By the mid-1990s, democracy's third wave had marked two decades of progress. But even as many parts of the developing world joined in, Southeast Asia served up quite mixed results, prompting Donald Emmerson (1995: 227, 238) to classify it as the ‘most recalcitrant region’, steeply resisting both democratizing processes and their comparative analysis. But he now looks upon Southeast Asia with greater optimism, contending that the ‘region is not immune to political change’ (Emmerson 2008: 79). Through a combination of ‘political entrepreneurship’ (agency) and ‘black swans’ (contingency, i.e., ‘a consequential but unexpected event’), he argues that more of Southeast Asia's political regimes may soon be democratized. In addition, though the principle regional organization, the Association of Southeast Asian Nations, is dismissed by most analysts as inutile for political reform, Emmerson (ibid: 77–78) is encouraged by the liberal overtones, however faint, of its recently inked charter, suggesting that democratization may also be hastened by ‘neighborhood effects.’

In making this argument, Emmerson tones down the causality usually attributed in Southeast Asia to structural and institutional forces. He writes that democracy's advance in Southeast Asia ‘depends less on underlying preconditions than on political entrepreneurship of the right kind’ (ibid: 79). He notes too the catalytic effects of black swans, in particular, the mis-fortuna of financial crises and natural disasters that has hastened regional cooperation between governments. Accordingly, Emmerson shifts attention back to the agency and contingency that once were spotlighted by O'Donnell and Schmitter (1986), as well as the regional ‘snowballing’ elaborated by Huntington (1991: 104–6). He thus poses a striking challenge to much recent scholarship which, in veering from democratic transitions to authoritarian durability, has moved steadily away from elite-level preferences and relations to structures, institutions, and mass-level formations.

Democracy in Indonesia raises some separate, yet related questions about dur-ability. The configuration of elites in the country has grown wider and more varied. Yet relations have remained characterized by much forbearance, at least at the national level, with the interests of new elites in political parties and legislative bodies accommodated by traditional elites in the bureaucracy and military. As collusion deepens, democracy's quality is diminished, of course, by the patronage that elites so vigorously pursue and the reserve domains that they tenaciously defend. But it is here that democracy's quality and persistence intersect.

The year 2012 has brought to the fore the difficult realities of a region adapting to a more competitive global environment. With intensifying great power rivalry in the region, continued global economic uncertainty and legitimacy challenges of Southeast Asian leaders, the strains of maintaining consensus within ASEAN, promoting shared economic opportunities and maintaining stability while meeting governance demands have become more prominent. While regional politics in the past year illustrated some of the serious obstacles the region as a whole faces in working collaboratively, developments also highlighted new initiatives that are being introduced to promote the welfare of Southeast Asians.

From a regionwide lens, the dominant story of the year was ASEAN. In this forty-fifth year of ASEAN's founding, this was perhaps one anniversary best forgotten. The failure of the organization to sign a basic communiqué in the July meeting in Phnom Penh and the limited traction on the code of conduct agreement with China over the contentious South China Sea issue at the East Asia Summit in November showcased the divisions among member states rather than a strengthening regional architecture.

After the years during which ASEAN developed stronger regional ties and excelled itself on the international stage under the chairmanships of Indonesia and Vietnam, 2012 was a wake-up call of the hurdles ahead for ASEAN under comparatively weaker chairs of the region's smaller countries. Under Cambodia's chairmanship, the dominant mode was one of limited consensus, showcasing division rather than unity.

The primary source of division reflects divergent views of the role of China in the region. From 2008, China has become more assertive in its territorial claims in the South China Sea. China's presence has extended economically as well, including stepping up efforts to control oil and gas production. Differences between the South China Sea claimant Philippines and strong China-ally and this year's ASEAN chair Cambodia in particular were quite pronounced, limiting the ability of member states to reach common ground. The year passed without the passage of a code of conduct after the ten-year period allocated to address this matter expired.

Part of this was due to developments outside of Southeast Asia. Both China and the United States consciously opted for a more competitive dynamic in their relations with the region. The United States set the course by deepening its “pivot” approach to Asia, renamed “rebalancing” at the June Shangri-La Dialogue.

