Introduction

Indonesia in 2013 was a nation in anticipation. Unlike the 1990s, when Indonesia was waiting for the fall of authoritarianism, it now waits for the next stage of democratic consolidation. 2014 will see the fourth parliamentary election and third presidential election since the Reformasi movement in 1998. The Susilo Bambang Yudhoyono (SBY) administration has overseen much progress for Indonesia's electoral democracy, in particular the full implementation of the direct election of regional leaders. However, some of the aspirations of the Reformasi movement remain unfulfilled. Corruption is still deeply embedded, and parties are yet to fully act as institutional conduits for the interests and aspirations of the people. As SBY will not be able to run for a third term in office, the political buzz in 2013 revolves around the question of who will become Indonesia's second popularly elected president, and whether he or she will be able to resolve some of the country's deep-seated problems. In addition to widespread corruption, which has plagued and limited the effectiveness of political parties, sectarian and communal tensions continued to brew in 2013 under the watch of a weak state.

On the international front, Indonesia continued to pursue an agenda of international and regional cooperation through the Asia-Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN) platforms, as well as ties with regional economic powerhouses such as China, India and South Korea. While relations with Australia's new Abbott government started off on a sure footing, this was soon marred by a diplomatic spat over accusations that the Australians had been wiretapping Indonesian leaders. At the same time, the Indonesian economy faced tough challenges managing its growing current account deficit amidst capital outflows as the US tapers off its loose monetary policy. The issues that Indonesia faced in 2013 will be addressed in turn in the following sections.

Corruption: One Against A Million?

Public attention on corruption continued to heighten as more high-profile cases captured the headlines. Besides showing the prevalence of corruption, the latest cases proved that it was not only well-institutionalized but also adaptable. While the Komisi Pemberantasan Korupsi (KPK, Corruption Eradication Commission) had made serious inroads into eradicating corruption through the prosecution of high-profile politicians and officials, the remarkable scale of corruption these cases reveal suggests that fully clamping down on corruption remains a substantial challenge in Indonesia.

For a Cambodia that has revealed few surprises over the last two decades, 2013 proved to be a year of unprecedented volatility. Along with persisting conflicts and violence over land grabs, labour exploitation and environmental degradation, Cambodia's political landscape of 2013 was taut with tension in Thai-Cambodia relations over the Preah Vihear temple that even the November ruling of the International Court of Justice at the Hague has yet to quell, and anxieties engendered by the national elections in July that locked the country in a political impasse, setting off mass mobilization at a level it had not seen in decades. King Norodom Sihanouk's cremation in February marked the end of an era, evoking an ever-looming question about the role and future of the monarchy in Cambodia. The year closed with the theft of the Buddha's relic from Udong, the historic final resting place for Khmer monarchs, that brings to the fore concerns about corruption, lawlessness, and general moral failings of the nation where the overwhelming majority of the population is Buddhist.

Politics

While many looked on in anticipation with the customary dose of jadedness, this year's elections, with eight contending parties, brought both a replay of previous election dramas as well as some unexpected developments. Despite the nervous atmosphere that preceded and followed the casting of the ballots on 28 July, marked by pre-emptive deployment of military police units from the provinces to the capital, and despite early instances of violence directed at peaceful protestors, there was a noticeable restraint on the part of the ruling Cambodian People's Party (CPP), once again the declared winner of the elections, that can be read as a sign of the system's increasing political maturity or the astuteness of a regime that recognizes the volatility of the situation.

The decline in political violence notwithstanding, the elections were marred by irregularities, intimidation of members and leaders of the opposition parties, suppression of the media, allegations of fraud, overall lack of accountability and utter disregard for recommendations repeatedly made by the United Nations and donor countries for electoral reform; failure of Phnom Penh to heed earlier appeals had led British election monitors to refuse involvement in the recent elections.

