ISEAS-Yusof Ishak Institute

Summary

The swift and strong rebound of capital inflows in emerging Asian economies after the onset of the global financial crisis in 2008 has added new impetus to the debate on how to reap the gains to be enjoyed from capital inflows, while minimizing the possible economic costs. One of the unfavourable side effects of “too much” capital flows is (real) exchange rate appreciation — a loss of a country's competitiveness — that could adversely affect the tradable production and export sectors. Real exchange rate appreciation occurs regardless of the nature of the exchange rate regime implemented in a country. Under a flexible regime, real appreciation occurs through an upturn in the nominal exchange rate, while under a fixed exchange rate regime appreciation comes mainly through a rise in non-tradable prices. Under an intermediate regime, real currency appreciation occurs through a mixture of these two processes.

Stronger currency appreciation has become evident in emerging Asian economies (see Figure 6.1) along with a strong rebound in capital inflows (see Chapter 2). Exporters in many countries have asked for government intervention to mitigate the pressures arising from currency appreciation. Many central banks in the region, including China and Taiwan, have begun to tighten capital control policies, while the others monitor closely the movement of capital flows. In Korea, Taiwan and Thailand central banks have also intervened extensively in foreign exchange markets, while local currency bonds were issued to mop up the liquidity arising from foreign exchange market intervention.

These issues lead to empirical questions concerning the relationship between real exchange rates and capital flows in emerging Asian countries, particularly how far and how fast (real) exchange rates will be adjusted in response to capital flows. While there is strong evidence to believe that particular types of capital flows behave differently, whether the composition of capital flows matters in determining the movements of (real) exchange rates is also another question of interest. In particular, does the impact of foreign direct investment (FDI) on real exchange rates differ from other forms of capital flows, especially portfolio and bank loan investments?

Summary

There were three waves of private capital inflows to developing Asian countries over recent decades, as outlined in Chapter 2. The first began in the latter half of the 1980s, escalating in momentum through the early 1990s, before abruptly ending in 1997 with the onset of the Asian financial crisis. The extensive capital inflows experienced during this period could be attributed to the capital liberalization policy instigated by many regional central banks during 1990–94. In the second swell, capital inflows surged again from 2002 until the subprime mortgage crisis in late 2008, with this build up even faster than that witnessed during the early 1990s. However, the Asian financial crisis has changed the nature of local capital flows in different ways. Robust current account surpluses, for example, have been the major factor supporting foreign reserve accumulations after the Asian crisis. Net capital inflows have not been a major source of foreign exchange reserves. In addition to foreign direct investment (FDI), portfolio equity has become an important component of capital inflows, while other investment inflows have played a notably less crucial role. Capital outflows, both in terms of FDI and other forms of capital, have become increasingly important for the region. The surge of capital outflows has limited the role of financial accounts in supporting reserve accumulation. Furthermore, cross-border mergers and acquisitions have become important components of FDI. In particular, the economic recovery of developing Asia from the crisis period led to an upward trend in cross-border M&A (purchases). China; Hong Kong, China; and Singapore represent the key players in this activity.

Capital inflows in developing Asia were interrupted again in 2008 because of the current global financial crisis. So far the decline in capital flows during this period has been more dramatic than that of the Asian financial crisis. However, strong economic fundamentals in the region, especially within financial institutions, have allowed these economies to successfully redress and manage the lion's share of adverse repercussions. One key similarity that can be drawn from both the Asian and global financial crises is that FDI (both inflows and outflows) tends to be more resilient to shocks than other forms of capital flows.

Summary

Capital liberalization have been implemented in most emerging Asian countries since the late 1980s. Restrictions have been gradually phased out during this period with the aim of enhancing a country's capacity to derive benefit from capital flows. However, the evidence related to the impact of such liberalization over the past two decades has led to doubts about the scale of the net gains of such policy in capitalreceiving countries. Particularly, it has been blamed as a key factor precipitating the boom and bust cycle experienced in many emerging countries, including the sudden reversal of capital inflows inherent in the Mexican crisis of the early 1990s and Asian financial crisis in the late 1990s.

