by Walden Bello*

(This paper was originally prepared for the Hivos Partner Consulation, Trivandrum, Kerala, India, September 1-3, 1997.)

Overviews are always broad-strokes affairs that inevitably miss many key dimensions, trends, and nuances. And when one tries to select the key developments to emphasise and analyse in such vast regions of the world as Southeast Asia and South Asia, the risks of distortion through omission, overemphasis, or underemphasis are even greater. Nevertheless, let us try, realising full well that the result may be less an objective panorama than a portrait of the cognitive map and biases of the painter.

Southeast Asia

Economic developments. Let me begin with the economic dimension in Southeast Asia. A good starting point it seems is the currency crisis that has hit all the major economies in the region: Thailand, the Philippines, Malaysia, Indonesia, and even Singapore. In the case of Thailand, of course, we have seen the sudden, spectacular collapse of the economy. Now the governments would have us believe that the depreciation of currencies by as much as 25 per cent relative to the dollar in the case of the baht and 10-15 per cent in the case of the peso, rupiah, and ringgit, is the work of speculators, evil people like George Soros trying to make a fortune on shifts in exchange rates that they themselves provoke.

True, speculators have played a role, but the causes of the currency fluctuations are much, much deeper. A currency, it is said, is only as strong as one’s economy. What we see happening in the region today is the crisis of a model of development that is highly dependent on foreign capital inflows.

The current crisis is traceable back to the Plaza Accord of 1985, which forced the drastic appreciation of the yen relative to the dollar as a way of solving the US trade deficit with Japan. This made continued production of manufactured exports within Japan quite prohibitive, forcing the Japanese conglomerates to relocate the more labor-intensive phases of their production systems in East and Southeast Asia. Some $15 billion worth of Japanese direct investment, a large portion in the form of industrial plant and technology, flowed into the region in one of the largest and swiftest flows of capital to the Third World in recent history. Of course, it was not just Japanese direct investment that flowed in, but also Japanese capital in the form of bank loans, government loans, and government grants. Also, Japanese direct investment triggered a flow of ancillary capital from Korea, Taiwan, and Hong Kong which at times was even bigger than Japanese capital.

Just to give you a sense of the dimensions of this inflow of Japanese capital, let me cite three facts:

o in 1987, Thailand received more Japanese investment than it received in the previous 20 years;

o Indonesia now has a total stock of $18 billion worth of Japanese direct investment, and Japan is also that country’s top creditor and top aid donor;

o The Japanese conglomerate Matsushita Electrical Co.’s operations alone are said to account for between 4 per cent and 5 per cent of Malaysia’s gross domestic product.

There were several consequences of these developments. First, it lifted the region’s economies from the deep recession of the mid-eighties. Second, it gave these countries leverage vis a vis the IMF and the World Bank to forestall or abort the structural adjustment of their economies then being pushed on them by the World Bank and the IMF. Third, the combination of massive capital inflow and avoidance of structural adjustment allowed these countries, with the exception of the Philippines, to undergo a decade of rapid growth.

Here the comparison with the Philippines and Latin America is instructive. For in contrast to Southeast Asia, Latin America and the Philippines were boycotted by foreign capital because of the debt crisis and were subjected to 10 years of structural adjustment by the Philippines and the IMF. Unlike its neighbours, the Philippines was skirted by Japanese capital because of severe political instability at the time of the transition from the Marcos dictatorship to a democratic government, which was interrupted by six coup attempts. In any event, in the Philippines and Latin America, there was a decade-long recession marked by zero or minimal growth rates.

I guess the point here is that the difference in the economic record of the two groups is not accounted for by policies of deregulation, privatization, and free-market reform but by an external factor, the massive inflow of foreign capital. In Malaysia and Indonesia, government continued to be the most significant economic actor, with a highly interventionist role, while in Thailand, technocrats moved to a second stage of import substitution, or building up an intermediate and capital goods industry via protectionist trade policies.

But to return to our narrative, in the early nineties, the flow of direct investment, Japanese and otherwise, began to significantly decline. By that time, however, the prosperity triggered by Japanese direct investment had began to attract new players, this time portfolio investors, particularly the managers of mutual funds that tapped into pension funds and other savings in the US who were looking for quick and easy returns for the massive amounts of capital in their trust.