Overall, 2013 was certainly annus mirabilisfor Singapore owing largely to major socio-political domestic issues seizing newspaper headlines. Domestic events have been so jarring to the Singaporean soul that some have even taken to describing such events as characteristic of a nation undergoing a mid-life crisis. In comparison, issues related to foreign affairs were remarkably steady and tame. Moreover, discussions on economics — customarily at the forefront of Singaporeans’ minds — took a back seat to socio-political issues, with the economy doing better than expected as Gross Domestic Product grew by 3.7 per cent and median salaries increased by 3.9 per cent in real terms. With socio-political domestic issues consuming the attention of most, it is somewhat unsurprising that the year was bookended by a by-election loss for the ruling People's Action Party (PAP) candidate on 27 January and Singapore's first riot in forty years by a large group of foreign workers in Little India on 8 December.

Domestic Political Developments

Another By-Election Loss

In a year littered with noteworthy socio-political issues, perhaps the major socio-political event of 2013 in Singapore was PAP candidate Koh Poh Koon's by-election loss to Workers’ Party (WP) candidate Lee Li Lian in the singlemember constituency of Punggol East. The constituency had become vacant owing to the resignation of its MP and Speaker of Parliament Michael Palmer after revelations of an extra-marital affair in late 2012. Through her victory in a by-election that also saw the Reform Party and the Singapore Democratic Alliance field candidates, Lee became the first female opposition member to win a single-member constituency since Singapore achieved political independence in 1965. The WP win was the PAP's second consecutive by-election loss in twelve months.

Many viewed the result as heralding the first signs of a cataclysmic change in the Singapore political scene. One political commentator even described the result of the Punggol by-election as “devastating” for the PAP and said that they should interpret the results as “more than a wake-up call” as their “efforts to win over the electorate are not working”. By and large, the result of the by-election was significant for three reasons. Firstly, the sizable (nearly 11 per cent) winning margin between the top two candidates in a four-corner fight may indicate how the WP is, from the electorate's perspective, becoming an increasingly credible check to a PAP-dominated Parliament.

Introduction and Summary

If the global economic recovery unfolds as expected, the Singapore economy should enjoy a reasonably good year in 2014 and beyond. The G3 economies to which Singapore remains highly geared are poised to recover in 2014 and build further momentum after that. Singapore's prospects are also boosted by the fact that it sits at the centre of a region that is enjoying a dramatic economic transformation. Even if China's growth slows a tad, its impact will remain powerful while the growth in India and ASEAN will add further vibrancy to Singapore's regional hub.

However, under the surface of this cyclical recovery are deeper challenges to which Singapore must adjust. Despite a supportive external environment, the easy phase of Singapore's rapid development is over. The key issue is that while Singapore's economy has certainly performed well, it has also had to face a number of structural issues in recent years:

1. • In the short to medium term, the impetus from the recovery in external demand will be offset by headwinds in the domestic economy arising out of necessary but potentially painful policy changes.

2. • Beyond this cyclical issue, an issue that has become a focus of policy concern is that of income inequality. Unlike in the past, where high economic growth filtered through to impressive gains in the living standards of the vast majority of Singaporeans, the translation of economic growth into broadly distributed welfare gains that the citizenry expects is proving harder to achieve.

3. • In addition, Singapore faces a number of challenges stemming from changing demographics. As the population ages and total fertility rates remain low, Singapore has to drive economic growth through productivity and innovation rather than adding more workers. But it is not clear if Singapore has enough of the pre-requisites to execute such a transition. Moreover, it is not clear that the existing arrangements for healthcare support and retirement funding are adequate to the task.

4. • Finally, Singapore's competitiveness is being challenged. Costs in Singapore have risen ahead of its competitors, directly undermining Singapore's competitiveness. More significantly, there are potential challenges for Singapore's status as one of Asia's pre-eminent regional hubs.

This chapter aims to set out these challenges and assess their likely impact on the Singapore economy. It will consider each of these challenges in turn before concluding with an assessment of their implications.

The case of East Kalimantan, namely a non-ethnically based call by a regional elite for a federal state, points to a major change in how the decentralized structuring of the Indonesian state needs to be discussed. In the past, issues of decentralization have been discussed in a “region versus centre” or “Java versus outer Islands” framework. While it is true that Kalimantan is an “Outer Island”, Amien Rais, first advocate of federalism, comes from Java and his party, while with strong support in Sumatra and elsewhere outside Java, also has a key support base on parts of the island of Java. The support for federalism in East Kalimantan has no real connection to identity or any aspect of geo-ethnic definition. Neither did any of Rais's justifications for federalism, nor later arguments favour decentralization.