On 8 August 1967 the “Bangkok Declaration” gave birth to ASEAN, the Association of Southeast Asian Nations, an organization that would unite five countries in a joint effort to promote economic co-operation and the welfare of their peoples.

After repeated unsuccessful attempts in the past, this event was a unique achievement, ending the separation and aloofness of the countries of this region that had resulted from colonial times when they were forced by the colonial masters to live in cloisons etanches, shunning contact with the neighbouring countries.

In effect this historical event represented the culmination of the decolonization process that had started after World War II. Following their victory in the war, the colonial powers tried their best to maintain the status quo. However, since they had not even been able to ensure the protection of their territories against the Japanese invasion, how could they justify their claim to control them again. In their defeat, the Japanese had effectively undermined colonial rule by granting some form of autonomy or even independence to the territories they had earlier invaded, thus sowing the seeds of freedom from the colonial masters. The process of decolonization, inside and outside the United Nations, then advanced at a fast pace and led to the emergence of a number of independent and sovereign nations.

This created an entirely novel situation which necessitated new measures and structures. Thailand, as the only nation which had been spared the plight of colonial subjection thanks to the wisdom and political skill of its Monarchs, felt it a duty to deal with the new contingencies. Pridi Panomyong, a former Prime Minister and statesman, tried to promote new relationships and co-operation within the region. I, myself, posted as the first Thai diplomat in the newly independent India, wrote a few articles advocating some form of regional co-operation in Southeast Asia. But the time was not yet propitious. The world was then divided by the Cold War into two rival camps vying for domination over the other, leading the newly emerging states to adopt a non-aligned stance.

When, as Foreign Minister, I was entrusted with the responsibility of Thailand's foreign relations, I paid visits to neighbouring countries to forge co-operative relationships in Southeast Asia. The results were, however, depressingly negative.

INTRODUCTION

Security cooperation between China and the Association of Southeast Asian Nations (ASEAN) has not attracted much sustained attention, perhaps because it is not the kind of multilateral security cooperation one sees in NATO, the EU, or the Organization for Security Cooperation in Europe (OSCE). The Western model features treaty-based institutions, formal voting procedures, and binding rights, rules, and obligations for members. China-ASEAN security cooperation lacks these formal institutional traits; it has developed in the area of non-military threats to security. Accordingly, Western security analysts tend to view China-ASEAN non-traditional security (NTS) cooperation as being weak, ineffective, and lacking in strategic importance. The situation is further clouded by the fact that ASEAN is involved in schemes of NTS cooperation with countries other than China (e.g., Japan), and that the U.S. maintains strategic dominance through its military alliances and bases in East Asia.

Nevertheless, Western analysts have the necessary analytical tools to appreciate how China-ASEAN NTS cooperation has become an institutionalized process that affects both the strategic and political future of East Asia. The China-ASEAN “strategic partnership” is managed in an annual cycle of summits and high-level meetings that guides not only NTS cooperation but also the China-ASEAN Free Trade Area (ACFTA). This meeting-driven process constituting China-ASEAN economic and security cooperation has advanced concrete security cooperation schemes far more than either the Asia-Pacific Economic Cooperation (APEC) or ASEAN plus Three processes. Several key observations about the significance of this can be made. The formation of a China-ASEAN security regime internalizes the bilateral asymmetry in power, allowing China to address ASEAN's security and collective action problems as a leader. China-ASEAN NTS cooperation also facilitates military-to-military cooperation; it expands the offshore role of China's army and navy.

WHY IS NON-TRADITIONAL SECURITY IMPORTANT?

“Non-traditional security” is the term that China and ASEAN use for their cooperation in meeting non-military threats. Areas of cooperation include piracy, smuggling, human trafficking, drug trade, transnational criminal organizations, illegal immigration, cyber-piracy and cyber attacks, terrorism, subversion, and ethnic/religious movements. In addition, there are natural threats such as epidemics, typhoons, earthquakes, and tsunamis that require cooperation in disaster and post-disaster relief, disease control, and food security.

When Southeast Asia emerged slowly from the clutches of colonialism in the last century it was a region riven with conflict and instability. On the domestic front, renewed nation-building was often a painful process that had to contend with insurgencies, secessionist movements, political unrest, civil strife and coups.

