by Peter Church
Secondly, South‐East Asia has experienced some of the effects of the heightened intensity of Islamic anger spilling out of the Israel/Palestine issue, the slow economic development of the Arab world, and various perceived grievances, especially against the United States. Some countries in the region have taken firm action to prevent violent expressions of that anger, including in the form of international terrorism. Others have been less effective. Domestic religious violence, in some places on a large scale, has also been costly.
Thirdly, recovery from the financial crisis has been patchy and slower than expected. Necessary action on failed banking and financial institutions in Indonesia, for example, is still awaited. Reform and improvement of governance and legal institutions have not been much in evidence.
Fourthly, the dynamism of the Chinese economy and particu‐ larly the growth of its exports have overshadowed South‐East Asia. Foreign investment has flowed strongly to China while appearing more wary of some of the old favourites in South‐East Asia.
Indeed all the last three factors have no doubt played a role in the reduction in FDI into the region in recent years.
South‐East Asia has also experienced a diminution of the growth of regional solidarity. This is hard to quantify, but the authority and standing of ASEAN and of its associated FTA seem to have slipped.
If confronted by an external challenge ASEAN would no doubt show renewed solidarity and resilience. But there has been a loss of momentum. This may be partly because the region seems to be waiting to see what comes out of China. Will China emerge in the next ten or 15 years as a new superpower, and if so will it inevitably expand its zone of influence? Will it then become the dominant power in an ASEAN plus Three configuration, a realisation of Dr Mahathir's EAEC concept but with China, and not ASEAN or Japan, as the main driver?
Finally, without wishing to sound a parochial note, something needs to be said briefly about the position of Australia. The Australian perspective has become more reserved, at least at the government level, and the strenuous enforcement of “border protection” measures, as well as confusion about an Australian “deputy sheriff” role and preparedness to undertake “pre‐emptive” action to stop emerging threats, have been among the factors seen in the region as evidence of a shift in Australian attitudes away from the “engagement” policy of the previous years. To some extent that perception overlooks the fact that the Australian engagement policy suffered a series of rebuffs by the region which would have made it difficult for any government to maintain. It also needs to be taken into account that Australian public opinion (to which government is highly responsive) was inevitably affected by the extensive and graphic media coverage of events in East Timor. That coverage was far more intensive in Australia, largely because of proximity, than anywhere else in the region.
The biggest challenge for Australia is to combine realistic expectations with a determination to make every reasonable effort to understand and cooperate with the countries of the region. That includes, for example, declining to enter into argument with those like Dr Mahathir who often vilify Australia for domestic purposes or as a proxy for an attack on the United States. It means, more importantly, returning to the policy of previous governments going back 40 years. For decades Australian governments encouraged and promoted the study of South‐East Asian languages and the history, politics, economies and societies of the countries of the region. That, unfortunately, has gone backwards in recent years.
Australia in the medium to longer term cannot afford to give up on the national project of building the relationship with its region. That is partly because the region will return to stronger economic growth and will be a growing market for what Australia produces. But beyond that, it would be very uncomfortable for Australia in the longer term to be faced by an indifferent or disapproving South‐East Asia. And, as many in the region understand, Australia can make a significant contribution. The role of business in that regard needs to be complemented and supported by addressing the historic task of building up knowledge and linkages across the board.
I see this small book as a contribution to that and hope that it will continue to be widely read by business and other visitors to the region from around the world.
Sydney, 12 June, 2003
Rawdon Dalrymple AO
Chairman, Advisory Board of Asean Focus Group; Former Australian Ambassador to Indonesia, Japan and the United States
INTRODUCTION TO THE 1999 SECOND EDITION
South‐East Asia has for many centuries been a part of the world whose fortunes were largely determined by centres of power elsewhere. It was a theatre for the intersection of Indian and Chinese influence—religious, commercial, cultural and political. Later, it was the easternmost extension of the spread of Islam. It saw rivalry and conflict for commercial and political control between the rival European colonial powers and then a long period of subservience to those powers until the brief ascendancy of Japanese imperial power in the 1940s.
In the 1980s and up until 1997, South‐East Asia experienced economic growth on a scale and at a rate which was unprecedented in world history. The region saw the beginning of a sense of shared purpose, and a confidence that the South‐East Asian nations would become prosperous and influential in the world. In the words of the American pioneer of developmental state theory, Professor Chalmers Johnson, they looked forward to achieving not only enrichment but also empowerment. There was a vigorous debate in the international financial institutions and in academic circles about the factors which had made it possible to achieve such spectacular economic progress. One dimension of that debate concerned the influence of the “Japanese model.” The “flying geese” theory had it that as Japan moved out of labour‐intensive industry it invested in South‐East Asia and other emerging economies which were able to take off into export‐driven economic growth with a high degree of state direction. Opposed to that was the theory that the South‐East Asians had achieved record‐breaking economic growth by opening their economies increasingly to the world market which forced them to become highly competitive and made them attractive investment opportunities. On that theory, deregulation and openness were the keys to continuing success.
