SOUTHEAST ASIAN AFFAIRS 2006 00 Prelims_100506.indd 1 5/16/06 3:05:32 PM The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publications, an established academic press, has issued more than 1,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publications works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world. 00 Prelims_100506.indd 2 5/16/06 3:05:33 PM SOUTHEAST ASIAN AFFAIRS 2006 Edited by Daljit Singh Lorraine C. Salazar INSTITUTE OF SOUTHEAST ASIAN STUDIES Singapore 00 Prelims_100506.indd 3 5/16/06 3:05:33 PM First published in Singapore in 2006 by ISEAS Publications Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: http://bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2006 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data Southeast Asian Affairs. 1974– Annual 1. Asia, Southeastern. I. Institute of Southeast Asian Studies. DS501 S72A ISSN 0377-5437 ISBN 981-230-372-3 (soft cover) ISBN 981-230-373-1 (hard cover) Typeset by International Typesetters Pte Ltd Printed in Singapore by Seng Lee Press Pte. Ltd. 00 Prelims_100506.indd 4 5/16/06 3:05:33 PM Southeast Asian Affairs 2006 Contents Foreword vii K. Kesavapany Introduction ix Daljit Singh and Lorraine C. Salazar the region Southeast Asia in 2005: Strength in the Face of Adversity 3 Michael Vatikiotis Southeast Asian Economies: A Year of Exogenous Shocks 15 Cassey Lee, Boon-Huat Quah, and Marc Foo Terrorism: Evolving Regional Alliances and State Failure in Mindanao 26 Kit Collier Japan in an Insecure East Asia: Redefining Its Role in East Asian 39 Community-Building Tsutomu Kikuchi Brunei darussalam Brunei Darussalam: Consolidating the Polity 57 Pushpa Thambipillai CamBodia Cambodia: Positioning for 2008 73 Verghese Mathews indonesia Indonesia: Accomplishments Amidst Challenges 93 Irman G. Lanti Indonesian Military Reform: More Than a Human Rights Issue 111 John B. Haseman laos Laos: The State of the State 129 Kyaw Yin Hlaing 00 Prelims_100506.indd 5 5/16/06 3:05:34 PM malaysia Malaysia: The Challenge of Money Politics and Religious Activism 151 K.S. Nathan Mahathir as Muslim Leader 172 Ooi Kee Beng myanmar Myanmar: Challenges Galore but Opposition Failed to Score 183 Tin Maung Maung Than Myanmar’s Human and Economic Crisis and Its Regional Implications 208 Bruce Matthews the philippines The Philippines: Crisis, Controversies, and Economic Resilience 227 Lorraine C. Salazar The Abu Sayyaf Group: From Mere Banditry to Genuine Terrorism 247 Rommel C. Banlaoi singapore Singapore: Globalizing on Its Own Terms 265 Terence Chong thailand Thaksin’s Political Zenith and Nadir 285 Thitinan Pongsudhirak Thailand’s Independent Agencies under Thaksin: Relentless Gridlock 303 and Uncertainty Alex M. Mutebi timor leste Timor Leste: On a Path of Authoritarianism? 325 Jacqueline Siapno vietnam Vietnam: Laying the Path for the 10th National Congress 345 Danny Wong Tze Ken 00 Prelims_100506.indd 6 5/16/06 3:05:34 PM Foreword Southeast Asia was on the cusp of major changes in 2005. At year’s end in December 2005, the long-awaited East Asian Summit was held in Kuala Lumpur. It marked the beginning of region-building that encompasses East, Southeast, and South Asia, as well as Australia and New Zealand, a process that heralds looking beyond narrow sub-regionalism. At the same time, ASEAN launched the process of preparing an ASEAN Charter, with the guidance of an Eminent Persons Group. Both events signalled the strengthening of ASEAN and the wider region. Furthermore, the democratic processes were strengthened by the successful organization of regional elections in Indonesia following the legislative and presidential elections in the previous year. In Thailand and the Philippines, the political processes delivered different results: Prime Minister Thaksin came under pressure which led to his resignation in April 2006, whilst President Arroyo retained her post despite street demonstrations. Vietnam continued to achieve rapid economic growth. Bird flu appeared, but was contained, at least for the time being. Most ASEAN economies benefited from the high growth sustained by India and China. The good economic performance plus the central role of ASEAN in the driver’s seat of the East Asian Summit has restored some of the shine back to ASEAN. Southeast Asian Affairs 2006, like the previous 32 editions of this flagship publication of ISEAS, provides an informed and readable analysis of developments in the region. K. Kesavapany Director Institute of Southeast Asian Studies April 2006 00 Prelims_100506.indd 7 5/16/06 3:05:34 PM 00 Prelims_100506.indd 8 5/16/06 3:05:34 PM introduction At the end of 2005 Southeast Asia looked in a better condition than at any other time since the 1997 Asian crisis. The economies had recovered and there was steady growth as countries continued to pursue economic reform. The world economy was resilient in 2005, notwithstanding a modest cyclical slowdown during the year. Moreover, Southeast Asia’s