RSS 2.0

rss feed
printer friendly page email this article to a friend
September 2002



Part 5. Asian economy

177) The whole Asian area is a key region for world capitalism. This was underlined by the Asian crisis of 1997, which was the trigger, with some delay, for the world recession. There have been much-vaunted claims that the region had recovered fully from the effects of the 1997 crisis. However reality, particularly as far as the mass of the working class and the peasantry in the region are concerned, is far removed from the rosy picture which bourgeois commentators seek to paint. There has been a huge spiralling upwards, compared to the past period, of those living in poverty in key countries such as Indonesia. Economic growth in the powerhouse of East Asia has fallen dramatically in comparison to the situation prior to 1997.

178) Apart from Japan the second industrial nation in the world, the ten principal East Asian economies are: China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Many of them are reliant on the exports of high technology goods, particularly to the US market. They have therefore been severely affected first by the 1997 crisis and then by the contraction of the US and the rest of the world economy in the past period. The International Monetary Fund estimated in its updated World Economic Outlook published at the end of 2001 that the volume of world trade in goods grew by just 0.2 per cent in 2001 and will grow only by an estimated 1.7 per cent in 2002. This compares with a 12.8 per cent growth in 2000. Global exports of electronic goods have been falling at an annual rate of more than 30 per cent, and Taiwan, Malaysia and Singapore have all recorded double-digit falls in their exports and quarter on quarter falls in output in 2001.

179) For East Asia as a whole the estimated growth last year was 3.7 per cent, less than half the rate for 2000 of 7.6 per cent. If China and Vietnam are excluded the eight economies that are left in East Asia have grown by just 0.9 per cent in 2001. Some are expected to perform better in 2002 - as we have commented South Korea is likely to grow but not on the scale of the past - while Singapore and Taiwan are expected to grow by no more than 2 per cent. The fastest growth rates, however, are expected again to be China and Vietnam, with both reckoned to grow by 7.2 per cent.

180) China has once more stepped in to advocate, for purely altruistic reasons of course, that East Asia should intensify its efforts to build a regional free trade area to reduce their dependence on information technology exports to the US. China, Japan and the US are competitors for future economic, political and even military hegemony in the region. Chinese leader Jiang Zemin has used the economic crisis afflicting most of Asia to press the advantages of the countries in the region being linked to China and the future growth prospects of the Chinese economy. He declared in 2002 that the creation of a free trade area between the ASEAN countries of South-East Asia and China would add one per cent to the gross domestic product of South-East Asia and 0.3 per cent to China.

181) Up to now, the equivalent of NAFTA or the EU, of a free trade zone in Asia, has not been possible and is unlikely to assume a definite form in the next period because of the rivalries between the three giants who seek to dominate Asia. Indeed, rather than a period of co-operation and 'partnership' the signs are that a more difficult economic environment will be accompanied by the growth of conflicts and tensions between different states in the region. A growing feature will be increased national and ethnic problems, with the added ingredient of the military intervention, as well as the economic dominance which it exercises, of US imperialism in this arena.


182) Some of the most successful Asian economies of the past are beset by difficulties today. The island city state of Singapore, for instance, was held up as a model of what was possible on a capitalist basis. Yet Singapore has suffered its worst recession since independence in 1965 (Hong Kong has suffered a similar fate). In 2001, Singapore's economy contracted by 2 per cent, largely as a result of plummeting exports of electronics, which account for 60 per cent of its manufacturing. In contrast, the previous year saw a growth of GDP by 9.9 per cent. Unemployment, hitherto largely unknown, has reached the 15-year high of 4.7 per cent and despite a projected small growth in the economy 2002 could go higher.

183) Burnt by its heavy dependence on electronics the regime is attempting to replace Hong Kong as the best place "to do business in Asia". It has announced that it will reduce the top personal and corporate tax rates to 20 per cent and would attempt to become the 'hub' for such service industries as healthcare, higher education and private banking. At the same time the state employees have seen their salaries slashed by 10 per cent, as have the salaries of state workers in Hong Kong.

184) Singapore has an undemocratic regime with a battery of security measures which can allow the holding of suspects for a period without trial. Also the image of Singapore as an island paradise of racial harmony has been shattered in the post-11 September situation with the discovery of a local Islamic terrorist group, which was allegedly planning to attack US military and commercial interests in this city state. The Singapore capitalists have gone to great steps in words to promote a "racial harmony in multiethnic Singapore". Yet this has resulted in the prohibition of the wearing of the tudungs - the Malay word for the traditional Moslem headscarves - by Moslem girls in state schools. However, exceptions are made for Christian students who wear crucifixes and Sikh boys who can wear turbans.

