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AseanAffairs Magazine November - December 2010



China in Spotlight
The emerging role of China in the 21st century is a focal point for conjecture and a certain degree of apprehension in the world outside of China. Is China an ally, a competitor, an adversary or perhaps all three?


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Year in Review

Key Issues in Asean Countries

Faster Asean Economic Community, Thailand and Myanmar elections, New Economic Model for Malaysia, New Singapore casinos, Philippines economy is #2, Vietnamese president to step down?, Brunei labor upgrade, Oil and gas flow in Cambodia, Laos becoming new power hub?

Pushing for quicker AsEan
Economic Community start-up



President Susilo Bambang Yudhoyono called for police cooperation on graft cases.

          Economic: Indonesia is responsible for 40 percent of the GDP of Asean, and in line with its Asean partners the economy has done very well in 2010. One should not forget that in 1965 under strongman Sukarno, Indonesia was one of the world’s poorest countries. Jakarta is the headquarters city of Asean.

Today Indonesia has an annual GDP in 2010 estimated at US$700 billion. That figure is expected to top a trillion dollars by 2015. The Jakarta Composite Index is up more than 20 percent in the year to date. The Asian Development Bank expects Indonesia to grow its economy by 6.1 percent this year and 6.3 percent in 2011. The International Monetary Fund’s representative in Indonesia said the country ranks just below China and India in attracting foreign investment, and capital inflows have surged in 2010 in line with other Asean countries.

Major industries include petroleum and natural gas, textiles, apparel, and mining. Major agricultural products include palm oil, rice, tea, coffee, spices, and rubber. The country has extensive natural resources, including crude oil, natural gas, tin, copper, and gold. Indonesia’s major imports include machinery and equipment, chemicals, fuels, and foodstuffs. The services sector is the economy’s largest and accounts for 45.3 percent of GDP (2005).

In July 2010, the Japan Credit Rating Agency upgraded Indonesia’s investment grade from BB+ to BBB (Investment Grade: proper to invest). Poor economic infrastructure, rampant corruption and a legal framework that does not quite provide investors with better certainty are problem areas to be addressed.

Political: Indonesia has relative political stability. President Susilo Bambang Yudhoyono was re-elected to his second five-year term in July 2009.

Social: Indonesia has the world’s largest Muslim population and it is a country composed of more than 17,000 islands, thus, it has a wide number of ethnic groups, with the largest being Javanese (41 percent).

The country is nominally a pluralistic society but this is under attack from extremist Muslim sects. For the first time in more than a decade, Indonesia sent military forces to fight local militants, who are shifting from suicide bombings to armed attacks on the government.

Sensing the difficulties that could arise, Indonesia and the United States reached an agreement on a security pact in 2010.

IN 2011: Continued economic growth and capital inflows into Indonesia; extremist Muslim groups also continue to operate.

Looks toward the 2011 election



Economic: Thailand is Asean’s second largest economy after Indonesia. Despite this, Thailand ranks midway in terms of wealth spread in the region, since it is the fourth richest nation, based on GDP per capita, after Singapore, Brunei and Malaysia. However, this disparity may be due to Thailand’s much larger population of 67 million. The GDP is currently US$627 billion.

In its September report, the World Economic Forum ranked Thailand 36th (2009) but it fell to 38th in the Global Competitiveness Report 2010-2011. Thailand’s economic growth could reach a 15-year high of 7.8 percent in 2010, the finance ministry said on September 27, as exports counter the impact of street violence that killed 91 people in April and May. The Thai currency, the baht, reached a 13-year high in October dipping below the 30 baht to the U.S. dollar.

Thailand is an automobile production hub exporting to other Asian countries, with some models entering western markets as well. Thailand is the world’s largest rice exporter. The major Thai industries are based on crops and include rubber products and textile products, plus food, drink and tobacco processing. Tourism accounts for 8 percent of the country’s GDP but recent political developments could drop that figure in 2010, although tourism has rebounded quicker than most observers expected.

The red shirt protest failed to shaked the Thai economy.

At year’s end, domestic demand surged due to the currency’s strengthening, but the economy remains highly dependent on exports. Infrastructure remains a problem. To that end, the Thai government recently signed an agreement this year with China to develop high-speed railways to improve logistics.

