Matching Asia's politics with its economics

Matching Asia's politics with its economics

James Cotton looks at the increasing mismatch between economic
performance and political institutions in Asia-Pacific countries.

According to the World Bank, the "High-performing Asian
economies" (HPAEs) of Asia are the four tigers (South Korea,
Taiwan, Hong Kong and Singapore) and Japan, along with the better
performing members of the ASEAN six -- Thailand, Malaysia, and
Indonesia. The four tigers have been particularly successful in
achieving rapid economic transformation. In 1965, together they
accounted for 1.5 percent of world exports of manufactures. By
1990 this had grown to 7.9 percent (this being 61.5 percent of
manufactures by all developing economies).

Latterly the tigers have been emulated by a number of
Southeast Asian nations, of which the most successful has been
Malaysia. In addition, the region's economic pattern has been
fundamentally altered by the emergence of China. In China, the
annual GNP growth rate in the period 1979 to 1989 was 11.4
percent. After a reduction in 1989 to 1990, this pattern was
resumed. At the same time, China has developed strong linkages
with the other economies of the region. While such very high
growth rates are unlikely to be sustained, China may still become
the world's largest economy by about 2020.

This Asian success story has been constructed partly on the
basis of mercantilist policies pursued by strong and relatively
autonomous states. However, the classic mercantilist states of
the region are all experiencing important political and social
changes which are reducing their capacity to pursue these
policies. South Korea and Taiwan have democratized, which has
required their governments both to abandon authoritarian
controls, and to attend to the demands of formerly excluded
interests.

In Japan, the party which presided from 1955 over the most
successful growth model of the 20th century has broken up into
antagonistic factions. The strengthening of GATT and the
formation of the WTO demonstrate that even those states that have
pursued strong industrial policies are no longer free to do so.
Not only has the world trading environment changed, but as
industrial conglomerates in Asia grow large and begin to trans-
nationalize, their governments are no longer capable of
exercising the same degree of control over them.

Institutional changes may be altering the ways in which the
countries of the region manage their economies, but in other
respects the Asian region still has in place many of the
fundamentals which make continued strong growth possible. These
include high savings and investment rates, a predilection towards
the development and use of indigenous technology, a strong
commitment to education, and policies which encourage exports.

While the economic dynamism of the Asia-Pacific seems assured,
the region is still laboring to acquire the political
institutions to manage and facilitate the greater power and
interdependence which has resulted. Perhaps the most successful
mechanism for regional cooperation has been ASEAN, but even this
mechanism is not immune to internal strains. It is fair to assume
that regional as well as international institutions will be
formed or strengthened in the search for new modalities to
improve Asia-Pacific cooperation.

ASEAN (enlarged to include Indochina and Myanmar), the ASEAN
Regional Forum and APEC will all take on a more important role in
the immediate future. However, regionalism in Asia has a lot of
ground to cover and differences to resolve, as the Spratly
Islands dispute illustrates. Moreover, the nature of the China-
Taiwan divide renders even more difficult the formation of a
truly comprehensive security regime.

Probably the greatest obstacle to the trend towards regional
harmonization is likely to derive from the anomalous position of
China in the regional system. China is "anomalous" in the sense
that its political and economic objectives to a degree run
counter to each other. No country has embraced with greater
enthusiasm the regional division of labor.

But this embrace is ultimately grounded upon the need of the
leadership and political system to build an alternative
foundation for their legitimacy upon their capacity to build
national wealth and power. However, wealth and power thus
generated tends to erode the traditional bases of support of the
regime. This process has many facets, some of which are more
obvious than others.

With the proportion of state enterprises in the Chinese
economy diminishing and the proportion of private and collective
enterprises increasing, the state can no longer command directly
the activities of as large a proportion of the population as
formerly, and also the state must derive more of its revenues
from non-state economic activity. And the phenomenon which has
been most apparent, the integration of coastal and border regions
of China with external regional economies, has led to a reduction
in the power of the center over the regions. These changes are
increasingly posing difficult choices for the regime in Beijing.

There may be a reassertion of political priorities by the
center, or centrifugal tendencies may become so pronounced that
provincial and regional differences will grow. These ambivalences
are also expressed in foreign policy: whether to engage with the
region and regionalism (in the form of Tumen River cooperation
with Korea and Russia) or to reassert older notions of
sovereignty.

A lesser obstacle, though one which shares some of the same
characteristics, is the continued existence of socialist regimes
in North Korea and in Vietnam. So far, Vietnam has managed to
accommodate itself both to capitalism and to its regional
neighbors, but North Korea is at a particularly awkward juncture.
Not only is it still an avowedly socialist state, but it is also
undergoing regime succession (as a result of the death of Kim Il
Sung in Asia) while experimenting with an opening policy (forced
upon the leadership by the loss of Russian and Chinese
patronage). So far the change in the North Korean leadership
appears to have proceeded according to expectations, but even if
reforms produce economic improvement, a dilemma of the same form
will face the leaders in Pyongyang as is now faced in Beijing.
This dilemma will be more acute and challenging in so far as the
capital, technology and linkages which are integral to an opening
policy will be largely of South Korean provenance.

The other danger posed to North Korea is that generated by the
nuclear problem. Pyongyang has been adept at negotiating a way
out of the crisis of the past two years (as reflected in the
U.S.-North Korea nuclear accord of 1994) but will shortly have to
adopt greater transparency in its nuclear program or risk further
isolation and the jeopardizing of its economic reform
initiatives.

If China's political transition can be successfully
accomplished, and regional institutions continue to mature, the
Asia-Pacific region can be expected to be the power house of the
21st century. But there are many obstacles left before the
matching of politics with economics in the Asia-Pacific can be
achieved.

Dr. James Cotton is Professor of Political Science at the
University of Tasmania, Hobart, Australia.