The crisis which started with the collapse of the Thai baht in June 1997 was widely seen in the West as discrediting the Japanese model and Japanese leadership in the region. The International Monetary Fund's rescue operations in the region were driven by a belief that the crisis economies needed strict control of public expenditure, transparency in regulation of the banking and finance sector, and liberalisation of financial flows in particular and their economies generally. Debate continues about the wisdom of the Fund's policies which were modified after an initial period, especially in Indonesia. It is probably fair to say that no one would now believe that South‐East Asia can return to strong growth in the long term without substantial reforms of governance. But there remains in the region a strong belief that these countries cannot afford to place themselves totally at the mercy of international financial markets and that some measures of control are necessary.
It will be some time before these policies and other problems are resolved but, in the meantime, the sense of achievement seen as based on national and more broadly Asian cultural traditions and values, and not simply derived from the West, has been diminished. The sense of regional solidarity based on the shared economic success and on the growing international status of the Association of South‐East Asian Nations (ASEAN) has also been affected. ASEAN as a body was shown to be largely irrelevant when the financial crisis struck. Again in September 1999 when East Timor, after voting massively for independence from Indonesia, was plunged into a frenzy of killing and destruction, ASEAN, possibly due to its long‐standing policy of not commenting on or being seen to be interfering in the domestic affairs of its members, seemed unwilling or unable to play any substantial role in international efforts to re‐establish order. There have been a number of other events over recent y
ears which demonstrate the interdependence of ASEAN's members and how events in one country have the potential to severely affect another. These range from occurrences of ethnic and religious conflict to unchecked forest fires in Indonesia causing havoc in other ASEAN countries such as Singapore, Brunei and Malaysia. Events such as these have led a number of members to express the view that ASEAN needs to review its raison d'etre and one suspects this will have to lead to substantial changes in policies if the grouping is to continue to have relevance.
But in the longer term the present situation is likely to be seen as an interlude, although in some cases—and especially in Indonesia—it might last some years. It should not be seen simply as an interruption of the remarkable economic successes of the last 20 years. High levels of economic growth will not return without substantial reforms and policies to equip these countries for success in a rapidly changing world economy. Moreover, there is substantial political change afoot in South‐East Asia. That is perhaps most evident in Thailand, where democracy seems now firmly implanted and working well. There is a sense in Malaysia that change there cannot now be too far off. In Indonesia, the troubled giant of the region, there are elements of major change together with retention of elements from the Suharto New Order era. Of the two great political forces in the country, the Islamic seems to have gained ascendancy over the secular nationalist. But it is a moderate and tolerant Islamic leadership apparently committed to equal rights for all. In that country, much economic and social ground has been lost and it will be a hard task to establish a new political order and the basis for a new era of economic growth and increasing welfare for the population of more than 210 million.
It would, in my view, not take long if stability and economic recovery prevail for the sense of optimism and confidence to return to South‐East Asia, and this time it could be enhanced by a much wider public acceptance and sense of participation. In Indonesia, where the outlook is still uncertain, there is already an enormous change in the atmosphere with a novel and unaccustomed frankness and exchange of opinions in the media and a sense of relevance and indeed of power in the elected parliament. If economic recovery takes hold across the region we are likely to see a move to try to enhance the role and relevance of ASEAN. The proposal to establish an East Asian Monetary Fund has support in South‐East Asia and the initiatives which flow from the Miyazawa Fund could lead to an invigorated cooperative arrangement supported by Japan. Global currents caused havoc in the region in 1997 and 1998 and that has led some to think in terms of building defences and walls. Globalisation will, however, affect South‐East Asia in positive ways—socially, politically and economically. Indeed they cannot afford not to respond to it, and one of the questions which faces them is whether or how they can best support each other in that enterprise.
Sydney, 1 January, 2000
Rawdon Dalrymple AO
Chairman, Asean Focus Group
1
Brunei
Brunei is a small state of just 2,226 square miles located on the north‐west coast of the island of Kalimantan, or “Borneo” (a Western term derived from “Brunei”). It is an Islamic State where the sultan, Sir Hassanal Bolkiah, the 29th Sultan in the dynasty, rules by decree. Its population is about 426,000, of whom nearly 60 percent live in urban areas. Malays comprise about 64 percent of the population, Chinese about 20 percent, and indigenous tribes about 8 percent. It would be an unremarkable territory were it not that underneath its soil and under its territorial waters lie huge oil and gas reserves which have enabled the country to boast the highest per‐capita income in South‐East Asia at around US$36,000. This underground wealth has also enabled one of the world's few remaining absolute monarchies to survive into the 21st century. The sultanate has considerable financial reserves invested overseas.
