Introduction

Perhaps the most positive feature of Southeast Asia in 2010 was the robust economic recovery from the global financial and economic crisis of 2008–09. Growth rates rebounded, capital flows returned, stock markets rose, and currencies appreciated. But on the political front good news was scarce. The election of a new president in the Philippines yet again revived hopes for improved political leadership and performance. The results of the election in Myanmar were unsurprising and offered no immediate prospect of change. The future would depend as much on the actions of the international community, especially the United States and the European Union, as on actors within Myanmar.

Elsewhere, the best that can be said is that there was no major deterioration from the previous year. In Indonesia, shortcomings in governance and the failure to deal effectively with extremism generated negative perceptions. Thailand continued to be marked by deep political polarization and uncertainty about royal succession in view of the frail health of the King. In Malaysia, Prime Minister Najib Razak was navigating through the political shoals and increasing popular support for the ruling coalition, but racial and religious tensions remained a threat to social harmony. The insurgencies in the Philippines and Southern Thailand persisted. A good deal of the domestic political violence in the region arose from, or was exacerbated by, poor governance, state ineffectiveness, and the marginalization of minorities. Governments in several countries also faced the challenges of managing rising expectations of middle classes, income inequalities, or lack of social safety nets amongst populations increasingly connected to the rest of the world through easy travel and new forms of communications.

Meanwhile the geopolitical trends in Asia involving the major powers were even more troubling. A more assertive China and signs of increased Sino-U.S. competition threatened a long-held ASEAN assumption that its vision of an equilibrium of major-power interests in the region would be acceptable to all the major powers.

The Association of Southeast Asian Nations (ASEAN) had a busy year and continued to work on its integration project in the face of considerable difficulties. Armed clashes on the Thai-Cambodia border reflected poorly on ASEAN, as the organization had prided itself on maintaining interstate peace among members. In this case domestic political struggles were allowed to spill over into interstate tensions and conflict to advance domestic agendas with scant regard for the well-being of ASEAN.

This Introduction highlights some of the trends and developments in Southeast Asia during 2010, drawing mostly, though not exclusively, from the chapters in the volume. It cannot possibly do full justice to the analyses and rich insights of the authors, but hopefully serves as a rough guide for readers.

Good Economic Performance

In his economic overview of Southeast Asia in the first chapter of this volume, Thiam Hee Ng highlights the strong recovery that the region staged in 2010 after the global crisis. The countries that registered the strongest growth rates as global trade recovered —Singapore, Malaysia, and Thailand — were also those which had experienced the sharpest slowdowns during the crisis when international trade had contracted. Indonesia and the Philippines, less open to trade, showed relatively more modest but still impressive growth rates, driven by consumption and investments. Capital flows into the region rebounded causing stock markets to rise and currencies to appreciate. Some countries introduced measures to mitigate their adverse effects. Ng points out that financial vulnerability in the region remained low “as most countries maintained healthy fiscal balances and low levels of external debt … [and] comfortable levels of foreign currency reserves. … The banking system in the region has also remained robust and stable with very little impact from the sovereign debt crisis in Europe.” Among the challenges he expects the region to face in 2011 are anaemic growth in the developed countries, tighter monetary policy due to inflationary pressures, volatility of capital flows, and stronger currencies. These will significantly moderate growth in the fastest growing countries of 2010. He also flags the need for longer-term structural reforms to sustain growth in 2011 and beyond: improving the investment climate, strengthening domestic demand, raising productivity, reducing income inequalities, and increasing spending...