budget for regular activities, member organisations often suggested activities using the available budgets for their existing projects. When they need money for some activities, they get together to apply for new grants or new projects. Thao, the coordinator of this group, said, We do not commit anything. We make [annual] plans from individual organisations’ activities. If the World Bank has 10,000 or 15,000 USD for certain activities, it will inform the group about that grant. Organisations will be responsible for activities that belong to their expertise… We are not dependent on any core donors in the group. We plan our activities. We will raise funds if we do not have a fixed budget for any activity. We will write a concept note and send it to different embassies and receive feedback from interested donors. (Thao, interview)

People’s Power is an example of the localisation process of foreign NGOs in Vietnam. In this process, local NGOs are supposed to take over the leadership of an organisation or network that was traditionally owned by foreign donors or foreign NGOs (Hannah, 2007). This localisation is also happening within NGO coalitions. While this trend shows the networking strategy of local actors to cope with the funding shortage, it also illustrates how local NGOs are unifying to protect their own communities. Duong, for example, emphasised NGO solidarity in times of crisis: Coalitions or alliances have become an indispensable global trend. It is a way for NGOs to connect in one area to make them stronger. This trend occurs when resources become scarce, and everyone becomes weaker. At that time, they have to hold each other’s hands to make a stronger voice. (Duong, interview)

3

The name of the working group was changed to protect the identity of the informant.

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While these coalitions are advocating for a stronger and united local NGO community, they were not necessarily resisting restrictions from the state. It is noticeable that donors were also considered to be debilitating local NGOs, especially when some informants pointed out the need to be financially independent of foreign donors. I talked to Dzung who was a leader of a local NGO and also a member of a global civil society network. According to Dzung, her network was advocating for an enabling environment for a stronger community of Vietnamese civil society organisations (CSOs). Despite her acknowledgement of the legal restrictions on CSOs, she did not agree that these were the main obstacles for Vietnamese NGOs but insisted that they were still able to work despite the restrictions of the government. Instead, she criticised the dependence of local NGOs on foreign donors for funding. According to Dzung, local NGOs have weakened themselves by focusing on the projects and priorities of foreign donors or foreign NGOs rather than their own, and she criticised foreign or international NGOs (INGOs) for exploiting cheap labour in local NGOs rather than recognising them as owners of the project results: They [INGOs] put great pressure on us. The salaries they paid us were so low. They took our results as their own results because we were just their sub-grantees. (Dzung, interview)

According to Dzung, local NGOs need to retreat from their dependence on INGOs. While criticising INGOs in Vietnam, she proudly told me that her organisation was qualified to bid for international grants independently of INGOs. Nevertheless, she considered mobilising funds domestically in order to avoid dependence on foreign donors. As foreign aid for NGOs shrinks, it is observed elsewhere that NGOs have turned to governments or domestic sources for funding (Lang, 2013; Ungsuchaval, 2016). Likewise, some organisations in Vietnam started to mobilise state budgets for service delivery in the context of scarcity of foreign funding. For example, Duong told me that her organisation was developing a strategy to bid for the state budget to help people living with HIV/AIDS. According to Duong, government funding does not debilitate the capacity of NGOs to deliver social services for the benefit of local communities: One of our strategies is to mobilise the budget from local governments, provinces and the central government for the benefit of communities which are also prioritised by the local governments that are working with us. We do not care how much or whether we receive the funds for our organisation’s sake. We only care that the state budget was used to support our communities. It is also a good source that we can mobilise. (Duong, interview)

The formation of recent NGO coalitions and localisation shows they are implementing strategies in diversifying funding sources and pooling resources to build stronger and more united local NGOs in the context of funding scarcity. It seems clear that when highlighting both the shared interest and shared visions over collective welfare, there is no division between NGOs and the state. Rather, difficulties in the context of funding shortages have forged NGO solidarity in line with the vision of collectivisation for caring work, which must be mobilised and diversified from multiple sources, whether private or public and national or international, for collective welfare.

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The Civil Society Activism of Carers and Educators Studies of recent social movements in Vietnam suggest there are coalitions between formal and informal organisations across society. Andrew Wells-Dang (2013), who studies the networks of social movements in Vietnam and China, suggests that the network structure of the recent social movements in Vietnam becomes more complex with the involvement of various groups in society. Similarly, Ngoc Anh Vu’s (2017) study of the Tree (Hugging) Movement in Hanoi in 2015 suggests a new form of citizen-led activism, in which NGOs are temporarily allied with unregistered groups to exercise activism to mobilise social change. According to Vu (2017), recent social movements in Vietnam were driven by the collective interest of different groups in society temporarily banded together to mobilise the emotional and physical participation of people in all social clusters to make an appeal to local and/or central government. The coalition between these groups and NGOs, which are registered groups, was not permanent but rather “symbiotic”, meaning that NGOs relied on the temporary coalition with unregistered groups in social movements to practise and legitimise activism that was often restricted by their registered status (Vu, 2017, p. 1183). Following this development in civil society actions in Vietnam, I also found a form of civil society activism performed by NGO professionals in the roles of educators and caregivers. In these roles, NGO professionals adopted civil society actions to consolidate the distinctive middle position of NGOs and reconcile the tension between the state and the grassroots. This middle position resonates with Ferguson and Gupta’s (2008) proposition of a vertical topography of governance, wherein the routine and bureaucratic work of civil society organisations in the middle reinforces an imaginary state position “on the top” to bring about the compliance of the grassroots community to the authority of the state. This vertical topography illustrates the distinctive middle position and role of NGO professionals as caregivers and educators who reinforce this hierarchical relationship by reproducing social services that benefit both communities and the state’s legitimacy. Furthermore, as carers and educators, female social workers mobilised emotional and political support from both the state and society for their traditional domestic role. In voluntary and non-profit organisations, they demonstrate what is considered ethical and relational labour, which is symbolic of social reconciliation and solidarity in the restructuring process (Muehlebach, 2012). Ngoc, a leader of a local NGO, said that she also participated in the Tree movement to defend people’s right to demonstrate. In the movement, she insisted on her distinctive middle position and technical skills which allowed her to mediate the relations between the state and grassroots communities: When joining a movement, you are still a technical person, right? After all, that is my expertise and my technical [knowledge] in the organisation. That is the key [core competence] that I can involve in the policy-making, or I can work with the community. When we work in social movements, we are all technical persons. We are not [spontaneous]. We articulated what the engagement technique is. That was not a spontaneous coalition. (Ngoc, interview)

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Like Vu (2017), who suggests NGOs often avoid activism because of their legally registered status, I also find that registered NGOs tend to adopt non-confrontational approaches rather than opposition against the state. Although opposition activism has been deployed by a few NGOs and individuals, it was not accepted by all NGO professionals. There were critiques or scepticism from the informants, mainly retired state cadres, who considered these activisms undesirable as they had aggravated the state distrust of NGOs. For example, Hoang, a former state cadre and founder of a local NGO, denounced activism as it gave NGOs a bad reputation: [Because] some organisations in Vietnam were so radical. They made noisy protests or participated in this or that business, the people [người ta4 ] tend to have a less amicable view of NGOs. (Hoang, interview)

Dzung, a young leader of a local NGO, suggested that a few NGO activists tended to exaggerate the negative aspects to maximise public attention. Rather than optimising that strategy, Dzung preferred to develop her skills as an educator and contributor to the development process. She highlighted the role of civil society in harmonising the state-society relationships: I adopt the approach of educators. I fill the gap in knowledge between civil society organisations and the state and tend to harmonise their relationships. We also build the image of CSOs as a contributor to the development process. (Dzung, interview)

It seems clear that as carers or educators, NGO women tended to demonstrate their indispensable role in reconciling the conflicts between society and the state. Several women I met also highlighted the necessity of maintaining the balance between social and economic development. For example, Thanh, a deputy director of a local NGO, preferred to adopt a harmonious and non-confrontational approach rather than the rights-based approach: When working, I always try to harmonise the benefits of beneficiaries, overall social benefits, and of stakeholders, like the state or the businesses. Therefore, I always try to find a solution that balances the benefits of stakeholders and the expectations of the target groups. I think that balance is good. [smiled] I do not favour the negative solutions from the rights-based approach. I do not want to get what I want by all means while sacrificing other values of the community. In my opinion, it is not a sustainable solution. (Thanh, interview)

In a focus group discussion, one informant strongly disagreed with the proposition that NGOs were competitors of the state. She, instead, highlighted how NGOs played a complementary role to the state in service delivery: NGOs will never compete [with the state]. They only work on the problems which were neglected by the government because it does not have sufficient resources, time or attention. (Nguyet, focus group)

Quyen, who was working on a project for the development of civil society organisations for people living with HIV/AIDS, also confirmed the complementary role to the government that NGOs play. According to Quyen, her NGO supported public hospitals when they could not provide services to these people at the grassroots level: 4

Người ta can be also understood as “the state”.

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Because their [the government’s] roles were in the [public] hospitals, we support them at the community level. They know that there are gaps they have left. Therefore, we work together [with the government]. (Quyen, interview)

The way these women demonstrated their skills and knowledge in caregiving seems to reflect the distinctive power of NGO professionals despite the limitations of their political and legal status. As caregivers, as Andrea Muehlebach (2012) suggests, voluntary and social workers perform a role in society by mending social relations within the context of the social decline of trust and solidarity as the result of restructuring policies. The value of care is distinctively attractive to some groups in society, particularly women, who risk being jeopardised as the vulnerable and dependent population. Through care, social workers have produced and accumulated social relations representing the figure of selfless caregivers to produce a sense of belonging and a role in society (Bornstein, 2012; Malkki, 2015). This explanation rings true with the women working within the non-profit and NGO sector. Despite their political constraints, the informants often stressed their indispensable role in maintaining social harmony and mitigating conflicts. In the interview with Ngoc, she told me about the art of peacebuilding when working in this field: After learning more about peace, I understand the value of peacebuilding. I understand how important inner peace is. Peace is created by ourselves but not brought by anyone. (Ngoc, interview)

I met her in a coffee shop when she was conducting a training course for young participants. Looking at the learners who were having a break from a class organised by the NGO, she expressed her belief in the next NGO generation who would possess the skills and knowledge to promote peace rather than resistance: I do not want to create a generation of non-violent resistance in Gandhi’s way. If I did not teach them now, they would go in an unsafe direction; it would be their mistake. (Ngoc, interview)

It is noticeable that these women, who are traditionally empowered with professional skills and innate caring functions, also demonstrated their responsibility to nurture a civil society to foster harmonised and peaceful development. While observing multiple forms of caring pursued by the women working in NGOs, it seems clear to me that the new civil society generations delivered by them will continue the tradition of caring and evolve with imaginative visions of peaceful and harmonised development.

Conclusion The emergence of the NGO sector in Vietnam involves diverse forms of organisation independent from the state, resembling a civil society in its plurality and autonomy of private pursuits. However, despite the pluralisation of civil society organisations and actions, they are restricted to certain welfare functions and those driven by

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political causes continue to be suppressed by the state. Without legal provisions for an autonomous civil society, such formations of civil society spaces and actions are not entirely free from state control, which is instead exercised from a distance employing the market mechanism and repressive state measures to shape people’s “rational” behaviour. As demonstrated in this chapter, a plural and autonomous civil society is formed particularly in the context of marketisation and privatisation in Vietnam and attempts to optimise strategies for collective welfare in the context of state welfare reduction. Through the market, the women working in NGOs accumulate skills and knowledge regarding caregiving to forge a kind of activism, which is not necessarily resisting the state. The movements for caring and nurturing in the private space, in contrast, have consolidated the state’s leadership in the reform with the new vision of collective welfare that must be mobilised from personalised and private sources. With private resources and feminised talents, women working in NGOs continue to demonstrate a role of mending social relations and building solidarity with the vision of market socialism and which is supposed to be the source of women’s power in Vietnam’s socialist tradition.

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Chapter 3

Labour-Market Flexibility and Digitalization: Challenges to Work Intensification, Employment Relations, and Trade Unions in Indonesia Nawawi, Triyono, and Ngadi

Introduction This study analyzes the implication of flexible labour market policy and the expansion of the digital economy on work intensification, employment relations and trade union’s positions in Indonesia. It examines the case of Indonesia, where the labour market remained dualistic and dominated by informal workers with lower secondary education (Wihardja & Cunningham, 2021; Ngadi et al., 2020; ADB & BPS, 2010). Also, there is a high mismatch gap, low social security coverage, and scattered uniondense industrial areas, while the labour market embraces flexible working systems (Ngadi et al., 2020; Gropello et al., 2011; Juliawan, 2010; Ford, 2009; Nawawi, 2020). Moreover, this study assessed the impact of labour market flexibility on trade unions and their movement against pro-economic liberalization regimes and workers’ welfare. This analysis was supported by raw data from the National Labour Force Survey 2019 on the types of jobs, economic sectors, worker status, and trends in the digital economy. Primary data were collected through online interviews in 2021– 2022 with various workers using the internet to do their jobs. The empirical findings

Nawawi (B) · Triyono · Ngadi Research Center for Population, National Research and Innovation Agency (BRIN), Jakarta, Indonesia e-mail: [email protected] Triyono e-mail: [email protected] Ngadi e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_3

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could enhance the understanding of the current challenge of flexibilization, digitalization and its impact on labour. Additionally, they could support the future development of workers’ competencies and skills strategies in Indonesia. In the last half of the twentieth century, both labour-market flexibility and digital technology inventions changed many aspects of work and employment relations globally. Whether workers can uphold a strong engagement with their work largely depends upon how they manage to deal with changing work systems, demanded skills and work-related roles (Kirpal, 2011: 1). In political debates about the restructuring of work, new forms of individual’s engagement with work and welfare are discussed in many contexts and along with the question of the role and effectiveness of trade unions to represent their members. In fact, under flexible labour market system, trade unions in Indonesia are facing many challenges, including a decrease in the membership as workers tend to be individualized and have no interests to organise (Kirpal, 2011; Nawawi, 2020; Ngadi et al., 2020). Further, Castells (2014: 56) stated that people had entered a new labour market and technological paradigm centered around flexibility, mobility, and digital engineering. The company’s strategies focusing on flexibility and advanced development in digitalization, automatization, and internetbased digital technologies have shaped workers’ careers and welfare while increasing connectivity between places and reducing the operational costs of economic activities. This shift in corporate governance has changed employment relations due to the global demand for flexible production (Kirpal, 2011; Schwab, 2016). What is considered a new on-demand economy is significantly altering the relationship between workers and employers. Workers in manufacturing companies no longer carry out tasks manually based on demands from their workplaces as well as permanent labour relations. Instead, they comprise dispatched workers performing specific tasks from private labour providers. Moreover, more employers are using mechanical robots and artificial intelligence (AI) to replace humans, cut labour costs, accelerate production, and gain a competitive advantage. Internet-based technology has led to a new way of organizing production and working, increasing global economic, political, and social integration between people and places (Perrons, 2004: 170). Flexibility systems allow companies to make changes such as employee hiring and firing, compensation, and benefits, working hours and conditions. While the increasingly advanced and widespread Internet-based Communication Technologies (ICT) have enhanced the availability and ease of services, there is increased attention on digital technology development and new skill requirements for the future labour market. However, their dynamic impact on the changes in work intensification and employment relations remains comparatively understudied. Understanding these issues helps comprehend the impact of labour-market flexibility and digitalization of production on workers, especially those who are most affected and forced to adapt to the changes. The implementation of flexible labour market policy and the use of digital technology have also been triggering many other unintended sociocultural costs and consequences for society. Drawing from recent literature, there are at least three approaches to discussing market flexibility and digital economy and societal relationships. First is a technological deterministic approach which supports economic

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globalization and the development of new digital technology to solve social problems. According to Jurriens and Tapsell (2017), the labour-market flexibility and development of the digital economy in recent decades have had a massive impact on many aspects of our modern life which also solve many social problems. These impacts can be seen in the media industry, governance, commerce, informal sector employment, city planning, disaster relief, health, education, religion, and artistic and cultural expression. The second is the humanistic approach, which focuses more on how flexibilization increases job insecurity while digital technology dehumanizes society. Pangestu and Dewi (2017) and Schwab (2016) mentioned that the negative impact of market flexibilization and digitalization had been occurring in many countries, where it was associated with the substitution of many manual jobs as well as loss of jobs and rising insecurity among many low-skilled workers. For many other reasons, it is a much bigger problem for developing countries. These countries are transformed from agriculture and manufacturing sectors into service-based economies without experiencing an established industrialization process. Those worries also hit Indonesians today. The third is the post-humanist which tries to seek the reciprocity of human-digital technology in the way that each entity is influencing and reshaping each other. Ford and Honan (2017), for example, have shown how digitalization in public transportation such as Gojek in Indonesia has impacted both consumers and conventional motorcycle taxi drivers. They explain that, apart from the convenience services obtained by users of online-based transportation, the app-based transport providers also faced fierce resistance from conventional motorcycle taxi drivers, leading to protests and in many cases causing violence. In Indonesia, the recent extensive economic liberalization and global technological development have shaped the future economy, life, work, socio-cultural, and political identity. While supporting the overt techno-optimism and post-humanistic approach, we argue that opening the labour market and the use of digital technology in the economy offers a challenging impact on the Indonesian labour market. Realizing those impacts means evaluating the challenges that digital innovations bring, including the negative impact of economic liberalization and the use of digital technology on labour. With a population of 270.2 million in 2020, Indonesia can be predicted to have an excellent opportunity to take advantage of technological developments in the digital era. According to ATKearney (2019), it has the potential to enter the top 10 world economies in 2030. The Indonesian Ministry of Finance (2021) showed that adopting digital-based technologies could increase economic growth by at least 0.5% per year. However, this advantage is not guaranteed considering the various problems in the Indonesian labour market which need various adjustments, especially in terms of the quality of labour, economic absorption, and regulations related to employment.

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Indonesian Workers and Labour Market in the Digital Era The number of internet-based workers1 in the Indonesian labour market has grown rapidly in the past few years The National Labour Force Survey (Sakernas) data in 2019 found that the number of workers using the internet in their activities increased from 17.8% (2018) to 27.2% (2019). The number of internet users in the labour force is expected to increase with internet access facilities in remote areas through the Palapa Ring program. The Palapa Ring project would integrate the existing communication network with a new network in eastern Indonesia (Palapa Ring-East). Palapa Ring-East would be built as far as 4,450 km, consisting of 3,850 km sub-marine and 600 km land cables, with 15 landing points in 21 cities or districts (Kominfo, 2013). Furthermore, telecommunications infrastructure and digital human resources have been prepared to face the digital world. In 2021, there would be at least 20,000 training courses on the four digital pillars, including digital ethics, security, skill, and culture. This training would reach more than 12 million participants in 34 provinces and 514 districts or cities (Balitbangsdm, 2021). However, it is far yet compatible with the actual training demand for workers in many sectors across the country. Table 3.1 shows the variation in the use of digital internet in the workforce. The agricultural sector used the internet the least, with 2.8% in 2019. This is because it is mostly located in rural areas and run by old-aged workers with low education and limited internet access. Zhang (2018) found that internet use is correlated with location, and agriculture, as the basis of rural livelihoods, lags in digital access compared with other sectors. In comparison, other sectors, such as information and communication, and financial and insurance, have more than 83% of workers using the internet. This is because they are information technology-based sectors that adapt to the latest technological developments, including the digital internet. Over the past two decades, debates have been focused on the fact that digital technology substitutes several jobs, especially telemarketers, bank tellers, toll gatekeepers, real estate brokers, couriers, and messengers. Everything is occurring at a speed faster than ever before, with many revolutionary changes happening simultaneously (Schwab, 2016). Kirpal (2011) stated that economic globalization, the company’s flexibilization, modern work organization, and technological use rapidly change the work environment and skill demands. For employees, work restructuration translates into new discontinuities and uncertainties in many contexts concerning their employment and individual careers. Furthermore, workers experiencing major redirections in their work-life use various strategies to adapt and progress. Those may include up-skilling, reskilling, changing employers, seeking challenging work, or increasing or reducing working hours (Juliawan, 2010). Many work categories, particularly those involving actual manual labour and mechanically repetitive work, have been automated. As a result, many others would follow as the innovation and the use of the internet and advanced digital technologies 1

We define Internet-based workers as workers using internet for doing their jobs. This is based on the question in the National Labour Force Survey.

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Table 3.1 Distribution of workers in Indonesia according to internet usage, 2018 and 2019 Main Industry

2018 use

2019 not use

N

use

not use

N

• Agriculture, forestry, and fishing

1.6

98.4

34,787,286

2.8

97.2

33,545,479

• Mining and quarrying

13.7

86.3

1,410,232

23.0

77.0

1,367,390

• Manufacturing

15.5

84.5

17,912,113

26.2

73.8

18,512,648

• Electricity and gas

39.6

60.4

337,236

62.5

37.5

349,005

• Water supply; sewerage, waste management. and remediation activities

15.1

84.9

457,805

21.8

78.2

483,435

• Construction

9.3

90.7

8,134,847

16.4

83.6

8,281,226

• Wholesale and retail trade; repair of motor vehicles and motorcycles

21.0

79.0

22,699,252

30.9

69.1

23,374,887

• Transportation and storage

30.1

69.9

5,276,803

44.2

55.8

5,432,671

• Accommodation and food service activities

13.4

86.6

7,481,201

22.6

77.4

8,265,644

• Information and communication

74.5

25.5

891,187

87.6

12.4

904,316

• Financial and insurance 68.2 activities

31.8

1,787,729

83.6

16.4

1,734,226

• Real estate activities

37.6

62.4

385,521

60.8

39.2

392,107

• Business activities

49.0

51.0

1,623,069

63.5

36.5

1,872,509

• Public administration, defense, and compulsory social security

50.7

49.3

4,628,006

74.4

25.6

4,796,248

• Education

46.8

53.2

5,986,752

67.0

33.0

6,201,742

• Human health and social work activities

43.3

56.7

1,815,435

67.1

32.9

1,918,178

• Other services activities 17.9

82.1

5,903,015

27.1

72.9

6,153,094

Total

82.2

121,517,489

27.2

72.8

123,584,805

17.8

Source BPS, Indonesian Labour Force Survey, 2018 and 2019

continue to grow exponentially. In the Indonesian context, technology has substituted many manual workers such as hand tractors, to substitute farmworkers (Kurniawan, 2021; Ningrum, 2018; Sudaryono, 2018). Furthermore, digital computerbased sewing machines have massively replaced manual machines in small and medium-sized textile industries (Puspitawati, 2021; Asiati et al., 2018). However,

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the increasing abilities of ICT and digital technologies are not the only drivers of this substitution. The use of the internet dominates finance and insurance service jobs. Data from the National Labour Force Survey 2019 showed that around 83% of finance and insurance services were processed through the internet (Table 3.1). These services vary from promoting prospected consumers, and financial transactions, to communication between the company and customers. However, digitalized work was not optimized compatibly across economic sectors. In their study on the relationship between digital technology and the economy in Indonesia, Pangestu and Dewi (2017) conclude that “Indonesia is not extracting full economic value from the digital economy, including its potential to contribute to development and inclusion”. They propose that the use of digital technology is too concentrated in retail sales and transport, due to the ability of companies in these two sectors to raise capital both domestically and abroad. The same argument was also found in a study conducted by Moore (2017) who argues that digital economy development in Indonesia is still in the “relatively early stages of inception” with the dominant role of large conglomerates in shaping the industry. According to Frey and Osborne (2013), flexibilization and digitalization have been adopted mostly by companies to maximize corporate profits through job simplification and defining processes for outsourcing, off-shore sourcing, and digital work in recent years. This job simplification means that digital technologies are considered better able to replace humans. According to Schwab (2016), discrete, well-defined tasks enhance better monitoring and more high-quality data around the task. This creates a better base from which digitalization is designed for the work. In understanding the impact of automation and human-to-machine substitution, technology use in production is how the new economic demand works and seeks better solutions. Labour-market flexibilization and digitalization have significantly changed current and future labour and workplaces globally (Perrons, 2004; Stiglitz, 2007; Schwab, 2016; Frey & Osborne, 2013). However, this does not mean that the continued new economic demand faces a man-versus-machine dilemma. On the contrary, production automatization and digital technology innovation drive the current changes and enhance human labour and awareness (Perrons, 2004; Schwab, 2016; Asiati et al., 2018). Furthermore, the new economic demand in the digital era requires workers to prepare and develop new skills. This would enable them to work with and alongside automatic and digital machines (Perrons, 2004; Schwab, 2016). Brinkley (2016: 6) stated that the current economic liberalization results in declining full-time jobs and regular employment. Consequently, this creates more self-employment, micro-businesses, contingent work, and people having multiple jobs. Furthermore, these changes have posed significant challenges in the labour market, including workers’ welfare. When companies hire contract workers, the wages and benefits of regular employees are decreased (Artecona & Chau, 2017; Brinkley, 2016; Asiati et al., 2018). The digital work platforms and the gig economy are examples of new jobs and work systems emerging due to changes in the work environment. Brinkley (2016: 5) stated that the gig economy comprises self-employed professional workers in shortterm economic contingent activities in companies or individuals. The digital work

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platform and the gig economy are growing rapidly in many countries, including Indonesia. According to Bloomberg (2018), a third of the 127 Indonesian workforce is in the freelance category, working under national standards (minimum 35 hours per week). This situation closely relates to current developments due to digitalization and automation in the Industry 4.0 era, where workers have flexible time and a mobile workplace. Also, companies efficiently optimize production or service provided through various options (Brinkley, 2016). Enterprise gig economies choose the number of workers and beneficial skills needed for a particular project. Also, they reduce the company costs in recruiting workers and increase employee benefits such as bonuses, year-end benefits, and pensions. However, gig economies have changed the labour market with significant consequences on workers’ wages, working hours, labour relations, and job security (Puspitawati, 2021; Asiati et al., 2018; Brinkley, 2016; Tjandraningsih, 2013; Juliawan, 2010).

The Implication for Work Intensification The future work in the world is marked by an increase in the flexibilization recruitment system and digital technology use, which have shifted work intensification (Dachs, 2018). Work intensification can be described as the increasing effort an employee must make on a working day, resulting in increased economic pressure and other societal changes (Green & McIntosh, 2001; Green, 2004a). It can be distinguished between extensive efforts, such as the time spent at work, and intensive efforts, such as the intensity of work during the time at work (Green, 1999). Extensive work intensification could be measured through hours spent at work, while intensive work intensification is less tangible and often relies on self-reports (Bamberger et al., 2015). The Indonesian National Labour Force Survey provides extensive work data on working hours. This data shows that the average working hours of jobs that utilize the internet are greater than those that do not, with 46.28 and 43.11 hours per week, respectively (Table 3.2). The increase in working hours on internet-based jobs is consistent with the findings in several countries worldwide. For instance, in Japan, information communications technologies and mobile (ICTM) workers spend 43.9 hours per week on paid work. In comparison, the entire Japanese workforce spends an average of only 39.1 hours of work per week. In the US, 78% of the increase in working hours from 2007 to 2014 among male workers was related to time spent working from home rather than in the office. In India, survey results indicated that a higher proportion of ICTM workers work for more than 48 hours per week, longer than office-based workers (Eurofound & the International Labour Office, 2017). In Thailand, for example, many women engage in gig work on online platforms, typically from home, which gives them the flexibility of working whenever and wherever they want (Jamme & Greathouse, 2021).

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Table 3.2 Working hours in a week according to main industry and internet usage, 2019 Main industry

Not Using Internet

Using Internet

Man

Woman

Total

Man

Woman

Total

• Agriculture, forestry, and fishing

39.79

30.31

36.41

44.95

36.04

43.74

• Mining and quarrying

50.43

37.66

49.36

54.02

45.28

53.17

• Manufacturing

47.65

39.54

43.96

48.24

42.96

46.44

• Electricity and gas

47.43

37.92

46.40

46.33

42.94

45.85

• Water supply; sewerage, waste management. and remediation activities

45.07

37.95

43.36

47.63

40.33

46.36

• Construction

50.11

46.12

50.07

48.65

43.82

48.25

• Wholesale and retail trade; 50.48 repair of motor vehicles and motorcycles

49.88

50.17

51.09

46.08

49.02

• Transportation and storage

48.77

38.22

48.50

53.72

45.09

53.01

• Accommodation and food service activities

52.80

46.87

49.14

53.16

48.93

51.23

• Information and communication

50.63

47.28

49.62

50.68

46.98

49.51

• Financial and insurance activities

49.08

39.67

46.86

46.15

43.03

44.97

• Real estate activities

44.48

26.37

41.03

45.10

41.45

44.14

• Business activities

47.62

41.62

46.59

47.54

42.88

46.36

• Public administration, defense, and compulsory social security

44.80

37.11

43.03

44.84

40.04

43.40

• Education

40.43

31.22

34.71

41.38

36.16

38.21

• Human health and social work activities

45.57

40.17

42.27

46.94

44.30

45.10

• Other services activities

44.60

40.47

42.20

45.70

42.33

44.32

Total

45.41

39.53

43.11

48.42

42.59

46.28

Source BPS, Indonesian Labour Force Survey, 2019

Working hours for internet-based jobs in Indonesia vary by sector (main industry). The three sectors with very long working hours (>50 hours/week) are (a) mining and quarrying, (b) transportation and storage, and (c) accommodation and food service activities. In these three sectors, all internet users use the internet to communicate related to their work. Long working hours occur specifically for male workers. This is part of the challenge of internet for work because overworking hours have an adverse effect on worker health, owing to fatigue and work stress. Workers tend to keep productivity below their potential (Goldel, 2012). These working hours exceeded the standard optimal by the ILO, which regulates that the hours shall not exceed 48 a week

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and eight a day, except as hereinafter otherwise provided (ILO, 1930). The length of working hours for jobs that use the internet is related to the characteristics of the internet that enable workers to work anywhere and anytime. Therefore, boundaries between work and personal time no longer exist (Carlson et al., 2018). Additionally, the internet renders flexibility in work practices, which is a remedy for long working hours (Kelliher & Anderson, 2010). Women do not work very long working hours in sectors that utilize the internet (>50 hours a week). That is correlated with the burden role of Indonesian women as family breadwinners as well as family caregivers (Walton, 2019; Purwanto, 2021). They should divide their time between work and family. On average, women using the internet only work for 42.59 hours a week, with the lowest working hours of 36.04 a week in the agricultural sector. In comparison, they spend 48.93 hours a week in the accommodation and food sector, which is the longest. Furthermore, the internet increases the working hours of women in the real estate sector. The working hours of women not using the internet in this sector are only 26.17 a week, while those using the internet spend 41.45 hours a week. This shows that the internet has increased working hours in several sectors. The averages working hours in the young age group are relatively low, though they increase and peak in the age group between 44 and 46 years. Average working hours then decrease to the lowest in workers aged 65 and over. This shows that workers’ productivity using the internet is almost the same as workers who do not use the internet. However, the working hours using the internet in the younger (15–20) are longer than those without the internet. This shows that digital internet technology helps young workers acquire jobs with decent working hours. The decrease in hours for older workers indicates a decrease in productivity after reaching the optimal age. Figure 3.1 shows that among Indonesian workers using the internet, working hours decreased by about 7.6%, from 47.6 hours/week in the 40–44 age group to 44.0 hours/week for those between 55 and 59 years of age. This situation is consistent with one observed in other European countries that, in the general group of 55–64 years, there is an 8% decrease in the average working time, for example in Belgium (Aliaj et al., 2016). The working hours of older workers who use the internet in Indonesia remain at the ideal level of 40.1 hours a week. Meanwhile, the average working hours of older workers who do not use the internet is 36.1 hours a week. This shows that internet technology is useful for maintaining decent working hours for all ages, including older workers (55 years old and over). Based on the overall education level, workers using the internet spend longer hours than those not using the internet (Table 3.3). Very few workers use the internet (5.6%) with very long working hours at a low education level. Furthermore, internet usage among university-educated workers is very high at 78.5%, with 42.3 working hours per week. This shows that educated workers know and use the internet well according to the needs of the workforce. In comparison, low-educated workers do not know and use the internet well. At the tertiary education level (senior high school and vocational education), the internet usage in this group is better than that among workers with lower education, but below 50%. With these conditions, digital internet literacy for workers with lower secondary education is important.

