Portents of transactional diplomacy in US–Southeast Asia relations

November 12, 2017

Portents of transactional diplomacy in US–Southeast Asia relations

by Alan Chong, Rajaratnam School of International Studies, Nanyang Technological University, Singapore

In the wake of three Southeast Asian prime ministers’ visits to the Trump White House, a new pattern of diplomatic communication appears to be taking shape — transactional diplomacy.

It is well known that the election of Donald Trump triggered a wave of privately expressed unease in many Asian capitals. Trump’s inauguration speech spelt out the cornerstone of his foreign policy in simple terms: ‘We will follow two simple rules: buy American and hire American. We will seek friendship and goodwill with the nations of the world — but we do so with the understanding that it is the right of all nations to put their own interests first’. In the course of three recent visits by the leaders of Malaysia, Thailand and Singapore to Washington, President Trump has demonstrated consistency in applying these rules.

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What one sees emerging out of the Trump White House is nothing less than transactional leadership translated into foreign policy. Leaders produce compliance from followers by promising tangible carrots and sticks. In managerial settings, this is remarkably effective since followers expect the leader to specify clear key performance targets against which the former can measure their productivity. But in the world of international politics, transactional foreign policy may be complicated to the point of possible failure.

The problem with Trump’s foreign policy is that he takes his ‘America First’ policy too seriously. This has triggered a peculiar foreign policy overture manifested in the visits by the Malaysian, Thai and Singaporean prime ministers to the White House recently: shopping diplomacy.

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During Malaysian Prime Minister Najib Razak’s visit, he made it clear to the media that he was bringing a ‘strong value proposition’ to the United States. It was announced that Khazanah Nasional (the Malaysian government’s sovereign wealth fund) and the Employees Provident Fund (Malaysia’s national pension fund) would invest several billion dollars in equity and infrastructure projects in the United States. Additionally, Malaysia Airlines was pledged to actively explore options for acquiring more Boeing jetliners and General Electric engines to the tune of US$10 billion.

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Not to be outdone, Thailand’s Prime Minister Prayut Chan-ocha had an even longer shopping list to please Trump. Prayut promised that the Thai military would acquire Blackhawk and Lakota helicopters, a Cobra gunship, Harpoon missiles and F-16 fighter jet upgrades to be topped off with 20 new Boeing jetliners for Thai Airways.

Next, in an obvious nod to Trump’s championing of the plight of US workers in the much bandied ‘Rust Belt’, Siam Cement Group agreed to purchase 155,000 tonnes of coal while Thai petroleum company PTT agreed to invest in shale gas factories in Ohio. To top it off, Prayut and Trump signed a memorandum of understanding to facilitate an estimated US$6 billion worth of investments that will purportedly generate more than 8000 jobs in the United States.

Singapore’s Prime Minister Lee Hsien Loong followed a similar script by showcasing Singapore Airlines’ publicly televised signing ceremony with Boeing Corporation for buying 39 aircraft with the attached tagline of generating 70,000 jobs in the continental United States. It did not go unnoticed that Trump smiled broadly and jabbed jocularly at the Boeing CEO while uttering very audibly to the television cameras ‘that’s jobs, American jobs, otherwise don’t sign!’.

Trump was not fooling around for the media. He meant to live up to his ‘America First’ rhetoric. Yet one hopes that Trump and his cabinet appreciate that shopping transactions do not define a whole bilateral relationship. Each of the prime ministers had also sought Trump’s friendship for multiple ancillary issues such as keeping US markets open to their businesses or getting a lift for domestic politics.

All three countries too wished to keep the US military engaged in the region as a stabilising factor vis-a-vis the emergence of Chinese power. In the Malaysian and Singaporean cases, both countries share with the United States a clear joint stake in the defeat of Islamic State-inspired terrorism worldwide. In the Southeast Asian strategic mentality, diplomatic relationships are always viewed in the long term. With or without President Trump in the White House, the United States is a naturalised political, economic and military presence in the region.

Another time-honoured diplomatic virtue practised by Southeast Asian governments is that of making gifts as a material representation of friendship. Gifts need not be a sign of surrender or weakness on the part of the giver. They are an indirect language for affirming respect despite political inequalities between great powers and weak states, and they signal the durability of strategic partnerships painstakingly built up since the Cold War.

