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77. The Asian Crisis and the Adequacy of Regional Institutions
- ISEAS–Yusof Ishak Institute
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382 Michael Wesley By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 77. THE ASIAN CRISIS AND THE ADEQUACY OF REGIONAL INSTITUTIONS MICHAEL WESLEY Reprinted in abridged form from Michael Wesley, “The Asian Crisis and the Adequacy of Regional Institutions”, Contemporary Southeast Asia 21, no. 1 (1999): 54–73, by permission of the Institute of Southeast Asian Studies. THE FUTURE OF REGIONAL INSTITUTIONS IN EAST ASIA If a case has been established that the East Asian financial crisis has produced an increased demand for more effective regional institutions, brief consideration should be given to factors that will influence whether regional institutions will be able to provide appropriate responses to meet this demand. One obstacle to the decisive restructuring of regional institutions to cope with future economic or political turmoil lies in the twin philosophies that underpinned the formation of East Asian institutions. One implicitly assumed that economic growth and stability were interrelated and would continue indefinitely, and that the task of regional institutions was to promote the conditions for their continuation. The other asserted that this or any other common regional endeavour was subordinate to national interests and independence. These twin philosophies explain both the minimalism and the consensuality of regional institutions. They also meant that rapid economic development assumed greater importance as the glue that held the region together. APEC and AFTA were institutional innovations designed to liberalize trade to accelerate this process of development, attract foreign investment, and achieve greater complementarity among the region’s economies. There was little between the mid-1980s and the mid-1990s to suggest that institutional innovations should be made in case economic growth suddenly and catastrophically came to an end. Such moves seemed to threaten both the buoyancy and the inevitability of economic growth. Collective action to cope with economic crisis and political instability challenges the original twin philosophies of East Asian institutions, and will inevitably compromise the minimalism and the consensuality of regional institutions. More obstacles to decisive institutional change derive from a number of consequences of the financial crisis. The first is the political, economic, and social chaos that has overtaken Indonesia as a result of 077 AR Ch 77 22/9/03, 12:56 PM 382 The Asian Crisis and the Adequacy of Regional Institutions 383 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville economic collapse. Indonesia has always played a crucial role at the core of ASEAN, and by extension, of other regional organizations . Regional institutions have also lost a number of elder statesmen as a major source of drive and innovation. Regional institutions in East Asia are predominantly leader-driven: initiatives and agreements are reached at the highest levels of government while secretariats and support structures remain skeletal.1 The duration of the financial crisis has seen the loss or silencing of ASEAN’s prominent statesmen : Indonesia’s Soeharto, the Philippines’ Ramos, Malaysia’s Mahathir. The first was a casualty of the crisis; the second of a regular election cycle, and the third not deposed but internally focused on domestic political turmoil. More problems for institutional innovation derive from uncertainties over the appropriate scope for regional organization in East Asia. One of ASEAN’s difficulties in dealing with an Asian financial crisis was that the organization did not include all the economies affected by the crisis, which was crucial to its response. ASEAN found that it needed to rely on dialogue in broader contexts to co-ordinate its actions with such important players in the crisis as South Korea, Japan, and China. Other countries like Australia and New Zealand, which had wanted to become involved in the collective alleviation of the crisis, had to do so bilaterally or through other, less sensitive institutional mechanisms. But broadening its membership has also created great problems for ASEAN and its ability to respond innovatively. The process of “widening” its membership to include Vietnam , Laos, Myanmar, and eventually Cambodia , is an enormous task of digestion for the organization. These states have less open political systems, much lower levels of economic development, and are inexperienced in participating in regional institutions. ASEAN will expend a great deal of energy on absorbing its newer members for some time to come. APEC, at the other extreme, includes all of these relevant players, but its membership is too broad. It includes a wide range of development levels, from the United States with a per capita gross domestic product (GDP) of US$28,600...