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Fig. 3.1 Hours of work in a week of a worker according to age groups

Table 3.3 Internet use and hours of work in a week according to education attainment Education

Internet use

Number of workers

Elementary and below

Not use

45,996,893

94.4

41.9

Use

2,733,578

5.6

50.6

Not use

18,163,782

82.2

43.9

Use

3,943,603

17.8

48.7

Not use

14,066,497

61.9

44.7

Use

8,667,539

38.1

47.2

Not use

8,169,222

55.9

46.0

Use

6,436,446

44.1

48.0

981,890

29.4

42.8

Use

2,363,169

70.6

44.8

Not use

2,589,816

21.5

40.3

Use

9,472,370

78.5

42.3

Not use

89,968,100

72.8

43.1

N

Secondary school Tertiary school Vocational school Diploma or academy University Total

Work hours

%

Not use

Use

33,616,705

27.2

46.3

Total

123,584,805

100.0

44.0

Source BPS, Indonesian Labour Force Survey, 2019

Different from extensive effort, intensive effort is the work intensity, meaning that work intensification is also characterized by heavy workloads and time pressure (Fein et al., 2017). Work overload is characterized by the need to work faster, quicker responses, reduced break periods, and performing multiple tasks simultaneously (Sandoval-Reyes et al., 2019). Work intensive can be measured on a job demand scale in a five-point Likert scale ranging from very rarely/never/not at all to very

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often/completely (Kubicek et al., 2015; Bunner et al., 2018). Another study used a 7-point Likert-type scale, rating from 1 (all the time) to 7 (never). Example items included “does your job involve working at very high speed?” and “does your job involve working to tight deadlines?” (Fein et al., 2017). A Linkert scale is not available in the National Labour Survey in Indonesia, so we use research data from interviews to show the impact of technological advances on work overload. Asiati et al. (2018) found that modern technology shifts the manual work in garment companies in West Java, reducing the demand for labour by 50%. In line with this, the packing workforce was reduced from fifteen to ten people, while the finishing workforce was previously reduced from six to two. This employee reduction induces a greater workload on the existing employees while still demanding better production quality. A different effect occurs on the small and medium enterprises in YogyakartaIndonesia. In these establishments, the internet has productively improved communication with customers and marketing of the resulting products. Although working hours increase, it does not burden workers since it results in high income. Furthermore, the internet has given rise to new businesses, such as tourist attractions in rural areas and start-up businesses among the younger generation (Ngadi & Asiati, 2019). However, the rapid technology use development in Indonesia should be balanced with an increased quality of digital technology education and training, as recommended in OECD countries (OECD, 2019). Our interviews with education, health, transportation, and e-commerce (start-up) employees were conducted to describe the workload of internet-based jobs. Education and health workers were chosen because these sectors directly contribute to Indonesia’s human resource development. Furthermore, the transportation sector is essential in population mobility, while e-commerce is a rapidly growing business. The BPS survey shows that 15.05% of businesses used the internet in 2019, and the number increased to 90.18% in 2020 (BPS, 2020). The proliferation of internet-based businesses is associated with pressures in the labour market due to the COVID-19 pandemic. Based on interviews in the internet-based education sector, we found that the influence of internet technology caused a work overload of workers in certain areas. One business known as the ruang guru (literally, “teacher space”), provides online student counseling and guidance services. Most jobs in this sector are carried out using internet technology, where employees must serve their customers with more flexible time. This makes the employee working hours unlimited because they must be ready online at any time and place when requested, as found from the interview: As an employee of the marketing department, I follow up with the customers outside of working hours to achieve the company’s targets and must think about working almost 24 hours a day. Additionally, I must carry out multiple tasks simultaneously. As a sales marketing teacher, I also have to deal with complaints about the products being marketed, though complaints are part of the customer service responsibilities. Therefore, I feel overly exploited at work. (Tono, marketing staff of Ruang Guru, interviewed on May 6, 2021)

Long working hours also occur for online transportation workers (Gojek workers) who use digital technology and online motorcycle taxi workers with uncertain wages.

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There is a driver’s statement that online motorcycle taxi workers were exploited because of uncertain income. In return, this job is flexible with no specific time to start working, making it suitable for side workers. However, those relying on it as their main job face challenges of wage uncertainties. This is in line with Ford and Honan (2017) that drivers’ working conditions in Gojek remain speculative. Meanwhile, motorcycle taxi drivers are not protected by manpower law. On another side, Isbah (2019) states that there is an unlimited working time for Gojek and Grab workers as transportation based on digital technology. Apart from long working hours, they suffered severe mobility restrictions imposed on population mobility due to the Covid-19 pandemic. An online motorcycle taxi worker said: …As an online motorcycle taxi driver, I receive uncertain income and long working hours. Only time flexibility is found in working but depends on the customers. I should be ready when customers need services. (Wono, interviewed on October 18, 2020)

Meanwhile, not all online workers are in flexible working hours, for example administrative workers in online doctor service companies. Medical workers stated that they do not have any additional burdens, though they use the internet and telephone technology. According to the contract, the permanent employee’s working hours are as usual from 08.00 a.m. to 05.30 p.m. In this case, the internet makes it easier for these professionals to communicate with customers online. One HelloDoc employee said: The administrative staff in my company have a two-year work contract with the company with the possibility of an extension. They use the telephone and the internet as the main means of communication with customers. It is used during the office, and working hours are not affected by internet usage. I would start and work according to the hours in the contract, though they work from home during this pandemic. (Rikko, administration staff of HelloDoc, interviewed on May 6, 2021)

In our interviews with workers in start-ups, we found that workers in start-up companies are not strictly controlled by working hours because workers are assessed based on the achievement of predetermined targets. Generally, they work shorter working time from 10:00 to 18:00, and they could change the working time based on the agreement of team members. Sometimes, the team also could work through an online system. One of the start-ups entrepreneurs said: I and an employee started working at “start-up” in 2018 in the risk management section. Working hours at the company are flexible. Usually, we start work at 10:00 and stop at 18:00 but if there is a reason, they could change the work time. The workload in the company is not too heavy with the target set by the team. Part of the work time is having discussions with the team and stakeholders to make a risk management analysis. (Siska, risk analyst division of start-up, interviewed on Jun 7, 2021)

Based on Sakernas data and interviews we found that the working hours of workers who use the internet are longer than those who do not use the internet. The internet is one of the factors that work can be done flexibly. Work using the internet can be done online without time and place restrictions. When the working relationship has become more fluid, there are greater opportunities for certain time-work agreements to grow due to lower communication costs (Terzi, 2011).

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The Implication for Employment Relations An employment relationship is the legal link between employers and employees. It exists when a person performs work or services under certain conditions in return for remuneration (ILO, 2003). The working relationship between management and employees is part of the industrial climate (Jha & Singh, 2019: 386). In Indonesia, the employment relationship comprises workers, wages, and orders (Goverment of Indonesia, 2003). In this section, we explore several elements of work relationships: wages, work status, and trade unions. The digital developments influencing employment relationships include wages, worker status, labour unions, and responsibilities within the company. According to Hassard and Morris (2020), increased responsibility for young managers brings a feeling of insecurity at work. Furthermore, work intensification is primarily considered a given phenomenon in the modern workplace. Therefore, the intensification caused by digitalization increases exclusive work relationships and pressures. Some studies suggest that digitalization facilitates economic empowerment, for example, workers get benefits by gaining skills in digital use. Another study argues that labour relations are still a mere tool for exploitative capitalist gain (Sharma, 2020).

Wages Wages are remuneration in cash and in-kind paid employees for time worked or work done. Also, it covers time not worked, such as annual vacation and other paid leave or holidays (OECD, 2019). Indonesian regulations stipulate that workers are entitled to equal pay for work of equivalent value. Workers’ rights to wages arise when there is an employment relationship between them and the company. Wages consist of those without allowances, basic wages, and fixed allowances, and basic wages, fixed and non-fixed allowances (Goverment of Indonesia, 2021). This regulation applies to all workers including workers in the digital economy. Table 3.4 shows that the average wage of workers using the internet is 2.5 times that of those not using the internet, 3.1 million IDR/month and 1.2 million IDR/ month, respectively. It could be said that internet use in the labour market increases the worker’s income. This is in line with research on access to online business in Thailand also found that there was a positive correlation between media technology access and wages (Saksiriruthai, 2018). Similar results were found in Colombia that technologies positively affect the demand for skills and make the workers more productive (Barrios et al., 2022). In Latin America, internet usage at home and usage at work by salaried workers are complemented concerning their impact on earnings. There is a positive return to use the internet on earnings for self-employed workers, those who have a lack of internet access at home and work (Navarro, 2010). This situation shows that the internet can increase workers’ wages.

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Table 3.4 Average wages of workers by main industry and internet usage, 2019 Main industry

• Agriculture, forestry, and fishing

Not use internet

Use internet

The average wage (a)

The average wage (b)

N

32,597,335

1,763,756

948,144

296.0

314,765

292.2

595,946

N

(b/a)*100

• Mining and quarrying

2,330,042

1,052,625

6,809,172

• Manufacturing

1,661,571

13,666,422

3,052,878

• Electricity and gas

2,592,703

130,823

4,449,216

218,182

171.6

• Water supply; sewerage, waste management. and remediation

1,321,204

377,836

2,913,324

105,599

220.5

• Construction

2,060,287

6,923,915

3,373,612

1,357,311

163.7

• Wholesale and retail trade; repair of motor vehicles and motorcycles

1,242,742

16,158,268

2,141,829

7,216,619

172.3

• Transportation and storage

2,003,982

3,031,921

3,619,528

2,400,750

180.6

• Accommodation and food service activities

1,117,033

6,395,040

2,073,733

1,870,604

185.6

• Information and communication

2,210,962

112,252

3,588,622

• Financial and insurance Activities

2,738,805

284,784

4,493,098

• Real estate activities

2,686,740

153,604

4,666,730

• Business activities

2,132,742

684,359

3,588,560

1,188,150

168.3

• Public administration, defense, and compulsory social security

2,649,553

1,230,100

4,457,168

3,566,148

168.2

• Education

1,967,140

2,048,541

2,996,360

4,153,201

152.3

• Human health and social work activities

2,391,631

3,777,440

1,286,367

157.9

• Other services activities

1,317,347

4,488,464

2,347,687

1,664,630

178.2

Total

1,229,364

89,968,100

3,103,568

33,616,705

252.5

631,811

Source BPS, Indonesian Labour Force Survey, 2019

4,846,226

792,064 1,449,442 238,503

183.7

162.3 164.1 173.7

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The wages of the agricultural sector workers using the internet are three times higher than those of non-internet users. This is because the internet helps reduce the marketing chain and costs, enabling producers and consumers to interact directly. Therefore, using the internet ICT increases competitiveness and welfare in the long run (Abbasabadi & Soleimani, 2021). Subsequently, the growing use of the internet in agricultural product marketing is independent of collectors and traders because workers sell directly to online consumers. Moreover, technology allows workers to produce good-quality products (Dachs, 2018). In Germany, Walwei (2016: 3) found that digital technology encourages productivity, triggers product innovation, and promotes the marketing of new products. Furthermore, digital technology could allow a company more flexible time management while offering employees potential opportunities to work. For instance, Coyle (2017) found that digital platforms provide attractive salaries for workers in England. Therefore, it is critical to understand the relationship between work and wages, especially in Indonesia. Table 3.4 shows that the highest average wage in Indonesia was IDR. 6,809,172/ month were recorded among workers using the internet in the mining and quarrying sectors. This is three times the wage for non-internet users in the same sector, meaning that digital use increases the wages of mining and quarrying sector workers. Across the sector, the wages of workers who use the internet for work are 252.5% higher than those who do not. Therefore, technology is a tool and platform that benefits humankind, including workers in that sector (Decas & Kailas, 2019). This is in line with Kharlamova et al. (2018), which found that technology has increased labour productivity and efficiency. Additionally, it increases the workers’ bargaining power and wages (Habibi & Zabardast, 2020). However, digital development also creates productivity gaps. For instance, Herman (2020: 1) showed a gap in labour productivity in the European Union. The highest labour productivity was obtained by Ireland (194.5%), Luxembourg (160.3%), Belgium (128.1%), Austria (116.6%), and France (115.1%). In contrast, Bulgaria (46.7%), Romania (67.5%), Hungary (68.9%), and Latvia (70%) recorded the lowest labour productivity. Figure 3.2 shows that wages for workers in Indonesia vary according to age. The wages of workers using the internet are higher than those that do not. The highest wages of workers who use the internet are in the age 55–59 years. Meanwhile, the highest wages of workers who do not use the internet are in the age 25–40 years. Therefore, the internet has changed workers’ productivity by age. This finding suggests that internet technology could extend the time for workers to reach their peak productive age. The relationship between age and productivity of workers not using the internet was examined by Ours and Stoeldraijer (2010). The results showed that the highest productivity occurs in workers aged 30 and 45, while the lowest is at 25 and under.

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Fig. 3.2 Wages of workers according to age groups

Workers’ Status Workers’ status refers to the position of workers based on the legal link between employers and employees or the employment relationship. If there is no written law in the work agreement, workers’ rights cannot be protected, and it is difficult to sue when industrial relations problems occur. This could be traditional without work agreements or modern with contractual agreements (Countouris, 2019). Therefore, this part of the paper will explain the status of the employment relationship, especially based on the sector that uses the Internet. Industry 4.0 is an internet-based industry whose results can be received in real-time which allows all production activities to be carried out digitally and integrated and produces an information-based economy that is spread globally (Schwab, 2016). In Indonesia, there are four categories of worker status, namely: an unspecified time work agreement, a certain time work agreement, an oral agreement, and no work agreement/contract (BPS, 2020). On the other hand, there are market demands and changes in status technology, not all of which are implemented, for example, the relationship between application platform owners and motor status drivers, whose relationship is in the form of a partnership, not a working relationship with permanent status or outsourcing. Changes in working relationships due to digital expansion in employment are increasingly widespread. An example of this case is the emergence of the precariat, freelancers, and partnerships between online motor drivers and applicators. The current development of workers’ career status is increasingly unstable, with a high vulnerability to uncomfortable at work. The legal status of a partnership is not included in labour law regulations therefore it is not recognized in employment and the nature of this partnership is very flexible and unprotected both in terms of income and social security (Gandini, 2018; Triyono, 2021). Therefore, it is necessary to return to the constitutional philosophy of the International Labour Organization that labour should not be considered a commodity (Kaufman, 2010: 79). Workers in online motorcycle taxis, for example, do not have income certainty and social

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security (Juliawan et al., 2020; Triyono, 2021). It is usually assumed that labour is the main element in running the company’s production, and the relationship between workers and employers is symbiotic and mutual. A study in Europe suggests that digitalization helps overcome structural problems in the labour market by creating new job opportunities (Abbasabadi & Soleimani, 2021). This is for example the existence of technology that has created an online driver job market even though it has not been able to provide wage certainty and social security. By this structural effect, it means that space boundaries would be diminished with the existence of the internet, which effectively opens up previously closed markets with traditional physical restrictions. Table 3.5 showed that digitalization had increased the employment agreement for a specified time in Indonesia, as seen in the financial and insurance activities by 56.2%. Meanwhile, in the agricultural sector with the lowest internet use, employment agreement for a specified time is only 25.0%. This difference is caused by the characteristics of the employment sector and internet acceptance. Besides internet acceptance, changes in employment relations in the agricultural sector are also influenced by climate change and the availability of fertilizers. These factors affect the income and interest of workers, especially young people, to enter the agricultural sector (Ngadi et al., 2023). The financial services sector has the highest outsourcing work relationship because of its high internet use. Also, there are various improvements in financial services, such as reducing processing and traveling time for customers when using internet applications to access financial services without visiting banks. As a result, the working relationship is flexible, increasing the workload (Hassard & Morris, 2020). This explains that increased internet usage results in increased workload due to efficiency to reduce production costs. But for entrepreneurs who are not tied to a company, online platforms have provided opportunities to market products from home (Jamme and Greathous, 2021). The verbal employment agreement was considerably high at 10.7% in 2019 for workers in the online business (Table 3.5). A large number of workers with verbal employment agreements should be considered a threat to workers’ rights. This is because they are not protected by social security ownership and risk a wage loss due to the lack of a written Collective Labour Agreement (PKB). Without a written agreement, workers have difficulty claiming their rights because they lack legal standing. The expansion of the industry 4.0, for example, of web-based businesses has created a new type of relationship in the form of partnerships “Mitra.” In Law 20 of 2008 concerning Micro, Small, and Medium Enterprises, partners are business relations to mutually strengthen and equal. In this type of business, web-based business app developers, such as those in Gojek claim that they are not an employer but a partner to avoid employer responsibilities. They can set and charge fees and deprive drivers of access to customers. They can charge fees and block a driver from doing his/her business. This kind of arbitrary and unilateral decision could do harm to the status and income of Go-Jek drivers (Ford & Honan, 2017). Thus, there is no so-called equality between drivers and the platform providers in practice.

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Table 3.5 Work status of workers utilizing the internet by sector in 2019 Main industry

Work status A*

B*

C*

D*

E*

• Agriculture, forestry, and fishing

23.5

25.3

22.7

25.8

2.7

• Mining and quarrying

29.8

53.9

4.6

9.5

2.1

291,063

• Manufacturing

29.9

44.3

9.9

14.6

1.3

3,488,266

• Electricity and gas

33.7

51.7

5.3

7.5

1.9

202,471

• Water supply; sewerage, waste management. and remediation activities

35.3

39.0

12.5

10.7

2.6

75,201

• Construction

N 420,461

15.9

26.8

28.4

27.3

1.7

1,106,395

• Wholesale and retail trade; repair of 19.2 motor vehicles and motorcycles

36.2

18.8

23.5

2.2

3,369,217

• Transportation and storage

22.7

40.2

14.1

20.7

2.2

1,121,602

• Accommodation and food service activities

18.2

41.8

17.4

21.0

1.5

946,845

• Information and communication

27.3

45.5

9.9

15.6

1.7

534,862

• Financial and insurance activities

30.6

56.2

3.8

7.6

1.9

1,407,282

• Real estate activities

25.2

49.0

7.7

16.2

1.9

196,916

• Business activities

23.5

44.0

12.6

18.4

1.6

855,224

• Public administration, defense, and compulsory social security

56.7

41.0

1.4

0.1

0.8

3,566,148

• Education

44.0

48.0

5.0

2.2

0.8

4,031,953

• Human health and social work activities

40.5

48.4

3.1

7.3

0.8

1,226,882

• Other services activities

10.5

20.2

30.6

36.6

2.1

921,753

Total

32.8

42.0

10.7

13.0

1.4

23,762,541

Note * A = employment agreement for unspecified time; B = employment agreement for specified time; C = oral agreement; D = No agreement/ contract; E = Do not know Source BPS, Indonesian Labour Force Survey, 2019

The Implication for Trade Unions Labour unions function to fight for workers’ interests such as wages, working hours, severance pay, and the freedom to negotiate with employers. The ILO has issued International Convention No. 87 on Freedom of Association and Protection of the Right to Organize. Indonesia has ratified this convention through Presidential Decree No. 83 of 1998, followed by Law No. 21 of 2000 on Trade Unions/Labour Unions. The law was the starting point for a fundamental change in industrial relations (Nawawi, 2020; Mizuno, 2005; Caraway, 2004; Hanartani, 2002). It was part of the transformation to restore political freedom and reform Indonesia’s legal system. Therefore,

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as a pillar in maintaining working relations, trade unions control government and business policies on labour issues. In general, trade unions in Indonesia are workers’ efforts to achieve prosperity (Ford, 2009; Zamzani, 2011). However, workforce development is marked by digital technology and Industry 4.0, which directly and adversely affects the sustainability of trade unions. Subsequently, this limits the opportunities for workers to organize collectively (Tubaro, 2021). Moreover, the expanding outsourcing work relationship, as a form of flexible recruitment, reduces the company’s obligations and the strength of union organizations. Although outsourcing was created to reduce work strikes, it erodes the strength of labour unions. Meanwhile, workers focus on the fate of their work continuity without enough time to organize labour movements effectively (Anner et al., 2021). Table 3.6 showed that the rate of internet-using workers that join labour unions was 20.6% in 2019. This is higher than the rate of registered workers not using the internet, which was 7.5%. That indicated that labour movement is affected by advances in internet technology. Although each union member uses different internet access by sector. In addition, internet use is also influenced by how the internet functions in supporting work. Without protection from trade unions, workers might suffer from work discomfort because of losses of employment benefits and increased pressures (Green, 2004b). As a result, workers feel alienated and focus only on achieving company targets to avoid being dismissed. This is different from working with a business selling goods independently by using a digital platform that has flexibility in working (Jamme & Greathous, 2021). On the other hand, digital development does not necessarily erode trade unions, for example in Ireland, where Mas and Gómez (2021: 15) suggested that the digital enterprise’s management development is integrated into trade unions. Table 3.6 also showed that the highest trade union membership among internet workers is in the public administration sector, defense, and social security at 34.7%, while the lowest is in the services sector, at 4.3%. Trade union membership in public administration uses the internet the most to pursue targets and accelerate bureaucratic services. Apart from this sector, low internet use among trade union members was recorded in other service sectors. In this respect, Nissim & Simon (2021) suggested that the internet reduces the relevancy of the traditional workplace-centered appeals to organize unions. However, research also showed that greater physical distance and less psychological attachment to employers and workplaces make professional, clerical, technical, and sales workers believe collective bargaining does not fit their situations (Nissim & Simon, 2021). Meanwhile, the development of the internet has had an impact on trade unions. Mas and Gómez (2021) found that the government offers internet networks through social media which are utilized by trade unions, for example in Iceland, Norway, and Uruguay in developing their social networks. Furthermore, the change in employment due to digital trade unions can boost the new emerging labour market (Nissim & Simon, 2021). It is often anticipated that online workers from Gojek are loosely organized compared to labour unions in the manufacturing sector (Isbah, 2019). However, another study found that associations among Gojek drivers were more

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Table 3.6 Trade union membership of workers according to main industry and internet usage (%) Main industry

Not use internet yes

Use internet

No

Not know

Yes

No

Not know

• Agriculture, forestry, and fishing

3.9

92.1

3.9

19.4

74.3

6.2

• Mining and quarrying

7.1

85.4

7.5

26.1

62.5

11.4

• Manufacturing

15.6

77.1

7.3

24.7

67.1

8.2

• Electricity and gas

15.1

76.2

8.7

26.3

64.4

9.3

• Water supply; sewerage, waste management. and remediation activities

3.2

90.4

6.4

15.9

69.2

14.9

• Construction

0.8

95.7

3.5

7.8

85.5

6.7

• Wholesale and retail trade; repair of motor vehicles and motorcycles

2.2

91.8

5.9

6.3

85.6

8.1

. Transportation and storage

5.9

87.4

6.7

13.1

78.6

8.3

. Accommodation and food service activities

1.7

93.3

4.9

5.8

87.9

6.3

• Information and communication

8.2

84.0

7.8

12.2

80.1

7.7

11.0

79.7

9.3

14.5

75.5

10.0

• Real estate activities

5.1

85.9

9.0

7.1

83.3

9.6

• Business activities

4.7

89.3

5.9

7.9

83.8

8.3

• Public administration, defense, and compulsory social security

21.2

73.6

5.2

34.7

61.0

4.3

• Education

• Financial and Insurance Activities

23.2

73.0

3.8

32.5

63.9

3.6

• Human health and social work 19.8 activities

72.5

7.7

30.6

63.8

5.6

• Other services activities

1.0

95.9

3.0

4.3

91.1

4.6

Total

7.5

87.4

5.1

20.6

72.8

6.6

Source BPS, Indonesian Labour Force Survey, 2019

focused on creating community (Triyono, 2021). In Jakarta, workers began to focus on the collective demands of Gojek’s management on certain matters such as labour social protection facilities and increased income.

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Conclusion Workers in Indonesia are increasingly using the internet for work because of its various advantages, especially borderless communications that are not limited by time and place. This digitalization of the labour force continues to grow fast as it is supported by the release of labour laws aimed at supporting economic liberalization and various government programs promoting equitable internet access and digital literacy, such as the Palapa Ring project, the national digital literacy program, and the digital entrepreneur academy. However, internet-based technology development would affect the intensification and work relations in Indonesia’s future labour market. On the one hand, flexibilization in the recruitment process and the use of modern technology would transform job intensification, allowing people to work without time and location limits. On the other hand, this process would increase working hours for workers, especially those utilizing the internet to work over 50 hours per week. Some workers deal with work overload, limited time for tasks and breaks, and more intense work phases. Consequently, they are forced to multitask jobs and deprived of decent work conditions, such as eating lunch, writing emails, talking on the phone, and dealing with problems of work overload. Flexibilization and digitalization also change working relationships in terms of workers’ status, trade unions, and wages. The wage of workers using the internet is higher than that of non-internet users. One of the problems that occurs is the disparity in internet use in various sectors in Indonesia. The lowest internet usage occurred in the agricultural sector (only 2.8%). If it does not get attention, the agricultural sector in Indonesia will be increasingly lagging behind other sectors. Therefore, the use of technology in the agricultural sector should be increased. Labour-market flexibility and digitalization also influenced the working relationship as can be seen by increasing the certain time work agreement (PKWT) relationship. This is because the production structure becomes leaner by replacing humans with technologies, as shown in the financial and insurance sectors. Moreover, about 10.7% of workers working in the digitalized sectors have verbal employment agreements and are vulnerable to job loss and inadequate wages. Therefore, a protection system is needed concerning job loss and ensuring decent wages. Labour-market flexibility and widespread digitalized production have weakened trade unions and made them more fluid. Although trade unions are weak, internet technology is not a problem if it can improve worker protection and income. Therefore, the government should strengthen worker protection, including outsourcing and precariat, from problems such as unilateral dismissal, to ensure decent wages, fair negotiations, and work contracts, as well as the freedom to organize and job loss guarantees. This would maintain the positive industrial climate with an equal impact on workers and employers. Moreover, the internet should be used to strengthen trade unions and expand their membership because it is cheap and quickly accepted by the public. For instance, trade unions use the internet to convey programs and workers’

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struggles to achieve prosperity. Although today the internet still has negative implications for trade union membership, going forward, changes in Indonesia’s labour market is anticipated to produce positively impacts to economic sectors and society in the long term.

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Chapter 4

Civil Society and Regional Connectivity: Governing the Transforming Connectivity at Thai-Laos Border Narut Charoensri

Introduction Economic regionalisation is often considered a state-centric and state-led phenomenon. We have witnessed the role of the governments and superpowers (e.g., the United States, China, and Japan) in the initiation of regional and sub-regional initiatives, particularly after the Second World War (Beeson and Lee-Brown, 2021; Troitskiy, 2019; Leslie and Wild, 2018; Buelvas, 2013; Dadabaev, 2018; Zhao, 2019; Pattanaik, 2016). The literature on economic regionalism often focuses on state-led regional economic and political arrangements which are based on the neoliberal economic institutions. The goals of economic regionalism are to increase trade facilitation and support cross-border mobility of goods, services, and people by using agreed-upon regional regulations and institutions, including regional co-operation and supranational institutions. As such, economic regionalisation requires not only governments, but also the business sector and local community, to work together across all levels. Theoretically, economic regionalisation is driven by a wide range of factors. Mechanisms and tools that help trade facilitation comprise hard and soft infrastructure developments. Hard, or physical, infrastructure development includes transport, energy, and telecommunication development. Soft infrastructure development is the synchronisation of economic policies, laws and regulations, and the decrease of trade barriers amongst member states for the free flow of goods and capital, which are often seen as parcels of structural adjustments. These physical and structural developments were believed to enable the effective facilitation of the cross-border mobility of goods, services, and people. Nonetheless, the idea behind these developments, as mentioned earlier, is based on neoliberal presumptions of the global N. Charoensri (B) Chiang Mai University, Chiang Mai, Thailand e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_4

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economic order, thereby, often focusing on state-led economic projects. In Southeast Asia, there are two major ‘regional connectivity’ development schemes, which are (1) ASEAN Regional Connectivity, the Master Plan on ASEAN Connectivity (MPAC) (ASEAN, 2017), and (2) the economic corridors of the Greater Mekong Subregion Economic Programme (henceforth, the GMS Programme), a regional initiative which was launched by the Asian Development Bank (ADB) in 1992. The former is a comprehensive regional transport connectivity development scheme, with aims to create, improve, and support existing roads and networks throughout both mainland and maritime Southeast Asia. The latter focuses mainly on mainland Southeast Asia. These regional connectivity development projects are aimed at engendering economic and social impacts. In these projects, the infrastructure development process requires collaboration between multiple actors within society. Overall, the government is responsible for national development projects by coordinating efforts from government agencies, business communities, and civil society groups. There are many issues that must be tackled to ensure that the development of regional connectivity will reduce the possibility of negative social or environmental impacts. The environmental impact assessment (EIA), for instance, is usually used as a tool to measure or analyse such potential impacts. However, studies conducted by small working groups based on technical calculations alone might not always reflect the reality of the affected populations. Scientific research or studies conducted by an external international organisation are often challenged and questioned. This was seen in a 2020 study by the Mekong River Commission (MRC), a Vientiane-based international organisation that monitors environmental issues in the Mekong River. Findings from this study, which was conducted by Alan Basist and Claude Williams (2020), suggested that changes in the flow of the Mekong River are not caused by the construction of dams in China. This example is one of many EIA studies that are questionable empirically and scientifically. In the context of the Mekong River, it is not the government, but rather civil society actors and environmental activists who have actively engaged in social events to raise awareness across communities in Thailand. A social movement based in Chiang Rai, a province in the northern part of Thailand, called ‘Rak Chiang Khong’ (literally translated to ‘Love Chiang Khong’), has taken the lead in regional activism. Rak Chiang Khong advocates against various issues, such as the changing environment of the Mekong River, human and drug trafficking, and illegal cross-border trade. They also contributed to the identification of social impacts as a result of the regionalisation process, which include not only horizontal or empirical effects (e.g. widespread effects on the cross-border mobility of people, goods, and services), but also vertical or institutional affects (e.g. the intensification and harmonisation of regional regulations and laws). This chapter discusses the role of non-state actors in reinforcing regional governance by looking at a case study of one of the bridges between Thailand and Laos. To make the most of their close proximity and shared border, Thailand and Laos decided to build Friendship Bridges in an effort to increase cross-border activities;

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four of which have already been built. The focus of this study is the Fourth ThaiLaos Friendship Bridge, which directly links Chiang Khong District (Thailand) with Huay Xai (Laos). This particular Friendship Bridge was anticipated to help improve regional connectivity between China, Laos, and Thailand by integrating the existing road networks in each country with the other road development projects that are financed by regional co-operation, such as ASEAN and ADB’s GMS Programme. After the amicable relationship between the two countries was established in 1950, there was an increase in the number of studies that analysed the impacts of regional connectivity developments at the local and regional levels. In local communities, there were concerns regarding faster and freer cross-border mobility. Civil society organisations in Chiang Rai have actively engaged in the mitigation of issues caused by cross-border activities, such as human trafficking, drug trafficking, cross-border diseases, and transboundary environmental problems. As the existing literature about regionalisation processes in the Mekong Subregion focuses mainly on economic regionalisation (ADB and ADBI, 2009; ADBI, 2015; Battacharyay, 2010; Ishida 2012), it primarily explains the importance of the harmonisation of rules and regulations, and physical linkages within the subregion for transnational economic activities.1 Whilst state-led development is one of the factors that supports regionalisation in subregions, the role of non-state actors, particularly civil society organisations, was not emphasised in mainstream literature. Meanwhile, there are a few research studies, namely Breslin and Nesadurai (2018), that are starting to call for more attention to the role of regional non-state actors, such as the private sector and civil society, in tackling cross-border issues that are triggered by regional connectivity developments. This paper investigates the role and contribution of Thai civil society organisations that play an active role in tackling cross-border issues that have been triggered by the Fourth Thai-Laos Friendship Bridge. It seeks to discuss the understanding of civil society within the context of regionalisation in the Mekong Subregion. This paper argues that civil society actors could play an important role in the economic regionalisation process. By discussing the role of civil society as non-state actors, I do not presume that civil society actors reject or deny every state-led development project. Rather, as this chapter will show, they try to contribute to the harmonisation of regional rules and promote the idea of an inclusive, free, fair, and open regionalisation process. Regional governance, thereby, could benefit from the active engagement and contribution of civil society actors. This chapter selects the developments of regional connectivity in the Mekong Subregion as the main case study. Regional connectivity is one of the top areas of co-operation in the subregion and is supported by the work of the Association of Southeast Asian Nations (ASEAN), the Asian Development Bank (ADB), which

1

There are some differences between ‘region’ and ‘subregion.’ The former refers to the geographical area which is politically named and grouped and is globally known. The latter, on the other hand, refers to a smaller area which is located within the region. For example, Southeast Asia is a region, whilst the Mekong Subregion is a subregion within Southeast Asia.

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aims to create ‘economic corridors’ throughout subregions, and other regional cooperative initiatives that seek economic regionalisation. In addition, by looking at how the ‘Mekong School’ has contributed to regionalisation in the Mekong subregion, this chapter will help us to have a better understanding of the interplay between state and civil society, which drives regionalism in the subregions of East and Southeast Asia. From this section onwards, this chapter is divided into four parts. The first section will look at the role of civil society in the regionalisation process. It studies how the existing literature on regionalism comprehends the role and contribution of civil society to regional governance institutions, particularly in the context of the Mekong Subregion. The next section will explore regional connectivity through a regional development scheme supported by Mekong Subregion member countries and regional initiatives. I will explore how the Thai-Laos relationship benefits from regional connectedness. The third section will elaborate on the Mekong School, a civil society organisation that advocates against environmental changes that have come as a consequence of developments along the Mekong River, and how they contribute to the Thai-Laos relationship. Finally, the conclusion will summarise the significance of civil society in the regionalisation process and how civil society should be integrated into the study of economic regionalism within the Mekong Subregion.

