Towards a Political Economy Explanation of Rapid Growth in ASEAN: A Survey and Analysis

Abstract

This article offers an explanation for the rapid economic development of the four highgrowth economies of Southeast Asia (Indonesia, Malaysia, Singapore, and Thailand) over the past 30 years. It initially provides a brief review of the major determinants of international differences in economic performance, drawing on both the economic growth and the Asian miracle literature, and a confirmation that these determining factors have been operative to some extent in the four countries. The major section of the article addresses the political economy question of why, over the past 30 years, these countries have generally adopted the right development policies more than is the case almost anywhere else outside East Asia. I. Introduction Arguably the most important economic phenomenon of the second half of the twentieth century has been the extraordinary economic performance of East Asia. No country in world history has grown so quickly, for so long, as the majority of the Asian Nine (that is, Japan, the four NIEs, China, and the remaining three in ASEAN). There is no challenge for contemporary social science more important than the search for an explanation of this performance. The purpose of this article is to address this issue, with particular reference to the high-growth ASEAN Four countries, Indonesia, Malaysia, Singapore, and Thailand. This article addresses the question of why these countries have, until mid 1997 at least, grown quickly by examining the reasons for their governments generally adopting policies which have facilitated rapid growth. There is a broad professional consensus among economists concerning policies which are conducive to rapid economic growth. However, there is much less understanding of why some countries have pursued such a mix of policies, why they have got it right, and other countries have not. The focus of the article is on the successful cases of Southeast Asian economic development over the past three decades, that is, of countries which have achieved sustained high growth over this period. Therefore, the Philippines is excluded, since it grew significantly more slowly from the late 1970s to the mid 1990s; Vietnam is also excluded since its rapid growth is of very recent origins.' One important implication of our Southeast Asian focus is that most of the literature on high growth in East Asia has been with reference to Japan and the four NIEs. Southeast Asia excluding Singapore (which analytically and developmentally belongs with the NIEs anyway) rarely featured in this story until the late 1980s. Indeed, much of the authoritative literature on the subject emphasized the differences between the NIEs and non-Singapore Southeast Asia.2 It is therefore important that, in distilling the lessons from the experience of Japan and the NIEs for the ASEAN-3 (that is, Indonesia, Malaysia, and Thailand), account be taken of differences between the two groups. Compared to the NIEs, the latter are all late-comers to some degree, their political, institutional and social structures differ, and they possess a richer natural resource base. It also needs to be emphasized at the outset that this article works within a framework which assumes that the principal determinants of growth are endogenous. There are enough pairs of countries, similar in terms of resource endowments, size, level of development, etc. but divergent in development outcomes, to provide examples for us to assert that performance is primarily the result of domestic economic policies. This article is structured as follows. Section II briefly examines various approaches to the issue of growth determinants, and assesses a number of methodologies, including quantitative modelling, growth accounting and what might be termed the inferential approach. It distils from this literature what may be termed the core factors which explain rapid growth, and considers the Southeast Asian experience in this light. …