In the early 2000s, capital inflows gathered momentum again in emerging countries worldwide, including Asia. Central banks in many countries re-introduced capital restrictions to guard against the build-up of inflows, while preserving their monetary autonomy and extensively intervening in foreign exchange markets. For example, in Thailand, the unremunerated reserve requirement on fixed income flows was introduced in September 2006 after unsuccessful measures to limit the build-up in non-resident holdings of baht accounts had been taken place in 2003. Chinese authorities restricted the borrowing of dollars by foreign bank branches in the People's Republic of China (PRC) in September 2006. Such a restriction was also introduced in Korea and India in April and August 2007, respectively.

Over the past two decades, a number of empirical studies have examined the effectiveness of capital account policies introduced in emerging countries, but the results are still mixed and vary according to the particular countries and periods sampled. Tamirisa (2004), for example, shows that capital account policies introduced in Malaysia during the Asian crisis could help the central bank to gain monetary autonomy. By contrast, Edison and Reinhart (2001) revealed evidence of the ineffectiveness of capital control policy in Thailand in 1997, whereas Coelho and Gallagher (2010) found that capital controls introduced in the 2000s were modestly successful in reducing the overall volume of inflows in Thailand.

Summary

INTRODUCTION

Islam has always been an important factor in Malaysia's politics. Even political parties whose members are mainly non-Muslims cannot run away from debating the role of Islam in public policy. Since its establishment in 1951, the Islamic Party of Malaysia (PAS) has dominated the discourse on political Islam, and many others have had to respond and compete with it. It would not be wrong to say that the deepening Islamization in Malaysia over the years is the result of political competition between PAS and the ruling coalition. However, a new development took place in 2015 when a group of senior PAS leaders left the party to form Parti Amanah Negara (Amanah). PAS suddenly found a competitor who is also staking a claim on the right to define and shape the discourse on political Islam in the country.

This essay looks into the break-up and its implications on the politics in the southern state of Johor, since this was the state where much of the groundwork to form Amanah took place. Following this introduction, a brief history behind the break-up is provided. Attention is then given to Johor, with a discussion on the role of activists in the state that led to the formation of Amanah, the party's current organization, and their likely electoral potential. The essay concludes with a discussion on how the emergence of Amanah may affect PAS in Johor.

FROM PAS TO AMANAH

To understand how Amanah came to be, a brief review of the evolution of Islamist thoughts in Malaysia is useful, as it has heavily influenced PAS’ own evolution. The history behind PAS’ establishment in 1951 is a contested one. Arguably, it was closely tied to the strategy of the United Malays National Organization (UMNO) which was founded six years earlier, especially to the latter's desire to widen its support base. UMNO at that time was worried that it was losing support from conservative Malay Muslims and wanted therefore to reposition itself as a champion of Islam. Thus, UMNO sponsored two Ulama Congress (Perjumpaan Alim Ulama Tanah Melayu), on 20–22 February 1950 and 23 August 1951. The purpose was to bring together conservative Muslim scholars to discuss, among others, steps that they could take to bring the country towards independence.

Summary

The economic, political, strategic and cultural dynamism in Southeast Asia has gained added relevance in recent years with the spectacular rise of giant economies in East and South Asia. This has drawn greater attention to the region and to the enhanced role it now plays in international relations and global economics.

The sustained effort made by Southeast Asian nations since 1967 towards a peaceful and gradual integration of their economies has had indubitable success, and perhaps as a consequence of this, most of these countries are undergoing deep political and social changes domestically and are constructing innovative solutions to meet new international challenges. Big Power tensions continue to be played out in the neighbourhood despite the tradition of neutrality exercised by the Association of Southeast Asian Nations (ASEAN).

The Trends in Southeast Asia series acts as a platform for serious analyses by selected authors who are experts in their fields. It is aimed at encouraging policy makers and scholars to contemplate the diversity and dynamism of this exciting region.

Summary

EXECUTIVE SUMMARY

Summary

INTRODUCTION

Batam has an unbeatable business proposition. Situated a mere 20 kilometres from Singapore, linked by logistics networks, and possessing vastly cheaper land and labour, the Indonesian island is ideally placed to absorb investment from its wealthier neighbour. In theory, it should be teeming with investors and populated by factories and workers.