Civil Society and Economic Regionalisation at the Border in Regionalism Studies It is often acknowledged that there is limited literature on the role of civil society in economic regionalism. Shaw et al. (2011) argue that the emergence of the new wave of regionalism introduced the notion of civil society to scholarship; whilst the old regionalism wave mainly studied regionalism by emphasising state-led regional cooperation and/or supranational institutions that endeavoured to control economic, political, and security arrangements. In contrast, the new school of regionalism recognises that there are multiple informal relations and actors in society that play a vital role in transnational governance and the regionalisation process. In addition to the recognition of multiple actors in this process, there was also a shift from ‘old regionalism’ to ‘new regionalism’. The role of civil society in economic regionalism has been examined considerably in Africa. Söderbaum (2007), for instance, studies the relations between regionalisation and civil society in Southern Africa, proposing that there has been a limited number of empirical and theoretical studies that analyse how civil society affects the regionalisation process. The limited understanding of civil society regarding the regionalisation process in Southeast Asia can be attributed to three main reasons. First, civil society actors have a limited role in advocating for social issues and in turn are unable to make significant changes in the ASEAN Secretariat. This is partly

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because transnational social issues are often controversial and cannot be investigated due to diplomatic and political constraints, particularly those that depend on the political situation of a particular member state, for instance, human rights issues in Myanmar (Asplund, 2014; Tadem, 2017). Second, research on social movements in Southeast Asia is generally dominated by scholars in the fields of sociology, politics and government, social administration, or social development. The study of such social movements tends to be more restricted in IR scholarship, as IR focuses more on international and national mechanisms, legislation, trade and investment. Third and finally, there have not been many civil society actors that have had a major impact on transboundary issues. ASEAN, as a regional governance body, thereby, has comparatively limited knowledge and experience of how to incorporate civil society into local frameworks of regionalisation. A study by Chandra (2009) proposes the idea of ‘alternative regionalism’, which steps beyond state-led economic regionalisation. Chandra argues that to construct a Southeast Asian community, we might need to expand our understanding of civil society, which Chandra refers to as a non-governmental element (Chandra, 2009, p. 1). For Southeast Asia, the role of civil society in ASEAN regional governance was first officially institutionalised by the creation of the ASEAN Civil Society Conference (ACSC) as initiated by the Malaysian government. The establishment of this framework was expected to provide recommendations to the ASEAN Summit as civil society is one of the actors that can raise the voice of local people. In other words, it helps to convey the opinions, needs, and concerns of stakeholders to policymakers. Thus, by including civil society in the policymaking process, policymakers can adopt a more comprehensive and inclusive approach. Civil society organisations, thereby, could contribute to the regionalisation process through the reflection of local communities’ needs, further helping the regionalisation process to become more democratic (Acharya, 2003, p. 381). Theoretically, regionalisation is presumably led by the state (Börzel, 2016, pp. 42– 43), but this theory should be challenged by including the roles of various other actors throughout the multi-level processes of globalisation, regionalisation and nationalisation of development institutions. The European experience after the Second World War, which led to the rise of neoliberalism and neofunctionalism, and theoretical assumptions on the regionalisation phenomena and processes of European regional institutionalisation often dominated the general concept of regionalisation in most contexts. Without regard to sui generis context, regionalism was mainly explained by scholars applying Western- or European-dominated assumptions and approaches. However, the emergence of multiple actors in multi-level development processes and in competing regional governance frameworks demonstrated that each regionalisation process has its own context and involves unique actors that must be taken into account (Börzel and Risse, 2019, p. 1233).

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Regional Connectivity and Regionalisation in the Mekong Subregion Regional connectivity is not solely related to the economic dimension. The complexity of ‘connectivity’ requires a deeper understanding to address economic, political, security, and social challenges (ESCAP, 2014). ASEAN regional connectivity was once considered an economic-related project, but after some consideration, the ASEAN Secretariat recognised that regional connectivity also involves economic, political, social and security aspects (ASEAN, 2017). Regional connectivity, with particular reference to cross-border transportation developments, is expected to facilitate the mobility of goods, services and people, which will lead to further economic regionalisation. Regional connectivity in Southeast Asia has been supported by many international organisations through regional initiatives and a wide range of development projects. At the regional level, these include the ADB’s GMS Programme and ASEAN’s MPAC. The ADB launched the GMS Programme in 1992, one year after the collapse of the Soviet Union, to establish a regional mechanism that would create a marketoriented approach to regional development. The GMS Programme included many areas of co-operation when it first launched, with a focus on emphasising the importance of economic corridors. ASEAN’s MPAC guides ASEAN leaders in thinking about hard and soft infrastructure development, aiming to link various parts of the region together both on mainland Southeast Asia and within the maritime economic corridors. At the national level, there are many infrastructure development projects that support economic regionalisation, for instance, cross-border transport development and dam construction projects (Charoensri, 2021). Meanwhile, China’s endeavours to support the growing domestic demand for electricity due to its rapid economic growth have been argued as the primary reason for China to construct dams on the Mekong River (Thaibizchina, 2018). Transport development is expected to increase integration within the Mekong Subregion through economic activities and people-to-people mobility (ASEAN, 2011). Thereby, the ADB’s economic corridor strategy and ASEAN’s MPAC supplement each other. Nonetheless, the role of civil society in the process of drafting and implementing regional transport development initiatives in mainland Southeast Asia has not been adequately observed. The only information that could be accessed in Thailand is an article that states a lack of civil society engagement in the Southern Economic Corridors (SEC), one of the ADB’s economic corridors in the Mekong Subregion, which links the Dawei deep seaport in Myanmar with Thailand, Cambodia, and Vietnam (Wattana, 2020). Apart from this source, the actual role of civil society in regional connectivity within the Mekong Subregion has not been adequately explored. Although there is a gap in the knowledge of the role of civil society actors in land transport development projects in the Mekong Subregion, they have a more visible role in regional water transport. The flows of the Mekong River, which travels from Tibet through China, Myanmar, Thailand, Laos, Cambodia, and Vietnam,

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have been studied widely. There has been a plethora of studies on the management of the Mekong River, the river’s biodiversity, dam constructions, and the socio-environmental impacts of the dams, among other topics (Thammasutthiwat, 2011; Ogden, 2022; Biba, 2012). The existing literature focuses on how civil society raises their concerns for and engages with the environmental issues concerning dam construction and the rapid development alongside the Mekong River (Southeast Asia Rivers Network, 2003; Wheeler, 2004). These studies have built on the narratives that revolve around China’s dam construction and the rapid explosion of construction in the Mekong River. However, they have not considered the role of civil society organisations and their contribution to the governance of transnational transport developments, especially from the IR perspective as most studies mainly look at the issues from the development approach. Therefore, I propose the development of a better understanding of the role of civil society from the IR perspective.

Case Studies: The Mekong School Regional connectivity engenders physical land, maritime, and air connectivity. Along the border of Thailand, not only does the Mekong River separate Thailand and Laos, but it also links the two subregions through river transport. Commercial transport from China to riparian states along the Mekong River helps to improve economic activities and people-to-people mobility. The management of regional connectivity, thus, was monitored and administrated by ASEAN’s MPAC, alongside regional member countries’ Ministries of Transport and other relevant organisations. The role of civil society in helping government agencies to frame and plan regional connectivity, however, is far behind its role in other social issues, such as human rights or women’s empowerment movements within the subregion. However, when we look at the civil society movements that advocate for and contribute to relevant issues on regional connectivity, it can be said that the Mekong School is one of the most active civil society organisations engaging in transboundary issues in the Mekong Subregion. The leader of the Mekong School is Niwat Roykaew, a native of Chiang Khong—a small, ancient city by the Mekong River—which is located in Chiang Rai Province in the northern part of Thailand. Born and raised in Chiang Khong. Niwat used to be a teacher. That is why he is also called ‘Kru Thi’ (Kru means ‘teacher’ in Thai), and his nickname is ‘Thi’. Growing up by the river, Niwat witnessed first-hand the ecological changes in the Mekong River. In 1995, he started to advocate for the environmental protection of the Mekong River by establishing the Rak Chiang Khong group. Rak Chiang Khong works actively with local people to raise awareness of the environmental degradation caused by the changing water flows in the Mekong River. While there were many reasons that drove China to construct dams alongside the Mekong River, the main motivation comes from China’s growing need for electricity to support its economic development. As the Mekong River flows through Yunnan province in the south of China, sharing a border with Laos and Myanmar, China

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constructed massive dams in an effort to generate more electricity and control water management. According to China, these dams help to manage the river so that the Lower Mekong countries, including Laos, Thailand, Cambodia, and Vietnam, would not suffer from floods or drought during the extreme rainy or dry seasons. However, excessive dam construction has significantly deteriorated the environmental situation in the Lower Mekong countries as the dams have considerably changed the river’s water flows (Dugan et al., 2010; Kuenzer et al., 2013). The Mekong School has been working to raise the community’s awareness of the environmental impacts caused by Chinese dams for many decades. Kru Thi works with a number of international organisations in Thailand and abroad to educate people about the multi-dimensional impacts of the changing Mekong River on the livelihoods of local communities, such as regional biodiversity and ecology. Fighting against the ‘rapids-blasting’ projects, Kru Thi successfully pressured the Thai government to terminate these projects after twenty years. With many civil society organisations in Chiang Rai, around Thailand, and throughout the subregion (e.g. International Rivers), Kru Thi has established firm ground upon which to protest against the ‘development’ that Beijing and other regional development projects promote as they have not proven beneficial to local communities. For many years, local people along the banks of the Mekong River suffered from the negative impacts of the dams. In an effort to mitigate their struggles and to fight against state-led development projects, Kru Thi and his colleagues have employed principles of international development to promote development processes that are inclusive and participatory, ensuring that local communities are given a voice (Uawithya, 2021). As such, Kru Thi’s advocacy work has made an enormous impact on the governance of regional development projects and on the improvement of local people’s livelihoods, for which he received the Goldman Environmental Prize in 2022. The Mekong School also plays an active role in engaging with the construction of the Fourth Thai-Laos Friendship Bridge. This Friendship Bridge was constructed in June 2010 and officially opened in December 2013. As can be seen in Fig. 4.1, the bridge has significantly changed the geo-economic landscape of the city. Figure 4.1 shows the shifted economic centre. In the figure, Point 1 used to be the centre of cross-border activities. There were serviced cross-border boats that people could use to commute for work and tourism purposes on a daily basis. The pier was called ‘Buck’ and there was also a Customs Department that managed cross-border documents. We can see from the map that on Laos’ side, the Huay Xai city centre is opposite Chiang Khong. However, after the completion of the Fourth Thai-Laos Friendship Bridge, the centre for official cross-border activities was relocated from Point 1 to Point 2, but the city had not yet expanded to this part of the river. The relocation of the city centre has majorly affected the livelihoods of local people along the Thai border. When the centre of economic activities moved to the area of the newly constructed bridge, cross-border procedures shifted correspondingly and became complicated for local people. Additionally, the areas around the Friendship Bridge in both countries are not physically developed. On the Thai side, the Ministry of Transport has constructed a warehouse to prepare for a railway network, which is currently under construction, to help link Chiang Khong with other parts of Laos.

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Fig. 4.1 A map of Chiang Khong and the Fourth Thai-Laos friendship bridge (Source Google Maps)

Although there are some hotels and local settlements on the Laos side of the bridge, the city and transportation infrastructure are not yet adequately developed. As a result, it can be said that the Friendship Bridge does not serve to benefit the local people; instead, it is meant to help better facilitate trade through the development of cross-border transport infrastructure. There is room for the Mekong School to expand their advocacy work from the narrower focus on local environmental issues into the larger area of transnational co-operation through effective reflection of the economic and social challenges that have been caused by the construction of the Friendship Bridge. Figure 4.2 shows a picture of Kru Thi (on the left-hand side) and a map that illustrates a joint cross-border tourism project. Kru Thi proposes that Chaing Khong and Huay Xai could develop a joint-tourism trip that starts from Buck Pier in Thailand, moves through Huay Xai, and crosses the Friendship Bridge back into Thailand. This route would help local people to have more opportunities to engage with tourists, further increasing economic activities in the area. Although the idea might not come to fruition, the fact that the Mekong School, a civil society organisation that advocates for the environment, has stepped in to propose the idea of tourism development and people-to-people mobility to increase economic activities at the border, demonstrates the potential benefit of engaging civil society in regional development. From the above discussion, I have demonstrated the role of civil society in addressing environmental problems and improving transnational cooperation, with

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Fig. 4.2 Kru Thi discusses an idea to organise joint-border city development (Source Author [This photo was taken in 2021])

the Mekong School as a case study. As a civil society organisation, the Mekong School has helped to monitor the development in the Mekong Subregion. This case study outlines two important ways in which a civil society organisation can participate to improve economic regionalisation. First, it can participate in raising awareness about environmental protection at the grassroots level, as well as influencing policymakers at the local or national levels. The Mekong School has gained attention from policymakers throughout the Mekong Subregion regarding regional development, further demonstrating how civil society actors can use various strategies to draw attention at the international, regional, national and local levels. Second, as the case study shows, civil society actors can also participate in promoting transnational co-operation to develop economic activities for the improvement of local livelihoods. The role of civil society, then, can be analysed across three dimensions. First, civil society organisations do play an important role in reinforcing the rules and principles of global and local governance. Second, civil society can expand the areas of their advocacy work to cover more issues. Third, the role of civil society, thereby, should not be limited to the school of development studies but can also be explored through IR perspectives to better inform global and regional cooperation. What we have seen from this case study is the contribution of a civil society organisation in reflecting issue-specific impacts to a wider audience. The involvement of civil society organisations in the regionalisation process has significantly helped the Mekong Subregion. Economic regionalisation should not be seen as a purely state-led project, but rather as a multi-actor and multi-level development process. The sophisticated and complex interactions between actors, including government, civil society, and

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the business community, should be studied further to reveal how each decides to act, both individually and collectively. To think about regional governance in the Mekong subregion, therefore, we must think multi-dimensionally. Economic regionalism has been strengthened by regional connectivity; however, regional connectivity that develops land and water connectivity (in this case, in the Mekong River) could be also governed by civil society organisations. Water and river governance of the Mekong River has been discussed widely regarding the identification of a commonly acceptable practice amongst riparian states (Kinna and Rieu-Clarke, 2017; Jacobs, 1995). This means that the Mekong River riparian states must work to find a common ground in which information sharing and water management by the Chinese government would also guarantee consideration of the Lower Mekong countries. Civil society organisations could also engage in regional governance in the area of international transport, including that of both land and water. As such, regional governance might not require an established institution, but rather mechanisms that implement agreed-upon practices throughout the subregion. With this, IR scholars interested in economic regionalisation would have more research opportunities to explore the empirical and theoretical issues regarding the role of civil society in regional governance and its impact on economic regionalisation at the subregional level. Additionally, as this article focuses on regional connectivity, the role of civil society in advocating for environmental and transboundary issues should also be taken into account. If the main idea of regional connectivity is to facilitate the movement of goods, services, and people, then the relative development schemes should also facilitate the inclusive engagement of civil society organisations. The role of the Mekong School is a good example. Although the Mekong School has been advocating for improved environmental governance of the Mekong River for many decades, the role of civil society has not yet been integrated into policy formulation or the regional connectivity development schemes of the ADB or ASEAN.

Conclusion As shown in this chapter, Southeast Asian regional connectivity does not revolve solely around economic development issues. There are social and environmental problems that also need to be addressed by many actors in order to raise the voice of local people regarding the impacts of these issues. As actors develop close relationships with local people at the grassroots level, civil society will comprise those who can help support economic development that amplifies the voices of local communities. The role of civil society actors should not be limited to conflictual or oppositional relations with the state, but rather expanded to allow for co-operation in implementing norms and regulations for the sake of improved governance. This chapter explores the role of the Mekong School in advocating for environmental protection of the Mekong River for twenty years. It shows that a civil society organisation can contribute to the improvement of environmental and social issues through existing

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regional governance frameworks and aid in the economic regionalisation process. Regional governance, thereby, could benefit from an expanded participatory role of civil society organisations. Civil society organisations could then contribute to the resolution of issues within their areas of expertise, whilst making both direct and indirect impacts on economic regionalisation through lobbying and advocacy. Considering the limited research on civil society within the IR discipline, particularly regarding regionalisation, further research should be conducted to understand how civil society organisations can influence ASEAN decision-making processes. Findings from the empirical research will be integrated with the knowledge from the ground to understand the impact across all levels. Together with this, regional governance could become something that is actually ‘regional’.

References Acharya, A. (2003). Democratisation and the Prospects for Participatory Regionalism in Southeast Asia. The Third World Quarterly, 24(2): 375–390. ADB & ADBI. (2009). Infrastructure for Seamless Asia. Tokyo: Asian Development Bank Institute. ADBI. (2015). Connecting South Asia and Southeast Asia. Tokyo: Asian Development Bank Institute. ASEAN. (2011). Master Plan on ASEAN Connectivity. Jakarta: ASEAN Secretariat. ASEAN. (2017). Master Plan on ASEAN Connectivity 2025. Jakarta: ASEAN Secretariat. Asplund, A. (2014). ASEAN Intergovernmental Commission on Human Rights: Civil Society Organisations’ Limited Influence on ASEAN. Journal of Asian Public Policy, 7(2): 191–199. Basist, A., and C. Williams. (2020). Monitoring the Quantity of Water Flowing Through the Upper Mekong Basi Under Natural (Unimpeded) Conditions. Sustainable Infrastructure Partnership, Bangkok. Bhattacharyay, B. N. (2010). Infrastructure for ASEAN Connectivity and Integration. ASEAN Economic Bulletin, 27(2): 200–220. Beeson, M., and T. Lee-Brown. (2021). Regionalism for Realists? The Evolution of the Indo-Pacific. Chinese Political Science Review, DOI: https://doi.org/10.1007/s41111-020-00163-0. Biba, S. (2012). China’s Continuous Dam-Building on the Mekong River. Journal of Contemporary Asia, 42(4): 603–628. Börzel, T. A. (2016). Theorising Regionalism: Co-operation, Integration, and Governance. In Börzel, T. and T. Risse (eds.), The Oxford Handbook of Comparative Regionalism (pp. 41–63). Oxford: Oxford University Press. Börzel, T. A., and T. Risse. (2019). Grand Theories of Integration and the Challenges of Comparative Regionalism. Journal of European Public Policy, 26(8): 1231–1252. Breslin, S., and Nesadurai, H. E. S. (2018). Who Governs and How? Non-state actors and Transnational Governance in Southeast Asia. Journal of Contemporary Asia, 48(2): 187–203. Buelvas, E. P. (2013). Why Regionalism Has Failed in Latin America: Lack of Stateness as an Important Factor for Failure of Sovereignty Transfer in Integration Projects. Contexto Internacional, 35(2): 443–469. Chandra, A. C. (2009). Civil Society in Search of an Alternative Regionalism in ASEAN. Manitoba: International Institute for Sustainable Development. Charoensri, N. (2021). Regional Intellectual Hegemony and Regional Connectivity: Japan’s Norms of Development, International Research Organisations and Network-Building in Southeast Asia. PhD thesis, University of Leeds.

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Dadabaev, T. (2018). Japanese and Chinese Infrastructure Development Strategies in Central Asia. Japanese Journal of Political Science, 19(3): 542–561. Dugan, P. J. et al. (2010). Fish Migration, Dams, and Loss of Ecosystem Services in the Mekong Basin. AMBIO: A Journal of Environmental and Society, 39: 344–348. ESCAP. (2014). Regional Connectivity for Shared Prosperity. Bangkok: United Nations. Ishida, M. (Ed). (2012). Emerging Economic Corridors in the Mekong Region. BRC (Bangkok Research Centre) Research Report No. 8. Bangkok: IDE-JETRO. Jacobs, J. W. (1995). Mekong Committee History and Lessons for River Basin Development. The Geographical Journal, 161(2): 135–148. Kinna, R., and Rieu-Clarke, A. (2017). The Governance Regime of the Mekong River Basin: Can the Global Water Conventions Strengthen the 1995 Mekong Agreement? Brill. Kuenzer, C. et al. (2013). Understanding the Impact of Hydropower Developments in the Context of Upstream-Downstream Relations in the Mekong River Basin. Sustainability Science, 8(4): 565–584. Leslie, H., & Wild, K. (2018). Post-hegemonic Regionalism in Oceania: Examining the Development Potential of the New Framework for Pacific Regionalism. The Pacific Review, 31(1): 20–37. Mekong River Commission. (2020). Understanding the Mekong’s River Hydrological Conditions: A Brief Commentary Note on the “Monitoring the Quantity of Water Flowing through the Upper Mekong Basi Under Natural (Unimpeded) Conditions” Study by Alan Basist and Claude Williams (2020). Vientiane: Mekong River Commission Secretariat. Ogden, S. (2022). The Impact of China’s Dams on the Mekong River Basin: Governance, Sustainable Development, and the Energy-Water Nexus. Journal of Contemporary China, 32(139): 152–169. Pattanaik, S. S. (2016). Sub-Regionalism as New Regionalism in South Asia: India’s Role. Strategic Analysis, 40(3): 210–217. Shaw, T. M., J. A. Grant, and S. Cornelissen. (2011). Introduction and Overview: The Study of New Regionalism(s) at the Start of the Second Decade of the Twenty-First Century. In Shaw, T. M., J. A. Grant, and S. Cornelissen (eds.), The Ashgate Research Companion to Regionalisms (pp. 3–30). Surrey: Ashgate. Söderbaum, F. (2007). Regionalisation and Civil Society: The Case of Southern Africa. New Political Economy, 12(3): 319–337. Southeast Asia Rivers Network. (2003). Mekong Rapids under Fire (2nd ed.). Chiang Mai: Southeast Asia Rivers Network. Tadem, E. (2017). New Perspectives on Civil Society Engagement with ASEAN. Accessed February 20, 2023. From https://www.boell.de/en/2017/08/02/new-perspectives-civil-societyengagement-asean. Thaibizchina. (2018). Looking at the Potential of Water Power Generation in Yunnan through Jinghong Dam. Accessed January 23, 2023. From https://thaibizchina.com/ (in Thai) Thammasutthiwat, S. (2011). Navigating on the Mekong River in the Greater Mekong Sub-Region. Chiang Mai: The Confucius Institute Press, Mae Fah Luang University. Troitskiy, M. (2019). The Emerging Great Power Politics and Regionalism: Structuring Effective Regional Conflict Management. Global Policy, 10: 14–21. Uawithya, A. (2021). For … The Mekong River and School of Lives. Accessed October 2, 2021. From https://readthecloud.co/mekong-school/. Wattana, T. (2020). Special Economic Zones and Deep-Sea Port VS. Civil Society in Dawei: The Fight of Dawei People to Gain Land, Live and Justice. Accessed December 19, 2022. From https://researchcafe.tsri.or.th/position-of-myanmar-civil-society-a-case-study-ofthe-dawei-special-economic-zone/. (in Thai) Wheeler, M. Z. (2004). Blasting River: Dilemmas of Mekong Navigation. ICWA Letters. Accessed January 4, 2023. From https://www.icwa.org/wp-content/uploads/2015/10/MZW-12.pdf. Zhao, H. (2019). China-Japan Compete for Infrastructure Investment in Southeast Asia: Geopolitical Rivalry or Healthy Competition. Journal of Contemporary China, 28(118): 558–574.

Chapter 5

New Economic Policy: Impact of Social and Economic Engineering on Malaysia’s Development Julia Roknifard

The legacy of colonialism has left Malaysian society with complicated and fragile race relations that are increasingly being understood as a ticking time bomb of interethnic and inter-religious frictions that are holding back its ability to form strong, cohesive and united social structures. Having gained independence in 1957 from Great Britain, Malaysia saw a long running leftist insurgency from 1948–1989. While that shaped local politics to a degree, arguably the most important postindependence event in the young country’s history was the deadly racial riots in 1969. That bloody mark brought forth arguments that the ethnic Malays, who are Muslim as per the wording of the country’s constitution and share Peninsular Malaysia with a large minority of Chinese and Indians, had been sidelined economically resulting in tensions that led to the infamous racial riots. This was used as the basis to bring forth the New Economic Programme (NEP), a 20-year affirmative action project that began in 1971 that was supposed to conclude in 1991 but has been extended ever since under various rebranding exercises. Rather than promote a more equitable and balanced society where members of all racial groups could be brought to some reasonable parity, it has instead reinforced and prolonged the methods of colonial control—namely the use of divide and rule tactics through playing up fears of one ethnic group over others and allowing a small elite to amass wealth for themselves in a self-reinforcing cycle that has seen race relations go from uneasy to tense in recent years. This was not accomplished overnight and indeed through the skilful exploitation of mindsets, insecurities and social structures that had been in place since pre-independence, these techniques have been developed into an efficient means of control by a small political elite over the nation of 30 million. When talking about transitions in the modern era we often refer to a path from more centralised, authoritarian modes of governance to democratic ones where the J. Roknifard (B) University of Nottingham Malaysia, Semenyih, Malaysia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_5

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ideas of Foucault and Gramsci about governing based on shared values can be interpreted and applied in its most optimistic sense. The transition to democracy, even while seen as desirable and inevitable, did not materialise in Malaysia, with a decidedly more authoritarian form of government developing instead. Nation-building out of major ethnic groups, some of which like Chinese and Indians were immigrants of the time of colonialism, was yet another transition that did not come through. The consensus achieved upon independence laid the ground for unequal treatment of different ethnic groups within the country despite the minorities being awarded citizenship. Proclaiming a cohesive society that is more evened out economically as its goal, NEP has failed to achieve it. Instead, it deepened ethnoreligious fault lines, while also failing to create the entrepreneurial core out of the majority group in the population. The political elite learnt to exploit perpetuated grievances in its favour which discouraged it from resolving the predicament that NEP was supposed to address. Over decades, the multifaceted discourse has been built around the NEP and the system of discrimination in favour of the majority that the policy accommodated. It is of particular interest to this chapter how despite the rational arguments against NEP’s continuing existence, there has been little resistance to the existing system. The key characteristic of a Schumpeterian procedural democracy is a competition which is to be provided by the institutions in place, like fair elections or freedom of speech, those that in the long run, guarantee competition and rotation of political leaders, who are required to be high-grade professionals to be able to compete for the job (Schumpeter 1943: 269–273). With reference to Crouch (1992), applying his findings to the case of Malaysia, Gomez and Jomo (1997: 2) stressed that “even the minimal civil liberties and democratic procedures that exist are only allowed as long as the position of the ruling elite is not seriously threatened, let alone undermined”; it was observed that “such rights have been ‘quickly modified or abolished when elite interests were threatened’.” With this, the Gomez and Jomo conclusion of 1997 suggested that any such guarantees hardly existed in Malaysia. It can be argued that by 2023 the situation has not progressed towards the strengthening of those guarantees if not deteriorated. As the introductory chapter notes with reference to Rose (1999: 168) and Hirst (2000: 14), stable regimes, rule of law, efficient state administration and a strong civil society, independent of the state, as well as minimisation of the government’s role and rather its policy-setting function, may be considered as elements of good governance. The idea put forward by Walters (2004: 29) suggests that when moving from old to new modes, governance is shifting from the institutions to processes of concertation, interaction or adaptation between those institutions and also with the entities beyond the system, like the third sector, which signifies the decline of the nation-state and loss of monopoly of the state in the decision-making process. In a sense, Malaysia relies on a rigid, more traditional perception of governance. At the same time, there is a great deal of behind-the-scenes interactions, as well as discursive instruments of power that speak in favor of alternative tools being deployed and eventually confirm Walters’s thesis on the shift towards processes. In terms of key indices of government quality such as political freedom, judicial efficiency, and lack of corruption, Malaysia

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does not rank highly. The past decades have not demonstrated significant progress on all these indicators. The processes and institutions, in turn, were used to strengthen the autocratic grip on power, while the democratic transition did not significantly advance. In a direct continuation of the colonial regime, the United Front or Barisan Nasional (BN) coalition made up of a grouping of race-based parties held control of Malaysia from 1957 to landmark elections in 2018. The lynchpin of BN was and remains the United Malays National Organisation (UMNO), an-ethnic Malay party that dominated the BN coalition in all aspects and dictated policies for decades. Bear in mind that while Malaysia achieved independence in 1957, British military forces remained in the country till at least 1971 to fight the aforementioned long-running leftist insurgence, helping prop up the hold of the BN coalition. The 2018 elections saw a rival coalition of Pakatan Harapan (PH), ostensibly made up of parties with an ideological and multi-racial base take power. However, even the PH coalition could not completely avoid the race-based approach to politics that Malaysia, especially what the ethnic-Malays had become accustomed to. PH included the Malaysian United Indigenous Party (known in Malay as Bersatu), which was largely made up of former UMNO members and played the role of an ethnicMalay party in the mold of UMNO but without the same clout in the PH coalition, and would eventually undermine PH and lead to its downfall 22 months after forming the government when Bersatu withdrew from the coalition government and aligned itself with other Malay-centric parties to form two more short lived governments before national elections were again held in 2022. Therefore, in what concerns the electoral process, some progress has been achieved in the rotation of political forces. At the same time, since both the ruling coalition and the opposition uphold more or less the same values, despite differences in rhetoric, it is hard to effectively distinguish between the old and new political elites, where both can be seen as showing slight differences in approaches while being a part of the same entrenched political class. Use of the categories such as race, religion, gender norms and cultural rules is tightly embedded in the governance and civil service apparatus practices, but it cannot be described as a result of a strictly consolidated strategy to weave social fabric in a particular way. At least in part that fabric became a product of political struggle and created traps in which ruling forces, without noticing, caught themselves over the decades. Attempts to make sense of Malaysia’s trajectory of democratic transition led some to explore the infighting taking the once dominant UMNO as a vessel for realizing the interests of powerful elites (Khoo 2018a). However, such an exercise is rather useful for understanding the patterns and the level of underlying culture but not for a comprehensive explanatory framework for Malaysia’s transition. The 2018 national elections were called a political tsunami, as the postindependence one-party rule finally came to an end. But the PH coalition that came to replace it was led by none other than the prime minister who stood at the helm of the country for 22 years in the past as a part of that very UMNO—Mahathir Mohamad. While PH was in power after the 2018 elections, they continued with established political practices, refusing to implement radical institutional or policy change. The

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same elites that climbed without elections to the top positions in the country after the replacement of Mahathir, first with Muhyiddin Yassin and then Ismail Sabri Yaakob as a prime minister, returned to their unapologetic use of race and religion for political gain while demonstrating the strongest will for power preservation and little appetite for accountability. This chapter examines the discourse that accommodated and perpetuated the (NEP) enforced after the ethnic riots of 1969 to even out economic disparities between different ethnic groups. The riots erupted after the largely Chinese Democratic Action Party (DAP) declared victory at the 1969 municipal elections in Malaysia’s capital Kuala Lumpur. The Chinese marched through the streets chanting provocative slogans. During the subsequent Malay counter-rallies, violence erupted between the two ethnic groups. The NEP that ensued in 1971, under the watch of UMNO, was meant to address the economic disparity, between the generally poorer Malays and the wealthier Chinese. That would also be the first step in addressing the disparity of economic base to the political power—the move that was via economic empowerment of Malays meant to create a solid base for Malay political dominance. While the policy succeeded in the creation of the new middle class and to an extent in poverty eradication, its over 50-years implementation has become a stumbling block in the way of Malaysia forming a cohesive nation with the attributes of the actual transition to democracy, where accountability of the government apparatus, independent media and judiciary are supposed to play a crucial role. The rhetoric of the government being the major protector for the deprived majority, the majority that would mostly be identified in ethno-religious terms as Malay-Muslim became well-entrenched since the introduction of NEP. The chapter argues that such rhetoric indulged the system to compromise on all the aspects that would be required for a democratic transition and for Malaysia to build a nation out of ethnically, culturally and religiously diverse people residing within its borders. Instead, the narrative that was perpetuated through the institutional structures stifled progression towards democracy, effective nation-building and as a result, formulation of coherent policies that would aid the economic development of Malaysia as one project that involves most of the population in it. The chapter starts with the origins of the NEP in Malaysia, proceeding to the state control over the corporate sector which became a result of the NEP. It then explores the cultural underpinnings of the NEP, as well as the race-religion refrain in the cultural discourse. Methodologically the chapter relies on discourse analysis since Malaysia’s independence until the present day. For that, it explores the conditions of wealth distribution, policies that targeted its redistribution and rhetoric that provided the rationale for such policies, including the official documents like Malaysia Plans—the five-year outlines of government development policies and strategies—and existing legislation. To make sense of the existing system of power and general compliance with it, the conceptual framework was derived from the work of Foucault and Gramsci. In particular, the notion of cultural hegemony is applied and potential pathways to resistance are explored.