Financing the government is a problem in Thailand due to the large amount of money earned by the “shadow economy” that is not taxed. This money stems from gambling, drugs, prostitution and smuggling. To generate income, the government has always imposed high tariffs on imports. However, with the coming of the Asean Economic Community, tariffs will drop, and it will be of interest to see how the government responds.

Enforcement of existing laws has always been a problem in Thailand, and proper law enforcement could channel more revenue into the economy. Political: Thailand is a constitutional monarchy with a parliamentary system. The Thai king, King Bhumibol, is the longest serving monarch in the world and celebrates his birthday on December 6. He is the only king that most Thais know, but there is a sense of apprehension because of concerns his succession may be complicated at a time of heightened political tension. A state of emergency was put in place throughout the country but has been gradually lifted except for Bangkok, where sporadic bombings of a minor nature have occurred.

The current constitution calls for an election by the end of 2011. Fugitive former prime minister Thaksin Shinawatra has lowered his profile since the end of the red shirt protest on May 19. Leaders of the protest stated that Thaksin was “the boss” behind the protest and heavily financed it. The government has formed reconciliation committees to develop solutions to the issue of economic disparity between the rural population and the Bangkok elite, which was the nominal cause of red shirt protest. There is also a committee to recommend police reform, which is a major issue.

A Muslim insurgency in the south of the country that has taken more than 4,300 lives continues unabated with no immediate prospects for solution. Political stability is needed for Thailand to maintain its present position and advance as a country. Social: With a population of 67 million, there are more people now living in cities than in the countryside. The country is Buddhist (95 percent) but has a firm policy of religious freedom. Although English is nominally Thailand’s second language, it is usually not heard outside of Bangkok. The government has announced a new initiative to improve English instruction.

A court case initiated by residents near the industrial site of Map Ta Phut was upheld by Thai courts as the proper environmental clearances had not been followed. Most of the projects were sidelined and then reinstated. However, the episode demonstrates the growing sophistication of Thai citizens and the growing role of NGOs. The Abhisit government is pursuing policies to combat income disparity between the rural and urban populations. Most prominent in these plans is a new real estate tax. The real estate tax will be used to finance social programs.

In 2011: A national election is slated to be held at some point to elect a new government. Thailand’s economy is expected to normalize to a GDP growth rate of 5 percent-6 percent. Will the government’s populist policies and other reform efforts bear fruit?

Will New Economic Model work?



Economic: Malaysia has the third largest economy in Southeast Asia, with a population of approximately 26 million and a GDP estimated at almost US$400 billion. Malaysia has dropped two spots in the World Economic Forum (WEF) competitiveness index, coming in 26th out of 132 countries, with security, productivity and higher education identified as areas for improvement.

Malaysia’s New Economic Model (NEM), developed by the government of Prime Minister Najib Razak, is a framework that promises to bring the country out of its middle-income status and push it into the realm of a high-income economy. The model’s initiatives target reenergising the private sector, developing a quality workforce, and creating a competitive domestic environment. Growth is also considered, both in terms of enhancing the sources of growth and ensuring the sustainability of growth. Other initiatives target the public sector, affirmative action and building Malaysia’s knowledge-base and infrastructure.

Prime Minister Najib Razak has introduced the New Economic Model.

Malaysia is a country of rich biodiversity, but that is threatened by the proliferation of palm oil plantations. Issues related to allegations of illegal logging, wildlife abuse, forest destruction and human trafficking in Malaysia have been brought up for high-level discussion between Malaysian lawmakers and their counterparts from Australia, Canada and Asean countries. Nuclear power generation is also an issue in Malaysia, with plans to have a nuclear power plant by 2021.

Political: The National Front (Barisan Nasional) is the main political party in Malaysia. It is multiracial and consists of 14 parties, with the largest being the United Malays National Organization. The March 8, 2008 elections marked the first time since 1969 that the ruling coalition did not win a two-thirds super majority, as opposition parties won almost 37 percent of the parliamentary seats. The next election is to be in 2011.

Malaysia’s minority groups (40 percent of the population) criticize the ruling United Malays National Organisation (UMNO) party for its decades-old policy of giving the ‘Bumiputra’ privileges, including land ownership and access to business licences and scholarships.

At the same time, the right-wing Malay group Perkasa, led by de facto leader Ibrahim Ali, criticise Prime Minister Najib Razak for conceding to minority group demands for political equality with native Malays................................


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