To attract these capitals in order to trigger a second stage of foreign-capital fuelled growth, what were now called the new newly industrialising countries or tiger cubs or baby dragons adopted a similar set of macroeconomic policies:

First, foreign exchange restrictions were abolished or eased, stock exchanges were opened to foreign investors, and foreign banks were attracted with more liberal lending rules, including allowing the making of dollar loans to local borrowers.

Second, interest rates were kept high–higher than comparative benchmarks like US interest rates–in order to suck in foreign capital.

Third, the local currency, while not formally fixed to a particular rate of exchange, was informally pegged to a stable rate fixed to the dollar via periodic interventions in the foreign exchange market by the central monetary authority. This was to eliminate or reduce currency risk for both foreign investors and local borrowers.

These policies were immensely successful in attracting portfolio investment, with Thailand’s Bangkok International Banking Facility, for instance, attracting over $50 billion in just three year’s time.

It soon became clear, however, that portfolio investment was not an unmixed blessing. They were, for one, extremely volatile, coming in one day, leaving the next, as it were, in search of higher returns elsewhere. As the managing director of the Philippine Central Bank put it, in an era of globalised markets brought about by financial liberalization, billions of dollars worth of funds can be moved across the globe “at the tap of a finger.”

Also these funds, zeroed in on those parts of the domestic economy that promised a high rate of return with a quick turnaround time, and invariably, from Bangkok to Kuala Lumpur, this was the real estate sector. Manufacturing and agriculture were dismissed as low-yield sectors, where decent rates of return to capital could, moreover, be achieved only with significant amounts of investment over the long term. Bondholders and mutual fund shareholders could not wait that long.

So great were the prospects in real estate that even manufacturers gambled their profits in property rather than reinvesting it in upgrading their technology or the skills of their workers, an absolute necessity in the intense global competition for markets. Not surprisingly, the growth in the region’s manufactured exports slowed down, in the case of Thailand, the export powerhouse of the early 1990s, registering zero growth in 1996.

Not surprisingly, the property sector became overheated in Bangkok, Manila, and Kuala Lumpur. By 1995, the inevitable glut came to Bangkok, with the consequent domino effect of developers with unsold spanking new residential and commercial units dragging their financiers into bankruptcy with their non-performing loans.

With similar gluts expected to develop in Manila, Kuala Lumpur, Jakarta, and even Ho Chi Minh City, portfolio investors began to grow skittish. Skittishness began to turn to panic when investors took other dimensions of the economy into account, particularly widening current account deficits owing to the slow growth of their exports, anaemic local manufacturing sectors, troubled or stagnant agricultural sectors. They started withdrawing capital from these markets, resulting in plunges in stock market indicators throughout the region. It was this rapid deflation of confidence among foreign investors that created the climate for the recent speculative attack on the Thai baht, the Philippine peso, the Malaysian ringgit, and the Indonesian rupiah.

I have spent a great deal of time on the recent crisis because it is a milestone, because it ushers in the end of the so-called Southeast Asian miracle.

Let me move now to ask the question: What is the legacy of this era of rapid growth, besides the scores of unoccupied high-rise buildings in Bangkok and Kuala Lumpur?

Social and ecological considerations. True, average per capita income, a standard measure of economic improvement, rose rapidly in all countries. But these figures masked several negative distributional phenomena. One is that income distribution has worsened along with rapid growth, a fact acknowledged by a recent World Bank study. Thailand, for instance, has become one of the most unequal societies in the world, with an income distribution very similar to Brazil’s: the portion of household income going to the top 20 per cent of households rose from 50 per cent in 1970-75 to 53 per cent in 1989-94, while that going to the bottom 40 per cent of households declined from 15 to 14 per cent.

Another problem is that the rural areas have been left behind by a process of development that has benefited mainly the cities. In Thailand, the development process has benefited mainly the 15 per cent of the population that lives in Bangkok, leaving a very significant part of the population–estimated at 30 per cent–trapped in poverty.