Indeed, this is just what happened during the 1990s and early 2000s. The liberalization of investment regulations, coupled with Batam's well-developed infrastructure and proximity to Singapore, made the island an attractive site for manufacturing operations seeking to escape the city-state's rising costs. During the 1990s, Batam's industrial base grew in size and sophistication, rapidly becoming one of the country's centres of electrical and electronics production. In the mid-2000s, the shipbuilding industry also began to develop on the island. Coupled with the older, more established tourism sector, Batam became a crucial source of foreign exchange for Indonesia. Through these three “motors”, hundreds of thousands of formal sector jobs were created, and the island became one of the country's richest — with its economy often growing at more than 10 per cent p.a.

The Batam Industrial Development Authority (BIDA) was at the helm of this transformation. Established by presidential decree, this agency had high-quality staff, central government funding, and direct access to decision-makers in Jakarta. It also had the unquestioned backing of B.J. Habibie — Indonesia's long-serving Minister for Research and Technology — who saw Batam as the gateway to securing capital and technology. BIDA's commitment to providing investors with advice and expedited approvals, as well as its custodianship of the island's infrastructure, have been a key part of Batam's success — even after Indonesia's far-reaching political and administrative reforms.

The island's economy continues to grow steadily, as do the number of tourists coming to visit its resorts and leisure facilities. However, over the last few years, the success of Batam's export-focussed industrialization model has come under question. Indeed, exports have been decreasing since 2013, and unemployment has spiked over the last two years and is now considerably above the national average. The once-burgeoning ranks of semiconductor, hard disk drive, and component manufacturers have atrophied over the past half-decade, with anchor firms such as Panasonic, Sanyo and NIDEC closing their facilities.

Subsequently, in 2013, the shipping sector, once heralded as Batam's sunrise industry, also began to contract.

Small and medium-sized enterprises (SMEs) account for more than 90 per cent of all businesses in the Asia-Pacific region - an area which is rapidly updating its competition laws and regulations to encourage greater entrepreneurship and open, dynamic economies. Yet SMEs are almost invisible when those competition policies and laws are developed and enforced. SMEs are often quite different businesses than large, multinational corporations, but their nature, significance and characteristics are often overlooked. This book seeks to rectify the relative neglect in research and policy discussions on the role of the SME sector in competition policy and law. Drawing on contributions from a wide range of competition regulators, lawyers, academics, consultants and advisers to the SME sector, it addresses such important issues as:

perceptions and views of small businesses about competition law;
regulator engagement and education of the SME sector;
the link between competition law and economic growth;
franchising, SMEs and competition law;
issues in enforcing competition law against SMEs;
the role of Chinese family firms;
trade, professional and industry associations;
country case studies from Vietnam, Singapore, Indonesia, Malaysia, China, South Korea, Hong Kong SAR, Japan and the Pacific Islands.

'As the euphoria fades from the Jokowi presidency, this timely book reviews the processes that brought him to the top, and the processes that have undermined his initial standing. The nineteen articles by ten writers provide views from along the way, starting with a chapter on the Jakarta governor elections from November 2012 and preceding through the key events up to a contemporary assessment in February 2015. Several major clues to the current disillusion are provided in accounts of the legislative elections and the presidential campaigns. Key topics are vote buying, the Islamic factor, economic platforms, pluralism, economic challenges. Max Lane points to deep alienation from politics and the emergence of new unions and a new political arena. The ISEAS team provides a range of events and analyses that will be most useful to all students of current Indonesian politics; clear, concise, insightful.' – David Reeve, Conjoint Associate Professor UNSW, ILTI Academic Coordinator ACICIS.

'This book effectively captures the dynamics of Indonesian politics by focusing on the various phenomena surrounding the 2014 elections. It begins this political journey with an analysis of the implementation of local autonomy, and the birth of a leader brave enough to challenge extant political elites. It further explores the application of political culture in campaigns, the shortcomings of elected leaders, and the inadequacy of a state obliged to accommodate various interest groups. Beyond all these, this book proves that the political culture approach remains crucial in investigating Indonesia's political realities.' – Sukardi Rinakit, Political Analyst, Special Staff to President Joko Widodo.

