Regional Outlook Forum 2007: Summary Report 9789812304537

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REGIONAL outlook forum 2007

Summary Report

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

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REGIONAL

~

outlook forum 2007

Summary Report

Institute of Southeast Asian Studies Singapore

First published in Singapore in 2007 by ISEAS Publishing Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Road Singapore 119614 Internet e-mail: [email protected] World Wide Web: http://bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the Institute of Southeast Asian Studies. © 2007 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions expressed in this publication rests exclusively with the contributors and their interpretations do not necessarily reflect the views or the policy of the Institute, or its supporters. ISEAS Library Cataloguing-in-Publication Data The Regional Outlook Forum (10th : 2007 : Singapore) Regional Outlook Forum 2007 : summary report. 1. Southeast Asia—Politics and government—Congresses. 2. Economic forecasting—Southeast Asia—Congresses. 3. Southeast Asia—Economic conditions—Congresses. 4. Terrorism—Southeast Asia—Congresses. 5. National security—East Asia—Congresses. 6. Haze—Economic aspects—Southeast Asia—Congresses. I. Institute of Southeast Asian Studies. DS526.7 R331 2007 2007 ISBN ISBN

978-981-230-450-6 (soft cover) 978-981-230-453-7 (PDF)

The Regional Outlook Forum 2007 received generous support from:

Typeset by International Typesetters Pte Ltd Printed in Singapore by Utopia Press Pte Ltd

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CONTENTS Preface

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1.

Opening Remarks K. Kesavapany

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2.

Keynote Speech: Religious Extremism in Southeast Asia Chandra Muzaffar

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3.

Strategic Trends in East Asia Robert Sutter, Robyn Lim and Jusuf Wanandi

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4.

Dynamics of Regional Economics Manu Bhaskaran, Hendrawan Supratikno, Mohamed Ariff, Peter Wallace, Low Sin Leng, Peter Brimble and Song Seng Wun

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5.

Luncheon Speech: Hong Kong’s Hinterland — Pearl River Delta and Beyond Victor Fung

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6.

The Haze: Economic and Social Ramifications Emil Salim, Gurmit Singh K.S. and Simon Tay

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7.

Political Trends in Thailand, Malaysia, Indonesia, and Myanmar Chris Baker, Maznah Mohamad, Michael Vatikiotis and Zarni

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8.

Terrorism Rohan Gunaratna and Greg Fealy

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9.

Concluding Remarks Chin Kin Wah

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Forum Programme

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Speakers and Panellists

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Rapporteurs of the Regional Outlook Forum 2007: Summary Report

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PREFACE The region of Southeast Asia was in the grip of the Asian financial crisis from late 1997. More than any other time, analysts, policy-makers, academics, businessmen, as well as the ordinary person in the street wanted to find out the outlook for the region — when will the gloom end and the boom return? In this atmosphere, the team at the Institute of Southeast Asian Studies held the first Regional Outlook Forum (ROF) to try to shed some light. Since then, the ROF has been held annually and it has become the flagship conference event of the Institute. The issues that have been examined at the ROF have varied, but the key issues of the strategic environment, the economic health, and the prospects for political stability in the region have been the recurrent themes. Speakers at the ROF have always been selected from among the top and prominent analysts of the region, not forgetting the regular feature of a keynote speech, usually given by an eminent person selected from the field of politics and international relations, economics, and social policy. This Summary Report of the Tenth ROF held on 4 January 2007 is the inaugural summary of proceedings of an ROF. It records the most significant points raised by the speakers at the Tenth ROF. Hopefully it will serve as a guide for action for the reader for the rest of 2007 and beyond. The writing is deliberately light and breezy, helped by the fact that speakers were asked to put aside their academic styles to make their insights accessible to everybody. Full versions of the papers can be downloaded from http://www.iseas.edu.sg. Thank you for taking the time to read this Summary Report. We look forward to seeing you at the Eleventh ROF to be held in January 2008.

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1 OPENING REMARKS •

Ambassador K. Kesavapany Director, Institute of Southeast Asian Studies

Excellencies, Ladies and Gentlemen, Friends A very good morning to each and everyone of you, Happy New Year and a very warm welcome to the Tenth Regional Outlook Forum. Let me begin by suggesting that as we look towards 2007, we cannot but be starkly reminded that 2006 was a year with a number of turbulent patches. In particular, the civil war in Iraq captured media attention everywhere and even as I speak the unfolding drama of Saddam Hussein’s death is being felt beyond Baghdad. There is increasing pressure for a U.S. withdrawal. The trauma of a premature departure will invariably impact on the global order and undoubtedly embolden cavalier states. The region was not spared either with its fair share of natural disasters and political upheavals, including the 19 September coup in Thailand that caught many people by surprise. Surprises did not end there. The series of explosions on News Year’s eve brought unprecedented tension to the Thai capital, away from the southern provinces where it has hitherto been contained. ISEAS Director Ambassador K. Kesavapany I am highlighting these two incidences, one regional and the other international, as attendant developments are still unfolding. There are many more instances, including positive changes, which we can individually or collectively highlight as a means to assess what 2007 has in store for us. In this respect, when we at ISEAS polished our crystal ball, as we are wont to do now and then, our attention was drawn to a host of important issues. We selected what we considered were the more striking ones, and to help us understand these, we are privileged to have with us today a panel of distinguished experts.

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REGIONAL OUTLOOK FORUM 2007: Summary Report

One of these issues which is increasingly preoccupying regional governments is the harsh reality that extremist groups and individuals have become bolder and more creative in sowing distrust and hatred in our communities, especially between Muslims and non-Muslims. Unfortunately, meaningful dialogue among religious faiths that can help stem this trend has yet to effectively take root in our societies. To address this, we have the honour of having with us Dr Chandra Muzaffar, renowned social activist for justice and peace, to deliver the keynote address. Another issue we have selected is the frustrating annually recurring haze, the intensification of which threatens not only the regional health and the economy of member countries but also tends to strain the unity among ASEAN’s peoples. More than in previous years, questions are being raised by a more environmentally aware citizenry. Questions like what concrete actions regional governments have taken to prevent or at least minimize the occurrence of haze. To answer some of the more searching questions we are privileged to hear the views of the three eminent individuals. Pak Emil Salim of Indonesia has worked on the environment agenda both on the international and national scenes for decades. We also have the renowned environmental activist from Malaysia, Mr Gurmit Singh K.S., and Professor Simon Tay from the Singapore Institute of International Affairs. The third is an issue that continues to occupy our minds — terrorism. The consensual wisdom is that the overall intensity of the threat has somewhat decreased, thanks to the determination and timely action of individual governments in the region, but that flashpoints still remain and that there must not be a let-down in regional vigilance. We have two internationally acclaimed experts, Professor Rohan Gunaratna and Dr Greg Fealy, to help us understand the overall Southeast Asian situation and to assess how real the threat is. On the geostrategic and economic front, there is no denying that China has become and will continue to be a major driver of economic growth. It has become common knowledge that China presents immense opportunities for the ASEAN countries. However, we felt that we should have a more focused look at one of the sub-regions of China. In this regard we are very fortunate indeed to have Dr Victor Fung from Hong Kong to address us at lunchtime about developments in the Pearl River Delta. Another issue that featured prominently in our crystal ball was the question of energy security. In this respect, I am pleased to inform

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Opening Remarks

you that ISEAS organized the first ever Singapore Energy Conference in November 2006. A report of that Conference is now available from ISEAS. As many of those present here today attended the Conference, we decided not to revisit the issue. Before I introduce the keynote speaker I want to highly recommend to you three excellent publications that ISEAS produced in 2006. The first is Voices of Islam in Southeast Asia which has received excellent reviews, the latest being that by Sharon Siddique in the Straits Times a few days ago. Among the well-deserved accolades, it has been adopted as a textbook by universities in the United States. One of the editors of the book, Dr Greg Fealy, is with us today and if you get the book quickly enough, you can get him to autograph it. The second publication is Southeast Asia in Search of an ASEAN Community by Rod Severino who has had a long and highly distinguished diplomatic career and who was the former Secretary-General of ASEAN. From these vantage points, Rod captures very vividly the ideals of ASEAN, the actors of the ASEAN process, the state of ASEAN today. The publication has been very well received in the United States and Europe and I would suggest is a must read for everyone in this region. The third and latest is The Reluctant Politician: Tun Dr Ismail and His Time by Dr Ooi Kee Beng which is a very sensitively written human portrayal of former Malaysian Deputy Prime Minister Tun Dr Ismail. Many of us remember the late Tun as a man of great courage and integrity who had a clear sense of what was needed to keep the peace and balance in a country that had to deal with communalism. We foresee this book flying off the shelves and would urge you to get your personal copy quickly. Kee Beng is also with us today. On that note, I wish every one of you a fruitful day at the Regional Outlook Forum. If for any reason you miss any of the presentations today, be assured that ISEAS will webcast the entire Forum on our website. Thank you.

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2 KEYNOTE SPEECH: RELIGIOUS EXTREMISM IN SOUTHEAST ASIA •

Dr Chandra Muzaffar President, International Movement for a Just World

Dr Chandra Muzaffar (right) with Ambassador K. Kesavapany

Dr Chandra Muzaffar reminds us that not unlike similar incidents in a history that goes back to the last decade, radical fringe groups have exploited religion as a tool in their quest for power. This comes out fairly clearly if we examine the causes of recent acts of extremism, which are not connected to religion per se. There are, first of all, factors relating to domestic governance. Breakdown of the internal law and order situation easily degenerates into arguments and disputes about religion. In such cases, there is usually lurking in the background, state policies which have the effects of weakening or alienating the position of a cultural or ethnic minority and these policies often lead to political grievances and even a violent backlash. Southern Thailand, southern Philippines, and parts of Indonesia provide clear examples. Another response to the unfairness is fanatical interpretation of religion, some of which propose the establishment of a religious state as the path to justice for the alienated groups. Aggressive religious proselytization to strengthen the identity and numbers of the religious groups, usually lead to religious polarization, which extents to the ethnic as well as religious arena if the latter identities are intertwined.

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Keynote Speech: Religious Extremism in Southeast Asia

Afar but not absolved of blame are the global causes. The invasions of Afghanistan (2001), Iraq (2003), and suppression of the Palestinians’ legitimate aspirations have sprouted worldwide sympathies as well as religious brethrens who feel angry and obliged to help. This leads to the impression of teutonic religious struggles where in fact it is a geostrategic problem. Denigration of Islam by a fringe group of Christian-Zionist groups, leading to a deterioration of inter-religious harmony, is one clear case of such unfavourable portrayal. Dr Muzaffar also counted as a global cause the Al-Qaeda-led goal of establishing a global caliphate. He said its Southeast Asian manifestation is the Jemaah Islamiyah (JI). Dr Muzaffar then took a close look at Southeast The people of the region accept Asia. He said despite the rise in religious extremism, religious-cultural diversity and Southeast Asia enjoys a remarkable degree of interreligious harmony. To him, the situation is not incidenpractice, tolerance and inclusiveness. tal but due to several characteristics of the region. For These have been their hallmarks for one, the people of the region accept religious-cultural many centuries. diversity and practice, tolerance and inclusiveness. These have been their hallmarks for many centuries. Generally, Southeast Asians adopt a “live and let live” attitude. In addition, bearing the messages of peace and kindness, both Islam and Buddhism have contributed to an atmosphere of regional inclusiveness. Also not to be discounted is the fact that governments in the region have strongly advocated religious moderation and inclusiveness. What should the world and in particular the region do to combat religious extremism? Dr Muzaffar suggested the following emphases. For the region, there must be a solution to the causes and consequences of the conflicts in the Philippines, Thailand, and parts of Indonesia. True for the region as well as around the globe, there should be good political governance. Political elites’ accountability, popular participation in politics, equitable distribution of wealth and opportunities that enhance the dignity of every community should become the goals of governance. Governments should demand an end to the U.S. occupation of Iraq, and the creation of a truly independent Palestinian state based upon UN resolutions. Professor Tommy Koh asking a question after the keynote speech. There should also be a conscious effort by governments to counter extremist interpretations of religion, especially by mobilizing the moderate, mainstream Islamic intelligentsia.

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3 STRATEGIC TRENDS IN EAST ASIA Panellists: • Professor Robert Sutter Professor of Asian Studies, School of Foreign Service, Georgetown University, USA

•

Professor Robyn Lim Professor of International Relations, Nanzan University, Japan

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Mr Jusuf Wanandi Vice Chairman, Board of Trustees, Centre for Strategic and International Studies Foundation, Jakarta

Presentation by Professor Robert Sutter The U.S., China, and East Asia, 2007–2008

Professor Robert Sutter

The United States will continue to urge Beijing to be a “responsible stakeholder” in international security.

Professor Robert Sutter saw U.S. foreign policy towards Asia remaining basically unchanged and pragmatic in 2007–2008. This means that Asia is secondary in President Bush’s foreign policy priorities. In this regard, Professor Sutter suggested that the United States is likely to take the following courses of action in the next two years. 1. The Bush administration is likely to continue using the 6-Party Talks to persuade North Korea to reverse its nuclear weapons programme, unless Pyongyang deliberately seeks to follow a policy of nuclear proliferation. 2. President Bush is likely to continue to emphasize the positive aspects of U.S. China relations. The United States sees Beijing as focussed on promoting China’s economic development, while maintaining domestic political stability. But the United States will continue to view China’s growing military power and international influence warily. The United States will continue to urge Beijing to be a “responsible stakeholder” in international security. 3. The U.S.-Japan Alliance is likely to deepen. The easing of China-Japan and Japan-South Korea tensions during the visit of new Japanese Prime

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Strategic Trends in East Asia

Minister Shinzo Abe to Beijing and Seoul in October 2006 and thereafter will be welcomed by the United States. 4. Begin significant initiatives and advances in U.S. relations with some Asian countries in particular India, Pakistan, and Afghanistan. President Bush visited India and signed a landmark U.S.-India nuclear agreement in 2006. He also held summit meetings with the leaders of Pakistan and Afghanistan in 2006. 5. Strengthening relations with energy-rich Kazakhstan.

On Southeast Asia, the Bush administration has become more active in developing initiatives towards individual ASEAN states and ASEAN as a whole. This was partly an attempt by the United States to catch up with ASEAN’s free trade agreements and other formal arrangements with China, Japan, and South Korea. But the United States has not agreed to the ASEAN Treaty on Amity and Cooperation (TAC), and remained ambivalent on participation in the annual ASEAN-led Asian Leadership meeting that required agreement to the TAC as a condition for participation. The United States is not opposed to Asian regional organizations that excluded other involved powers like the United States, but Washington’s favour has focussed on regional groupings open to the United States and other concerned powers. U.S. Secretary of State Rice made extraordinary efforts to participate actively in the annual ARF meeting in 2006. The Bush administration also strongly supported the Asia-Pacific Economic Cooperation (APEC). President Bush attended the APEC summit in Vietnam in November 2006. In August 2006, the United States announced that it was planning to appoint an ambassador to ASEAN, and that the U.S. Treasury Department intended to establish a financial representative post for Southeast Asia. But Myanmar will continue to complicate U.S. relations with ASEAN.