EARLY HISTORY
Little is known of the early history of Brunei. There appears to have been trade between the north‐west coast of Kalimantan and China as early as the sixth century and Brunei was influenced by the spread of Hinduism/Buddhism from India in the first millennium. Chinese records make mention of a kingdom of Puni, located on the north‐west coast of Kalimantan, which paid tribute to Chinese emperors between the sixth and the ninth centuries. Brunei was claimed by the great Javanese empire of Majapahit in the 14th century, though it was most likely little more than a trading/tributary relationship. Brunei became a more significant state in the 15th century with a greater degree of independence from its larger neighbours. When the Chinese Admiral Cheng Ho visited Brunei in the early 15th century, as part of his exploration of South‐East Asia, he discovered a significant trading port with resident Chinese traders engaged in profitable trade with the homeland.
Brunei was a small cog in the early South‐East Asia trading networks but well known enough to figure in the records of the major states. The Brunei ruler seems to have converted to Islam in the middle of the 15th century when he married a daughter of the ruler of Melaka. The Portuguese conquest of Melaka in 1511 closed Melaka to Muslim traders, forcing them to look elsewhere in the archipelago. There was an outflow of wealthy Islamic traders who settled in other parts of the Indonesian archipelago, taking with them not only their business acumen but also their religious beliefs. The Islamisation of the archipelago was given a great impetus. Brunei prospered from the Portuguese conquest of Melaka as Islamic traders were now attracted to its port in greater numbers. When Magellan's expedition visited Brunei in 1521 it found a prosperous town with a flourishing trading community linked into the South‐East Asia–China trading network. Throughout the 16th century it engaged in political and commercial relations with other states in the Malay world, comprising the Indonesian archipelago, the Malay Peninsula, and southern Philippines.
Brunei became a major regional kingdom in the 16th and 17th centuries, with its influence stretching into the southern Philippines and its territorial claims extending over most of the north coast of Kalimantan, including what are now the Malaysian states of Sarawak and Sabah. As the first Islamic kingdom in the area, Brunei was the base for the Islamisation of the southern Philippines and surrounding areas, frequently coming into conflict with Catholic Spain after the Spanish conquest of Luzon, the central island of the Philippines. In 1578 Spain attacked Brunei and briefly captured the capital. It was unable to hold the town, in large part because its forces were decimated by sickness. Spain continued to try to conquer the Islamic Sultanate of Sulu in the southern Philippine islands, only finally succeeding in the last quarter of the 19th century.
Brunei did well out of the Portuguese conquest of Melaka. Not only did it become an important port for Muslim traders but it was able to negotiate a deal with the Portuguese for cooperation in the South‐East Asian trade with China. Brunei was no threat to Portugal, having no territorial claims outside Kalimantan. It also shared a commercial interest in promoting the China trade. In 1526 the Portuguese established a trading post at Brunei to collect the valued products of Kalimantan and surrounding islands. Brunei became an integral port of call on the Melaka‐to‐Macau route.
Brunei's commercial and political power was at its peak in the middle of the 17th century. It had managed to stave off Spain and had reached a mutually beneficial accord with Portugal. From the middle of the 17th century it was increasingly challenged by the Sultanate of Sulu in the islands north‐east of Kalimantan. Ostensibly under Brunei suzerainty, the Sultanate of Sulu gradually established total independence, going so far as to acquire from Brunei sovereignty over most of the area which today constitutes the Malaysian state of Sabah.
By the beginning of the 19th century the political and economic power of the Malay rulers in Kalimantan and what is now the southern Philippines was declining sharply. The rule of the once‐powerful Sultans of Brunei and Sulu now barely extended outside their capitals. Their decline resulted largely from the development of European entrepots in South‐East Asia, which offered local traders a better price for their produce and were free from the taxes
of the Malay ports. The development of local trade with European entrepots, especially Singapore, Batavia, and Manila, and the decay of the older trading centres of Brunei and Sulu meant a drastic reduction in the Sultanates' revenues, with a consequent decline in political power.
About 40,000 people lived in Brunei town and surrounding areas in the mid‐18th century. By the 1830s the population had declined to about 10,000. The northern coast of Kalimantan, except for Brunei town itself, was ruled by local chiefs based at river mouths. The coastal population was predominantly Malay (and Muslim), with a small group of Chinese merchants and pepper growers and a smattering of people of Arab descent. The tribal people who lived in the interior were neither Malay nor Muslim: they were subsistence farmers who traded with the coastal Malays but resisted attempts to bring them under Malay control. To Brunei's south the most significant tribal people were Iban, or Dayak. To the east (in Sabah) the most significant groups were Kadazan‐Dusun and Murut.
In addition to its economic decay, the Brunei Sultanate was further weakened by power struggles within the Court. Omar Ali Saifuddin, who succeeded to the throne of the Sultanate in 1828, was a weak ruler. During his reign a bitter power struggle developed between two rival factions led by Brunei chiefs. The decline in the Sultan's power was evidenced by the increasing independence of provincial rulers, and by the growth in the power of formerly subservient chiefs. In the late 1830s, Sarawak, the westernmost province claimed by the Sultanate of Brunei, was in open rebellion against the local provincial ruler, whose rule had become progressively more oppressive as he became more independent of Brunei. In 1837, the Sultan tried to suppress the rebellion but without success.