185) This has earned the ire of neighbouring states, either predominantly Moslem or with huge Moslem populations. Malaysia, Brunei and Bangladesh have officially criticised the decision. Naturally, the officially subsidised Islamic Council of Singapore, in effect a government body, has backed the government on this issue. This is now a running sore not just in Singapore but also in its relations with neighbouring states. In particular it could become a big bone of contention with its more powerful neighbour Malaysia.

186) A dispute is brewing on the issue of water which could flare up into a major clash. Singapore imports 40 per cent of its water from mainland Malaysia. The dispute centres over how much Singapore should pay to Malaysia, ruled by Mahathir Mohamad. Malaysia itself faces the threat of water rationing as the result of a drought. Despite the agreement between Singapore and Malaysia voices were raised in Malaysia that its water should go to Malaysians first before the Singaporeans. Lee Kuan Yew, Singapore's founding father, has replied by warning that any cut off of Malaysian water could lead to "serious consequences", which is taken by some in the Malaysian capital Kuala Lumpur as a veiled threat of military action against them.

187) Other issues have festered between the two states, such as transport links and the question of a new suspension bridge to connect the two countries across the narrow Johor Strait, instead of an existing road causeway. Malaysia is also more assertive in attempting to transform its southern state of Johor into an international cargo hub to rival Singapore. Malaysia claims that Singapore has decided to retaliate with a land reclamation programme on its side of the strait, which would narrow its shipping channel. Singapore denies the allegation. But it is clear that the changes effected by 11 September has had an impact on Malaysia and consequently on its relations with Singapore.

188) The agreements over water and transport were reached prior to 11 September but that event altered everything. Before then, Mahathir was challenged by the fundamentalist Islamic opposition and needed the agreement with Singapore to bolster his position. He was able to claim that he had won a 'breakthrough' deal with Singapore. The events of 11 September discredited Malaysia's Islamic party, leaving the prime minister in a stronger position to demand greater concessions from Singapore.


189) Malaysia, and its premier Mahathir Mohamad in particular, have assumed some importance in an Asian and world context since the crisis of 1997 began. In the teeth of the economic hurricane that swept Malaysia and the region, Mahathir, in contradistinction to other governments and in opposition to the austerity diet meted out by the IMF and World Bank, nationalised some key sectors of the economy. This included the UEM-Renong group, the country's biggest conglomerate and largest corporate debtor. This was accompanied by capital controls. They were seen as emergency measures. With the appearance of an economic revival, small though it is, Mahathir is now proposing to sell these renovated firms back to the private sector.

190) Nevertheless, this did indicate, as we pointed out at the time, what could be a general trend, although mainly through blocs rather than individual countries, in the event of a serious recession or slump. Bourgeois governments, hitherto pledged to pursue neo-liberal agendas, could reverse this. Argentina has shown that in desperate economic circumstances the bourgeois, for a time, can nationalise failing industries, take action against foreign capital in particular, halt privatisation and move in the opposite direction to the policies of the last two decades. The example of Malaysia disproves the argument that nothing can stop the 'inexorable' march of untrammelled globalisation. In the kind of economic climate that would open up in the next decade it could be continents or whole groups of countries - Argentina today, Latin America tomorrow - which could take measures to throw globalisation into reverse as we have known it up to now. This does not mean that the world economy could collapse into a form of autarchy by the separate blocs. 'Globalisation' - in the sense that the ties which bind the world together, the world division of labour - would be maintained but the economic situation of the last two decades of unrestricted globalisation would be severely curtailed.

Hong Kong

191) All the 'star performers' - perhaps with the exception of China - have faced severe difficulties since 1997. Hong Kong, for instance has faced two recessions in the last five years. It grew by just 0.1 per cent last year compared to 10.5 per cent in 2000. Exports are down and job losses are rising. Moreover, like Japan, Hong Kong has suffered from significant asset deflation, with property prices less than half what they were at their peak in 1997.

192) Despite its amalgamation - takeover - by China and the maintenance of the economic status quo - "one people, two systems" - Hong Kong is still seen as a separate entity to China itself. It is both linked to China and is a competitor to some of the burgeoning Chinese cities such as Shanghai. As one Financial Times correspondent put it: "The city now alternately regards China's rapid economic growth as the rising tide that can lift its sinking boat - or a towering wave that threatens to capsize it".

193) Hong Kong is by far the biggest 'foreign' investor in Shanghai, accounting for more than 40 per cent of the cumulative FDI into the city through 1999. A lot of this is probably the 'overseas Chinese' capitalist who have heavily invested in China in the past decade, including Taiwanese capitalists precluded from investing directly on the mainland. Indeed, Hong Kong and the neighbouring Chinese territory of Shenzhen are the growth engines of China's wealthy Pearl River Delta region.