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Origins and Results of the New Economic Policy The NEP was declared after the ethnic riots of 1969 and at first was meant to be implemented between 1971 and 1991. The NEP was designed to mend inter-ethnic but also inter-class differences and create socio-economic conditions for building national unity. As in many other cases, this policy change was introduced as a reaction to the shift in voters’ attitude which was seen as a pressing need to administer a policy change. NEP was introduced as a response to the economic disparity for which colonial rule was partly responsible. The Malay majority that was left in charge of the country post-independence could not compare to the Chinese minority in terms of wealth accumulation and hence, lacked the material base to effectively rule. For that, the NEP introduced a two-prong strategy. The one that is usually brought to attention was about eliminating the connection between occupation and race. The other prong, meanwhile, did not have a particular race as a target and was aimed at the reduction and then eradication of poverty irrespective of race (Malaysia, 1976). The NEP defined the broad category of Bumiputera, or “sons of the soil”, as the ones who needed to be primarily elevated from poverty, including Malay-Muslims and aboriginal communities, which together make up about 70% of the population, 54% of which are in the former group (Anand 2021). Malaysian Department of Statistics places the current share of Bumiputera a bit lower, estimating that in the total population of 32.7 million. Bumiputera makes up 21.13 million or about 64% (Bumiputera Statistics 2022). Malay-Muslims represent the bulk of this group and since independence the proportion changed in their favor due to the differences in birth rates (and to a lesser extent – conversions of non-Muslims to Islam which brings with it Bumiputera status). It was not one single document that rolled out the NEP but rather a series of subsequent documents and economic plans. The Outline Perspective Plan (OPP) introduced within the 3rd Malaysia Plan (1976–1980), set “the socio-economic framework within which the objectives of the [NEP] are being pursued” (Malaysia 1976: 51). The OPP laid out data that showed stark socio-economic inequalities, specifically the multiple ways in which Bumiputera was lagging (Lee 2021: 4). The NEP rolled out in that earlier version looked sensible at the time, being designed to bridge the inter-ethnic gaps via better wealth redistribution mechanisms of the growing export-oriented economy (Jomo 1990: 472). Surprisingly, the only then opposition to NEP came from the Pan-Malaysian Islamic Party (PAS), an Islamist party that argued that the formation of the nation required a common spiritual commitment rather than just economic redistribution. It is later that PAS would get on board with the rest of the political elite to utilise the ethno-religious discourse as a means to justify the NEP and pose as a protector of the interests of the majority. One of the goals set by the OPP was to reduce the official poverty rate from 49% in 1970 to 16% in 1990. It was indeed brought down to 17% by 1987 in peninsular Malaysia. For Sabah and Sarawak, which were not the primary targets of the policy at its start, poverty rates remained at 35 and 25% respectively. Jomo (1990) doubts these

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official numbers as the poverty line was also brought down by 1987 through the use of 1970s prices. Then the head of the UMNO Youth and current Prime Minister (2022) Anwar Ibrahim stated that based on the results obtained by the Socio-Economic Research Unit (SERU) the poverty rate still stood at 43% in 1983 (Jomo 1990: 473). In a more diversified political landscape with other component parties lobbying for the interests of their electorate, there was a chance for the likes of the finance minister Tan Siew Sin (Lee 2021: 4) to object to the equity redistribution, but after his retirement from politics in 1974, the Industrial Coordination Act was passed in 1975 to mandate manufacturing firms below a certain size threshold to allocate 30% of equity to Bumiputera investors. Manufacturing licenses, foreign investment and public listing were imposed with the 30% Bumiputra allocation, while privatisation sought majority Bumiputera ownership. Analysing the results of the NEP by 1990, Jomo (1990) suggested that it was difficult to obtain data on how much of the declared $30 billion was spent on poverty eradication, with even subsidies being unsophisticatedly designed resulting in benefits for well-off farmers and fishermen rather than the poorest (Jomo 1990: 473) and thus, not moving closer to the goal of poverty eradication. On the other hand, he argues, the government expenditure on poverty has been politicised over the years, “encouraging and consolidating political nepotism and patronage in the process” (Jomo 1990: 473). He argued that the benefit of the redistribution mechanisms, if any, was only marginal, while whatever poverty eradication achieved, happened due to overall economic growth. As for Bumiputera equity and property control in the economy, the information is also not comprehensive, in part as it largely depends on what is included in the count. If to include the control over the corporate sector via government-linked investment companies (GLICs) and the network of the government-linked companies (GLCs) where Bumiputera control is prevalent, even by the late 1980s there was a suggestion that it stood at not less than 60% (Jomo 1990: 477). Understanding what GLCs and GLICs represent is key to decoding the economic basis of power in Malaysia. There are seven business groups, or GLICs, that “have extensive ownership of key sectors of the economy including banking, plantations, media, property development and construction, and oil and gas” (Gomez et al. 2017: 209). The seven GLICs rest on thousands of GLCs where all of them would be linked to the government via ownership of shares or the political appointees or both. In other words, the system of GLICs and GLCS provides extensive governmental control over the corporate sector which prevents competition, and economic development and in the long run negatively affects the business environment and attractiveness of the economy for foreign investments. The problem with the omission of the government ownership in the target setting and the presence of nominee companies, which mask identities, as it continued to undermine the transparency of the official equity ownership statistics, was highlighted at later stages as well (Lee 2021: 5). Increase in foreign ownership to 45% by 2015 was not well reflected in Malaysia’s policy documents too (Lee 2021: 6). Lee states that the case for including government ownership gained prominence in the mid-2000s with the incorporation of government ownership by the Centre for Public

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Policy Studies (CPPS) to provide an alternative estimate of ethnic ownership—with 70% of government shareholding assigned as “representing” Bumiputera interest. This inquiry found that Bumiputera’s equity ownership has exceeded the targeted 30%. Privatization under such circumstances was administered ineffectively, where profitable public assets ended up in private hands creating private monopolies instead of fostering healthy competition. Economic growth relied on industrialisation and manufacturing with the engagement of foreign capital with the reasoning that reliance on domestic capital like in the cases of South Korea and Taiwan will reinforce the capital of the Malaysian Chinese which would go against the goal of redistribution pursued under NEP. In the run up to the 1990s, the tentative deadline for NEP, it was understood that possible abolition of the policy cannot be done abruptly, as the fallout could strengthen the opposition or even lead to riots again—something that the policy was meant to prevent. The problem with measuring the success of the NEP was about the shifting target that eventually stood at the level of corporate ownership for Bumiputera to surpass 30%. Income level alone does not serve as a clear indicator as it disregards wealth previously accumulated by households, and yet the New Economic Model (NEM) introduced by the government in 2010 as another iteration of NEP relied on corporate ownership and income as the marker of economic progress and progress in redistribution. According to the data supplied by the Economic Planning Unit (EPU), by 2010, the top 10% of households controlled 35.22% of the wealth distribution, while the bottom 10% controlled nothing. The bottom 40%, had just 0.15% of the top 20%; their overall ownership of the wealth holdings equalled just 8%. The average wealth of the bottom 40% stood at RM 39,334, while the figure for the top 20% was RM 124,737, translating into a disparity of 0.31 (Muhammed Khalid 2011: 402). The distribution of wealth was the subject of concern for NEP when talking about the ratio between Bumiputera and Chinese, which the policy fixed to an extent, improving the income gap but still struggling to bridge the wealth gap. However, while helping Bumiputera to accumulate wealth, it led to high disparities within the ethnic group itself. For the Bumiputera, in 2010, the top 20% controlled half of the overall wealth (50.8%), while the middle 40% controlled 41.6%. The bottom 40%, however, had a cumulative share of 7.6% (Muhammed Khalid 2011: 403). To be fair, the disparity in wealth distribution among Indians was even higher, with the top 20% having 54% (Muhammed Khalid 2011: 403), but that was not of concern for NEP. For the latter case, it can be explained by the lack or absence of affirmative action programs and the different approach of Indian elites to the distribution of wealth within the community. However, given that the Indian community is small in proportion to the total population and Bumiputera, even the wealth owned by the top 20%, if put in real numbers, is incomparable to the wealth accumulated in the hands of other ethnic groups. The 10th Malaysia Plan set for 2011–2015 stressed the remaining problems in the realisation of the NEP, among which was the low participation in professional and high-skilled occupations, wealth ownership below the target, low capacity to

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own non-financial assets and the lagging development of Bumiputera Economic Community (BEC). As an example, 71.5% of the unit trust fund Amanah Saham Bumiputera (ASB) holders had less than RM5,000 in their unit accounts while the top 9.3% owned 77.8% of total units. In addition, ownership through Bumiputera institutions lacked a trickle-down effect on the Bumiputera community. In terms of market value, Bumiputera Public Listed Companies (PLCs) accounted for only 16.1% in 2011 and grew to 16.8% in 2014, reflecting a lack of effective control and influence on the corporate decision. Another highlighted issue faced by BEC was that their products and services were less competitive resulting in limited access to domestic and global markets. For example, the 11th Malaysia Plan (2015) mentioned that the exports by Bumiputera in the furniture industry are only 0.4% or RM25.2 million out of the total RM6.3 billion in 2014. Overdependency of Bumiputera microenterprises on the government, GLCs and GLICs as well as rent-seeking and spuriousfront practices have affected the ability of Bumiputera entrepreneurs to compete in the open market, the 11th Malaysia Plan stated. Without significant Bumiputera participation and share in the open market, the target of achieving the Bumiputera Development Agenda would not be realised, was the warning for the 11th Malaysia Plan. Among the goals set for the 11th Malaysia Plan to be realised in 2016–2020 was the divestment of profitable non-core GLCs and GLICs assets and activities to genuine Bumiputera entrepreneurs will continue to be implemented to increase Bumiputera effective direct individual ownership (as initially outlined in the Fourth Malaysia Plan). Handholding [on the part of the government], the plan stated, would take place until Bumiputera enterprises are able to independently operate these businesses. Enhancing Mindset Change Programmes had a separate section in the document prepared by the Economic Planning Unit (EPU). Entrepreneurship development was supposed to include an orientation programme to develop more independent Bumiputera entrepreneurs to bring a mindset change to reduce dependency on government assistance and eliminate rent-seeking and spurious-front activities. This programme was also designed to boost the confidence level of Bumiputera entrepreneurs to become more resilient and competitive in the local and global markets. The 11th Malaysia Plan also modified the target to a new notion of 30% Bumiputera corporate equity ownership with “effective control” but no details were provided on what that means. The latest plan, the so-called Shared Prosperity Vision (SPV) 2030 referred to the NEP, while acknowledging the National Development Plan (1991–2000) and the National Vision Policy (2001–2010). The SPV acknowledged that Bumiputera have progressed toward policy targets in education (for example, shift from English medium to Malay or equalise access to education for disadvantaged Bumiputera) and employment (providing a certain level of employment for the group, especially in the civil service), but according to the official estimations Bumiputera equity holdings persisted below the 30% threshold (Lee 2019). The new government of Anwar Ibrahim that came to power after the 2022 elections once again came up with a new plan called Malaysia Madani, which nevertheless cannot be described as something reformative.

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According to the Department of Statistics, by 2021, many Bumiputera remained poor, with 73.6% in the B-40 (the lowest income) group (Anand 2021). Whether or not the data can be relied on, for many within that group, especially the MalayMuslims, the abrupt discontinuation of the policy seemed intimidating due to the perception of benefits being more significant than they are in reality. The numbers are very tentative, as precision cannot be reached in calculating the wealth owned by particular ethnic groups due to undeclared assets and the ways calculations are done, the presented numbers intend to point out that regardless of the decrease in income differentials among the ethnic groups, the gap in other asset classes, notably in wealth, remains wide, especially between the Bumiputera and the Chinese (Muhammed Khalid 2011: 403). However, on the political side it can be argued that the wealth gap between Bumiputera and Malays themselves now constitutes and bigger problem as it is used by the politicians during the electoral campaigns to boost popularity through cash and other handouts while playing the declared disparity between Malays and Chinese against the latter. Besides, the income levels do not take into account the patterns of spending, as well as benefits enjoyed by the Bumiputera that are not reflected in the calculation of income and comparisons between ethnic groups. In terms of education, the Constitution Amendment Act added a new clause (No. 8A) to Article 153 in line with NEPfor setting quotas for accepting a certain number of Bumiputera to educational institutions may be introduced by the authorities. The quotas imposed for supporting Bumiputera, with a focus on Malays-Muslims, led to a significant shift in non-Bumiputera opting to study abroad and in some cases not to return, which contributed to a brain drain trend that reached alarming levels in 2022 (The Straits Times 2022). The primary reason for the brain-drain among nonBumiputera is perceived discrimination (Supramani and Suraya Ali, 2022). Government scholarships for Bumiputera to study abroad, in turn, contributed to lesser regard and attention to tertiary education at home (Jomo 1990: 475). Public universities in Malaysia guarantee 55% of university places for Malay students (but approximately 75% of the students there are Malays), and some educational institutions, like MARA or UiTM, practice a 100% Bumiputera admission. Many non-bumiputras are unhappy with this arrangement because it has been difficult for students of other races to enter a public university even with excellent results in the higher school certificate (known under its Malay abbreviation STPM). Even in its primary version of 1957, the Reid Commission1 recommended a 15year sunset clause for Article 153 that puts on the King the responsibility to guarantee the special rights of Malay and other native populations, but the policy remained in place (Soong 2018). Apart from some apologetic pieces for the system of positive discrimination (Ganapathy 2020), there is a general understanding that a narrow group of politicians has been maintaining present narratives for self-enrichment and perpetuation of power at the expense of the majority, even the Malay-Muslim part of 1

A commission formed in 1956 to draft the constitution of the Federation of Malaya in preparation for independence on 31 August 1957. Takes the name from Sir William Reid who chaired the commission.

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it, the one that is the target of the existing discourse and the backbone of the electoral support (Yusuf Hashim 2020). The sentiment is that the particular culture trickled down to the public level from condoning practices at the level of elites—breaking the law to please a patron or simply for personal benefit, because those above are seemingly unaccountable for their actions.

State Control Over the Corporate Sector in Malaysia The core institutions employed by UMNO till its electoral defeat in 2018, are collectively known as government-linked companies (GLCs). These GLCs are, in fact, a complex ensemble of statutory bodies, foundations, trust agencies, investment enterprises, a sovereign wealth fund, as well as companies, with representation in a wide array of industries. These institutions, controlled by the central and 13 state governments in the Malaysian federation, officially function primarily as “enablers” of domestic firms, to nurture a dynamic privately-owned enterprise base. But GLCs also constitute an estimated 42% of the total market capitalisation of all publiclylisted firms. 67 quoted firms can be classified as GLCs, as the government, through various institutions, has a majority equity interest in them (Gomez 2019). Network metrics applied to Malaysia allowed us to calculate that seven GLICs through 35 publicly listed GLCs out of the top 100 are linked to as many as 68,300 companies and a core of 26 corporations controls 54% of the power of the Malaysian corporate sector (Gomez et al. 2017: 176–179). At the state level, different public institutions own GLCs through the states’ chief ministers, through holding firms known as Chief Minister Incorporated (CMI or MBI in its Malay abbreviation). CMIs establish companies to undertake activities in specific constituencies to mobilise electoral support. Party members are often appointed as directors of these GLCs, a major source of political financing as their stipends are used for political activities. Through the CMIs, what had emerged from the fusing of bureaucratic and party apparatuses, allowed politicians to selectively channel government resources in a manner that would help them consolidate or enhance their political base. “Political patronage thus perpetuates rent-seeking activities by those seeking to induce government decision-makers to allocate various state rents in their own favour in return for economic and political support” (Gomez and Jomo 1997: 6). However, it is “through the NEP that rents have been created, captured and disbursed, ostensibly as part of the government’s policy of ‘restructuring’ to attain greater inter-ethnic wealth parity and to develop Bumiputera entrepreneurs” (Gomez and Jomo 1997: 25). This policy led to the establishment and entrenchment of patronage networks, where UMNO played a central role as it was consolidating its power base and soliciting electoral support. With the strengthening economic positions of a limited circle of people belonging to the political elite, intra-ethnic inequality increased.

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Gomez and Jomo (1997: 6) stress how the creation of such a system of government control over the economy via the system of GLICs and GLCs access to rents became increasingly contingent on political access and influence (Gomez and Jomo 1997: 3) and nurtured the rent-seeking behaviour in Malaysia (Gomez and Jomo 1997: 3) which is a type of directly unproductive profit-seeking (DUP) activity, which, in turn, is defined as ‘ways of making a profit (that is, income) by undertaking activities which are directly unproductive’ (Bhagwati et al. 1984: 292).” Such DUP as lobbying, political activities, or bribery tends to increase in societies where competition is artificially limited by the government and undermines economic development. The rent-seeking activity appeared some years before the formal introduction of the NEP – Chinese (and European) capitalists were required to share business opportunities with leading Malay bureaucrats and politicians (Khoo 2018a, b: 230). With the advent of the NEP, more mechanisms such as regulation, investment and sponsorship were introduced to produce different forms of rent. The rents used to nurture the Bumiputera Commercial and Industrial Community (BCIC) included “licenses, contracts, concessions, preferential lending (at low interest rates) and share allotments (at below market prices), and guaranteed high-return investments” (Khoo 2018a, b: 230). The enterprises established after the 1969 ethnic riots, focused more on modern industries, like finance, as opposed to the redistributive authorities like RISDA2 and FELDA3 that prioritised rural development. Public development expenditure also kept multiplying throughout the decade, from RM10.3 billion in 1970–1974 to the allocation of RM74 billion in 1986–1990. The government acknowledged the lack of propensity to save among Bumiputera handing the task of accumulating capital to the public enterprises (Gomez and Jomo 1997: 32; TheVibes 2021). This generated a favourable environment to create businesses to be later divested to Bumiputera. One of the means to redistribute public wealth was offering equity shares to Bumiputera at a nominal price, which contributed to the rise of some of the public enterprises like Pernas4 and PNB.5 The individual Bumiputera share of equity dropped from 60% in 1970 to 34% in 1980 which raised concern that the shares were being sold to Malaysian Chinese (Gomez and Jomo 1997: 34). Control over other sectors like banking and utilities, left little space for resistance originating from a grassroots level or private business corporation. There are GLCs owned directly by GLICs (utilities, banks, some property developers and construction companies, plantation-based like Sime Darby or Boustead, media organisations such as Media Prima that controls New Straits Times, one of the largest newspapers, 2

Rubber Industry Smallholders Development Agency established in 1972 to develop rubber industry in the smallholder sector. 3 Federal Land Development Authority established in 1956 for the development of land and relocation with the objective of poverty eradication through the cultivation of oil palm and rubber. 4 Perbadanan Nasional Berhad is a company owned by the Minister of Finance Incorporated (MOF Inc.) with the mandate to lead the development of Malaysia’s franchise industry. 5 Permodalan Nasional Berhad is one of the largest fund management companies in Malaysia with the core function to evaluate, select and acquire a sound portfolio of shares in limited companies with growth potential.

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among others), through private companies (in particular the subsidiaries of Petronas or healthcare provider IHH); and direct ownership of GLCs by the government entities, bypassing the GLICs, like state-level companies (Johor Corp, State Financial Secretary of Sarawak) or statutory bodies (FELDA). The country’s banking system was consolidated under nine, majority-controlled by GLICs, banks by 2013, with Malayan Banking (MayBank) being the largest. Those banks, in turn, control a large number of subsidiaries, therefore, by extension the government also has control over an extended network of companies. The control mechanism in GLCs also does not need to depend on the equities if the government invokes a golden share mechanism. The media’s degree of independence under these circumstances is low to nonexistent. The major media networks are controlled either by a GLC (and ultimately— by the state) or by political parties. The Media Prima Group is in charge of the largest newspapers—the New Straits Times (NSTP) or Berita Harian or television channels, like TV3. Management of the media is appointed according to the political conjuncture. For example, in the early 1990s when Anwar Ibrahim was the Deputy President of UMNO he obtained and retained control of NSTP via a company called Realmild Sdn Bhd, but after being expelled from the party by Mahathir, his supposed proxies lost control over it. Instead, the company was taken over by Abdul Rahman Maidin, a businessman appointed to replace Anwar as a minister of finance (Gomez et al. 2017: 119). Other large newspapers, like Utusan Malaysia or the Star, are controlled by political parties, UMNO and MCA respectively in the case of these two. In 2023, in the Press Freedom Index annually released by Reporters Sans Frontiers (RSF) Malaysia was placed on the record 73rd place, being ahead of all of ASEAN (MalaysiaKini, 3 May 2023). However, given the political and corporate control over media and invisible mechanisms of influence, this figure in the ranking is not wellreflective of the actual state of affairs. This influence and structure of ownership also serve as an enhancer in foreign interference with media freedom, as it becomes a conductor to the agenda of foreign parties (as of recently China, Japan and the US) (Business Today 2023). The strong blow to non-Bumiputera businessmen was delivered by the Industrial Coordination Act of 1975 which obliged each company (unless exempt) to have at least 30% share belonging to Bumiputera. Other instruments of redistribution such as licensing, allocation of concessions for logging and mining, and import controls – restricted opportunities for non-Bumiputera. By the 12th Malaysia Plan which integrated SVP, the measurement still hinged on the 30% equity control mark (Twelfth Malaysia Plan 2021–2025). Such a Malay-centric agenda in the governmental policy of 1975 resulted in the loss of support for the Malaysian Chinese Association (MCA), a component party in BN, the ruling alliance. That was reflected in less numerous and significant political appointments, starting from the top ministerial level. The flight of Chinese capital and discouragement of investments also became the effects of the Industrial Coordination Act (Jomo 2004: 9). With the loss of grassroots support upon the introduction of redistribution measures like the Industrial Coordination Act, the Chinese businessmen affiliated with the MCA, like Khoo Khay Peng, started to rally smaller businesses appealing

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to the idea that without consolidation of the community with the highly individualistic mindset, they will not be able to navigate through the waters of the politicized economy under the NEP (Gomez and Jomo 1997: 44). Multi-Purpose Holdings Bhd (MPHB) became a platform for pooling resources together and managing them (Cilisos 2018). In 1984, another BN component party, the Malaysian Indian Congress (MIC) proposed that the same policy of positive discrimination be applied to Indians as their economic situation worsened under the NEP. Indians were not the only ones overlooked by the policy and complaints were heard from other non-Malay Bumiputera, like Orang Asli and the indigenous people of Sabah and Sarawak. An earlier effort to consolidate the Indian support base was undertaken by the MIC in 1960 when it established the National Land Finance Cooperative Society (NLFCS) intended to buy estates from foreigners who were concerned with nationalisation coming after the proclamation of independence in 1957. The enterprise was not successful and in 1982 was replaced by Maika Holdings Bhd which emulated MPHB to a larger extent and relied on the Indian middle and working class. Maika Holdings benefitted from privatisation as it had better access to political patronage than the MCA. However, while it raised money mostly from low-income shareholders, it failed to deliver returns to the investors, largely due to poor investment and corruption involving Maika itself. All these are examples of community mobilisation in resistance to the NEP that entailed the need for non-Malay community consolidation and the adoption of new strategies. This mobilisation effort by both MCA and MIC found a positive response amongst respective minorities despite the lack of trust the constituents might have for these parties. At the same time, the mobilisation in this case was not happening to forge a direct opposition to the Bumiputera policies but adaptation to the new realities. Gomez and Jomo (1997: 48) point out that the Chinese community adopted a two-prong strategy of working closely with Bumiputera politicians to secure their interests, as well as building new relations with foreign businesses, mostly Chinese with China-based businesses—as a hedge against further changes in Malaysia itself. Redistribution, apart from creating an atmosphere of uncertainty for Chinese businessmen, motivated their reorientation to establish informal ties with Malay politicians and bureaucrats. One of the ways to do that was to offer them a discounted stock option or directorship on the board (Gomez and Jomo 1997: 41), which would create the so-called ‘figurehead capitalists’ who would not need to participate in the actual activity but would still receive income. For example, such former government employees as the former attorney general Abu Thalib Othman or inspector-general of police Haniff Omar or UMNO Supreme Council member Tengku Adnan Tengku Mansor were engaged as directors of publicly listed local Chinese companies in the 1990s. Also in the 1990s, number two of the top ten publicly listed companies was Halim Saad, a close associate of Daim Zainuddin. Together with his wife, who was featured among the top ten, was Noraini Zulkifli, Halim’s wife (Gomez and Jomo 1997: 50). Collectively, they owned shares in the companies providing informal support to UMNO, where some of those companies officially belonged to UMNO in the past. In this environment, those were large companies headed by a limited number of Bumiputera with good access to the top of the political food chain who

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benefited, while the competition between them grew. Daim Zainuddin himself was the perfect emanation of the merger between the institutions of the state, the party and business, as at some point he was concurrently the minister of finance, UMNO treasurer and a leading Malay capitalist. The practice continued well into 2023, under the new coalition government of Anwar Ibrahim. In January 2023 Anwar’s former political secretary, better known for his political career than his corporate profile, was named the new non-executive chairman of the Malaysian franchise for the chain of convenience-stores 7-Eleven (The Star, 3 January 2023). The immediate preceding chairman who had to make way for Farhash was Robin Tan Yeong Ching, the son of Malaysian tycoon Vincent Tan. The appointment of Anwar’s man to the position at yet another Chinese company was widely read as a move to curry favour with the new prime-minister (Sooi 2023). The NEP indisputably led to the creation of the new Malay middle class, but while existing publications attribute success in this enterprise to government agencies such as MARA, PNS (PERNAS) and PNB, particularly in what concerns business and industry activities, there is no consistent data to confirm this success. For example, Wan Kamal Mujani et al. (2012: 1382) quote the number of business premises owned by Bumiputera, but without comparing it to the numbers of ownership amongst nonBumiputera or how did this ownership progress over the years, or to what extent those premises are actually used by the same people that own them. They cite that Bumiputera ownership in business and industry as a whole stood at 11.7% in 2012 which stands in stark contrast with the 30% target for Bumiputera by the NEP, but this figure again does not cover those involved in the grand system of GLICs-GLCs. At the same time, the strength of that middle class came into question during the COVID-19 pandemic, where the same attentive watchers of it like former government adviser Muhammed Khalid concluded that the Malaysian middle class contracted with their pensions and other savings spent during the tough times of the pandemic disruptions and lockdowns (Malhi 2021). Chandra Muzaffar noted that this process was supported by UMNO’s input in maintaining the ‘subsidy mentality’ among the Malay majority (Chandra Muzaffar 1979). By the end of Mahathir’s administration in 2003, the GLICs’ ownership and control structure was set in place, but this structure did not turn out how he envisioned it. Before leaving office, Mahathir admitted that his policies to develop independent entrepreneurial Bumiputra-owned companies had failed and instead, entrenched the “crutch mentality” in the minds of the majority, while the structure of ownership and control over GLICs did not turn out the way he envisioned (Mazwin Nik Anis et. al. 2018). Enhancement of government intervention in the economy, being an active player in it through the GLIC ownership and control structure, with occasional murky bailouts of controversial companies, constituted the legacy of the 22-year premiership of Mahathir’s first term. Mahathir resorted to GLICs to bail out large Malay-owned conglomerates such as Renong, Malaysian Airlines, Proton, and Konsortium Perkapalan (which belonged to Mahathir’s son) and GLCs to take control of certain assets of Anwar Ibrahim’s Malay and non-Malay corporate allies (Gomez 2009: 362).

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Former prime minister Najib Razak (2009–2018) tried to put forward a new economic model (NEM) that would reduce state intervention in the economy and drop ‘race-based affirmative action’, but poor performance by UMNO at the 2013 general election forced him to adopt the Bumiputera Economic Empowerment (BEE) policy. Thus, the reliance on GLICs and GLCs in implementing BEE perpetuated the NEP. In fact, the NEM became just an extension of the NEP. With the eroding Malay voters base by 2013 Najib could not afford to risk it further by undertaking bold moves such as abolishing NEP. In UMNO taking a moderate line in what concerns ethnoreligious nationalism, he could not match the unrestricted rhetoric of the Islamist PAS, the one that played well with the Malay electorate. The issue of redistribution painfully came to the forefront of the political debate once again when in January 2021 the Finance Ministry demanded local freight forwarding companies comply with the rule of having 51% Bumiputera equity if they wanted to obtain customs licenses by December of the same year. The requirement shocked businesses as it would be virtually impossible to find a buyer with enough capital for the equities, which means they would have to be given away for free if companies wished to stay in business. The then opposition leader Anwar Ibrahim and experts expressed grave concern over this move for driving a further wedge between different ethnic groups in the country and benefiting only some “crony companies” (Anand 2021). The matter of both ownership and control eventually falling into a few hands is problematic in terms of other possible abuse, for example when resources of GLCs are used for electoral campaigns to benefit those in power to stay there, despite the assets being at their disposal meant to serve the nation as a whole. By 2023, calls for abolishing the NEP were heard from multiple quarters, even from the likes of Mahathir’s former confidant Daim Zainuddin (Daim Zainuddin 2019). The major arguments in favor of such a drastic move are that it was good as an ‘emergency room procedure’ (Lim 2015), but in the long term created a nontransparent non-accountable system from which only a few in the political elite benefit, in turn, that became a roadblock to progress and development. While political rhetoric becoming more focused on the issues of race and religion, the climate for business and industrial manufacturing has deteriorated. However, there is no consolidated force that would push the agenda in one voice. That used to be the role of the (DAP), but like other non-Malay and multiracial parties before them, they were co-opted by the system and have become muted in their criticism of the NEP. The rent-seeking within the system of political patronage nurtured variations of NEP that flourished under UMNO. Since PH campaigned on the anti-corruption platform, there was a direct reason to expect that this stealth revolution of sorts would bring about the review of the premises on which the Malaysian political system rested since the NEP was introduced and the patronage system which reached its maturity under the premiership of Mahathir. But the rotation within political elites did not bring about the overhaul of the system. Political leaders then would acknowledge that a declaration of abolishing the NEP altogether would guarantee rejection by the electorate, explaining that the change needs to be gradual.