Indonesia was founded on the ideal of the 'Sovereignty of the People', which suggests the pre-eminence of people's rights to access, use and control land to support their livelihoods. Yet, many questions remain unresolved. How can the state ensure access_to land for agriculture and housing while also supporting land acquisition for investment in industry and infrastructure? What is to be done about indigenous rights? Do registration and titling provide solutions? Is the land reform agenda - legislated but never implemented - still relevant? How should the land questions affecting Indonesia's disappearing forests be resolved?The contributors to this volume assess progress on these issues through case studies from across the archipelago: from large-scale land acquisitions in Papua, to asset ownership in the villages of Sulawesi and Java, to tenure conflicts associated with the oil palm and mining booms in Kalimantan, Sulawesi and Sumatra. What are the prospects for the 'people's sovereignty' in regard to land?

The aftermath of the global economic breakdown in 2008–9 underscores the risks facing Southeast Asia's growth prospects. Although the region has demonstrated exceptional resilience to external shocks emanating from economic powerhouses around the globe, Southeast Asia is in dire need of an optimal policy mix of macroeconomic and trade policy measures that differ by country, underpin domestic demand, and revive domestic economies. This book offers in-depth, region-specific economic policy discourse that illuminates how a policy push is at work in the region, and sheds light on room for strengthening regional cooperation.

This book aims to: (1) discuss the developments of macroeconomic and trade-policy mix against the backdrop of the eurozone sovereign debt crisis and economic prospects for major countries in Southeast Asia (i.e., Singapore, Thailand, Malaysia, Indonesia, and Vietnam); (2) assess the effectiveness of policy responses to the global economic unrest; (3) identify opportunities and challenges facing Southeast Asia in the midst of the global economic slump when developing Southeast Asia leverages on an ever-expanding role in the global business environment; (4) rethink the East Asian model of growth where enormous gains were driven principally by export demands from advanced economies; and (5) pioneer the key areas of regional cooperation and macroeconomic and trade policy reforms that may potentially strengthen regional economies.

This volume advocates a trans-regional, and maritime-focused, approach to studying the genesis, development and circulation of Esoteric (or Tantric) Buddhism across Maritime Asia from the seventh to the thirteenth centuries CE. The book lays emphasis on the mobile networks of human agents ('Masters'), textual sources ('Texts') and images ('Icons') through which Esoteric Buddhist traditions spread. Capitalising on recent research and making use of both disciplinary and area-focused perspectives, this book highlights the role played by Esoteric Buddhist maritime networks in shaping intra-Asian connectivity. In doing so, it reveals the limits of a historiography that is premised on land-based transmission of Buddhism from a South Asian 'homeland', and advances an alternative historical narrative that overturns the popular perception regarding Southeast Asia as a 'periphery' that passively received overseas influences. Thus, a strong point is made for the appreciation of the region as both a crossroads and rightful terminus of Buddhist cults, and for the re-evaluation of the creative and transformative force of Southeast Asian agents in the transmission of Esoteric Buddhism across mediaeval Asia.

Twenty-five years ago, the governments of Singapore, Malaysia, and Indonesia agreed to jointly promote the city-state, the state of Johor in Malaysia, and the Riau Islands in Indonesia. Facilitated by common cultural references, a more distant shared history, and complementary attributes, interactions between the three territories developed quickly. Logistics networks have proliferated and production chains link firms based in one location with affiliates or transport facilities in the other territories. These cross-border links have enabled all three locations to develop their economies and enjoy rising standards of living.Initially economic in nature, the interactions between Singapore, Johor, and the Riau Islands have multiplied and grown deeper. Today, people cross the borders to work, go to school, or avail of an increasing range of goods and services. New political, social, and cultural phenomena have developed. Policymakers in the various territories now need to reconcile economic imperatives and issues of identity and sovereignty. Enabled by their proximity and increasing opportunities, families have also begun to straddle borders, with resulting questions about citizenship and belonging. Using the Cross-Border Region framework - which seeks to analyse these three territories as one entity simultaneously divided and bound together by its borders - this book brings together scholars from a range of disciplines. Its 18 chapters and more than 20 maps examine the interaction between Singapore, Johor, and the Riau Islands over the past quarter-century, and seek to shed light on how these territories could develop in the future.

