Introduction

This chapter examines the position of a frequently mentioned figure in the ethnographic literature on Southeast Asia who is often called the Lord of the Land, though he is known locally by various titles (cf. Tannenbaum and Kammerer 2003). Although I focus on Southeast Asia and specifically Indonesia, this delimitation is ultimately an artificial one because the patterns I describe are found in a much wider area and, as is clear from discussions by Abalahin (2011), Shaffer (1994), and Sen (2014), the “boundary” between East, Southeast, and South Asia, and ultimately also Austronesia (Sahlins 2008), is an elusive and shifting one. It is, therefore, perhaps better to consider this region as a component of what Mus (1975) characterized as “Monsoon Asia”, especially given the common cultural substratum noted by Mus, and the active participation of regional traders in the commerce that linked East, Southeast, and South Asia to the Middle Eastern Muslim caliphates and ultimately Europe (Shaffer 1994; Sen 2014), and the state and local level cultural exchanges that inevitably resulted from this participation (e.g. Wessing 2011, in press; Sen 2014). I therefore use the term Southeast Asia here as a “convenient geographical indicator” (Fifield 1976, p. 151), rather than as a reference to a “bounded” cultural entity.

While parts of the argument to be presented here have been discussed at length before, e.g. the idea of the Stranger King, much of the data on villagers’ relationship with the spirit world has existed primarily as scattered mentions in the ethnographic literature: locally specific and not seen to form a coherent pattern with other such local traditions, and the relationship of these to ideas such as that of the Stranger King. This chapter, therefore, attempts to demonstrate their mutual interdependence and ultimate unity, and in doing so aims to show the highlighted pattern to be a trans-local cultural motif that, with other such motifs, forms a coherent substratum underlying (traditional) power relations in Southeast Asia, an integrative or centripetal factor in an area increasingly seen as eluding definition.

In spite of its above mentioned frequent appearance, it is not always clear what is meant by the term Lord of the Land, or who the occupant of the position is.

Research Design

The data for this article is a result of a survey on public opinion and voting behaviour that was done on three cities (Medan, Surabaya, Samarinda) shortly after the 9 December 2015 elections. To determine the population samples in the location, a multi-stage random sampling strategy was used, with villages as the primary sampling unit (PSU). First, the population of each city based on total population at the subdistrict (kecamatan) level was stratified to obtain proportional samples in each of the sub-districts. Then the population was stratified further based on the area of domicile (rural vs. urban) to ensure a representative proportion between urban and rural residents in each sub-district. For this article, the respondents are completely urban residents as Surabaya is overwhelmingly urban. Finally, gender was stratified to have an equal number of female and male respondents.

For each municipality, samples were drawn in proportion to the population size of each sub-district, and the randomization process followed these main steps. First, kelurahan (the urban equivalent of villages) were selected in each sub-district according to the subdistrict's respective proportion of population. Second, all neighbourhood organizations (rukun tetangga or RT) in each PSU were listed and five of them were selected at random for each unit. Third, two households were selected at random in each RT. Finally, in each selected household, all household members aged 17 years or older were listed, and one person selected with the aid of the Kish Grid. If a female respondent was selected from one household, a male respondent would be selected from another household. In case the selected respondent could not be interviewed (not available after two visits during interview time in the village, refused to be interviewed, etc.), the respondent was substituted by repeating stages three and four above.

The Garuda — the man-bird — in Indian mythology is the vehicle of Vishnu. Perhaps the best known image of the Garuda in ancient Javanese art has it transporting historical eleventh-century East Javanese king Airlangga. The Garuda has been adopted as the symbol of the modern Indonesian state. The author has used the Garuda as a metaphor for Indonesian foreign policy and has likened it to the Phoenix, the fabulous bird of Greek mythology that arises from the ashes of the fire that consumed its previous incarnation, to fly again. Sukarno's Garuda was left in ashes in 1965. Under Soeharto, it rose to fly again, towards Indonesia's leadership in ASEAN and the so-called “South”. It was immolated in the economic meltdown and political turmoil of the collapse of the regime in 1998. The ashes of the Garuda were barely stirred by the short presidencies of B.J. Habibie and Abdurrahman Wahid (Gus Dur); the former engulfed in the disastrous separation of East Timor from Indonesia and the latter by the leader's erratic eccentricity. It was not until President Megawati Sukarnoputri's term of office that the Garuda began to struggle out of the ashes of its predecessor. It was a wounded Garuda, bleeding from the internal war in Aceh, but able to stretch its wings at the 2003 Bali ASEAN Summit (Bali II), where it sought to reclaim ASEAN leadership. Only in the presidency of Susilo Bambang Yudhoyono (SBY) did the Garuda take full flight again. SBY's high-profile global foreign policy outreach was viewed as a tool to advance Indonesia's place in the world as an emerging middle power actively engaged in international affairs.