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The Cultural Underpinning of the NEP Economically, the NEP was meant to create a solid basis for successful nationbuilding by eliminating supposed imbalances between Malaysia’s different ethnic groups. Culturally, it was the policy that institutionalized discrimination based on the principle of ethno-religious identity and has been used to stifle political competition in favor of already well-entrenched elites. With time, it became more apparent the NEP which outlived its value as an ‘emergency remedy’, is used as a discursive mechanism to garner and maintain the support of the Malay electorate. The research showed that in the absence of major wealth redistribution with only a limited group of the political elite and crony capitalists being enriched in the process, the support for the system of NEP-accommodated discrimination remained significant enough to be a factor in electoral campaigns, day-to-day rhetoric without outright resistance or at least strongly demonstrated resentment. The key question thus is how with all the accumulated proof of the regressive effect of the NEP, including the damaging effect on national cohesion, no significant resistance to the state of affairs has taken root, neither from the majority that is not profoundly benefitting from it, nor from the minority that it discriminates against, with ethno-religious identity being overtly used as a pretext for this discrimination. For that, Foucault’s and Gramsci’s concepts of compliance and resistance can provide a sensible framework. The diffuse power of modernity, Foucault argues, is more difficult to contest as it is placed not as much in a sovereign or a concrete group of people but in more dispersed structures (Schulzke 2016: 61). Malaysia is a country case that rather invokes the more pessimistic concept laid by Foucault about the ubiquity of power and is suitable for reflecting on how the knowledge is produced and adopted as nature (Foucault 1979: 27), without being questioned. Before Foucault, Gramsci questioned how people remain comfortable with policies that oppress and exploit them. Both agreed that the more effective way of dominating people is by setting cultural parameters that people live by. To Gramsci, it is a cultural story that is being told that people learn to accept, in other words taking a cultural setting for nature that can’t be changed. The system then acts based on consent from the people who are often not conscious of alternatives (Gramsci 1992). He argues that the elites create the narratives and introduce manufactured measurements for the public to assess the surrounding reality. Thus, the society at large is kept in check not by the threat of force or the use of it, but also by more subtle mechanisms. “The normalizing discourses that regimes of truth produce are widely accepted because they take on the false appearance of necessity. People become so embedded in social relations based on these discourses that it becomes exceedingly difficult to see how they create and reproduce relations of power, much less to resist these relations of power” (Schulzke 2016: 60). Foucault argued that people should engage in critical resistance, exposing the hierarchy and subverting domination. At the same time Foucault’s sketchy concept of resistance draws the mostly pessimistic conclusion that resistance eventually has

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no value, because it leads to the establishment of an alternative system of power that would not be necessarily better than the one that preceded it (Schulzke 2016: 60). According to Gramsci, cultural hegemony is established by maintaining control of intellectuals, education and philosophy that drives people to political action. Different instruments of social control, in turn, can fragment the population to the extent that revolution never takes place, especially if all three major channels are sufficiently controlled by the political elite. If to apply Gramsci’s idea of the need to win the war of position before the war of maneuver can even be started (Gramsci 1971: 238), the case of Malaysia will demonstrate the deep embeddedness of the power structure perceived as a necessity, as a nature and the lack of the critical mass of organic intellectuals ready to go against the status-quo attests to that the process has not even started. A famous work tying culture and political capacity by Banfield (1958) explores a community that is pessimistic and fearful about life prospects and loss of assets, tends to care only for the immediate family and has a very limited planning horizon. He particularly developed the idea about failure to see a long-term prospect for caring about larger entities than just the nuclear family. Bansfield’s work is a reminder that analysis of how selfish political elites inclined to self-preservation take policies in the wrong direction is not enough to explain the state of affairs in Malaysia but given some similarity of the cases, it does encourage research on the culture of the community, because if the society is not predisposed to shape demand for different policies, then change will not occur. The idea of NEP and the ways through which it was realised over decades grew in particular socio-cultural conditions, but it also led to establishing a culture that institutionalised and legitimised discrimination, and stifled competition, while having questionable results in terms of poverty eradication. Partly, the sedentary lifestyle of Malaysia that does not cultivate a culture of achievement can be attributed to the climate and wide availability of food and other resources, thus creating a sense of security for the foreseeable future. The other side of it, is how this culture was constructed socially. The NEP was supposed to provide the underlying basis for successful nation building where an ethnically diverse society would also be engineered to be economically diverse. Despite the emergence of a plural society in Malaya with the mass migration of Chinese and Indians into the country, there was very little integration and only limited interaction among the ethnic communities (Gomez and Jomo 1997: 10), economic specialisation kept communities apart. This also predetermined the formation of race-based political parties, because multiracial parties received little political support. In fact, the means of resistance practiced in colonial Malaysia played a role in the decision by the British to import labour from societies with different backgrounds. Quiet resistance directed against the colonial masters and the culture of foot-dragging created conditions where foreign labour had to be imported—fresh hard-working blood not inclined to indulge in the practices of sabotaging work. Researching the means of peasant resistance in rural Malaysia, Scott pointed out the weapons of relatively powerless groups—foot-dragging, dissimulation, false compliance, pilfering,

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feigned ignorance, slander, arson and sabotage (Scott 1985: 29). More often, he says, such “resistance is taking the form of passive non-compliance, subtle sabotage, evasion, and deception” (Scott 1985: 31). “Where institutionalized politics is formal, overt, concerned with systematic, de jure change, everyday resistance is informal, often covert, and concerned largely with immediate, de facto gains” (Scott 1985: 33). Such means of covert resistance, he suggests, could often deliver a more effective result than open defiance of the system in place, for example in the form of an armed uprising. With time, society culturally evened out in terms of how responsibly one approaches work. That is if one is to realise that there is a certain glass ceiling for minorities that can’t be overcome by legally available and morally acceptable instruments, the individual would be either discouraged from putting in the hardest effort into work where the payoff is limited or start looking for extra-normative means to achieve what he believes belongs to him by right. The latter may take a widespread character and be established as a practice, the one that eventually nurtures nontransparent systems of governance based on corruption, cronyism and patronage. Nevertheless, minorities might still present more effective work and more potent aspirations by virtue of the need to provide for survival in a non-accommodating environment. The economic growth of Malaysia in the 1960s–1970s did not trickle down to a large portion of the population residing in rural areas. In the 1970s, 44% of the rural population lived below the official poverty line which could be compared to countries with lower per capita income (Scott 1975: 52). Regional distribution of poverty was by far higher among the paddy farmers (who were 84% Malay), was noteworthy, mostly concentrated in the northern peninsular states of Kedah, Perlis, Kelantan and Terengganu—as well heavily Malay-dominant states such as Pahang. Therefore, when PAS made successful advances in the elections of 1969, the more moderate in terms of Islamist discourse UMNO had to change course to effectively compete in those states. Tackling poverty was a matter of great political significance. From the early NEP period to the late Mahathirist era, policy reorientations picked privileged winners and created aggrieved losers (Khoo 2018a, b: 235), as Khoo puts it in application to the corporate sector, the same can be extended to society at large – and this resentment appeared in different manifestations. Easier, quota-based access to education, jobs, healthcare and other social services deprives younger generations of developing a culture of achievement and having such wider access as compared to the other members of Malaysian society, breeding resentment amongst non-Bumiputera. If one’s success is attained based on the mere belonging to a particular race or religion, it means that there is no pressing need to be of merit to staying on par with the unprivileged ones. It also creates an expectation that the entitled category of the population can create frameworks—legal or policy—to extract more resources from the rest of society. Extraction of such kind is not conducive to business, economic and social development. Besides lacking a competitive environment necessary for forging a strong hardworking character, the situation also bred resentment of another kind—towards those

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who worked hard to get where they are, without any external help, which in the long run stifles healthy competition and improvement (Mariam Mokhtar 2021). The Hofstede model sheds some light (Hofstede) on the culture, where Malaysia stands first in terms of the power distance index among 54 countries, which is reflected in reverence to the authorities, low propensity to criticize or demand for change, and is 52nd among 74 on individualism index that points at a collectivist mindset. Loyalty to the family or larger groups is of paramount importance. This indicator also stands for the high importance of ‘face-saving’ in interpersonal interactions. Malaysia stands 65th among 74 countries on uncertainty avoidance, which is reflected in uncertainty being a pervasive feature of how politics or business are managed. Schedules in such cultures are flexible and hard work is not performed for its own sake, but when necessary. That is rather opposed to the conditions of certainty and transparency once one transitions towards the more democratic end of the spectrum. A low ranking on the index of long-term orientation for Malaysia stands for a low propensity to save and focus on achieving quick results. Malaysian researchers confirm those findings when talking about values in more familiar terms. Vaseehar Hassan (2013: 40) pointed out the necessity to provide legitimacy for power (daulat), loyalty (to elders or superiors) (kesetiaan), caution (kehalusan) and high sensitivity towards any signs of betrayal (derhaka) (can be tied to eschewing criticism of the incumbent power). In the Malay Dilemma, the book that laid grounds for economic, social and educational policies under the NEP, Mahathir speaks of conflicting cultural traits of Malays that prevent the culmination of grievances into open dissent or expression of disagreement and criticism, and rather promotes the sentiment to be bottled up: The constant restraint the Malay imposes on himself is unnatural. There is always an internal struggle, a conflict, and this conflict finds expression in a variety of ways… He is never frank except with those whose sympathy he can rely on absolutely. And he can rely absolutely only on his own people. His opinions as expressed to those not of his own kind are therefore different from those expressed to his own kind. Of course the difference only occurs when what he has to express to others is unpleasant or unpalatable. Where his true opinion will cause no unpleasantness or animosity, he does not hesitate to voice it to his own community as well as other communities. The conflict within him is potentially dangerous. It is perpetually seeking expression. (Mahathir 2005: 150–151)

Criticising the policy of granting privileges to Bumiputera is not welcome, even from an academic angle, even if the unsatisfactory results of the NEP and its subsequent iterations are backed by data and plainly obvious to any observer. Decades of the policy fostered a particular mindset, a culture that is neither conducive to progressive development, especially amongst those with special privileges (Yusuf Hashim 2020), nor to building a harmonious nation, as it was initially deemed by the NEP. To resolve an issue, like Malaysian nation building, one needs to lay it out in clear terms. However, there are a number of legal mechanisms that can be applied to those questioning the viability of Bumiputera privileges. For example, these privileges were brought into question when the government debated the ratification of the International Convention on Eradication of Racial Discrimination (ICERD), as Article 153 of the Federal Constitution referring to the ‘special position of the Malays’ would need to be amended. The possibility of such ratification and thus making the special

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privileges relic of the past, caused a backlash among Malay groups and their political backers. Therefore, despite evidence of the detrimental character of the NEP and the discrimination that it accommodates, the discursive practices in place have been perpetuating and deepening the rift that has been there since independence. Political elites effectively maintained the narrative in its various forms of the non-Malay inhabitants of Malaysia being a legacy imposed by the former colonial master. While the minorities to a large extent became the driving force of economic development, the discourse about them was manufactured in a way to find an ever relevant scapegoat for why policies of the government being led by the majority did not deliver the promised prosperity. At the start, the co-existence of various ethnic and religious groups has been premised on the unwritten social contract and BN as an alliance that represented three major races in the country – Malay (Bumiputera), Chinese and Indians, represented by UMNO, MCA and MIC respectively. In the first decades, the redistribution of assets and businesses mostly concerned large entrepreneurs and not the layfolk. By 2023, with growing concerns over Malay votes in every electoral cycle, the negative rhetoric against minorities would intensify. For the majority to show any sort of resistance, the perceived benefits of the NEP should appear too small or non-existent, and despite high rates of urban poverty, it yet has not reached the point where perception changes. To minorities, the issue of representation and resources to advocate for change is there. The political forces that could lobby for abolishing the NEP, like DAP, were co-opted by the system and does not actively object to it. should the intellectuals emerge as a driving force, it might be felt that there are insufficient resources for resistance that overflow into a revolution. While passive resistance like feet-dragging is not enough or not possible when mobilisation of present resources is required to just stay afloat.

Race-Religion Identity and Civil Action There is enough research done on how the race-religion nexus emerged as an instrument in Malaysian politics, so we only highlight some points about the polarisation of race and religion in a way relevant to the topic. The reformist agenda, or Reformasi, spearheaded against corruption, cronyism and nepotism (KKN in Malay abbreviation) appeared in 1998, following the dismissal of the then deputy prime-minister Anwar Ibrahim. That could be considered a landmark moment for civil society activism among the more secular, reform-oriented middle class. The Coalition for Clean and Fair Elections (Bersih) has held five mass rallies on different occasions since it was founded in 2005. The rally Bersih had in November 2007 saw an estimated 30,000–40,000 people showing up at Merdeka Square of Kuala Lumpur, to demand a change in skewed electoral process. The rise of civil consciousness led to the drastic turn at the 2008 general elections where UMNO lost its two-thirds majority. In July 2011 and April 2012 tens of thousands of people

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gathered at Bersih rallies demonstrated that patience for compliance was replaced by open demand for more democratic procedures. In both rallies police fired tear gas and used water cannons (The Straits Times 2015). In 2015, Bersih held a rally to demand Najib Razak’s resignation over his implication in corruption related to the 1MDB mega-corruption scandal, with US$700 million ending up in the prime-minister’s personal bank account. The protest also objected to the dismissal of governmental officials who spoke out about the case. Using the state leverage over the media, the government then tried to misrepresent the protests as a non-Malay and hence anti-Malay gathering, however, representatives of all Malaysian races participated in the rally. The government used the legal apparatus to outlaw the rally, as it was declared illegal due to failure to secure a permit. Nevertheless, it became an act of civil disobedience that gathered between 80,000–108,000 participants in Kuala Lumpur alone (MalayMail 2015). A prominent example of resistance in recent Malaysian history came from the Hindu Rights Action Force (HINDRAF), a grouping of 30 civil society organisations, and became a culmination of discontent among the Indian minority of Malaysia – for the reasons such as poverty and lack of educational and job opportunities, custodial deaths and demolition of Hindu temples. HINDRAF organised a 30,000 rally on 25 November 2007, following the Bersih rally earlier in the year. That was an outstanding attempt to reclaim urban space and put it to use for political action, even if it faced a harsh response from the government. Before the rallies by Bersih and HINDRAF, up to 2,000 members of the Bar Council marched to the Ministry of Justice in Putrajaya in September 2007, to demand judicial freedom. All three demonstrations at the end of 2007 at the core pursued a demand for reform – judicial, electoral and social. The three are often cited as an exceptional outburst and mobilisation of ordinary Malaysians into social activism (Boon 2022: 871). Such a mobilisation both affected and reflected public sentiment with which in the 2008 general election where 49% of the electorate voted for the opposition, breaking BN’s two-third majority. The 2008–2009 protests resulted in the abolition of the draconian Internal Security Act (ISA) which allowed prolonged detention without trial. However, it can be argued that behind the seeming progress of the government acknowledging the need to advance universal rights, like the freedom of assembly, was the idea of replacing the existing blunt measure with more sophisticated ones. The introduction of the Peaceful Assembly Act (PAA) in 2012 to replace ISA, was meant to create a legitimising façade for Najib’s government, while Bersih protests in 2011 and 2012, the preceding introduction of the new act were brutally suppressed. Calling the passing of the act a ‘neo-liberal exception’, Boon (2022: 879) argues that the new measures improved the government’s ability to contain dissent and legitimise police suppression of ‘targeted’ groups. Furthermore, the legitimacy of the policy in protest suppression rests on the premise emanating from the carefully crafted discourse that any kind of protest might escalate into ethnic violence, even if this is more of an imaginary threat than a real one (Boon 2022: 880). In 2022, upon the inauguration of the new government, civil society groups urged the government to make amendments to the PAA that since it was passed in 2012

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was used to haul up protesters for holding demonstrations, as it still criminalised spontaneous protests (Shahrin Aizat Noorshahrizam 2022). Resurgence of civil society was especially celebrated after the 2018 general elections (Khoo 2018a, b), but later political developments with the prolonged pandemic proved that this can be reversed with the population exhibiting strong compliance with established limitations. Nevertheless among positive shifts of the time was the Undi-18 movement successfully lowered the voting age in the country from 21 to 18. Bureaucratisation of religion with the establishment of the Department of Islamic Development (JAKIM) and the system of regional Islamic departments upon Mahathir’s initiative in 1997 institutionally accommodated the progressing trend of utilizing the amalgam of arce and religion for political ends. The 4th Malaysia Plan (Malaysia, 1981) accordingly proclaimed the leading role of Islam in developing the country. This idea concerned not only JAKIM’s role in developing the halal-certification industry in the country but its broadening functions, including provision for religious schools, marriage registration and moral policing. To accommodate the increasing significance of JAKIM’s role, its budget grew to RM1.4 billion ($334.5 million) by 2021 (Tee 2020), and then again to RM1.5 billion ($324 million6 ) (MalaysiaToday, 12 June 2023) while remaining impenetrable for public monitoring and accountability. With an increasing role to play, the system of religious institutions turned into a machinery for ascertaining the superiority of Islam and Malays (as the largest subgroup among Bumiputera). By producing the cadres of supporters through Islamic schools and running other activities on strengthening the dedication of Muslims to practicing the religion attached to their constitutionally defined identity, it was naturally interested in upholding its own importance in the system of power through maintaining a particular discourse. The outbursts of social activism represented by Bersih in the protests of 2011 and 2015 provoked a backlash on the part of pro-governmental groups whose ideology was an extension of the government’s discourse of the state being the guarantor of Malay-Muslim privileges. The so-called red shirts, a coalition of pro-government groups, were raised to counter the protests of Bersih by having protests of their own. In 2011, such a protest was led by an important member of UMNO, its then Youth Chief and later a holder of ministerial positions, Khairy Jamaluddin.7 The polarization over race and religion with Malays being left by the British in charge of the country politically, but without a solid material base, started after independence. But it reached new heights as the religious component grew in the nationalist discourse towards the 1980s when the Islamists of PAS started to be seen by Mahathir as a credible threat to UMNO’s continuous rule. To counter this challenge from PAS, the state ruled by UMNO undertook the role of promoter and protector of Islam – the aforementioned system of religious departments (JAKIM) 6

The sum in USD is smaller due to depreciation of MYR. The latest position he occupied before being sidelined by Anwar’s government in 2022 was of the health minister.

7

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became one such response. There was also the co-opting of popular leaders like Anwar Ibrahim himself, to boost the Islamist credentials of UMNO. Malaysia has gone through an intensification of the racial divide due to this fusion of Islamist discourse with the Malay nationalist one, which, given that belonging to the Malay race is predicated on being a Muslim by the constitution, was not difficult to tie together. Minorities, at the same time, are mostly non-Muslim and in the absence of representation of their respective religions in the state regulations, tend to be more secular. Following the line of the political divide, the Malay-Muslim political elite by implementing a feudal model of politics, proclaimed itself as the protector of the Malay-Muslim community. Based on this self-indulgence, it deems itself entitled to control state resources, even if they are used for the personal benefit of only a few. Accordingly, this outlook implies the expectation of loyalty and obedience from the public (Welsh 2020: 42). “The government narrowed democratic space and limited civil liberties, seeking to protect Malay rights and those in power” (Welsh 2020: 43).

Post ‘Regime-Change’ Developments in 2018–2023 When Pakatan Harapan (PH) unexpectedly secured power after Malaysia’s 14th General Elections (GE14) in May 2018, voters who imagined a fairer new order for Malaysia expected the coalition and Mahathir at the helm of it to at least try to reform an extremely well-entrenched government-business institutional framework that had contributed to extensive clientelism, collusion, nepotism and embezzlement. After all, the institutionalisation of more transparent and accountable governance was PH’s campaign pledge. However, within months after taking control, PH was re-instituting the practice of selective patronage in the conduct of politics and through the implementation of public policies (Gomez 2019). In this inter-connected domain of public policies and selective patronage, government-linked companies (GLCs) were again meant to play a key role. As researchers on the corporate sector in Malaysia underline, the political systems characterized as semi-authoritarian or a flawed democracy, or ‘partly free’ if to go by the metrics outlined by Freedom House (Freedomhouse 2020) it is problematic to ensure transparency and accountability as checks and balances are compromised (Gomez et al. 2017: 230). The prime minister who can also appoint himself as a minister of finance, wields enormous power over the sector via the Ministry of Finance Inc—the body under the ministry that allows it to participate in economic activity, enter contracts and manage assets. Mahathir appointed himself as a minister of finance in 1998 during his first term and then again in 2001, Najib Razak was implicated in Malaysia Development Berhad (1MDB) scandal in 2015 also kept the portfolio in the 2008–2018 period, and despite assurances for a change, the same thing was done by Anwar Ibrahim, who was appointed following a heavily contested general election in 2022 and became the finance minister upon forming the cabinet. When Mahathir and Najib’s then deputy

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Muhyiddin Yassin criticised him for the unfolding scandal around state-investment fund 1MDB, Najib sacked Muhyiddin who teamed up with Mahathir to create a new political party called Parti Pribumi Bersatu Malaysia (PPBM or Bersatu). The party, as a part of PH, scored well in the elections of 2018 that deposed Najib and the BNUMNO’s 61-year rule. Since then, both Najibs’s critics—Mahathir and Muhyiddin— among whom the former is the most responsible for creating today’s sophisticated system of government control over the corporate sector, sat in the prime-minister’s chair. However, despite blaming Najib for his transgressions, he neither attempted to reform the sector nor ensured better accountability, with both falling on the back of the same convenient system of state patronage. Many developments in an undemocratic direction happened with the start of the COVID-19 pandemic in February 2020 when the government in Malaysia changed due to the defection of a number of members of parliament (MPs) led in part by Mahathir’s then deputy Muhyiddin Yassin. No confidence vote was held to establish who then had the support of 111 members in 222 law-making bodies, while the King utilised his prerogative to establish who commands the majority in the parliament. Limits on public gatherings and other precautions enforced to prevent the spread of the virus, provided the new prime-minister with a temporary excuse to not test his support via parliament debate or public gatherings, like those that demanded Najib’s resignation in 2015. The first move by Muhyiddin therefore was to ensure that he has enough support among the members of parliament. 73 members were incentivised by the positions of ministers, deputy ministers and special envoys, while 19 received key positions in GLCs (Paddock 2020). In the aftermath of his premiership, accusations were made against Muhyiddin for misusing RM600 billion ($129.7 million) funds under the disguise of aid during the COVID-19 pandemic (Radzi Razak 2022). In May 2020 Najib’s stepson Riza Aziz, the Hollywood producer of “Wolf of the Wall Street”, was accused of receiving US$248 million from his stepfather’s project of the 1MDB and facing five years in prison on each count and penalties of up to US$1.2 billion, was acquitted and allowed to keep US$83 million of the obtained funds. Unlike in the years preceding the change of power to the hands of conditional opposition helmed by Mahathir, there was no opportunity for the public to express dissent to such a blatant acquittal of corruption due to political expediency. During his short tenure, Muhyiddin forged a coalition with less reform-oriented components of PH, the ethno-nationalist Perikatan Nasional (PN, or National Alliance) that included the Islamist PAS. PN was prompt to brand itself as a Malaydominant, Islam and Muslim-protecting coalition, with only two ministers representing the country’s two largest minorities being included in Muhyiddin’s cabinet. However, the more the government was questioned on the quality of its performance, the more the part on the ‘Malay-Muslim government’ was toned down, in order not to taint that part of discourse with political failures. After the so called backdoor government of Muhyiddin came to power in February 2020, the parliament gathered for the first time in late July 2020, but besides updates on the COVID-19 situation, no motions were allowed. Facing pressure to convene the parliament for an actual discussion, Muhiyddin was pushed from power in August of

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the same year. He was replaced by a compromise figurehead representing UMNO, while top members of the party were investigated for criminal charges, among them— Najib himself and his UMNO deputy Ahmad Zahid Hamidi. Both exerted significant power in the system and managed to consolidate political forces to replace Muhyiddin with someone who could be expected to take a softer stance on corruption cases—the vice-president of UMNO Ismail Sabri Yaakob was appointed prime minister. However, another scandal resurfaced against Ismail Sabri after Anwar Ibrahim’s government came to power in 2022. During his short time in the office, 100% of important landmarks in the city of Kuala Lumpur, Menara KL were sold to a private company. The deal for selling 100% of stock for RM3.8 million ($821,178) of the asset estimated at RM20 million in 2019, was approved by the then communications minister Annuar Musa, to the small company called Hydroshoppe that was not seen as profitable enough to win the bid, allegedly owned by a close associate of Annuar. Foreseeing that he will have to vacate the post, the interim prime-minister Ismail Sabri might have tried to accumulate some of the lucrative assets for himself or his associates. Malaysian Anti-Corruption Commission (MACC) intended to investigate the deal. However, given a major corruption scandal around MACC chief Azam Baki himself in 2021 investigation on which by the police, the attorney-general (AG) and other relevant bodies like the Parliamentary Select Committee (PAC), did not yield any result, there was not much to be expected from the formal investigation of the case against Ismail Sabri’s associates as well. As usual, it became a matter of informal dealings, depending on where the interests of the actors involved lie (Focus Malaysia 2023). Another duo of corruption scandals of the past 20 years speaks volumes of how an improvement has not been made in terms of anti-corruption activities and the background—better transparency and accountability of those in power. The Scorpenesubmarine deal8 of 2002, on which investigations are still conducted in France, has not been properly investigated in Malaysia, despite a consistent body of allegations against former prime minister Najib. The lack of improvement is proven by a later, but very similar corruption scandal on combat littoral ships, involving Najib, as well as the former defense minister and UMNO deputy president Ahmad Zahid, among others. Strikingly, similar schemes were applied to enrich the similar circle of cronies, including even the French party earlier involved in the Scorpene affair (Aliran 2022). Both cases are traced back to one of the GLICs, the Armed Forces Pension Fund (LTAT), which holds a significant stake in the Malaysian economy via a myriad of GLCs. Silence of MACC on both affairs and the appointment of Ahmad Zahid Hamidi, against whom the number of other corruption charges are lingering, to the position of Deputy Prime-Minister in Anwar Ibrahim’s government, point at the status quo on certain parameters that could otherwise attest to a democratic transition.

8

The deal is infamous for enormous bribery, also involving the murder of a Mongolian citizen Altantuya Shaaribuu in the process of procurement of two Scorpene submarines from France to Malaysia.

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Conclusion Nassim Taleb in his book “Skin in the Game” (Taleb 2018) argues that for fairness, justice and commercial efficiency of an enterprise there has to be a measurable risk for the decision-maker. Among the most prominent groups he discerned were hawkish politicians and reckless bankers who do not have to face the consequences of their decisions. Any member of an elite that benefits from the win but is not impacted by losses, would have a vested interest in perpetuating such a system. The overview of the situation in Malaysia from the introduction of the NEP until the present day demonstrated that the policy and its surrounding discourse have allowed the political elite to stay in power unchallenged by alternative narratives of governance and social engineering. In fact, maintaining the idea that the goals of NEP have not been achieved allowed political elites to cultivate support amongst the public. The overview of NEP since its inception looked into how the economic growth of the 1980s-1990s brought a new Malaysian middle class into existence, not only the one associated with crony capitalists, but among the population at large which is not associated with the political elites. With the growth of the middle class, more civil activity started to emerge, to demand fairer governance, combating corruption and better guaranteed rights and freedoms. However, that remains far from reaching a critical mass. The case of the former prime minister Najib being convicted on several charges with regards to 1MDB in 2022 was an important testimony to the Malaysian judiciary being able to still function, despite a high-profile politician being involved. However, many other corruption cases involving top governmental officials, some of them—within the current government, remain uninvestigated. Furthermore, the state’s grip over the corporate sector remained intact as every new government fell back on the established patronage system to reward supporters, without an attempt to reform the pervasive system of government control over the economy. With the expansion of the poorest category of the population, the B40, at the same time, divisive rhetoric along the lines of race and religion increased. That was supported by the Islamist-leaning bureaucracy interested in its self-perpetuation. Surprisingly strong support gained by the new Perikatan Nasional (PN) coalition, especially the Islamist PAS within it during the 2022 general election, proved that the national mindset is not moving towards a more liberal democratic order. Polarisation within Malaysian society is as strong as ever and the discourse of the need to protect Islam and the interests of Malays is still a key card for political elites to play. In fact, that discourse became one of the strongest and most reliable foundations of governance in Malaysia over the past 20 years. With that, the role of the state did not shrink, neither politically, nor economically, as political elites carried on with the NEP, justifying it by claiming that its aims have not been achieved since its introduction in 1971. At the current pace, with the growth of civil consciousness among the middleclass and demands for change, it would still take a long time to reach the boiling point before the change is brought into effect. Polarisation along racial and religious lines will also continue aggravating social tensions and remain a stumbling block in the

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way of Malaysia’s political and economic development. Community mobilisation when it comes to social needs, for example during the COVID-19 pandemic (from 2020) or major floods (in 2021, 2022), showed potential, but it is a different impetus that comes into play when we consider mobilisation for political change. Malaysia’s political elites will likely continue on the same path for the foreseeable future unless some radical development such as strong upward pressure from the bottom or unless a once-in-a-lifetime visionary political reformer manages to emerge. In the current situation, it is more difficult to imagine that this change takes place in a way of gradually building an alternative political force that will not be co-opted by the system, by means of the ‘war of position’ but rather that the existing tensions would escalate into a more disorganised and violent scenario. That, however, is hard to imagine without the active involvement and support of external players.

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Chapter 6

Housing Affordability in Hong Kong and Its Socio-Political Implications Jun Zhang

Introduction Hong Kong has been notorious for its barely affordable housing for a long time. In recent years, the housing issue has come under increasing scrutiny from a mainstream Chinese perspective, with many pointing to it as one of the root causes of the city’s socio-political instability (Leung 2022; Chan 2021; Legco Secretariat 2021; Shek 2020; Our Hong Kong Foundation 2020, 2021, 2023; Purbrick 2019). The central government has reportedly criticised Hong Kong’s model of Positive Non-interventionism and warned the city’s developers that it will no longer tolerate monopolistic behaviour, and has asked that they help solve Hong Kong’s housing problems (Kwan 2021). While Beijing’s narrative on the issue holds some truth, it is incomplete. In reality, the housing policy of the Hong Kong government represents a hybrid model of neoliberalism and developmentalism, which have gained popularity in East Asia since the 1980s. Under the economic framework of developmental neoliberalism, the Hong Kong government, which pursues an attitude of “maximum support, minimum intervention and fiscal prudence” (Tsang 2006), has always maintained a strong presence in the local housing market. The housing policy of the Hong Kong government has consistently eased tensions by providing a large amount of public housing, and has consolidated the attractiveness of financial centres for capital investment by subsidising low government taxes with high land sales revenues. However, while such policies suit lower income groups and the affluent, helping them to entrench themselves into Hong Kong society, the middle class, especially those of marriageable age, is increasingly struggling to buy a home, spreading feelings of helplessness and frustration through the younger generations (Legco Secretariat 2021: 16; Shek 2020: 624). The purpose of this chapter is to J. Zhang (B) Sun Yat-Sen University, Guangzhou, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_6

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reveal how Hong Kong’s developmental neoliberal housing policy has achieved a sense of equilibrium among the government, real estate oligarchs, financial elites, real estate holders and low-income groups, leaving only the young middle class in a disadvantageous position. This chapter starts by presenting the affordability of housing in Hong Kong in comparison to other metropolitan areas, with reference to several core indicators. The second section focuses on the strong intervention of the Hong Kong government in the local housing market, which involves not only social housing that benefits lowincome groups, but also the incentives for the wealthy to acquire private property. After looking at detailed government provisions for low-income and affluent groups, the third section turns its focus on the young generations sandwiched between these two layers, analysing why they were not supposed to be the most vulnerable group but have been put in a particularly helpless position in terms of housing. Finally, the fourth section illustrates how the developmental neoliberal housing mechanism works and how it helps to consolidate the existing pattern.

Expensive House Prices in Hong Kong Rather than using misleading absolute unit prices, nowadays, specialised sectors are more inclined to measure the burden of housing on residents firstly using as a priceto-income ratio, secondly a rent-to-income ratio, and thirdly a mortgage-to-income ratio. Comparing Hong Kong’s data on these three core indicators with data from other metropolitan areas, this paper visualises where Hong Kong’s average housing affordability stands in the world, and more importantly, what it means for the local population.

Measurement and Data Source According to the OECD (2021, 2023), there is no international consensus on defining or measuring housing affordability, nor is there any single measure that adequately covers a range of concerns about families’ ability to access decent housing in appropriate locations at affordable prices. However, relatively straightforward measures based on data are readily available in most countries. Specifically, housing prices include real and nominal house price indices, housing rent cost indices, and ratios of price to rent and price to income.1 Among them, the price-to-income ratio (the 1

According to OECD (2023), “housing prices include housing rent prices indices, real and nominal house prices indices, and ratios of price to rent and price to income. In most cases, the nominal house price index covers the sales of newly built and existing dwellings, following the recommendations from the RPPI (Residential Property Prices Indices) manual. The real house price index is given by the ratio of the nominal house price index to the consumers’ expenditure deflator in each country from the OECD national accounts database. Both indices are seasonally adjusted.”

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nominal house price index divided by nominal disposable income per head) can be considered a measure of affordability, while the price-to-rent ratio, (the nominal house price index divided by the rental price index), can be seen as a measure of the profitability of house ownership. The rent-to-income ratio shows the amount or percentage of a tenant’s salary that goes to rent. Since the purchase of property in modern developed commercial societies usually needs to be completed with bank loans, the mortgage-to-income ratio should also be taken into consideration. All these indicators demonstrate relative situations, which are more statistically significant than absolute numbers, and relevant data are abundant and recent. As well as these core indexed economic indicators, this chapter makes references to many academic papers and research reports discussing housing issues in Hong Kong using indicators such as the home ownership rate, the supply of public housing and the per capita living space, which are also believed to affect housing affordability in a broader sense (Chan 2022; Our Hong Kong Foundation 2020, 2021; Legco Secretariat 2021; Shek 2020; Yan et al. 2020; Evergrande 2018; Yip 2012, 2014).

Numbeo Data Numbeo data, specifically its Property Prices Index by City, provides figures on the three core indicators of each city surveyed, including the price-to-income ratio, price-to-rent ratio and loan affordability index. Numbeo data include most of the world’s major metropolises (Fig. 6.1, Table 6.2), making it easier to assess Hong Kong’s housing affordability from a comparative perspective. However, there is also a disadvantage in that data collection by Numbeo relies on voluntary self-reporting from global netizens, which means that there is an inherent sampling bias, although such biases decrease as self-reported data accumulate. Conservative researchers may question the authority of Numbeo data, which is based on reciprocity in Internet communities, but compromise is the most sensible approach as Numbeo data has been widely cited in the reports of many real estate research projects involving Hong Kong (Ren 2021; Xia and Ren 2020; E-house 2020; Evergrande 2018).

Demographia Data Collectively speaking, Demographia is data presented by the U.S. Urban Reform Institute (URI) think tank and the Canadian Centre for Public Policy (FCPP) think tank in their report Demographia International Housing Affordability (2022 Edition). Because it is a professional report, rather than an index website, Demographia provides more details of every surveyed city than Numbeo. Demographia covers 92 major metropolitan areas in eight countries. Demographia’s data has a certain audience, such as the Research Department of the Federal Reserve Bank of Dallas, which cites Demographia data in its working paper Why is the Hong Kong Housing Market Unaffordable? Some Stylised Facts and Estimations (Leung et al. 2020). Nevertheless, Demographia also faces criticism that the publishers’ stance may be

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Fig. 6.1 Property Prices Index by Country 2022 (Source Numbeo 2023a) (Green to red showing the level from high to low affordability)

biased to some extent it has always been persistent in arguing that the only way to deliver affordable housing is with suburban fringe expansion into greenfield spaces (Nick 2014). Finally, it must be emphasised that for the same indicator, such as the price-toincome ratio (which is the most important indicator for this study), the formulas of different institutions are not identical, although they are based on the same principles. The following sections will explain in detail when such issues are specifically involved.

