China, The United States, and the Future of Southeast Asia

U. S. -China Relations, Volume II

David B. H. Denoon

• Publisher: NYU Press
• Year: 2017
• ISBN:
  9781479810208
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

Distinguished experts explain the economic trends and varied political goals at work in Southeast Asia. With China’s emergence as a powerful entity in Southeast Asia, the region has become an unlikely site of conflict between two of the world’s great powers. The United States, historically regarded as the protector of Pacific Southeast Asia—consisting of nations such as Vietnam, the Philippines, Myanmar, and Malaysia—is now called upon to respond to what many would consider bullying on the part of the Chinese. These and other countries have become the economic and political engine of China. While certainly inclined to help the country’s former allies, the United States has grown undeniably closer to China in the recent decades of global interconnected economic growth. China, the United States, and the Future of Southeast Asia uncovers and delves into the complicated dynamics of this situation. Covering topics such as the controversial response to human rights violations, the effects of global economic interconnectedness, and contested sovereignty over resource-rich islands, this volume provides a modern and nuanced perspective on the state of the region. For anyone interested in understanding the evolving global balance of power, China, the United States, and the Future of Southeast Asia illuminates how countries as different as Thailand and Indonesia see the growing competition between Beijing and Washington.

PART I

Overview

1

Southeast Asia

Thriving in the Shadow of Giants

VIKRAM NEHRU

Introduction

At first glance, the countries of Southeast Asia appear a diverse lot. The region includes a small, rich oil kingdom (Brunei); a wealthy entrepôt economy (Singapore); a postconflict society (Cambodia); a country emerging from half a century of autarkic military rule (Myanmar); a poor, landlocked economy blessed with hydropower and minerals (Laos); a populous nation modeled on China’s political structures and matching its growth potential (Vietnam); and four diverse middle-income, market-oriented economies that aspire to join the ranks of advanced countries (Indonesia, Malaysia, the Philippines, and Thailand).

But what these countries share are a strategic location sitting astride one of the world’s busiest sea lanes, access to plentiful natural resources, and close proximity to the world’s two giant countries—China and India. Their diversity and increasing economic integration lie at the heart of Asia’s rapid and resilient economic growth. Cross-border conflicts have been few, short, and contained; and domestic political insurgencies are gradually being overcome, one by one. And a regional institutional architecture is emerging that will help develop shared solutions to common regional and global challenges.

Together, these developments have helped underpin Southeast Asia’s impressive economic performance over the years and positioned it well for future economic and social progress. The two largest economies in the world—the United States and China—recognize the enormous economic and strategic potential of Southeast Asia and have made the region a core element in their regional and global plans.

At the same time, Southeast Asia confronts many challenges that could derail its continued rapid economic and institutional development. Some of these challenges emanate from outside the region, such as the region’s vulnerability to global economic instability and, more recently, to the slowdown in the Chinese economy. Southeast Asia’s openness to trade and financial flows has been an essential ingredient to its development success, but it has also carved channels that immediately transmit global trade and financial instability to the domestic economy, and often even amplify them. Similarly, potential friction between China’s rise as a regional military power and America’s rebalancing strategy toward Asia could, if poorly managed, affect Southeast Asia’s long-term security and stability.

Other challenges come from within the region. Political, ethnic, and communal tensions threaten stability and development in some countries. Inadequate investment in an institutional and regulatory framework to support a range of public goods—regional peace, social mobility, infrastructure, environmental protection, good governance, and a globally competitive private sector—threatens the sustainability of the region’s growth in the long term. And weak regional institutions unable to deliver regional public goods—such as further trade and financial integration, or responses to growing transborder risks that include health pandemics, nontraditional security threats, and extreme weather events related to regional and global climate change—could also undermine the region’s steady economic progress.

This chapter first examines the factors behind Southeast Asia’s long-term economic progress and the development of a regional institutional structure that has helped make this progress resilient over several decades. It then examines the economic outlook for the region and assesses the important risks that could slow—or even disrupt—its continued rapid and resilient growth.

