The year 2008 will be remembered for the tragedy of Cyclone Nargis, which devastated the Ayeyarwady delta region of Myanmar, resulting in the loss of more than 140,000 lives. More broadly, it will also be remembered for the onset of the global financial crisis which clouded the performance of Southeast Asian economies and led to a downturn in the later part of the year. Growth rates were starting to plummet, especially in the more export-dependent economies, accompanied by the spectre of rising unemployment into 2009.

Politics in both Malaysia and Thailand were more tumultuous. In Malaysia, pressures for change led the ruling UMNO-dominated coalition to lose its two- thirds majority in Parliament in the general election in March 2008, ushering in a period of uncertainty and forcing incumbent Prime Minister Abdullah Badawi to agree to step down in March 2009 in favour of his deputy, Najib Razak. Thailand was increasingly polarized between anti- and pro-Thaksin political forces. The former seemed to triumph when, through unprecedented street protests and siege of government buildings and airports, they succeeded in forcing two governments, perceived as pro-Thaksin, to resign. Defections by parliamentarians from the ruling party then enabled the Democrat Party to form the government. However, the risk remained that the same destabilizing tactics might be used against the new government by pro-Thaksin forces.

Elsewhere in Southeast Asia, there was more political continuity than change. In Myanmar, Nargis resulted in greater interaction between the international community and the ruling junta but there was no deviation from the regime's plans to have a new constitutional order dominated by the military, as it successfully conducted a referendum on its draft constitution to achieve this end. Indonesia, the largest country in the region, impressed through its stability and progress, though the clouds of the global economic downturn raised questions about how it would weather the crisis.

The year 2008 will be remembered as a watershed for the Malaysian political system and for the forward trajectory of Malaysian democracy. This election year saw a refurbished coalition of oppositional political forces, the People's Pact (Pakatan Rakyat), deprive the ruling National Front (Barisan Nasional) coalition of its two-thirds majority of seats in Parliament. Even more significantly, four state governments fell, making it a total of five governments in Opposition hands. I suggest here that this development has created a de facto two-party system for a maturing Malaysian democracy. Economically, Malaysians will be facing a severe downturn though not a technical recession. The year also saw the denouement of a leadership crisis within the United Malays National Organisation (UMNO) leading ultimately to the anticipated departure from the political stage in March 2009 of the fifth Malaysian Prime Minister Abdullah Ahmad Badawi. The political terrain remains fraught with pitfalls for premier-in-waiting Najib Abdul Razak and for Opposition Leader, Anwar Ibrahim, who awaits his sodomy trial.

The Malaysian Prime Minister Abdullah Badawi already had more than his fair share of a baggage of problems to deal with even before his tenure headed into 2008. Let me briefly recollect. After 25 November 2007, five HINDRAF lawyers remained in detention under the draconian ISA, while one was at large. The V.K. Lingam video expose in September 2007 and the Royal Commission inquiry into it in January 2008 remained much in the public consciousness, so too the Altantuya murder trial which had dragged on from 2007. Inter-faith fractures which had surfaced since 2005 remained largely unresolved and so too internal squabbles within the ruling coalition parties. Most sensationally, the MCA Minister for Health had to resign because of the circulation of a sex video by his detractors. Finally, the economy was not in great shape with petrol prices and inflation spiking and Mahathir still sniping from the sidelines. Yet speculation was rife by early 2008 that an early election would be called presumably to salvage the premier's beleaguered situation, more than one year in advance of the mandatory five years.

The title of my first contribution to Southeast Asian Affairs in 1980 was “Laos: The Vietnamese Connection”. A great deal has happened in the Lao People's Democratic Republic (LPDR) over the past three decades, both internally, and in its relations with its neighbours. The Lao People's Revolutionary Party (LPRP) is still in power, but it is a party riven by ambition and greed. The country is wealthier than it was thirty years ago; but the urban-rural divide is more marked than ever. Wealth is concentrated in the cities, most of it in the hands of Party members and their families. The resources of the country, which the French had glimpsed a century before, most of which are located in rural areas, are now being rapidly exploited, but not for the benefit of the rural majority. Neighbouring states have hungrily eyed these resources, and seized their opportunities to obtain a share — none more so than China. So just as what was interesting about Laos in 1980 was the Vietnamese connection, so in 2009 what is interesting is the developing Chinese connection, and what this means for Lao politics and policies.

