The Financial Times

Gerald Segal: A dose of political reform for Asia


East Asia's economic fundamentals no longer seem robust. A large part of that problem lies with weak political fundamentals. As Asia's crisis turns into the most important economic event of the post-cold war period, it is essential to understand one thing: there will be no secure recovery unless there is political reform.

Asia has a paucity of robust, pluralist political systems with entrenched democratic institutions. Those now suffering economic woes have notoriously opaque, highly regulated and largely unaccountable political systems. Crony capitalism and inefficient financial systems flourish in such unreformed political environments.

Under certain conditions, it is true, political pluralism can actually hamper adjustment to the economic crisis. South Korea's electoral process clearly introduced a degree of uncertainty that was punished by the equity and currency markets. Autocratic Singapore and authoritarian China have, so far, weathered the crisis better than the more democratic South Korea or Thailand. On the other hand, perhaps the region's two most democratic countries, Taiwan and the Philippines, have been hit less hard.

As well as weak institutions, many Asian countries suffer from unresolved national identities, as in South Korea. Indonesia, and especially Malaysia, have serious identity crises because of resentment against powerful ethnic Chinese minorities. Extremists also build support along religious lines or against immigrant labour, as in Indonesia.

The result is distinctive patterns of democratic development and often weak and dangerously populist politics. In these uncertain democratic transitions, it is easy to see why authoritarian governments warn against the perils of democracy.

But if one stands back, the tide of history is with those who argue that economic development requires more pluralist and institutionalised democracy. In the short term, the case is made by markets which, for example, punished authoritarian Indonesia when the fragile health of President Suharto appeared to threaten one-family rule. In the longer term, any state that wants to prosper as a post-industrial, information and innovation economy must move towards becoming a more liberal democracy.

Democratic change comes in different forms and through varying mechanisms. In good economic times, it tends to emanate from the top down, as in Taiwan or South Korea. In bad economic times, democratic pressure tends to bubble from below through the unrest of the dispossessed or disadvantaged. In both good and bad times, there is sometimes pressure from the international community in the form of demands for trade liberalisation, better human rights or strict conditions attached to loans from the International Monetary Fund. In the coming years, east Asian governments will face demands for democracy from the bottom up and from the outside.

If east Asian countries want to continue to grow rich, they will have to accept some combination of the following five political reforms:

* The armed forces must take a less prominent role. This appears to have been achieved in South Korea and to have become more possible in Thailand. It is still an important concern in an Indonesia awaiting the succession to Mr Suharto.

* There needs to be a broadening of the range of business interests. Truly competitive economies require a multiplicity of vociferous economic actors. South Korea, Indonesia, Malaysia and Thailand are in need of such business-led pluralism. One of Taiwan's strengths is its broader base of business supporting diverse political interests.

* There must be a widening of the political forces outside the state that enhance civil society. There are healthy signs of a growing community of domestic non-governmental organisations in east Asia. Indonesia alone is said to have more than 10,000 NGOs. The news media in Jakarta are already remarkably free to criticise the regime, especially in comparison with Malaysia. It is hard to envisage real economic transparency and accountability without a powerfully nosy and noisy press. Thankfully, the trend throughout the region is towards greater press freedom.

* There is a growing need for more institutionalised pluralism. One of Indonesia's major weaknesses is its weak party and government structure. Even Malaysia has more robust institutions. South Korea, in comparison with Taiwan, relies far too much on crony connections instead of building independent and competing power structures.

* There ought to be more external pressure on individual Asian countries to keep up the pressure for reform. One of the more encouraging trends is the breakdown of the previous Asean norm of non-intervention. The triple embarrassment over Cambodia, the deadly pollution from Indonesian fires and the contagion effect of the economic crisis have ended the notion that east Asian states are political islands. The call by Anwar Ibrahim, Malaysia's deputy prime minister, for constructive intervention points to an acceptance of this reality, as does the agreement in Asean to use the Asian Development Bank to monitor economic conditions in individual states.

In spite of all such signs of political progress, it is important to recall that there is nothing inevitable about the process. Politics can often turn down dead-ends or make good governance more difficult in the short run. East Asian states are bound to have bouts of labour and ethnic unrest and weak governments will be severely tested.

But like the stalled economies of Latin America in the 1980s, east Asians are confronting that difficult stage of economic growth where the uncertainties of political pluralism must replace the limited certainties of autocracy.

The author is director of studies at the International Institute for Strategic Studies and director of the UK's Pacific Asia programme.

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