The 2004 general election in Indonesia began on 5 April with the parliamentary election and ended on 20 September with the second round of the presidential election. This was the longest election that the country had ever witnessed and a marked success in Indonesia's quest for democracy as it was conducted in an orderly and peaceful manner. This chapter examines both parliamentary and presidential elections and their significance for Indonesian politics; the formation of the new cabinet; and the problems faced by the new Yudhoyono administration. It also looks at the tsunami disaster and Indonesia's foreign relations with special reference to military relations between Indonesia and the United States.

The 2004 Election: Another Victory for Democracy

The 2004 election differed from the 1999 election in the sense that this was the first direct presidential election. Unlike the last election at which the president was elected by the MPR (People's Consultative Assembly), this time the people directly elected the president.

In 2003, the Dewan Perwakilan Rakyat (DPR, House of Representatives, the Indonesian parliament) completed the debates on the presidential election bill, concluding the discussion regarding the 2004 election. All laws and regulations regarding the parliamentary and presidential elections were passed. The parliamentary election — for members of DPR, Dewan Pimpinan Daerah (DPD, Regional Representatives Council) and Dewan Perwakilan Rakyat Daerah (DPRD, Regional House of Representatives) — was to be held on 5 April 2004, while the presidential election would be conducted in two phases, the first round would be on 5 July 2004 and the second, on 20 September 2004.

More than 200 political parties registered to take part in the 2004 elections but only 24 parties were qualified to contest, including 6 leading parties which had taken part in the 1999 election: the Partai Demokrasi Indonesia-Perjuangan (PDI-P), Partai Golkar, Partai Kebangkitan Bangsa (PKB), Partai Persatuan Pembangunan (PPP), Partai Amanat Nasional (PAN) and Partai Bulan Bintang (PBB).

Since it took power, the current military government of Myanmar has been beleaguered by several opposition forces. Its legitimacy has been questioned by a majority of the people, the international community, several political parties formed by the participants of the Four Eights democracy movement, and veteran politicians who have been involved in Myanmar politics since colonial days. The military's hold on the country has also been challenged by several insurgent groups. At the same time, the junta is believed to be riddled with internal power struggles, a view seemingly confirmed by the abrupt dismissal in October 2004 of the powerful intelligence chief and then Prime Minister Khin Nyunt and the discharge of his entire intelligence corps. Because Khin Nyunt was the architect of the 7-point road map2 for democratic transition in Myanmar and ceasefire agreements with insurgent groups, his dismissal was accompanied by rumours that the first step of the road map, the National Convention3 (resumed in May 2004 and adjourned in July 2004), would not convene again and that the ceasefire agreements would break down, with rebels returning to the jungles to resume their armed struggle against the government. Therefore, several observers read Khin Nyunt's dismissal as a signal of instability in the junta.

Yet, although the incident did highlight internal tensions between senior officials in the government, the junta did not appear to be a government that was on the verge of collapse. Apart from detaining some senior intelligence officials, the junta was found to be conducting its business as usual in the remaining two-and-a-half months of the year. It announced that the National Convention would be resumed in mid- February 2005 and that it would abide by all ceasefire agreements. As 2004 came to an end, senior government officials publicly noted with confidence that the government would continue to rule the country without Khin Nyunt and his powerful intelligence apparatus.

Why is the junta still in power? Why did the tension between the intelligence and army units not lead to the break-up of the regime?

Introduction

The year 2004, marking the 20th anniversary of Brunei's independence, signalled unexpected change as the Legislative Council was reinstated after being suspended since 1984. The performance of the economy was lacklustre despite record oil prices. However, the country continued to enjoy peace and stability. The event of the year that most occupied public and media attention was the royal wedding of the Crown Prince.

Human Development

Brunei's quality of life was considered to be on par, if not better, than that attained by some developed countries. The United Nations Development Programme (UNDP) ranked Brunei 33rd among 177 nations on its Human Development Index of 2004 (which took into consideration indices of per capita income, literacy and enrolment in educational institutions, and life expectancy), while in ASEAN, Brunei was ranked 2nd after Singapore.

