The past 12 months have been a very successful year for Vietnam's foreign relations. The single most important event in Vietnam's foreign relations calendar in 2005 was Prime Minister Phan Van Khai's six-day visit to the United States from 19 to 25 June. The visit, the first by a national leader of Vietnam to the United States in 30 years, coincided with the tenth anniversary of the normalization of relations between the two countries. The event is also important as it came exactly 30 years after the end of the Vietnam War when the two sides faced off in the conflict. On his return to Vietnam, the visit was celebrated as a huge success, and the event was described by Prime Minister Khai as an event that would hardly have been possible only ten years earlier.

The success of Khai's visit is significant for Vietnam in at least three ways: first, it points to the further improvements in the Vietnam-US relations; second, it reveals the unconventional Vietnamese stance on several important issues affecting the nation; and third, the government hopes to capitalize on the successes in its foreign relations to strengthen its position in domestic politics, especially in the run-up to the 10 th National Congress of the Communist Party of Vietnam (CPV) in 2006.

In 2005, however, domestic issues continued to dominate much of Vietnam's politics. The ruling party, the CPV, faced challenges in pursuing its reform programme without compromising its position as the paramount party in the country. The threats posed by endemic corruption and the government's efforts to overcome it, questions relating to religious freedom and the government's handling of political dissidents continued to dominate much of Vietnam's domestic politics as well as getting the attention of its leaders. The pace of equitization of the state-owned enterprises (SOEs), by turning them into joint stock companies, and Vietnam's pending entry into the World Trade Organization (WTO) were two of the main economic concerns.

Scholars, journalists, and political analysts observing East Timor for the past 20 to 30 years and visiting East Timor in 2005 comment that things seem to have become more “disheartening”: the local people are more angry towards the malaes (foreigners), more disillusioned with the government, the political elite, and emerging Timorese capitalists; members of civil societies and non-governmental organizations (NGOs) are more worried about the narrowing of spaces for pluralistic visions, opposition, and dissent; ex-Falintil 1 veterans are feeling more betrayed by the lack of acknowledgement of their contributions to the independence resistance struggle; armed forces soldiers have abandoned their barracks in Metinaro claiming discrimination and inequality; and citizens genuinely are concerned that the path to nation-building and democratization is increasingly signalling an authoritarian Mozambique-style suppression of opposition and freedom of speech.

Politically, East Timor is a fascinating study of democratization processes in a conflict/post-conflict context, in addition to being a paradoxical case study of the United Nation's mixed performance and most extensive involvement in nation-state building and peacekeeping in Asia and the Pacific. The country is currently undergoing serious challenges to freedom of speech and judicial sector reform, with a centralistic and rather insecure state trying to control, censor, and regulate NGOs, civil society, media, and opposition parties. As an example, one of the most widely discussed issues between the government, the judicial sector, and civil society at the moment is the re-introduction of the defamation law in the East Timor Penal Code. A defamation law (somewhat akin to the “Internal Security Act” in Singapore and Malaysia), which was criminalized by the Indonesian occupation and used under the “Subversion Law” to imprison independence resistance leaders, and was de-criminalized by the United Nations Transitional Administration in East Timor, or UNTAET (Executive Order No. 2000/2) under Sergio de Mello, is being reinstated by the Prime Minister Mari Alkatiri and the Council of Ministers in a move seen within opposition circles as intended to silence opposition in the country prior to the 2007 legislative and presidential elections.

“Quite so!”, said one of the retired professors from behind a cloud of cheroot smoke. “My Western friends always ask me, ‘Why are the Burmese so cynical?’ I reply that there isn't any single reason to be cynical. But in these prevailing conditions there is absolutely no reason for optimism.”

