Jusuf Wanandi, Jakarta
There are two main challenges for Indonesia in 2008. First, there is the possibility that a recession or even half-recession in the U.S. (i.e. growth of 0.5-1.5 percent of GDP) could affect growth in East Asia, including Indonesia. Speculations abound about sub-prime loan losses in the U.S. and their impact on the U.S. real economy.
It remains to be seen whether rising oil prices and the decline of the U.S. dollar will plunge that country into recession. In any case, the situation will have an impact on the world economy.
As one saw in the case of sub-prime loans, East Asia might not be directly impacted (because this part of the world has not yet become involved in these new financial instruments). A slowdown in the developed economies which are destinations for East Asian exports and sources of capital would have more nuanced effects, however.
In the event that a full recession hits the U.S., the impact will be more serious for East Asia. The extent will depend on the strength of East Asia’s various economies.
Indonesia is vulnerable, because its economic growth is partly dependent on its exports to developed economies, especially the U.S., Japan and the EU. Our economy is already reeling from unemployment (10 million) and underemployment (30 million), while half of the population lives below the poverty line of US$2 per day. Further economic blows could become a real challenge to political stability and economic growth in 2008.
Second, 2008 is the start of campaigning for the 2009 general elections. Parliamentary and senatorial elections are scheduled for April 2009, followed by the presidential election in September 2009. Because of the campaigns, one cannot expect to see many significant new economic initiatives by the government, bureaucracy, political parties or business community. Everything will be defined by the general elections, and a lot of money will be diverted into politics.
The combination of the above-mentioned two factors is bad not only for economic development, but for political stability as well, depending how much growth is curtailed. Already the high price of oil is hampering economic and political development, because the petrol price hike has created divisions among the government, business and elite.
In ASEAN, two main problems top the list in 2008. One is ratification of the ASEAN Charter, signed in Singapore last November. This document exemplifies the lowest common denominator of ASEAN’s existence and ability, and does not augur well.
Some in ASEAN argue that the charter is neither visionary, forward-looking nor progressive in responding to the challenges of the next 40 years. They feel it is only a repetition of what ASEAN has done before, and therefore will be insufficient for future challenges.
Civil society organizations in ASEAN oppose the charter. They consider it state-centered, even though it was meant to be people-centered. It calls for the creation of a human rights body, for example, but leaves the details to be formulated later by the foreign ministers.
There are two countries that might have problems with the charter. One is the Philippines. President Gloria Macapagal Arroyo has said that country’s Senate might not be willing to ratify it until the Myanmar junta releases Aung San Suu Kyi and demonstrates a willingness to move toward democracy.
The other is Indonesia. Members of Parliament have questioned why Indonesia always has to be on the receiving end on ASEAN matters, when as its biggest member she should be able to take the lead. The creation of the charter, for example, was mostly guided by ASEAN’s new members.
The MPs are now debating whether they should ratify the charter or not. They are planning to ask for comments from various sources and will hold public hearings on the issue.
But, as in the case of the EU, working without a charter is not a big problem. It may even be better, especially if the charter in question is reactive and conservative, because it will give members more freedom to create a “coalition of the willing” if one or more members will not go along.
The second problem for ASEAN is Myanmar. It has become common knowledge that ASEAN is divided and paralyzed on this issue.
So far, the U.S., the EU, Canada and New Zealand have issued strong warnings that without progress in Myanmar, relations between them and ASEAN will be endangered. Japan as well as Australia face immense pressure to follow suit.
Therefore, in 2008, ASEAN or some of its members together with China, India and the UN have to move on the issue more seriously and come up with something positive and real. Otherwise, ASEAN and the region will suffer.
Myanmar’s opposition to ASEAN’s briefing session with the UN Special Envoy on Myanmar, Ibrahim Gambari, at the ASEAN Summit last November was a slap in ASEAN’s face. It should not be allowed to happen again, for the sake of ASEAN’s credibility. Through the international mass media, the world discovered ASEAN’s inability to do anything about Myanmar.
East Asia’s most dynamic regions have gone through positive developments and serious problems at the same time.
The North Korean nuclear problem, hopefully, will be solved in 2008 with good political and economic compensation, as agreed upon by the Six-Party Talks.
Uncertainty lingers in the cross-straits relationship between China and Taiwan, because of Taiwan’s January parliamentary elections and March presidential vote. The DPP under Chen Shui-bian will resort to any tactic to win. This time the theme of his reelection is a referendum on “Taiwan’s” membership in the UN, not “China’s”.
This puts him in danger of crossing the red line, which is never to move for legal or formal independence. It brings not only uncertainty but danger to the region, although not everybody realizes it. The region must oppose and deflate this threat.
Meanwhile, the big problem for East Asia is China’s peaceful rise, and the question of how she will overcome her huge domestic challenges. At the same time, becoming a big economic power has brought new challenges in her economic relations with the U.S. and the EU on such issues as huge trade imbalances, intellectual property rights violations, the yuan exchange rate, and the quality problems of Chinese goods.
However, a successful Beijing Olympics in the summer of 2008 will boost her to the standing and recognition she has been yearning for, despite the efforts of civil society organizations to pressure her on her human rights record.
Japan is going through a difficult political period, and to some extent an economic and social one too. However, now that the leadership of China and Japan have developed positive attitudes toward each other, a period of better outreach and deeper economic cooperation may help them face their economic problems together.
Last but not least, in 2008 one can see that India will become more and more part of East Asia, especially after becoming more committed to economic cooperation, starting with the ASEAN-India Free Trade Agreement.
The region is looking forward to a more focused U.S. administration after the election in November 2008, especially in this most dynamic economic region, East Asia.
The writer is vice chairman of the Board of Trustees of the Centre for Strategic and International Studies, Jakarta.