194) But beset by economic difficulties the Hong Kong tycoons have looked hungrily towards the Chinese market hoping in particular that they would get preferential access to the mainland market for services, which account for 80 per cent of the Hong Kong economy. However, there are many competitors for such 'preferential treatment', including other cities within China who are looking for special deals with the major industrial growth areas such as Guangdong.

195) The election system in Hong Kong is tailored for the capitalist elite to maintain control. Its chief executive is not elected by universal suffrage but by a committee of 796 members. This arcane system involves religious, business and other organisations electing the majority of these 'electors'. The millions of people in Hong Kong elect just 24 of the Legislature's 60 members on the basis of one person, one vote. Only a third of the population in opinion polls supported the re-election of the chief executive, Tung Chee-hwa, who was nevertheless re-elected because he is both the representative of the financial plutocracy which rules Hong Kong and also the Chinese elite.

196) This Hong Kong plutocracy is pressing for a special free trade agreement with China, an idea "whose time has come" according to them. In the past, Hong Kong spurned such proposals. But the experience of economic recession since 1997 and the fear that Hong Kong may not enjoy the expected bonanza after China's entry into the World Trade Organisation has alerted it to the possibility that its privileged access to the mainland may start to be undermined. Hong Kong businesses have demanded preferential treatment from Chinese provincial governments, attempting to bypass Beijing. At the same time, Hong Kong is being used as a backdoor by foreign companies to enter China, thereby gaining better access. At the same time, Hong Kong's search for access of its 'service' exports comes against the opposition of Washington and Brussels, which as part of the WTO negotiations demanded that China open up these sectors to foreign competition, meaning themselves. They would not take kindly to Hong Kong now grabbing the lion's share of what is on offer.


197) The most important country in the region outside of Japan and China is Indonesia. We have carried an abundance of material in the past on the situation in this, the most populous 'Islamic' nation in the world. The experience of the mass of the population following the ushering in of 'democracy' was not of improved conditions but of a rise in unemployment, a huge increase of those in poverty and a pronounced centrifugal tendency for disintegration of the country along ethnic, religious and national lines.

198) What growth took place since 1997 was largely generated by domestic demand. This meant a better performance by Indonesia in crude terms than Singapore and Taiwan, for instance, because the latter were tied to the US market, which saw a dramatic drop in demand for imports. A certain insulation of the Indonesian economy therefore took place but without any of the fundamental problems being solved. The economy is now managing to stumble ahead at an average of three per cent, which given the growth of the population represents stagnation.

199) There has been a huge intensification of the ethnic and national conflicts. In Aceh, a longstanding regional secessionist movement has developed. There has also been conflict in the Spice Islands and Sulawesi - where communal conflicts between Christians and Moslems have erupted - in Eastern Indonesia, where Islamic militants clash with the West Papuan independence movement, in parts of Java and many other areas. Religious and national issues are a tinderbox.

200) The coming to power of Megawati Sukarnoputri in 2001 was itself the product of the impasse which followed the overthrow of the Suharto dictatorship. Society has been convulsed from top to bottom, with hundreds of thousands and millions of Indonesians looking for a new road. However, the capitalist elite have been left intact and indeed have been strengthened under the Megawati regime. There has been no real effort to seriously punish those who have sustained the Suharto dictatorship. There are even rumours that the groups which 'raped' the assets of the banks in 1998 are buying them back from the government at knockdown prices.

201) The Megawati cabinet is riven with divisions. She shares power with the former Suharto supporters, through the inclusion of their Golkar party in the cabinet. The government is unlikely to last, at least in its present form, until scheduled general elections in 2004. It is in the workplaces and amongst the youth which are the key areas of work for the Marxists in the period coming up. Indonesia is likely to suffer even more than it did in the post-1997 period from a worsening of the world economic position.

The Philippines

202) Next in importance after Indonesia is the Philippines, the scene of continual upheaval, even in the 'boom' of the 1990s. It is now one of the 'hotspots' in the US's 'war against terrorism'. An estimated 650 American anti-terrorism experts and service personnel have arrived as 'advisers' to combat the Islamic fundamentalist guerrilla forces, the Abu Sayyaf, who are alleged to be in alliance with bin Laden and al-Qa'ida. The Filipino armed forces have been unable to crush this force and this has provided the excuse for the government of Gloria Macapagal Arroyo, the president of the Philippines, to call in the 'Seventh Cavalry'. But, as a correspondent for the Financial Times has commented: "The Philippines may be getting more than what it bargained for".