The Trouble With Tigers: The Rise and Fall of South-East Asia

THE

TROUBLE

WITH

TIGERS

The Rise and Fall of South-East Asia

VICTOR MALLET

For Michele

Contents

Cover

Title Page

Dedication

Map

Preface

Introduction: A miracle that turned sour

ONE: The rise and fall of ‘Asian values’

TWO: The new democrats

THREE: Sex, drugs and religion: Social upheaval in the 1990s

FOUR: The day of the robber barons

FIVE: Nature in retreat: South-east Asia’s environmental disaster

SIX: Enemies outside and in: The ‘Balkans of the Orient’ and the great powers

SEVEN: Ten troubled tigers: The nations of south-east Asia

BURMA: Democracy delayed

THAILAND: The smile that faded

LAOS: No escape from modernity

CAMBODIA: The slow recovery from ‘Year Zero’

VIETNAM: Victorious but poor

MALAYSIA: Vision 2020 and the Malay dilemma

INDONESIA: Fin de régime – and end of empire?

SINGAPORE: Brutal efficiency

BRUNEI: Sultan of swing

THE PHILIPPINES: Chaotic democracy

EIGHT: After the crash: The unfinished revolution

Notes

Select Bibliography

Index

Acknowledgements

About the Author

Copyright

About the Publisher

Map

Preface

Asia can be disconcertingly modern for a westerner. One day a couple of years ago I was reverently approaching the centre of the ancient temple of Angkor Wat in Cambodia – apparently alone as I admired this 900-year-old work of art – when I heard a strange, high-pitched burbling noise. I soon found the cause. A Cambodian woman was sitting in the centre of the temple playing furiously with her hand-held electronic Game Boy. Perhaps I should not have been surprised. Europeans and Americans, not to mention Asian tourist boards, are still guilty of ‘Orientalism’, the practice of portraying eastern lands as exotic, sensual and mystical, rather than as part of the modern world. Asians themselves, meanwhile, have been taking part in the fastest industrial revolution in history, completing in a few decades a modernization that took 150 years or more for the first such revolution in England in the eighteenth and nineteenth centuries. And they have been doing so at a time when technology has advanced far beyond steam engines to computers and electronics, allowing them to leapfrog whole stages of the industrial revolutions experienced by others. It is not uncommon for Asian men and women to move straight from working in the family’s paddy fields to a factory producing microchips.

The world was rightly fascinated by this post-war transformation of agrarian Asian societies into fast-growing, industrial exporters, a process which came to be called the ‘Asian miracle’. Much has been written about the economics behind Asia’s success in the last four decades. But there is less literature on the risks presented by the extraordinary social and political upheavals accompanying this ‘miracle’ – risks that were vividly illustrated by the financial crash of the late 1990s. That is a gap I hope to fill. Likewise, there have been many books of general interest published about Japan and China, but not enough about the countries of south-east Asia. Indonesia – the fourth most populous nation and the largest Moslem one – has been correctly described as the most under-reported country on the globe.

I hope this book, by addressing these issues, will help to explain the financial crisis which erupted in Thailand in mid-1997, spread to the rest of Asia and eventually disrupted economies as far away as South Africa and Latin America. I trust it also shows that the continuing confrontation between the Malaysian government and its opponents and the Indonesian popular uprising in 1998 were not isolated events triggered solely by the crash of Asian markets, but part of a pattern of political reform throughout the region.

There has been no slackening in the pace of Asia’s industrial revolution in recent months. South-east Asian economies began to recover in 1999, although (as discussed in the final chapter) there are doubts about whether they will return to the high growth rates of the past. Over-reaction has been a consistent theme of short-term foreign investment in Asia, to the detriment of the investors as well as the recipients of the money. In the 1980s and early 1990s, over-optimistic investors thought south-east Asian economies could do no wrong. In 1997 and 1998, they withdrew their money in a pessimistic panic, consigning hundreds of companies to bankruptcy and millions of diligent workers to unemployment. Then they regained their confidence in the first half of 1999, pumping money back into the region in spite of warnings that governments had failed to tackle the ‘crony capitalism’, corruption and poor banking practices that had precipitated the crisis in the first place.

