The Global Economic Crisis and the Development of Southeast Asia

EXECUTIVE SUMMARY

This chapter analyzes economic growth in Southeast Asia and the impact of the current recession on countries in the region.

MAIN ARGUMENT

Southeast Asia’s economies have been hit hard by the world recession. On the positive side, the region’s financial system, having learned from the financial crisis of 1997–98, has to a large degree avoided the types of high-risk lending and derivative investments that caused so much damage in the West. On the negative side, the global financial crisis has resulted in a serious drop in the region’s exports, thereby posing a threat to Southeast Asia’s main engine of growth.

POLICY IMPLICATIONS

• The decline in exports and the resulting fall in the GDP growth rates for a number of countries in Southeast Asia—notably Thailand, the Philippines, Malaysia, and Indonesia—have come in the middle of a long and incomplete transition process from authoritarian to democratic forms of governance. Other countries, such as Vietnam, have retained authoritarian governance but depend on continued high growth to maintain support for the government. The impact of the global recession on exports, therefore, threatens political stability in a number of the countries in the region.
• Because the nations of Southeast Asia regularly consult with each other through the Association of Southeast Asian Nations (ASEAN), among other venues, there is little prospect of a major military action by one country in the region against another—even if the economic recession proves to be deep and prolonged.
• The U.S. can make the largest contribution to prosperity and political stability in Southeast Asia by restoring the health of the U.S. economy while remaining open to trade and investment both with the region and with the rest of the world.