Education

Brunei scored relatively high in enrolment in educational institutions and literacy rates, surpassing levels attained by some developed countries. Significant efforts have been made to increase resources, broaden access to schools and improve gender parity. Brunei's compulsory education between the ages of 5 and 16 reflected the benefits of the learning opportunities in early childhood that promoted subsequent achievement in school and further lifelong learning.

The national schooling structure was in the process of being revamped with the implementation of a pilot scheme of an integrated education system. Since 3 January 2004, a total of 37 government primary schools went for whole day schooling in which pupils in Pre-School, Primaries 1, 2, and 3 were taking either Islamic Education or Extended Civics, and Arabic Language. In this scheme, Arabic Language became a compulsory subject, while Islamic Education was compulsory for all Muslim pupils. Non-Muslim pupils would be provided with the option of studying either Islamic Education or Extended Civics. Previously, children had their secular education in single session government and private schools in the morning, and many then went to religious schools in the afternoon for religious education.

The year 2004 was very good for Southeast Asian economies. The region was well underway towards economic recovery, underpinned by robust growth in the global economy. In 2004, the global economy achieved a growth rate of 5.1 per cent — the highest in three decades — while world trade volume (goods and services) expanded 9.9 per cent. Stronger global growth was driven by economic rebounds in the United States, Japan and the European Union as well as rapid economic expansion in China.

Southeast Asia registered a strong GDP growth rate of 6.3 per cent in 2004 while the whole of East Asia grew by 7.8 per cent. Robust growth in regional economies had been underpinned by strong export performance and continued strengthening of domestic demand.

Singapore, Malaysia and Vietnam were the star performers in 2004. Singapore's economy grew strongly by 8.4 per cent compared to the previous year's lacklustre growth of 1.4 per cent when the city-state was affected by the SARS epidemic. Like Singapore, 2004 was a good year for Malaysia's economy. Although the Malaysian economy showed some signs of easing in the fourth quarter of 2004, strong growth in the first three quarters (averaging 7.6 per cent) delivered a robust GDP growth of 7.1 per cent for the full year. Both countries' economic performance was driven by strong domestic and external demand.

Vietnam's economy grew by a robust 7.5 per cent in 2004 supported by buoyant exports and strong consumer demand. Other Southeast Asian countries such as Thailand and Laos were also expected to report solid GDP growth rates. Table 1 shows real GDP growth rates for the ten member countries of the Association of Southeast Asian Nations (ASEAN) from 2000 to 2004. Figure 1 shows the real GDP quarterly growth for the ASEAN-5 countries (i.e. Indonesia, Malaysia, Philippines, Thailand and Singapore) over the same period.

The favourable external economic environment over the past year led to a rapid expansion of merchandise exports in Southeast Asia with many countries enjoying double-digit growth rates.

The Threat of Terrorism to Singapore

Following the terrorist attacks in New York and Washington on 11 September 2001, Southeast Asia, especially the Malay archipelago, has come into focus as the so called “second front” in the war against international terrorism. Subsequent events brought home the fact that the events of 11 September 2001 had great resonance within the region. The existence of an Al-Qaeda-affiliated network in the region was highlighted by the arrests in Singapore since January 2002 of 37 members of the regional extremist network, the Jemaah Islamiyah (JI). The radical Islamist group planned to attack American military personnel at a local subway station, U.S. naval vessels at Singapore's Changi Naval Base, U.S. commercial interests, Western and Israeli embassies, and Singaporean military facilities. Had the planned attacks succeeded, they would collectively have constituted the largest terrorist attack since 11 September 2001. They would have caused many casualties as well as made an immense political, psychological and economic impact on Singapore that would have reverberated throughout the region and internationally. Because Singapore is closely identified with the United States on political, security and economic issues, hosts a naval logistics facility that has supported U.S. naval and military operations in the Indian Ocean, Persian Gulf and Afghanistan, and is home to many U.S. multinationals operating in the region, Singapore is a prime target of radical Islamists. As a consequence, Singapore's response to the war on international terrorism has been the most vigorous of the Southeast Asian states. Like the United States, it has taken homeland security very seriously, and has instituted as a top national priority, the implementation of a new homeland security architecture that would better protect Singapore against terrorism. In August 2004, the government formally outlined Singapore's National Security Strategy primarily aimed at countering the terrorist threat.