Politicians have been busy, too. In Indonesia, President B.J. Habibie, the interim leader who succeeded the deposed Suharto, allowed the country to hold its first democratic election in nearly half a century in June 1999. The party of Megawati Sukarnoputri, a former opposition leader, won the most votes, but it was Abdurrahman Wahid, the ailing Moslem leader, who was later elected president. Still more remarkable was the Habibie government’s decision to grant the people of East Timor – brutally invaded by Indonesia in 1975 – the chance to secede. A referendum on independence was held under UN auspices in August 1999, amid frequent outbreaks of violence in East Timor itself and other far-flung parts of the Indonesian archipelago. The East Timorese voted overwhelmingly for independence, but pro-Indonesian militiamen backed by the security forces immediately unleashed a campaign of terror on the largely defenceless population.

In Malaysia, Anwar Ibrahim, the reformist deputy prime minister and heir apparent to Mahathir Mohamad, was sacked by Mahathir, expelled from the ruling party, arrested on charges of sodomy and corruption and beaten in detention. He was sentenced to six years in jail. Mahathir also imposed controls on the flow of short-term capital for a year and declared that ‘the free market system has failed’. But Anwar’s supporters took to the streets with the same cries of ‘Reformasi!’ (‘Reform!’) that helped bring down Suharto in Indonesia, and Anwar’s wife Wan Azizah Wan Ismail formed a new opposition party ahead of a general election. A couple of other south-east Asian governments broke with a tradition of polite noninterference to condemn publicly Mahathir’s treatment of his former deputy.

In Cambodia, the main political parties reached a compromise to end a violent dispute over the outcome of the 1998 election, in which Hun Sen’s ruling party won the biggest share of the vote with the help of widespread intimidation of voters. In Burma, the military junta sought once again to crush its opponents with hundreds of arrests. In Vietnam, tensions increased within the Communist Party over corruption and the need for political reform. Joseph Estrada, the action movie star who became president of the Philippines, was criticized for allowing the rehabilitation of business cronies of the late dictator Ferdinand Marcos.

This book is about the ten countries which are regarded – and which regard themselves – as ‘south-east Asia’, the region lying between India to the west and Japan and China to the east and north. In alphabetical order they are Brunei, Burma (Myanmar), Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam. All ten are members of the Association of South East Asian Nations (Asean), an organization originally established as a security umbrella at the time of the Vietnam war but which now focuses on trade as well. This is a region with more than 500 million inhabitants and a plethora of cultures and languages; where France, the US and China all came to grief fighting in Vietnam; where Pol Pot murdered more than a million people in Cambodia; which produces much of the world’s opium; which has inflicted on itself some of the worst traffic jams and most polluted rivers; which has (briefly) the tallest buildings on earth in Malaysia; and which boasts in Singapore one of the most computerized cities on the globe. The ten countries are at very different stages of development, but they see themselves as a distinct group with common interests and they are all undergoing industrial revolutions. All have been affected, to a greater or lesser degree, by the region’s financial crisis, and all have undergone convulsive change since World War II.

Some of the changes of the past decades, good and bad, would be familiar to nineteenth century Americans or to the English of the eighteenth century: the migration of men and women from the countryside to the cities in search of factory work, increased crime and pollution and the rise of ‘robber barons’ or ‘gangster capitalists’. But nowadays the process is much faster and there are many new factors: the rapid spread of television and computers; the growth of consumerism; imports of foreign films and music; the use of drugs such as heroin and Ecstasy; new sexual habits; and much else besides. It is hardly surprising that Asians feel bewildered as well as elated by the changes in their lives as they enter the new millennium.