High and Rising Prices The prevailing view today is that Hong Kong is one of the most expensive cities in the world in terms of housing prices. Over the past 25 years, the average house price in Hong Kong has roughly quadrupled (Ricacorp 2022). Before the COVID19 pandemic, in terms of absolute housing prices, Hong Kong’s urban average was US $30,500/sq m in August 2019, much more expensive than US $15,800/sq m in London, US $17,900/sq m in Singapore, and US $13,900/sq m in New York (Evergrande 2018: 11, 54). Admittedly, the absolute unit price is of little significance in terms of measuring affordability. Government or real estate circles are also more reliant on measuring affordability from a relative perspective. As mentioned before, the price-to-income

6 Housing Affordability in Hong Kong and Its Socio-Political Implications Table 6.1 The price-income ratio formula of Numbeo and Demographia

Numbeo

median apartment prices median familial disposable income

Demographia

median house prices gross median household income (pre -tax)

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ratio is the nominal house price index divided by the nominal disposable income per head, and can be considered as the most important measure of affordability. Before presenting the specific data on the housing price-to-income ratio in Hong Kong compared to other cities, it must be pointed out here that the formulas used by Numbeo and Demographia are different in detail although based on the same logic (Table 6.1). As far as the housing price-to-income ratio in Hong Kong is concerned, researchers at Evergrande cited Numbeo data, showing that before the COVID-19 pandemic, in August 2019, the housing price-to-income ratio in Hong Kong was as high as 50.8, far exceeding 21.9 in London, 23.5 in Singapore and 21.7 in Paris (Xia and Ren 2020: 7). Affected by the epidemic, Hong Kong’s figure in 2021 and 2022 fell to 45.7 and 46.9 from the previous 47.81 (2018), 50.8 (2019), and 47.46 (2020), respectively. However, this was still significantly higher than London (14.5), New York (9.9), and Singapore (17.5) at that time, and closely resembled first-tier cities in mainland China (Table 6.2). However, the Demographia International Housing Affordability reports jointly published by two independent think tanks in the United States and Canada are more influential in the real estate industry. In its 2022 edition, Demographia used a different formula than Numbeo, preferring the price-to-income ratio calculated through the median house price divided by a multiple of the median annual household income pre-tax (Table 6.1). In any economy, pre-tax income is usually significantly higher than disposable income (meaning that Demographia’s denominator is usually larger than Numbeo’s). As a result, the price-to-income ratio calculated using Demographia’s formula is smaller than Numbeo’s. According to the 2020 edition of the Demographia report, the housing price-to-income ratio in Hong Kong was as high as 23.2, significantly higher than in New York (7.1), London (8.0), and Singapore (5.8).

High and Rising Rents Expensive housing prices feed through to rental costs, and it will come as no surprise to learn that Hong Kong is the third most expensive city in the world for property rental prices, after New York and Abu Dhabi (CBRE 2020: 7). According to the CBRE Group, the average monthly rent in Hong Kong was US $ 2,681 in 2020, although rents declined marginally in 2019 by 1.7% (ibid.: 34). For those who have higher-end demand, Hong Kong is the most expensive city to rent a prime property. According to Knight Frank, prime rents in Hong Kong averaged US $6.7 per sq ft at

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Table 6.2 Property Price Index by City 2022 Country

Price to income ratio

Gross rental yield city centre

Gross rental yield outside of centre

Price to rent ratio city centre

Price to rent ratio outside of city centre

Mortgage as a percentage of income

Affordability index

Beijing, China

52.2

1.5

1.6

67.3

62.0

422.8

0.2

Hong Kong

46.9

1.6

1.5

63.4

67.7

293.9

0.3

Shenzhen, China

44.0

1.1

1.3

95.0

77.9

354.0

0.3

Shanghai, China

43.8

1.8

2.0

55.1

51.2

348.3

0.3

Guangzhou, China

35.2

1.3

1.4

74.7

69.6

284.3

0.4

Seoul, South 32.3 Korea

1.1

1.3

94.1

75.0

215.4

0.5

Taipei, Taiwan (China)

31.6

1.3

1.4

75.1

70.0

186.1

0.5

Bangkok, Thailand

26.8

3.8

3.7

26.3

27.2

216.4

0.5

Macao, (China)

23.6

2.2

2.5

46.4

39.6

148.5

0.7

Paris, France

19.1

2.4

2.2

42.0

45.1

108.5

0.9

Singapore, Singapore

17.5

2.6

3.2

39.1

31.6

105.9

0.9

London, United Kingdom

14.5

3.2

4.6

30.9

21.7

92.6

1.1

Tokyo, Japan

13.3

2.7

2.5

36.4

39.4

74.5

1.3

9.9

4.6

5.8

21.7

17.2

68.1

1.5

New York, NY, United States

SourceNumbeo (2023b)

the end of 2020, meaning that a tenant with a budget of US $10,000 per month would be able to rent less than 1,500 sq ft. That is much more expensive than second-place New York (US $2.25 per sq ft), which is followed by Singapore, London and Sydney (Everett-Allen 2021). Meanwhile, in the 25 years since the handover (1997–2022), cumulative rents for private property in Hong Kong have risen by 31.14% (Ricacrop 2022).

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However, such narratives are no substitute for more rigorous measurement. The easiest way to measure rent is to look at the median rent-to-income ratio, which shows the amount or percentage of a tenant’s salary that goes to rent (Weetas 2018). It is generally accepted that rent should not exceed 30% of income, otherwise it is considered burdensome (PD & R 2017). According to this standard, the burden of private housing on tenants in Hong Kong is heavy. According to the 2016 population census, the median rent-to-income ratio for privately rented flats (私人住宅單位) is 30.7% (Hong Kong Census and Statistics Department (HKC & SD 2017: 8), while the median rent-to-income ratio for other quarters in private permanent housing (私 人永久性房屋的其他樓宇單位) is 20.6% (ibid.: 9). Five years later, according to the latest consumer price index released by the HKC & SD, which takes the level of the 2019–2020 period as the benchmark, the rent-to-income ratio of private housing (私人房屋) grew from 30.7% in 2016 (ibid.: 8) to by 35.46% in September 2022 (HKC & SD 2022: 28). Together with management fees and other housing charges (管理費及其他住屋雜費), the housing section of the composite consumer Price Index accounted for 40.25% of earnings (ibid.).

Prevalent and Heavy Indebtedness Due to the impact of both internal and external factors, the interest rates of different economies and the rates in a single economy in different periods differ significantly (Global Economy 2023). As well as the mortgage rate, the burden of housing debt needs to be additionally measured through the mortgage-to-income ratio. On Numbeo’s website, the mortgage-to-income ratio is specifically defined as the Mortgage as Percentage of Income, a ratio of the actual monthly cost of the mortgage to take family income in which lower is better. As Table 6.2 shows, mortgage as a percentage of income in Hong Kong was 293.9%, significantly higher than in any other city except those in mainland China (E-house 2021).2

2

According to Numbeo, the index that mortgage as a percentage of income is a ratio of the actual monthly cost of the mortgage to take-home family income (lower is better). Average monthly salary is used to estimate family income. It assumes that a 100% mortgage has been taken over 20 years for a property of 90 square meters where price per square meter is the average of prices in the city center and properties outside the city center. In reality, however, homes in Hong Kong typically have properties of less than 90 square meters, which represents a relatively large living space in the local government’s classification. Given that Hong Kong’s per capita residential floor area is only 18 square meters for private housing normally. Meanwhile, the mortgage-to-income ratio for Hong Kong households is unlikely to exceed 100%.

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Small Living Area Size The widespread downsising of Hong Kong homes is a direct result of unaffordable property prices. According to figures from the Hong Kong Legislative Council (2022), the 2016 Population census report shows that Hong Kong’s per capita residential floor area is only 15 sq m (11.5 sq m for public rental housing and 18 sq m for private housing). Although the figure rose slightly to 16 sq m in 2021, it still lags behind Tokyo (20.1 square meters), which is also recognised as a city in which living space is cramped, and far behind other advanced cities, including Seoul (30.7 sq m), London (32.6 sq m), Singapore (33.0 sq m), Taipei (34.3 sq m) and New York (49.3 sq m) (Legco 2022). What is noteworthy is that Hong Kong residents bear the burden of housing prices, rents and mortgages, which is comparable to the big cities on the Chinese mainland, in return for a much smaller housing area. According to the China Census Yearbook 2020 (中國人口普查年鑒 2020) published by the National Bureau of Statistics (2021), the per capita living area of urban households on the mainland is 36.52 sq m. Beijing (33.41 sq m), Shanghai (30.58 sq m) and Guangzhou (34.61 sq m) have more than 30 sq m of living space per capita, while that of Shenzhen is significantly lower at 21.5 sq m (National Bureau of Statistics 2021), but still more comfortable than Hong Kong (Fig. 6.2). Public perception of Hong Kong’s housing difficulties is not necessarily based on official statistics, but rather on visual media that often highlight the living conditions of those in sub-divided flats (劏房) and “cage” homes (籠屋). Few institutions claim to have precise knowledge of the size of these two groups, some of which have no legal identification and are hard to count accurately. Allegedly, the average living space of roughly 226,000 people living in sub-divided flats is 6.6 square metres (Yang et al. 2021). Even more socially and economically disadvantaged are the more than 5,000 “caged people” (籠民) (ibid.) who live in “cages” with barely enough room for them to sit upright or stretch their legs. In 1994, Hong Kong enacted the Bedspace

Fig. 6.2 Per capita living area of selected advanced cities (Latest figures collected between 2016 and 2021. Sources Legislative Council, 2022. Regulation on minimum home size in London. ISE09/ 2022)

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Apartments Ordinance to improve and reduce the number of cage homes. However, given the low rent and proximity to urban areas, there is a certain market demand for cage homes, and the government has not banned them.

Extensive Government Involvement Hong Kong’s housing prices are barely affordable, but fewer residents are actually under these pressures than public stereotypes suggest. According to government statistics (HKSAR Gov. 2022), by 2021 53.7% of Hong Kong’s residents were living in private permanent housing, 45.7% in public permanent housing (made up of 30% in Public Rental Housing (PRH, 公租房) and 15.7% in subsidised home ownership housing), with the remaining 0.65% living in temporary housing (Table 6.3). In global terms, it is rare to see a metropolis in which nearly half the population lives in social housing, and the situation in Hong Kong is the result of massive government involvement.

Public Rental Housing Hong Kong’s chronic shortage of affordable housing has made it the first city in Asia to develop public housing. With the characteristics of a developmental state whose government was heavily involved in housing markets, the Hong Kong Housing Authority (HKHA, 香港房屋委員會) and its actuator, the Hong Kong Housing Department (HKKD, 香港房屋署), are together the world’s largest providers of social housing in terms of the percentage of the population it serves. Hong Kong’s public permanent housing, which includes rental housing and subsidised home ownership, is managed by the Hong Kong government and covers more than 45% of the population, the vast majority of whom are people on low incomes. The Hong Kong Housing Authority was managing 819,500 rental housing units by the end of 2022 (HKHA 2022a), accommodating 30% of Hong Kong’s population (HKSAR Gov. 2022). This percentage is significantly higher than many advanced economies, including the United States (6.2%), the United Kingdom (20%), Germany Table 6.3 Proportion of population by type of housing Housing type Public permanent housing

% Public rental housing

30.0

Subsidised home ownership housing

15.7

Private permanent housing

53.7

Temporary housing

0.6

Source HKSAR Gov. Housing in Figures

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(16.2%), Singapore (10%)3 Japan (6.1%), and only slightly lower than the Netherlands (34%) (Chang 2015: 82). Meanwhile, the burden on public housing tenants is disproportionately lower than on private housing tenants. After the handover in 1997, public rental housing tenants protested because their rent-to-income ratio was higher than 10% (Legco 2005; Anon 2005). This seems unimaginable for many, but can be understood through Hong Kong’s experience. In 2016, the average rent for public housing was HK $1,500 (US $191), while the average rent-to-income ratio was 9.3%, according to the 2016 population census (HKC&SD 2017). That figure remained stable over the years with slight fluctuations. From 2007 to 2021, the cumulative increase in household income of public rental tenants was 108.6%, while the increase in public rental rents was 70%. The average rent-to-income ratio of public rental housing tenant families has decreased from 9.97% in 2007 to 9.56% in 2022, according to the 2022 Rent Review of Public Rental Housing (HKHA 2022b). This meant that low-income residents with legal status were largely insulated against expensive private rent, although the problem of having to wait an average of 5.5 years before receiving such benefits is considerable (HKHA 2022c). It is therefore fair to argue that the stereotype of Hong Kong’s adherence to positive non-interventionism limits our realisation of the extent to which the local government invests in social welfare.

Subsidised Ownership Housing As well as the 30% of the population living in public rental housing, some lower middle class households—roughly 17% of Hong Kong’s population—are slightly less economically vulnerable, but are eligible to apply for the government’s subsidised home ownership programme, also known as subsidised housing sales (資助出售房屋). Subsidised ownership housing is a collection of subsidised sale schemes mainly provided by the Hong Kong Housing Society (香港房屋協 會) and the Hong Kong Housing Authority (香港房屋委員會). Among these sales programmes, the Home Ownership Scheme (HOS, 居者有其屋計劃/居屋) lasts the longest and provides the most units. The Green Form Subsidised Home Ownership Pilot Scheme (GSH, 綠表置居計劃/綠屋) aims to speed up the transfer of public rental housing by providing more subsidised sales to relatively higher-income tenants, while the Sandwich Class Housing Scheme (SCHS, 夾心階層住屋計劃/夾 屋), which existed for a decade in the 1990s, including properties that were sold to lower-middle and middle-income residents known as the sandwich class, who did not qualify for low-income public housing under the Home Ownership Scheme but who were also unable to afford private housing (LCQ15 Press Release 2012; LCQ3 Press Release 2008). The properties involved in these schemes are normally sold at a 60–70% discount off the market price, and house buyers can borrow 90–95% of the 3

Singapore data shows 90% of citizens living in social housing, of which 10% live in public rental housing and 80% live in subsidised ownership.

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purchase price with a down payment of less than 10%. Subsidised home ownership housing in Hong Kong is, therefore, an important tool in helping to bridge the gap between the affordability ceiling for first-time buyers and the high prices of private homes. Subsidised ownership housing further opened up the private housing market to potential buyers, and subsidised ownership housing owners, at least in theory, can eventually upgrade to owning private properties. Unsurprisingly, there are specific requirements for buying subsidised housing, such as income limits and asset limits, shared ownership arrangements, supplementary land premium payment at sale and restrictions of sales only to persons with subsidised sale housing qualifications. Despite these restrictions, the benefits of subsidised sale housing are attractive, and citizens are keen to take advantage of them. However, the subsidised ownership housing lottery system has made young people’s dream of getting on the property ladder (The local expression 上車 means the first-time buyer) (Podcast One 2020) less likely. The Home Ownership Scheme (HOS) has been operating in Hong Kong since 1978, but as demand for HOS properties greatly exceeds supply, the Housing Authority and Housing Department draw lots to determine who among eligible families can buy the HOS flats, with the winners offered the chance to buy a house. The Homeownership and Youth Social Mobility study launched by Our Hong Kong Foundation (團結香港基金) showed that in 2017, the success rate of HOS applicants aged below 30 was less than 1%, while that of those aged 30 or over was only 3% (Our Hong Kong Foundation 2023). There are many reasons for the low supply of subsidised housing, but one of the most controversial is the government’s nearly decade-long moratorium on home building. Between 2002 and 2011, construction of some 85,000 subsidised homes was halted in order to protect house prices. The reasons for this will be explored more fully in the last section of the whole paper, but are linked with the operating principles of the neoliberal mechanism.

Help with Private Property Ownership As noted above, 30% of Hong Kong’s total population is covered by public rental housing, with a further 15% taking advantage of subsidised ownership housing. But what about the more affluent classes? The government’s approach for this section of the population is to use various low-interest loan schemes to encourage them onto the property ladder. The mortgage schemes offered in Hong Kong are flexible and diversified, with various types of mortgage loans available for different purchasing or trade in scenarios, including “first mortgages”, “second mortgages”, “plus mortgages”, “conversion mortgages” and “trade-in mortgages”, with flexible repayment plans (Xia and Ren 2020).4 The repayment periods can be divided into 4

The “first mortgage” refers to the provision of mortgage loans for housing other than the down payment; “Two clicks” means the mortgage for the down payment; “Plus press” refers to the repayment of part of the loan, the original property mortgage or cashing out; “Transfer” means an

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monthly or two-weekly repayment schemes. There are equal principal repayment schemes, equal principal and interest repayment schemes as well as fixed-term and fixed-amount repayment schemes where the term changes along with interest rates. Incremental repayments and decreasing repayments can also be set according to the income of the borrower. The expansion of home ownership inevitably triggered a growth in mortgage debt, which rose by 250% in nominal terms between 1996 and 2011. This increase became more pronounced over time as house prices rose more quickly, and between 1996 to 1998 alone, mortgage debt rose from 27% of GDP to 36%. In 2011, this figure had risen to 42%. Noting the rising share of mortgage debt in commercial banks’ loan portfolios, the government adopted a cautious approach to adjustment. Over the past decade, the Hong Kong Monetary Authority (HKMA)—the equivalent of Hong Kong’s central bank—has stepped up its regulation of mortgage lending. In stark contrast to mortgage liberalisation and deregulation elsewhere in the 1990s, Hong Kong raised loan-to-value (LTV) ratios to a maximum of 70% and strictly enforced a 50% repayment-to-income ratio. Some risk-aggressive financial innovations, such as interest-only mortgages or inflated loans, were resolutely resisted by the HKMA. This made Hong Kong, despite its reputation as a neoliberal icon, perhaps one of the most regulated mortgage markets in the world (Stephens 2007). Such regulation, from the point of view of the pro-intervention camp, has clearly had positive results, and as long as they hold their assets, individual buyers can make considerable profits. In fact, among all homebuyers, the relatively less well-off ones who bought ordinary apartments have obtained a higher yield than the wealthy who bought luxury houses. Over the past 25 years the property price index, according to the Rating and Valuation Department (RVD) of the Hong Kong government in 2022, has increased by 123% from 172 points in June 1997 to 384.4 points in May 2022. Class A flats, which are smaller units with a saleable area of less than 40 sq m, outperformed the market, with a cumulative increase of 149% over the past 25 years to become the unit type with the largest increase. Meanwhile, the lowest increase in the price index was 74.67% for large units in Class E flats with a saleable area of 160 sq m or above.5 This reflects that the greatest rise in unit property prices was inversely proportional to the size of the property. Compared with the lowest rise of 58.4 points in July 2003, the overall property price has increased by 558% times. Among them, the 651% rise in small A-class flats is the highest, while the large-sized flats of the E-class only increased by 327% (Ricacorp 2022). Under such inter-bank transfer of mortgage business for a customer; “Building for Building mortgage” refers to a credit loan issued for the down payment on a new building with the proceeds from the sale of the old building owned by the borrower as the source of repayment. 5 Private domestic units in Hong Kong are defined as independent dwellings with exclusive cooking facilities, bathroom and toilet. They are classified by reference to floor area as follows: Class A: Saleable area less than 40 m2. Class B: Saleable area of 40 m2 to 69.9 m2. Class C: Saleable area of 70 m2 to 99.9 m2. Class D: Saleable area of 100 m2 to 159.9 m2. Class E: Saleable area of 160 m2 or above

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circumstances, Hong Kong people have been educated by the market to believe that investment in real estate is one of the most important, if not the only, ways to benefit from asset appreciation in the city. If you own property, you have a chance to benefit, especially if it is a small property.

Reassessing Government Involvement There are still many shortcomings in Hong Kong’s public housing system. Some criticisms are legitimate, including small sizes, long waiting times, the sharp drop in the supply of subsidised home ownership housing between 2002 and 2011, and the fact that the Sandwich Class Housing Scheme only existed for a relatively short period. Other criticisms are more controversial. For example, some argue that for the future of Hong Kong society, the most important issue in the public housing system is treating young people fairly (Chang 2015; Our Hong Kong Foundation 2023). Under the existing points system, younger applicants have to wait much longer than older applicants (Yip 2012). It is worth debating whether this is reasonable and necessary or unfair and inefficient, but either way these problems need to be addressed. However, rather than criticising its deficiencies, it is more important to understand the government’s public housing plan from the perspective of a development strategy. Based on official data and the aforementioned analysis, roughly half of Hong Kong’s residents (48.5%) are owner-occupiers, which include subsidised ownership (15.7%) and private ownership (32.8%) (Table 6.4). These people are considered lucky because they have shared the dividends of urban development. Of the remaining half of the population, 30% are accommodated in Public Rental Housing (PRH, 公租房), which leaves the remaining 20% of the population living in expensive private rental housing (HKSAR Gov 2022; Legco Secretariat 2021; Transport and Housing Bureau 2010). However, the authorities, neither in intention nor in practice, treat public housing as slums for the abandoned lower classes. Compared to most of its East and Southeast Asian neighbours, Hong Kong’s public housing provides high-quality housing that is mostly free of stigma, accompanied by good retail and leisure facilities, and accessible through efficient public transportation links (Yip 2014: 84). The integration of public housing in Hong Kong is viewed as positive, and research indicates that Hong Kong’s public housing system is generally free the issue of social exclusion, which is prevalent in public housing communities in numerous other countries and regions (Wu and Chen 2013). Meanwhile, the population living in public rental housing is encouraged at least in principle to continuously upgrade through various subsidised home ownership housing programmes to eventually become a private property holder, although only around 20% of subsidised home ownership housing (mainly HOS) buyers have so far been able to trade up (HKSAR Gov 2022; Legco Secretariat 2021; Transport and Housing Bureau 2010). This illustrates the essence of the hybrid model of developmentalism (state intervention) and neoliberalism (free market and free determination) in the housing market of Hong Kong.

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Table 6.4 Proportion of population by tenure of accommodation Types of accommodation Tenant Owner-occupier

% Public rental housing tenant

30.0

Private rental housing tenant

17.0

Subsidised home ownership housing

15.7

Private ownership housing

32.8

Rent free/ provided by employer

47.0 48.5 4.5

Source Housing Department; Legislative Council Secretariat; HKSAR Gov 2022

The Hardships Faced by the Young Sandwich Layer While the rich have been enjoying the appreciation of their assets, those on low incomes have also been helped to a great extent by the government’s strong involvement in the housing market. In this light, housing issues should not be a major cause of socio-political instability in Hong Kong. However, the problems remain for young people caught between the two categories. Studies have shown that although young people do participate in social movements subjectively based on democratic demands, there are also economic incentives as well as political factors (Shek 2020; Martínez 2019). Young people suffering problems as first-time buyers who could have become a young middle class by getting on the property ladder have instead become a group that is generally restrained and divided by family social capital, which objectively weakens the middle-class community and is not conducive to socio-political stability (Legco Secretariat 2021).

First-Time Property Buying is Tough Section “Help with Private Property Ownership” looked at government and financial sector assistance in private property ownership, and the author concluded that the trend in the housing market of Hong Kong is that as long as someone buys a house, even if it is small in size or with incomplete property rights (such as subsidised ownership housing), they will enjoy the dividends of urban development based on the rapid appreciation of assets. However, if they cannot afford to take that first step in buying a property, they will always face the predicament of struggling against a highly capitalised market, with incomes often falling short of the growth of house prices and rents. However, the entry of younger cohorts into homeownership is not a very promising area. According to a briefing by the Legislative Council Secretariat (2021), since the handover, the threshold for young people to become property owners has been rising. Specifically, young people under the age of 35 had a much higher chance of becoming property owners in 1997, when there were as many as 198,100 young homeowners,

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accounting for 22.1% of the total. However, as affordability for young buyers worsened, this number had shrunk to just 98,200 (7.6%) by 2019, while the average age of first-time home buyers rose to 44 in that year. This reality is widely considered with a sense of hopelessness among younger generations (Huang et al., 2020; Chen and Xu 2018; Yip 2012, 2014). The mechanism behind this phenomenon is complex. After 1997, with higher employment rates and lower income prospects for young adults (Yip 2012), younger groups started to find it harder to rely on their own ability to become real estate owners. A counter-intuitive reality is that recent analysis shows that younger groups, specifically the post-eighties generation, have higher homeownership rates than older people at the comparable stage in their own lives (ibid.). However, this conclusion does not apply throughout the young population. Generational transfer and differentiation in young people’s careers are considered key factors. Due to the exceptionally high level of down-payments required, fewer young people can actually save enough from their own income alone, which means that help from parents or family is essential. As the job market polarises, disparities in income and job prospects have also broadened. Family background is more important than ever when it comes to home ownership, and the significant intergenerational transmission benefits of family capital are a cause of resentment among young people (Chen and Xu 2018; Yip 2012).

Settling for Second Best is not Easy If there is little hope of buying a private house in any way, an obvious and better solution lies in buying into subsidised ownership housing first, and attempting to upgrade when the financial situation improves. In theory, either transferring to private ownership through the supplementary payment of land prices or selling subsidised houses to those who meet relevant requirements and then buying a private home is a feasible alternative. This is what the government expects when designing subsidised home ownership. However, this approach is not easy to achieve in practice, because most of the well-educated young people would be “too rich to apply for subsidised ownership”. Under the asset limits for the Hong Kong 2022 HOS programme, the requirements for joint applicants for the subsidised property include a maximum household income of HK $66,000 (US $8,407) a month and an asset limit of HK $1,850,000 (US $235,670), or for a single person a monthly income not exceeding HK $33,000 (US $4,204) and an asset limit of HK $925,000 (HKHA 2022d). In the fourth quarter of 2022, the average income of Hong Kong residents was HK $20,000 (HKC & SD 2023a), the average salary of full-time employees with post-secondary degrees was HK $30,900 (US $3,936), and the average salary of the seventy-fifth percentile was HK $47,300 (US $6,025) (HKC & SD 2023b). Meanwhile, persons with post-secondary degree education generally enjoyed faster income growth after 5 and 10 years in the labour market (Wong 2020: 8). This means that young people with post-secondary degrees who are employed are already not far from being above the income limit for subsidised ownership housing application, let alone after five

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Table 6.5 Income and asset limits for White Form applicants in home ownership scheme flats 2022 Household size

Monthly income limit (HK $) (Note)

Asset limit (HK $)

1 person

33,000

925,000

2 persons or above

66,000

1,850,000

years of work. By that time, more than 80% of those with post-secondary education have entered highly skilled jobs (ibid.: 9), with earnings heading over the HK $33,000 (US $4,204) limit. In other words, well-educated young couples or single people, after their first few years in the labour market, are very unlikely to be eligible for subsidised home ownership housing, and are even less likely to qualify for public rental housing, which caters to the more disadvantaged (Table 6.5). Ironically, some young people who are lucky enough to qualify on the basis of relatively low income. Fewer people are able to buy subsidised home ownership properties after years in the queue, but are unable to achieve the upgrades the government is looking for because they do not have high incomes. As mentioned above, only about 20% of the owners of all subsidised ownership housing have been able to achieve the upgrade plans expected by the government. Other people have failed to upgrade because of the recent, higher land prices, which makes it more difficult for owners to find the costs of upgrading and change ownership.

Social Political Participation At a time when more and more young people are becoming frustrated by being trapped in the sandwich layer (夾心層) or below it, it is not surprising that they give vent to their unhappiness through political expression and social movements (Mei 2021; Cheung 2017). Nowadays, the housing issue is seldom seen as a separate issue, and is mixed with the highly politicised divisions between different social circles, showing the struggling mentality of various circles in Hong Kong in transition. These social movements have undoubtedly deepened the rift between the central government and Hong Kong society (Anon 2021; Liu and Lin 2017). Unlike local social movement activists, who blame the radicalisation of Hong Kong’s social unrest on long-standing democratic debts, Beijing has a theory that Hong Kong people either like to get on the property ladder or take to the street in protest (不上車, 就上街). Accordingly, the central government has become increasingly assertive on its assessment criteria as it has been told roughly the same information by various trusted sources and agencies, including the Liaison Office of the Central People’s Government in the HK SAR. According to the authorities, a strong sense of deprivation permeates young people as they face almost insurmountable difficulties in obtaining decent living conditions. As such, they participate in street protests and take radical action under the instigation of reactionary forces at home and abroad, and this is the primary cause of the many social instabilities such as the

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2014 Umbrella Movement and 2019 anti-amendment protests. Therefore, improving housing affordability has arguably become the biggest social issue in Hong Kong. In addition, the mainstream view on the Chinese Mainland holds that the crux of Hong Kong’s expensive housing prices lies in the long-term shortage of residential land supply, and the difficulty in land acquisition is ultimately the consequence of the government being overly restricted (China Resources Institute of Macroeconomics and Policy 2012). From Beijing’s perspective, the essence of Hong Kong’s housing problem is therefore developmental rather than democratic, and that the problem has become particularly serious because Hong Kong’s aggressive democratic development has hindered social and economic development. The experience of China’s first 30 years of reform and opening up led Beijing to conclude that “development is the basis and the key to solving all problems in China” (CPC News 2018). In recent years, as the “China model “of overseas export through the Belt and Road initiative, the Asian Infrastructure Investment Bank (AIIB), and the acquisition of high-end assets in developed economies, Beijing’s self-confidence has risen to a new height along with the idea that development is the approach to solving all problems at any nation or region, and Hong Kong is certainly not an exception. It is entirely possible to solve the problem of housing unaffordability through the framework of executive leadership under a more active government. Beijing may be a little too confident in its own narrative, but studies do suggest that during the large-scale social movements in Hong Kong in recent years, property speculation, poor welfare policies and the wealth gap were intimately related to the activists’ democratic aspirations, although these factors were rarely at the forefront of their discourse (Martínez (2019). A study by sociologists at the Centre for Applied Socio-economic Research (CASER) at New York University Shanghai on local residents covered by Hong Kong’s home ownership scheme confirmed a positive causal link between property ownership and “life satisfaction and subjective class identification”(Miao and Wu 2022). Moreover, the Legislative Council and the government of Hong Kong have both acknowledged on various occasions that the housing problem, especially as it relates to young people, has a bearing on the social stability of the SAR (Legco Secretariat 2021; Our Hong Kong Foundation 2023).

Developmental-Neoliberal Mechanisms for the Housing Affordability High housing prices closely relate to the financial and taxation policies of Hong Kong as a financial centre, forming a developmental-neoliberalist housing mechanism. Under this mechanism the government, real estate oligarchs, property owners and even low-income people who enjoy housing welfare reach a game equilibrium, leaving the less financially able sector of the middle class—particularly the young—as the sandwich layer in Hong Kong’s housing market.