To focus on the Chinese connection is not to suggest that the Vietnamese connection no longer matters. It certainly does. Rather it is to focus on economic and political changes that are now taking place. What I want to do in this article is to examine the changes that were becoming apparent in 2008 in three areas: in politics; in economic development; and in international relations. But I shall deal with these in the reverse order, for Lao politics are all but opaque in the absence of any media reporting or discussion, and it is only by examining the shifting influence of neighbouring states, and popular responses to the impact of development policies, that some light can be cast on Lao politics.

Introduction

Thailand has endured a succession of recent crises: the Asian financial crisis of 1997–99, originating with the collapse of its own currency and reducing investor confidence for the entire decade since; the terrible tsunami of December 2004; outbreaks of SARS and Avian Influenza; rural drought; an interminable insurrection in its southernmost Muslim provinces, producing more than 4,000 deaths; and growing concern about the consequences for Thailand of global climate change. As if all that were not enough, in 2008 an additional double crisis overwhelmed the country: a self-inflicted internal political crisis deepening social divisions within the country and culminating in the closure of Bangkok's international airport in late 2008; and the repercussions of the most serious global financial crisis since the Great Depression of the 1930s.

Thailand's immediate prospects are somber, along with the rest of East Asia. In contemplating this depressing story it is easy to lose long-term perspective. Despite the serious problems, the quality of everyday life in Thailand has continued to improve over several decades and poverty incidence has maintained its long-term decline. Thailand has already achieved essentially all of its Millennium Development Goals, well ahead of the target date of 2015, while most developing countries lag far behind schedule. The current crisis will undoubtedly produce a pronounced economic contraction and some worsening of poverty incidence. No one knows how long-lasting this episode of deglobalization will be, but it will be temporary. It should be seen in the context of long term economic improvement which can be expected to continue once the global crisis subsides.

Accordingly, this chapter turns first to Thailand's current twin crises: the internal political crisis and the worldwide financial crisis. It then places these events in longer term perspective by reviewing Thailand's long term economic experience and in particular the impact of the last serious economic crisis to affect Thailand — the Asian financial crisis of 1997–99. To see what is likely to happen as a result of the present contraction it is helpful to look at what happened during previous economic downturns.

In 2008 ASEAN intensified its longstanding search for identity. In the final quarter of the year the Association was transformed from a consultative group into a legal entity when the Philippines, Indonesia and Thailand became the last member states to ratify the ASEAN Charter. However, the translation of the group's new status into policies remains an open question. ASEAN continues to be the bedrock of Asian regional architecture, but signs are emerging that the Northeast Asia members of the ASEAN+3 may not need Southeast Asian training wheels much longer. At the same time, ASEAN was pulled closer into Northeast Asian conundrums — and potential conflicts — with new overtures from North Korea and Taiwan.

However, more tangible challenges to Southeast Asian unity in 2008 came from developments within and between the member states themselves. The protracted multi-party process to forge a peace agreement between the Moro Islamic Liberation Front (MILF) and the Philippine government failed, assuring continued instability in Mindanao and calling into question the efficacy of ad hoc regional diplomacy. A dispute over an historic border temple sparked a brief military clash between Thailand and Cambodia, with each side accusing the other of provoking conflict for domestic political gain. At the end of the year international attention was drawn to Thailand's complicated political crisis when anti-government protestors seized the international airport in Bangkok, disrupting regional air routes and forcing Bangkok to postpone the annual ASEAN Summit.

But arguably the greatest challenge to ASEAN coherence posed by a member state in 2008 was the response — or lack of — by the government of Myanmar to Cyclone Nargis and to offers of humanitarian relief from the international community. Less than a year after the government's crackdown of the “Saffron Revolution”, the disaster became a diagnostic for Myanmar's regional relations. ASEAN emerged as the interlocutor of choice, but the limits of the Association's influence on its isolated and isolationist member were obvious.