Nor is it surprising that Asian leaders, especially south-east Asian ones, became more assertive on the international stage as they became wealthier and more powerful in the 1990s. The last European colonies in Asia have been handed back to China (Britain returned Hong Kong in 1997, and Portugal was due to leave Macao at the end of 1999). Lee Kuan Yew, the architect of modern Singapore, and Mahathir of Malaysia both remember the colonial era and attribute their economic success since independence to ‘Asian values’. They argue that Asians work hard and respect their families and communities, in contrast to individualistic, liberal and decadent westerners. Opponents of the ‘Asian values’ school, on the other hand, say the argument is a false one deployed merely to justify authoritarian Asian governments.

I have devoted space to this lively debate because it explains much about what went wrong with south-east Asia’s ‘tiger’ economies, and because its outcome should make it easier to predict the region’s future. One of the few benefits of the financial crisis is that it has prompted Asians to ask questions about their own societies. How much of what is happening is peculiarly ‘Asian’ and how much is merely ‘modern’? Do richer and better educated citizens always demand more democracy and better human rights? What is the point of all this economic growth if our quality of life is getting worse?

Few of the answers are simple, but my conclusion is that industrialization itself has proved to be a much more powerful force for change than any particularly ‘Asian’ values. The industrial revolutions of south-east Asia have remarkably similar effects to those that have gone before in Britain, America and Japan. It could be argued that as a western-educated person, it was inevitable that I would come to this conclusion, just as it was inevitable that Francis Fukuyama of the US would assert the primacy of liberal democracy as a political system in The End of History and the Last Man. I do not believe the languages and cultural traditions of south-east Asia will suddenly disappear, any more than they have in France, Germany or Britain. But I was surprised by how few ordinary Asians – and I asked the question of almost everyone I met while researching this book – subscribed to the theory of ‘Asian values’ as voiced by Asian political leaders and millionaires, and by some western business executives too.

In the aftermath of the financial crisis, south-east Asia will resume the race to catch up with the industrialized world. In the process more and more of its inhabitants will enjoy the benefits of prosperity – better education and healthcare, more material goods and more leisure. But this time around, as they emerge from the humbling experience of the economic crash, they will also be more inclined to tackle the challenges of industrialization: pollution, crime, social disorder, cultural confusion and the urgent need to build effective political institutions. In places as different as Burma, Vietnam and Malaysia, lifestyles are changing rapidly and democrats are already demanding a say in the way their countries are run. The revolution in Indonesia was not the first in the region, and it will not be the last.

Victor Mallet

September 1999

Introduction: A miracle that turned sour

Bangkok in the early 1990s was an extraordinarily energetic city. The peaceful chaos of the streets, where Mercedes-Benzes and BMWs jostled with motorcycles and three-wheel tuktuks for hire, where hawkers cooked noodle soup next to newly-constructed skyscrapers, epitomized the south-east Asian economic boom. When I first set foot in Thailand in 1991, I was impressed not just by the energy but by the easy mixing of new and old, rich and poor, western and Asian. On Ploenchit Road outside my office, a statue of the Buddha, wreathed in incense and garlands of flowers, sat only yards away from a slightly bigger, plastic statue of Colonel Sanders outside a Kentucky Fried Chicken store. On the crowded pavements, foreign backpackers dodged between Thai businessmen talking stock prices into their mobile telephones and disabled women selling lottery tickets to passers-by.

South-east Asia’s dynamism was seductive for a journalist accustomed to other continents. Europe seemed almost lethargic by comparison, and the sense of purpose in Asia’s cities was a refreshing change from the despair in much of Africa and the Middle East. Books about the east Asian economic ‘miracle’ proliferated. It was impossible not to be impressed.

