Can tigers change their stripes ?

Amidst the almost daily reports of collapsing chaebol, gangster dominated keiretsu and Asian banks with less liquidity than Manhattan during prohibition, it is curious that until recently dominant orthodoxy considered East Asian miracle growth and the ‘open regional’ order it facilitated the basis for a ‘post modern’ world. What, we might wonder, happened to the uniquely Asian values that sustained the model and what impact will the spectre of financial meltdown have on the regional order ? Does it entail an increased emphasis on Asian bonding and ‘multi-level regionalism’ or something far more uncertain and unstable?

The World Today Published 1 February 1998 Updated 7 December 2018 5 minute READ

Describing the central features of the East Asian model, Chalmers Johnson maintained it consisted of: a strong developmental state coalition; state regulated access to and allocation of capital; harmonious labour relations; state bureaucratic autonomy; administrative guidance; and state directed conglomeratisation.

All the East Asian states identified by the World Bank in its notorious 1993 report as participants in the ‘East Asian Miracle’, but now experiencing the consequences of long term financial mismanagement, shared some, but by no means all, of these features. Important differences exist between the market governed, conglomerate based, industrialisation that developed relatively early in the Cold War era in Northeast Asia and the more foreign direct investment (FDI) friendly, technologyless growth that occurred primarily during the 1980s in Southeast Asia.

Despite this significant difference in modernisation in the two areas, their economies were symbiotically connected. This accounts in part for their shared and spectacular economic demise.

Under the international trading order established at Bretton Woods towards the end of the Second World Wa r, Japan, the progenitor of the most successful form of Asian capitalism, and to a lesser extent, South Korea and Taiwan, moved up the technology ladder by protecting domestic markets and exporting to the relatively open and developed economies of North America and Western Europe.

When, in the early 1980s, US and EC governments became increasingly alarmed at the state of their balance of trade with Northeast Asia, they induced Japan, South Korea and Taiwan to revalue their ‘undervalued’ currencies. In the aftermath of the Plaza Agreement of 1985 and the Louvre Accord two years later, Northeast Asian currencies rose, and labour intensive manufacturing moved offshore together with a ‘strong yen’ inspired wave of FDI.


After 1985, this liquidity fuelled strong regional growth and disguised poorly regulated financial systems with an endemic weakness for lending to crony capitalists and shaky chaebol (corporations). Thus, although Japan entered apparently permanent recession as early as 1990, the strong yen, together with cheap credit, fuelled rampant property speculation, overbuilding and asset inflation from Seoul to Jakarta. When the credit crunch came, banks across littoral Pacific Asia found themselves sitting on a mountain of non-performing loans.

Problematically, the Asian developmental way considered the bank and the stockmarket extensions of state led administrative guidance. The fatal flaw in the Asian model was its indifference to financial accountability. The legal system ceded power to an omniscient technocracy, guided by a largely unaccountable political elite. Patrimonial tax systems channelled savings and FDI to inefficient conglomerates and business cronies.

Endless golf

Significantly, the Asian model for internal development was extended in the 1980’s to regional diplomacy. Much was made of an ‘Asian Way’ facilitating what the Malaysian Deputy-Premier, Anwar Ibrahim, termed an Asian Renaissance. It was to be the ideological foundation of a Pacific Asian order appropriate for the eagerly anticipated Pacific century.

Part of the problem was that some of the more enthusiastic proponents of the Asian Way also doubled as academic analysts. These scholar bureaucrats from Canberra to Tokyo considered Asian values of face-saving and face-giving cooperation, consensus, hierarchy, harmony and balance, the ideological template for a new pan Asian order. Western democracies might, with reservations, join the new dispensation; however, they would have to accept that the Asia Pacific was a ‘two way street.’4

This Asian strategic thinking rejected rule based and contractually binding approaches to economic and political problems – which smacked of an imperialistic western rationalism5 – in favour of close bilateral ties founded on good interpersonal relationships, endless rounds of golf, and a vaguely defined consensus without any embarrassing loss of face for non compliance.

Regional agreements on trade, like the Asia Pacific Economic Cooperation Forum (APEC) brokered Bogor Declaration (1994), which appeared to herald a new era of economic and political interdependency, assumed Asian values in regional economic development.

Expounding the new principles in 1994, Indonesian President Suharto explained ‘consensus must be broad and flexible, decisions should be made collectively and there can be no quick… implementation.’ APEC agreements it would appear were neither enforceable nor binding. Nevertheless this was enthusiastically embraced by Australian academics in second track diplomatic fora as dynamic, but disturbingly oxymoronic, ‘open regionalism’.

Club for gerontocrats

Equally insubstantial and even more grandiose in its regionalist pretensions was the rapid expansion of Association of Southeast Asian Nations (ASEAN). As the only regional grouping of any note it attracted international respect in the post Cold War era.

European, North and South American and Australasian diplomats and political economists scrambled to attend its dialogue groups, workshops and multilevel fora. Its many admirers claimed its excursions into multilateralism through arrangements like the ASEAN Free Trade Area (AFTA) and the ASEAN Regional Forum (ARF) were the building blocs of the new regionalism. Yet the organisation’s achievements are more rhetorical than real, sustained largely by inflated claims for what is essentially a club for ailing regional gerontocrats.

ASEAN was rooted in a number of abortive regional experiments of the 1960s that attempted to secure the fragile post colonial regimes in Southeast Asia from external, communist, threat. In the somewhat vague terms of the Bangkok Declaration (1967) the founder members8 agreed to ignore the ethnic, religious, ideological and territorial rivalries that had sustained the bitter confrontation between Indonesia and Malaysia from 1963-66.