Southeast Asian states will be more than well-rehearsed for this chapter in US–Southeast Asia relations. Many pundits are also speculating that China will also follow the same tack by decorating President Trump’s upcoming official visit to Beijing with even more dazzling multi-billion dollar energy and high tech deals. Today, diplomacy by gifting has found a new frequency in the Trump White House.

Alan Chong is Associate Professor at the Centre for Multilateralism Studies, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

A version of this article was originally published here on RSIS.


Think For Yourself

August 31, 2017

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COMMENT: Normally, I will join fellow Malaysians to watch television with my wife, Dr. Kamsiah Haider to celebrate  Merdeka Day.  However, this milestone year, the 60th Anniversary of Independence, we choose to spend our time together in stead of witnessing a farce at Dataran Merdeka, Kuala Lumpur. Kamsiah and I feel there is nothing to rejoice.

Our Malaysia today is not what I had expected when my teenage friends and I–I was 18 years old– welcome Merdeka on August 31, 1957. My generation listened to Tunku Abdul Rahman Putra Al-Haj’s Independence Proclamation in a newly built Merdeka Stadium amidst pomp  and ceremony with excitement and hope.

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Today we are divided, unequal in terms of rights, opportunities, and widening income disparity. We are identified by race and religion; and we are being governed by a corrupt and inept Najib’s UMNO regime which disregards the rule of law. Tunku, Tun Razak and Tun Hussein Onn would be disappointed to see what we have become.

Dr. Kamisah and I would like to advise millennial Malaysians  to “Think for Yourself”. The future of a wonderful country is in your hands. You can make a difference. You can work to achieve Tunku Abdul Rahman’s dream that “We are all Malaysians. This is the bond that unites us” come true. That bond is broken  by the present generation of political leaders.–Dr. Kamsiah Haider and Din Merican

Ivy League Scholars Urge Students: ‘Think for Yourself’

by Conor Friedersforf


As the fall semester begins, 15 professors from Yale, Princeton, and Harvard have published a letter of advice for the class of 2021.


Fifteen highly accomplished scholars who teach at Yale, Princeton, and Harvard published a letter Monday with advice for young people who are headed off to college: Though it will require self-discipline and perhaps even courage, “Think for yourself.”

The “vice of conformism” is a temptation for all faculty and students, they argue, due to a climate rife with group think, where it is “all-too-easy to allow your views and outlook to be shaped by dominant opinion” on a campus or in academia generally.

They warn that on many campuses, what John Stuart Mill called “the tyranny of public opinion” doesn’t merely discourage students from dissenting from prevailing views:

It leads them to suppose dominant views are so obviously correct that only a bigot or a crank could question them. Since no one wants to be, or be thought of, as a bigot or a crank, the easy, lazy way to proceed is simply by falling into line with campus orthodoxies. Don’t do that. Think for yourself.

They go on to explain what that means: “questioning dominant ideas,” and “deciding what one believes not by conforming to fashionable opinions, but by taking the trouble to learn and honestly consider the strongest arguments to be advanced on both or all sides of questions,” even arguments “for positions others revile and want to stigmatize” and “against positions others seek to immunize from critical scrutiny.”

They go on to explain what that means: “questioning dominant ideas,” and “deciding what one believes not by conforming to fashionable opinions, but by taking the trouble to learn and honestly consider the strongest arguments to be advanced on both or all sides of questions,” even arguments “for positions others revile and want to stigmatize” and “against positions others seek to immunize from critical scrutiny.”:

Monday’s letter argues that “open-mindedness, critical thinking, and debate” are “our best antidotes to bigotry;” that a bigot is a person “who is obstinately or intolerantly devoted to his or her own opinions and prejudices;” and that the only people who need fear open-minded inquiry and robust debate “are the actual bigots, including those on campuses or in the broader society who seek to protect the hegemony of their opinions by claiming that to question those opinions is itself bigotry.”

The letter’s signatories are Paul Boom, Nicholas Christakis, Carlos Eire, and Noël Valis at Yale; Maria E. Garlock, Robert P. George, Joshua Katz, Thomas P. Kelly, John B. Londregan, and Michael A. Reynolds at Princeton; and Mary Ann Glendon, Jon Levenson, Jacqueline C. Rivers, Tyler VanderWeele, and Adrian Vermeule at Harvard.