Politics and National Issues

2004 was very much Abdullah Ahmad Badawi's year. In defining his leadership, he experienced the whole gamut from the triumph of being the reason for one of the most sweeping election wins in history for the ruling coalition … to heeding the rumblings that had him say publicly at the end of the year that his honeymoon was over.

Abdullah quickly forged his own course for the nation, but kept some fundamental dynamics in consonance with his predecessor, the man who steered Malaysia for 22 years. One fundamental he shared with Mahathir Mohamed was a deep sense that it was the government, but more specifically the leader and “the role of leadership”, which made the difference in the success or failure of a nation. Abdullah said, “Why is it that some Islamic countries are poor and weak? Why is it that some [Islamic] countries are not poor and weak? There is a difference, and the difference is in terms of the government, the role played by the government and the role of the leadership.”

Such a sense of leadership — whether Abdullah's or Mahathir's — is a heavy mantle to assume. It is even more burdensome when the medium and the messenger change. Mahathir's style of leadership was about deciding, demanding, and if necessary, deriding. However, Abdullah is courteous and consensual, not wont to showing — and thus giving notice — that he wants his way. But Abdullah Badawi knew the enormous task he faced as a leader, because of his huge mandate from the people. Amidst celebrations over their electoral victory in March, he constantly reminded his political party that much was now expected of them.

With that overwhelming electoral mandate from Malaysians came expectations which he seemed to have not fulfilled sufficiently by the end of just one year. Abdullah has undertaken the enormity of reforming governance and politics, but at the helm of the same crew who are used to a far stronger style of leadership and the ensuing conformity it demanded.

Introduction

The year 2004 marked the tenth anniversary of the opening of the first Lao-Thai Friendship Bridge that permits travel by road between Vientiane and Nongkhai. The completion of the bridge seemed to signal the beginning of a new era. Wars in the region had frozen the project for almost three decades. As recently as 1987–88, Thailand and Laos were involved in a border dispute that escalated into a military conflict. The bridge therefore appeared to highlight a significant shift in the relationship between the two countries, with cooperation being privileged over confrontation. Yet, Martin Stuart-Fox sounded a note of caution when he wrote in 1995 that “the Friendship Bridge [serves] as a symbol of threat or hope, depending on perspective”. His article in this annual was among the rare analyses of Laos' post-Cold War challenges regarding regional integration. The historian furthermore observed: “whether the bridge exists or not, Laos will still find it impossible to isolate itself from the changes now occurring in mainland Southeast Asia”. His comment was accurate, albeit somewhat premature. The 1997 Asian financial crisis brutally hit all the Southeast Asian countries' economies and Laos began to have second thoughts over the direction of her own economic development; her rapprochement with China thus reached a new level during that period. Nevertheless, despite the general slowdown of regional projects in the aftermath of the Asian crisis, Laos' economic subregional integration was always to be an irreversible movement, favoured by all sides, i.e., the country itself, its neighbours (first and foremost, Thailand and Vietnam) and international lending organizations, as well as China. As Stuart-Fox explained in 1995: “Transport routes and other communications between the principal member states — Thailand, China, Vietnam — cannot help but pass through Laos if long and costly detours are to be avoided.” The road to development for Laos has to some extent become embodied in one expression, namely “land-linked”, in the hope that the realization of this goal will conjure away the nation–state's fate as the only country in Southeast Asia with no direct access to the sea, thereby overcoming its remoteness from world markets.