A third problem is that the development has been gender-biased. Despite the fact that the so-called “Southeast Asian miracle” has been built on the backs of women’s labor, especially in the electronics and garments industries, women have not benefited equitably in the process. Indeed, it has impacted on them negatively in many ways. Market reforms in Vietnam have resulted in a significant spread of prostitution. One of the consequences of the Thai boom has been the systematisation and expansion of the involuntary recruitment not only of Thai rural women but also women from Thailand’s cultural minorities and from Burma for a sex trade that reaches as far as Japan.

A fourth problem is that growth has been a process that has involved a massive rundown of natural capital and a massive externalisation of environmental costs, leading to sharply deteriorated ecological base for the present and future generation.

In Indonesia, logging practices, including a concession system that benefits mainly business interests allied to President Suharto, is said to be responsible for a deforestation rate of 2.4 million hectares a year, one of the highest in the world. Industrial pollution is significant in centers like Jakarta and Surabaya, with about 73 per cent of water samples taken in Jakarta discovered to be highly contaminated by chemical pollutants. Already one of the most thickly populated places on the globe, the island of Java sees about 40,000 hectares of agricultural land converted to industrial and residential areas every year, contributing to a decline of 600,000 tons in rice production.

In the Malaysian state of Sarawak loggers eliminated 30 per cent of the forest area in barely 23 years and are expected to eat up the rest by the year 2000. Meanwhile, in Peninsular Malaysia, only 27 per cent of 116 rivers surveyed were said to be “pollution free,” the rest being ranked either “biologically dead” or “dying.”

Thailand is an ecological disaster area, with only 17 per cent of its land area now occupied by forests–and this is an underestimate. The great Chao Phraya River that runs through Bangkok is biologically dead in its lower reaches. Only 50,000 metric tons of the 3.5 million metric tons of hazardous waste produced each year are treated, the rest being disposed off in ways that pose a severe threat to public health. So dangerous is Bangkok’s air by northern standards that a University of Hawaii team measuring air pollution refused to return to the city for fear of incurring lung cancer.

In Vietnam, says Ngo Vinh Long, “much of the GDP growth has come from wanton stripping of Vietnam’s resources for export without much concern for environmental and social consequences…Vietnam’s forest cover is just 19 per cent today and…at current reduction rates, the natural primary forests will disappear within 20 years.”

Political trends. Moving on to the political arena, what can be said to be the main development over the last few years. Well, I think this has been the stalling of the democratic revolution after the unhorsing of the Suchinda dictatorship in 1992 and the ideological and political counteroffensive mounted by authoritarian regimes under the banner of “Asian values.”

As formulated by its prime exponent, Senior Minister Lee Kwan Yew of Singapore, Asian values or “Asian governance” ideology holds that Asians, like good Confucians, value order over change, hierarchy over equality, and cooperation and mutual respect over conflict between the elite and the masses. Moreover, Asians have their own forms of governance that do not have the Western emphasis on individual rights, electoral competition, the free press, free assembly, and checks and balances. Let me just say that when I first came across Lee’s list of supposed Asian values, I saw values that were not so much specific to Asian culture but good British, upper-class Tory values dear to threatened elites everywhere. It was not without good reason that one British cabinet minister once referred to Lee, when he was still known as Harry Lee, as the “best bloody Englishman East of Suez.”

The latest step in the Asian Values counteroffensive has been the declared intention of the government of the Association of Southeast Asian Nations (ASEAN) to review and revise the UN Charter on Human Rights on the grounds that it is too western-oriented.

ASEAN has been the scene of a major defeat for democratic forces in the last period, when the SLORC government in Burma was admitted as a member despite its extremely repressive record, its being an illegal government that lost the May 1990 elections by a landslide to Aung Sang Suu Kyi’s National League for Democracy, and international condemnation. ASEAN is now an association of seven authoritarian governments and two formal democracies, Thailand and the Philippines. The latter are almost ashamed of their democratic credentials, a measure of this being the fact that the Philippine government went out of its way–under Indonesian pressure–to be the formal sponsor of Burma’s entry into ASEAN during the association’s recent annual gathering in late July in Kuala Lumpur.

Strategic trends. On the regional security front, the big issue is China and Southeast Asia’s big question is how it will relate to China.

For many of ASEAN’s elites, China is a threat in three ways: 1) It is laying claim to resource rich areas like the Spratly Islands on the South China Sea that are also claimed by ASEAN countries; 2) low-cost Chinese exports are eating into ASEAN market shares in developed country markets like the United States; and 3) investment that would otherwise go to Southeast Asia is going instead to China, which is now the destination of most foreign investment.

