International Herald Tribune
Bowring: Asean's self-absorbed members
Tuesday, July 22, 2008

HONG KONG: The annual meeting in Singapore this week of Asean foreign ministers and those from the major nations of Asia, Europe and America will get some international attention because of events on its sidelines, where U.S. Secretary of State Condoleezza Rice is due to meet her North Korean counterpart at the six-party nuclear talks.

It deserves notice, too, that the Association of South East Asian Nations has finally criticized one of its members, Myanmar - an admission of the failure of its efforts to influence the Burmese generals despite the organization's good work on cyclone relief.

But the meeting itself is a sideshow to broader developments in a region that has failed to take advantage of favorable economic conditions that may not last much longer. Domestic political instability in several member states has begun to spill over into relations between Asean members. The expectations of Malaysia, Thailand and other middle income members that they would follow South Korea and Taiwan to becoming fully developed economies now look threadbare. Economic integration is making more progress on paper than in practice. Meanwhile, China, which presents a smiling image as it talks about a free trade deal with the group, actually follows a policy of divide and rule.

Asean's 10 members have all benefited from the commodity price boom. Four are significant net energy exporters - Indonesia (coal and gas), Malaysia (oil and gas), Vietnam (oil and coal), Myanmar (gas). Among food commodities, Indonesia and Malaysia dominate global palm oil; Thailand and Vietnam, rice exports. The region is a major provider of such booming items as coffee, rubber, sugar and seafood. Even the resource-poor Philippines has benefited from a surge in remittances from its overseas workers in oil rich regions, and Singapore is prospering as an oil sector intermediary and a safe haven for its neighbors' money.

These good times have been showing up in foreign exchange surpluses and steady economic growth. But a sense of impermanence is growing as populations fret about inflation, and local investors prefer to guard their wealth rather than take on long-term commitments, despite the desire of sovereign wealth funds to focus more resources on the region.

Inflation cannot be blamed only on global circumstances and high commodity prices. Vietnam allowed it to get out of hand before a belated effort to control the money supply seemed to stabilize the situation. There, as elsewhere, governments made insufficient use of interest-rate and exchange-rate policies to dampen inflation.

One consequence has been to further raise the political temperature, particularly in Thailand and Malaysia. Thailand is no nearer to re-establishing a stable democracy than it was when the generals overthrew Thaksin Shinawatra nearly two years ago. The anti-Thaksin alliance has shown itself to be more concerned with countering him than defending democracy and has recently stirred up a nationalist hornet's nest over an ancient Hindu temple located in an area of Cambodia that some Thais claim as their own creating.

Things are no better in Malaysia, where, despite the anti-corruption efforts of Prime Minister Abdullah Badawi, the governing United Malays National Organization, whose senior figures sometimes appear above the law, are taking extreme measures to try to block a challenge for the leadership by a one-time deputy prime minister, Anwar Ibrahim. The result could be increased communal tensions and more capital flight - and that is before the commodity cycle turns from boom to bust.

The Philippines faces no immediate crisis, but while President Gloria Macapagal-Arroyo has proved durable and improved the public finances, investment remains weak and the nation becomes ever more dependent on money from its workers overseas.

Singapore is stable, but even there, many people wonder what the impact will be after the country's aging longtime leader, Lee Kuan Yew, is gone. The International Bar Association recently cast doubt on judicial independence there and criticized the use of court actions against political opponents.

Of the 10 Asean members, perhaps only Indonesia and Cambodia have exceeded expectations. But for all the moderate leadership and sensible economic policies of Indonesia's president, Susilo Bambang Yudhoyono, and for all his country's ability to combine democracy with tolerance, corruption and institutional failures remain a drag on both its image and investment at a time when money remains plentiful.

Given domestic preoccupations, progress on trade liberalization has stalled and some Asean members continue to look more to bilateral deals than to the organization itself.

Nor is there much sign of diplomatic cohesion against bullying by big powers. Last week, Beijing warned foreign oil companies against participating in oil exploration in waters off Vietnam. China's border claims extend hundreds of miles to the shores of Vietnam, Philippines, Malaysia, Brunei and Indonesia.

But, just as for years the subject of oppression in Myanmar was off-limits, addressing the China Sea issue would entail a degree of confrontation that few of its members want - especially at a time when most of its individual states are pre-occupied with bilateral relations and domestic issues.