(Emma Larkin, Secret Histories: Finding George Orwell in a Burmese Teashop [London: John Murray, 2004], p. 30)

Myanmar is a leading example of what represents, at least by some definitions, a failed state: tyrannically governed by a military junta whose sullen leaders are seldom seen in public, with a downtrodden, impoverished, and dispirited citizenry — most of whom struggle to survive, at best with the most basic standard of living. Except for the swollen hierarchy of the State Peace and Development Council (SPDC), upper elements of the armed forces (SitTat or Tatmadaw) and crony businessmen (including an increasingly self-evident resident Chinese population), the people of Myanmar experience few of the comforts and advances of the modern world. The unloved governing military junta, in absolute power under one name or another since 1962, prevails only because of the authority of the gun, and obliging neighbours on all sides eager to partake of Myanmar's still abundant natural resources at fire-sale prices.

But Myanmar's internal situation has deep geopolitical ramifications. Emanating from this wounded nation are huge and problematic challenges for the region. There is evidence to suggest that despite periodic state efforts to eliminate the production of opium poppies, Myanmar remains one of the world's largest producers of heroin and amphetamines — most of which is consigned for international delivery through India, China, and Thailand. This, combined with what amounts to an uncontrolled HIV/AIDS epidemic, arguably makes Myanmar a threat to regional security. Perhaps even more destabilizing is the steady wave of despairing people aiming to escape, particularly through the border region with Thailand, a phenomenon which will only increase as Myanmar's economic and political instability continues unabated.

Southeast Asia was on the cusp of major changes in 2005. At year's end in December 2005, the long-awaited East Asian Summit was held in Kuala Lumpur. It marked the beginning of region-building that encompasses East, Southeast, and South Asia, as well as Australia and New Zealand, a process that heralds looking beyond narrow sub-regionalism. At the same time, ASEAN launched the process of preparing an ASEAN Charter, with the guidance of an Eminent Persons Group. Both events signalled the strengthening of ASEAN and the wider region.

Furthermore, the democratic processes were strengthened by the successful organization of regional elections in Indonesia following the legislative and presidential elections in the previous year. In Thailand and the Philippines, the political processes delivered different results: Prime Minister Thaksin came under pressure which led to his resignation in April 2006, whilst President Arroyo retained her post despite street demonstrations. Vietnam continued to achieve rapid economic growth. Bird flu appeared, but was contained, at least for the time being. Most ASEAN economies benefited from the high growth sustained by India and China. The good economic performance plus the central role of ASEAN in the driver's seat of the East Asian Summit has restored some of the shine back to ASEAN.

Southeast Asian Affairs 2006, like the previous 32 editions of this flagship publication of ISEAS, provides an informed and readable analysis of developments in the region.

For Indonesia 2005 was marked by a number of achievements, especially in politics and security. The experiment with democracy that had been initiated with the fall of Soeharto in 1998 seemed to be stabilizing, albeit perhaps temporarily. The direct regional elections were by and large successful in electing governors, mayors, and district heads. The government of Susilo Bambang Yudhoyono (SBY) and Jusuf Kalla enjoyed some degree of success in dealing with the restive provinces, most notably Aceh. The tsunami disaster that struck the province on 26 December 2004 provided the impetus for peace talks between the rebel group GAM (Gerakan Aceh Merdeka, or Free Aceh Movement) and the Indonesian government. In foreign policy, strategic partnership agreements were signed with China and India, the two rising powers in the world. Jakarta was also successful in lobbying the US government to lift the arms embargo that had been put in place after the riots following East Timor's referendum in 2000. The death of terrorist leader Dr Azahari and the subsequent capture of members of the domestic terror cell network were the highlights of the fight against terrorism in Indonesia. The country's law enforcement agencies also made significant advances in the fight against corruption, one of Indonesia's foremost woes.

Despite these successes, the country still faced a number of tribulations, especially in the economic domain. The sky-rocketing of oil prices on the world market pushed the government to slash the subsidy for petroleum in the domestic market. This move created significant pressure on the population, and sharply reduced the popularity of Yudhoyono's administration. Additionally, in spite of the serious drive by the government to reduce corruption and bureaucratic red tape, foreign investors were still shying away from Indonesia, citing a lack of legal clarity and predictability as the reason.