The speeding up of the creation of the ASEAN Free Trade Area (AFTA), which is supposed to create a regional market of close to 500 million people enjoying substantially free trade among themselves by the year 2003, may be seen as an effort to put the region on a better competitive position vis-a-vis China.

Similarly, the admission into ASEAN of Vietnam and Burma, which have the two strongest military establishments in ASEAN, has been dictated to a significant degree with China in mind, with Vietnam securing ASEAN’s eastern flank and Burma its western flank.

What these developments have done is move ASEAN closer strategically to the United States, where the Pentagon now follows a de facto contain China policy even as US corporations vie with European and Japanese firms to penetrate and exploit the China market. A grand alliance against China is on the make, and it moved a step closer to realisation when Japan earlier this year not only confirmed the 46-year-old US-Japan Treaty as the basis of its security but agreed to take an active role in logistically supporting US military activity in areas outside Japanese territory.

The implications of these geoeconomic and geopolitical trends are momentous, but they are items we can reserve for the discussion.

South Asia

Let me now move on to South Asia, and, not being an specialist in the area, I must confess that I am on less sure footing. Let me begin with a statement made last March by the Finance Minister Chidambaram of India: “Development is the only hard truth,” he said, and he went on to encourage Indians to learn the “courage, wisdom, and pragmatism” of the ASEAN nations which “are surging ahead.”

Looking East to ASEAN has been a common attitude in the Indian elite in the last few years; indeed, India has been trying very hard to join ASEAN. I wonder if in the light of recent developments, there is a rethinking going on in Indian circles. And I wonder if, given their current troubles and their growing problems with China, the ASEAN elites might not begin to shed their disdainful attitude toward South Asia and look at it as a lifesaver, both as a market and a strategic ally. But we shall return to this.

South Asia has late been the focus of much attention and analysis in the world press on the occasion of the 50th anniversary of the independence of India and Pakistan from the British Empire, which was and continues to be a momentous event in world history.

The Broad Regional Picture. Much of the writing on the region has been grim. Two of the world’s least developed countries are in the region, Nepal and Bhutan, whose $170 annual GNP per capita is lower than every other nation’s, except Ethiopia, Mozambique, and Tanzania. We are of course familiar with the fact that South Asia is the home of nearly half of the world’s poor, some 500 million people, of whom around 300-350 million are in India. Some place the poverty rate in India at a higher level, claiming that 52 per cent of the country’s 950 million people live on incomes of less than $1 a day. The Times of India columnist and progressive Praful Bidwai describes about the 200 million of his countrymen and countrywomen that constitute the core of poverty as “cretinized, subhuman, abysmally underdeveloped people.”

The harshest judgments on the region come from experts from the region themselves. Mahbub Ul-Haq, head of the Human Development Center in Islamabad, claims that “South Asia has emerged as the poorest, the most illiterate, most malnourished, and least gender-sensitive region in the world.”

Sri Lanka, Kerala, and Bangladesh. Yet it is in South Asia also that we witness some of the world’s most impressive advances in meeting the challenge of poverty, through a combination of family planning, equity measures, positive government intervention, and civil society pressure.

Sri Lanka’s politics are, of course, far from ideal, but this must not detract from its advances in terms of addressing poverty and promoting equity. Sri Lanka’s GNP per capita in 1996 stood at $640, the highest in the region and its fertility rate, at 1.4 per cent, was lower than many of the industrially advanced countries. Alongside a sharp decline in fertility were a decline in the infant mortality rate to 27 per 1000 live births, a rise in life expectancy at birth to 71 years, and a total adult literacy rate of 87 per cent.

What seemed to have made the difference for most of the post-World War II decade, according to Rapti Goonsekere, has been “a strong government commitment to social welfare.” Since the late forties, successive governments influenced by socialist ideals sought to eliminate grinding poverty by supporting the consumption of basic foods, notably rice, through a combination of free food, rationed food, and subsidised prices. At the same time, state policies promoted higher educational levels and greater employment opportunities for women than was the case in most other Third World countries. Credit was not due to government alone, however, for instrumental in pressing the state to deliver was pressure from an impressive network of non-governmental and people’s organizations.