Relations among states were frequently bad too. Historical enmities bred by past conflict, territorial sovereignty issues and disputes over land and maritime borders undermined bilateral relations and regional peace. Border incidents, armed confrontations and disruptions in diplomatic ties were normal features of the prevailing environment. Vietnam even invaded its neighbor, Cambodia, in 1978 and occupied the country for a decade. Major power conflicts and the Cold War also divided Southeast Asia into communist and non-communist halves.

Southeast Asia is very different today. The countries of the region are largely at peace with themselves and with each other. There has been a sea change in the level of trust among them. The remaining territorial disputes are muted and are being handled peacefully through diplomacy, negotiations and international arbitration.

Applying the model postulated by Emanual Adler and Michael Barnett in their book Security Communities (1988), the 10-member Association of Southeast Asian Nations has transformed itself from a “nascent” to a firmly “ascendant” security community. Indeed, war today between neighboring ASEAN states (such as the Indonesian “confrontation” with Malaysia in 1963–1966 and Vietnam's invasion of Cambodia) is generally unthinkable, and ASEAN is evolving into a security community in the classic Deutschian sense.

Despite some lingering problems aggravated by residual territorial disputes and other occasional bilateral issues, progress towards the creation of an ASEAN Economic Community by the end of 2015 and thereafter is set to further strengthen the bonds of trust and the emergence of a credible community in Southeast Asia.

There is another, profoundly significant dimension to the achievement of these Southeast Asian states. This is their remark-able ability to attract all the major, middle and lesser powers outside Southeast Asia to join various ASEAN-centered platforms for regional co-operation and trust- building in East Asia and the Asia-Pacific region.

The ASEAN Regional Forum, ASEAN Defense Ministers Meeting Plus, ASEAN Plus Three process and the East Asia Summit all contribute to trust and confidence in the wider region, both directly and indirectly.

Southeast Asia has often had to react to developments taking place in the world outside. International tensions played an important role in the formation of ASEAN in the late 1960s. In recent years, the influence of global changes has intensified. On the economic front, Prema-Chandra Athukorala and Archanun Kohpaiboon talk about the emergence and subsequent deepening of global production networks further integrating a number of Southeast Asian economies with major East Asian manufacturing powerhouses such as Japan, South Korea and Taiwan. ASEAN's goal of establishing a single market and production base reflects the importance it attaches to the integrating of its economies into the global production network. Be that as it may, as Hal Hill has pointed out, the convergence and integration of ASEAN economies is still an on-going and slow process. This has not, however, prevented ASEAN from creating cooperative mechanisms, processes and institutions aimed at mitigating risks from external shocks such as the Global Financial Crisis in 2007/2008. This is discussed by Jayant Menon and Aekapol Chongvilaivan, and Jayant Menon and Thiam Hee Ng.

Another important development, which is debated by Razeen Sally, is the rise of China as a major global economy since the 1990s. This has had significant impact on trade and foreign direct investments (FDI) in Southeast Asia. For one thing, Southeast Asian countries is now more dependent on trade with China, whilst the two at the same time have become competitors in attracting FDI. Ja Ian Chong analyses the rise of China from a geo-strategic and political perspective. The rise of China has also increased tension between China and Japan, and between China and the United States. The maritime disputes over the South China Sea and the Diaoyu/Senkaku Islands have further compounded the problem. ASEAN's responses to these challenges have included economic-oriented initiatives, such as the establishment of the ASEAN-Japan free trade agreement and the American-led Trans-Pacific Partnership Agreement. Chien-Peng Chung argues how cooperation and rivalry between these countries have also been played out in various ASEAN-based multilateral forums, such as the ASEAN Regional Forum and the ASEAN Plus Three.

Southeast Asian countries will continue to respond to external forces in the future — both individually and collectively. The challenge they face is one of finding space to shape their separate destinies whilst functioning within a regionally integrative context. ASEAN centrality is a manifestation of this balancing act.