On the whole, 2005 will be marked in Indonesia's history as the year of positive accomplishments, raised expectations, and continued challenges.

Since the Philippine government joined the global war on terrorism, it has been in hot pursuit of the Abu Sayyaf Group (ASG). Though government and media sources continue to describe the ASG as a mere bandit group because of the many kidnap-for-ransom activities (KRAs) it perpetrated in the past, the series of bombings that the ASG carried out in 2004 and 2005 were hallmarks of terrorism rather than banditry. Is the ASG mutating from a mere bandit group to a genuine terrorist organization?

Much has already been written about the ASG. But there is still little understanding of its exact origin, ideological inclination, organizational structure, leadership dynamics, operational capabilities, and recruitment strategies. This article aims to add value to the ongoing discussions on the ASG by focusing on such issues. It also aims to update the reader on the terrorist attacks conducted by the ASG in 2005 and to describe the Philippine government's counter-terrorism response.

The Genesis Of The Asg

Though it is widely known that Ustadz Abdurajak Janjalani founded the ASG, there is no uniform account of its exact origin. According to media reports, the military allegedly formed the ASG in early 1990s to penetrate the ranks of Muslim radicals in Southern Philippines. The ASG reportedly acted as an agent provocateur of the Armed Forces of the Philippines (AFP). Edwin Angles (aka Ibrahim Yakub), who is believed to be Janjalani's co-founder of the ASG, was said to be the deep cover agent for the Defense Intelligence Group (DIG). Some sources even said that the National Intelligence Coordinating Agency (NICA) facilitated the establishment of the ASG with the prodding of the Central Intelligence Agency (CIA). A Moro National Liberation Front (MNLF) leader in Basilan even confessed that the ASG enjoyed the support of the military assigned to the area. The International Peace Mission that went to Basilan on 23–27 March 2002 found that there were “consistent credible reports that the military and the provincial government are coddling the Abu Sayyaf”.

At the end of 2005 Southeast Asia looked in a better condition than at any other time since the 1997 Asian crisis. The economies had recovered and there was steady growth as countries continued to pursue economic reform. The world economy was resilient in 2005, notwithstanding a modest cyclical slowdown during the year. Moreover, Southeast Asia's economic prospects were buoyed by the growing linkages with the rising economies of China and India and a recovering Japanese economy. Apart from a few cases, regime stability characterized the political landscape of the region.

There were two other positive factors: Indonesia and the Association of Southeast Asian Nations (ASEAN). As the largest country of Southeast Asia located in a huge maritime swathe between the Philippines on the east, Australia in the south, and the Bay of Bengal in the northwest, Indonesia's stability or lack of it, has had an important bearing on perceptions of Southeast Asia. Under the administration of President Susilo Bambang Yudhoyono, the country was back on the right track, working to achieve domestic stability, improve governance, build institutions, and attract investments.

Meanwhile, ASEAN was regaining some of the importance it used to enjoy a decade earlier. It was again in the centre of moves to shape a new Asian regional architecture as it organized the first East Asian Summit that included not only the 13 members of the ASEAN+3 process but also India, Australia, and New Zealand. It was being courted by the major powers as each tried to maintain or extend its influence.

ASEAN's complexion also seemed to be undergoing subtle changes as a result of the democratization of Indonesia and the growing realization that the principle of non-intervention needed to be used flexibly to enable cooperation on transnational challenges. The decision to draw up an ASEAN Charter raised hopes of a more rules-based organization with a better sense of common values.

Yet, despite the more promising outlook for Southeast Asia, many challenges remained.

