Introduction

According to the World Bank, Thailand was the world's fastest-growing economy in the decade 1985–94. Real gross domestic product (GDP) per capita increased at an average rate of 8.2 per cent a year.

From 1987 to 1990, the GDP recorded real annual growth rates of 9.5, 13.2, 12.2 and 11.6 per cent. Since then, the pace has levelled out to the 8–9 per cent range, but the momentum of growth remains strong.

This spurt has transformed the Thai economy. In the early 1980s, Thailand could still justifiably be viewed as an agrarian economy, with crops playing the major role in exports. By the mid-1990s, Thailand belongs to the club of NIEs (newly industrializing economies), with computer and electronic parts topping the list of export products.

This article looks at three aspects of this phase of growth and its consequences for the Thai economy in the mid-1990s. Rapid growth has wrought large changes in the structure and dynamics of the Thai economy. The first section traces the major patterns.

Secondly, Thailand now figures in the debates over Asian industrialization, and the special features of the “Thailand case” bring new elements to the debate. In brief, the World Bank has argued that “second-tier NIEs” such as Thailand have grown by following the Bank's structural adjustment policies; by courting direct foreign investment; by creating a favourable environment for exporters without intervening directly in the capital market; and by refraining from positive industrial policy-making. Several other economists, particularly those associated with UNCTAD (United Nations Commission on Trade and Development), have countered that governments in these countries have in fact played an important and effective role through interventionist industrial policies and active restructuring of the markets for capital and labour. The second section looks at the recent changes in these two markets in Thailand.

Thirdly, the speed and special character of Thailand's growth have given rise to doubts about the country's capacity to sustain the current momentum.

The two most significant developments in 1995 in terms of their implications for Southeast Asia were the deterioration of U.S.–China relations and the expansion of ASEAN. The first clouded the hitherto rosy prospects for East Asia while the latter highlighted the very rapid changes in regional relations since the end of the Cold War.

U.S.–China relations, difficult even before over issues like human rights, trade, intellectual property rights, exports of missile and nuclear technology, plummeted after the U.S. government granted President Lee Tenghui of Taiwan a visa to make an unofficial visit to the United States. As China conducted missile firing tests and other military exercises to exert pressure on Taiwan, there were concerns that military conflict, which could also involve the United States, could erupt through accident or miscalculation. Such a development could constitute a significant setback to the economic dynamism of the East Asian region.

ASEAN expanded to include Vietnam into its fold and steps were being taken to bring into the regional organization the remaining three countries of Southeast Asia — Cambodia, Laos and Myanmar — within the next few years. Vietnam had been an observer at ASEAN meetings since 1992 when it had also signed ASEAN's Treaty of Amity and Co-operation (TAC). In 1995 Cambodia also signed the TAC and became an observer, while Myanmar became an observer even though it has not signed the TAC. Laos has been both an observer and a TAC signatory since 1992, but so far constrained from full membership by a shortage of English language speakers.

At the same time, ASEAN was pushing ahead with its Free Trade Area whose original target to reduce tariffs on manufactured goods to 0–5 per cent by the year 2008 has since been brought forward to 2003. The Fifth ASEAN Summit held in Bangkok in December 1995 saw the signing of a framework agreement on financial services, but an agriculture tariff reduction programme was marked by contention as Indonesia placed fifteen products on the temporary exclusion list.

Catherine Lim, one of Singapore's most acclaimed writers, describes in a short story a Mr Sai Poh Phan who is always perplexed by the demands of life, and the difficulties in reconciling his public duties and personal desires. “I'm only a humble civil servant”, he is moved to say by the satirical pen of the author, “I suffered much, but I'm glad that in the end it was for the good of so many Singaporeans”. Mr Sai is undoubtedly one of those who has made it to the upper reaches of the Singapore social-economic ladder. He has a well-paid job as a school principal, lives with his family in a two-storey semi-detached house, and owns an apartment which he rents out to a Japanese business executive. However, Mr Sai's evident satisfaction with his life is dampened by a self-doubt which plagues his otherwise perfect existence. Current riches are stalked by the shadow of past deprivations. Mr Sai tells his children, making a point about another middle class symbol: “Air-conditioning? I shared a room with three brothers and two sisters on the top-floor of a shophouse in Chinatown. We had two mattresses to share among us. Most of the time, I slept on rice-sacks. Now my son says he can't study except in an air-conditioned room!”.