In President Joko “Jokowi” Widodo's first two years in office, the Garuda has been hovering, circling a more self-restricted flight zone while casting about for direction, still unsettled on a course. Jokowi seems uninterested in foreign policy, or at least only in how it connects to his domestic agenda. During the 2014 election campaign, both Jokowi and his opponent, Prabowo Subianto, trashed the globalist internationalism of outgoing President SBY. The fact that SBY's high-level international visibility showcased Indonesia as a rising middle power was dismissed as having no direct domestic payoff. SBY showed the Indonesian flag to the world; Jokowi has furled it.

It seems fitting that we start our inquiry into the relationships between Indic, Austroasiatic, and Austronesian language-speaking peoples in Monsoon Asia by trying to reconstruct the situation around 1500 BC, before Indian thought took solid form in the Vedas and Austronesianspeakers dominated the islands. We know that there were people in the islands for thousands of years before that, early forms of Homo erectus and now-extinct variants of Homo sapiens like the Hobbits of Flores or the Denisovans who left traces of their genetic material in the outer islands. At a guess, these people tended to be short and dark, like Munda of Chota Nagpur, some inhabitants of the Mentawai islands, or Semang of interior central West Malaysia.

Little trace of their original languages remains (Blust 2013). “It seems reasonably safe to assume that Andamanese is the sole remaining linguistic representative of pre-Neolithic Southeast Asia, its roots perhaps going back as far as the initial colonization of Southeast Asia by modern humans—an isolate that has remained largely unaffected by the vast linguistic spreads that have occurred elsewhere in Southeast Asia in Neolithic and post-Neolithic times” (Burenhult 1996, p. 14), though northern Andamanese may have Austroasiatic affinities (Blevins in Blust 2013, p. xx, fn. 7). The other linguistic isolate is Shompen, traditionally spoken by foragers among the Austroasiatic-speaking Nicobarese (Blench 2010). Blust (2013) suggests that these people may have migrated to Indonesia not through Malaysia but by sea, from Burma.

The year 2016 was a crucial one in Laos. According to an established five-yearly cycle, the year was punctuated by a series of key political events, foremost among them the Tenth Congress of the ruling Lao People's Revolutionary Party (LPRP). As on past occasions, the Tenth Party Congress took stock of the country's political and economic performance over the previous five years and adopted the country's next five-year National Socio-Economic Development Plan. Most importantly, it also elected the new Party Central Committee (PCC), the party's main decisionmaking body, together with the Politburo, PCC Secretariat, and Secretary-General. The congress was followed in March by elections for the National Assembly, which then approved party nominations for the President and Prime Minister, who in turn appointed a new cabinet. Throughout this process, Laos occupied the chair of ASEAN, just its second time in the role, and in September played host to U.S. President Barack Obama, the first sitting U.S. President to visit the country, for the East Asia Summit.

While all these events were important, most consequential was the process of party renewal that culminated with the congress. Given the LPRP's grip on political power and the control its leaders exercise over Laos’ rich reserves of natural resources — the main source of the country's rapid economic growth since the early 2000s — LPRP congresses represent critical moments of leadership renewal and transition. Even by these standards, the 2016 congress was particularly significant given the expectation that around half the positions in the eleven-member Politburo would change hands. With old age finally catching up with the revolutionary generation, most anticipated changes were due to retirement. At the top of the list was party Secretary-General and State President, Choummaly Sayasone, and several of his ageing Politburo colleagues who seemed likely to follow.

The stakes were raised further by a plane crash in May 2014, which had taken the lives of another four high-ranking members of the PCC.