Presentation by Professor Robyn Lim Northeast Asia: A Nuclear Weapons “Breakout”? Professor Robyn Lim pointed out that while U.S. policy towards the region of East Asia is second priority to the United States now, there are specific issues in Northeast Asia that could turn that around very quickly.

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REGIONAL OUTLOOK FORUM 2007: Summary Report

Professor Robyn Lim

She said in Northeast Asia, inter-state tensions and insecurity that were the legacy of the Cold War remained unresolved, despite some changes and new realities. For instance, U.S.-Japan security interests are not as congruent as they were during the Cold War. Japan is feeling more insecure because of the steady pace of China’s force modernization, the nuclear missile brinkmanship of North Korea, and China’s unwillingness to rein in Pyongyang. The issue is whether Japan will decide unilaterally to go nuclear. Washington is trying to convince Tokyo that it can continue to rely on the U.S. nuclear umbrella. Australia and Indonesia are keeping their options open regarding the acquisition of a nuclear deterrent, due mainly to the rapid pace of China’s military modernization, especially its maritime and missile capabilities. Therefore, notwithstanding the best efforts of every stakeholder, a faster pace of nuclear proliferation could occur.

Presentation by Mr Jusuf Wanandi Major Powers and the Strategic Future in East Asia If nuclear proliferation is kept in check, it will have a positive impact on the strategic outlook for the East Asian region. Mr Jusuf Wanandi was cautiously optimistic because of the capabilities of the regional governments and major powers in steering significant issues away from breaking points. These issues in the past few years include the North Korean nuclear impasse, cross-straits tensions between China and Taiwan, and the downturn in China-Japan relations. Furthermore, for building trust and interdependence, growing regional economic integration, and the vision of building an East Asian Community (EAC) will help to stabilize and institutionalize peace in the international relations of the region. It is important for East Asia to Mr Wanandi said that East Asia should focus on signal to the US that the proposed building greater political trust among themselves, EAC will be open and inclusive. especially between the big powers. The role of the United States will be crucial. It is important for East

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Strategic Trends in East Asia

Asia to signal to the US that the proposed EAC will be open and inclusive. ASEAN, acting together with South Korea, should remain the driving force behind the vision of building an EAC, until there is greater trust between China and Japan. Finally, Mr Wanandi remarked that over the past two decades, political developments in the region have been positive, and have expanded the political space and civil liberties in South Korea, Taiwan, and the ASEAN member countries with the exception of Myanmar. With a rising middle class, this positive trend should continue. Mr Jusuf Wanandi

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4 DYNAMICS OF REGIONAL ECONOMICS Panellists: • Mr Manu Bhaskaran Partner/Head, Economic Research, Centennial Group

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Professor Hendrawan Supratikno Institute of Business and Informatics, Indonesia

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Professor Mohamed Ariff Executive Director, Malaysian Institute of Economic Research

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Mr Peter Wallace President, The Wallace Business Forum, Philippines

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Ms Low Sin Leng Senior Executive Director, SembCorp Industries, and Executive Chairman, SembCorp Parks Holdings Ltd

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Dr Peter Brimble President, Asia Policy Research Company Limited, Thailand

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Mr Song Seng Wun Regional Economist and Head of Research, CIMB-GK Research Pte Ltd

The panel on regional economics with Chairman of the session, Mr Stephen Lee (fourth from left).

For the region of Southeast Asia, economic growth and development remain the cornerstones of peace and stability, not just domestically but also for its international relations. Hence the economic outlook as well as

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Dynamics of Regional Economics

the dynamics of growth and development of Southeast Asian countries are priority concerns. In spite of short-term risks, the At the Regional Outlook Forum, Session II addressed outlook for the Southeast Asian the dynamics of Southeast Asian economies through economies was structurally a panel discussion covering the general economic positive. issues and/or trends within ASEAN, and specific case studies of Indonesia, Malaysia, the Philippines, Vietnam, Thailand and Singapore. The panellists remained generally optimistic about Southeast Asian economies. This was summarized very well by Mr Manu Bhaskaran, who asserted that in spite of short-term risks, the outlook for the Southeast Asian economies was structurally positive. On the region’s economic health as a whole, despite On the region’s economic their optimistic outlooks, the speakers were mindful health as a whole, despite their that their positive forecasts might not necessarily transoptimistic outlooks, the speakers late into actual positive growth. This was manifest in were mindful that their positive Mr Bhaskaran’s emphasis on the dependence on globforecasts might not necessarily al liquidity and risk tolerance, Professor Supratikno’s translate into actual positive elaboration of key structural problems in the Indonesian growth. contexts, and Professor Ariff’s observations of the economic aspects that appeared problematic in Malaysia.

Presentation by Mr Manu Bhaskaran Growth Prospects and Outlook for ASEAN Economies Mr Bhaskaran presented an overview of the projections, growth prospects and economic outlook for ASEAN. He posited that while there were short-term risks, structurally, the outlook for the Southeast Asian economies was positive. The speaker noted that 2007 could mark a cyclical turning point for ASEAN and recommended attention to global liquidity trends, OECD lead indicators turning down and one-off domestic factors. Structurally, he foresaw the Southeast Asian economies coping with competition and a general rising investment ratio. While the ASEAN countries were With reference to the economic prospects in ASEAN, exposed to global economic risks, Mr Bhaskaran noted that while the ASEAN countries were the global situation for 2007 was exposed to global economic risks, the global situation one of moderate risk. for 2007 was one of moderate risk. The “tech demand” was holding up and this he suggested would be vital

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REGIONAL OUTLOOK FORUM 2007: Summary Report

as the demand for electronics drives many economies. While the global economy is envisaged to decelerate, he remarked that this would be mitigated by a likely fall in oil prices matched by a corresponding peak in monetary tightening. On the impact of the United States on Southeast Asia, Mr Bhaskaran asserted that the nature of the slowdown would be pivotal for Southeast Asia. He The nature of the U.S. slowdown noted that the confluence of positives in the United would be pivotal for Southeast Asia. States such as monetary and financial stimulus, and the housing boom was ending. This was accentuated by a slow consumption, which is likely to presage a rise in savings, presently at their lowest since 1933. He added that U.S. companies would need to restructure, hold up business spending on IT, preserve profits and not expand capacity. Furthermore, the speaker noted that protectionism is likely to rise in the United States and that the Congress is bound to be hostile to free trade. He observed that the U.S. profit/GDP ratio is unusually high and that the U.S. dollar is likely to weaken modestly in 2007. With reference to China, the speaker noted that a short-term reacceleration of growth should be expected, monetary policy eased and investment flows increased. However, the element of risk is represented by an increase in the number of illegal loans, threat of excess capacity, a fall in pricing power and the emergence of financial constraints on the economy. Mr Bhaskaran also noted that ASEAN’s resilience to external and internal shocks have improved. He posited that not only are the economies more diversified, new niches of activity are also spurring Mr Manu Bhaskaran growth. On the intra-state front, domestic demand has been revived. Further emphasizing ASEAN’s resilience, the speaker stated that regional external Regional external balances are balances are robust, and large current account robust, and large current account surpluses and a sizeable rise in foreign exchange surpluses and a sizeable rise in reserves are the order of the day. Correspondingly, foreign exchange reserves are the financial sectors are stronger as evidenced by the order of the day. low rate of non-performing loans and the strong banking/corporate balance sheets.

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Dynamics of Regional Economics

FIGURE 4.1 Share of FDI to Developing Countries (In percentages) 30%

25%

China RHS ASEAN5 SE Europe/CIS

20%

15%

10%

5%

0% 1997

1998

1999

2000

2001

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2005

Mr Bhaskaran also noted that a more resilient ASEAN translates into better policy-making that is swifter and more effective in responding to the emergence of problems. The improvements on the policy fronts include flexible exchange rates, better fiscal positions creating extra space for stimulus packages, a check on inflation and more central bank credibility. However, he cautioned that the risk of political shocks remains, citing Thailand as an example. Nonetheless, he re-emphasized the positive aspects noting that a new investment cycle is raising growth with a reversal of the post-1997 fall, in addition to an increase in foreign direct investment (FDI) into the region (see Figure 4.1).

Dr Tin Maung Maung Than asking the speakers a question.

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REGIONAL OUTLOOK FORUM 2007: Summary Report

Mr Bhaskaran noted that across Asia, the post-1997 investment fall is reversing with the inducement to invest on the rise. He pointed out the rising returns on investment, improvement in capacity utilization, the upturn in the property cycle as well as the better business environment, as fundamentally determining a rise in investment expenditure. In addition, raising capital is becoming easier as banks are not averse to lending more. Focussing on Malaysia, the speaker noted the service niches of outsourcing, education, transport and health as sectors to watch out for in 2007. There are also supply side gains as evidenced by the large state driven projects launched in Sabah and Johor. He also mentioned the large oil finds but observed that the prognosis on manufacturing competitiveness was decidedly mixed. While the big tech MNCs such as Intel, Dell and Flextronics were growing, many Japanese companies are moving out. Commenting on Singapore, Mr Bhaskaran highlighted that the new engines of growth in the manufacturing sector that deserved attention are pharmaceuticals and high-end electronics. As for services, wealth management, oil-related services, computer animation and creative industries all represented sectors to watch out for in 2007. The speaker summed up his presentation with three fundamental points. Firstly, he noted that the cyclical risks are rising, and this X factor will be the nature of the U.S. slowdown. Secondly, ASEAN is finally reviving from the 1997 crisis, investment recovery being the main factor responsible for the revival. Finally, while the economic outlook is good, this may not necessarily translate into a positive market outlook. Mr Bhaskaran re-emphasized the dependence on global liquidity and risk tolerance, both of which can be potentially negative.

• • •

Cyclical risks rising, U.S. economy will be X factor. ASEAN revived from 1997 crisis on the back of investments. Dependence on global liquidity and risk tolerance could be potentially negative for ASEAN’s present momentum.

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Dynamics of Regional Economics

Presentation by Professor Hendrawan Supratikno Indonesia: The Largest and Most Populous Country in Southeast Asia Professor Hendrawan Supratikno presented an overview of Indonesia’s economic and business outlook in 2007 and beyond. He articulated an optimistic perspective of the Indonesian economy, but highlighted certain obstacles that can potentially impede economic progress. The speaker attributed his positive outlook to three key strategies of the Indonesian government: (i) maintaining macroeconomic stability, (ii) providing a conducive climate for investment, and (iii) increasing measures against corruption. This was explicated by his comparison of Indonesia’s relatively high economic growth rates (at a stable 5–6 per cent for the past three years) with other Southeast Asian states affected by the 1998 economic crisis (see Figure 4.2). He noted how the Bank of Indonesia had recently succeeded in curbing the inflation rate from 17.1 per cent to 6 per cent, and reduced the interest rates 9 times (see Figure 4.3). He drew attention to how the latter was a positive indicator as declining interest rates would decrease the borrowing rate of bank loans, and furthermore, facilitate larger investment. The speaker pointed out how the fluctuation of the Indonesian rupiah against the U.S. dollar in the past had been very wide, but the government’s measures have managed to confine the vacillating rates within a tight range. Noting the exceptionally good performance of the Jakarta Stock Exchange, Professor Supratikno illustrated how the Capital Market Index had increased steadily from 2006. He also emphasized how Indonesia had displayed an impressive export performance that was integrally linked to its export commodities such as coal, tin and palm oil. In fact, he remarked that by the end of 2006, a new record in Indonesian exports had been reported. Similarly, he stated that the budget deficit was manageable.

Professor Hendrawan Supratikno

Three key strategies of the Indonesian government: (i) maintaining macroeconomic stability, (ii) providing a conducive climate for investment, and (iii) increasing measures against corruption.

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REGIONAL OUTLOOK FORUM 2007: Summary Report

FIGURE 4.2 Indonesia: Economic Growth, 1998–2006 10

4.9

5

4.1

5.6

5.6

2005

2006

5.1 3.7

3.4 0.8

0

–5

–10 –13.1 –15

1998

1999

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FIGURE 4.3 Indonesia: Interest Rate, 2006 12.75

13

12.50

12.75 12.25

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11.75 11.25

10.25 10.75

9.75

9

7

5

5.25

5.00

4.75

4.50

Fed-rate

Dec-06

Nov-06

Oct-06

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Jul-06

Jun-06

May-06

Apr-06

Mar-06

Feb-06

Jan-06

3

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Dynamics of Regional Economics

Professor Supratikno balanced this positive outlook by highlighting the problems imminent within Indonesia. He By the end of 2006, a new record noted how there were structural problems: consumption in Indonesian exports had been still remains the prime mover of economic growth, and reported. Similarly … the budget as such Indonesia is still an “import-hungry economy”. deficit was manageable. Furthermore, the slow growth of the manufacturing sector has been exclaimed by certain Indonesian analysts as representative of a threatening deindustrialization. The presence of major portfolio investment over FDI was also troubling; he countered the claim of a resurgence of FDI in Indonesia, claiming that the increase is only reflective of higher approval rates, and not “realization”. Professor Supratikno noted that while the present Indonesian administration under the leadership of Susilo Bambang Yudhoyono was serious about combating corruption, the space for business players remained limited due to a cumbersome and/or costly government bureaucracy and legal systems. Similarly, he stated that the Indonesian economy was not autonomous of external factors and pressures such as decreasing oil prices. Other problems included There were structural problems: the fact that an estimated 17.75 per cent of the popuconsumption still remains the lation lives below poverty line, and if the World Bank prime mover of economic growth, definition of poverty is employed, it is more than 50 per and as such Indonesia is still an cent (see Figure 4.4). In addition to the high level of pov“import-hungry economy”. erty, the seeming norm of 11 per cent unemployment was pointed out as the most worrying problem of all.

FIGURE 4.4 Indonesia: Population Below the Poverty Line (In percentages) 23.43 25

18.41

17.42

17.75

20 15 10 5 0 1999

2001

2003

2006

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REGIONAL OUTLOOK FORUM 2007: Summary Report

The speaker’s view however remained largely positive in light of his discussion of linearly increasing economic growth in 2007 and beyond. Professor Supratikno emphasized that certain Indonesian sub-sectors such as infrastructure, communications, palm oil and services remained promising. If the growth rate in 2006 is observed in terms of the performance of individual sectors, transportation has been the most successful, followed by communications. Better infrastructure was noted as being promising for business in the future. The speaker expressed his hope for a decline in international interest rates and a 2007 will see the Indonesian better regulatory framework for Asian economies, coneconomy grow by 6–6.3 per cent. cluding his remarks by predicting that 2007 will see the Indonesian economy grow by 6–6.3 per cent.