All this is of course parody. But the story none the less conveys a sociological intelligence which helps to open up for a close look the world of the middle class in Singapore. In one way, it is clear that they aspire to much of what their counterparts in other parts of the world also seek: university education, professional jobs, designer goods, expensive cars, overseas holidays, golf club memberships and other forms of life-style consumption. The desire, we might say, is one in response to the lure of global marketing, and for acquiring goods that are crucial social markers in an upwardly mobile society.

Nineteen ninety-five was a frustrating year for those who had high hopes for democratization in Thailand as the more things changed, the more they remained the same. The year saw a political crisis being resolved by democratic and parliamentary means — through an election — rather than by a military coup. It resulted in the smooth and peaceful transfer of power from the government of Chuan Leekpai, leader of the Democrat Party, to one led by Banharn Silpa-archa, leader of the Chart Thai (CT) party. But while the process represented a step forward for Thai democracy, the results of the election were, for democracy advocates, a step backwards. The main winners were rural-based, old-style patronage politicians, some of whom had been in the 1988–91 Chatichai government which had been accused of being very corrupt. Their presence in the new government raised concerns that history would repeat itself.

The Downfall of the Chuan Government

After two relatively successful years in power, the Chuan government found itself in a series of troubles beginning in late 1994. The most serious stemmed from allegations of irregularities in the handling of a land reform scheme that was originally intended to benefit poor landless farmers. The opposition and press pounced on the government after it was discovered that one of the beneficiaries of the scheme in the southern resort island of Phuket was the husband of a local Democrat Member of Parliament (MP), who was formerly secretary to the Deputy Agriculture Minister, Suthep Tuaksuban. The opposition's attempt to grill the Democrat Agriculture Minister and his deputy in December was thwarted when the two men resigned before the parliamentary debate on the issue could take place. However, the government was kept on the defensive by opposition charges that much of the land under the land-reform scheme handed out in Phuket had gone to wealthy families associated with Democrat politicians rather than to poor farmers.

Chuan tried to defend the government's implementation of the scheme, insisting that there was no irregularity involved.

The end of the Cold War has opened a window of opportunity for Japan to play a larger political role in Southeast Asia. One view anticipates that Japan and China will fill the power vacuum in this region that resulted from the end of the Soviet presence in Indochina and the U.S. military withdrawal from the Philippines. A more likely scenario in Southeast Asia within the next two decades is the rise of a balance of power with a more confident and assertive China counterbalanced by a continued U.S. strategic presence, augmented by its ally, Japan. However, Tokyo's contribution to regional security in Southeast Asia will not be underpinned by a direct military presence but by a substantial economic and an increasing political role. This troika is operating in an area where many regional states have enjoyed impressive economic growth, progress in nation- building, enhanced military capabilities, the development and expansion of a regional grouping, ASEAN (Association of Southeast Asian Nations), and a strong desire not to be dominated by any regional or extra-regional powers. Tokyo's post-Cold War attempts to exercise political initiatives in Southeast Asia are framed by its relationship with the United States and China, the favourable or negative outlook of the regional states to an increased Japanese role, and the domestic politics of Japan. The country seeks a higher political profile within the bilateral framework of the U.S.-Japan Alliance, and multilateral regional and international organizations. Such a non-unilateral approach is more acceptable to the United States, China, the Southeast Asian states and Japanese public opinion.

This article addresses the following questions. Why does Japan seek to be an increasingly important political actor in Southeast Asia? In what ways have the end of the Cold War directly or indirectly provided Tokyo the opportunities to play a regional political role? What political role is Japan adopting in the region? What are the domestic and international considerations to Tokyo's ambitions to play a larger political role in the region?