The ASEAN way

The public philosophy of ASEAN expressed in the Declaration, commended non-interference in the internal arrangements of member states and the resolution of domestic and regional instability through economic growth.

In 1976, after a decade of drift, the ASEAN Heads of Government eventually agreed to a Treaty of Amity and Cooperation (TAC). This established a code of conduct for regional interstate relations and regional order. During the Cambodian conflict ASEAN’s international reputation grew, but even here the group essentially acted as a convenient proxy for Chinese and US regional interests.

Although by the 1990s ASEAN had evolved an identity as a diplomatic community with a collegial style and practice, and had in the aftermath of the Cold War extended its embrace across the region through mechanisms like ARF and AFTA, its contribution to regional security and economic integration remained distinctly abstract. Despite its well-honed interpersonal networks and endless preoccupation with confidence building measures, ASEAN has secured only minimal institutional deepening.

The grouping put its faith in maintaining good relationships established over time and cultivating bilateral ties rather than a multilateral security structure. Consequently, ASEAN achieved its regional standing by managing problems rather than solving them. This strategy was soothed by the opiate of two decades of untroubled economic growth.

ASEAN, therefore, has had remarkably little impact on the intramural disputes that troubled its formation. Indeed a number of disagreements continue to pose a threat to ASEAN credibility and its uniquely Asian solution to regional security.

The Philippine claim to the Malaysian state of Sabah remains unresolved. Singapore’s relations with Malaysia, Indonesia and the Philippines have at times been acerbic and anxious rather than harmoniously consensual. The long established rivalry over the leadership of the Non Aligned Movement, together with unresolved claims over the islands of Ligitan and Sipidan, periodically cloud relations between Jakarta and Kuala Lumpur.

The practice of non-interference in the domestic affairs of neighbouring states has also fostered festering claims of autonomy by disappointed regional minorities. Thus in southern Thailand and Mindanao in the Philippines, Islamic separatism has assumed an increasingly fundamentalist hue. Human rights abuses in East Timor continue to undermine Indonesia’s international credibility, whilst ASEAN’s ‘constructive engagement’ with the State Law and Order Council of Burma (Myanmar) has exacerbated relations with both the US and the European Union.

A potent symbol of the inherent weakness of the approach is the smog from burning rainforests in Sumatra and Kalimantan that embraces Singapore and Malaysia each August and relinquishes its grip only with the arrival of monsoon rains.

In the ASEAN way, the smog was officially redefined as ‘haze’ and ignored because of its potential to damage relations with Indonesia and the interests of Suharto cronies. Only when the impact of the haze on economies became so great that it could no longer be ignored did ASEAN leaders reluctantly acknowledge a regional eco-problem. In ASEAN think, then, all regional difficulties would be resolved through a bizarre mixture of indifference, insouciance and a Panglossian faith in sustained economic growth.

Another year of living dangerously?

The end of economic growth may witness not only the deterioration of the wider balance in the Asia-Pacific, but may also expose the fragile nature of the ASEAN inspired regional order as long repressed ethnic, religious and territorial issues bubble to the surface. Consensual regionalism relies on what Lee Kuan Ye w terms ‘pragmatism’; that is, it seemed to make economic sense. Now that the Asian approach to economic development has been so cruelly exposed by the global market, there would appear to be little to be gained from sustaining the regional momentum. In fact it could unravel.

Croniest capitalists

This unraveling would most likely begin in Indonesia, the most economically and politically exposed element in the region. It should be recalled that ASEAN emerged as a device for affording ‘some recognition of the regional standing of Indonesia’ whilst simultaneously containing ‘any propensities on its part for a hegemonial position.’9

Indonesia is by far the largest member of the group in terms of in territory and population. Of all the crony capitalisms in Pacific Asia, it is both the croniest and most ersatz. Like most of the regimes in Southeast Asia the military rulers of the New Order developed mutually beneficial patrimonial relations with Chinese entrepreneurs. As in Malaysia and Thailand, Indonesia’s economic development was left in the hands of flexible, mobile and highly diversifie d Chinese ‘paper entrepreneurs’.

In Indonesia in particular, exasperation with Chinese business ownership and the corrupt ‘state officials who work with Chinese colonisers and surrender Indonesia into Chinese hands’ as one representative of a proscribed labour org a n isation expressed it, represents a major source of popular resentment. It reflects wider displeasure at the close ties between Chinese conglomerates and those run by Suharto’s children – like second son Bambang’s Bimantara and eldest daughter Tutut’s Citra Lamtoro Gung Group.

Nor is this suspicion of the role of what are still regarded as ‘overseas’ Chinese and their bamboo network confined to Indonesia. Economic chaos in 1960’s Indonesia and Malaysia provoked critical reassessments of the loyalty of the ethnic Chinese to the fragile new states.

As the IMF reveals the full extent of the financial mismanagement of late Suhartoism, and the corporatist structure of the New Order degenerates, it should be recalled that the only previous experience of leadership transition in Indonesia was the bloody coup and counter coup of 1965-66. Given the centrality of Indonesia to the regional order, its political and economic implosion would undermine the much vaunted regional bonding which produced so much unwarranted optimism.

It seems unlikely that the Asian Tigers can change their stripes in the short term. The face saving values that have had such disastrous consequences for Asian finances are unlikely to be an enduring or an effective basis for evolving regional cohesion.