INTRODUCTION

The wide-ranging economic and institutional reforms undertaken by the government of Myanmar over the past four years has made the resource-rich country a major new investment frontier in Asia. However, the policy challenges that the country faces remain formidable, in particular, in view of the weak capacity of key policy-making institutions and the low level of human resources development. Infrastructure including transport and power is underdeveloped after decades of neglect. Myanmar's economic and institutional challenges today are similar to those faced by Vietnam after Doi Moi in the late 1980s and early 1990s. Myanmar can thus learn not only from the experience of Vietnam, but also from that of many other ASEAN countries such as resource-rich Malaysia and Indonesia, as well as the experience of Cambodia in the 1990s and even Thailand in the 1980s (Lim and Yamada 2013).

Compared to earlier development experiences in Asia, the big difference working to Myanmar's advantage today is the much more advanced stage of integration in Asia in general, and in ASEAN in particular — the latter with the ASEAN Economic Community (AEC) becoming effective at the end of 2015. A more integrated Asia has become the economic power-house of the world. The reason for this is succinctly expressed in ADB (2014): “Regional cooperation and integration provides a great opportunity to secure access to regional and global markets, technology, as well as finance and management expertise.” The development of regional production networks and intra-industry trade in parts and components offers great opportunities for Myanmar to jumpstart its economic development. Geographical location, low labour cost, abundant natural resources and the growing size of its domestic market all work to the advantage of Myanmar in an integrated ASEAN. For ASEAN investors, the political and economic reforms ongoing in the country offer vast and unique opportunities to enhance competitiveness and expand the scale of their operations. There is no doubt that Myanmar will become a major destination for outward foreign direct investment (FDI) from ASEAN countries over the next decades.

INTRODUCTION

The Association of South East Asian Nations (ASEAN) has continued to pursue a free and open investment regime to promote more investment flows and investment integration in the region. On one hand, an increase in investment flows will sustain economic growth and improve social conditions in terms of employment and technology transfer. On the other, integration will create better investment environment with lower cost and time efficiency.

Despite the global economic turbulence in 2008–09, the trend of foreign direct investment (FDI) inflows to ASEAN has continuously improved due to strong macroeconomic foundations, increasingly favourable investment climate, and improving policy environment in ASEAN. The attractiveness of ASEAN has considerably increased since the Blueprint of ASEAN Economic Community (AEC) was signed in November 2007. The Blueprint incorporates several high-impact agreements such as the ASEAN Trade in Goods Agreement (ATIGA), ASEAN Framework Agreement on Services (AFAS), and ASEAN Comprehensive Investment Agreement (ACIA). These agreements help create a more favourable economic environment for investors and traders in the region by increasing the region's attractiveness for investment, production and trade. Additionally, the ASEAN Agreement on the Movement of Natural Person (MNP) that was signed in November 2012 also aims to facilitate movement of businessmen and professionals in the region. Institutional capacity was also strengthened with the establishment of the ASEAN Investment Forum (AIF) in 2011, with the participation of lead investment agencies from each ASEAN country. Altogether, many regional measures have been undertaken to promote investment climate and strengthen the region's investment environment, resulting in a more free flow of investment across ASEAN.

In addition to the regional initiatives, each ASEAN Member State (AMS) has also introduced measures to further improve their investment climate and facilitate investment flows, i.e., liberalizing their investment regimes, opening up more industries for investment, providing more attractive investment incentives, and simplifying investment procedures and taxation.

This chapter aims to describe the transitional process of ASEAN's regional investment integration as well as its impacts on FDI flows in the region, both inflows and outflows. Empirical evidence are presented together with a discussion on the implications of ASEAN's efforts towards regional integration under the AEC initiatives and key deliverables. The availability of ASEAN investment data, particular the outflow foreign direct investment (OFDI), is limited.

INTRODUCTION

Outward foreign direct investment (OFDI) from developing countries has progressively attracted research attention due to its increasing share in world outward flows. According to UNCTAD (2006a), only six developing and transition economies reported outward stocks of more than US$5 billion in 1990. By 2005, 25 developing and transition economies have exceeded that threshold, while contributing to 17 per cent of world outward flows. Malaysia is one of the contributors to this phenomenon. In 1980, Malaysia was ranked 11 in the top 15 developing and transition economies in terms of stocks of OFDI, but it moved up to the tenth position by 2013 (UNCTADSTAT 2014). OFDI in terms of flows surpassed inward flows after 2007, and Malaysia became a net capital exporter.