INTRODUCTION

From being a furniture businessman in the Javanese city of Surakarta, Joko “Jokowi” Widodo became the city's mayor in 2005, then Governor of Jakarta in 2012, and finally went on to win the Indonesian presidential election in 2014. To assume the highest political office of the land after a formal political career of merely nine years is exceptional by any standard. Needless to say, Jokowi's meteoric rise as a political celebrity has created much hype and expectations, both domestically and internationally. Jokowi's supporters see him as the champion who will finally bring about clean and efficient governance in Indonesia, while international analysts interpret his victory as a close call in favour of democracy (Aspinall and Mietzner 2014).

I would like to suggest that Jokowi's rise as a political star was possible because of significant changes in the political system in Indonesia. The implementation of political decentralization or what is known as “regional autonomy” since the end of Soeharto's New Order era in 1998 led to the emergence of regional political elites (Lane 2014). In particular, the direct election of leaders since 2004, from mayors to district heads, governors and the president, democratized the electoral process, and made these elections a broad contest of popularity among a wide range of candidates. Many work without robust party structures and ideological platforms, and established political parties often play a secondary role. In what follows, I will consider the rise of the political figure in Indonesian politics and its relationship with political parties in practice.

POLITICAL FIGURES AT THE CENTRE OF DECENTRALIZATION

With the end of the New Order regime, Indonesia embarked on the road of democratization and decentralization. The promulgation of Law No. 22/1999 and Law No. 25/1999 gave greater political authority and control over revenues to the districts and municipalities. These became key administrative units for the implementation of “regional autonomy” and they proliferated, growing from 341 districts and municipalities in 1999 to 440 in 2004, and now to more than 500. At the same time, with the devolution of power and revenue to these regional administrative units, regional political elite emerged and entrenched themselves, sometimes as political dynasties, such as the Sochib family in Banten (Buehler 2013; Hamid 2014).

INTRODUCTION

ASEAN has made a remarkable achievement in liberalizing trade in goods. The progress made in liberalizing trade in services, however, has not been as impressive. Liberalization efforts in services in the past have been focused on two areas: the promotion of trade services by using the GATS approach of request and offer of liberalization by services sector and the promotion of flows of skilled labour through the establishment of Mutual Recognition Arrangements (MRAs) of professional services.

ASEAN FRAMEWORK AGREEMENT IN SERVICES

ASEAN has completed seven packages of commitments to liberalize services trade thus far. But negotiations for the past fifteen years have resulted only in marginal liberalization of trade in services in ASEAN.

Lim (2008) quantified commitments made in AFAS compared to those made in the GATS. Table 1 illustrates the Sectoral Coverage Ratio (SCR) of AFAS commitments. SCR is defined as the ratio of GATS + AFAS sectoral coverage in the numerator and the GATS sectoral coverage in the denominator. That is, the larger the ratio, the more advanced are commitments made in the AFAS as compared with those made in the GATS. The minimum ratio, which is one, indicates that concessions made in the regional forum under the AFAS are not any more advanced than those made in the multilateral forum under the GATS.

As can be seen, except for Brunei, Myanmar and the Philippines, the SCR figures for member countries are marginally greater than one. The low SCR scores for Cambodia and Vietnam, however, can be explained by their already advanced liberalization commitments made in WTO (due to their relatively late accession) rather than their unwillingness to open up their services sector at the regional level. Table 1 shows quantitative indicators of individual ASEAN country's GATS commitments index. As mentioned earlier, Cambodia and Vietnam obtain the highest scores of 49.08 and 30.15, respectively. Brunei and Myanmar made very little concession in the GATS, while larger ASEAN economies such as Indonesia, the Philippines, Thailand, Malaysia, and Singapore, receive scores that range from the lowest at 9.52 for Indonesia to highest at 25.4 for Malaysia. For these countries, barring the Philippines, AFAS commitments are only marginal to those made in the WTO as the SCR figures are between 1.09 for Singapore and 1.56 for Indonesia. ASEAN's average SCR score is only 1.58.

It has taken ASEAN a whole decade to translate its vision of an ASEAN economic community into a blueprint. The beginning was the ASEAN Vision 2020 that was adopted by the ASEAN leaders in December 1997 in Kuala Lumpur. The vision envisaged “a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services, investment and freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities” by the year 2020. The Hanoi Plan of Action was issued as a first step to implement the vision.