Presentation by Professor Mohamed Ariff Malaysia: Sound Macroeconomic Fundamentals In an overview of the Malaysian economy’s “near-term outlook”, Professor Ariff concluded that it is one of the more stable regional economies primarily due to sound macroeconomic fundamentals. The speaker illustrated these macroeconomic foundations through indicators of Malaysia’s increasing GDP growth, projecting a growth rate of 5.9 per cent for Malaysia could have a growth rate the year as a whole. These indicators, according to the of 5.9 per cent for the year 2007 speaker, include exports that are still growing at doubleas a whole. digit rates and a lower growth of imports, leading to a substantial trade balance. Furthermore, Professor Ariff drew attention to capital flows as a stabilizing factor, noting that a small outflow of portfolio investment is balanced by positive FDI inflows. Fairly substantial foreign reserves amounting to an estimated US$80 billion, surpassing significantly the economy’s shortterm liability and external debt, prove that Malaysia has more reserves than necessary. Currently, Malaysia is facing a comfortable external In comparison to other regional debt that is less than 40 per cent of its GDP. Moreover, currencies, the Malaysian central less than 5 per cent of export is utilized to service this bank plays a more assertive role debt (see Figure 4.5). The speaker also emphasized in controlling the way in which the the ringgit’s depreciation after depegging, and claimed ringgit appreciates. that in comparison to other regional currencies, the Malaysian central bank plays a more assertive role in

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Dynamics of Regional Economics

FIGURE 4.5 Malaysia: External Debt/GDP 60 50 40 30 20 10

ExDebtGDP

controlling the way in which the ringgit appreciates. The state’s successful and progressive stock market that has recently exceeded the 1,000 mark in recent months is synchronous with the regional trend. Professor Ariff also noted that inflation has been brought down to approximately 3 per cent which has made it a non-issue at the moment, and that this deceleration of inflation has consequently led to real interest rates being in a positive zone after an extended period of remaining in the negative zone. The speaker drew attention to the major palm oil and rubber economies that have enhanced Malaysian export revenues and contributed to the GDP growth. He also highlighted the net positive impact of the rising price of petroleum on the Malaysian economy and the supplementary tax revenue that sustains the growth rate. He remarked that tourism remained the second highest foreign exchange earner, and was optimistic about 2007, which has been designated as “Visit Malaysia Year”. Professor Ariff highlighted a few problems that the Malaysian economy still faces, but remained

3Q06

1Q06

3Q05

1Q05

3Q04

1Q04

3Q03

1Q03

3Q02

1Q02

3Q01

1Q01

3Q00

1Q00

0

Debt Serv Ratio

Professor Mohamed Ariff

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REGIONAL OUTLOOK FORUM 2007: Summary Report

optimistic about its progress in general. He spoke of the difficulties being encountered by the construction sector, particularly its negative growth, but concluded that it would improve in 2007. Similarly, while noting the deceleration in the manufacturing sector, the speaker pronounced the sector as having a The manufacturing sector’s promising year ahead due to its growth rate being still increasing provision for nearly 10 per cent. Furthermore, the speaker impressed employment … illustrated a the manufacturing sector’s increasing provision for considerable decrease in excess employment which he noted, illustrated a considerable capacity. decrease in excess capacity. See Figure 4.6. While mentioning that Malaysia’s FDI figures remained limited in comparison to Singapore and Thailand, Professor Ariff discussed the recent upturn in FDI. In a similar vein, he remarked that the overall economic performance has been aided by the increase in foreign manufacturing investment approval as well as domestic approvals. The interest rate margin, Professor Ariff pointed out, has been holding up as the central bank revised interest rates at a number of junctures.

FIGURE 4.6 Malaysia: Manufacturing Sector 30 25

%yoy

20 15 10 5

Manf Employ (yoy%)

Manf Sales (yoy%)

Sep-06

Aug-06

Jul-06

Jun-06

May-06

Apr-06

Mar-06

Feb-06

Jan-06

Dec-05

Nov-05

Oct-05

Sep-05

Aug-05

Jul-05

Jun-05

May-05

Apr-05

Mar-05

Feb-05

–5

Jan-05

0

Ave Manf Wages (yoy%)

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He positively assessed the Malaysian banking system as fiscally sound, and predicted that even the non-performing loan problem was not a destabilizing factor and would be resolved soon. Another positive indicator, the speaker noted, lay in the comfortable federal government’s fiscal balance. The speaker highlighted one apparent shortcoming, namely Malaysia’s budget deficit that has persisted for Malaysia’s budget deficit has a decade, and remains comparatively disappointing in persisted for a decade. This relation to other post-1997 crisis-affected Southeast Asian deficit was decreasing as a countries. Professor Ariff highlighted however, that this percentage of GDP, and … deficit was decreasing as a percentage of GDP, and more than 95 per cent of this that more than 95 per cent of this deficit was financed deficit was financed by domestic by domestic borrowing. In light of the liquidity in the borrowing. system, he remarked that this budget deficit appeared manageable, and even functioned to stimulate a still under-performing economy. In presenting a “near-term economic outlook”, Professor Ariff remarked that the global economy’s slowdown was bound to impact the highly open Malaysian economy; however, he stressed its resilience. On the regional front, he noted On the regional front, he noted that Malaysia was that Malaysia was becoming becoming increasingly sensitive to East Asia, especially increasingly sensitive to China, rather than the United States as contrasted with economies in East Asia. approximately six years earlier when changes in the U.S. GDP growth gravely affected Malaysia’s. He remarked that while a slowdown in the United States would affect Malaysia, the latter was resilient enough to withstand these repercussions. The speaker cautioned that the electronics cycle was expected to soften and that the GDP growth was likely to decelerate in 2007. While noting that the import and export expansion may ease in 2007, he remained hopeful that the former would not depreciate as much as suspected, and that in the case of the latter, double-digit exports would still exceed imports, resulting in a comfortable trade surplus. In the “near-term”, Professor Ariff predicted that FDIs are likely to rebound modestly, the trade surplus will remain sizeable, inflationary pressures will be contained considerably, and interest rates will remain stable. The speaker cited certain forecasts for 2007 made by the Malaysian Institute of Economic Research (MIER), including a predicted inflation rate of 3.3 per cent that will reduce to 3 per cent in 2008. These findings

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also suggest that Malaysia’s GDP growth in 2007 will be approximately 5.2 per cent, which falls below their Forecasts for 2007: inflation rate … calculation of the state’s potential growth rate of 6.5 will reduce to 3 per cent in 2008. per cent. While this signified the underperformance … GDP growth in 2007 will be of the economy, the speaker remained optimistic that approximately 5.2 per cent. any figure above 5 per cent should be considered “healthy” (see Figure 4.7). Professor Ariff concluded with brief observations of certain key issues. These included the expected strengthening of the exchange rate, the undervalued ringgit still operating on a short lease, and the continued rise of the stock market with economic analysts expecting the 1,200 benchmark this year. The speaker also noted how governmental plans perpetuated fiscal stimulus and “growth momentum” in a yet underperforming economy.

FIGURE 4.7 Malaysia: GDP Growth 12 10

%

10

8.9 7.2

8

5.5 5.2

5.5

6 4

5.9

5.2

4.4

7.3

6.1

2

–4

’08

’07

’06

’05

’04

’03

’02

’00

99

98

97

96

–2

’01

0.3

0

–7.4

–6 –8 –10

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Dynamics of Regional Economics

Presentation by Mr Peter Wallace Philippines: Fragility and the Mixed Outlook

Mr Peter Wallace and his very interested panel members

Mr Peter Wallace said the Philippines is undergoing a fragile political situation with the President under The Philippines is generally constant threat. It is fiscally sound but risk of losing uncompetitive in most sectors … control hovered with the possibility of overspending vast disparity between the classes in 2007 elections. It was generally uncompetitive in of society … educational system is most sectors due to poor infrastructure, high power in disarray. costs, rigid labour laws, among others. There was a vast disparity between the classes of society — 53 per cent of the population rated themselves as poor. The country’s educational system is in disarray with very high level of children failing to finish secondary school. The Philippines has both pluses and minuses. Firstly, while it is witnessing some of the fastest economic growth in years, with some lowest inflation The Philippines is witnessing some and interest rates, the growth is too narrowly focussed of the fastest economic growth in on exports, overseas Filipino workers’s money and years, with some lowest inflation retail trade. See Table 4.1. Second, although there has and interest rates, the growth is too been impressive fiscal discipline, this has mainly been narrowly focussed. due to low spending rather than higher revenues. Third, the Philippines has some of the richest mineral

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TABLE 4.1 Economic Forecast for Philippines ITEM

2005

2006

2007

2008

GNP

5.1

5.5

5.8

6.1

GNP

5.7

5.7

6.0

6.2

Consumer Spending

4.9

5.7

5.4

5.4

Fixed Investment

(3.0)

(0.1)

3.1

7.6

Exports

2.3

9.7

10.1

10.0

Imports

1.8

2.0

4.5

6.4

Agriculture

2.0

4.6

3.2

3.9

Industry

5.3

5.3

5.9

6.0

% Growth Rate

resources in the world, but the Catholic Church opposes their exploitation. Fourth, while it has a skilled workforce for MNCs, it also has one of the worst bureaucracies in Asia. That said, the Philippines economy is expected to perform better in 2007. It is expected to grow by 5.8 per cent in 2007 and another 6 per cent in 2008 The Philippines is expected to grow vis-à-vis 5.5 per cent in 2006. This is because, 2007, by 5.8 per cent in 2007 and another being an election year mandates stronger spending. 6 per cent in 2008 vis-à-vis 5.5 per The government is also likely to spend on infrastructure, cent in 2006. and thus private construction activity is expected to turn around. Moreover, stable oil prices will foster improved household spending, and with support from the global economy, exports will provide an added boost. The economy is expected to perform better in the next two to three years, given higher government spending on infrastructure and social services, private investment responding to public investment, and a boom in property market. The Philippines offers lots of opportunities for the foreign investors. These include — information technology enabled services (ITES), mining, healthcare, electronics, tourism, agri-business, power, and property

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Dynamics of Regional Economics

development. For ITES, global players still rated the Philippines as the second-best outsourcing destination in Asia. Training centres have been established to overcome the shortage of skills issue, and higher value services have been introduced. However, manpower skills constrained growth. In 2006–2007, the industry could have grown modestly at 40 per cent with demand increasingly shifting towards balance of payment. For mining, the country has vast resources, and there is robust global demand especially from China. However, there are pressures on local governments from anti-mining groups and the Church. Despite this, performance will remain strong on a buoyant global market. In the healthcare sector Filipinos are planning to start retirement villages. They have some of the world’s best educated doctors and the best hospital equipment. The tourism sector witnessed strong growth in tourist arrivals in the last three years, and there has been phenomenal growth of budget airlines in the country. In 2006–2007, though tourist receipts could have fallen on poor infrastructure and security, but they have remained substantial at around 10–15 per cent growth per annum. Under property development, there is potential in terms of building offices and hotels as more call centres demand more space and tourist arrivals increased beyond 3 million. However, banks may still be reluctant to extend loans to real estate projects, except mid-income housing construction by occupiers. Nevertheless, the industry’s performance will be comparable with the last five years as new office projects are already underway. On the whole, while the government is the Philippines’ top investment barrier, given the low competence of the bureaucracy, its people are the main attraction to investments.

Presentation by Ms Low Sin Leng Vietnam: Ready for a Take-off Ms Low Sin Leng suggested that Vietnam is set to grow by 7.8–7.9 per cent in 2006–2007 after growing by 8.2 per cent in 2005. The pick-up in business Vietnam is set to grow by 7.8–7.9 per confidence and a surge in FDI for last three years cent in 2006–2007 after growing by supported the growth story (see Table 4.2). 8.2 per cent in 2005. As a country, Vietnam has a population of 85 million and an impressive coastline of 1,650 km. Ho Chi Minh City, the commercial hub of Vietnam, is very conveniently located in the region with travelling time from other Asian countries

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TABLE 4.2 Vietnam’s Growth Figures 1990 GDP Growth FDIs Inflation GDP Per Capita

2000

2005

2006(F)

2007(F)

5.1%

5.8%

8.2%

7.8%

7.9%

US$0.6b

US$1.97b

US$5.8b

US$9.5b

US$9.0b

67.5%

3.4%

9%

6.5%

7%

US$200

US$380

US$637

US$726

US$825

(China, Japan, Seoul) varying between 5 to 5½ hours (see Figure 4.8). Vietnam is gradually moving towards a market-oriented economy, and the government tries constantly to create more jobs and to reduce poverty. Over the years, the government has also made significant efforts to integrate itself with the world economy. It became a full member of ASEAN in 1995, an APEC member in 1998, and a WTO member in 2006. It has trade Vietnam became a full member of agreements with eighty countries and is a member ASEAN in 1995, an APEC member of various UN agencies. Given these, the country is in 1998, and a WTO member in surely moving towards a steady and stable growth of 2006. It has trade agreements with 7 per cent GDP. This is much higher than the avereighty countries. age GDP growth of around 5 per cent for ASEAN-5 countries.