But from the beginning I had doubts – both about the supposedly miraculous nature of what was happening and about how long it could be sustained. I do not claim to be alone in this, for my doubts were sparked and then fuelled by the south-east Asians I met and interviewed throughout the region. Most governments and many business executives were supremely confident, but opposition politicians, academics and others repeatedly warned of the dangers ahead: governments were authoritarian or corrupt or both and would be challenged by their subjects; many Asian businesses were successful not because they were well managed but because they were in league with the same corrupt governments; the environment was being destroyed; and the societies and cultures that seemed so stable were actually in the throes of an enormous upheaval. I confess that my scepticism about the ‘miracle’ soon began to waver in the face of accusations that I and some of my journalistic colleagues were too pessimistic and were mistakenly viewing events through ‘western’ eyes. Several more years of rapid economic growth made our doubts seem even more unreasonable.

Then came the financial crash of 1997. This book was conceived in 1996, so neither the region-wide economic crisis nor the overthrow of President Suharto in Indonesia came as a shock to me or to those Asians who had long advocated political and economic reform. But these events – particularly the abrupt end of the economic boom – did come as a nasty surprise to many south-east Asians and foreign investors. They had assumed that rapid economic growth would continue indefinitely, although they argued about the precise rate of expansion. In the mid-1990s, if you asked anyone in a southeast Asian city a casual question about how things were going, it was surprising how often the reply was a cheerful ‘7.6 per cent’, ‘9 per cent’ or some similarly precise number. Europeans or Americans usually know if their economy is doing well or badly, but most would struggle to remember a recent estimate for the growth of their gross domestic product. For Malaysians, Thais and Singaporeans, however, economic expansion had become an obsession.

There were good reasons for this. The rapid economic growth these countries had enjoyed in the previous three decades had a palpable effect on people’s lives, whether they were cabinet ministers or factory workers; an economy growing at 8 per cent a year doubles in size in nine years, and most people have correspondingly more money to spend and save. South-east Asia’s success – one of the great achievements of the second half of the twentieth century – was also a source of pride to politicians and ordinary citizens alike. The ten countries of south-east Asia have been involved in the most rapid industrial revolution in history. For the half a billion people who live there, this means being catapulted out of traditional and largely rural societies into the new world of big cities, factories, offices, cars, telephones and mass entertainment. Much has been written about the economic causes of this ‘miracle’. This book is about its effects on the people of south-east Asia, and about how it went wrong.

Many of the results of rapid industrialization are self-evidently good: people now live longer, and they live better. But some of the leaders who supervised south-east Asia’s industrial revolution became arrogant. They began to believe that their societies were imbued with special ‘Asian values’, and were therefore immune to the political and social pressures that had accompanied previous industrial revolutions. They failed to deal with increasing demands for democracy; the spread of crime and drugs; the ultimately disastrous rise of a class of businessmen better at making friends with politicians than at managing their balance sheets; the destruction of the region’s environment and natural resources; or the need to fend for themselves diplomatically and militarily after the end of the Cold War.

Whether or not south-east Asia recovers economically – as most economists believe it will after the recent financial crisis – the need to manage these challenges will make the bare statistics of growth seem much less important in the early years of the twenty-first century than they did in the 1990s. Most of the challenges are new to the region, but not to the world. As people become educated, they tend to become more vocal in defending their interests and confronting unrepresentative governments. As they move out of villages into impersonal cities, they loosen the ties to families and small communities. Politics, social life, religion, culture and business are all transformed. But south-east Asia’s industrial revolution has been much more rapid than those that went before in Europe, the US and Japan. The result is a delay of many years between the superficial changes – the arrival of television and mobile telephones – and the more profound shifts in the way people think about their families, their communities, their governments and their gods. South-east Asian leaders made a mistake. Instead of seeing this time lag for what it was, they interpreted the continuing weakness of their political opponents and the strength of social traditions as signs that Asia was different and that they would be spared the trauma of modernization.

It was an oversight they would later regret. But even after the collapse of confidence in the region’s developing economies in 1997, there is plenty to boast about in the scale and extent of the south-east Asian ‘miracle’. One country, the city state that is the island of Singapore, has completed the industrial revolution, in the sense that it has caught up with other industrialized nations and even started to overtake them. The average Singaporean is already richer than the average Briton. Singaporeans live in an efficient and highly computerized urban society, eat at expensive restaurants, buy expensive clothes and travel widely, just like their fellow consumers in Japan, the US or Italy.