The death of Azahari bin Husin in a shoot-out with Indonesian police near the East Java town of Malang on 9 November 2005 was widely acclaimed as the most important victory against the regional terror group Jemaah Islamiyah (JI) since the capture of Hambali. But it became increasingly clear during the year that Malaysian-born Dr Azahari — known as the “Demolition Man” for his skills in assembling the first Bali bombs that killed 202 three years earlier — did not answer to the JI hierarchy and was operating as his own man. Indeed, in 2005 it became obvious that old ways of thinking about JI and regional terrorism were no longer adequate — if they ever were in the first place.

The dominant model, perpetuated in the media by prominent commentators Rohan Gunaratna and Zachary Abuza, views JI as an al-Qaeda franchise, with a clearly demarcated command structure and organizational boundaries, dedicated to the establishment of an Islamic caliphate embracing much of Southeast Asia. To the extent this image was ever valid, as Sidney Jones points out, it represents a five-year-old “snapshot” of JI with little relevance today. A fluid pattern of alignment and realignment between autonomous jihadi factions characterized the terrorist threat in 2005, and this trend is likely to strengthen in the future.

What knits these factions loosely together is not “a very horizontal and exceptionally compartmentalized organization” with a “very rigid cell structure”, as Abuza insisted after Bali's second series of suicide bombings on 1 October 2005, but a shared world-view based on personal allegiances forged in exile, training camps on the Afghan border, or the conflict zones of Sulawesi, Maluku, and — looking forward — Mindanao. Gunaratna has even declared Mindanao the “new strategic base of Jemaah Islamiyah”, but like Abuza, misperceives the nature of this threat.

This overview examines Mindanao's growing role as the regional terrorist crossroads in 2005, but from the perspective of local realities, not externally imposed organigrams.

Military reform in Indonesia is an ongoing but long-term process. The armed forces are making remarkable progress in transforming itself into its new role in a vigorous democratic society. Since the resignation of President Soeharto in May 1998 the armed forces establishment has implemented important reforms to bring about this transformation. While the military is still the most powerful element of Indonesian society, it is no longer the monolithic arbiter of political power in Indonesia that it was for the three decades of Soeharto's New Order.

Military reform in Indonesia is important to many players. Three institutional elements stand out in this regard. Obviously the greatest impact is on the Indonesian military itself. Military reform is also of consummate importance to the people of Indonesia, most of whom favour reform of the TNI in some substantial form. Finally, reform of the TNI is a key element in the foreign policy with Indonesia of several important friendly countries, including Australia, the United States, and the United Kingdom.

The TNI has not yet implemented all of the reforms its critics desire, but it must be given credit for the changes it has made to date. The TNI gave up its blocks of reserved appointed seats in parliament and regional assemblies. Military personnel now must retire before taking civilian government posts, whether electoral positions in parliament or at the province level and below, or in non-defence-related positions in the government civil service. This is a huge contrast to the Soeharto years, when thousands of military personnel occupied civil government and societal posts at all levels and active duty officers routinely filled cabinet posts. There are no active duty officers in the current national cabinet, a significant change from the Soeharto years.

The TNI has withdrawn, as an institution, from day-to-day political activities. The TNI does not support any political party — no more wearing the yellow jacket of Golkar, for example, as senior officers did during the Soeharto years.

There is truly never a dull day in Cambodia and 2005 was no exception. What started off as an uncertain year ended much better than expected, but only to subsequently witness renewed excitement and condemnation of the government for the detention of some high-profile political activists towards the end of the year and in early January 2006.

Truly, too, some things hardly ever change. In contemporary Cambodian politics any issue is fair game for both the opposition and the government — as one tries to make the country ungovernable while the other tries to make its adversary impotent. The country's friends and detractors alike assess the post-conflict Cambodian political culture as not having yet imbibed Western concepts of power sharing, loyal opposition, and open dissent. Politicking, it would appear, is both in the blood and in the roots of the hairs of Cambodian politicians who practise it with great enthusiasm and blatant impunity.