Southeast Asia’s Long-Term Economic Performance

Southeast Asia’s ten economies have a combined GDP of US$2.3 trillion (much bigger than that of India); a population of over 600 million people (nearly twice that of the United States); and an average per capita income that is almost two-thirds of China’s (see table 1.1). If Southeast Asia were one economy, it would be the world’s seventh largest.1 It would also be the most trade-dependent, with a trade-to-GDP ratio well in excess of 100 percent.

The enormous diversity of Southeast Asian economies has meant that neither policy approaches toward development nor development outcomes have been uniform. Yet, over the broad span of the past four decades, Southeast Asia has been one of the world’s consistently good economic performers. Average per capita income in the region climbed faster than in any other developing region (see figure 1.1). In the 1970s, several Southeast Asian economies were singled out for their economic promise. Singapore (together with South Korea, Hong Kong, and Taiwan in Northeast Asia) was dubbed an Asian tiger, while Indonesia, Malaysia, the Philippines, and Thailand were considered tiger economies in the making. Singapore lived up to its early moniker and is now a high-income economy. But economic progress in the remaining four middle-income economies was more mixed. Growth in Indonesia, Malaysia, and Thailand, while rapid till the late 1990s, was hit badly by the Asian financial crisis in 1997–98; their growth since has not been as rapid as in the pre-crisis years (see table 1.2). The Philippines, on the other hand, suffered from weak growth through the 1980s and 1990s, earning it the unfortunate reputation of being the “sick man of Asia,” but its growth picked up after 2004, and over the past few years it has been one of the better performers in Southeast Asia.

TABLE 1.1. Southeast Asia: Key economic and social indicators 2014a
Country	Population (in millions)	GDP per capita (current US$)	Trade (% of GDP)	Gross fixed capital formation (% of GDP)	Urban population (% of total)	Population growth (annual %)	Military expenditures (% of GDP)	Infant mortality rate (per 1,000 live births)	Internet users (per 100 people)
Southeast Asian countries
Brunei Darussalam	0.4	40,980	106.6	27.3	76.9	1.4	3.1	8.6	68.8
Cambodia	15.3	1,095	129.0	20.9	20.5	1.6	1.7	24.6	9.0
Indonesia	254.5	3,492	48.2	32.6	53.0	1.3	0.8	22.8	17.1
Lao PDR	6.7	1,793	90.1	30.1	37.6	1.6	0.2b	50.7	14.3
Malaysia	29.9	11,307	138.5	26.0	74.0	1.5	1.5	6.0	67.5
Myanmar	53.4	1,204	44.3c	NA	33.6	0.9	3.7	39.5	2.1
Philippines	99.1	2,873	61.1	20.8	44.5	1.6	1.2	22.2	39.7
Singapore	5.5	56,285	350.9	25.4	100.0	1.3	3.2	2.1	82.0
Thailand	67.7	5,977	131.8	24.6	49.2	0.4	1.4	10.5	34.9
Vietnam	90.7	2,052	90.7	23.8	33.0	1.1	2.3	17.3	48.3
Southeast Asia	623.3	4,044	116.3	27.3d	47.1	1.2	1.6b	22.0e	28.7
Other developing regions
South Asia	1,721.0	1,504	46.7	26.9	32.6	1.4	2.4	41.9	16.6
Middle East and North Africa	357.3	4,313	65.7	25.6	60.0	1.9	3.8	20.8	32.7
Sub-Saharan Africa	973.4	1,776	60.3	21.1	37.2	2.7	1.0	56.3	19.2
Latin America and Caribbean	525.2	9,091	48.5	21.0	77.8	1.1	1.3	15.9	47.5
Europe and Central Asia	264.4	6,874	74.1	20.4	59.9	0.7	2.0	0	48.2

a. The data are for 2014, except where indicated.

b. Laos data for 2012.

c. Estimate for 2013/14. Data from IMF, “2015 Article IV Consultation.”

d. Excludes Myanmar.

e. Data for 2015 taken from ADB, “Key Indicators for Asia and the Pacific 2015.”

Sources: World Bank, World Development Indicators, http://databank.worldbank.org; IMF, “2015 Article IV Consultation and First Rev...