Japan's Search for a Political Role

Japanese ambitions to play a political role in Southeast Asia preceded the end of the Cold War and even before it emerged as a recognizable economic super-power in the early 1970s.

Nineteen ninety-five was an eventful year for Vietnam, as the country marked the twentieth anniversary of its reunification, the fiftieth anniversary of Ho Chi Minh's declaration of independence, and the sixty-fifth anniversaries of the founding of the Communist Party of Vietnam and the Vietnam Fatherland Front. It was also the year that Hanoi finally “normalized” its relations with Washington, and gained full membership status in the Association of Southeast Asian Nations (ASEAN). But with these anniversaries now passed, and greatly improved external relations firmly secured, government attention has shifted back towards domestic issues, and the need to look ahead. Having laid the broad foundations of economic reform in Vietnam — which will be a decade old in 1996 — and begun to see relatively consistent performance results, better managing the reform process has become Hanoi's primary task. In anticipation of the Eighth Party Congress, provisionally scheduled for mid-1996, Vietnam's leaders have been debating the appropriate pace and parameters of doimoi (renovation), the results of which should become evident in the impending 1996–2000 Five-Year Plan.

Whilst few observers question the commendable success of the economic reform programme — pursued fairly vigorously since 1986, resulting in greatly improved economic growth figures — there is a perceived desire to take the process further, although the Party wishes to see reform remain contained within fairly fixed socio-political limits. With the gross economic inefficiencies endured under the centrally planned system now largely (although not wholly) removed, the government realizes it must enact new initiatives that will generate new growth if the reform process is not to become mired at its current stage. And there is little room for complacency, with the perils of excessive bureaucracy and corruption, a worrisome budget and current account deficit, new-found inflationary pressure, widening disparities in income, and numerous other adverse factors, potentially able to stall — if not actually derail — the current reform programme.

When the Republicans took the United States Congress by storm in November 1994, seizing both chambers of the mighty legislative branch for the first time in forty years, East Asian experts in their respective capitals and in Washington wondered what would change in America's Asia policy and what would not. There was a great deal of speculation as to how the new Republican Congress — the U.S. legislature's 104th session spanning 1995–96 — would deal with issues involving the United States and East Asia.

Two Schools of Thought

Roughly speaking, there were two schools of thought. One group of Asian observers expected that the Republican Congress would be much like recent Republican administrations in its foreign policy stance. Another group stressed, however, that many of the younger Republicans in Congress had nothing to do with the party's realist-internationalists who made foreign policy for Presidents Ronald Reagan and George Bush, and that the new Republicans were more likely to have populist, possibly even “nativist”, impulses. One factor which intensified the speculation was the powerful Speaker of the House of Representatives, Newt Gingrich, who had led the charge on the Democratic Congress and was about to dominate the 104th Congress. As a radical reformer, Gingrich combined the new with the old in the Republican Party; it was not clear which way he would move on Asian issues.

Sophisticated Asians among the first school were well aware that congressional Republicans, as a majority, might not follow in the footsteps of past Republican administrations in all matters. But it was assumed, reasonably, that the Republican Congress would be at least closer to recent Republican administrations than the long-entrenched Democratic Congress had been. And during the years of “divided government”, in which a Republican President occupied the White House while Democrats dominated Congress, the Democratic Congress had generally appeared tougher on East Asian governments than the Republican executive ranch on issues ranging from trade and security “burden-sharing” to “values”, including human rights and democratic governance.

For Indonesians in general, the year 1995 marked a memorable milestone at the fiftieth anniversary of the country's independence from colonial rule. Viewed from the Pesta Rakyat (Celebrations for the People) occurring everywhere in the country, with an obvious highlight in its capital city of Jakarta, one could not help but appreciate the past accomplishments of the country and yet, at the same time, be aware of the challenges to come.