The Economy in 2005

Interestingly enough, Cambodia has managed to record a fairly impressive economic growth rate the past few years. In 2005 the economy grew more than 6 per cent. While this was less than the 7 per cent of 2004, it exceeded World Bank projections three times over. The garment industry continued to spearhead growth, followed by the tourism and construction sectors. Nonetheless, Cambodia remains one of the poorest countries in the world with a per capita income of only US$320.

The growth was due, in no small measure, to increasingly prudent fiscal policies and to overall sustained political stability. In this context, in late December 2005, the Royal Cambodian Government (RCG) was delighted with the announcement of the International Monetary Fund (IMF) that it would grant Phnom Penh a 100 per cent debt relief, amounting to approximately US$82 million — the amount that Cambodia had amassed before 1 January 2005.

The cherry on the cake of the announcement was the IMF observation that Cambodia, one of a handful of countries to be thus rewarded, had qualified for the debt relief because “of its overall satisfactory recent macroeconomic performance, progress in poverty reduction, and improvements in public expenditure management”.

From Malay To Muslim Dilemma

At the relatively mature age of 45, Mahathir Mohamad published The Malay Dilemma, an effective formulation of the position taken by many Malay nationalists about the unacceptability of the socio-economic state of the Malays. 1 With it came fame, and infamy. The book was written in haste after his suspension from the ruling United Malays National Organisation (UMNO) following his public criticism of Tunku Abdul Rahman, Malaysia's first premier, in 1970. After being rehabilitated in 1972 by the succeeding premier, Abdul Razak Hussein, Mahathir quickly rose within the political hierarchy. In May 1981 he became Malaysia's fourth prime minister and stayed in that position until he retired in October 2003 at the age of 77. Along the way he fought and won countless battles against political rivals on all imaginable fronts, and worked to turn Malaysia into an industrialized economy.

Alongside the impressive economic progress, an Islamization of Malaysia took place during Mahathir's watch. In 1982 he brought Islamic youth leader, Anwar Ibrahim, who was not a member of any political party at that time, into UMNO, purportedly to help him put an Islamic stamp on his modernization ideas, and to resist the Islamist party, Parti Islam SeMalaysia (PAS). That is the generally accepted interpretation of Mahathir's surprise move. Such conclusions result from the assumption that Mahathir — and UMNO for that matter — is basically a secular leader concerned with the material development of his country and his own ethnic group, the Malays, and that the “Muslimness” of the Malays was of lesser importance.

Yet, Mahathir himself had claimed that he did not accept the polarity of secularism and religion, even if this particular conviction appears to have come late in his life. In The Malay Dilemma, for example, Islam is not dealt with centrally.

While such a stance may be regarded as a rejection of what is normally considered a Western dichotomy, Mahathir's position was just as much — if not more poignantly so — a criticism of Muslim leaders through the ages who turned their backs on all knowledge that they considered not to be religious.

Present-day Thailand has a more stable and transparent political system than in the past, when frequent changes in government, often by military intervention, seemed to be the leitmotif of the Thai polity. The last coup in 1991, followed by events in May 1992, where security officers killed at least 50 unarmed civilians during street confrontations in Bangkok, shocked the Thai political system and stimulated a marked change in the kingdom's democratic consolidation. Since then, not only have the armed forces kept out of the operation of the civilian government, but there have also been five successful elections with peaceful transitions. In addition, Thailand's political party system has grown increasing stable over time. In January 2001, Thaksin Shinawatra's Thai Rak Thai (TRT) party almost won an absolute majority in the first general election under the new charter, and subsequently absorbed a variety of factions and parties into its fold.