Unfortunately, in recent years, these advances are threatened by a combination of unresolved ethnic warfare, rising military spending, and IMF-backed structural adjustment. Military spending neared 10 per cent of GDP in 1996, and while GDP’s annual growth rate was above 5 per cent and self-sufficiency in rice has been achieved, unemployment has reemerged as a significant problem, real wages have gone down, and income distribution has worsened. Nonetheless, Sri Lanka had a higher ranking in the UNDP Human Development Index than the Southeast Asian countries of the Philippines, Indonesia, Vietnam, Laos, and Cambodia. The percentage of its population with access to health services was higher than Asia’s “fifth tiger” Thailand. And its life expectancy at birth was higher than that of Malaysia, Thailand, South Korea, and Russia.

Kerala was recently toasted in the pages of the Financial Times by Harvard Professor Amartya Sen for achieving close to universal literacy, a life expectancy of 72 to 74 years for women, and a fertility rate of 1.8 per cent, a figure similar to Britain and France and lower than China’s…without the latter’s use of compulsion.

Here it seems that a combination of strong government commitment to social welfare and the work of community-based NGO’s and people’s organizations appears to have made the difference.

“Fair price” shops have kept the cost of rice and other essentials like kerosene within the reach of the poor, and social security, pension, and unemployment payments transfer resources to the poorest groups. Expenditures on public health are high and health facilities are spread throughout to serve both the rural and urban populations. Land reform, while incomplete, did abolish tenancy, thereby providing security to many who before were only renters. As in Sri Lanka, grassroots political organisation is widespread and deeply rooted, providing the poor with a mechanism to pressure government to respect their political and economic rights.

This system has created a situation in which a sharp decline in the population growth rate has been accompanied by a decline in the infant mortality and death rates and by longer life expectancy. Kerala’s infant mortality is less than one-third the all-India average.

Greater economic security appears to have greatly reduced the need of the poor to have children in order to advance economic ally and ensure economic security in their old age. At the same time, greater education for women has apparently led to greater control over reproduction. The literacy rate for females in Kerala is 2-1/2 times the all-India average.

And alongside the advances registered in Kerala and Sri Lanka must be cited Bangladesh’s ability to reduce its population rate to 1.7 per cent a year, an achievement that is undoubtedly partly due to gender development and empowerment initiatives being pushed at the grassroots levels by the country’s impressive network of NGO’s and people’s organizations. Bangladesh, it must be mentioned, is the birthplace of the successful banking for the poor that is the Grameen Bank, and some of its NGO’s like BRAC are innovators in other areas of grassroots development work. All this must be taken, of course, in the context of the many deep social and gender inequities that continue to plague this country.

Failure of Development in Pakistan. At the opposite end of the spectrum from these countries is Pakistan, where high, sometimes spectacular economic growth rates have been matched by rapidly growing poverty and inequality. According to the Pakistani economist Mahbub Ul Haq, Pakistan has had the fastest rate of economic growth in South Asia, yet its economic system has produced “one of the greatest and most scandalous divergences between economic growth and human advance.” Between 1990 and 1995, for instance, despite a respectable rate of growth, the number of absolute poor rose from 24 million to 42 million. Ul Haq continues:

Pakistan’s social indicators paint an even more dismal picture. Two thirds

of Pakistan’s adult population and over three-quarters of adult women are

illiterate. Basic health facilities are not available to over half the population;

67 million people lack access to safe drinking water; and 89 million are without

elementary sanitation facilities….A quarter of newborn babies are malnourished.

Population growth is extremely high: the rate is between 2.7 per cent and 3 per

cent a year.

Comparing Pakistan to other countries in the region, Ul Haq notes that while India is poorer than Pakistan in terms of per capita income, it is already ahead in terms of education and health indicators. More stark, he notes, is the comparison with Sri Lanka.

It has roughly the same per capital income as Pakistan, but there is a world

of difference in the living conditions of the people in the two countries. Pakistan’s

adult literacy rate is only 36 per cent compared with 90 per cent in Sri Lanka; its

average life expectancy is 10 years lower than Sri Lanka’s. And Bangladesh enjoys

half the income per capita of Pakistan, yet it has succeeded in lowering the popula-

tion growth rate to 1.7 per cent a year.