These changes inevitably lead to comparisons between OFDI from developed and developing economies. Based on the investment development path (IDP) theory, there are five stages of development whereby a country transits from being a net recipient of investment flows to becoming a net source of foreign direct investment (FDI). The first stage is characterized by little inflows and outflows as the country may not have acquired the necessary location-specific advantages to attract inflows, except for given endowments such as natural resources. The firms in the country are also at a nascent stage of development and therefore do not have as yet the firm-specific advantages and resources for investing abroad. In the second stage, inflows start to emerge with the development of location-specific advantages such as increases in per capita income. By the third stage, however, inward flows may start to decline due to erosion of some location-specific advantages such as low labour costs and the increasing competitiveness of local firms as they move up their learning path and acquire firm-specific advantages. Outward stock of FDI may equal or exceed inward stock by the fourth stage, while in the fifth stage, the net investment position hovers around zero with inward and outward stocks tending to be of the same magnitude.

Southeast Asian countries have historically engaged in international trade long before the arrival of European colonial powers in the sixteenth century. The prospects and potential gains from trade and the control of the sources of natural commodities attracted these powers and eventually led to the colonization of much of Southeast Asia. With the exception of Thailand, which was never colonized by any European power, much of Southeast Asia became further integrated with the global economy as foreign colonies. In the aftermath of the Second World War, countries in the region gained independence and with it, sought to develop their economies via export-oriented industrialization. This did not take place simultaneously and concurrently amongst countries in the region. Political and institutional differences meant that some countries (such as Malaysia, Singapore, Thailand and Indonesia) had an earlier head start than others (such as Cambodia, Laos, Myanmar and Vietnam). As a result, there are still large differences in the level of development amongst countries in the region. This continues to be a significant challenge for member countries of the Association of Southeast Asian Nations (ASEAN) as they seek to achieve higher levels of regional economic integration.

One important manifestation of the differences in the level of development amongst ASEAN member countries is the difference in the patterns of foreign direct investment (FDI). At the initial stage of development, most ASEAN countries have abundant labour but lacked capital and technology. For ASEAN countries that adopted the export-oriented industrialization strategy early, the inflow of foreign direct investment (inward FDI) into the export-oriented industries in the manufacturing sector helped overcome these limitations. Over time, as higher levels of development and income per capita were attained, the factor composition in these more developed ASEAN countries began to tilt towards greater capital intensity and higher technology. At this juncture, enterprises in these countries, both local and foreign-owned, began seeking countries abroad to invest in — with the hope of establishing production facilities and/or accessing the final markets in these countries. The result is the emergence of outward FDI (OFDI) from the more developed ASEAN countries. The above transformation has been observed amongst ASEAN countries. Singapore, Malaysia and more recently Thailand has become net-investors in which outward FDI exceeded inward FDI.

INTRODUCTION

For a long time, inward foreign direct investment (IFDI) has more often been studied than outward foreign direct investment (OFDI) in Southeast Asia as most countries in the region are developing countries. IFDI can generate technology transfer and positive spillovers to domestic firms (Blomstrom and Kokko 1997; Alfaro et al. 2003) and promotes economic growth in developing countries (Balasubramanyam, Salisu and Sapsford 1996). Most Southeast Asian countries are still experiencing net inward FDI, with the exception of Singapore. From a comparative advantage perspective, Singapore is a small and open economy with factor endowments skewed towards human and physical capital. Thus, it is not surprising that the country has received and still receives the largest amounts of OFDI in the region. However, given the uniqueness of the Singaporean economy — a city state entrepôt and regional financial centre — a question that arises is whether the country's experience is similar to that of other countries.1 This question can be answered partially by an econometric analysis of the determinants of Singapore's OFDI.

A number of studies have been conducted on this issue, both qualitatively and quantitatively. None of these studies have, however, covered sectoral OFDI beyond the Global Financial Crisis (GFC). This paper seeks to examine the state and determinants of Singapore's OFDI using a dynamic panel data estimation for the period 1994–2012. This study compares the determinants of OFDI stock and flow. It also provides an analysis of total and sectoral OFDI to uncover sector-specific determinants.

