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.