Important foreign relations milestones 1995 : Full Member of ASEAN 1998 : APEC Member 2001 : US-VN Bilateral Trade Agreement 11/2006 : Member of WTO 2006 : Full Implementation of AFTA Vietnam has trade Agreements with 80 Countries Vietnam is a member of various UN agencies; including UN Human Rights Committee

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1hr 30min

3hrs 15min 4hrs 15min 5hrs 10min 5hrs 35min 1hr 25min

HCMC - Taipei

HCMC - Shanghai

HCMC - Seoul

HCMC - Tokyo

HCMC - Bangkok

HCMC - Hong Kong 2hrs 45min

HCMC - Singapore

Flight Time Hong Kong

Shanghai

Singapore

Taiwan

Korea

Indonesia

Philippines

Ho Chi Minh City

Vietnam

China

Beijing

Vietnam – Heart of Asia

FIGURE 4.8 Vietnam: Travelling Time from Other Asian Cities

Japan

Dynamics of Regional Economics

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REGIONAL OUTLOOK FORUM 2007: Summary Report

In 2006, Vietnam enjoyed high FDI inflows of US$9.5 billion. During 1998–October 2006, In 2006, Vietnam enjoyed high FDI while Taiwan (US$1,547 million) and South Korea inflows of US$9.5 billion. (US$1,246 million) were the most aggressive investors in Vietnam in terms of number of projects, Singapore was also important in terms of total capital invested (US$8.03 billion). In 2006 the United States also came in strongly, and this is expected to grow further. One of the reasons for this attraction to foreign investors is the domestic economy, which has maintained not only high growth, but also created conditions to develop the domestic market. The government, which is very stable compared to some other Southeast Asian countries, implemented pro-business strategies (tax holiday for ten to fifteen years, The government implemented zero tax on raw materials, profit repatriation, etc.) pro-business strategies (tax holiday and the country itself has a market of 85 million for 10–15 years, zero tax on raw people. It has a growing middle class, especially in materials, profit repatriation). Ho Chi Minh City, where there is much hidden purchasing power. According to the World Bank, overseas Vietnamese remit US$5 billion back to Vietnam every year. In October 2002, Political and Economic Risk Consultancy (PERC) rated Vietnam as the safest place in the Asia-Pacific region, and PERC rated Vietnam as the safest this statement holds true today, as it is not affected place in the Asia-Pacific region. by terrorism or other religious conflicts. Another factor behind the increased investment is the labour force. The workforce is young and diligent, with 60 per cent below thirty years old. It also offers a competitive labour cost vis-à-vis other ASEAN countries, with the monthly minimum wage around US$65. Vietnam provides many of opportunities in various sectors of the economy. These include: (1) infrastructure projects which the country is still relatively lacking and the government is aware of the condition; (2) construction — Singapore and Taiwan are the biggest investors in terms of commercial and residential projects; (3) telecommunications — although the regulatory regime is limited it is expected to be liberalized soon; (4) service industries include education, finance and tourism — language skills, especially English and Chinese, and financial skills were much sought after by the Vietnamese; (5) manufacturing sector including electronics, automotive and

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consumer products — the young workforce and low labour cost make Vietnam an attractive manufacturing base. Japan has been moving into Vietnam in a big way. Thus, overall Vietnam has been making steady improvements in its investment environment with strong government support and initiatives. It is now one of the fastest growing economies in Southeast Asia, and a successful renovation process will provide the country with many more new investment opportunities.

Ms Low Sin Leng

Presentation by Dr Peter Brimble Thailand: Uncertainties and Turbulence Dr Peter Brimble suggested that growth in Thailand is expected to moderately slow down from 4.8 per cent in 2006 to 4.5 per cent in 2007, reflecting the political uncertainty and ongoing decline in consumer confidence (see Table 4.3). The external sector is expected to deteriorate on slower export growth and hence the current account is likely to suffer. This lower growth will lead to lower government revenues and hence might put pressure on the fiscal situation.

Growth in Thailand is expected to moderately slow down from 4.8 per cent in 2006 to 4.5 per cent in 2007.

TABLE 4.3 Thailand’s Economic Projections 2004

2005

2006F

2007F

GDP

6.1

4.5

4.8

4.5

CPI (average, y/y)

2.7

4.5

4.7

3.1

Current account (% of GDP)

4.2

–2.0

2.0

–1.1

Fiscal balance (FY, % of GDP)

0.3

0.6

1.0

1.0

SOURCE: UOB.

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REGIONAL OUTLOOK FORUM 2007: Summary Report

However, the overall outlook is not so dull. Thailand remains high on the foreign investor conThailand remains high on the foreign fidence list, especially in Japan, Western Europe investor confidence list, especially and the United States. The net FDI inflows in in Japan, Western Europe and the 2006 reached record levels, amounting to US$4.5 United States. billion until August 2006. This could have led to increased activities in the country. But domestic private investment has fallen in 2006, following the rising energy prices. Against this picture, the country is currently undergoing some problems. Firstly, though Thailand was signing a number of FTAs, and most of the time it was not clear whether these were in Thailand’s favour. Second, in the past the country had a pro-business environment, which has now faded under the military government. Third, Thailand was said to have a developed infrastructure, but now there are serious doubts about the bidding and supervision process. Fourth, in terms of competitive costs, while the overhead costs were still lower compared with Vietnam, its salary costs were higher than certain competitors and are rising quickly. In addition to these, Thailand was also suffering from further fundamental weaknesses. Political instability was a sore point in the past year. The military brought the country back to stability with the coup in 2006, but this stability has been short-lived. There is a rather weak cast of characters in the Cabinet. The education sector has been neglected and mismanaged as it is seen more as a source of “income” rather than human capital for national development. The Thai business environment is generally not competitive as the absence of linkages in the supply side and low factor productivity might bring down the Thai manufacturing sector. That said, what were the specific concerns of doing business in Thailand? First, there are the foreign ownership regulations with the Foreign Banking, property ownership, Business Act being “reconsidered”. Second, a numand the stock market have been ber of business-related areas (banking, property affected by the perceived antiownership, stock market) have been affected by foreign measures. There is a lack of the perceived anti-foreign measures. Third, there consistency in economic and related is a lack of consistency in economic and related policies. policies in the areas of taxation, tourism, and the stock market.

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Nevertheless, Thailand offers lots of opportunities for foreign investors. First, it is a leading exporter of natural rubber, rice, sugar, seafood and some specific opportunities exist in processing rubber and tapioca. Second, Thailand is the largest producer of automobile in Southeast Asia and the second largest producer of one-ton pickup trucks. Further opportunities exist in auto assembly, auto part manufacturing, motorcycle production and higher value-added services (R&D and design activities, precision engineering and shipping services) that support these industries. Third, Thailand is a leading exporter of electrical and electronic products and specific opportunities exist in supplying parts and manufacturing higher end products. Fourth, the Board of Investment is strongly promoting alternative energy sources (biofuels, solar Thailand is the hub of the Greater cells, energy saving machinery) in anticipation of Mekong Subregion, which has a Thailand’s potential as a regional base for energy. strong infrastructure base. Finally on a regional basis, Thailand is the hub of the Greater Mekong Subregion, which has a strong infrastructure base and can generate greater benefits from cooperation. On the whole, after growing by 5 per cent in the last three years, Thailand is likely to show an above average performance in 2007. But the political problems will remain for now, which might delay the infrastructure projects and new reforms in the manufacturing sector.

Dr Peter Brimble

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REGIONAL OUTLOOK FORUM 2007: Summary Report

Presentation by Mr Song Seng Wun Singapore: Still Boleh in 2007

Mr Song Seng Wun

Except for one or two quarters in 2005, growth has been sustained for the last fourteen quarters.

The Singapore economy is projected to expand by 5 to 6 per cent in 2007.

2007 will also see a more broadbased growth model, especially with the services-producing sector, such as retail and hotels.

Compared with any other Southeast Asian economy, Singapore is the most stable and predictable. Except for one or two quarters in 2005, growth has been sustained for the last fourteen quarters. This was supported by the services sector, especially in the last part of 2006 when the construction sector was recovering from its downturn since 2002. Last year was an exceptional year for the Straits Times Index as it outperformed the average of the last fifteen years. For 2007 as well, the Index is expected to perform well but it may not repeat the performance of 2006. Looking at the job market, Singapore increased the number of jobs last year and it will continue to do so especially in the construction sector. The Singapore property market has been on the mend. Although the market is going up for luxury home buyers, the underlying mass market is relatively stable. The story has not been the same for the rental market. Office property rental has gone up in the Central Business District. As wages are also on the rise, this might add to business costs. The tourism sector has been booming on the back of more tourist arrivals. The banking sector is flushed with liquidity, which has kept a downward pressure on interest rates and hence inflation. The country has 5 million credit cards for 4 million people. With a better employment situation, the debt on credit cards has also come down. More money in the hands of the people, however, has not translated into an allrounded boom in the retail sector. This is because people are more willing to spend on higher-end goods and services than lower-end ones. Given this, on the back of sustained regional and global growth, the Singapore economy is projected to expand by 5 to 6 per cent in 2007. The construction sector, after a downturn of five years, turned the corner in 2006. In 2007, it is expected to grow by

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Dynamics of Regional Economics

another 3 to 5 per cent. The year 2007 will also see a more broad-based growth model, especially with the services-producing sector, such as retail and hotels.

A member of the audience asking about the finer points of the presentations by the regional economics panel.

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5 LUNCHEON SPEECH: HONG KONG’S HINTERLAND — PEARL RIVER DELTA AND BEYOND •

Dr Victor Fung Chairman, Greater Pearl River Delta Council; Chairman, Airport Authority Hong Kong; Vice Chairman, International Chamber of Commerce

Dr Victor Fung spoke on Hong Kong’s hinterland and the geostrategic implications of Hong Kong’s integration with its hinterland — the Pearl River Delta (PRD) within the People’s Republic of China (PRC). Hong Kong’s integration experience bears resemblance and lessons for Singapore and ASEAN. Singapore might not have a hinterland as Hong Kong does, but it can Hong Kong’s integration surely learn from the similarity of being a city-state experience bears resemblance connected closely to a bigger region. Therefore, the key and lessons for Singapore and issues are regional economic integration and building ASEAN. competitiveness. The history of Hong Kong’s economic integration with mainland China is conducted under the one country two systems principle — a construct that would never be compromised by either side. The integration started with the reform process in the 1980s initiated by Deng Xiao Ping, which saw the creation of a special economic zone with Shenzhen as its important focus. Hong Kong’s Hong Kong’s economic integration connectedness to the PRD, which is basically the region with mainland China is conducted in the mainland at the other side of the border of under the one country two Hong Kong, makes for the Greater PRD — consisting systems principle. of Hong Kong plus the PRD, a total population of 40 million — and further on, the Pan PRD, that is Guangdong province plus eight other provinces in the surrounding and two special economic zones of Hong Kong and Macau. With a population of 450 million and a GDP of US$900 billion, the Pan PRD has a size equivalent to ASEAN. The Pan PRD region — also known as the 9+2 region by the number of provinces and special economic regions it contains — has

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Luncheon Speech: Hong Kong’s Hinterland — Pearl River Delta and Beyond

strong complementarities between the economies of its areas. These southern Chinese provinces have been significant contributors to China’s competitiveess in globalization, and Hong Kong’s integration with the PRD without a doubt has been the core of it. In this regard, Hong Kong would continue to serve as the region’s financial, logistics, trading and service exporting centre. It owes the success to its highly efficient service platform, which benefits the whole region. Hong Kong has also been increasingly active as a training ground for development of human resources that China needs in globalization. For this matter, an increase in the number of nonlocal students would be imperative. In the past, Hong Kong universities used to have only about 2 per cent non-local students. Nowadays, about 10 per cent are coming from outside Hong Kong — mainly from PRC but also from the rest of the world — and the aim is to reach the level of about 20 per cent as the population of non-local students at Hong Kong’s institutions of higher learning. Another key issue in the integration would be the development of infrastructure that will connect regions in the PRD. The factors of connectivity between regions would be decisive in sustaining Hong Kong’s capacity in the flow of funds, goods, people and information in the region. An understanding of the source, destination, interaction and the changing natures of these flows are important. Hong Kong has been better connected to most of the other regions in PRD, but plan for connection to second- and third-tier cities is a must in the future, given that these are the future new sources of flows. There has to be a reorientation to capture new opportunities arising from these changing nature of flows, for example the raising importance and needs for development in the western part of China, which needs more infrastructure development in transportation.

Dr Victor Fung

In the past, Hong Kong universities used to have only about 2 per cent non-local students. Nowadays, about 10 per cent are coming from outside Hong Kong — mainly from PRC but also from the rest of the world — and the aim is to reach the level of about 20 per cent.

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In a nutshell, the importance of Hong Kong and PRD in terms of connectivity can be likened to an hourglass. The map of Asia would show Hong Kong and PRD as the neck, with Northeast Asia and Southeast Asia respectively as the top and bottom of the hourglass. On the flip side of this connectivity and in resemblance to how the haze problem is affecting ASEAN, Hong Kong also has to deal with the impact of air pollution coming from the PRD by developing an understanding that people of those regions are basically living in the same space and thus, a solution based on the understanding of the problem would be the way out instead of accusing each other.

Chairman of ISEAS, Professor Wang Gungwu, introducing the luncheon speaker.

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6 THE HAZE: ECONOMIC AND SOCIAL RAMIFICATIONS Speaker: • Professor Emil Salim University of Indonesia; and Chair, Economic Advisory Council, Indonesia

Discussants: • Mr Gurmit Singh K.S. Centre for Environment, Technology and Development, Malaysia

•

Professor Simon Tay Chairman, Singapore Institute for International Affairs

The haze problem has established itself as a perennial health and diplomatic irritant in Southeast Asia. With 2006 proving to be among the worst year by far, there has been heightened concern on whether the situation is set to deteriorate in 2007 or whether corrective measures will be taken in time. The panel to explore the haze issue composed of leading Indonesian economist and environmentalist Professor Emil Salim, Malaysian environmentalist Mr Gurmit Singh K.S. and Singaporean expert in international environmental law Professor Simon Tay. Exploring the varied causes underpinning the haze problem in the region, the panel identified not only immediate factors but also long-standing fundamental causes that involved government responses, paradigms of development and conventional lifestyle choices. It concluded that the haze problem could remain serious in the 2007–2008 period owing to climatic factors (El Nino, in particular), dry conditions and the growing use of The haze problem could remain forests for oil palm plantations and logging, among serious in the 2007–2008 period others. However, timely government intervention owing to climatic factors (El Nino, through price correction, legislation and stronger law in particular), dry conditions and the enforcement could stem the problem in due course. growing use of forests for oil palm The panel also fleshed out the regional implications plantations and logging, among of the haze problem, not only as an environmental others. challenge, but also as a test for the credibility of Indonesia and ASEAN.

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Presentation by Professor Emil Salim Safeguarding the Environment of Southeast Asia Professor Salim provided a broad analysis of the haze problem by situating it within the developmental path followed by Southeast Asia over the years. While the speaker referred to the role of more immediate factors, he placed much emphasis on the need to investigate current paradigms of development and more fundamental lifestyle choices that were directly linked to the environmental problems of the region, of which the annual haze was a major symptom. Professor Emil Salim The speaker argued that the haze was a product of several factors: the peat and swamp forest fires in Kalimantan and Sumatra, the position of the intertropical convergence zone (ITCZ) that exacerbated haze motion over the ASEAN region, the El Nino Indonesian forests, the source for Southern Oscillation (ENSO) that had heightened much of these fires, have been drought and fire activity, among others. But there are more fundamental causes as well. subjected to intense inter-sectoral Indonesian forests, the source for much of these competition where they were used fires, have been subjected to intense inter-sectoral for agriculture, timber, mining, and competition where they were used for agriculture, transmigration. timber, mining, and transmigration. Furthermore, with development being land-based and resource-based (through mining, forest resources, etc.) Indonesian forests have come under increasing strain. Professor Salim argued that these fundamental causes extended to all ASEAN countries. Even though The ASEAN Agreement on Trans ASEAN shared an interdependent eco-system, indiBoundary Haze Pollution (2002) has vidual countries had managed the system with their not yet been ratified. own initiatives. Further, the ASEAN Agreement on Trans Boundary Haze Pollution (2002) has not yet been ratified, reflecting not only a lack of political commitment but also differences over issues such as smuggling of logs, illegal fishing, the finance behind forest fires and extradition within ASEAN. Just as important, the patterns of development and lifestyles in ASEAN countries were not ecologically sustainable.