Why is Pakistan so backward? According to ul Haq, the main culprit is a feudal system of land tenure that is untouched by land reform. One may also ask to what extent structural adjustment programs pushed by the Bank and the Fund, which have created immiserizing and inequitable impacts elsewhere have contributed to this dismal state of affairs. Since the early 1980s, Pakistan has been under almost constant stabilisation structural adjustment, having received over 20 loans from the Bank and the Fund to put these programs into effect.

India at 50. Let us then move to India. To population specialists, the good news is that India has reduced its population growth rate to 1.9 per cent; the not so good news is that even at that rate, the Indian population will surpass China’s sometime early in the next century.

Since independence, India’s economy has grown sixfold, average per capita income has more than doubled, and industrial output has grown tenfold. On the other hand, per capita gross domestic product has shrunk from parity with South Korea’s to only one fortieth, and India’s share of world trade has shrunk from 2 per cent to 0.4 per cent.

On the one hand, India has successfully avoided famines since independence and has achieved self-sufficiency in rice, with some help from Green Revolution. On the other hand, some 400 million Indians are malnourished and deprived of food security owing to lack of purchasing power.

There is almost universal consensus that India has failed to deliver in terms of lifting people from poverty and promoting justice and equity. There are now more poor people living under the poverty line in India than during Independence. Differences in income distribution have widened tenfold, with the top 10 per cent of the population now making 200 times more than the lowest 10th. Gender discrimination remains unchecked, with women subjected to unequal access to food and education as well as to genital mutilation and bride burnings. As in rural Bangladesh, 20 per cent of rural households are headed by women in rural India owing to male desertion or death, and these households have lower income levels than male-headed households. India accounts for the bulk of the 74 million South Asian women that are simply missing, or who would otherwise be present if there were natural demographic growth–the implication being that they have been victims of infanticide.

The ecological situation is very serious, with one institute estimating that environmental degradation now costs the country the equivalent of 10 per cent a year. Soil erosion owing to intensive farming is very far advanced in key agricultural areas. Intensive agriculture is also responsible for the fall in the water tables in several states, including the Punjab, the nation’s breadbasket. As one observer notes,

The double cropping of high yielding, early maturing wheat and rice there

has dramatically boosted the overall grain harvest since the mid-sixties, but

unfortunately it has pushed water use beyond the sustainable yield of the underlying

aquifer. Water tables are also falling in parts of the semi-arid state of Rajasthan

in India’s northwest. As this happens, cities and towns drill deeper wells. Mean-

while, villagers without the capital to deepen their own wells are left high and dry,

forced to abandon irrigated agriculture.

Over ten years after the Bhophal disaster, industrial pollution remains uncontrolled, with air pollution, industrial water pollution, and unauthorised disposal of toxic wastes reaching alarming levels in key industrial areas. New Delhi is now the second most polluted city in the world after Mexico City, with around 2,000 metric tons of pollutants released daily into the city’s atmosphere and the incidence of respiratory diseases standing at 12 times the national average.

Since 1991, India has been in a process of structural adjustment, with financial support and advice from the International Monetary Fund and the World Bank. The aim is to turn India into an economy integrated into the wider global economy via fiscal stabilisation, currency devaluation, radical deregulation, liberalization of trade and investment, and privatization of state enterprises. The elites of the North have almost universally praised India’s free-market reforms, and they are said to have triggered a GDP growth rate of 6.3 per annum between 1991 and 1997. Undoubtedly, the Indian economy is quite dynamic, but many question if the dynamism is in the right direction. Critics have pointed to what they consider to be disturbing trends:

  1. Deregulation and other economic reforms have apparently contributed to a worsening of both rural and urban poverty.
  2. Less than one-third of the country claims more than two-thirds of all investment, accentuating regional inequalities and inequality between the cities and the countryside.
  3. The bulk of foreign capital coming in is portfolio investment or speculative capital rather than foreign direct investment. Net private capital inflows in 1996 came to $8 billion and foreign direct investment came to only $1.9 billion in 1995-96. The inflow of speculative capital has led to spectacular rises and equally spectacular crashes of stock prices as well as price inflation in urban real estate. Mumbai residential and office space is now the most expensive in the world and indications are that the real estate market there is now headed for a crash. In other words, as in Bangkok, Kuala Lumpur, and Manila, it is likely to the speculative sectors of the economy rather than the truly productive sectors like manufacturing and agriculture that are spearheading the economic growth.
  4. Bangalore’s information technology industry, which is said to the crown jewel of the “new Indian economy,” is seen to be one that is mainly integrated into the international economy, with few links or spinoffs into the domestic economy. Some would say that the industry is mainly an adjunct of Northern transnational firms specialising in low-cost data processing for them.

In the political field, it is certainly a triumph for all Indians that democracy has not only survived and taken root. That democracy has remained mainly at the level of formal political rights, however, and not been translated into social democracy is a major limitation that Indian democracy shares with Northern liberal democracies, where wealth and class differences continually make a mockery of formal political equality among citizens through the illegal or legal deployment of money to achieve particularistic goals.

Nevertheless, as Bidwai notes, previously “excluded and disenfranchised plebeian classes now participate in growing numbers in the political process. Although few mainstream parties articulate the interest and demands of the poor majority unambiguously, the Indian elite has not been able to hegemonise politics. Indian democracy is acquiring a porous, mass character.”

When it comes to the sensitive interaction of politics, culture, and tongue, the Indian state has been notably unsuccessful in creating a stable pluralistic polity, with the result that it today has to deal with bitter insurgencies waged by large minority groups in Kashmir, Punjab, and several other states. The tendency of the state to crush these insurgencies by force has led to the rise of an authoritarian dimension that is difficult to reconcile with democracy. Also worrisome is the rise of Hindu chauvinism that threatens the secular foundation of the Indian state and could weaken the faith of the non-Hindu groups in it as a mechanism of peaceful conflict resolution.

When it comes to regional security, South Asia is engaged in an arms race that is as heated as the one taking place in East and Southeast Asia. The seemingly intractable India-Pakistan rivalry overshadows the region, with Pakistan reportedly planning to buy Chinese M-11 tactical missiles and India seeking to upgrade its SAM-3s and its existing batteries of Russian-made Prechora missiles. Indeed, India is on an arms-buying spree; it plans to increase its defence spending by 21 per cent between April 1997 and March 1998, buying mainly from Russia, to counter a Pakistani buildup of weapons bought from Washington and Beijing.

There was nonetheless much enthusiasm and some hope that greeted the articulation of the “Gujiral Doctrine” by India’s new prime minister. As described by one observer, this approach seeks “to renegotiate [India’s] relations with the neighbouring states in southern Asia, making concessions without demanding automatic reciprocity.” Whether this initiative does lead somewhere, however, remains to be seen.

Because of the deep cleavage with Pakistan, which New Delhi assumes is developing nuclear weapons, India lobbied hard in 1996 to defeat the Comprehensive Test Ban Treaty (CTBT), which it felt would have put it at a great disadvantage. Indeed, this year has seen strong lobbying from some quarters to complete the development and testfire warheads on India’s medium-range missiles.

These unfortunate developments, however, cannot be understood without reference to New Delhi’s strategic rivalry with China. That rivalry has been stoked not only by traditional security concerns but by a sense of sharpened economic competition with Beijing. Like the ASEAN elites, India’s establishment resents and worries about the fact that the greatest portion of global capital flows to the South–an enormous $52 billion in 1996–goes to China, and that China now dominates many export-markets that India should be moving into.

It is these mutually shared concerns and fears about China that is leading India to look East, to seek a firmer political, economic, and strategic ties with the ASEAN countries, which India views as a non-threatening collection of states. As the region enters the 21st century, developments in Asia will be greatly determined by the geoeconomic and geopolitical interaction of the triangle India-China-ASEAN–with all the perils that accompanies such balance-of-power politics.

*Dr. Walden Bello is co-director of Focus on the Global South, a program of policy research, analysis, and action of the Chulalongkorn University Social Research Institute (CUSRI) in Bangkok and a professor of sociology and public administration at the University of the Philippines in Manila. He is the author of several books on Asian development and ecological issues, including Dragons in Distress: Asia’s Miracle Economies in Crisis (London: Penguin, 1991).