A further boost came from the Summit in Bali in October 2003, when the leaders signed the Declaration of ASEAN (Bali) Concord II. They declared that the ASEAN Economic Community (AEC) shall be the goal of regional economic integration as outlined in the ASEAN Vision 2020. In December 2005, the ASEAN Leaders discussed the acceleration of the AEC to 2015.

Subsequently, the High Level Task Force (HLTF) on ASEAN Economic Integration took up the matter and recommended to the ASEAN Economic Ministers (AEM) that the establishment of the AEC be advanced from 2020 to 2015. They also requested the ASEAN Secretariat to develop “a single and coherent blueprint for advancing the AEC by identifying the characteristics and elements of the AEC by 2015 consistent with the Bali Concord II with clear targets and timelines for implementation of various measures as well as pre-agreed flexibilities to accommodate the interests of the CLMV and other concerned Member Countries”. The AEM endorsed the recommendation and agreed to propose the acceleration of the AEC to the leaders at their Summit in January 2007 in Cebu, the Philippines.

At the ASEAN Summit in November 2007 in Singapore, the leaders adopted the AEC Blueprint. They stated that each ASEAN member country shall abide by and implement the AEC by 2015. They also tasked the concerned Ministers, assisted by the ASEAN Secretariat, to implement the AEC Blueprint and to report regularly on the progress of its implementation through the Council of the AEC.

THE BLUEPRINT

The AEC Blueprint is the first of its kind for ASEAN. The Blueprint has been crafted to realize the AEC, defined by its four main characteristics, namely, a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.

INTRODUCTION

So much has changed since China joined the World Trade Organisation (WTO) in late 2001. In the past decade China has become the leading regional power in Asia, and is on its way to becoming a “great power” in the wider world, alongside the USA. These trends have clearly accelerated in the wake of the global economic crisis.

China is now one of the Big Three in the global economy. Until recently, it imported “global order”: it absorbed policies, rules and institutions that materialised from decisions made elsewhere. China still imports global order; but, given its market size, and like the USA and EU, it now exports global order as well. But, given the speed and scale of this transformation, China has evident difficulty in acting like a rule-setter and system-shaper — in other words, like a leader (or co-leader) of the world trade order.

TRENDS UP TO WTO ACCESSION; TRADE AND FDI PATTERNS

China's “Reform” and “Opening” started in 1978. But its decisive external opening, and with it sweeping industrial and agricultural restructuring, belong more to the post-Tiananmen phase, especially since 1994. China undertook enormous trade and FDI liberalisation during the 1990s — before WTO accession in 2001 — followed by another big dose of liberalisation in line with its WTO commitments.

It is important to note that the primary liberalisation thrust, especially in the 1990s, was domestic and unilateral, coming from the Beijing leadership. China's WTO commitments, and its participation in the WTO after accession, can be read as more the consequence than the cause of its sweeping unilateral reforms.

China's weighted average tariff is just over 4 per cent — low-ish by developing-country standards and the lowest among large developing countries (e.g. compared with other BRIICS — Brazil, Russia, India, Indonesia and South Africa). Trade liberalisation also whittled down the impact of border non-tariff barriers (NTBs) to about 5 per cent on the eve of WTO accession. Overall, border barriers on goods trade have come down to Southeast-Asian levels, and have been locked in by much stronger WTO commitments. China's GATS commitments are very strong.

China has climbed up the world rankings for trade and FDI with lightning speed.

Security and economy have been, and remain, the standard fare of ASEANology. Democracy has been an afterthought in this literature. That is partly why I have chosen, in this article, to feature democracy to the relative neglect of security and economy.

I begin by drawing what I hope are some useful analytic distinctions between Southeast Asia as a region and ASEAN as an organization. Next I discuss the challenge of transforming Southeast Asia into something more than a collection of states — that is, a community. I then ask whether the Association can and should favour democracy in Southeast Asia on the one hand, and inside its own organization on the other. I close by returning to my point of departure in the above epigraphs to discuss ASEAN's delayed response to the 2007 crisis in Myanmar in the context of democracy in the region and in the organization.

REGION ≠ ORGANIZATION

Southeast Asia the region and ASEAN the organization are not the same thing. It is not quixotic, however, to question the isomorphism of ASEAN and Southeast Asia that the Association has so successfully cultivated for so long. Two objections come to mind. One is spatial, one is social, both are political, and both are, in their own ways, “challenging ASEAN”.