ASEAN Charter: Back-and-Fill Institutional Development?

It is not possible to pull together into this introductory essay the many rich themes and insights contained in this volume. Instead I have selected eight points which, in my view, deserve the reader's attention when looking at Southeast Asia in the year 2008.

A Region Mostly At Peace

First, Southeast Asia enjoyed a relatively peaceful year. While it is true that Thailand and Cambodia fired at each other in anger, the fighting was quickly ended. As Michael Vatikiotis says in his chapter in this volume, “the instinctive avoidance of conflict which is rooted deep in the region's cultural DNA” helped to defuse a potential crisis. Southeast Asia has also been fortunate that relations between the major powers in its broader Asian and Pacific environment, especially U.S.-China relations, have remained generally stable, which is crucial for the region's peace and tranquility. Further, several internal conflicts within Southeast Asian states have been settled or mitigated in recent years, mostly within Indonesia. Al Qaeda-linked terrorism has continued to suffer setbacks (see below).

The principal blots on this generally peaceful scene have been the conflicts in the southern Philippines and southern Thailand. The unfortunate breakdown of the Malaysian-brokered peace negotiations between the Philippines government and the Moro Islamic Liberation Front (MILF), the main armed Muslim group confronting the government in the south of the country, was a significant setback, while the insurgency in the southern provinces of Thailand continued to rage as before with no prospect of an early end.

Given the virtual absence of interstate conflict and relative freedom from big power tensions and conflicts, at this moment in history, the security threats to Southeast Asia are largely of the ‘non-traditional’ type — like violence or tensions associated with ethnic, religious or separatist conflict; terrorism; illegal migrations; and pandemic diseases. ASEAN's Progress Second, ASEAN's institutional evolution advanced a few more steps.

Introduction

This article demonstrates the inadequate response of the international community to the suppression of drugs in Myanmar and the lost opportunity by the United States to reverse its policy toward interdiction since 2002. First, it provides a brief history of drug production in Myanmar and examines the reliability of surveys conducted by the United Nations Office of Drugs and Crime (UNODC) and the United States, both together with Myanmar, on opium cultivation and of estimates of amphetamine type stimulants (ATS) production. Second, it sheds light on international and domestic efforts to halt the production and distribution of opium, heroin and ATS, and discusses the roots of the dramatic decline in opium cultivation and production over the twelve years preceding 2007. Third, it evaluates the alleged involvement of authorities under the State Peace and Development Council (SPDC), the governing body of Myanmar, in the drug trade. Fourth, it concludes that extensive assistance by the international community and local authorities is vital to avoid a humanitarian disaster in the opium cultivation areas and consequent reversal of the favourable progression.

An Historical Overview

For centuries farmers have grown the opium poppy plant mostly in the far reaches of northern Myanmar for medicine and to raise cash. The British commercialized the cultivation in colonial times. After Independence in 1948, Myanmar nationals, often minority groups in the growing areas, have became the wholesalers, while ethnic Chinese merchants and international syndicates located in Thailand and, later, China have been the ultimate major purchasers of the poppy crop. Since the completion of ceasefire agreements between the Myanmar government and various ethnic armed resistance groups starting in 1989, the latter have been given varying degrees of autonomy in their fiefdoms and are permitted to tax the poppy farmers, opium manufacturers and distributors.

Beginning in 1999, Myanmar and these local ethnic minorities agreed to eliminate poppy growing by 2014 and the former increased its suppression efforts after a period of lethargy.