economic prospects were buoyed by the growing linkages with the rising economies of China and India and a recovering Japanese economy. Apart from a few cases, regime stability characterized the political landscape of the region. There were two other positive factors: Indonesia and the Association of Southeast Asian Nations (ASEAN). As the largest country of Southeast Asia located in a huge maritime swathe between the Philippines on the east, Australia in the south, and the Bay of Bengal in the northwest, Indonesia’s stability or lack of it, has had an important bearing on perceptions of Southeast Asia. Under the administration of President Susilo Bambang Yudhoyono, the country was back on the right track, working to achieve domestic stability, improve governance, build institutions, and attract investments. Meanwhile, ASEAN was regaining some of the importance it used to enjoy a decade earlier. It was again in the centre of moves to shape a new Asian regional architecture as it organized the first East Asian Summit that included not only the 13 members of the ASEAN+3 process but also India, Australia, and New Zealand. It was being courted by the major powers as each tried to maintain or extend its influence. ASEAN’s complexion also seemed to be undergoing subtle changes as a result of the democratization of Indonesia and the growing realization that the principle of non-intervention needed to be used flexibly to enable cooperation on transnational challenges. The decision to draw up an ASEAN Charter raised hopes of a more rules-based organization with a better sense of common values. Yet, despite the more promising outlook for Southeast Asia, many challenges remained. Indonesia needs to achieve and sustain close to 7 per cent economic growth to make a dent on unemployment and poverty. It was difficult to see this happening unless the fragile investment climate is improved. Indonesia’s democracy also needed consolidation as the country struggled to build the institutions and the 00 Prelims_100506.indd 9 5/16/06 3:05:34 PM  Introduction rule of law without which democracy may not be sustainable. Street demonstrations in Bangkok and Manila to oust the leaders of the two countries, while reflective of political ferment and contestation in the process of democratization, also highlighted its weaknesses. In Myanmar there was no indication when the work of the National Convention, a landmark on the roadmap of reform, would be completed. Terrorism remained a threat, especially in Indonesia and the Philippines. ASEAN still needed to demonstrate that it had the will to move forward boldly to achieve greater internal cohesiveness. Its economic integration agenda remained well short of implementation. Meanwhile the major powers were more active in Southeast Asia. In recent years China has significantly increased its influence through skilful political and economic diplomacy, eclipsing that of Japan, at least in the perception of Southeast Asian states. There were signs that US attention to the region was becoming more broad-based, and not just confined to counter-terrorism. Noteworthy in this respect was the renewed attention to Indonesia, including the resumption of military aid to Jakarta. India’s economic links with Southeast Asia were still far behind the other three major powers but were growing rapidly. In the broader Asian geopolitical environment, the uncertainties caused by the shifting alignments between the major powers were heightened by tensions in Sino-Japanese relations, which remained at a low ebb in 2005. Meanwhile US-Japan security relations continued to strengthen and Japan was on the path towards becoming a more “normal” power. Strategic cooperation between India and the United States was deepening, even as economic links between China and India were expanding rapidly. China’s military modernization was causing anxieties in the United States and Japan. Overall, in strategic terms, the United States remained distracted by and preoccupied with Iraq and the war on terrorism, a state of affairs that continued to provide China more freedom of manoeuvre and latitude to expand its influence in Asia. Southeast Asia had little or no influence on these developments even though they could have major implications for the region. ASEAN desires cooperative relations between the major powers and their balanced engagement with Southeast Asia. With this in mind, the Association has established a multiplicity of dialogue and cooperative mechanisms with them. In the regional section of this volume, the first two articles provide the political and economic overview of Southeast Asia in 2005, with Michael Vatikiotis writing on the former and Cassey Lee, Boon-Huat Quah, and Marc Foo on the latter. In the third article, “Terrorism: Evolving Regional Alliances and State Failure in Mindanao”, Kit Collier provides a valuable reminder that, contrary to 00 Prelims_100506.indd 10 5/16/06 3:05:35 PM