The spatial caveat entails this question: What happened on 20 May 2002, when the former Indonesian province of Timor-Leste was internationally recognized as an independent state that did not then, and in 2007 still had not, joined ASEAN? By that account, the region trumped regionalism, and from that date onward, ASEAN could no longer claim to represent all of Southeast Asia.

Timor-Leste wants to join ASEAN, but ASEAN has been less than eager to let it in. That reluctance reflects four non-technical concerns: that Timor-Leste is either a failed or failing state whose membership could become a headache for the other members; that its abject poverty could burden them materially as well; that its foreign policies might be too heavily influenced by outsiders, notably Australia and Portugal; and that its leaders’ public criticism of the junta in Myanmar for violating human rights could augur disloyalty to the speak-no-evil-of-a-fellow-member “ASEAN Way”.

INTRODUCTION: ASEAN's QUEST FOR REGIONAL INTEGRATION

In December 1997, the ASEAN Vision 2020 statement outlined the notion of a single community in Southeast Asia, which, by 2020 would be “a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development, and in a community of caring societies.” It was the first attempt to pull together the different spheres of regional cooperation — political, economic and social — that had, up to then, pursued largely separate paths in progressing the Association's goals in each of the areas. The 9th ASEAN Summit in 2003 defined the three “community pillars” that formed the foundation for a single integrated ASEAN Community, which are “closely intertwined and mutually reinforcing for the purpose of endurable peace, stability and shared prosperity in the region”. The “deadline” for achieving this was shortened from 2020 to 2015 at the 12th ASEAN Summit in 2007.

One can argue that ASEAN is already a community, mainly because the member states — and the numerous dialogue and development partners — have willed it to be so. Yet, there are views expressing doubt about ASEAN's ability to create a single market and production base by 2015. Analysts attribute this gap between commitment and implementation to a lack of identification with mutual benefits under regional cooperation. ASEAN sceptics point to the tendency of ASEAN members to prioritise national interest over regional commitment.

ASEAN INTEGRATION GOALS

ASEAN's first decade was focused largely on consolidating the Association's foundations, and establishing the necessary mechanisms and processes for regional cooperation. The years 1977 to 1997 were ASEAN's expansion years. External relations through the Dialogue Partner system were established, expanding steadily to the current number of ten full Dialogue Partners and one sectoral partner. These two decades were also the years of expanding ASEAN membership. The present decade spanning 2008 up to the ASEAN Community's planned announcement in 2015 constitutes ASEAN's community-building years, where documents including the ASEAN Charter (which entered into force in 2008), the Community Blueprints for each sphere of cooperation, and the Initiative for ASEAN Integration (IAI) Work Plan all emphasise joint effort for mutual benefits in achieving peace and prosperity for ASEAN's peoples.

PEACE

ASEAN as a political and security community has been the Association's raison d’être.

In the minds of ASEAN stakeholders, the ASEAN development gap is the disparity that exists between the ASEAN-6 and CLMV groups — that is between the original members of ASEAN (Singapore, Malaysia, Indonesia, Philippines and Thailand, plus Brunei Darussalam) and the latter joining members (Cambodia, Lao PDR, Myanmar and Vietnam). The narrowing of this gap has been a focus of ASEAN since the launch of the Initiative for ASEAN Integration (IAI) at the Fourth Informal ASEAN Summit in 2000. Narrowing the development gap is a cornerstone of the equitable economic development agenda within ASEAN and forms an important part of the ASEAN Roadmap. ASEAN recognises that the gap between its member countries needs to be narrowed if it is to move forward in a more unified manner towards the achievement of an equitable ASEAN community.

This chapter provides a definition of the development gap that is consistent with current international thinking on the meaning of development. In line with the writings of Nobel Prize-winning economist Amartya Sen, and widely accepted quality of life or standard of living conceptualisations, it treats development as an end or as an outcome in which people are provided with the opportunity to exercise their reasoned agency. As such it does not define the development gap in terms of the many drivers of development in ASEAN member states, but as the quality of life outcomes that these drivers generate.