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The Haze: Economic and Social Ramifications

The speaker listed out the possible means of tackling the haze problem. In the first place, governments must play a more assertive role by correcting skewed market prices that do not internalize the social and ecological costs of land use and resource depletion. In more immediate terms they must also correct problematic policies that contribute to the forest fires. In Indonesia, responsible land In Indonesia, responsible land clearance costs nearly clearance costs nearly US$250 US$250 per hectare while the clearance by fire costs per hectare while the clearance a mere US$5. Such discrepancies must be addressed. by fire costs a mere US$5. Such Governments must also adopt sustainable economic discrepancies must be addressed. policies and develop energy efficient technologies. Professor Salim closed his analysis by asserting the importance of changing the current paradigm of development that valorizes the economic and material over the social and ecological, and called for the adoption of a more knowledge-based and spiritual lifestyle.

Presentation by Mr Gurmit Singh K.S. Mr Gurmit Singh shared his insights on the haze problem as a representative from the civil society sector in Malaysia. He pointed out that Southeast Asia had been experiencing haze since the 1980s, and that the situation had worsened in recent years owing to the El Nino effect. According to him, the burning of vegetation and peat soil was the major cause for the haze problem. However, he questioned the rhetoric of blame that has He questioned the rhetoric of blame often been targeted at Indonesia by arguing that local that has often been targeted at pollution in Malaysia also played a role in intensifying Indonesia by arguing that local the haze. In places like the Klang Valley, air pollutants pollution in Malaysia also played a from motor vehicles compounded the haze due to the role in intensifying the haze. process of temperature inversion. In such a situation the pollutants would not get blown away into the sea and thus added to the pollution caused by particulate matter. He questioned if Malaysia had been taking care of its own fires and open burning of areas while He was pessimistic on ASEAN’s the press in Malaysia consistently blamed the haze efforts to deal with the haze on Indonesian decision-makers. problem. He was pessimistic on ASEAN’s efforts to deal with the haze problem, saying that treaties other

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than those pertaining to financial subjects were rarely effective. He also agreed with Professor Salim on the long-term steps required but questioned whether a paradigm shift in development would ever materialize. Mr Singh said that Indonesia had been unable to prevent the start and spread of fires and that it did not have the required resources for dealing with the problem. He was also surprised at the paucity of any authoritative academic study on the haze issue and of the various costs borne by governments and society at large.

Mr Gurmit Singh K.S. and Professor Simon Tay

Presentation by Professor Simon Tay A Singaporean perspective to the haze problem was provided by Professor Tay, who approached the subject from his expertise in international environmental law. While he did not disagree with the fundamental and long-term strategies suggested by Professor Salim, he pointed out that there were more immediate steps that were required to deal with the problem. He warned that the price of inaction would be substantial as the haze is set to get worse in the 2007–2008 period under the effect of El Nino, dry Decision-makers have not paid weather conditions, and expanding palm plantations. adequate attention to the problems Professor Tay argued that the ineffectual response of those living beyond Jakarta who of the Indonesian government to the haze problem have indeed suffered most from the in the past has been a result of the imperfections of haze and forest fires. a nascent and evolving democracy. Decision-makers have not paid adequate attention to the problems of

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those living beyond Jakarta who have indeed suffered most from the haze and forest fires. Indonesia’s refusal to sign the ASEAN haze treaty is aimed outwards at Singapore, Malaysia and issues such as logging and extradition, and has not registered fully the impact of the problem on the Indonesian people themselves. However, the situation has changed under the leadership of the current Indonesian President Susilo Bambang Yodhoyono who apologized and has promised to take action. Professor Tay broadened the stakes of the haze issue and pointed out that apart from being an environmental problem, it was also a challenge to the Apart from being an environmental credibility and success of Indonesia and ASEAN. The problem, the haze was also a way in which the haze problem was treated would challenge to the credibility and thus have significant regional implications. success of Indonesia and ASEAN. The speaker argued that the problem existed at various levels: as a land rights problem between local people and multinationals; as a cross-sector problem, when the Ministry of Environment in Indonesia has to negotiate with the forestry ministry and the agriculture ministry; and also address a cross-border problem because companies and trade networks outside Indonesia were involved. Thus, it was important to conceptualize the problem across sectors, borders and levels of governance. Professor Tay said that in the short term the haze problem was likely to remain serious. However, there were several measures that could be taken in the medium term. In this regard, he emphasized the importance of the ASEAN haze treaty and argued that it must be followed through. In response to remarks by Mr Gurmit Singh, he pointed out that treaties were rare for ASEAN and that having one was better than having none since it would be possible to hold states against their promises. He also urged Singapore to play a significant role in ensuring that the development of the Riau province would be environmentally sound. Further, Professor Tay highlighted the “Heart of Borneo” initiative, which would link various national parks and create a large environmental zone free from fires. For the long term, Professor Tay expressed agreement with Professor Salim in pursuing a development path that is sustainable and in consonance with the environment.

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7 POLITICAL TRENDS IN THAILAND, MALAYSIA, INDONESIA AND MYANMAR Panellists: • Dr Chris Baker Independent Writer, Thailand

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Professor Maznah Mohamad Visiting Senior Research Fellow, Asia Research Institute, National University of Singapore

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Dr Michael Vatikiotis Visiting Fellow, Institute of Southeast Asian Studies

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Dr Zarni Visiting Research Fellow, Department of International Development, Queen Elizabeth House, Oxford University

The political trends panel with Dr Chin Kin Wah (centre) chairing the discussion.

Looking back on 2006, the politics of individual countries in Southeast Asia were characterized by continuity and change. Other themes that surfaced were democracy in Southeast Asia and growing Muslim religiosity and Islamic political activity in Indonesia and Malaysia (see the accompanying thematic boxes in this chapter).

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Presentation by Dr Chris Baker After the Thai Coup: Looking Backwards, Peering Forward Dr Chris Baker’s paper perhaps best illustrates the sense of change and continuity. Dr Baker argued that the miliThaksin’s political innovations: tary dominated government has powerfully revived the introduction of big business into tradition of “managed democracy”, which is in line with the very centre of political power the long-term trend in Thailand’s constitutional democand his populist appeal to the racy. The forces that came out in opposition to Thaksin, informal masses. and which provided the means, the support, and the legitimacy for the 19 September coup, were reacting against Thaksin’s political innovations. These were his introduction of big business into the very centre of political power and his populist appeal to the informal Three main elements behind the masses. For the three main elements behind the coup coup: the palace, the army, urban — the palace, the army, and the urban middle class — middle class. these innovations threatened to transform the Thai state. This anti-Thaksin coalition aimed to reorient the political system through “managed democracy”. Looking back, the Thaksin era was moulded by two powerful currents in Thailand’s political economy, which rose through the 1990s and climaxed after the financial crisis of 1997. The first current was major business, feeling under threat from multinational competition, seeking a stronger voice in politics in order to use the resources of the state in their defence. The second current was the large informal masses of declining peasantry and the urban informal sector. They constituted around two-thirds of the population and the electorate and had begun to demand a greater share of public resources and to pull their weight in this electoral democracy.

Who was behind the December 2006 bombing in Thailand? How would the recent bombings in Bangkok affect Thailand? Dr Baker said there was nothing much we knew about the bombings to identify clearly the perpetrators. He said the bombs were unlikely to have anything to do with southern Thailand, and the bombings were not designed to kill on a large scale. Rather, the intention was more to create unrest. He said it was possible that this was similar to the period in 1975–76 when the uniformed and security agencies out-contracted the bombings to gangsters to create unrest. There seemed to be a breakdown in the unity of the military, and there could be many different explanations for the bombings and their impact.

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Looking forward, Dr Baker referred to Thaksin’s populism as an entrepreneurial response to the Removing Thaksin did not mean emerging politicization of the informal masses. He the destruction of the populism he thought the populism will not disappear; removing conjured up because it is rooted in Thaksin did not mean the destruction of the populism the political economy. he conjured up because it is rooted in the political economy. In the short term, were Thaksin to return to Thailand and be allowed to contest elections, there is a high chance he would win. In the long term, this populist force may take a very different form, departing from its present odd alignment with big business concocted by Thaksin. On the other hand, the “managed democracy” will seek to control the influence of money and populism. The key elements of this political form are constitutional engineering, political oversight by the military, and campaigns of state propaganda for unity.

Presentation by Professor Maznah Mohamad Malaysia in 2006: The Enemies Within Professor Maznah Mohamad’s paper started on a pessimistic note. She observed that while the leadership in Malaysia was not being challenged by opposition political parties, it was being attacked from within. The fallout between Prime Minister Abdullah Badawi and former Prime Minister Mahathir was one of the more astounding, if not bizarre, turn of events in 2006. Professor Maznah went on to highlight three major issues of contention in Malaysia in 2006. They were: Malay/Islam insecurity and its impact on ethnic relations, the undoing of Mahathir’s legacy, and the persistent systemic corruption and patronage politics. The third issue is an extension of an old theme — political scandals and corruption are a constant, for which foolproof mechanisms have yet to be instituted for their redress. Until UMNO stopped depending on patronage Until UMNO stopped depending politics for its survival, the scandal and corrupton on patronage politics for its would continue into the future. What was new survival, the scandal and was the re-emergence of a fresh sense of Malay/ corruption would continue into Islam insecurity, which has resulted in present the future. worries and perceptions of deteriorating racial relations.

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Is PM Abdullah trying to undo Mahathir’s legacy? Is Prime Minister Abdullah Badawi attempting to dismantle Mahathir’s legacy, which many people felt was the cause of the frictions between the ex-Prime Minister and incumbent? Professor Maznah said there was a real contrast between the styles of Mahathir and Abdullah, with the latter seeming to have less of a vision than the former. For example, Abdullah listened to advisers who were influenced by the results of governance they see in Singapore. When the PM subsequently acted in ways that were based on governance principles similar to those of Singapore, it then appeared to Mahathir that Abdullah was not acting in the best interest of Malaysia. In addition, Abdullah could be feeling the need to deliver on his election promises, which explained the policies he has adopted so far.

Muslim religiosity and race relations The theme of Muslim religiosity was also reflected in both Professor Maznah’s and Dr Vatikiotis’ papers. Dr Vatikiotis examined Islam and religiosity from the angle of terrorism, while Professor Maznah viewed Islam and religiosity in terms of race relations in Malaysia. Dr Vatikiotis argued in his paper that while there was the Jemaah Islamiyah and the Bali bombings in 2002, which opened a new front on the global war on terror and threatened to brand Indonesia a rogue state, a far more ominous development in the minds of many Indonesians has been the gradual growth of Muslim religiosity over the past two decades and the impact this was said to be having on the social and political landscape. The roots of this Islamic resurgence lie in the growing economic divide in Indonesia and the extent to which ordinary people felt that the only way to escape from unrelenting poverty, corruption and moral degradation was their religious faith. The theme of increased Muslim religiosity was also prominent in Professor Maznah’s paper. She noted that recently there has been religious intolerance and stridency because the whole Islamization project seemed to have taken a different set of modality from the ones during the Mahathir years. The partisan clamour for the Islamic state, once the mainstay of the opposition PAS, is no longer apparent. Instead, there were merely waves of attacks against liberal and secular elements coming from “faceless”

(cont’d)

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spokespersons, everywhere and nowhere. Many of the groups in the Islamic non-governmental coalition were new and relatively unknown to the public. But Islam continues to be at the core of Malaysian politics because Muslim religiosity is linked to simmering Muslim–non-Muslim mistrust. Maznah also reminded us that a constant in Malaysian politics was the race-based logic of party politics. UMNO defines and constantly reiterates itself as the vanguard of the Malays, and it is clinging to this old basis for political relevance.

Presentation by Dr Michael Vatikiotis Indonesia Outlook 2007 Dr Michael Vatikiotis started off his paper on an upbeat note. He noted that Indonesia in 2006 enjoyed more stability, more prosperity and more peace than at any time in its more than sixty years of independence. Dr Vatikiotis traced this good period back to the 2004 election of Susilo Bambang Yudhoyono as the country’s first directly elected President, which closed a turbulent but transformative chapter of Indonesian history. The preceding democratic transition lasted six long years and was marked by unstable, uncertain government, which delayed essential reforms and left the world wonderIndonesia eased out of the old ing if democracy and the country would fail after autocratic framework and inscribed all. Fortuitously, the 2004 election gave all players an a new heading for pluralism and opportunity and a stake in the political future so that democracy. when the contest was settled, there was no arguing about legitimacy or process. Thus, Indonesia eased out of the old autocratic framework and inscribed a new heading for pluralism and democracy. The speaker also acknowledged lingering pessimism about the outlook for Indonesia. Against this, he thought Indonesia’s course was set and we can expect a smooth ride towards presidential and parliamentary elections in Far from coming apart at the 2009, and look towards an orderly change of governseams, Indonesian society is ment. Far from coming apart at the seams, Indonesian maturing, and with maturity comes society is maturing, and with maturity comes the ability to debate and the the ability to debate and the courage to disagree. courage to disagree. Dr Vatikiotis ended on a positive note, arguing that Indonesia has travelled a long journey from

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political torpidity, through turbulence and on to transition. The country has emerged as a stable democracy and a moderate Muslim nation in a world that tended to see these qualities as incompatible. Despite the obvious need to focus on shortcomings at home, Indonesia’s long history of activism and idealism on the international stage makes it likely that many of the more positive aspects of Indonesia’s democratic transition will be injected into its foreign policy.

Democracy transition and foreign policy in Indonesia Indonesia is proud of its democratic transition. Jakarta has started to develop views on its immediate neighbourhood that are coloured by its new democratic principles. For example, one of President Yudhoyono’s first foreign policy initiatives was to try to convince the military junta in Myanmar to learn from Indonesia’s transition from military to civilian democratic rule. In return, Senior General Than Shwe lectured him on the Myanmar army’s essential role as the lynchpin of national stability. This incident is reflective of Indonesia positioning itself as a champion of democracy and democratic values.