Introduction

China's growing economic clout is increasingly felt in Southeast Asia. Competition has intensified in trade and foreign direct investment (FDI). Many companies in the region are finding it hard to compete against the lower prices offered by Chinese competitors. At the same time, China's voracious appetite for imports and the growing numbers of Chinese tourists have also brought good news. Just as the region is adjusting to China's growing economic presence, it is also now evident that India is also casting a potentially competitive shadow over Southeast Asian economies — it is beginning to attract more FDI and it is clearly highly competitive in several service activities.

This chapter will argue that the emergence of China and India will precipitate substantial policy and micro-level changes to the region. These adjustments will help Southeast Asian economies to respond to the growing competition and so permit them to find their own niches in the emerging new division of labour. In the process, there will be many winners and quite a few losers in the region. Whether the balance is a net positive or a net negative will depend on how effectively each country adjusts to the more competitive world that China and India create. It is argued here that the winners will be those countries that have the political will to reinvent policies and the entrepreneurial capacity to adapt and re-engineer the microeconomy.

This chapter will begin with a review of how China and India have affected the regional economies in trade, investment and other economic areas. It will then review how these countries are adjusting to this new world and conclude with an assessment of what the net impact would be on economic growth and development in the region.

Recent Economic Trends

Goods Trade: China's Increased Share of Exports not at Region's Expense

Recent trends in global exports of merchandise goods and of services are presented in Figures 1 and 2 and Table 1. A number of important features stand out:

1. • Both China and Southeast Asia increased their share of global merchandise exports in 1990–2002.[…]

Introduction

In 2004 Vietnam continued on the path of political, social, and economic adjustment that has given direction to its affairs since the mid-1980s. The regional and global environments and a number of domestic realities defined the challenges and opportunities before the country. While indicators of progress proved impossible to overlook, close observation of events in Vietnam during the year also offered cause for concern. The period between the end of 2004 and the opening of the Tenth Party Congress of the Communist Party of Vietnam (CPV) during the first half of 2006 may well come to be seen as one in which the sustainability of Vietnam's remarkable economic and social progress of the recent past hung in the balance.

Endemic corruption and newly vigorous efforts to confront it, an increasingly active National Assembly, and serious disturbances among ethnic minorities in the Central Highlands counted among the highlights of Vietnam's politics during 2004. In the economic sphere, continued steady growth accompanied worries over the country's public investment strategy, its timetable for accession to the World Trade Organization (WTO), the pace of its equitization of state-owned enterprises (SOEs), and its long-term international competitiveness. The state of Vietnam's education and public health systems only added to these concerns. The year's developments in the area of international relations included Hanoi's success in hosting the Asia-Europe Meeting, continued albeit low-level tensions over the South China Sea and human rights, deepening of the Vietnam-United States military-to-military relationship, and the well publicized, somewhat embarrassing use of Ho Chi Minh City as a channel of escape for a large group of North Korean asylum-seekers on their way to South Korea.

Vietnam's foreign affairs during 2004 thus mirrored Vietnamese affairs as a whole. Historical, ideological, political, and even demographic legacies framed the country's ongoing, almost inexorable integration into the post-Cold War international economic and political orders. The year raised not only the question of whether Vietnamese efforts at reform and adaptation have been “fast enough” but also the more basic one of whether these efforts have rested on viable foundations.

Introduction

Events of 2004 were the dénouement not only of the national elections of July 2003 and subsequent political deadlock, but of the decade of political transition since the departure of the United Nations Transitional Authority in Cambodia (UNTAC), and even of the course of Cambodia's political trajectory since the end of French colonialism. The UNTAC elections of 1993 aimed at restoring the country's independence and peace following ten years of communist Vietnamese occupation and insurgency against them and their Cambodian protégées. The elections were intended to launch the country on the path of liberal democracy, free market economics and human rights. None of these had existed in Cambodia since the early 1950s, in the twilight of French colonialism and early years of King Norodom Sihanouk's reign, when nascent liberal democrats and Khmer Issarak insurgents contested his control of the French-constructed administrative state. Democracy, market economics and human rights were suppressed under Sihanouk's postindependence Sangkum regime, murderously expunged during the 1975–78 rule of the Khmer Rouge, and repressed under the Vietnamese who liberated Cambodia from Pol Pot, but imposed their own colonial-like, socialist state-building project.