The President's current term ends in 1998. His achievements are well documented. He succeeded where Soekarno failed because he used his power to nurture a consistent economic policy suited to local conditions, yet founded on a managed opening of the economy to international investment and trade. Government investment in infrastructure and the improvement of educational and social standards have been among the legacies of the Soeharto era. These successes, coupled with a formidable system of state power used periodically to curb dissent, have delivered to Indonesia internal stability and given it the credibility to play a pivotal role in international organizations like the Association of Southeast Asian Nations (ASEAN), the Asia-Pacific Economic Co-operation (APEC) forum and the Non-Aligned Movement (NAM).

The underlying theme in this article is that in 1995, rather than contemplating the end of the Soeharto era, Indonesia was indeed preparing itself for the likelihood of the President continuing to a seventh term in 1998. The article also provides an overview of important developments in the fields of politics, the economy and international affairs which impacted on the nation during the year.

Preparing the Way for Soeharto's Re-election

President Soeharto probably wants his final legacy to the Indonesian people to be a smooth transition of power. For this reason, it is likely that, health permitting, he will seek a seventh term of office. There have been implicit and explicit indicators to support this view. Implicitly, the once rampant speculation about the presidential succession quietened down considerably in the second half of 1995, suggesting a growing acceptance that the President will stand again in the next presidential election in March 1998.

Four trends have been noticeable since the end of the Cambodian conflict which are illustrative of Southeast Asia's greater interaction with the Asia- Pacific region as a whole. The first is the expansion of regionalism as ASEAN is extended to embrace all mainland Southeast Asia. ASEAN's expansion is a particular success for Jakarta in view of its long-held vision of a united Southeast Asian community including all Southeast Asian mainland states. The second is the consolidation of regionalism as ASEAN promotes the Free Trade Area (AFTA) endorsed during the Singapore Summit of January 1992. The third trend has been ASEAN's emergence as an important actor in the wider Asia-Pacific region and as a contributor to and stimulator of both security and economic multilateralism. The fourth trend has been Southeast Asia's growing vulnerability to shifts and adjustments in the relationships between the major external powers. This article will examine each trend and the emerging challenges to ASEAN in the light of developments in 1995.

The Expansion of Regionalism

Vietnam became the seventh member of ASEAN during the Twenty-eighth ASEAN Ministerial Meeting (AMM), held in Brunei on 29–30 July 1995. Cambodia signed the Treaty of Amity and Co-operation (TAC) in January 1995, and was granted ASEAN observer status when the Cambodian National Assembly ratified the TAC on 30 June. Cambodia's accession to the TAC was formally proclaimed during the 1995 AMM. Myanmar's decision to sign the TAC was welcomed by the AMM but without the granting of observer status. According to the communiqué of 30 July, the foreign ministers regarded these events as mark- ing a “historical step toward creating a Southeast Asian community”. Cambodia and Myanmar may join ASEAN by 1997 while Laos may need more time. Laos acceded to the TAC during the Twenty-fifth ASEAN AMM which was held in Singapore in July 1992. Laotian Vice-Minister for Foreign Affairs Phongsavath Boupha declared then that Laos was not yet ready for ASEAN membership and cited the limited number of English language speakers in the Foreign Ministry and the financial obligations of membership as reasons.

Nineteen ninety-five will be remembered as the year that a critical mass supportive of market-oriented reforms was achieved in the Philippines.

After a long period of intense political struggle between the forces of reform and the deeply-entrenched traditionalist forces favouring continued protection- ism and state-brokered development, a breakthrough was accomplished in the year. Not coincidentally, the Philippine economy hit its stride in the same period, a string of natural calamities notwithstanding. In the third quarter of 1995, the country's national product grew by 6.8 per cent, riding the crest of unprecedented investment and export growth. The invesmentsled nature of this economic surge is the outcome of an economic and fiscal reform package pursued relentlessly in the years preceding by a political leadership that deftly engaged populist and conservative forces in an open and democratic political system.

