SINGAPORE - As Southeast Asia
prepares to mark 10 years since the collapse of
the Thai currency and the onset of the Asian
financial crisis, it would be comforting to look
back and reflect on a decade of reform and lessons
learned.
But while many changes have
indeed been introduced with the aim of preventing
another currency crisis that leads to sharp
economic recessions, the major political reforms
some thought would stem from the crisis have
happened only fitfully. So even if
the
currency speculators have been seen off, the
region continues to endure social and economic
inequality that stunts growth and sustains
political risk.
Before July 1997, the
paucity of broadly representative and accountable
democratic government in the region was
lamentable, but often excused in the face of
soaring economic growth figures. Afterward, as
foreign investment dried up and poverty rates
increased, political change was deemed necessary
for future stability and growth. Poverty levels in
Indonesia, for example, fell from 40% in 1976 to
just under 12% in 1996, but climbed back up to 26%
in 1998 and today hover around 18%.
After
the fall of the authoritarian president Suharto in
1998, Indonesia entered a long and agonizing era
of reform during which one government after
another promised to tackle corruption and cement
in place the foundations of truly representative
democratic government. Looking back over this
often frustrating decade, Indonesia has no doubt
made real progress.
Democracy is firmly in
place, the media are free, and government is much
more accountable as a result. Administration has
been decentralized and Indonesia's far-flung
regions enjoy a real measure of autonomy that has
started to unlock untapped or previously
mismanaged economic potential. District officers
once drawn from the ranks of the military are now
directly elected. Less progress has been made
tackling corruption, though unlike in many other
parts of Southeast Asia, the current government is
at least trying.
Elsewhere in the region,
old habits and traditions die hard. Thailand, the
epicenter of the financial crisis, spent the
initial post-crisis period in a period of frantic,
International Monetary Fund-guided reform. But
Thais quickly grew tired of austerity; the urban
middle classes clamored for the "easy come"
prosperity of the go-go 1990s, forgetting all
about the "easy go" that ensued.
Big-business families were anxious to stem
the tide of foreign ownership that followed the
crisis and diluted their equity. All this
translated into solid backing for the incoming and
for a short time nationalistic administration of
Thaksin Shinawatra in 2001.
Thaksin argued
that there had been enough reform and that Thais
wanted to get on with growing rich again. This set
the stage for dramatic reversals of economic and
political reforms that had encouraged transparency
and probity in both the public and private
sectors. Populism became the leitmotif of
post-financial-crisis politics in Thailand, a
blend of economic nationalism and cronyism that
allegedly supported spreading the wealth to the
masses, but in reality created bigger markets for
a select few businesses owned by the ruling party
and its cronies.
Protective impulse In Malaysia and Singapore, the mantra of
reform soon gave way to the impulse to protect and
preserve state-owned assets from the wave of
foreign ownership that swept other parts of
Southeast Asia post-1997.
The financial
crisis was expected to make a dent in Malaysia's
rigorously enforced preferential assistance for
ethnic Malays, known as the New Economic Policy,
and open up Singapore's state sector to foreign
investment. Instead, both countries relaxed rules
so that foreign banks and other firms could
operate more freely, but core assets have stayed
off-limits to foreign buyers. This was reform at
half-speed, and the result was a fairly unchanged
landscape.
Given all this, there have been
several periods since 1997 when economists and
commentators speculated that the region might slip
again into crisis. Governments continue to
manipulate their currencies to maintain lower
exchange rates that attract investment and beat
labor costs down, but which also undermine the
value of ordinary people's savings and drive up
the costs of imported goods and services. Ten
years on, Thailand is still imposing capital
controls and the inequalities enforced by
Malaysia's New Economic Policy persist.
The real problem here isn't economic
reform, but rather a stubborn reluctance to allow
untrammeled political change. For decades,
democracy has been only half-embraced in Southeast
Asia - allowed just enough freedom and
representation to keep people off the streets and
prevent them demanding more of a say in how they
are governed, yet imposing enough limits on
freedom to preserve the elite political and
economic status quo.
Usually, these limits
are defended in the name of social cohesion and
political stability. The best description of this
kind of democracy was the one coined by Indonesian
independence leader and founding president
Sukarno. He appropriately called it "guided
democracy".
As far as Southeast Asia's
current generation of leaders are concerned, the
beauty of this more defined and constrained
democracy is that it prevents the undermining of
long-established ties of patronage at the apex of
society. These ties promote the stability that
businesses crave; they also perpetuate the wealth
of a few by stifling competition and limiting
broad-based economic growth.
Michael
Vatikiotis is regional representative of the
Center for Humanitarian Dialogue based in
Singapore. He covered the Asian financial crisis
from Bangkok as a journalist for the Far Eastern
Economic Review.
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