The UNTAC mandate over Cambodia and the years since have been analogous to the earlier period of contestation for control of a post-colonial state in Cambodia and elsewhere in Southeast Asia. 2004 saw it end with the overwhelming victory of prime minister Hun Sen and his political and economic entourage, self-made men who emerged out of the apparatus created by the Vietnamese and the beginnings of market liberalization in the late 1980s. Their decisive triumph may determine the trajectory of Cambodian politics for many years to come. Their political juggernaut is interknit through marriages among children of key players, including premier Hun Sen, deputy premier Sok An, national police chief Hok Langdy and army procurement czar Moeng Samphan.

Introduction

One could easily be pessimistic about Southeast Asia's prospects given the series of crises that hit the region in 2004. These include the onset of avian flu (coming on the heels of SARS) and the looming pandemic threat, the persistence of terrorist-related incidents, and the devastating earthquake and tsunami that caused massive loss of lives, property and livelihood. Yet, if there is something to be optimistic about it is in the number of general elections that took place in many ASEAN countries within a span of one year. It began in March 2004 with the holding of Malaysia's general elections, followed by elections in Indonesia in April that were spread over six months, and then the elections held in the Philippines in May. This was soon followed by the elections in Thailand in February 2005.

This series of elections is significant for many reasons. First, we see the emergence of new political actors who have taken over the mantle of leadership from long-serving leaders in the region. In Malaysia, Abdullah Badawi replaced long-time Malaysian prime minister Mahathir Mohamed; and while there was no election in Singapore in 2004, there was nevertheless a changing of the guard in August 2004 with the installation of a new prime minister, Lee Hsien Loong, who succeeded Goh Chok Tong. Second, despite having come after three short-lived presidents who had succeeded long-time Indonesian leader Suharto, the country's new president Susilo Bambang Yudhoyono was the first directly elected president of post-New Order Indonesia. The direct presidential elections have capped the sixyear process of political transition in the country toward a democratic political system. And third, the two incumbent leaders, Philippines' Gloria Macapagal-Arroyo and Thailand's Thaksin Shinawatra, who could still be considered as relatively new players in the region, are serving their second terms in office after their respective re-elections. Their renewed mandates have however raised some questions on the trajectory of democratic transitions in the region.

Introduction

Commercial energy use in Myanmar was constrained by both supply and demand factors in the second half of the twentieth century and the associated industries such as coal, oil and electricity played a relatively minor role in the nation's economic growth since independence in 1948. In fact, the two oil shocks (in the early 1970s and 1980s) that followed the action by the OPEC (Organization of the Petroleum Exporting Countries) to raise oil prices barely affected Myanmar's autarkic economy under one-party Socialist rule in which energy independence was maintained through fuel rationing, load shedding and administrative measures. Nevertheless, realizing the importance of energy in modernization and economic development, the Socialist regime formed the Ministry of Energy (MOE) in 1985. The MOE was tasked to oversee offshore oil and gas exploration and development (on a production-sharing basis with foreign oil companies) that apparently held some promise of a major gas find.

When the military regime that assumed power in September 1988 decided to liberalize the state-controlled command economy by introducing market-oriented reforms and allowing foreign direct investment (FDI) in many economic sectors, the pent-up demand for commercial energy rapidly increased. Meanwhile the issue of energy security became an important concern for many developing and developed countries in recent years. These probably led the Myanmar government to undertake institutional reforms in the production and regulation of energy. The MOE was reconstituted in 1989 with one department (Energy Planning Department) and three state-owned enterprises, viz., Myanma Oil and Gas Enterprise (MOGE), Myanma Petrochemical Enterprise (MPE) and Myanma Petroleum Products Enterprise (MPPE). A new Ministry of Electric Power (MEP) was instituted in November 1997 to promote and effectively operate the power sector. The MEP comprises the Myanma Electric Power Enterprise (MEPE, Myanmar's only electricity utility) and a planning and support department called the Department of Electric Power.