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Developmental Neoliberalism in Hong Kong Developmentalism refers to the belief that government intervention in the economy is necessary to promote economic growth and development, while neoliberalism emphasises free markets, deregulation and the importance of private enterprise. Together with developmental neoliberalism (the process of creating a NeoliberalDevelopmental State—Liow 2011), or other expressions with similar meanings and intentions such as neoliberalising spaces in developmental states (Kim 2015) and developmental/neoliberal hybridity (Pirie 2012), all approaches involve hybridity of an economic development strategy that combines elements of both developmentalism and neoliberalism, and such approaches have become more prominent in East Asia since the 1980s (Park et al. 2012; Chen and Li 2011; Hart-Landsberg and Burkett 2001). Historically, Hong Kong has been considered an economic hub since the colonial period and is presently recognised as a neoliberal economy due to its adherence to free-market policies. Many believe that Hong Kong exemplifies the features of neoliberal economic policies, with a focus on financial interests and free market ideals resulting in a significant concentration of economic power (Peck 2021; Keliher 2020). A series of measures, including reduced business taxes, eliminated or minimised regulation and the transfer of public institutions to the private sector, have shaped Hong Kong’s free market profoundly. Meanwhile, business tycoons have been able to infiltrate government policy and administration and use these powers to expand their influence. Critics point out that in Hong Kong, public power is mobilised to maintain a well-functioning legal institution that upholds property rights, enforces contracts, protects business investments and facilitates markets on behalf of capital (Keliher 2020). The application of policy underpinned by the neoliberal theory can be seen in Hong Kong’s economic development, especially in its economic take-off since the 1960s, which shows that Hong Kong is not merely pursuing a free market capitalist economic system, but is also implementing a laissez-faire policy on economic operations. Nobel Laureate in Economics Milton Friedman highlights the reliance on private enterprises and free markets as the overwhelming reason for Hong Kong’s success. Friedman argues that although the British economic system was once quite socialist in its orientation, Hong Kong—a British colony until 1997—had adopted a laissez-faire policy (Peck 2021). Friedman believes this is largely due to the British bureaucrat John James Cowperthwaite (郭伯偉), who served as Financial Secretary of Hong Kong from 1961 to 1971. Cowperthwaite insisted on low tax rates and nonintervention in the economy, and even refused to collect economic statistics, fearing that this would give government officials the excuse they needed to increase intervention (Peck 2021). Objectively, this policy of active non-intervention has achieved great results. After World War II, Hong Kong was a very poor island, with a GDP per capita of only a quarter to a third of that of the United Kingdom in the 1950s and 1960s. Although the UK also experienced rapid growth during the same period,

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when Hong Kong returned to China in 1997, the GDP per capita of Hong Kong had grown to be roughly the same as that of the UK (Macrotrends 2023a; b). However, from many aspects, the Hong Kong miracle cannot be entirely attributed to neoliberalism. As a member of the East Asian club, at least in some important areas, Hong Kong continuously embraced developmentalism after the Second World War. The government of Hong Kong effectively utilised the resources of previously uncultivated lands, the influx of cheap labour through waves of immigration, and the emerging property market to cater to the housing demands of the fast-growing population in a careful and economical manner. According to Keung (1985), Hong Kong’s manufacturing industry began to gain momentum in the 1950s as labourintensive industries from Europe, the United States, and Japan relocated to the city. The manufacturing industry reached its peak in the early 1970s and maintained vigorous development until the mid-1980s. In the 1980s, when the production process moved north to mainland China, Hong Kong enterprises turned to management and support in the pre-production and post-production stages. By the mid-1990s, Hong Kong’s economic structure had shifted to a highly service-oriented economy. During the decades of industrial upgrading, according to many previous studies (Ren 2020; Yip 2014; Ronald and Doling 2014; Liow 2011; Hart-Landsberg and Burkett 2001; Cuthbert 1991), the policy objectives of the three most active regions of government intervention—namely South Korea, Singapore and Hong Kong— shared two main characteristics. Firstly, the national and local governments made the stabilisation of commodity housing prices the key goal of government intervention. Secondly, they attached great importance to housing security, with the construction of public housing starting at an earlier stage, enabling each region to develop its own distinctive public housing supply and management system. Despite various measurements of housing affordability in Hong Kong, it has to be acknowledged that Hong Kong’s housing system is characterised by strong government involvement. After all, roughly half of the local population, including those living in public rental housing (29.7 and 30% of the total population in 2020 and 2022) and those living in subsidised ownership housing (15.3 and 17% of the total population in 2020 and 2022), are relieved of the hardship associated with exorbitant house prices or rents.

Sophisticated Financial Calculations As previously mentioned, numerous perspectives, particularly from the mainland, have censured Hong Kong for imposing excessive constraints on land supply (China Resources Institute of Macroeconomics and Policy 2022). It is true that the proportion of developed land in the total territory of Hong Kong is low, and the proportion of residential buildings in that developed land is even lower. There is therefore a widely held assumption that the government’s inaction on land supply is a deliberate policy to maintain high land prices. According to Evergrande (2018), since the 1970s, Hong Kong real estate industry has taken an excessively high position in the economy. The proportion of real estate-related industries in Hong Kong’s GDP once exceeded 30%,

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and has remained at roughly 20–25% in the decade since 2006. Meanwhile, more than 45% of local listed companies are either real estate developers or investors, or are heavily involved in real estate development and investment (Chui and Chau 2005). In the most recent fiscal years 2020–2021, 2021–2022 and 2022–2023, stamp duty accounted for 15.8%, 14.8% and an estimated 15.8% of government revenue respectively, and the government share of land price income is 15.7%, 20.7% and an estimated 16.8%. In other words, since the 1970s, land-related revenue has always accounted for about one-third of the annual revenue of the Hong Kong government, making it an indispensable financial pillar for the authority (Legco Secretariat 2022). However, from many aspects, such as high risk of geological disasters in Hong Kong, increasingly high compensation for land acquisition, and opposition from various social groups, the Hong Kong government faces many difficulties in terms of land acquisition, which may not always be due to subjective inactivity. Even if one accepts the conclusion that the government is obstructive in terms of land supply and therefore maintains land prices, it is necessary to interpret the significance of the financial logic behind high land prices in Hong Kong’s circumstances neutrally. In fact, the Hong Kong government has benefited from raising land prices by monopolising and restricting land supply, thereby maintaining low taxes. These low taxes, especially the zero capital gains tax, are precisely the advantages Hong Kong needs to maintain its status as a financial centre (Deloitte 2021: 6). In fact, such arrangements have generally been successful. Over the years, Hong Kong’s fiscal and taxation systems have remained generally healthy, its balance of payments well controlled and its land expropriation and acquisition system standardised, effective and regulated.

The Collusive Mechanism of Developmental Neoliberalism The above analysis shows that the Hong Kong government has plans for its housing market. The prudent land acquisition and development programs and the public housing system are meant to appease the lower income class, while incentives for private property ownership contribute to high housing prices. However, the original intention of the government was not to pursue high housing prices unilaterally, but to use high housing prices to maintain existing land tax rates, thereby enhancing the attractiveness to capital. However, high housing prices cannot be manipulated by the government alone, and government decisions over the past 25 years during times when housing prices were falling suggest that high housing prices are more likely the product of developmental neoliberalism. After the return of Hong Kong to China in 1997, based on housing policy research during Hong Kong’s British period, the Hong Kong SAR government announced three major goals for interventions in the housing market on October 8 of that year. These included firstly to achieve 70% housing ownership by 2007, secondly to increase the supply of housing by 85,000 units per year, and thirdly to reduce the average waiting time for public rental housing from 6.5 years to about 3 years by 2005 (Wang and Liu 2008). This set of policy objectives was collectively known as

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the 85,000 Policy, and had it not been for later problems, the 85,000 Policy would have been a project that garnered public praise. However, as a free-market economy, Hong Kong’s property market is inevitably subject to market volatility, and many of these volatilities were of significant size and duration. After peaking on October 19, 1997, property prices in Hong Kong fell by half within a year before rebounding by 20% in 1999. Due to the completion of the pre-policy 85,000 buildings and other factors such as the continuing impact of the 1997Asian financial crisis, property prices in Hong Kong fell by more than 40% in the following three years, reaching their lowest value on August 24, 2003 (Ren 2020). The consequence was that the wealth of a considerable proportion of homebuyers was quickly wiped out, and those who entered the market at the peak became negative asset holders, which then exposed banks to the risk of a large number of bad loans. Developers also suffered because homes became far harder to sell, falling house prices fed through to the local auction market and government revenue from land sales plummeted. Later, under pressure from all sides, the government was forced to ease the decline in prices in Hong Kong’s private housing market after January 2000 by cutting back on construction and sales, and at one point even halting HOS sales (Liu 2002). Today, many argue that abandoning the 85,000 Policy of the first SAR administration foreshadowed higher prices and more social trouble in the future (Ren 2020; Wei et al. 2016; Poon 2011; Liu 2002). After the termination of the 85,000 Policy, the stance of the banks, the developers and the government was not difficult to understand. Buyers, in contrast, took a more nuanced approach. According to Smart and Lee (2003), certain features of Hong Kong’s economy generated what they considered a primitive analogue of a propertybased growth regime. Under such circumstances, even for ordinary people, real estate speculation came to seem more important than actual work, and residents began to attach great importance to the preservation and appreciation of their assets. Once they were able to buy a home, disadvantages such as small size were considered acceptable when wealth accumulation resulted from soaring property prices. However, the loss of asset value is painful, and going into negative equity is a frightening concept. Such simple thoughts supported a strong foundation of public opinion in favour of the rapid rise in high housing prices. The government, by keeping taxes low while housing prices were growing once more, reinforced this sentiment and formed an alliance to keep housing prices rising. Defending prices by suspending subsidised housing sales, even if such a decision received considerable popular support, has to be problematic. High home prices made it harder for first-time buyers to get their foot on the property ladder. Even if people who couldn’t afford to own property went for the next best option by taking subsidised ownership as an alternative, the short supply of available housing significantly reduced the application success rate, creating a negative idea that hard work is less important than luck. Over recent years, the pendulum of mass opinion has swung from keeping home prices high to giving more people the chance of getting onto the property ladder. However, under the current developmental-neoliberal housing mechanism, the middle class—and especially the young—depends more on government decisions than on “living justice” (Chang 2015).

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Conclusion Admittedly, no city housing policy can please everyone, but Hong Kong’s situation seems particularly complex. Despite the efforts made by the Hong Kong government, the city is still widely considered to be the world’s most unaffordable city in terms of housing. More significantly, this situation continually fuels social-political unrest, and young people who are disillusioned with the local housing conditions are progressively engaging in political activism to express their discontent. However, enhancing housing conditions in Hong Kong poses a formidable challenge. Society is divided into two segments regarding this matter: property owners and non-property owners. The former share in the dividends of urban development, while the latter is left out, notwithstanding the provision of government-sponsored public rental housing to meet their basic housing requirements at a low cost. Therefore, even the relatively better-off non-property owners aspire to possess private property, even if they have to depend on subsidised home ownership programs initially. Once non-property owners become homeowners, they tend to switch perspectives and oppose schemes like the 85,000 Policy, as they perceive such measures as detrimental to housing prices. It may seem selfish to take the position that the property-owning class is preventing the proletariat from improving, but perhaps it is also unfair to blame non-property owners. After all, the equilibrium sought by all parties under the neoliberal housing mechanism of Hong Kong’s development is difficult to alter without fundamentally disrupting the fiscal and financial systems that Hong Kong relies upon.

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Chapter 7

How a New, Small and Poor Country Withstands Global Challenges: Timor-Leste’s Three Endowments Takeshi Kohno

Introduction Timor-Leste is a new country that gained independence in 2002 and is considered to be the 11th member state of the regional economic community of the Association of Southeast Asian Nations (ASEAN). Despite proclaiming success in seizing territorial sovereignty from the Indonesian occupation, the Timorese state encounters tremendous challenges, particularly when dealing with the oil and gas reserves deposited in the disputable sea, for its long-term development plan. As a petrostate, there are foreseeable threats known as the resource curse which accounted for state failures elsewhere. This chapter attempts to evaluate the prospect of the country by identifying and explaining the formation and utilization of three endowments of Timor-Leste, namely socio-economic, fossil resource, and historical legacy of resistance and principles of international law. The administrative process toward independence in Timor-Leste was heavily assisted by the international community, particularly by the United Nations. It does not mean, however, that there is a lack of Timorese desire for having their own nation—far from it. After nearly 30 years of resistance and sacrifice by guerrilla groups in the mountains, diaspora groups in Mozambique, Australia, Portugal and other places, and Timorese university students in Indonesia who were engaged in clandestine activities, the emotional energy for independence peaked in the 1999 referendum, which asked the voters to choose either self-government or remain within Indonesia, and the vast majority (79%) of the voters asked for self-government. At the same time, opposing emotions were also running high on the Indonesian side—the Indonesian authorities (particularly the armed forces and the police, and their militias) displayed naked physical anger by burning major cities (McDonald T. Kohno (B) Toyo Eiwa University, Yokohama, Japan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6_7

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et al., 2002; Nevins, 2005; Nicol, 2002; Robinson, 2010), much in the same way angry French militia terrorized the public and burned down cities including an iconic university library in Algeria as they departed after the 1962 decisive referendum for independence. Another key characteristic of Timor-Leste is that it is heavily fossil-resource dependent, a characteristic of a “petrostate” whose national income comes primarily from the sale of oil and gas, and lacks income from diversified economic bases such as manufacturing and financial service industries. Timor-Leste’s extraction and sale of oil and gas from the Timor Sea occupies almost 90% of the national budget and this makes the country extremely vulnerable, as its national income is almost entirely at the mercy of price fluctuations in the international oil and gas market. Timor-Leste is another example country which demonstrates how difficult it is to build stable and democratic institutions after independence. The 2006 assassination attempt on the president was one of such crucial moments. The abovementioned petrostate, Algeria, after the 1962 independence, failed to manage power struggles among independence leaders, particularly between former armed guerrillas and civilians. The power struggle was exacerbated by the elite struggle to maintain control over the vast wealth coming from oil and gas extraction and sales. Algeria fell victim to military coups and civil unrest, and finally welcomed dictatorship. Iraq, another petrostate, suffered a similar fate after overthrowing the monarchy in 1958. The Ba’ath Party supported by the military took over power which led to the dictatorship of Saddam Hussein until the United States invaded in 2003. There are many similar cases of countries that faced the difficult challenge of building stable and democratic institutions, marred by elite struggle over resources, and often ending up with some kind of anti-democratic regime. Thus, a conventional fear is that a petrostate is likely to fall into some kind of anti-democratic regime, and Timor-Leste may fall victim to it also. Widely known as a “resource curse,” a country with large income from extractive resources (usually oil and gas) provides fertile ground for an elite struggle for personal gain at the expense of the country, thereby creating social instability, which then invites autocratic political leaders with iron fists to enter and suppress democratic aspirations, using security apparatus (Juhasz, 2008). Acemoglu and Robinson (2013) argue that countries with “extractive institutions” both politically and economically fail because a small number of elites often seek to take from the state coffers by controlling state institutions and media, preventing fair competition in the market, and avoiding innovations as they are seen to threaten the status quo. They warn that extractive institutions are inherently unstable simply because they give incentives to elites to compete for limited resources. In other words, anti-democracy often becomes the sole governance type to ensure social stability for many petrostates. African countries such as Nigeria and Angola are also examples. The Middle East oil-producing countries, such as Saudi Arabia and the United Arab Emirates, are another autocratic petrostate based on a hereditary sultanate system in which aristocratic rulers earn vast cash generated from oil and gas sales, part of which is used for co-opting their citizens and screening any opposition via some security apparatus while foreign workers are imported to serve in the low wage construction and service sectors (Beblawi, 1987). Here, one

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may point out that Norway may be another petrostate but is an exception. Norway does not qualify as a petrostate because it has a vast and diversified industrial base that produces enormous wealth and generates taxes for the government, while having a very large oil and gas income offshore. Norway is also a democracy. In other words, these examples show two possibilities– democracy and anti-democracy. It may be easy to conclude that Timor-Leste’s ideal future would be to become another Norway, instead of a typical petrostate which becomes an anti-democratic poor country. Yet, as we look closer at the conditions of the current Timor-Leste, and the trajectories of Timor-Leste’s history, Timor-Leste is likely to be neither a typical petrostate nor a prosperous Norway in Asia. Unlike one prediction, this chapter does not argue that Timor-Leste is en route to its eventual downfall and becoming a failed state.1 Instead, this chapter assesses the elements of the current state of Timor-Leste as a product of its historical legacy of resistance and justice, which is so far relatively shared by not only the current leaders but also by the international community. I also argue that the current circumstances appear to be influenced less by such historical context, and more by the international context, which has renewed efforts to focus on how to manage China’s growing influence in the region. In conclusion, I argue that the historical legacy of resistance and the principle of international law as a context in which elites and influential neighbors make decisions may allow the country to muddle through to become a relatively insignificant country, which may help to at least retain democratic credentials, but results in a continuing struggle to survive economically. This assessment is crucial because the case of Timor-Leste demonstrates the intersection of the changing nature of economic fragility and dependency, international attention and its corresponding ethical mandate, and domestic governance. Because Timor-Leste is a product of decolonization, it was granted international legitimacy to be a sovereign state. However, it was pushed around by the cold war power struggle, and various economic interests (fossil resources and its financial gain). Thus, our analysis of the current problems of Timor-Leste becomes instructive to understand the conundrum as well as the possibility for a small and poor country to survive. To make this argument, this chapter first categorizes and explains three endowments of Timor-Leste which have so far been deployed and can also become useful resources for the Timorese to mobilize for the better, namely (1) socio-economic factors such as geography and population, (2) fossil resources, and (3) the historical legacy of resistance and the principle of international law. The first endowment of socio-economic factors may be obvious as they are the economic fundamentals to help define economic growth. The second endowment of fossil resources is also an economic fundamental but carries a special meaning for Timor-Leste because the country is economically heavily dependent on oil and gas income for survival. Because of this heavy dependence on oil and gas, the country’s political trajectory 1

Rebecca Strating of La Trobe University, Australia, testified to Australia Parliament’s Proof Committee Hansard, Canberra on 14 March 2017 saying, “(W)e see this in a number of fragile resource-wealthy post-conflict states: the resource curse… To go back to that idea of being the architect of their own demise, it is very possible to that they could be … But since 2012 it seems to me that this pursuit of independence may actually create a failed state in Timor-Leste.”

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is greatly influenced by the negotiation over the use of fossil resources. Finally, we are obligated to narrate the final key endowment because the historical legacy of resistance and the principle of international law as contexts guide the behavior of key actors including both domestic and international leadership. The key argument here is that the third endowment is the key to the successful utilization of the second and first endowments.

Endowment One: Socio-Economic Factors Timor-Leste is small. It is the 41st smallest country in the world, with a land area of 14,900 square kilometers (sq. km). Timor-Leste is about the same size as Northern Ireland in the United Kingdom or the state of Connecticut in the United States. The population in 2022 was about 1.3 million, which is an increase of more than double from 600,000 people when Indonesia invaded the country in 1975. The country struggles to provide resources for the growing population. The education standards, including teacher quality and physical infrastructure, are low and vary among schools. The average schooling time in 2021 was 10.3 years for boys and 10.9 years for girls, but the expected years of learning (estimated schooling achievement) were 6 years for boys and 6.3 years for girls (ADB, 2022, p. 5). The healthcare system, also by ADB’s account, is “inadequate… Access is also hindered by physical distances and costs… the low quality of healthcare, an important aspect of human capital development, undermines the quality of life” (ibid.). Geographically, the country can be roughly divided into north and south by the mountain range that stretches from east to west. The northern coastline is dry and more populated, whereas the southern coastline facing the Timor Sea across northwestern Australia is less populated. In the Timorese government plan, the southern coast is the target for industrialization, utilizing the future natural gas pipeline from the Timor Sea. The highest mountain peak is 2,960 m high, one of the highest mountains in the former Portuguese colonies. Strategically, the mountainous terrain helped shelter independence-seeking guerrillas during the war against Indonesia but has become a challenge for the development of infrastructure installations in peacetime. Timor-Leste is relatively poor, and its income is heavily reliant on fossil resource extraction (oil and gas). Although Timor-Leste became a lower middle-income country in 2007, which is a slight upgrade from a low-income country, its income mainly comes from oil and gas extraction, which provides almost 90% of the government budget (ADB, 2022). In other words, Timor-Leste lacks a strong income base besides oil and gas, and this makes the country acutely vulnerable to price fluctuations in the international fossil market. The gross domestic product (GDP) in 2021 was around US 1.65 billion dollars, and per capita GDP was 1,230 dollars in 2021, which is about the same as it was in 2017 (ibid.). The country ranks 160th out of 194 countries in terms of per capita income.

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The agricultural land of Timor-Leste is about 23% of the total area, while 61.9% is considered a forest area, according to the 2015 World Bank Open Data. The Asian Development Bank (2022) says that agriculture contributed only 19% to the GDP in 2020 but about 60% of the whole population was engaged in agriculture, mostly in rural areas. To improve access to the rural population, the Timorese government has allocated more than half of the national budget for infrastructure development since its independence in 2002. The goal is to provide roads and electricity to the countryside, in the hope of accelerating economic diversification and fostering private industries, so as not to entirely rely on the state coffer of fossil income. With heavy investment in thermo-electric generators, the electricity supply has improved, but about 24% of the population is not linked to the electricity grid (ADB, 2022). Timorese obstacles for economic diversification extend to more than having roads and electricity: the issue is that the government has not been effective in meeting basic social needs such as providing jobs and securing food. ADB’s country partnership strategy summarizes the enormous challenges of Timor-Leste as follows: … The hurdles to broader economic diversification and private sector development include inadequate infrastructure and services; public sector inefficiency; a weak business-enabling environment; and an underdeveloped financial market. Environmental degradation and climate change pose challenges to food security and sustainable development. As two-thirds of the population depends on agriculture for subsistence, improving and strengthening agricultural resilience and productivity are vital. The high prevalence of food insecurity has been exacerbated by rising global food and fuel prices because of the pandemic and severe floods in 2020 and 2021, and more recently the Russian invasion of Ukraine. With 20% of the population between 15-24 years old, creating jobs for youth is one of the most pressing priorities. (ADB, 2022, p. 1)

Although the ADB may soften the language, the urgent issue at hand is that Timor-Leste has problems in the management of state functions, which has become a major obstacle to fostering the private sector to help the country shift away from the reliance on the fossil economy. The World Bank’s 2022 report echoes the same: Enhancing the effectiveness and the efficiency of public spending is essential to improve the impact of fiscal policy on economic activity. The 2021 World Bank Public Expenditure Review (PER) suggests that large increases in public spending have had a limited impact on medium-term economic growth. Continuously improving public financial management (PFM) is fundamental to improving the quality of fiscal policies… (WB, 2022, p. 14)

In summary, after 20 years of independence, Timor-Leste has still underdeveloped infrastructure, traditional agriculture, a scant domestic industry base, and low-quality human resources. It struggles to manage the country’s public sector, whose spending is the main source of GDP. For a country that abruptly ended the colonization by Portugal after almost 300 years and was ruled under brutal occupation by Indonesia for 27 years,2 Timor-Leste’s underdevelopment is not unique. What is unique is that 2

The Portuguese governor first established the rule in 1702, and the administrative rule lasted until 1975 when Indonesia invaded the colony. The Indonesian rule lasted until 1999. The United Nations transitional authority was established in October 1999, which lasted until the independence in May 2002.

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the oil and gas resource exploration, which supplies almost 90% of the national budget, is presently stalled because it was entangled in diplomatic bargaining with Australia. Meanwhile, the international community mostly ignored the diplomatic entanglement between the two countries and let it stall even though the Timorese government’s budget almost entirely relies on the income from the sale of oil and gas. Therefore, we need to discuss the issues surrounding the second endowment, oil and gas, to understand the conundrum.

Endowment Two: Curse of Offshore Oil and Gas Timor-Leste’s future depends very much on oil and gas income and has been so since its independence in 2002. But this comes with two distinct macro-level disadvantages compared to other petrostates. First, its currently available oil and gas reserves sit in the Timor Sea, not inland, and the known fossil resources are limited within its small territory. These aspects are crucially different from other petrostates such as Sudan, Algeria and Libya, where the reserves are located inland, and more fossil resources, let alone the potential for exploration, are available in a larger territory. There are two known major oil and gas fields, namely the Bayu Undan and Greater Sunrise fields in the Timor Sea. The Bayu Undan field has provided the current income but is being depleted, while the Greater Sunrise field has the potential to provide future income, but its exploration has been stalled due to diplomatic disagreements over many years. The Bayu Undan field, a location nearly 500 kilometers offshore from Darwin, Australia and 250 km offshore from the southern coast of Timor-Leste, has been in operation to exploit mostly gas since 2004, which had given Timor-Leste 50% of the upstream income (and this income is almost 90% of its national budget) so far. Yet, the Bayu Undan field was expected to be depleted by the end of 2022,3 and change its well function to store carbon dioxide instead.4 The Greater Sunrise field is also located in the Timor Sea off the southern coast of Timor-Leste by 150 km and nearly 450 km offshore from Darwin, Australia. The 2018 Maritime Boundary Treaty (MBT) gave Timor-Leste more stake in exploration and left open the possibility for the processing pipeline to extend either to Timor-Leste or 3

The Timorese cabinet approved a draft decree to decommission activities in the Bayu Undan oil and gas field on March 22, 2023. https://en.tatoli.tl/2023/03/23/govt-approves-draft-decree-law-ondecommissioning-activities-in-bayu-undan-field/09/. 4 It is reported in news that the Bayu Undan field will change into a carbon capture and storage facility by Australian company Santos, which bought the facility from US-based ConocoPhilips in 2020. Australia’s Barossa field, another offshore natural gas field, side-produces large amount of CO2 (2.3 million tons per year), and this CO2 is scheduled to be piped from the Barossa field to Darwin and then Darwin to the Bayu Undan field for storage. By giving CO2 to Timor-Leste, Australia can claim Barossa as carbon-friendly gas field, and Timor-Leste gains by selling carbon credits to Australia. However, the dollar amount Timor-Leste will earn from this venture is not yet known. See Amanda Battersby, “World’s largest CCS project sat for sanction in 2023.” Upstream online (June 15, 2022).

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to Australia, depending on the outcome of diplomatic, technical, and financial negotiations. MBT gives Timor-Leste 80% of the income if the processing pipeline from the Greater Sunrise field is extended to Australia whereas it gives Timor-Leste 70% if the pipeline is extended to the southern coastline of Timor-Leste, locally called Tasi Mane. The Tasi Mane coastline consists of three identified clusters, namely Suai, Betano and Beacu cities, according to the government’s Strategic Development Plan 2011–2030 (SDP) which was adopted by the government and approved by the parliament in 2010 and has been a key guiding document for Timor-Leste’s development. The 10% income difference depending on the future pipeline installation was meant to assume that if Timor-Leste successfully brought the pipeline to its own soil, it would generate extra downstream processing income, such as corporate tax revenues and salaries from gas and oil processing plants. However, even in the short-term, Timor-Leste has extra miles to reach to exploit the oil and gas in the sea basin, and Timor-Leste’s challenges are unpredictable and uncertain as it needs to eventually stop relying on fossil resources for its survival. In my view, Timor-Leste needs to meet the following three conditions if it wants to earn from the Greater Sunrise field: (1) successful diplomacy to settle disputes with Australia, (2) the technology and financial power to exploit the oil and gas reserves, and finally, (3) a national strategy to wisely utilize the oil and gas income to help diversify their economic base, other than continuing to rely on the oil and gas income. The third aspect is a longer-term strategy, and Timor-Leste must develop its diversified industrial base without relying on fossil resource extraction, especially when the world community is trying to move away from fossil resource use to reduce greenhouse gases to prevent an ever-hotter planet. First, on diplomacy, the negotiation between Timor-Leste and Australia has been centered on which country gains more from the known oil and gas exploration, in particular from the Greater Sunrise field. The Greater Sunrise field was discovered in 1974 and is said to have the largest potential for natural gas extraction (worth more than US 40 billion dollars) in the Timor Sea but has not been developed up to now. There are two areas to settle in diplomacy—a maritime boundary dispute and the sharing of income from fossil exploitation. The Maritime Boundary Treaty made great progress in favor of Timor-Leste in 2018 but the income issue is complicated as it relates directly to the second condition—who has the technology and financial power to exploit the oil and gas. Before the MBT was concluded, the Treaty between the Democratic Republic of Timor-Leste on Certain Maritime Agreements in the Timor Sea, widely known as CMATS, signed in 2006, was in force and provided 50:50 income sharing from fossil extraction in the negotiated area. This area was called the Joint Petroleum Development Area (JPDA), which was agreed upon by Australia and Timor-Leste at the time of Timorese independence in 2002. Notably, significant seabed fossil fields (i.e. most of the Greater Sunrise field) lay just outside of the JPDA (Schofield and Arsana, 2007). Dissatisfied with the JPDA deal, Timor-Leste sought to change the maritime boundary to include the Greater Sunrise field by redefining the boundary in accordance with international law. The median line between the two countries would give

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Timor-Leste clear control over the Greater Sunrise field. But, under the CMATS signed in 2006 by both governments and approved by the Timorese parliament in 2007, Timor-Leste was bound to honor the agreement for the duration of 50 years or until 5 years after fossil exploration ends. The CMATS gave another advantage to Australia: the agreement prohibited either party from participate in any effort to draw a maritime boundary in accordance with international law. Again, if an international maritime boundary is drawn, it would have been the median line from the coast of two countries and given Timor-Leste the entirety of the Greater Sunrise field. Under the CMATS terms, therefore, Australia had enjoyed the upper hand in negotiating space for fossil exploration of the Greater Sunrise field. Praised as a landmark agreement, the success of concluding the 2018 MBT which gave Timor-Leste territorial control of the Greater Sunrise field, had multiple reasons. Professor Michael Leach (2018) attributes Timor-Leste’s successful conclusion of the MBT to the following three factors. First, the new Australian labor government changed its foreign policy to soften its stance on maritime boundary negotiations. Second, Australia failed to defend the CMATS in an international court which ordered Australia to re-negotiate the maritime boundary in good faith as Timor-Leste demanded. Third, Australia made a strategic calculation that it is better diplomatically to abide by international law when it criticized the Chinese for not abiding by the international court order in the South China Sea dispute (Leach, 2018). Journalist Hamish McDonald (2020) further elaborates on the second point on the reason why Australia lost in a proceeding at the international court. Timor-Leste’s demand in court was that Timor-Leste withdraw from the CMATS because it was, at the time, negotiated in bad faith. It became evident from witness testimony that Australia was conducting a bugging operation on the Timorese leaders since the time leading up to the conclusion of CMATS (McDonald, 2020). This spy scandal was initially revealed in 2013 by Bernard Collaery, a former attorney-general of the Australian Capital Territory (ACT) and a lawyer who had been helping Timor-Leste’s resistance long before the 2002 independence. Collaery was representing a witness (called “Witness K” in the trial) who knew of the bugging operation by Australian intelligence over the fossil exploration discussion among Timor leadership and was willing to give testimony in support of Timor-Leste at the International Court of Justice. The Australian government in response barred “Witness K” by cancelling his/her passport for national security reasons. As explained above, Australia chose to renegotiate with Timor-Leste by giving up CMATS, and concluded the MBT in 2018, which gave Timor-Leste one victory in favor of their fossil interests. Yet, the Australian pursuit of Collaery on the grounds that he violated national security law continued until July 2022 when the AttorneyGeneral of the Albanese government finally dropped the case. The decision to drop the charge may have been due to the fear that further trials would reveal intelligence gathering practices to the public that should remain secret (McDonald, 2022). The negotiations over how to exploit the Greater Sunrise field consist of many bargaining dimensions such as bilateral and multilateral diplomacy, technological superiority, financial power, and leadership in domestic politics. On the bargaining in bilateral and multilateral diplomacy, Australia, which is increasingly worried about

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the Chinese influence in the Pacific region, aims to maintain its sphere of influence in Timor-Leste. China, as it advances its sphere of influence into the Pacific region, may come in to help Timor-Leste with both technical and financial resources in the Greater Sunrise field production if Australia is unwilling to negotiate in Timor-Leste’s favor. In fact, Timorese President Ramos-Horta in mid-2022 pressured Australia by stating China may take over the Greater Sunrise field exploration (Lyons and Ferguson, 2022). Meanwhile, the 2023 ASEAN chair Indonesia which disfavors Australia’s rise but has so far been friendly to Chinese economic interest may bring in Timor-Leste as its eleventh member state in the November 2023 ASEAN summit. By joining ASEAN, Timor-Leste may be able to use ASEAN as a bargaining cover and/or ask ASEAN member states such as Malaysia and Indonesia for necessary fossil exploration technology and funding if and when it is convenient to diminish Australia’s influence over Timor-Leste. Japan meanwhile favors keeping out Chinese influence in Southeast Asia and hopes to maintain a stable and cheap supply of natural gas from Timor-Leste. In other words, the regional powers are competing for influence over Timor-Leste’s fossil fuel exploration needs and ambitions, and this competition can become a favorable bargaining card for Timor-Leste. Second, on technological superiority and financial power, Australian companies have the clear upper hand over Timor-Leste as they have decades-long experience in oil and gas exploration and processing in the Timor Sea and maintain close ties with global fossil companies and buyers, including those in Japan. An Australian company, Woodside Petroleum (currently Woodside Energy), owns 33.44% of the Greater Sunrise field while the Timorese government via a state company Timor GAP owns 56.56%, and Osaka Gas of Japan owns the remaining 10%. Despite its majority ownership, Timor-Leste has virtually no domestic fossil exploration industry or technology, nor well-trained human resources in the industry, in addition to its very limited financial power. What the Timorese government has, on the other hand, is its major ownership share and its ability to trigger nationalism and political leadership to navigate to pursue its national interest, especially when the regional powers compete for influence. As explained in the previous paragraph, Timor-Leste’s bargaining position can be strengthened by exploiting regional power rivalries, given its extreme disadvantages in technology and financial power. Also, another power to be recognized in this negotiation for the Greater Sunrise field development is the utilization of market power, especially when it comes to the sale of global commodities such as oil and gas by multinationals. At first glance, Woodside Energy as the operator has no interest in bringing the pipeline to the Tasi Mane coastline. If the pipeline is to be connected to the Tasi Mane coastline (the abovementioned Strategic Development Plan 2011–2030 states that the Beacu city on the coast will be an LNG plant cluster) the pipeline would have to be extended across the 3,000-meter-deep Timor Trench. In addition, journalist McDonald reports that a consultancy study concluded that the Indo-Australian plate “is moving north at seven centimeters a year, meaning it would move 1.5 meters over the life of the project” which makes a pipeline to Tasi Mane from the Greater Sunrise field physically impossible to maintain, implying that the only possible pipeline for exploration is that to Darwin, Australia (McDonald, 2022).