In Vietnam, Laos, Cambodia and Burma, on the other hand, the revolution has hardly begun. Most people in these countries are still peasant farmers barely able to subsist on what they grow. But even here the trappings and habits of modern life – motorcycles, tarred roads, televisions, discotheques, tall buildings, toilets, shampoo, banks, advertising, passenger aircraft – are spreading fast. As recently as 1992, the Vietnamese capital Hanoi was a quiet town of elegant but dilapidated French villas where the swish of bicycle tyres was only occasionally drowned by the noise of an army truck; peasant women defecated openly on the pavements. There were no taxis and hardly any cars. The few simple restaurants that existed in what was then a typically dour, communist-run city rarely had names – they were known by their street numbers. Today, the city seethes with noisy activity; the streets are crowded with new motorcycles, cars and taxis, and they echo to the sound of construction as new hotels and office blocks spring up alongside bars and karaoke parlours. In northern Cambodia, far from the capital Phnom Penh, villagers watch videos at night on black and white televisions powered by twelve-volt car batteries which are recharged each day in the nearest town. In communist Laos, young women play cheap, handheld computer games on the banks of the Mekong river.

Halfway up the ladder come Malaysia, Thailand, the Philippines and Indonesia. They have a large middle class of relatively wealthy, well-travelled and well-educated citizens living in the big cities; but also millions of poorer people, urban and rural, who are able to enjoy only some of the fruits of the continuing revolution. Malaysia, once known for its plantations of rubber and palm-oil trees, has become the world’s biggest exporter of air conditioners; the world’s tallest buildings, originally designed for Chicago, now tower over the capital Kuala Lumpur. In Thailand, nine tenths of the population live in homes with television; in the Bangkok metropolis, the figure is 97 per cent. If you visit one of the new shopping malls in Jakarta, the Indonesian capital, only the faces of the shoppers and the occasional sign in Bahasa Indonesia betray the fact that you are in Asia rather than Europe or America; there are ‘cybercafés’ serving refreshments and access to the Internet, McDonald’s burger bars, cinemas showing Hollywood films and shops selling the same brand-name clothes you can find in Paris or New York.

The reasons behind south-east Asia’s success – ‘probably the most amazing and beneficent revolution in history’, as one author called the whole east Asian experience1 – are now generally agreed. Governments adopted sensible economic policies and promoted exports; most of them also provided a reasonably stable political environment which allowed growth to proceed unhindered; ordinary people worked hard and saved a high proportion of their earnings, permitting investment in education and in further industrial expansion; foreign countries helped too, principally by opening their markets to imports from south-east Asia (in the case of the US), and by investing heavily in industry (in the case of Japan). In the 1980s, the end of the Cold War – which had pitted ‘pro-western’ nations such as Thailand against the communist states of Indochina – provided an additional boost to the regional economy. South-east Asia’s success was all the more remarkable because it was not foreseen, and because other parts of the world failed where south-east Asia appeared to have triumphed. Gunnar Myrdal, a Nobel Prize-winning Swedish economist, has become the butt of jokes among Asia experts as a result of his gloomy predictions about south-east Asia in a three-volume, 2,700-page book in the 1960s.2 Another academic wrote in 1962 of the ‘desperate, and in most cases to date, the losing race to achieve economic growth in the face of consistently mounting population pressure on already inadequate resources’; he also lamented the failure of south-east Asia’s ruling elites to show ‘any notable capacity to solve the problems involved’ in modernizing politics and society.3 Today, much of Africa is afflicted by war, poverty and disease. Latin America has only recently begun to recover from a long period of stagnation. The Middle East continues to struggle with political instability. Yet south-east Asian countries, after as many as thirty years of strong economic growth, have been extraordinarily successful and – until the crisis that began in 1997 – increasingly self-confident.