The new situation that has arisen and continues to evolve does not pit outer regions against the centre but localism against national perspective. This is also consistent with the demands for decentralization which developed after 1999 from kabupaten and municipalities on the island of Java itself, even resulting in kabupaten splitting to form new ones. It reflects developments of contradictions more radical than those represented by the old region-versus-centre tensions. To the extent that some of the regional elites campaign for federalism or independence, and for greater and greater decentralization reflects a lack of interest among them in any perspective on national political or economic development. Federalists presented arguments that a federal state would not lead to a break-up of Indonesia. However, a break-up into several separate states is not the danger that is threatened by contemporary developments. It is rather a stagnation or disintegration of function of the national economy and political processes. Such a dysfunction, stagnation or disintegration relates not so much to the running of day-to-day state functions, but to solving national problems and fostering national development. There is a tension between national and local perspectives, embodied in the absence of a capacity to coordinate to achieve evenness among the country's heterogeneity and in the ideology of local ownership or priority of access to natural resources.

The year 2013 proved to be a significant one in Timor-Leste's political history as the country sought to chart a new course after more than a decade of reliance on international state-building and peacekeeping assistance. A great deal was at stake in this transition, given the departure of peacekeepers from the UN Integrated Mission in Timor-Leste (UNMIT) and the Australian-led International Stabilization Force (ISF) in late 2012. The withdrawal of the earlier United Nations Mission of Support in East Timor (UNMISET) mission in 2005 had proved precipitous as the country quickly descended into the political-military crisis of 2006 and UN peacekeepers had to hastily return in April and May of that year. With these legacies in the background, the Timor-Leste government in 2013 sought to lay the groundwork for a new chapter in the country's history.

Compared to these earlier years, 2013 was refreshingly uneventful as the country remained stable with a growing if still highly uneven economy. This stability built on a successful year in 2012 when three rounds of national elections were held. They saw the former independence movement leader, Xanana Gusmão, returned as Prime Minister at the head of a new streamlined coalition of three parties led by his National Congress of the Timorese Reconstruction (CNRT) party. The new government was buttressed by the popular figure of another former military resistance leader, Taur Matan Ruak, as President. Economic growth remained strong in 2013, driven by the government's continued investment in major infrastructure developments.

However, behind this new found stability and slowly improving development indicators lay deeper questions of sustainability, with finite petroleum resources the main driver of the large budget expenditures, a demographic bulge of young East Timorese about to enter an overstretched labour market, and the likelihood of critical political leadership transition in the next two years.

Economic Performance and Development Indicators

Timor-Leste's economic performance was enviable in key headline respects, included among them its place among the ten fastest growing economies in 2013, with impressive economic growth above 10 per cent per annum from 2007–12, and with a decline in the poverty rate from 50 per cent to 37.4 per cent over the last five years. Most of this growth was driven by government spending drawing on returns from Timor-Leste's petroleum fund which now stands at US$14.6 billion.

Approaches to Understanding Indonesian Politics and Decentralization

It is very possible that the next president of Indonesia will be a former mayor from a modest size Central Javanese city: Joko Widodo, the mayor of Solo from 2005 to 2012. He was elected to the position of Governor of Jakarta in 2012, with 38 per cent of the vote in the first round and 56 per cent of the vote in the second round. His opponent, Fauzi Bowo, was supported by President Yudhoyono and the coalition of ruling parties. Whether Widodo is indeed nominated by the party he joined in 2004, namely the PDI-P (Partai Demokrasi Indonesia – Perjuangan, or Indonesian Democratic Party of Struggle), and then wins or some other scenario evolves, his stakes in the race are high. In September 2013, at a national working conference of the PDI-P, chaired by party head Megawati Sukarnoputri, Widodo emerged as its “star”, with wide media discussion of his presidential prospects.

There is a kind of Jokowimania afoot.

How is it that a local furniture factory owner and local mayor, with no prior political record and no known views on most national issues, can rocket into this position? Has “desentralisasi” created a launching pad for a local politician to launch into national politics? This essay will argue that the rise of Jokowi and desentralisasi are connected, but not as cause and effect. It will argue that both are the results (effects) of other major changes, based in the political economy (the economic-based structure of political power). The essay will identify two major processes of change at work here.