Staunchly committed to deepening democracy while simultaneously advancing reforms — reforms that asked the population to accept short-term costs in exchange for long-term sustainable growth — the political leadership in the Philippines has ventured into a development path consciously distinguished from the more usual East Asian model. Instead of relying on heavy-handed political methods to forge a development strategy that emphasizes market discipline in a political culture long nurtured in state patrimonialism, the political leadership put emphasis on the aspects of popular empowerment and greater accountability intrinsic to the liberalization process. These coincided with the pro-democracy consensus forged earlier.

The completion of the fiscal and reform process might, conceivably, have been achieved much earlier if the democratic space opened by the 1986 EDSA uprising was constricted to quell populist opposition to market-opening measures. But the costs would have been high and the gains in political stability probably negated by a deepening polarization of opinion. Advocates of an obsolete economic nationalism might have acquired the special status of martyrs for an anachronistic cause. The legitimacy of both the government and the reform programme it espoused might have been rendered tenuous.

Introduction

An important challenge facing the Southeast Asian countries concerns devising and implementing financial and managerial arrangements that are compatible with both economic growth strategy (the key characteristic of which is heavy reliance on external sources of investment, technology, markets and, increasingly, manpower) and a socially adequate level of old age income protection. In the early 1990s, expenditure on social security and welfare accounted for less than 5 per cent of total expenditure and net lending in the Southeast Asian countries, while an additional 3 to 5 per cent was spent on health. In contrast, high income industrial countries typically spend between two-fifths and one-half of total government expenditure on these two categories.

This challenge is a consequence of rapid economic growth accompanied by urbanization and industrialization, demographic transition and other factors. Demographic and economic indicators for selected countries in Southeast Asia are provided in Table 1.

Southeast Asia's rapid growth and rising living standards have brought about a new assertiveness and confidence. This has contributed to an attitudinal shift from a dynastic to a life-cycle view of income and consumption under which a much greater proportion of accumulated savings is likely to be consumed during one's life-time rather than bequeathed. As a result, life-time consumption-smoothing can be increasingly expected to become the primary motivation for saving.

Reliance on the family to finance old age, though still relatively high, is decreasing. This is in part due to attitudinal and value system changes, in part, the inevitable consequence of industrialization and urbanization that has increased formal sector employment.

The demographic transition in the Southeast Asian countries is expected to accelerate the aging of the population even in traditionally high fertility countries such as Malaysia and the Philippines. In both these countries, the proportion of those above sixty years of age is expected to increase by two and a half times between 1990 and 2030 (Table 1).

Liberal scholars would contend that democratization is the sure path towards peace. Liberal democracies, they say, have never fought each other. To them, the post-Cold War global resurgence of democracy may be just the perfect assurance that we may well be on the way to living in a peaceful world. What most liberal scholars have not given enough thought to is the question of whether there is a relationship between democratization and war at the domestic, not the international, level. In this article, I will argue that pushing for rapid democratization in conditions of domestic anarchy may result in permanent conflict rather than peace and may work against democracy. Cambodia serves as an interesting study because of its enigmatic history awash with violence and blood. Although the United Nations and the international community have helped to nurture pandemic democratic values in this war-torn state, the process of democratization has so far failed to consolidate itself.1 Because they adopted an anti-Khmer Rouge policy in favour of rapid democratization, some influential external actors have inadvertently contributed to the perpetuation of the armed conflict and to the creation of a new authoritarian regime.

U.N. Intervention and Cambodian Democratization

The principal aim of the United Nations in getting involved in Cambodia between November 1991 and September 1993 was to create a neutral political environment for free and fair elections. It may be useful to look at the process of Cambodian democratization, starting from the time the war broke out and explaining why the Cambodian factions signed their peace agreement in 1991. The U.N. mission was a limited success story.

Democracy by External Intervention

After a brief period of democratic experiment following World War II (still under French colonial rule), Cambodia reverted to authoritarianism. Since the late 1960s Cambodia has been at war, thus making it difficult for the country to be a prospect for democracy. After a period of political stability under the leadership of Prince Sihanouk (Head of State), the country plunged into instability and chaos.