There’s still little hope for breakthrough in Myanmar, but heads shall be kept high — Dr Zarni In Myanmar, according to Dr Zarni’s paper, there existsed no viable resistance organizations or structures of subversion and defiance — a situation unlikely to change significantly given that the regime has poured much of its resources into containing, if not obliterating completely, the domestic opposition. One major, and intended, consequence of forty-five years of military rule in Burma since 1962 has been this: the security-obsessed state in Myanmar has made every effort to ensure that no alternative centres or organizations of power emerge independent of the Army’s control and supervision. The past twenty years could be characterized as a period of fruitless struggle against the Orwellian state to re-establish various centres of power vis-à-vis the Army. Though in a position to declare illegal all opposition groups within Myanmar any time, the regime has apparently found it in their strategic interest to keep them alive, if only nominally and symbolically. Dr Zarni also reminded the audience, in response to a question of whether democratization in Myanmar was possible at all, that we cannot say there would be completely no hope and the issue was really whether people would have better human conditions rather than just democratization.

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8 TERRORISM Panellists: • Associate Professor Rohan Gunaratna Head, International Centre for Political Violence and Terrorism Research, Institute of Defence and Strategic Studies, Singapore

•

Dr Greg Fealy Fellow and Senior Lecturer in Indonesian Politics, Department of Political and Social Change, Research School of Pacific and Asian Studies, Australian National University Meeting the challenge of terrorist violence has been a major security agenda for most countries in Southeast Asia. The panel on this session agreed on the continued threat posed by terrorist groups but differed significantly on both approach and in the assessment of the level of threat posed by groups such as the Jemaah Islamiyah (JI). The panel discussed the split in the JI and analysed its implications for regional security. In short, the panel’s assessment suggested the weakening of the JI, and of the terrorist threat more generally, especially in light of broad counter terrorism measures in the region. But it also warned of the potential dangers from the rise of extremist factions (in particular the JI group led by Noordin Top) and from the spread of home grown cells.

Presentation by Associate Professor Rohan Gunaratna How Real Is the Threat? Dr Gunaratna asserted that governments in the West and in Southeast Asia would remain preoccupied with the challenge posed by terrorists in 2007. In Southeast Asia, terror activities in Southern Mindanao in the Philippines, Southern Thailand, and Indonesia would continue to pose challenges to regional security and stability. Further, the main threat developing in the region was that of “ideological extremism”. Traditional Al Qaeda groups Elaborating on the Southeast Asian context, Dr remained active in the region and Gunaratna claimed that traditional Al Qaeda groups that Asian members were still in remained active in the region and that Asian members contact with the core Al Qaeda in were still in contact with the core Al Qaeda in Pakistan. Pakistan. Ideologues and financiers from the Middle East were also in contact with this region.

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Terrorism

Apart from Al Qaeda, Dr Gunaratna referred to the threat from Al Qaeda affiliated groups in Southeast Asia, mainly the JI. Within this, one faction led by Noordin Top called the Al Qaeda Organization of the Malay Archipelago seems to pose the main challenge. Another threat, the speaker claimed, comes from home-grown cells that have emerged owing to the radicalization of segments of the Muslim population in Southeast Asia. Many of these “spawning” home-grown networks have, however, been dismantled owing to the collaboration of U.S. military forces with their Southeast Asian counterparts. Dr Gunaratna said that Southeast Asian groups Southeast Asian groups have been have been increasingly ideologically driven. While increasingly ideologically driven … some groups are toeing a political agenda, there the terrorist threat in the region are many groups in this region that are influenced remains pervasively high. by the idea of a “global jihad” that goes beyond just a “local jihad”. Further, he said that some groups have been Arabized and cited the attire of suicide bombers as evidence in this regard. He added that they are more motivated by Arab ideologues than by Southeast Asian ideologues and perceive Western governments (rather than local governments) as their principal enemies. The speaker also discussed the fractures within the JI group. He said that one structured faction under Abu Bakar Bashir had become more political while the unstructured faction under Noordin Top, the Al Qaeda Organization of the Malay Archipelago, remains committed to violence. There is also another unstructured faction led by Dulmatin and Umar Patek in the Sulu region in southern Philippines. Apart from the JI, the speaker reported the rise of many other groups in the post-Iraq environment. He described them as mainly “Lashkar groups”. Regarding the supposed nexus between terrorist groups in the region, Dr Gunaratna said that ties between groups in Indonesia with those in Philippines remain strong. These links extended to Sabah but were dismantled by the Malaysian Special Branch. He reported that counterterrorism operations in Indonesia had been kinetic and Java-centric, hence many groups had moved to Eastern Indonesia. Further, he lamented the inadequacy of counter-terrorism legislation in Indonesia, as evidenced by the Abu Bakar Bashir case. In conclusion, the speaker said that the terrorist threat in the region remains pervasively high. He also said that the operational threat from

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A “full spectrum response” to terrorism was required. The religious clerics of Southeast Asia must play a greater role in dealing with extremism.

terrorism had reduced in the last five years with the rise of counter-terrorism structures and legislation. He added that the threat from terrorism was manageable but that a “full spectrum response” was required. He also said that the religious clerics of Southeast Asia must play a greater role in dealing with extremism and called for the rise of a “Muslim Gandhi”.

The terrorism panel with Ambassador Barry Desker (centre) chairing the discussion.

Presentation by Dr Greg Fealy An Overview of the Southeast Asian Situation A rigorous assessment of the JI and of the threat it posed to security in Southeast Asia was put forth by Dr Greg Fealy. Using recent primary sources, he fleshed out tenable conclusions for a range of complex questions pertaining to the organizational coherence, potency and ideological scope of the JI. In short, he argued in support of the idea that the JI had split, that it was moving away from mass casualty terrorism, and that it was orienting itself increasingly to domestic rather than a pan-Islamic ideology. Further, he The JI had split, was moving away established how “horizontal” and “atomized” processes from mass casualty terrorism, and were challenging the JI’s model of disciplined was orienting itself increasingly to hierarchical organization. He argued that even though domestic rather than a pan-Islamic the JI appeared less threatening than before, its ideology. diffusion had however made it harder for security agencies to monitor.

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Terrorism

Dr Fealy clarified at the outset the highly problematic character of the evidence that has been There is a highly problematic often used by analysts of terrorism and called for character of the evidence used greater circumspection and scepticism towards these by analysts of terrorism. Greater sources. He based his research on a range of literary circumspection and scepticism matter and also on the deposition of the former towards these sources are needed. JI member Subur Sugiarto who was tried in 2006 and given a life sentence. Despite problems, the information disclosed in his testimony was detailed and consistent, and it lends itself to conclusions. Using a broad palate of sources, he concluded that the new emerging model of recruitment methods and preparation for jihad contrasts with the methods of the earlier structured JI. He described these as an “organic”, do-it-yourself brand of jihad. The speaker also fleshed out the complex debates and struggles taking place within the seemingly monolith of a terrorist organization by highlighting the doctrinal debate between the JI and the Noordin Top group on the conception and meaning of jihad. He established how there has been a reassertion of a mainstream, jurisprudential understanding of the concept by key religious scholars (ulamas) within the organization who consider the version advanced by “bombers” as a misinterpretation. Importantly, he challenged the notion that the JI and other groups in Southeast Asia were waging an essentially pan-Islamic and international jihad, as suggested by some analysts in the region. He did so by providing two key arguments. First, he pointed out the absence of any known deaths of Southeast Asian insurgents in Iraq, which would have happened had such links existed. Second, he marshalled texts making the rounds in jihadi Southeast Asian terrorists were Salafist circles in Indonesia that urged Muslims to becoming more parochial in their fight for their own countries than fight jihad abroad. goals. He concluded that Southeast Asian terrorists were becoming more parochial in their goals.

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9 CONCLUDING REMARKS •

Dr Chin Kin Wah Deputy Director, Institute of Southeast Asian Studies

Ladies and Gentlemen, let me first of all congratulate and thank all of you for your sustained interest and staying power. It is most encouraging to the organisers of this forum. So much information, so many interesting viewpoints, perspectives and analyses have been presented at today’s forum that it is difficult to do justice to them in the short time I have to make these concluding remarks. I have not been able to read all these papers in advance and even if I have had sufficient time to do so, I don’t think I would have wished to spoil my anticipation of the excellent oral presentations of today. But if time had permitted, I might have been tempted to take another look at some of the papers that were discussed at last year’s Regional Outlook Forum and ask myself how much off the trajectory some of those prognostications had been, or how frighteningly true they came to pass in the year 2006. It is in the nature of politics, indeed of life out there in the real world, that the best crystal ball gazing would have to contend with the imponderables. As some would say, we ponder but there is always the improbable. If I could stretch my memory a bit to the issues that we were grappling with at ROF 2006, there were at least two things that came to mind. One was about the frightening scenarios that somehow did not quite come to pass, that centred on energy insecurity. In fact we tabled that in the very last session in ROF 2005, and that kept everybody rooted. They were looking for signs of things to come. But I think the worst-case scenario in terms of the very negative impact on economic development in the past year had not really transpired. But the second trend, however, did come to pass and had been sustained in a very positive way, and it is worth noting here. I refer to the rather benign strategic environment that the Southeast Asian region as a whole has enjoyed. We have seen a good run of almost sixteen years of that since the end of the Cold War. I think that is an interesting and

This is an edited version of the concluding remarks.

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positive development that is being sustained. As Professor Robert Sutter observed, it is not being diminished by domestic political change within and development of external relations among the major powers. I think no less a realist than Professor Robyn Lim here has recognized the disjuncture between the great power competition on the one hand and local instability on the other. That volatile juncture that we had witnessed during the Cold War has become passé despite the embedded structural tensions in Sino-Japanese and Sino-U.S. relations and continuing security challenges in the Korean peninsula. This very encouraging trend will likely be sustained into ROF 2008. A second point that I would like to draw here is that on the whole the economic outlook for the region has been generally upbeat but without being excessively so. In fact, if you think back to the things that were said, even among the more sceptical and critical of those speakers in the mother of all sessions today (on the economic update and business opportunities in the new growth areas in key regional states) you would have felt sufficiently hopeful that the positive trends in the economic development of all these countries, including Thailand and the Philippines, would be quite encouraging in the year to come. According to Mr Manu Bhaskaran, regional economic resilience has improved, the economies have become more diversified, policies have become more anticipatory and domestic demand has grown significantly. But the question remains: Can the economic prospects translated broadly into positive economic growth rates for all the regional states, really deliver in terms of political stabilization? This takes me to the third point, which is about the “wild cards” in the works, and I think you will be a little more appreciative of them if you disaggregate the region and take a closer look at what is going on in, say, Thailand, the Philippines, and Malaysia and even Indonesia over which the most optimistic forecast was heard today from Dr Michael Vatikiotis. There are clearly glitches that bear watching closely in the year to come. An intriguing comment was heard in our session on the political trends in four selected countries of the region. Remember Dr Chris Baker saying the coup in Thailand is just the beginning of the crisis? But he did not quite say what else to expect in the next stage. Another coup? Just keep that in mind as we coast into the New Year. Also our attention has been drawn to the fragile political stability of the Philippines and the challenges to the political leadership in Malaysia. These are the regional countries marked by a mixture of good and bad news while Myanmar stands in a class of its own — at war with itself.

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The glitches, too, pertain to our reflections about the haze and about terrorism. We are told somewhat ominously that “the smell” (of the drifting smoke) could get worse next year. The problem needs urgent, concerted attention. It needs visionaries, no doubt, to reset the perimeters at least mentally for us, of the developmental paradigm in the region — which Professor Emil Salim has so eloquently called for. But, as Professor Simon Tay reminds us, it also needs men and women of action who can get the job done in the short term, in a concerted way to deal with burning forests and peat fires. Terrorism in a material sense is perhaps not as serious as we would have feared. While the intensity of the threat has decreased, the point too has been made about the very real threat in ideological extremism. However on the flip side of that, I am reminded of the very considerable resilience that exists within the region. I take you back to the very inspiring keynote speech this morning by Dr Chandra Muzaffar. He spoke of the very considerable resilience in the region that enables us to deal with the great diversities therein. He talked about the region’s ability to minimize religious violence and extremism and noted the tremendous religious harmony that exists — the tolerance, the moderation, and reciprocity, the prevailing compassion and kindness that shape the collective consciousness of the region. He drew attention to all these by way of attesting to the very considerable ability to survive, to overcome and to resist extremism. All that is about values and the realm of the ideational. What about action? I think we need to take account of the challenge of managing political order, not only in a regional and global sense, but more importantly now, in a domestic sense. A lot of the reflections that we went through today brought us back to this — the challenge of managing domestic and regional order in a time of complex globalization. Success at this depends very largely on how well we achieve “equilibrium” (or “balance” which in Dr Chandra’s personal context refers to that condition which religion seeks in human life) at different levels. On the international level this is seen in terms of equilibrium between the realist balance-of-power model, and the liberal multilaterist regionalism model, of managing inter-state relations. On the national level we can think in terms of striking that equilibrium between domestic political pluralism and domestic political order, between achieving growth and ensuring distributive justice and good governance. Indeed the management of domestic political order with consequent impact on and repercussions for external relationships is going to pose vast challenges

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to many regional governments and it bears watching very closely as we transit the year. Overall I would say that 2007 is likely to be a year of considerable promise that bears out the resilience of the region despite all the glitches in the works. Let me end on this upbeat though perhaps not excessively optimistic note. I would like to end finally by thanking all the hardworking people, headed by David Koh, who put this event together. To the people in ISEAS Administration who assisted in so many ways with the logistics; to sponsors who have given very generously their support to this event much gratitude is owed. If there are any sins of admission or commission, we take full responsibility for them. Thank you very much ladies and gentlemen for your presence and we look forward to seeing you at the next ISEAS event.