The outline of the rest of the paper is as follows. Section 2 presents a discussion on the Singaporean government policy towards OFDI. Trends and patterns are discussed in Section 3. The general and country-specific literature on the determinants of OFDI is discussed in Section 4. This is followed by a presentation of the modelling strategy employed in Section 5. The empirical results are discussed in Section 6. Section 7 concludes.

Outward foreign direct investment (OFDI) from developing countries has been growing significantly since the turn of the century. According to a recent study by UNCTAD, the share of developing country's outward FDI to global outflows has increased from 11.79 per cent in 2000 to 33.79 per cent in 2014. These growing outflows are driven by an increase in capital and trade openness from globalization and economic integration, and an increase in participation in international production networks.

ASEAN, a group of mostly developing countries in Southeast Asia, has, in between times, played an active role in international investment. Many ASEAN countries are already destinations of FDI from the developed economies. More recently, some of these countries have adjusted their own positions from being net capital inflow countries to become net capital outflow countries. Today, the obvious major investors from ASEAN are Singapore, Malaysia, and Thailand — collectively generating 79.54 per cent of outward FDI from ASEAN in 2014. With the advent of the ASEAN Economic Community (AEC) in 2016 and beyond, these net capital outflows from ASEAN to other destinations will continue to expand.

As a matter of fact, outward FDI from ASEAN countries is only at the beginning stage, so there is no wonder why literature on the topic is still very limited. To understand the integrated picture of outward FDI and to foresee the potential future of outward FDI in ASEAN, an overview of outward FDI in the region as well as the role of AEC should be examined. By bringing in the experiences from each country, as major investors or as major recipients of FDI, and the new players in the region will help to contribute to a more complete and integrated picture of international investment in ASEAN.

For this reason, ASEAN Studies Center and the Faculty of Economics, Chulalongkorn University and ISEAS – Yusof Ishak Institute jointly cooperated in this book project. The objectives of this book are to: (1) discuss the development of outward FDI in ASEAN; (2) examine the potential impact of AEC on outward FDI in ASEAN; and (3) discuss the experiences of the major investors from ASEAN (Singapore, Malaysia, Thailand), potential investors (Vietnam and Indonesia) and a major recipient of FDI (Myanmar).

INTRODUCTION

Inward-looking policies brought Indonesia close to bankruptcy towards the end of Sukarno's government in the mid-1960s. In contrast, his successor, President Suharto, started to develop a new development strategy by pursuing an outward-looking policy with more liberal trade and foreign investment regime (Thee 2012). The Foreign Investment Law was enacted in 1967 and the Domestic Investment Law was issued in the following year. The “open door” policy succeeded in attracting new foreign investment flows in the oil sector, other mining projects and the mining sector (Hill 1988, p. 81).

As seen from Figure 6.1, inward foreign direct investment (IFDI) flow increased gradually from about US$145 million in 1970 to about US$1.3 billion in 1975. Then between 1976 and 1989, the average IFDI flow was about US$349 million. IFDI flow gradually increased after 1989 and it reached a peak at US$6.2 billion in 1996, then it declined to US$4.7 billion in 1997 (before the economic crisis in 1997–98). On the other hand, the movement of outward foreign direct investment (OFDI) flow was not as quick as IFDI. However, in 1994, the ODFI flow was higher than IFDI. Even, for seven consecutive years (1998 to 2004), the flow of ODFI was higher than IFDI. In 2014, the flow of ODFI was about US$7.1 billion. The ODFI flow has increased more than double compared to its level in 2005. This indicates that IFDI and ODFI flows have increased in the same direction. By 2014, the IFDI stock in Indonesia was about US$253.1 billion, while the OFDI was about US$24 billion (UNCTAD 2015). This indicates that the share of OFDI stocks to inward FDI stock was about 9.5 per cent.