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Another issue pertains to the financing of the Tasi Mane development project. To finance the entire Tasi Mane development project, it will reportedly cost US$15–20 billion, which is by any account, a considerable sum that surpasses Timor-Leste’s petroleum savings in the US$19 billion Petroleum Fund. Consequently, Woodside Energy and other companies may be asked to contribute to the development of facilities in the project. Alternatively, Woodside Energy can simply choose to postpone the Greater Sunrise field development as it has other oil and gas fields in production. Japan’s Osaka Gas as a buyer also can look for other gas sources if Woodside chooses to do so. Timor-Leste on the other hand needs to find both a developer and a buyer at the same time, which will require a demonstration that Timor-Leste is commercially trustworthy in the view of multinationals—i.e. a stable government even if it is anti-democratic. Surely, China may also be a candidate to help develop the Tasi Mane coastline, and if this happens, Chinese interests will sit right next to northern Australia, threatening the sea lane near the strategic Lombok Strait. Third, on a strategy to wisely utilize the oil and gas income (including the currently saved cash) to help diversify the economic base, Timor-Leste faces mounting challenges. As the Asian Development Bank in its Country Strategy for 2023–2027 document states, the oil and gas revenues “represented 88%” of the total Timorese government revenues in the 2015–2020 period and ADB therefore advocated for the development of a non-fossil economy (ADB, 5). Mainly from the natural gas income, the accumulated income is currently saved in the Petroleum Fund, which acts as a buffer to mitigate the impact of volatile international market prices of natural gas. The Petroleum Fund was created in 2005 and is the sole instrument to manage fossil sales whose income so far had peaked at US 19.6 billion dollars in 2021 but declined by a billion in 2022. Therefore, Timor-Leste’s government budget hangs in the balance with the future sustainability of the Petroleum Fund, and this is the reason for the Timorese government to accelerate the Greater Sunrise field exploration as an additional income source. A well-respected local NGO, Lao Hamtuk, warns that given the budget projection based on the Ministry of Finance, the Petroleum Fund will be “exhausted” by 2035 if the government continues to withdraw from it at the current pace (Lao Hamtuk, 2023). Charles Scheiner (2015), Lao Hamtuk’s researcher since 2011, also anticipates the crisis from depleting the oil and gas in the Timor Sea: Although anything is possible, the country’s small and constrained land and sea area, geological structures, and 120-year history of oil exploration make significant additional reserves unlikely…. During Timor-Leste’s most recent offshore licensing rounds in 2006, no company that had previously explored the area submitted a bid. (Scheiner, 2015, p. 89)

Scheiner also added with a pessimistic tone: Timor-Leste must fortify its strongest resource – its people – by investing in education, nutrition, health care, and rural water and sanitation. It must develop agriculture, the sector that employs most of its workers, to meet basic necessities and reduce need for imports. … Timor-Leste has about 10 years before the only ship that can take the nation away from poverty – its remaining petroleum wealth - will have sailed. If the nation has not built a solid foundation for its non-petroleum economy, the Petroleum Fund safeguards will have failed to avert the resource curse. Sadly, the Petroleum Fund may have been only a delusion of

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economic security that enabled Timor-Leste’s officials, advisers and donors to delay difficult decisions and avoid challenging tasks. (Scheiner, 2015, pp. 92–93)

There is another key dependency of Timor-Leste in addition to its dependency on oil and gas for the national budget. Timor-Leste’s national currency has been the United States dollar which helped the macroeconomic stability overall after the 2002 independence. Yet, the US dollar economy provides a structural incentive to bring out US dollars overseas much easier than having to exchange a national currency in an exchange market. The lack of own national currency (although the government issues Centavo coins to supplant values below one dollar US bill) and the use of US dollars nationally gives people incentives to bring US dollars outside of TimorLeste (for example, to Indonesia, Singapore and Australia) where the US dollars can easily be exchanged and used for valuable purchases, rather than leaving their money in Timor-Leste where few latest valued goods and services are available, or are often more expensive. The incentive to send US dollars becomes stronger as the US dollar becomes more valuable against other familiar currencies such as the Indonesian Rupiah or Australian dollars. Furthermore, almost ten years after the 2002 independence, Timor-Leste had only Australian, Indonesian and Portuguese commercial banks which helped transfer the US dollar to/from the respective country currencies such as Australian dollars, Indonesian Rupiah and Portuguese Euro.5 This banking business structure reflects the fact that foreign contractors from these countries made use of these banks as they acquired Timorese government infrastructure contracts in US dollars, and then sent the profit back to their own country. A further disadvantage for Timor-Leste is that there are few Timorese contractors which can compete to win large scale infrastructure projects, as they lack experience and economy of scale. This limitation in infrastructural conditions and skilled human resources encourages the capital flight of Timor-Leste’s national wealth, which means that cash earned from the sale of oil and gas does not fully stay and circulate within the national boundary of Timor-Leste. In addition, corruption exacerbates the prevalence of capital flight. It is worth noting that the ADB points out the issue of corruption saying “(s)ome progress was made toward stability and the establishment of democratic institutions, but Timor-Leste ranks 82nd out of 180 economies in Transparency International’s 2021 Corruption Perceptions Index” (p. 6). The issue of corruption in Timor-Leste is a serious matter given the small economic and financial base. The Anti-Corruption Commission (ACC), which was created in 2009 as an independent agency to combat corruption, points out the existence of corruption in the public sector, referring to the massive infrastructure procurement amount as a subject of a corruption investigation. The ACC’s deputy commissioner in a speech delivered to a UN crime agency in 2019 acknowledged that the agency investigated 29 corruption cases from which the estimated state loss was US 18 million dollars in 2016, 24 cases with an estimated 5

The Australian bank is ANZ Bank established in 2001, the Indonesian PT Bank Mandiri in 2003 and PT Bank Rakyat Indonesia in 2017, and Portuguese Macao Banco Nacional Ultramarino Timor in 2000. The Timorese government owned commercial bank Banco Nacional de Comercio de Timor-Leste was established in 2011.

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loss of US 1.5 million dollars in 2017, and 36 cases with an estimated loss of US 1 million dollars in 2018 (Castro, 2019). According to him, a “poorly designed” funding control mechanism was one of the main reasons for those corruption cases (p. 148). In summary, Timor-Leste is likely to continue with the second endowment (oil and gas) to extend the life of the current economic structure while having enormous challenges to invest in, innovate, and foster a domestic industrial base. Education and health are critical areas, as well as roads and bridges, but prioritizing these items for implementation while stopping leaks (corruption and currently flight) are necessary. The country’s vulnerability is clearly its heavy dependence on old and gas. The government will continue its plan to cash in the income from the Greater Sunrise field, which is its only large income source, to extend the lifeline for the country for the next decade or so. However, the life support from oil and gas does not make the country sustainable in the long run. If Timor-Leste can succeed in fostering a domestic industrial base which employs its own people, especially youths, and let them save money to enlarge the size of the domestic currency circulation, having a domestic currency instead of US dollars may become a good option.

Endowment Three: Historical Legacy of Resistance and International Law The final endowment to be deployed by the Timorese is the nation’s historical foundation, particularly its legacy of resistance against foreign domination, and the role of the United Nations to help the Timorese independence buttressed by the principles of international law. Therefore, current domestic politics and changing regional power relations are also the variables that influence the nation’s legacy of resistance against foreign domination and the principles of international law. As explained above, Timor-Leste’s recent struggle for liberation shows that the country fell victim to the power struggles of large nations in the region for ideological and political domination (for example from the Cold War), and control over economic interests (oil and gas). However, it is also necessary to consider changing the nature of these factors alongside the changing power relations. We also need to understand these factors by paying attention to the contexts in which Timorese elites and large powers in the region make decisions in the intersection of the changing nature of economic fragility and dependency, international attention and its corresponding ethical mandate, and domestic politics. First, all nations produce some kind of myth to keep the people united, especially when faced with threats from the outside, such as wars and economic crises. The wars in Vietnam during the Cold War were a vivid example that united the people against foreign domination. Yuval Noah Harari’s idea of “fiction” that initially helped unite humans via the spread of money, imperialism and religion (Harari, 2011), helps to explain the case of Timor-Leste’s nation-building process to become

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a member of the global community. In other words, practical selections from the colonial legacy serve the present needs as decided by elites. For example, Timor-Leste was colonized by Portugal and its part of the legacy remains part of present TimorLeste’s social fabric. Few Timorese groups in today’s Timor-Leste despise current Portugal or the Portuguese people or food. Additionally, the Timorese Catholic faith came with Portuguese colonialism. One of Timo-Leste’s two official languages is Portuguese (the other is Tetun, a local language). In other words, the legacy of Portuguese imperialism persists in present Timor-Leste without the people hating them. Also, the memories of the brutal Indonesian occupation did not wipe out the Indonesian language which remains as a “working language” along with English or the traditional-style clothing “kebaya”. As described above, Timor-Leste’s national currency is US dollars for practical reasons, although the currency is printed in a country which gave the green light to Indonesia to invade Portuguese Timor. The reason for the use of US dollars is that the currency provides macroeconomic stability, and oil and gas are traded in US dollars in an international fossil market. The above-mentioned practical selection from colonialism by elites also applies to Timor-Leste’s current need for resource nationalism. Timor-Leste survives on the historical narrative of anti-colonial resistance and suffering, which resonates with resource nationalism and provokes public anger toward Western racism if the Timorese elites practically select to perceive a plot-like action by the West (Australia in this context) that undermines the Timorese development. Bovensiepen (2018) meanwhile points out the danger of resource nationalism by elites to drastically transform the Tasi Mane coastline without bottom-up consultation with the people regarding how much compensation to be paid for relocation (Bovensiepen, 2018, pp. 130–136). In other words, Timorese nationalism is a double-edged sword which, on the one hand, can unite the people, but otherwise hamper the capacity of elites to recognize the local opposition and concerns over the massive and sometimes distractive development projects as in the case of Tasi Mane development demonstrates. Looking back on recent history, Timor-Leste’s economic fragility and dependency is not purely a result of its subordinate relationship with Australia, but rather a product of an international power game. Portuguese Timor was invaded by Indonesia in December 1975 on the grounds that the Timorese would fall into the hands of communism after the 1974 coup in Portugal which granted its overseas territories, including Timor-Leste, the right to self-determination. Watching the major changes affecting their fate, the Timorese elites established two key political parties, namely Fretilin (Frente Revolucionãria de Timor-Leste Independente) and UDT (Unidão Democratica Timorense), both of which sought independence from Portugal. The Indonesian military, whose main concern was to ensure the elimination of left-leaning political movements which may instigate separatist sentiments, especially in the eastern part of its territory including Timor-Leste, was committed to undermining any Timorese independence aspirations by intervening politically via supporting the less popular pro-Indonesian political movement and party called Apodeti (Associação Popular Democratica Timorense), whose main supporters were conservative village chiefs (Dunn, 1995, pp. 61–63).

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By the end of September 1975, the Indonesian government decided to invade Timor-Leste, and started infiltrating the territory. The first major military landing took place on 16 October 1975. In response to imminent occupation, Fretilin, then the largest and independent-seeking political party, declared its independence on 28 November 1975. Portugal was of no help as it was going through its own political and economic turmoil. Relevant major powers, namely Australia and the United States, gave a covert green light to the invasion as they were fearful of communist influence in Asia, with the recent memory of the American defeat in Vietnam in April 1975 still fresh in their minds (Taylor, 1999, pp. 64–65, pp. 74–76). Using the fear of a rising communist movement in Southeast Asia, the Indonesian government lobbied other anti-communist Asian nations, while attempting to recruit pro-Indonesia Timorese leaders in preparation for the invasion and integration. Indonesia’s narrative was to show that the Timorese were to finally be reunited with Indonesia after the unjust Portuguese colonial rule by citing history back in the fifteenth century, just like Indonesia gained independence from the similarly unjust colonial rule under the Dutch (Kammen, 2018, pp. 33–35; Indonesian Foreign Affairs, 1984, p. 50). Yet, at the same time, brutal killings were taking place among Timorese themselves, including those between independent seeking UDT and Fretilin (Scott, 2005, pp. 358– 363). The only hope for the Timorese leaders to maintain their independence was the principles of international law and the United Nations Charter. The United Nations did not agree with the Indonesian invasion although Japan, Malaysia, and India, during the General Assembly’s Fourth Committee6 in their discussion on Indonesia’s invasion of Portuguese Timor, initially wanted to soften the language to avoid direct criticism of Indonesia (Inbaraj, 1995, p. 49). In the end, both the Security Council and the General Assembly adopted resolutions to condemn Indonesia’s actions and demanded withdrawal.7 Citing the violation of international law and the United Nations Charter, the General Assembly rejected the Indonesian claim that TimorLeste was integrated into Indonesia, and the UN continued to recognize Portugal as the legal administrative power of Timor-Leste. Australia, meanwhile, had a strong interest in exploiting the oil and gas resources in the Timor Sea. Negotiations between Portugal and Australia prior to the Indonesian invasion did not bear fruits, but the Indonesian invasion opened a renewed opportunity for Australian oil and gas industries, having seen the growing potential for export, especially to the fast-growing Japanese market. After a series of negotiations, Australia and Indonesia finally entered into a treaty called the Timor Gap Treaty 6

The UN’s 4th Committee which voted on a General Assembly resolution draft penned by Algeria, which condemned the invasion. 69 countries were in favor, 11 against (Benin, India, Indonesia, Iran, Japan, Malaysia, Mauritania, Morocco, Philippines, Saudi Arabia and Thailand), and 38 abstained (many in the Western countries including the United States). 7 United Nations Security Council Resolution 384 (1975) on December 22, which was agreed upon by all 15 members including the permanent five and Japan, deplored Indonesian military intervention but stop short of condemning the invasion, and called on Indonesia to withdraw “all its forces” from Timor-Leste. UN General Assembly Resolution 3485 also deplored the intervention with 72 votes in agreement to 10, with 43 abstentions.

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that divided the allocation of oil and gas resources (mainly natural gas) in December 1989. The Timor Gap Treaty effectively made Australia diplomatically recognize Indonesian sovereignty over Timor-Leste despite the United Nations’ decision to give Portugal administrative authority over the territory. Australia’s dealing with Indonesia was illegal according to international law (Clark, 1995, pp. 75–76). Based on the maritime boundary under the Timor Gap Treaty, the previously explained JPDA (Joint Petroleum Development Area) was drawn to give more leverage over the Greater Sunrise field to Australia in 2002 and CMATS afterwards cemented the deal in Australia’s favor until Timor-Leste successfully forced Australia to abandon CMATS and entered into current Maritime Boundary Treaty in 2018. By looking at the negotiations over the oil and gas interest, one could claim that Australia is a smart neighbor which pursued money-making practicality on the one side and asserted ethical considerations when convenient. A cynical view can openly embrace double standards if they can be justified in the name of national interest. However, as discussed in the previous section on the negotiations leading to the conclusion of the 2018 Maritime Boundary Treaty, not all Australian elites were cynical. For example, there was a witness from the intelligence circle who felt that telling the truth of spying served Australia’s national interest, and a former attorneygeneral of ACT committed himself to Timor-Leste’s right to self-determination (Leach, 2018). Behind them, thousands of Australian publics supported the Timorese independence by as many means as possible including pressuring their own government while condemning the Indonesian invasion of 1975. Such overseas public support for Timor-Leste’s cause did not end in Australia. Many countries where the Timorese diaspora settled after the 1975 Indonesian invasion had pockets of sympathizers in countries ranging from Australia, Japan, Mozambique, the United States, and many other countries in Europe, including Portugal. The sympathy reflected the public sentiment regarding what was right in the eyes of international law and the ethical obligations people felt to support the Timorese. The United Nations member states were often criticized for placing more importance on national interest over international law, and the public sentiment demanding justice (albeit that which is consistent with international law) was mentioned only in passing negotiations among the member states. However, in the case of Timor-Leste, the core argument to reject Indonesia’s sovereignty over Portuguese Timor persisted. In the end, under international pressure, Indonesia was forced to leave Timor-Leste. As Ali Alatas, the longest serving Foreign Minister of Indonesia wrote, Timor-Leste was “the pebble in the shoe” (Alatas, 2006) for Indonesia’s diplomacy and had to be removed. The case of Timor-Leste to this day provides a golden example of respecting the principle of international law and the proper role of the United Nations, which gathered international support backed by genuine public sympathy for the Timorese self-determination. Because of the importance of this historical legacy of resistance, both the Timorese and the international leaders are bound by it whenever they make their decisions. To understand the process of this rare golden example for the United Nations to successfully assist the right of self-determination, it is important to understand the

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background of domestic politics leading up to the 2002 independence. The background consists of 3 categories of groups which helped achieve independence in international coordination, and it is safe to say that independence may not have been achieved without such coordination among the 3 categories of groups. The 3 categories of groups also remain relevant to the mapping of current elites and also help to explain the delaying of generational change although it is inevitable if elites are willing to respond to youth aspirations. The three categories are in line with the structure of resistance elites and they are called “the 75 Generation” with reference to those leaders who joined in declaring independence in 1975: (1) diasporas who lobbied for independence overseas, (2) guerrillas who fought in the Timorese mountains and villages and (3) clandestine groups who smuggled goods and information in and out of Timor while studying in Indonesia and working as Indonesian public servants. Representing the leaders of the diasporas are the 4th and 7th President José Ramos-Horta and the first Prime Minister Mari Alkatiri, who assumed power in independent Timor-Leste after returning from exile. The guerrilla group is represented by the charismatic leader Xanana Gusmão, who was once a guerrilla commander captured in the 1990s by the Indonesian army and jailed in Jakarta before returning to Timor-Leste in 1999 to become the 3rd President of Timor-Leste (counting after the 1st President Xavier Amaral and 2nd Nicolau Lobato in 1975). Gusmão was also Prime Minister from 2007 to 2015. The same generation as Gusmão in this group is Francisco Lu-Olo Guterres who became the 6th President. Although a decade younger than Gusmão, a key person in this group is the current Prime Minister Taur Matan Ruak, who was the 5th President before assuming the current prime ministership. Finally, the clandestine group was a decade younger and represented by the late Fernando de Araujo who was the National Parliament President. His untimely death in 2015 made his own political party (Partido Democratico, or PD) consisting of much younger leaders seriously weakened. If we observe the way the political party competition is formed, we notice that it is in line with the above-mentioned 3 categories of elite divisions. In other words, in order to capture the prime minister’s seat, the party leaders continued to mobilize in line with the 3 categories from the 75 Generation even after 20 years of independence. Before the May 2023 parliamentary election, the two largest parties were led by the 75 Generation guerrilla leaders—Fretilin having 23 seats out of 65 total is led by Francisco Lu-Olo Guterres (former guerrilla, born 1954). Fretilin’s Mari Alkatiri (born 1949) who is a former diaspora remained as Secretary-General. The second largest CNRT (Congresso Nacional de Reconstrucão de Timor) having 22 seats is led by Xanana Gusmão (former guerrilla, born in 1946). The current president José Ramos-Horta (former diaspora, born 1949) who was a prominent diaspora leader and the Nobel Peace Prize laureate remains independent while his political stance has been aligned with that of Xanana Gusmão. The third party PLP (Partidu Libertasaun Popular—notice its name is in the other national language Tetun, not Portuguese) having 8 seats is led by current Prime Minister Taur Matan Ruak (former guerrilla, born 1956). A decade and younger generation belonging to the fourth largest party is above mentioned PD whose

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members come from the third category—the former clandestine group established by the late Fernando de Araujo (former student in Indonesia, born in 1964). PD is currently led by significantly younger Mariano Lopes (also a former student in Indonesia, born in 1975) and has always won around 10% of the votes and had only 5 seats in the parliament. After the May 2023 parliamentary election, the former guerrilla elites continued to gain public support, hence the same 75 Generation leaders continue to rule. Gusmão’s party, CNRT, won 41.6% of the votes followed by Fretilin’s 25.7%. This result gave CNRT 31 seats in the 65-seat parliament (2 seats short of a majority), and reportedly CNRT is in discussion with PD (which got 6 seats) to form a governing coalition, signaling Gusmão’s return to power.8 Hence, the current Timor-Leste elite structure can again be characterized as the return of the old guard—the 75 Generation. Despite a hopeful but brief transition of power to the younger generation in 2015, the 2021 presidential election gave José Ramos-Horta, another of the 1975 Generation, the presidency. Xanana Gusmão who will soon be 77 years old is firmly in power again. Given the fact that the CNRT and Fretilin’s campaigns leading up to the May 2023 parliamentary election were visibly led by the 75 Generation, it is clear that the dominance of the old guard will not spare the opportunity for grooming the next generation of leaders. Also, the upcoming Gusmão’s coalition government backed by popular mandate will likely demand his key agenda to bring the Greater Sunrise field pipeline to the Tasi Mane coastline. Australia will then likely be forced to manage the demand by either giving the pipeline to Gusmão or insisting on bringing it to Darwin or else letting Timor-Leste bring in China as a development partner. The mapping of these political parties shows the generational “un-change” of politics in Timor-Leste and may lead to a power transition crisis. The political leadership change to the younger generation is expected and necessary in this young nation especially given the growing youth aspirations for economic growth and employment (65% of the population is below 30 years old and youth unemployment is rising9 ). However, it is clear from the past six parliamentary elections10 including the one immediately organized before the formal independence, the guerrilla group has been dominating with the leadership of the 75 Generation, namely Fretilin’s Francisco Lu-Olo Guterres and CNRT’s Xanana Gusmão. Mari Alkatiri, a Fretilin insider as Secretary-General of the party and a diaspora leader has never been as popular as those Fretilin politicians from the guerrilla group because rural villagers shared resistance experiences with and occasionally protected the guerrillas during the Indonesian occupation. If the popular sentiment remains stronger with the former guerrillas than with the former diaspora or clandestine elites, the generational change in accordance with 8

See Australian Broadcasting Corporation. “Independence hero Xanana Gusmao’s party wins Timor-Leste election but falls short of majority.” 9 The youth (between 15 and 23 years old) unemployment rate has been increasing since 2010 from 9.1% to 13.3% in 2022. See FRED at https://fred.stlouisfed.org/series/SLUEM1524ZSTLS. 10 The first parliamentary election was held in 2001, followed by 2007, 2012, 2017, and 2018. The sixth parliamentary election took place on 21 May 2023.

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youth aspirations should occur within the former guerrilla group. Yet, the current power struggle does not allow a smooth transition of power to the younger generation. The guerrilla group under the leadership of CNRT’s Gusmão appears to be struggling to open doors to the younger generation especially due to the legacy of strict guerrilla command structure and unmatched charisma of Gusmão. Again, the diasporas were not in Timor during the resistance and the clandestine groups were literally hiding from villagers’ eyes and structurally part of occupying Indonesia. That makes both the diasporas and clandestine groups less popular among the masses even after 20 years of independence. Finally, it is important to capture the changing regional power relations which may alter the situation of Timor-Leste in the near future given the result of the May 2023 parliamentary election. As explained in the section on the second endowment (oil and gas), as regional powers vie for influence over Timor-Leste’s fossil fuel exploration, the country has the opportunity to leverage this competition as a favorable bargaining opportunity. This extends beyond monetary considerations and encompasses increased political influence in the region and greater international attention. It seems clear that President Ramos-Horta, whose fear is for Timor-Leste to become less relevant internationally, was playing the bargaining card with Australia so that Timor-Leste can work with China to accelerate the Greater Sunrise field exploration as well as the Tasi Mane development. Needless to say, China’s presence on the southern coast of Timor-Leste would be extremely uncomfortable for Australia whose priority is to play a responsible role in the AUKUS alliance to contain China and to keep its sphere of influence in the southern pacific region. Once the dispute over the exploration of the Greater Sunrise field is settled in favor of Australia to bring the pipeline to Darwin, Australia, the Timorese bargaining position will move to a new phase with more intense nationalism domestically. If the pipeline is to be installed to Tasi Mane, Timor-Leste, the Timorese will take on an additional financial burden to develop the southern coast, which will require foreign investors including the Chinese. In addition, as the rivalry between the United States and China intensifies, Australia and Japan will continue to take sides with the United States, especially to ensure safe sea lanes stretching from the Indian to the Pacific Ocean. The ASEAN region sits in the middle of the two oceans. Timor-Leste as a small state trapped between major powers will probably not benefit from this tension as the eleventh member of ASEAN. It is also difficult to expect ASEAN to play a constructive role if the tension between China and the US rises because current ASEAN as a whole is unable not only to send one unified message to China’s advancement to the South China Sea but also to find a credible solution to own member Myanmar’s military dictatorship. In this situation, the attention to Timor-Leste is and will be low on the list of ASEAN policy priorities.

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Conclusion Timor-Leste is a small and relatively poor country. Its bargaining position can only be improved by staying relevant in the international community and upholding the principle of international law. Joining in power rivalries, such as taking sides with one powerful country or another, is dangerous because it could force Timor-Leste to compromise on basic principles of international law, which are essential to its very existence. At the same time, finding the right niche in the regional power competition is also important for Timor-Leste when its historical legacy of resistance translates into rising nationalism. The right niche will depend on how Timor-Leste utilizes the three endowments to its advantage. Navigating these endowments requires careful political and diplomatic skills and carries serious risks if mismanaged. If mismanaged, Timor-Leste will be, once again, “an abandoned and almost forgotten half-island” (Sword Gusmão, 2003, p. 16). The first endowment (socio-economic), especially fostering human resources, requires middle- to long-term investment, regardless of who holds political power. The money required for middle- to long-term investment will need to come from the second endowment (oil and gas) income from the Greater Sunrise field as well as newly planned Bayu Undan carbon storage if the plan takes off. The financial management of the national budget drawn from the Petroleum Fund will need to be transparent to avoid corruption. The third endowment, the historical legacy of resistance and principle of international law, is the political pillar of Timor-Leste. They cannot be an obstacle to nation-building efforts. Changing regional power relations poses another danger as explained above. A helpful and timely task is to address and successfully complete the transfer of power to the younger generation in line with rising youth inspiration. Acknowledgements The author is grateful for edits and helpful comments by Chi Zhang and Binh Trinh on my earlier draft. I also thank the graduate students at Akita International University for valuable comments during my presentation on this topic in May 2023.

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Index

A Asian culture, 7 Authoritarianism, 2, 7, 11, 12, 18

B Businesses, 17, 61, 67, 98, 101–103, 105, 110

C Citizenship, 17, 36, 92 Civil society, 2–4, 6, 20, 22, 29–34, 36, 38, 39, 42–45, 78–88, 92, 110–112 Cold war, 8, 10, 14, 16, 151, 160 Colonialism, 91, 92, 161 Compliance, 2–7, 11, 22, 23, 32, 43, 94, 106, 107, 111, 112 Conflict, 20–22, 30, 36, 38, 44, 45, 109 Crony capitalism, 22

D Democracy, 1, 2, 4, 6, 7, 10, 11, 22, 24, 92, 94, 113, 151 Democratic transition, 15, 21–24, 93, 94, 115 Developmental neoliberalism, 121, 138, 140 Developmental state, 11, 14, 15, 18, 24, 129, 138 Development processes, 3, 29, 44, 78, 81, 84, 86 Digital economy, 21, 51–53, 56, 63

Discrimination, 23, 92, 99, 103, 106, 107, 110

E East Asia, 11, 13–16, 20, 121, 138 Economic autonomy, 33 Economic development, 7, 12, 44, 83, 87, 94, 96, 101, 110, 117, 137, 138 Economic liberalism, 9 Economic regionalisation, 77, 79–82, 86–88 Economic transformation, 4, 6, 8 Economic transitions, 1, 23 Electoral process, 93, 110 Employment relations, 51, 52, 63, 66, 67 Entrepreneurs, 62, 67, 98, 100, 110 Environment protection, 22, 83, 86, 87 Ethnicity, 19, 20, 23, 91–95, 97, 99, 101, 105–107, 110, 111

F Flexibility, 17, 21, 51–53, 57, 59, 69, 71 Foreign capital, 12, 13, 17, 97 Freedom, 6, 11, 18, 19, 21, 22, 39, 68, 71, 92, 102, 111, 116

G Gender, 17, 19, 20, 37, 93 Geopolitics, 14 Global governance, 8, 19 Globalisation, 81 Good governance, 4–6, 22, 31, 32, 92

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 C. Zhang and B. T. A. Trinh (eds.), Governance in Transitional Societies in East and Southeast Asia, https://doi.org/10.1007/978-981-99-5306-6

171

172 Governmentality, 11, 15–18, 21, 30, 34, 35 H Home owners, 123, 129–137, 142 Hong Kong, 2, 5, 7, 12, 13, 17, 23, 24, 121–142 Housing affordability, 23, 24, 122, 123, 137, 139 Housing markets, 129 Housing policy, 121, 122, 140, 142 Human agency, 20 Hybrid neoliberalism, 24

Index Neoliberal exception, 11, 17, 18 Neoliberalism, 2, 14, 16, 18, 23, 24, 81, 121, 133, 138, 139 New Economic Policy (NEP), 22, 23, 95–101, 103–110, 116 NGO, 20, 29, 30, 32–46, 158 NGOisation, 21, 29, 32, 33 Non-state actors, 3, 8, 19, 22, 78, 79

O Ocean economy, 166

I Independence, 24, 40, 91–95, 102, 103, 110, 112, 149, 150, 152–156, 159–166 Indonesia, 2, 5, 6, 17, 20, 21, 51–59, 61, 63, 65–68, 71, 149, 152, 153, 157, 159, 161–166 Infrastructural development, 159 Interdisciplinary research, 4 International Monetary Fund (IMF), 8–10, 14, 18 International relations, 22

P Petrostate, 24, 149–151, 154 Political economic, 1 Postcolonialism, 6, 29 Postsocialism, 18, 29 Poverty, 7–10, 22, 94–96, 107, 108, 110, 111, 158 Private sector, 3, 15, 34, 79, 138, 153 Privatisation, 30, 31, 34–36, 40, 46, 96, 103 Public housing, 2, 13, 121, 123, 129, 130, 133, 139, 140 Public policy, 32, 113

L Labour, 4, 5, 17, 19, 21, 36, 42, 43, 52–54, 56, 61, 65, 66, 69, 71, 107, 139 Labour markets, 9, 21, 51–54, 56, 57, 61, 63, 67, 69, 71, 135 Labour policy, 21, 51 Laos, 78–80, 82–85 Local accommodation, 2, 8, 10

R Regionalism, 77, 80, 81, 87 Resistance, 2–4, 7, 11, 16, 20, 22–24, 31, 34, 36, 45, 53, 92, 94, 101, 103, 106–108, 110, 111, 149, 151, 152, 156, 160, 161, 163–167 Resource curse, 24, 149, 150, 158 Restructuring policies, 7, 9, 10, 15, 16, 31, 32, 34, 45 Rights, 16–19, 21, 30, 34, 35, 37, 63, 67, 81, 83, 92, 99, 113, 116, 134, 138

M Malaysia, 2, 13, 17, 20, 22, 23, 91–96, 98–101, 103, 106–111, 113–117, 157, 162 Marketisation, 30, 34–36, 39, 40, 46 Market socialism, 15, 16, 19, 46 Middle-classes, 22, 23, 36, 94, 104, 116, 122, 130, 134, 137, 141 Middle-income countries, 37, 130, 152 Mixed methods, 136 Moral economy, 36, 112 N Nationalism, 12, 24, 105, 157, 161, 166, 167

S Social engineering, 116 Socialism, 10, 15, 18–21, 33, 34 Southeast Asian studies, 5 Spatial governance, 19 State control, 7, 9, 11, 14, 19, 21, 30, 33, 39, 46, 94, 100 State legitimacy, 7 State-owned enterprises, 12 Statistics development, 99, 127 Structural adjustment, 2, 8, 9, 14, 30, 77 Sustainable development, 153

Index T Tensions, 16, 20, 22, 91, 116, 117, 121 Thailand, 2, 22, 57, 63, 78, 82–85, 126 Timor-Leste, 2, 6, 24, 149–167 Trade unions, 21, 33, 51, 52, 63, 68, 69, 71 Transitional societies, 2, 5, 6, 8, 20

U Uncertainty, 34, 103, 109 United Nations, 149, 160, 162, 163

173 V Vietnam, 2, 5, 15, 17, 19–21, 30, 33–38, 40–43, 45, 46, 82, 84, 160, 162

W Welfare restructuring, 2, 31 Women, 20, 30, 36, 37, 39, 44–46, 57, 59, 83 Worker status, 51, 63, 66 World Bank, 6, 8–10, 31, 32, 153

Y Young population, 135