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FORUM PROGRAMME 8.00 am – 8.30 am

Registration

8.30 am – 8.35 am

OPENING REMARKS Ambassador K Kesavapany Director, Institute of Southeast Asian Studies

8.35 am – 9.20 am

KEYNOTE SPEECH Dr Chandra Muzaffar President, International Movement for a Just World, Malaysia RELIGIOUS EXTREMISM IN SOUTHEAST ASIA

9.20 am – 10.20 am

Session I: Chair:

STRATEGIC TRENDS IN EAST ASIA Ambassador K Kesavapany Director, Institute of Southeast Asian Studies

Panellists: (1) Professor Robert Sutter Professor of Asian Studies, School of Foreign Service, Georgetown University, USA THE UNITED STATES, CHINA AND EAST ASIA, 2007–2008 (2) Professor Robyn Lim Professor of International Relations, Nanzan University, Japan NORTHEAST ASIA: A NUCLEAR WEAPONS “BREAKOUT”? (3) Mr Jusuf Wanandi Vice Chairman, Board of Trustees, Centre for Strategic and International Studies Foundation, Jakarta MAJOR POWERS AND THE STRATEGIC FUTURE IN EAST ASIA 10.20 am – 10.35 am

Coffee

10.35 am – 1.05 pm

Session II: DYNAMICS OF REGIONAL ECONOMIES Chair: Mr Stephen Lee Chairman, Singapore Airlines Ltd Panellists: PROJECTIONS FOR ASEAN ECONOMIES, GROWTH PROSPECTS AND OUTLOOK, SECTORS TO LOOK OUT FOR WHEN UNDERTAKING STOCK INVESTMENTS AND THE IMPACT OF THE US ECONOMY

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(1) Mr Manu Bhaskaran Partner/Head, Economic Research, Centennial Group ECONOMIC UPDATE, BUSINESS OPPORTUNITIES IN NEW GROWTH AREAS IN INDONESIA, MALAYSIA, THE PHILIPPINES, VIETNAM, THAILAND AND SINGAPORE (2) Professor Hendrawan Supratikno Institute of Business and Informatics, Indonesia (3) Professor Mohamed Ariff Executive Director, Malaysian Institute of Economic Research (4) Mr Peter Wallace President, The Wallace Business Forum, Philippines (5) Ms Low Sin Leng Senior Executive Director, SembCorp Industries, and Executive Chairman, SembCorp Parks Holdings Ltd (6) Dr Peter Brimble President, Asia Policy Research Company Limited, Thailand (7) Mr Song Seng Wun Regional Economist and Head of Research, CIMB-GK Research Pte Ltd 1.05 pm – 2.45 pm

LUNCH Distinguished Luncheon Speaker Dr Victor Fung Chairman, Greater Pearl River Delta Council; Chairman, Airport Authority Hong Kong; Vice Chairman, International Chamber of Commerce HONG KONG’S HINTERLAND: PEARL RIVER DELTA AND BEYOND

2.45 pm – 3.50 pm

Session III: THE HAZE: ECONOMIC AND SOCIAL RAMIFICATIONS Chair: Associate Professor Victor R. Savage Department of Geography, National University of Singapore Speaker:

Professor Emil Salim University of Indonesia; and Chair, Economic Advisory Council, Indonesia SAFEGUARDING THE ENVIRONMENT OF SOUTHEAST ASIA

Discussants: (1) Mr Gurmit Singh K.S. Centre for Environment, Technology and Development, Malaysia (2) Professor Simon Tay Chairman, Singapore Institute for International Affairs

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3.50 pm – 4.05 pm

Tea

4.05 pm – 5.25 pm

Session IV: POLITICAL TRENDS IN THAILAND, MALAYSIA, INDONESIA, AND MYANMAR Chair: Dr Chin Kin Wah Deputy Director, ISEAS Panellists: (1) Dr Chris Baker Independent Writer, Thailand (2) Professor Maznah Mohamad Visiting Senior Research Fellow, Asia Research Institute, National University of Singapore (3) Dr Michael Vatikiotis Visiting Fellow, Institute of Southeast Asian Studies (4) Dr Zarni Visiting Research Fellow, Department of International Development, Queen Elizabeth House, Oxford University

5.25 pm – 6.25 pm

Session V: Chair:

TERRORISM Ambassador Barry Desker Dean, S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore

Panellists: (1) Associate Professor Rohan Gunaratna Head, International Centre for Political Violence and Terrorism Research, Institute of Defence and Strategic Studies, Singapore HOW REAL IS THE THREAT? (2) Dr Greg Fealy Fellow and Senior Lecturer in Indonesian Politics, Department of Political and Social Change, Research School of Pacific and Asian Studies, Australian National University AN OVERVIEW OF THE SOUTHEAST ASIAN SITUATION 6.25 pm – 6.30 pm

CONCLUDING REMARKS Dr Chin Kin Wah Deputy Director, ISEAS

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SPEAKERS AND PANELLISTS Mohamed Ariff Mohamed Ariff is currently Executive Director of the Malaysian Institute of Economic Research (MIER), and previously Dean of the Faculty of Economics and Administration. The University of Malaya confered emertius professorship on him in August 2004. He is currently Vice President of East Asian Economics Association and Vice President of the International Association for Islamic Economics. He has editorial positions such as Correspondent Editor of Asia-Pacific Economic Literature, Advisor to Asian Economic Policy Review, RISdigest, Asian Development Review, and Asia-Pacific Trade and Investment Review. He has authored and edited many books and monographs as well as many articles in academic journals and the mass media. His book The Malaysian Economy: Pacific Connections won the prestigious Tun Razak Award in 1993. Most of his work deals with international trade, FDI, and regional economic integration. He has also served as consultant to many international organizations, including the World Bank, UNIDO, OECD Development Centre, Commonwealth Secretariat, UNCTAD, UNCRD, ESCAP, and the Islamic Development Bank. Chris Baker Chris Baker was born in the U.K., has a Ph.D. from Cambridge University, and taught Asian history and politics at Cambridge in a previous life. In 1979, he moved to Thailand, and worked in business. Now he works independently as a writer, editor, and researcher. With Pasuk Phongpaichit, he has written A History of Thailand (CUP, 2005); Thailand: Economy and Politics (OUP, 1995; 2nd ed. 2002) which won the 1997 national research prize and has recently appeared in Japanese; Thailand’s Boom and Bust (1998); Thailand’s Crisis (2000); and Thaksin: The Business of Politics in Thailand (2004). They have translated Pridi by Pridi (2000), selected writings by one of the leaders of the 1932 revolution; Chatthip Nartsupha’s Thai Village Economy in the Past (1999); and pieces by King Rama V, the Communist Party of Thailand, and Nidhi Eoseewong. Recently he has edited the pioneer issue of the Thailand Human Rights Journal (2003); The Society of Siam: Selected Articles for the Siam Society’s

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centenary (2004); and co-edited Van Vliet’s Siam (2005) and the translation of Nidhi Eoseewong’s Pen and Sail (2005). He is working on a translation of the epic poem, Khun Chang Khun Phaen. He writes regularly in the local press. Manu Bhaskaran Manu Bhaskaran is Partner and Member of the Board of the Centennial Group Inc, a policy advisory group based in Washington, D.C. He graduated from Cambridge University with an M.A. Cantab and also has a Masters in Public Administration from Harvard University. Prior to his current position, Mr Bhaskaran worked for thirteen years at the investment-banking arm of Societe Generale as its Chief Economist and for seven years with the administrative service of the Singapore Government. Peter Brimble Peter Brimble has worked extensively in East Asia on industrial efficiency, investment promotion, economics and public policy issues. He has carried out research on industrial and technological development and government policy issues in Thailand and the region — working for various agencies, including the Asian Development Bank, Harvard Institute for International Development, the United Nations, the Thai Board of Investment and many other Thai government agencies/institutions. He has assisted a number of multinationals with corporate strategy work. In the past decade, Dr Brimble has worked extensively on trade, investment and business development issues in the Greater Mekong Subregion, both for multilaterals like the ADB and the United Nations and for private firms. He was instrumental in the establishment of the GMS Business Forum, a recently formed association of GMS chambers of commerce and industry. Dr Brimble is an Economics graduate of the London School of Economics, Georgetown University, the University of Sussex, and Johns Hopkins University. His Ph.D. thesis examined the productivity performance of Thai manufacturing firms. Formerly CEO and President of Policy Research of The Brooker Group Public Company Limited, he co-founded Asia Policy Research along with Dr David Oldfield in August 2003. Greg Fealy Greg Fealy holds a joint appointment as fellow and senior lecturer in Southeast Asian politics at the Research School of Pacific and Asian Studies,

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and the Faculty of Asian Studies, The Australian National University, Canberra. His main research interests are Islam and post-independence Indonesian politics. Dr Fealy is currently studying Islamism in Indonesia as well as the impact of globalization upon religio-political behaviour. He gained his Ph.D. from Monash University in 1998 with a study of the history of Indonesia’s largest Islamic party, recently published in Indonesian under the title Ijtihad Politik Ulama: Sejarah NU, 1952–1967. He is the co-author of Joining the Caravan? The Middle East, Islamism and Indonesia (2005), and Radical Islam and Terrorism in Indonesia (2005). He is also co-editor of Voices of Islam in Southeast Asia: A Contemporary Sourcebook (2006), Nahdlatul Ulama, Traditionalism and Modernity in Indonesia (1995) and Local Power and Politics in Indonesia: Decentralisation and Democratisation (2003). He was the C.V. Starr Visiting Professor in Indonesian Politics at the Johns Hopkins University School of Advanced International Studies, Washington, D.C. in 2003. He has also worked as an Indonesia analyst at the Office of National Assessments and a consultant to AusAID, The Asia Foundation, USAID, the Lowy Institute, ASPI and Oxford Analytica. Victor Fung Victor K. Fung is the Group Chairman of the Li & Fung group of companies, which includes major subsidiaries in Trading, Distribution and Retailing, including publicly listed Li & Fung Limited, Integrated Distribution Services Group Limited and Convenience Retail Asia. He is also Chairman of the Greater Pearl River Delta Business Council, the Hong Kong Airport Authority and the Hong Kong University Council. Dr Fung holds a number of civic and professional appointments. He is a member of Chinese People’s Political Consultative Conference, and the Hong Kong Government Judicial Officers Recommendation Committee. He is Chairman of Hong Kong–Japan Business Co-operation Committee. From 1991 to 2000, Dr Fung was Chairman of the Hong Kong Trade Development Council, and from 1996 to 2003, he was the Hong Kong representative on the APEC Business Advisory Council. Dr Fung is Chairman, Asia Advisory Board of Prudential Financial Inc and a non-executive Director of Bank of China (Hong Kong) Limited, PCCW Ltd, Orient Overseas (International) Ltd and Sun Hung Kai Properties Ltd. Born and raised in Hong Kong, Dr Fung holds Bachelor and Master Degrees in Electrical Engineering from the Massachusetts Institute of Technology, and a Doctorate in Business Economics from Harvard

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University. He also taught as a professor at the Harvard Business School for four years before returning to Hong Kong in 1976. Rohan Gunaratna Rohan Gunaratna has over twenty years of policy, operational and academic experience in counter-terrorism. He is Head, International Centre for Political Violence and Terrorism Research at the Institute of Defence and Strategic Studies in Singapore and Senior Fellow, Fletcher School for Law and Diplomacy’s Counter Terrorism Centre. A former Senior Fellow at the Combating Terrorism Centre at the United States Military Academy at West Point, Dr Gunaratna travelled to conflict zones to study threat groups including to Iraq in December 2006. Dr Gunaratna led the specialist team that designed and built the UN database on the mobility, finance and weapons of Al-Qaeda, Taliban and their Entities. He was invited to testify before the 9-11 Commission on the structure of Al Qaeda and the UN Security Council’s Sanctions Committee. He is the author of twelve books including, Inside Al Qaeda: Global Network of Terror (Columbia University Press, New York), an international bestseller and recently with Michael Chandler, Countering Terrorism: Can We Meet the Threat of Global Violence (London, Reaktion Books, 2006). Jusuf Wanandi Jusuf Wanandi is co-founder and Vice Chairman, Board of Trustees and senior fellow of the Centre for Strategic and International Studies (CSIS) Foundation, Jakarta. He is chairman of the Indonesian National Committee for Pacific Economic Cooperation Council (INCPEC) and cochair of CSCAP Indonesia and concurrently member of the Standing Committee of PECC and member of the Steering Committee of CSCAP (Council for Security Cooperation in the Asia Pacific). He is also president director of the publishing company of The Jakarta Post Daily as well as chairman of the Board of the Prasetiya Mulya Graduate School of Management, and chairman of the Foundation of Panca Bhakti University in Pontianak, West Kalimantan. A lawyer by training, Mr Wanandi was assistant professor of law at the University of Indonesia, and has served in various national and international organizations in the course of his career. He was appointed as secretary of the Indonesian Supreme Advisory Council; secretary general of the National Education Council; and as fourterm representative in the People’s Consultative Assembly. He was active in the Golkar Party between 1979 until 1988 as a member of the Central Board in various capacities. He has written extensively in national and

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international magazines and newspapers and has edited a number of books on political and security developments in the Asia Pacific region. Robyn Lim Robyn Lim is Professor of International Relations at Nanzan University, Nagoya, Japan, and the author of The Geopolitics of East Asia (2003). She is a frequent contributor of op-ed. articles on Asian regional security for the international press. Previous academic affiliations include Senior Lecturer at the University of New South Wales, Australian Studies Professor at the University of Tokyo, Academic in Residence in the Australian Department of Foreign Affairs, and Professor at Hiroshima Shudo University. She holds a Ph.D. in International Relations from the Australian National University. From 1988 to 1994, Professor Lim worked at the Office of National Assessments, Australia’s national foreign intelligence assessment agency, where her last position was acting Head of Current Intelligence. In 1992, she was Head of the Asia-Pacific Section in the International Division of the Department of the Prime Minister and Cabinet. Low Sin Leng Ms Low is Senior Executive Director, Group Strategic Relations, in SembCorp Industries Ltd (SCI) and concurrently Executive Chairman of SembCorp Parks Holdings Ltd (SCP), Deputy Chairman of SembCorp Utilities Pte Ltd, and director on the boards of various SembCorp Group companies. She is also a Council Member of ASEAN Business Advisory Council. Ms Low heads the Group Strategic Relations Department at SCI. She is responsible for building and maintaining strategic relationships/ partnerships with key decision-makers — government agencies, joint venture partners and current/prospective customers, with the intent to have SCI as the partner of choice and preferred service provider. As Executive Chairman of SCP, Ms Low is responsible for spearheading the development of the Group’s industrial park businesses in China, Vietnam and Indonesia (Batam and Bintan). SCP first ventured into Vietnam in 1996 with the investment of the Vietnam Singapore Industrial Park (VSIP). This was followed with the Norfolk Hotel Ho Chi Minh City, a small city hotel that caters for business travellers. Ms Low was initially the Chairman of VSIP Joint Venture Co Ltd from November 2001 to April 2006 and currently the Co-Chairman with the joint venture partner.