Introduction

The year 2007 left an an important mark on the economic history of Vietnam. The country became the 150th member of the World Trade Organization (WTO) on 11 January 2007 after its accession package was approved by the General Council of the WTO on 7 November 2006. For Vietnamese political leaders and the population as a whole, WTO membership was the last hurdle to cross to make Vietnam fully integrated with the rest of the world, particularly in view of the perceived ability of the United States to block Vietnam's WTO membership and thus its path to economic development in order to extract political acquiescence from Vietnam. The admission to the WTO was therefore treated by the leaders of the Communist Party of Vietnam (CPV) as a major victory, and like any victory in the past, be it over France, or the U.S., they became consumed with the elixir of triumph and embraced grandiose plans in disregard of reality.

This time, Prime Minister Nguyễn Tấn Dũng's government came to believe that a quick catch-up with other countries in the region was within grasp. The plan for 2008 was set in terms of achieving a high rate of growth in GDP, in the range of 8.5–9 per cent, by focusing externally on attracting capital inflows through foreign direct and portfolio investment, and internally on expanding the state-owned conglomerates and their subsidiaries with easy credit, public land and public money. Politically, the economic plan was expected to win the support of the party's rank and file and the provincial governments throughout the country as it would provide benefits to them from the growth of the state-owned conglomerates and general corporations in terms of seed money, land-use rights, and shares in hundreds of semi-private enterprises spun out by the conglomerates and general corporations. This plan demised rather quickly in 2008 as inflation jumped, the stock market crashed and the economy was threatened by an imminent balance of payment crisis.

Introduction

Notwithstanding its sometimes negative international image, the Philippine economy has been performing well in recent years, better than is commonly recognized. Until the global financial crisis in 2008, the country experienced its longest period — five years — of uninterrupted positive per capita economic growth since the 1970s. It seems to have moved on from the “two lost decades”, 1983–2003, when there was no net increase in per capita incomes. Business is beginning to insulate itself from the seemingly perennial curse of political machinations souring the commercial environment. That is, business and politics are apparently “decoupling”.

The Philippines has an unenviable history of politics nipping promising economic growth trends in the bud, resulting in a volatile development trajectory around a low average growth rate. The country grew quite strongly in the 1970s under Ferdinand Marcos. But this was debt-driven growth, which became unsustainable when the debts came due and political instability set in in the early 1980s. One of Marcos's enduring contributions to international polemics was the phrase “crony capitalism”.

Then, under arguably the country's most successful president, Fidel Ramos, growth accelerated in the 1990s, until the onset of the Asian economic crisis. This was of course an event outside of Ramos's control. It had the effect of slowing the economy but, unlike its high-growth neighbours, the Philippines did not experience a deep economic crisis. Ramos was then succeeded by Joseph Estrada — under the 1987 Constitution, the president is not permitted to serve more than one consecutive term — and political instability and backsliding again set in. Estrada had been under house arrest since his removal in early 2001, but in late 2007 he was pardoned and set free by his successor, the current president, Gloria Macapagal-Arroyo.

The key to the recent success is that, since the deep economic and political crisis of 1985–86, the reformers have been able to enact and institutionalize enough major policy victories to satisfy the business community that they are a more or less permanent feature of the political economy architecture.

It would be difficult to overstate the geostrategic and economic importance of Southeast Asia's maritime domains. The sea lanes of communication (SLOCs) that criss-cross and pass through Southeast Asia function as vital arteries of world trade. Southeast Asian SLOCs have been instrumental in the success of the ASEAN countries’ export-led economic growth, while countless maritime communities dotted across the region continue to depend on the sea for their livelihoods. Further north, the economic powerhouses of Northeast Asia — Japan, the People's Republic of China (PRC) and South Korea — rely on Southeast Asian SLOCs for the safe passage of 80–90 per cent of their energy supplies from the Middle East and Africa, and as conduits for transporting their manufactured goods to other parts of Asia, Europe and beyond. For the world's Great Powers, especially the United States and Japan, but increasingly China and India, Southeast Asia's SLOCs and maritime chokepoints such as the Malacca, Sunda and Lombok-Makassar Straits have strategic value beyond measure, linking as they do Northeast Asia and the Western Pacific with the Indian Ocean.