The first of these processes has longer term origins: namely, the quantitative growth of the Indonesian economy as a nonindustrializing capitalist economy under authoritarian rule, resulting in a domestic capitalist class comprising a small number of politically protected big crony capitalists and a huge number of small, local capitalists. The inability to industrialize, due to the lack of any sizeable capital in the hands of either the state or private business at the time of independence in 1945 has, in turn, limited the post-independence capital accumulation, including since 1965. Neither the state nor Indonesian domestic capitalists have been able to develop late twentieth century scale industry anywhere near sufficient to begin to raise Indonesia's average labour productivity or general prosperity.

The Barisan National (BN) and the Opposition Pakatan Rakyat (PR) contested the long-awaited general elections (GE) in 2013. The results and consequences of the GE were felt through the year. It was as if the entire country was consumed by the electoral results. All the major political events in 2013 were, in one way or another, connected to the 13th GE.

The 13th GE: No Popular Vote and Increased Importance of East Malaysia

The much anticipated GE was held on 5 May 2013. This was the first time in Malaysia's electoral history that a GE was held beyond the five-year term of the government, which had ended on 8 March 2008. After an intense two-week campaign period, the results were: 133 BN and 89 PR in the 222-seat parliament. The result represented a net loss of 7 seats for the BN compared to the 2008 GE. Nevertheless, the United Malays National Organisation (UMNO) performed better, winning 88 out of BN's 133 victorious seats compared with only 79 out of BN's 140 seats in 2008. All the states, with the exception of Sarawak, held simultaneous state elections. BN performed better at the state level this time. In the 2008 GE, the opposition PR captured five states (Selangor, Penang, Kelantan, Perak and Kedah). In 2013, the opposition only managed to keep three (Selangor, Penang and Kelantan) while Perak and Kedah returned to BN. In general BN lost the Chinese vote and large sections of the urban vote. BN was able to win because of gerrymandering, rural votes and votes from East Malaysia.

Two of the more important matters arising from the GE were the popular vote and the increased electoral importance for BN of East Malaysia. In the 2013 GE, BN only managed to get 47.5 per cent of the popular vote while PR achieved 50.9 per cent of the popular vote. This not only dented the government's claim to political legitimacy but caused months of political uncertainty when Anwar Ibrahim and PR decided to mount the “Black 505” campaign. This campaign alleged that the GE had been stolen from PR through systematic fraud and the BN had no legitimacy without the popular vote, and demanded fresh polls. PR organized fifteen rallies throughout major towns in peninsular Malaysia from May until the end of June. Both PR and BN also filed more than fifty election petitions to overturn individual results.

Introduction

The speed and extent of economic and political developments in Myanmar since March 2011 have surprised many observers of the country. The rate with which change is seemingly being embraced in the country contrasts markedly with the more cautious and incremental approaches taken in most other transitional economies of Asia, such as neighbouring China, Laos and Vietnam. This in turn has generated a great deal of excitement about Myanmar's immediate future, and the expectations of many stakeholders have become lofty as a result. For foreign investors, Myanmar is the last major “frontier” market in South and Southeast Asia, and poses an enticing business prospect in a number of ways. For the international development community, Myanmar is clearly in need of considerable technical and financial assistance, and the country will almost certainly be the recipient of significant aid inflows in the years ahead. And most importantly, for the Myanmar people themselves, the end of international isolation and improved prospects for internal peace provide an opportunity for the economy, and particularly their own incomes, to get a much-needed boost.

But delivering on all those expectations is not going to be an easy task, notably within the context of the fast-approaching 2015 elections’ time horizon, but also beyond that date. A number of hurdles, including the institutional and human capacity constraints that currently afflict Myanmar, necessitate that a development “road map” is designed and adopted that can deliver inclusive and sustainable growth, and which is feasible in its scope. Experience from other transitional countries shows that implementing and adhering to such a “road map” is rarely an easy task, and that delays and disappointments are virtually inevitable. There will always be different, yet legitimate, views on what the policy priorities are, as well as the optimal pace and depth of change. In addition, entrenched and powerful lobbies can have interests that are not aligned with economic reform, and seek to thwart some key components, particularly when it comes to business liberalization efforts and the opening up of the market to free and fair competition. Thus, Myanmar's future long-term economic growth prospects are potentially good, but are certainly not “a given”, and thus expectations have to be tempered with some degree of healthy realism about the numerous challenges that lie ahead.