Indonesia is the largest country in Southeast Asia where there is a significant number of ethnic Chinese, many of whom have played an important role. This book presents biographical sketches of about 530 prominent Indonesian Chinese, including businessmen, community leaders, politicians, religious leaders, artists, sportsmen/sportswomen, writers, journalists, academics, physicians, educators, and scientists. First published in 1972, it was revised and developed into the present format in 1978, and has since been revised several times. This is the fourth and most up-to-date version.

As Myanmar's military adjusts to life with its former opponents holding elected office, Conflict in Myanmar showcases innovative research by a rising generation of scholars, analysts and practitioners about the past five years of political transformation. Each of its seventeen chapters, from participants in the 2015 Myanmar Update conference held at the Australian National University, builds on theoretically informed, evidence-based research to grapple with significant questions about ongoing violence and political contention. The authors offer a variety of fresh views on the most intractable and controversial aspects of Myanmar's long-running civil wars, fractious politics and religious tensions. This latest volume in the Myanmar Update Series from the ANU College of Asia and the Pacific continues and deepens a tradition of intense, critical engagement with political, economic and social questions that matter to both the inhabitants and neighbours of one of Southeast Asia's most complicated and fascinating countries.

The global centre of gravity continues to shift to the Asia-Pacific, the most dynamic region in the world. These economies have generally grown faster for longer periods of time than any other major region in world history. Their embrace of globalization has been a central feature, and driver, of their dynamism. The management of Asia-Pacific economic integration and globalization is crucial not only for the countries themselves but also for the state of the global economy, including importantly latecomer developing economies who look to the region for analytical and development policy lessons. Twenty-eight leading international authorities in the field, drawn from nine countries, provide a comprehensive examination of the causes, consequences and challenges of globalization, in a volume that celebrates the distinguished career of Professor Prema-Chandra Athukorala.

Among the major issues examined are the region's distinctive approach to trade liberalization, the effects of economic growth on poverty reduction and the labour market, the special challenges of by-passed regions, the role of ideas in influencing policy making, the modalities of connecting to global production networks, and the importance of remittances in economic development. Several country case studies provide in-depth analyses of development processes and outcomes. These include episodes in economic development, the challenges faced by transition economies, the macroeconomics of adjusting to slower growth and rising debt in advanced economies, and the so-called middle-income trap phenomenon.

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Appendix 1 - A Chronology of Capital Account Policy in Malaysia, 1992–2010

6 - Capital Flows and Real Exchange Rates in Emerging Asian Countries

Summary

8 - Conclusions and Policy Inferences

Summary

7 - Effectiveness of Capital Controls: Evidence from Malaysia and Thailand

Summary

List of Figures

Parti Amanah Negara in Johor: Birth, Challenges and Prospects

Summary

Bibliography

Foreword

Summary

Frontmatter

Rowing Against the Tide? Batam's Economic Fortunes in Today's Indonesia

Summary

Rowing Against the Tide? Batam's Economic Fortunes in Today's Indonesia

Summary

Competition Law, Regulation and SMEs in the Asia-Pacific

ISEAS Perspective

Land and Development in Indonesia

Global Economic Uncertainties and Southeast Asian Economies

Esoteric Buddhism in Mediaeval Maritime Asia

The SIJORI Cross-Border Region

Prominent Indonesian Chinese

Conflict in Myanmar

Managing Globalization in the Asian Century

ISEAS-Yusof Ishak Institute

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Summary

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Summary

Summary

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Summary

Summary

Competition Law, Regulation and SMEs in the Asia-Pacific

ISEAS Perspective

Land and Development in Indonesia

Global Economic Uncertainties and Southeast Asian Economies

Esoteric Buddhism in Mediaeval Maritime Asia

The SIJORI Cross-Border Region

Prominent Indonesian Chinese

Conflict in Myanmar

Managing Globalization in the Asian Century