Bad news on Thailand’s Constitution

August 30, 2017

A year after referendum, only bad news about Thailand’s constitution

by Khemthong Tonsakulrungruang


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Former Prime Minister Yingluck Shinawatra–A Victim of Brutal Military Regime in Thailand

In the referendum of 7 August 2016, Thais voted in favour of the junta-backed constitution draft that would later would become the 2017 Constitution. The referendum marked a victory for the National Council of Peace and Order (NCPO, the official term for the junta), the generals having finally managed to convince the majority of Thais to overlook the democratic activists who opposed its “democratic” roadmap. Much has happened since then. The draft took a few unexpected detours before coming into effect on 6 April 2017. To commemorate the 2016 referendum, this post reflects on what this Constitution really means for Thailand over the next few years.

First and foremost, the lack of public participation during the drafting process and in the post-referendum amendments clearly show that this is not legitimately the supreme law of the land. It is not drafted according to the general will of the citizenry—whose supremacy the government does not respect. As a result, except for political parties and a handful of ardent observers, the public have distanced themselves from the current constitutional debates over election and political party laws, leaving it to the junta-appointed Constitution Drafting Committee (CDC) and National Legislative Assembly (NLA) to chart the country’s destiny.

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Look beyond the calm and beauty of the floating market in Bangkok for the reality of Thai democracy. The military junta makes a mockery of the new Constitution

This is not to say that the 2017 Constitution’s drafting was a farce. Far from it: the regime put its collective heart and mind into delivering the law, framing it as an operating manual to govern the country into the future. But this “manual” is not a constitution in the liberal democratic sense. This is not a document of a common goal of the people, nor is there public respect for it, unlike the 1997 (or even the post-coup 2007) Constitutions. If necessary, the military is ready to replace this manual with another one that suits its interests better—and the public is unlikely to protest against such an action.

We don’t see much of an afterlife for the 2007 Constitution in the 2017 Constitution—unlike the 2007 document, which inherited much from its 1997 predecessor. Rights and liberties, which were the selling point of the two most recent constitutions, are almost neglected. The general impression of the 2017 charter is that it is a potpourri of local innovations and adapted foreign transplants, all of which aim to cripple the next administration.

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The most notable feature is the drafters’ obsession with constraining the incoming civilian government’s powers. For the first five years, the law permits a non-MP outsider (e.g. General Prayuth Chan-ocha, junta leader and the current Prime Minister himself) to be nominated as prime minister. The first Senate would include ex officio military commanders and possibly some members of the junta’s handpicked NLA. The new mixed member proportional representation (MMP) electoral system is designed to create a fragmented parliament and a coalition government.

Moreover, the government would further be destabilised by a long policy to-do list as set out in the constitution, and a complex web of scrutiny by the judiciary and watchdog agencies. Administrative mistakes, corruption, and conflicts of interest can result in disproportionately harsh punishments. For example, one minor mistake in consideration of a financial bill can see the whole cabinet ousted on conflict of interest charges. While an effort to eradicate corruption is commendable in principle, the unrealistic goals set out in the constitution will hamper the government’s effectiveness—not to mention raise the chances of these anti-corruption safeguards’ being a pretext to harass political foes.

Here there is a paradox. In the 2017 Constitution, the CDC has designed a constitutional amendment procedure in which it is almost impossible to change the rule of the game. But the excessive constraining mechanisms outlined above deal mainly with the immediate government after the first election. This reflects the NCPO’s uncertainty about the prospects of post-coup Thailand. In their view, Thaksin Shinawatra and his men must not return to power. But in case they return, the NCPO wants to be sure that they are not free to run the country.

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Thailand’s Prime Minister, Prayut Chan-ocha, salutes members of the Royal Thai Army at the Thai Army Headquarters in Bangkok, Thailand on September 30, 2014.

© 2014 Reuters

The 2017 Constitution limits the next government’s ability to formulate its own policy, as it has already provided a list of preferred policy choices. Chapters on the Duty of the State and the Basic Policy Guidelines address a wide range of topics, from religion to national security, from education to environment, from Thai traditional medicine to satellite frequency. Formerly, these used to be policy guidelines with no legal authority. Now these government duties are enforceable in the courts.

In addition to a policy agenda enshrined in the Constitution, the NCPO appointed the technocrat-led Reform Committee and the bureaucrat-led National Strategy Committee, both of which will prepare the National Strategy Plan for the next 20 years. In 2014, the NCPO promised Thais a massive reform to overhaul the country. It has not delivered anything substantial, but these committees serve as easy way out. The NCPO has created a platform for the reforms that shall be carried out by its civilian successor. If the reforms fail, the incumbent government would be liable to be sanctioned according to the law. But if it works out, the backseat drivers—that is, the junta—can take all the credit. Ironically, most of these experts have been engaging, again and again, in reform projects throughout the past decade. These professional reformers are unlikely to bring about any innovative changes.