During the February 2005 General Elections, TRT established the first-ever popularly elected single party administration as it convincingly defeated four other parties. The 2005 elections were a watershed in Thailand's democracy, as TRT's victory ensured the Prime Minister's hegemonic control over parliament and other key state institutions without the need for coalition partners, legitimizing his seeming insolence towards democratic consultation. Whether one labels his regime as “semi-authoritarian”, “soft-authoritarian”, “diminished democracy”, or simply “delegated democracy”, there is little doubt that Thaksin's administration has shown greater authoritarian tendencies in comparison to his immediate predecessors. Thaksin's tenure has been characterized by frequent violations of Thailand's democratic institutions, so much so that his administration has been criticized as close to failing to meet conventional minimum standards for a true democracy. Levitsky and Way coined the term “competitive authoritarianism”, which is the most apt term to describe Thaksin's type of regime. In this type of regime, violations of democratic criteria are both frequent and serious enough to give the incumbent unfair advantage over the opposition.

The year 2005 will likely be remembered by most Southeast Asian countries as the year of negative exogenous shocks. Exogenous shocks to the economy often receive less analysis in textbooks than they deserve. Nevertheless, such shocks can have significant and long-term economic effects, as the oil shocks in 1970s did. The most important of these shocks in 2005 was the tsunami that occurred on 26 December 2004 and claimed more than 100,000 lives across several countries. The slowdown in the global economy and the rise in oil prices further weakened growth in Southeast Asia during 2005.

This article begins with an analysis of overall economic growth in the region in 2005. It is followed by a more detailed analysis of the macroeconomic performance of Southeast Asian economies. Towards the end of the article the impact of the tsunami as well as the risk of a pandemic avian flu is discussed.

overall Growth

The global economy went into a moderate cyclical slowdown in 2005 due to a number of factors — rising US interest rates, lower US and euro area growth, the rise in oil prices, and the catastrophic effects of Hurricane Katrina. Compared with the world's growth rate of 5.1 per cent in 2004, a record high in the last three decades, the global economy grew at a rate of 4.3 per cent in 2005. While the slowdown affected both developed and developing countries, growth in the developing world continued to be strong, at 5.9 per cent. This growth rate was twice as fast as that estimated for developed countries. Growth in the Asia-Pacific region, at 6 per cent, was expected to be higher than growth in the developing world as a whole. This was partly due to vigorous exports and strong domestic demand in China and India.

Southeast Asian economies grew at an estimated average rate of 5 per cent in 2005. This was lower than the economic growth rate of 6.3 per cent in the previous year.

Southeast Asia greeted 2005 in a sombre mood, as the full scale of devastation in the wake of the tsunami triggered by a massive earthquake that sent giant waves crashing into the coastlines of north Sumatra, southern Thailand, northwestern Malaysia, and Myanmar became apparent. Almost a quarter million people were killed across the region, a loss of life almost too great to comprehend. In Aceh alone as many as 180,000 people died as a wall of dark water 10 metres high travelling at speeds of almost 400 miles an hour rushed onshore crushing everything in its path. From the air, it still looks like the aftermath of an atom blast.

The tsunami was a particular blow for Indonesia, which had just crowned a protracted and messy democratic transition with successful multi-party elections and the first direct presidential election at the end of 2004. The new government led by President Susilo Bambang Yudhoyono was poised to inaugurate a new era of confidence and stability for Indonesia. Hopes ran high. Southeast Asia badly needed its largest component state to get back on track or face the prospect of unfavourable comparison with the booming economies of China and India.

Since 2001, Southeast Asia has been badly buffeted by the global war on terror. A string of bombings in Indonesia and the Philippines, as well as the uncovering of local terrorist cells and networks over the past four years has dragged the region into the terror spotlight. Southeast Asia's most wanted terror suspect, Hambali, was arrested in central Thailand in 2003. Indonesia's resort island of Bali had been the scene of the most devastating and audacious terrorist attack since 2001, when bombs exploded outside nightclubs frequented by Western tourists in Kuta in October 2002 — and another in October 2005. The Philippines is widely suspected to be a haven for Islamic militants who train in remote camps in the southern province of Mindanao. A terrorist attack perpetrated by Islamic extremists was perceived as the principal threat to security in Southeast Asia throughout the year.