How SE Asian economies should be rebuilt
How SE Asian economies should be rebuilt
By Mike Yeong
SINGAPORE (JP): After the worst is over, the governments of
Southeast Asia, especially those hardest hit by the financial
crisis, will have to quickly get down to the task of
restructuring their economies. At the moment it appears the top
restructuring priority is the banking and financial sector. This
is understandable because affected countries must first attract
back the foreign funds that fled the region when the crisis
broke.
Although there is much talk of greater transparency and
accountability in the financial sector, the more important
lessons to be learned from the crisis are not being discussed
openly in the mainstream media and may have been overlooked
altogether.
One of the most crucial lessons to have emerged from the
crisis pertains to the lop-sided development prevalent in some
Southeast Asian countries. Like in other parts of the world, the
governments of Southeast Asia invested heavily in export oriented
industries concentrated mainly in urban areas.
In Indonesia, investment was focused on Java, in Malaysia, the
Federal Territory, and in Thailand, the Bangkok metropolitan
area. Rural areas in these countries remain undeveloped or
underdeveloped as a result, a phenomenon which came about as a
result of governments equating industrialization with
development.
People from rural areas are attracted to urban centers by the
availability of jobs. However, when economic difficulties strike,
the first people to lose their jobs are often migrant workers.
Some then return to their villages, where unemployment also
awaits.
Thousands of farmers recently marched from North East
Thailand, the poorest part of the country, to Bangkok in protest
at neglect by the government. Leaving aside questions of whether
the protest was organized by opposition political parties, the
incident provides a good example of how the unequal development
of recent decades has created political, economic and social
problems, all of which have been exacerbated by the financial
crisis.
The problem is a serious one for countries with large rural
populations such as Indonesia, Malaysia, Thailand and the
Philippines. As their economies become more developed, so the
divide between urban and rural areas grows.
It is time for Southeast Asian governments to re-examine the
notion of industrialization and the broader issue of unequal
economic development.
King Bhumibol Adulyadej of Thailand hit the nail on the head
when he said in his birthday speech, made shortly after the Chuan
government was sworn in, that Thailand should strive for self-
sufficiency before pursuing a program of rapid industrialization.
Indeed, what is the point of being called a newly industrialized
country (NIC) or a developed country when large numbers of
citizens continue to live in poverty.
Self-sufficiency does not only mean that everybody has enough
food to eat. It also means that every able-bodied worker should
have a job.
King Bhumibol's prescription is not confined to Thailand. It
is equally applicable to Indonesia, Malaysia and the Philippines,
which face a similar situation -- a heavy concentration of
economic activity in urban centers and an underdeveloped
countryside containing the bulk of the population.
The financial crisis lead to large scale bankruptcies and the
closure of many factories. As a result, a large number of
workers, many of whom were rural migrants, lost their jobs. Some
returned to their villages to try to eke out a living, while
others remained in cities and tried to find new jobs. The
desperate turn to crime and the angry demonstrate in the street,
placing an additional pressure on the system which already has to
cope with myriad social, economic and financial problems. The
strain placed on all parties sometimes leads to violence, such as
the recent rioting by illegal Indonesian immigrants being held in
detention camps near Kuala Lumpur.
To ensure that such a situation does not recur in the future
it is essential that Southeast Asian governments undertake
structural economic reforms with a view to developing rural areas
in the region.
The top priority for any government is to ensure there is
sufficient food for all citizens. In this light it is heartening
that Thailand recently offered Indonesia food aid, despite facing
severe financial difficulties itself.
Equally important during times of crisis is to discourage the
migration of the rural unemployed to urban areas. To achieve
this, governments will have to focus attention on rural
development programs. While manufacturing sectors can continue to
be concentrated in urban centers, serious efforts must be made to
unleash the potential of rural areas.
For example, if an entire village or district in West
Kalimantan relies entirely on fishing, the government, perhaps
with the help of foreign partners, should seek to develop small
scale secondary ventures associated with fishing, such as fish
meal processing plants. Efforts should also be made to diversify
the local economy. This will ensure that if a financial crisis
strikes again, the village or district will have a greater degree
of self-sufficiency, which in turn will help to discourage the
unemployed from migrating to cities and adding to the burden on
central authorities.
This type of model can be tailored and replicated in other
parts of Indonesia and Southeast Asia. However, of vital
importance to the success of any such initiatives is whether or
not the central government has the political will to pursue such
policies.
Identifying and maximizing the potential of each area in a
country is not an impossible task. The World Bank has the
technical expertise and could provide the assistance required. In
the past, the World Bank showed a preference for funding massive
projects, however it now favors assisting the development of
small scale entrepreneurial activities of the sort required in
the region.
Birth control programs are required to complement economic
development, especially in Indonesia which a population of
approximately 200 million. Even before the financial crisis, the
Indonesian government had difficulty creating jobs for the
thousands of new graduates entering the labor market each year.
Indonesia's unemployment problem has now spilled over into
neighboring countries, particularly Malaysia and Singapore. Both
these countries have had to spend large amounts of money on
preventing the entry of illegal migrant workers and detaining and
deporting those who successfully evaded coast guards patrols, and
port and customs officials.
While the main responsibility for restructuring the economy
rests with individual governments, ASEAN should also play a role
and further funding and expertise could be obtained from the
World Bank and the Asian Development Bank (ADB).
When the worst has past, an ASEAN Summit should be called to
discuss the lessons learned from the crisis and solutions to the
many problems left in its aftermath.
Less badly affected countries like Singapore and Brunei, which
still have large foreign exchange reserves, can play a critical
role in helping their ASEAN neighbors. Such assistance is not
interference in other countries' domestic affairs, it is merely
good neighborliness.
Singapore has recently embarked on a regional drive to this
end. So far, investments have been directed towards manufacturing
and hotel sectors located in urban areas. Having helped develop
Batam and Bintan, it is time for assistance to be directed toward
other parts of Sumatra. If Indonesia were to suffer any serious
social and political upheaval, Singapore would be inundated with
thousands of economic refugees. Helping specific regions in
Sumatra become self-sufficient is therefore not only good
practice, it is also vital to Singapore's internal security.
With Indonesia lying so close to Singapore it is natural that
Singaporean aid be focused on Indonesia. But it must remember not
neglect other ASEAN countries, such as Thailand, which also
require similar assistance and investment.
Mike Yeong runs a political and economic risk consultancy
company in Singapore.