Today, Indonesia lags in the promotion of OFDI. According to the Central Intelligence Agency (CIA), in term of OFDI stock, Indonesia was ranked 48 out of 93 countries. In the ASEAN region, Indonesia lags behind Singapore (rank 18), Malaysia (rank 27), and Thailand (rank 34).1 As seen from Figure 6.2, in 2012, there were no Indonesian firms in the list of top-100 non-financial Transnational Corporations (TNCs) from developing and transition economies. In the list, about 50 per cent of the top nonfinancial TNCs came from China and Singapore. Thus, Indonesia's companies lack in internationalization record compared to other developing countries.

INTRODUCTION

Foreign direct investment (FDI) has long been a key driver of economic growth and industrialization in the Association of Southeast Asian Nations (ASEAN) countries. ASEAN countries have traditionally been attractive destinations for foreign enterprises and multinational companies (MNCs), thanks to abundant natural resources, cheap and motivated labour force, and its strategic location in Asia. Inward FDI ushers in not only capital resources and jobs, but also knowledge, know-how, technology, and organizational expertise through spillovers as well as backward and forward linkage effects. Through these mechanisms, inward FDI has been part and parcel of economic and industrial development strategies and has seen the region play host to FDI since the 1980s.

However, the past two decades have witnessed rapidly evolving global and regional business environments. China and India have emerged as competing hubs for low-cost production since the 2000s, due in no small part to their large domestic markets and improving connectivity through regional production networks. Many ASEAN countries such as Indonesia, Malaysia, and Thailand have also experienced rising labour costs, thereby making them less conducive for low-cost production. These recent developments caution that the conventional FDI strategies will soon reach the limit of offering the pace of economic growth and industrialization they once achieved.

Given the emerging challenges, ASEAN countries have exhibited a shift in FDI strategies towards outward FDI. Although inward FDI has been, and will continue to be, an important element of economic development, it has been vividly observed that more enterprises, especially government-linked and large businesses, have started to seek new business opportunities overseas and venture in foreign markets. This implies that regionalization and industrialization among firms will serve as another catalyst of economic growth and industrialization in the region.

Against this backdrop, this chapter aims to examine the emerging trends of outward FDI from ASEAN countries and characteristics of outward FDI strategies among three major players, namely Singapore, Thailand, and Malaysia. The lessons learnt from the experience of these ASEAN countries potentially provide interesting insights into the essential policies and reforms which will enable other ASEAN countries to successfully ride the waves of internationalization.

INTRODUCTION

Since the launch of market-oriented economic reforms in 1986, Vietnam has become one of the fastest growing countries in Southeast Asia. During this period, the Vietnamese government has quickly joined the competition for inward foreign direct investment by restructuring the domestic economy and by opening its economy to the external trade and investment.

Foreign direct investment (FDI) is one of the most significant features of Vietnam's movement from a planned economy to a market economy. Since Vietnam's government regulations on foreign investment abroad were signed in 1999, the number of outward FDI (OFDI) projects as well as registered capital has increased steadily. In 2013, the registered capital of Vietnam's outward FDI was more than 157 times of that in 2003 and 789 times of that in 1999. The average registered capital of Vietnam's FDI outflow annually amounted to US$887.5 million. The average value of a project is about US$23.9 million. Although Vietnam's outward direct investment is still small relative to its huge inward FDI, it increased dramatically in Vietnam over time. So how has Vietnam's OFDI performed since economic reforms were carried out in 1986? What are the prospects for the country's OFDI? What policies has the country implemented to increase its direct investment overseas in the long run? This study intends to address these specific questions.

The structure of this chapter is organized as follows. Section 2 presents an overview of the Vietnamese economy's performance. Section 3 briefly shows the development of outward FDI policies in Vietnam. The next section presents the current state of OFDI in Vietnam. Section 5 explains the prospects of Vietnam's FDI outflows. The final section deals with conclusions and policy implications.

THE PERFORMANCE OF VIETNAM's ECONOMY

After Vietnam gained independence in 1975, the country adopted a centrally planned economic regime. This economic model under this regime was based on the classic Soviet-type command economy with strong governmental control over all economic decisions. At this time, all of economic decisions were taken by the State, not by the market. The State not only assumed management functions such as issuing policies, laws, regulations, monitoring and inspecting foreign trade activities, it also fulfilled the functions of guiding business decisions such as fixing the list of trade products, trade markets, and export-import prices.