Disappointingly, the 2017 Constitution avoids addressing the real cause of Thailand’s political crisis: the accountability deficit among the constitutional watchmen. Since 1997, several independent agencies (for example, the Constitutional Court, the National Anti-Corruption Commission, the Election Commission, and the National Human Rights Commission) have been created to enforce accountability on elected bodies. The charter is still based on a false premise that only civilian politicians are corrupt, so it imposes severe punishments on them for misconduct. The Constitutional Court and other watchdog agencies are assigned a greater role in keeping politicians’ legal and moral standards in check, but there is no attempt to effectively hold these unelected bodies to account. The drafters trust these watchmen’s personal integrity and moral standards, which have historically proved inadequate. Without better accountability, watchdog agencies will continue to suffer a legitimacy crisis, a result of their seemingly unfair exercises of power since 2007. Peace and prosperity under the new Constitution, as propagated by the NCPO, is nowhere in sight.

At present, the CDC is drafting other relevant laws, such as those on elections, political parties, and watchdog agencies. Some of the legislative proposals are even more radical than the 2017 Constitution itself. A person who fails to vote will be banned from voting for two years. Members of a political party must pay a membership fee in order to prove their genuine belief in the party’s ideology. A primary vote is also introduced, a mechanism which is impractical for most small to medium-sized parties.

Interestingly, there seems to be some inconsistency, or a lack of consensus, among the political elites regarding how to use their “operating manual”. The CDC is considering using different numbers for candidates from the same party in different districts. This proposal will surely generate voter confusion, and contradicts the CDC’s earlier statement that the constitution would direct voter’s focus from each individual candidate to one party. The numbering system is opposed by the Election Commission, but the CDC insists that the measure will force parties to work harder to win the people’s support.

Inconsistencies are also apparent in the case of the watchdog agencies. The NLA dismisses the current members of the Election Committee and the National Human Rights Commission, but spares the Ombudsman and the National Anti-Corruption Commission. The discrepancy in “set zero” of these agencies likely has more to do with each watchdog’s political leverage, and willingness to obey the NCPO, than real legal issues. The Election Commission is again upset, and has threatened the CDC with a court case.

The full effect of the 2017 Constitution will not be felt until the first post-coup general election, which is supposed to happen in late 2018. The unusually lengthy transitional period of 15 months, and the death of the beloved King Bhumibol, has allowed the NCPO to stay in power and arbitrarily exercise dictatorial powers under Section 44 of the 2014 Interim Charter for another year. Thailand is thus currently under two overlapping constitutional frameworks: that which was voted upon in 2017, and the 2014 Interim Charter. The two are completely different. The presence of the latter erodes any credibility of the former. The NCPO is blessed to not have to respect the rights and liberties of Thais as Section 44 supersedes any constitutional guarantees.

But an election has to come one day. A new government will navigate the roadblocks put in front it by the 2017 Constitution. After a year-long barrage of propaganda, the outcome is the possibility of a crippled and unstable civilian government dictated to by a band of unelected elites. Under the 2017 Constitution, Thailand’s political future does not look promising.

Khemthong Tonsakulrungruang is a constitutional law scholar. He graduated from the Faculty of Law, Chulalongkorn University before earning his LLM at Yale Law School. Currently he is a PhD candidate at University of Bristol’s School of Law.


Trump’s White House and Thailand’s autocratic descent

August 22, 2017

Trump’s White House and Thailand’s autocratic descent

by Matthew Phillips


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Header image: Secretary of State Rex Tillerson meeting for talks with Prime Minister Prayuth Chan-Ocha in Bangkok on 8 August 2017, via the US State Department on Flickr.

US Secretary of State Rex Tillerson visited Bangkok as part of a tour of the region. Top of the agenda was Thailand’s relationship with North Korea, but Tillerson also confirmed arrangements for Prime Minister Prayuth Chan-ocha to visit Washington in October and paid respects to the recently deceased King Bhumibol Adulyadej.

Conspicuously absent from the Secretary of State’s remarks, both to Thai officials and later to staff at the US Embassy, was any criticism about Thailand’s deteriorating human rights record. This apparently pragmatic approach marks a significant shift in Thai–US relations, which had cooled considerably after the military coup of May 2014, led by General Prayuth.