The drivers of development identified in this chapter are those for which there is both robust theoretical and empirical support, as well as those with broad acceptance in policy circles. These drivers will differ in importance among ASEAN countries. All these drivers are important in all countries, although their relative importance to countries at varying stages of development may differ. The identified drivers include trade openness, investment in human and physical capital, governance and institutions, labour mobility and external development finance. Processes through which these drivers contribute to development and to development gaps are identified.

Development, broadly speaking, is seen as multidimensional, involving achieve-ments in universally valued quality of life outcomes. Defining development in terms of achievements in or levels of health, education and income has clear implications for how development gaps are defined and measured. As these achievements differ among individuals according to the country in which they live, development in this sense varies among countries.

INTRODUCTION

Five years after the Global Financial Crisis (GFC), the economies of the United States and the eurozone continue to struggle, with the eurozone recovery lagging behind that of the United States.

European banks’ funding conditions have been worsening as evinced by slower bond issuance (Bank for International Settlements 2012). Worries about the health of the banking system have also led to a rash of withdrawals by bank depositors. The banking system in the United States is relatively healthier as losses have been recognized and banks have undertaken recapitalization. Nevertheless, the troubles facing European banks could also affect the liquidity situation in the United States.

Given the fragility of the financial system, what are the possible impacts of a shock to the financial system in the eurozone on the economies of Southeast Asia?

SOUTHEAST ASIA AFTER THE GLOBAL FINANCIAL CRISIS

The initial impact of the 2007/08 GFC was felt more on the real side. A huge decline in exports led to a sharp slowdown in the region's economic growth. However, this impact was short lived.

On the financial side, there was also an initial outflow of foreign capital from the region's economies. However, fund inflows resumed quickly. The region's financial system has become more resilient following the reforms carried out after the 1997/98 AFC. Nevertheless, capital inflows to the region have remained volatile.

The inflow of foreign capital to the region can be beneficial as it supplements the domestic resource base and facilitates the transfer of technological knowledge and managerial expertise from abroad. However, sudden stops and reversals in capital flows could disrupt financial systems and lead to macroeconomic instability.

An attempt to sterilize inflows will only create excess liquidity in domestic financial markets, resulting in exchange rate misalignments, and ultimately derailing economic stability and growth. Policy-makers fear that the surge in capital flows could lead to asset bubbles and exert upward pressure on the exchange rate.

Given the threat to the region's economies, governments acted quickly to implement fiscal and monetary stimulus. Higher initial policy rates compared to those in the United States and Europe provided ample room for the region's monetary authorities to reduce interest rates.

Monetary policy easing has had the desired impact of increasing bank lending in the Asian economies.

INTRODUCTION

In December 2014, Chinese Premier Li Keqiang attended a Shanghai Cooperation Organization meeting of prime ministers in Kazakhstan. He traveled on and met 16 other government heads at the third China-Central and Eastern European Leaders’ Meeting in Serbia where he advertised a US$10 billion Chinese credit line for infrastructure development, a US$3 billion Chinese equity investment fund, and a deal to build a new railway link from Budapest through Belgrade and Skopje to the Greek port of Piraeus on the Mediterranean Sea. Li Keqiang then departed for Thailand where he signed a US$ 10.6 billion financing deal to build the Thai segment of a railway that will connect Bangkok to China, and he pledged US$3 billion at the Greater Mekong Subregion Economic Cooperation summit to finance infrastructure connectivity, Chinese machinery exports, and poverty reduction efforts.

The connection between these far-flung destinations is China's two Silk Road initiatives. Xi Jinping announced the Silk Road Economic Belt initiative during his tour of Central Asia in September 2013. This envisions efficient, high volume land connectivity between China and Europe — with links to all major sub-regions along the way. He announced the 21st Century Maritime Silk Road initiative during his visit to Indonesia in October 2013. This envisions Chinese participation in the development of major ports on the Eurasian rim between China and the Mediterranean Sea in order to promote maritime connectivity. China refers to this pair of initiatives as “One Belt, One Road” (yidai-yilu). Together, the two Silk Roads constitute a grand vision of Eurasian integration under China's leadership.