Brunei is currently a politically stable and peaceful country that enjoys one of the highest per capita incomes in Asia due to an abundance of hydrocarbon reserves. However, it is the smallest Southeast Asian nation in terms of its population (415,717) and second smallest in terms of its land mass (5,765 square kilometres). This, together with its long term existence as a constitutional sultanate or Malay Islamic Monarchy (Melayu Islam Beraja), provides for a fascinating mix of historical, cultural, and political considerations. However, its size, strategic location, and the challenges of modernization and globalization continue to generate a conundrum over the most viable policy approaches to economic, social, and security issues in the long term. Given these considerations, this chapter provides an overview of a broad spectrum of key developments in economic, political, and foreign affairs during 2013. As detailed below, Brunei faced a mixed year where there was a general stasis on the economic front and a new level of conservatism politically, but a successful mix of international diplomacy and leadership vis-à-visSoutheast Asian regionalism.

Economic Affairs

The pace of economic development in Brunei Darussalam has been quite mediocre in recent years. At the time of writing, Brunei was estimated to have achieved only 1.4 per cent real GDP growth during 2013 and this follows from 0.9 per cent in 2012. While real GDP growth is predicted to accelerate to 2.1 per cent in 2014 and 2.5 per cent in 2015, such growth falls far short of the official target of 6 per cent that is declared in the country's Vision/Wawasan 2035. This relatively lacklustre performance is primarily a consequence of continued dependence on the export of hydrocarbons and an associated lack of capacity to diversify the economy away from such dependence despite numerous decrees and directives to the contrary by Sultan Haji Hassanal Bolkiah. Nonetheless, the hydrocarbon revenue remains sufficient to maintain significant trade and budget surpluses; a state-of-affairs that is reinforced by the long-term channelling of its oil wealth into significant investments abroad. The economic climate was also reinforced by continued low inflation (estimated at 0.8 per cent in 2013), an outcome that is a consequence of the currency peg to the Singapore dollar and the government's continued subsidization of certain basic items like rice and sugar.

Introduction

Malaysia's 13th general election in May 2013 was touted by many as the “mother of all battles”. Many held the belief that the election would see the end of the Barisan Nasional's (BN) fifty-six years of uninterrupted rule. In BN's place would be the resolute and determined opposition coalition, the Pakatan Rakyat (PR), a coalition of three major parties: the Islamic party (Parti Islam SeMalaysia or PAS), the Democratic Action Party (DAP) and the Parti Keadilan Rakyat (PKR) led by its charismatic leader Anwar Ibrahim. Public optimism for a PR win came largely from the PR's impressive publicity machinery. Using multiple media platforms, the PR machinery wooed Malaysians to ride on its reform agenda. Its election campaign left Malaysians hooked on the slogan: “Ubah” (Change) and “Inikalillah” (Time for change).

The election result however was a letdown for the PR. Despite the political calls for “ubah”, the BN was returned to rule for another five years. BN's victory however was no walk in the park. For the first time in its fifty-six-year rule the party lost the popular vote. It now rules with a smaller number of parliamentary seats winning only 133 seats in the 222-seat Dewan Rakyat, 5 seats less than it garnered in the 2008 elections. The PR, on the other hand, improved on their election performance taking 89 seats compared to 84 seats in 2008. It also won sizeable numbers of seats in 12 of the 13 state legislatures it contested. The PR now controls 3 state legislatures (Selangor, Penang and Kelantan), one less than the 4 states won in the last election.

Despite the political mood sweeping the country, the markets gave a thumbsup to the election results. The newly installed Najib government seemed to promise what the market wanted. But if the new administration seems ready to adopt market friendly policies, the same cannot be said of Malaysia's readiness to forego its brand of politics. This essay will describe how Malaysia's attempt at economic reform is not matched by political reform. In fact, the election result could see law-makers from both sides of the political divide promoting populist policies that can do more damage to ethnic relations.