Over the past several decades, globalization contributed to a phenomenal increase in the volume of seaborne trade: in 2007, 8.02 billion tonnes of goods were moved by sea, up from 6.27 billion in 2000 and 2.6 billion in 1970. The dynamic economies of Asia accounted for much of this growth: in 2007 Asia took the lion's share, accounting for 40 per cent of loaded goods, followed by the Americas (23 per cent), Europe (18 per cent), Africa (10 per cent) and Oceania (9 per cent). Of the world's 20 busiest ports in 2005, 15 were located in Asia; and of the 20 busiest container terminals 13 were in Asia, including seven in the PRC alone. China's spectacular economic growth since the late 1970s has been a major, if not the primary, driver of maritime trade expansion, forcing the global shipping industry to struggle to keep pace with demand for vessels to carry raw materials into China and transport Chinese-manufactured goods to overseas markets.

The most significant events for Myanmar in the year 2008 were the devastating tropical Cyclone Nargis that wreaked havoc in the former capital Yangon and the Ayeyarwady Delta and the constitutional referendum that was conducted soon after the disaster. Both elicited strong emotional responses from the military government's detractors at home and abroad. In fact, the tragedy brought about by Nargis provoked a storm of protest and angry calls for humanitarian intervention from opposition groups, human rights advocates, and (mainly) Western politicians over the military government's seemingly lethargic response in the storm's aftermath and its attempts to control the flow of international aid as well as access to affected areas. At the same time, the timing of the referendum that was organized in two stages during the same month in which Nargis struck as well as the overwhelming (over 92 per cent) proportion of affirmative votes led to accusations of callousness and allegations of vote rigging on the government's part.

On the other hand, the extent of the devastation that required a sustained and massive relief and rehabilitation effort led to the active involvement of the United Nations (UN) — through the personal diplomacy of Secretary-General Ban Ki-moon — and ASEAN (Association of Southeast Asian Nations) in a tripartite arrangement with the Myanmar government to coordinate and oversee damage assessments as well as international assistance in personnel, money and material. Consequently, an opportunity was created for local civil society organizations (CSO), general public, and INGOs (international non-governmental organizations) to take part in a monumental effort aimed at helping the victims of Nargis. To some observers, this augurs well for the development of civil society in Myanmar.

Meanwhile, skeptics and critics continued to harp on the lack of progress in political dialogue between the government and the political opposition and the continued detention of opposition icon Daw Aung San Suu Kyi.

Domestic Politics

By the end of 2008, the political scene in Brunei was dominated by preparations for the commemoration of Brunei's Silver Jubilee celebrating twenty-five years of independence from colonial rule. On the eve of the National Day in early 2009, Sultan Haji Hassanal Bolkiah delivered a titah (a speech or decree) where he declared his intention to increase the growth of industries, to continue to reduce poverty, to increase rice production, and to ensure the continued development of an efficient and outstanding public service. The Sultan contended that both ‘regeneration’ and ‘change’ in Brunei will need to be engineered through the ‘Brunei Vision’ which itself will need to take ‘into account not only the nation's status but also global trends’. Implicit in the Sultan's address to the nation was the recognition of the difficult global economic climate which had already affected Brunei.

Since independence on 1 January 1984, Negara Brunei Darussalam has remained a monarchy where the Sultan's powers include the prerogative of mercy in the judiciary, the regulation of Islam and the ability to rule by decree. While the Sultan stated that the Malay Islamic Monarchy will ‘ceaselessly remain a sovereign nation, independent and democratic’, his pre-National Day titah was also notable for the fact that it did not discuss any of the political reforms he had previously outlined for the nation. One of the most significant of these reforms concerned the Legislative Council (LegCo or Majilisi Masyuarat Negeri) that was reconstituted by royal decree in 2004 as a wholly appointed chamber following a twenty-year respite. A new LegCo was reconvened on 24 September 2005 with an enlarged membership totalling thirty delegates including five indirectly elected members representing the Village Councils. During the meeting, the members voted to further increase the number of representatives to a total of forty-five with the new members being selected via popular vote. However, and through to the conclusion of 2008, there had been no announcement as to when such an election (the first since 1968) would take place.