THE TWO SILK ROADS

This vision is inspired by China's rise to great power status and the transition back to structural bipolarity in the international system. China's neighbours are becoming ever more dependent on it for money, finance, and trade, while the rest of the world looks to Beijing to drive global economic growth. Judging from his speeches at Chinese Communist Party central leadership meetings and at international summits, Chinese President Xi Jinping is implementing an ambitious geo-strategic vision of a China-centric order in Asia and the long-term integration of Eurasia to serve China's growth and development needs.

This section offers a broad picture of the diverse landscapes in Southeast Asia in which the relationship between civil society and state varies according to the political system, historical circumstances and societal complexion of different countries. It seeks to identify common trends and idiosyncrasies in order to provide a regional overview of civil society in Southeast Asia.

THE ROLE OF THE STATE IN ASEAN MEMBER COUNTRIES

Throughout the 10 ASEAN member states, the state continues to be the most crucial player in setting the conditions for civil society. The state has the power, through the institutional capacities at its disposal, to determine the character and agenda of civil society organisations (CSOs).

However, while the state is a primary player in contemporary societies, the everyday reality on the ground may not necessarily reflect this. As the country chapters indicate, in some countries, civil society has emerged as the key facilitator of public services and education. Here, civil society has either taken over or strongly supplements the state's traditional role in providing public services.

In other cases, the state may indirectly determine the agenda of CSOs through government policies, which may further entrench economic, political, ethnic, religious or cultural divisions in society. Whether in the areas of the economy, housing, or politics, minority groups may be marginalised, resulting in the emergence of CSOs to offer representation. In such instances, civil society-state relations may be strained.

CIVIL SOCIETY-STATE WORKING RELATIONSHIPS: TACIT UNDERSTANDING, ADVOCACY-ORIENTED AND MEDIATED

In light of the diverse conditions, there is no single ASEAN norm or regional modus operandi with regard to civil society-state collaboration or co-operation. CSOs in the ASEAN member countries have had to adapt to and negotiate the specific political and historical terrain in their respective countries.

The working relationship between CSOs and the state may best be characterised as one of ‘tacit understanding’ where there is a convergence of interests between CSOs and the state, especially in the area of public service delivery. The authoritarian state may not have the capacity, expertise or the (political) will to effectively deliver basic public services such as health and educa-tion, and thus relies on CSOs and/or international non-government organisations (INGOs) to fund and deliver such basic services.

REGIONALISM IN EAST ASIA

From Market-Driven Integration to Governance

In the 1990s, virtually only ASEAN countries made an effort to create a free trade area in East Asia and to harmonize limited aspects of economic policies, such as investment and services. The lack of a formal regional arrangement was due to a combination of factors, ranging from a lack of vision to then sufficient unilateral actions, a lack of importance given to intra-regional economic relations by regional governments, and external pressure — mainly from the United States. It is interesting to note that before the new millennium, Japan did not have a single treaty for investment protection — such treaties normally take the form of a bilateral investment treaty — with an East Asian country, while it had established intensive trade and investment relations for decades.

Regionalism in East Asia entered a new phase when China announced its intention to have an FTA with ASEAN, which was implemented in 2003. Partly because of the domino effect and fear of trade diversions, other countries in the region — including Japan — started to embrace regionalism. This opened up an opportunity for Japan to address some problems related to market-driven integration with its counterparts. Economic and trade relations between Japan and other countries in the region have grown so extensive that they require a more harmonized international regulatory framework. Japan came up with a strategy of building comprehensive economic partnerships with ASEAN countries that went beyond traditional trade liberalization.

This was done by including various provisions and commitments on behind-border issues in an agreement between ASEAN member countries and Japan — the ASEAN-Japan Economic Partnership Agreement. Those BBIs’ (behind-border issues) provisions set international rules for various economic matters normally determined domestically. The agreement provides cross-border governance for trade, investment, and production relations between Japan and ASEAN countries. This move was followed by other countries in East Asia, including South Korea and Australia.

BEHIND-BORDER ISSUES: AN OVERVIEW

Disciplining Integration: Importance of Behind-Border Issues in East Asia

A firm's objective in opening production bases and sourcing intermediate inputs overseas is to take advantage of geographical differences in price of production. While this strategy offers many advantages, it also brings up problems that do not exist with more conventional production activities.