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Prior to joining SembCorp, Ms Low was the Executive Vice President of Singapore Power and had served twenty years in the Singapore Government Administrative Service holding several senior positions in the Ministries of Finance, Trade & Industry and Education. A President Scholar, she holds an MBA (High Distinction) from the Catholic University of Leuven, Belgium, a B. Eng (Distinction) from the University of Alberta, Canada, and attended Harvard University’s Advanced Management Programme. Maznah Mohamad Maznah Mohamad is currently a Visiting Research Fellow at the Asia Research Institute of the National University of Singapore. Before coming to Singapore she was Deputy Dean of Social Sciences of University of Science Malaysia, and she was also the Director of the University’s Women’s Development Research Centre. Her major research interests are in the fields of Malay, Gender and Islamic Studies, and politics. Her publications include: The Malay Handloom Weavers: A Study of the Rise and Decline if Traditional Manufacture (1996); Risking Malaysia: Culture, Politics and Identity (2001); and Feminism and the Women’s Movement in Malaysia (2006). She has published articles on Malaysian politics, Islam, and democracy and human rights. Chandra Muzaffar Chandra Muzaffar is a Malaysian political scientist who is the president of an international NGO, the International Movement for a Just World (JUST). JUST is critical of global hegemony and seeks to develop an alternative vision of a just and compassionate civilization guided by universal spiritual and moral values. Chandra has written and edited more than twenty books and monographs on religion, civilizational dialogue, international politics and Malaysian society. In addition to his home organization JUST, Chandra also sits on the boards of numerous NGOs of the region as well as of the United States, Japan, and Europe. Chandra is a prolific writer — in a CV of his obtained online, out of 61 pages, the list of publication takes up 55 pages. He was the winner of the following awards: Rockefeller Social Science Fellowship in Development Studies for Southeast Asia (1984–1985); Monitor, Human Rights Watch (1988); The Harry J. Benda Prize for distinguished scholarship on Southeast Asia awarded by the Association of Asian Studies, North America, (1989); The Weigand Distinguished Visitor Fellowship Duke University (2000); Presidential

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Citation from Xavier University, United States in recognition of scholarship and leadership in the area of human rights (2000); and Distinguished Visitor, University of Berkeley and University of California, Los Angeles (2002). Emil Salim Dr Emil Salim was a former government Minister of the Republic of Indonesia, but the role he has been playing on the environment agenda is global, beyond his country’s border. He was a member of the United Nations World Commission on Environment and Development (1984– 1987), Deputy Chairperson of the UN High level Advisory Council for Sustainable Development (1992), the Co-chair of the World Commission on Forests and Sustainable Development (1994), Chairperson of the 10th United Nations Commission on Sustainable Development, Chairperson of the Preparatory Committee for the World Summit, and Chair of the Third ASEAN Environment Ministerial Conference. In all these positions Dr Salim has been able to give voice to the environmental problems of developing nations of Asia. At home, his government has also recognized his expertise. He occupied different key economic posts of the government spanning over thirty years, as State Minister for Administrative Reform and Vice Chairman of the National Planning Board (1970–1973), Minister of Transportation, Communication and Tourism (1973–1978), Minister of Development Supervision and Environmental (1973–1983), Minister of Population and Environment (1983–1993), Chairperson of the National Economic Council (2001–2002), and Member of Advisory Group for the President (2001–2002). The third pillar of his enormous contribution to the environment agenda is teaching Sustainable Development and national NGO work, becoming a professor at the Faculty of Economics at the University of Indonesia in 1972, and returning to the University where he presently teaches. He started the Foundation for Sustainable Development, Indonesia Biodiversity Foundation, and the Indonesian Ecolabelling Institute. Dr Salim also assisted the “Tokyo International Conference on African Development” (TICAD) initiative by the Japanese Government. He has won a number of awards that recognize his contributions in his field, including the Bintang Mahaputera Adiprandana (Republic of Indonesia, 1973), Golden ARK (Commandeur) (The Netherlands, 1982), Paul Getty Award (USA, 1990), The Hamengkubuwono IX Award of the University of Gajah Mada (2003), the Zayed Prize for Environmental Action Leading to Positive Change in Society (2006), Mercu Buana University Award 2006 and the Blue Planet Asahi Prize Award 2006. Publications that he either

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authored or took charge included “The Environment and Development” (1984), “Environmentally friendly Development” (1986), and “Our Forests Our Future” (1999) a report based on worldwide grassroots consultations and emphasized conservation of forestry facing crises published for the World Commission on Forests and Sustainable Development, and “Striking Better Balances” the Extractive Industry Report for the World Bank (2004). Gurmit Singh K.S. Gurmit Singh K.S. is an electrical engineer by training, graduating from the University of Malaya in 1970 and he has been a Registered Engineer and Member of the Institution of Engineers, Malaysia (MIEM) since 1974. Since June 1985, he has been the Executive Director of the Centre for Environment, Technology & Development, Malaysia. His work on the environment is also seen in the Environmental Protection Society, Malaysia, where he is Adviser and Founder President, and the Environmental Quality Council, where he is a Member since 1994. Other prominent appointments in recognition of his expertise includes Member of the Steering Committee of the Climate Action Network of Southeast Asia (CANSEA), and the Steering Committee of the Sustainable & Peaceful Energy Network Asia (SPENA). Gurmit Singh won an honorary M.Sc. from the University Putra Malaysia in 2000, and the Langkawi Award from the Malaysian Government in 1993. The Langkawi Award, which was introduced in 1991, represents recognition by the Government of Malaysia of any Malaysian individual who has contributed significantly towards the betterment of the environment. Song Seng Wun Mr Song Seng Wun is presently a Regional Economist and Head of Research in CIMB-GK Research Pte Ltd (formerly G.K. Research). Born a Malaysian, Mr Song holds an M.A. in Econometrics from the University of Canterbury, New Zealand. He started his career as an economist in Malayan Banking Bhd. In the early 1990s, he moved to Singapore and worked as a Regional Economist with various major multi-national financial institutions such as Merrill Lynch (formerly Smith Newcourt); Warburg Dillion Reed (formerly SB Warburg) as well as ABN Amro (formerly ABN Amro Hoare Govette). Mr Song’s areas of focus are in the economies of ASEAN-5. He is a familiar name in the news as he has greatly contributed his professional views on the regional financial markets.

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Hendrawan Supratikno Hendrawan Supratikno graduated in 1983 from Satya Wacana Christian University, Salatiga. He earned his Master of Business Administration degree from the Catholic University of Leuven, Belgium in 1986 and his Ph.D. in Business Economics and Strategic Management from the Vrije Universiteit Amsterdam in 1998. In 2001, Hendrawan was made a Professor in Strategic Management. Hendrawan began his academic career when he was appointed Vice Dean for Academic and Research Affairs, Faculty of Economics, Satya Wacana Christian University, Salatiga in 1986. In 1989 he became the Dean of the Faculty of Economics serving until 2005. He was a visiting scholar at the Australian National University in Canberra in 1991 and has been a visiting speaker at various universities in Singapore, Vietnam, and the Netherlands. He became a member of National Research Board from 1999–2005 and Chairman of the Association of Indonesian Economists (ISEI), Salatiga. Hendrawan was appointed as the Director of Post Graduate Studies for The Indonesian Institute of Business and Informatics (IBII) in 2005 and Chair Coordinator of the Economic Research Institute of IBII in 2005. He is also a member of the Strategic Management Society in the United States. Robert Sutter Robert Sutter specialized in Asian and Pacific Affairs and U.S. foreign policy in a U.S. government career of 33 years involving the Congressional Research Service of the Library of Congress, the Central Intelligence Agency, the Department of State, and the Senate Foreign Relations Committee. He was for many years the Senior Specialist and Director of the Foreign Affairs and National Defense Division of the Congressional Research Service. He also was the National Intelligence Officer for East Asia and the Pacific at the U.S. Government’s National Intelligence Council, and the China Division Director at the Department of State’s Bureau of Intelligence and Research. A Ph.D. graduate in History and East Asian Languages from Harvard University, Professor Sutter taught part-time for over thirty years at Georgetown, George Washington, Johns Hopkins Universities, and the University of Virginia. His current full-time position is Visiting Professor of Asian Studies at the School of Foreign Service, Georgetown University. He has published fifteen books, over a hundred articles and several hundred government reports dealing with contemporary East Asian and

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Pacific countries and their relations with the United States. His most recent work is China’s Rise: Implications for US Leadership in Asia (2006). Simon Tay Simon S.C. Tay, LL.B Hons (National University of Singapore), LL.M (Harvard), teaches international law at the National University of Singapore. He is concurrently chairman of the Singapore Institute of International Affairs, a non-governmental think-tank. Since July 2002, he has been chairman of the National Environment Agency, the country’s major agency for environmental protection and public health. In Fall 2003, he was a visiting professor, teaching at the Harvard Law School and Fletcher School of International Law and Diplomacy. He was selected for three terms as a Nominated Member of the Singapore Parliament (1997–2001) and has served to lead public consultations on Singapore in the twenty-first century, the national concept plan, and the Singapore Green Plan 2012. He was a Fulbright scholar (1993–94) at Harvard Law School, where he won the Laylin prize for the best thesis in international law. In January 2000, the World Economic Forum (Davos) named him a “global leader of tomorrow”. In 2002, he was awarded an Eisenhower Fellowship, one of Singapore’s first non-governmental recipients of this award. Michael Vatikiotis Michael Vatikiotis is the regional representative for the Geneva-based Henry Dunant Centre for Humanitarian Dialogue. Based in Singapore, he works on promoting dialogue and conflict resolution in Asia. He is also a Visiting Fellow at the Institute of Southeast Asian Studies. Formerly editor of the Far Eastern Economic Review, Vatikiotis has been a writer and journalist in Asia for twenty years. He has lived in Indonesia, Malaysia and Thailand as well as Hong Kong. He has written two books on regional politics: Indonesian Politics Under Suharto and Political Change in Southeast Asia. His published fiction includes The Spice Garden, a novel on religious conflict in Eastern Indonesia published in 2004 and Debatable Land, a collection of short stories on Southeast Asia. He is a regular contributor to the opinion page of the International Herald Tribune as well as a number of regional newspapers. Dr Vatikiotis is a graduate of the School of Oriental and African Studies in London, earned his doctorate from Oxford University and was awarded an honorary doctorate from the University of Maryland. He is a member of the Asia Society’s International Council. He speaks the Thai and Indonesian languages fluently.

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Peter Wallace Peter Leslie Wallace obtained his Bachelor of Science in Technology (electrical engineering) from the University of New South Wales, Australia. He went to the Philippines in 1975 to build a factory for an American multinational corporation, then subsequently led two other MNCs before founding his own company in 1982 — The Wallace Business Forum, Inc. Spending his over thirty years in the Philippine business community, he continuously provides consulting services to more than 160 MNCs and aid agencies, as well as deals with successive Philippine governments on foreign investments and policies affecting business. Other than his own business, he is also the Chairman of ATRIEV (a computer college for the blind), and he also sits on the boards of iAcademy, Universal LRT Corporation, The Forum for Family Planning and Development, the Management Association of the Philippines, and the Australian-New Zealand Chamber of Commerce. Zarni Dr Zarni is Visiting Research Fellow (2006–2009) with the Department of International Development (Queen Elizabeth House), Oxford. His current research focuses on sustainable and rural development, nation-building, social movements, and imperialisms. In 1995, he founded the Free Burma Coalition, one of the Internet’s first and largest campaigns with the intent of supporting Aung San Suu Kyi’s National League for Democracy party in its struggle for democratic change in Myanmar/Burma. In 2005, he voluntarily ended his exile in the United States, returned to his native Myanmar/Burma and resumed Myanmar citizenship, having lost confidence in both the NLD’s leadership and organizational capacities and the Western policy of the prolonged sanctions and isolation of Myanmar/Burma as the strategy for social change. After sixteen years of his involvement with the pro-sanctions Myanmarese/Burmese opposition, he now advocates open engagement with and integration of both the regime and society in Myanmar/Burma in areas such as trade, commerce, tourism, education and capacity building, humanitarian field, cultural exchange and technology transfer. Zarni received his initial education at St Peter’s Boys School in Mandalay and Mandalay University in Burma and did his postgraduate studies at the universities of California, Washington and Wisconsin in the United States. He edited The Free Burma Coalition Manual: How You Can Help Burma’s Freedom Struggle (1997), co-authored, with Naw May Oo, the Free Burma Coalition report entitled “Common Problems Shared Responsibilities:

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A Citizens’ Initiative for National Reconciliation in Burma/Myanmar” (2004), and wrote his Ph.D. thesis (1998) entitled “Power, Knowledge, and Control: The Politics of Education under Military Rule in Burma (1962–88)”, based on his year-long archival research at Cornell, Northern Illinois, Berkeley and London, as well as face-to-face interviews with about 100 Myanmarese/Burmese émigrés in the United States, including former military intelligence and security officers, cabinet level officials, academicians, teachers and students from diverse ethnic, class and ideological backgrounds.

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RAPPORTEURS OF THE REGIONAL OUTLOOK FORUM 2007: SUMMARY REPORT David Koh — Summary Report Editor and Coordinator of ROF 2007 David Koh is Fellow at the institute of Southeast Asian Studies and the Coordinator of the institute’s Regional Strategic and Political Studies Programme. His core research is on Vietnam politics and society but he also keeps watch on region-wide issues and comparative politics of the region. Agung Wicaksono Agung is a Research Associate at the Institute of Southeast Asian Studies. His main research area is corporate governance and internationalization of firms in Southeast Asia. He graduated from Institute of Technology Bandung (ITB) in Indonesia with a B.Sc. in Industrial Engineering as well as from Technical University of Hamburg-Harburg (TUHH) in Germany with an M.Sc. in Technology Management, and is currently writing his Ph.D. thesis at the University of St. Gallen, Switzerland. Deepak Nair Deepak is a Research Associate at the Institute of Southeast Asian Studies. His areas of interest include emerging security discourses on India and China, and maritime security in Southeast Asia. He has published commentaries on issues such as the “China threat”, territorial disputes between India and China, the U.S.-India Nuclear deal, among others. He has a B.A. in History from St. Stephen’s College, Delhi, and holds an M.Sc. (Distinction) in International Relations from the London School of Economics. Jean Tan Ming Jean is a Research Associate at the Institute of Southeast Asian Studies. She has a B.A. (Hons) in Philosophy from the National University of Singapore and an M.A. (International Relations) from The Australian National University.

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REGIONAL OUTLOOK FORUM 2007: Summary Report

Terenjit Singh Sevea Terenjit is a Research Associate at the Institute of Southeast Asian Studies. He recently graduated from the London School of Economics and Political Science with an M.Sc. in Comparative Politics. His research interests include Islamic linkages between South and Southeast Asia, and recentring Islam to South and Southeast Asia. Teo Kah Beng Kah Beng is a doctoral candidate in political science at the National University of Singapore. He is an Associate Lecturer (International Relations) at the Singapore Institute of Management. He is also an Intern at the Institute of Southeast Asian Studies. Sanchita Basu Das Sanchita is an economist by profession and has worked both in consultancy services and banking industry for five years. She is currently a Research Associate at the Institute of Southeast Asian Studies.

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