Figures from Japan’s Ministry of Finance.

Thailand Development Research Institute, Thailand’s Economic Structure: Summary Report (Bangkok: TDRI, 1992), p. 26.

Figure from Japan’s Ministry of Finance

Chistopher Johnstone and Atsushi Yamakoshi, “Strength Without Dominance,” Japan Economic Institute, May 16, 1997, pp. 5-6.

“Three Main Challenges for the Central Bank,” Business World, May 9-10, 1997, p. 13.

According to Ngo Vinh Long, “In the real estate business, foreign investors have…pushed many local proprietors to the brik of financial disaster. Of the total $6 billion in foreign investment in Ho Chi Minh City by the end of 1995, $2.7 billion was for hotels and high rise office and residential buildings…As a result. occupancy rates in locall owned hotels…plummeted from 85 per cent in 1993 to about 30 per cent in 1995.”

Ngo Vinh Long, “A Letter from Vietnam,” Challenge, January-February 1997, p. 104.

Figures from Walden Bello and Shea Cunningham, “A Siamese Paradox: Development and Degradation in Modern Thailand,” forthcoming.


Emmy Hafild, “Environmental Impact of Rapid Development Strategies in Southeast Asia: An Indonesian Case Study,” Paper prepared for the Northeast Asia-Southeast Asia Consultation on Environment and Development, Bangkok, Oct. 20-22, 1995.

Walden Bello, People and Power in the Pacific: The Struggle for the Post-Cold War Order (San Francisco: Food First, 1992), p. 50.

Monash Group, APEC and the Environment (Melbourne: Australian APEC Study Center, 1996). Downloaded from Internet.

All these data are from Walden Bello and Shea Cunningham, “A Siamese Paradox…”

Ngo Vinh Long, p. 89.

Quoted in Samuel P. Huntington, The Clash of Civilizations and the Making of World Order (New York: Simon and Schuster, 1996), p. 93.

These trends are analyzed in Walden Bello, “The Balance of Power Doomsday Machine: Resurgent US Unilateralism, Regional Realpolitik, and the US-Japan Security Treaty,” AMPO, Vol, 27, No. 2, 1996, pp. 12-29.

Mahesh Unyal, “India-Economy: Budget Pleases Rich and Middle Class India,” Interpress Service, August 29, 1997.

Quoted in “Ambition Joined to Pride,” Newsweek, Aug. 4, 1997, p. 19.

Cited in Inter Press Service.

“Hunger, Inequality, and Conflict in Sri Lanka,” in Hunger 1992 (Washington, DC: Bread for the World Institute, 1991), p. 124.

Amartya Sen, “Development: Education, Health Care Need to Beat Poverty,” Financial Times, August 1, 1997.

Much of the following interpretation is based on Richard Franke and Barbara Chasin, Kerala: Radical Reform as Development in an Indian State (San Francisco: Food First, 1991).

Mahbub ul Haq, “The Poverty Puzzle,” Financial Times, August 14, 1997.

Praful Bidwai, “India: Modest Progress at 50, Amidst Turmoil,” Interpress Service, August 29, 1997. Most of the following figures also come from Bidwai’s excellent piece.

Mahbub ul Haq, cited in IPS


Lester Brown, “Facing the Prospect of Food Scarcity,” State of the World (New York: W.W. Norton, 1997), p. 30.


Rahul Bedi, “India: Corruption Seeps Deep into Political System,” Interpress Service, Aug. 4, 1997.

Suryanarayana, “Economic Reforms, Nature, and Poverty,” Economic and Political Weekly, March 9, 1996, pp. 617-624.


Martin Wolf, “Liberalization: Success, With More to Come,” Financial Times, August 1, 1997.

Narasimhan, “Walking on One Leg: India’s Software Industry,” Economic and Political Weekly, Aug. 3, 1996, pp. 2073-75.


See Sergei Strokan, “India-Russia: New Delhi’s Arms Buying Spree Gets Moscow All Excited,” Interpress Service, Aug. 29, 1997.

Quentin Peel, “Foreign Policy: Remolder World View,” Financial Times, August 1, 1997.

“Turbans, Spit and Polilsh,”Newsweek, August 4, 1997.