It is a rapprochement that permanently threatens Thailand’s already struggling democracy.

In Thailand, symbols matter. Throughout the Cold War, pronouncements of US support for dictatorship were vital in securing the dominance of the Royal Thai Army. As long as Thai generals could point to American friends guaranteeing economic development, they could align themselves (however loosely) with the principles of freedom and democracy that legitimised their role. For their part, US actors, by claiming to respect Thailand’s cultural traditions (primarily through support for the Thai monarchy) helped frame communism as a threat to the Thai ‘way of life’.

This consensus changed in the early 1990s when a popular movement emerged from within the urban middle class calling for reduced military power and greater accountability. In May 1992 military leaders ordered the suppression of pro-democracy protesters leading to scores of deaths. For many within Thailand, the heavily-censored local media meant that international outlets became the only trusted source of news. With Thailand’s leaders condemned by the international community, it was the protesters who now commanded the respect of global peers.

Thailand, it was clear, was out of step. With the end of the Cold War, and communism no longer a threat, authoritarian regimes through Asia were falling or being forced to adapt. The emerging new order, led by the middle class, was characterised by a shift towards greater democratic accountability and underpinned by a shift toward neo-liberal economics. It was at this point that King Bhumibol Adulyadej, in the fifth decade of his reign, stepped in, aligning his own destiny with the forces of change.

In an exquisitely dramatised exchange, broadcast across state media, His Majesty sternly encouraged then Prime Minister General Suchinda Kraprayoon to reconcile with enraged civilian leaders. The King, in a single stroke, positioned himself in line with global trends, at the same time securing the enduring affection of Thailand’s middle classes. This Royal intervention also marked a historic breakpoint that was followed by economic deregulation and more democracy so that by the beginning of the new millennium, Thailand appeared to have taken its place within a world united around free market economics and liberal politics; what the political economist Francis Fukuyama had boldly described as ‘the end of history’. Portraying himself as a critical agent of change, King Bhumibol helped authenticate the moment as an intrinsically natural and necessary step for the Thai people. He also reaffirmed his status as a benevolent monarch who, by appearing to gift the next step toward democratisation, demonstrated his love and concern for the Thai people: the embodiment of Buddhist virtues that confirmed his divinity.

By 2005, however, the Thai establishment had grown weary of elections that repeatedly elected populist parties connected to Thaksin Shinawatra. In 2010, the army violently attacked Thaksin-supporting ‘Red Shirt’ protesters, many of whom had spent months away from rural homes to call for elections. Taking to the internet, the middle classes rallied to support the establishment view that force was necessary. They also joined a chorus of growing disdain for the international media, taking particular issue with what they felt was the uncritical reporting of Red demands for more democracy. Of all the networks, CNN was most notably earmarked for derision.

In late 2013, middle class groups were once again mobilised to topple a Thaksin linked government, finally provoking the May 2014 coup. Since then, Prayuth’s government and the royalists who support him have been relentless in attempts to extinguish both the influence of Thaksin and the political system that produced him. Many from the middle class have cheered them on.

Today Thailand is the polar opposite of what King Bhumibol’s 1992 military-civilian mediation was supposed to foretell. Journalists are silenced; sharing a critical Facebook post can land someone in prison; and many who oppose military rule have been forced into exile.

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His Majesty King Maha Vajiralongkorn

The country also has a new King, Maha Vajiralongkorn,  whose erratic behaviour and strongman persona has helped stabilise autocratic rule. Elections are penciled in for next year, but the new constitution does more to diminish the institutions and symbols of democracy than reinstate them.

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Throughout this time, Barack Obama’s White House had made it clear that Thailand had veered off course. While US economic commitments to the Junta remained largely intact, the symbolic relationship and professions of friendship that secured it deteriorated rapidly, leaving Thailand out in the cold. Come mid-2016, the country failed to win a non-permanent seat on the United National Security Council, scoring a humiliating loss to Kazakhstan by a vote of 55–193.

The election of Donald Trump, however, has blurred if not obscured Thailand’s status as an outlier and threatens to normalise many of those indicators that mark its descent into autocracy. For years now, Thais opposed to Thaksin have rallied against CNN and its counterparts as unreliable, a stance parallel to the new American President’s daily denunciations of “fake news”. Having rejected mainstream international media, conservatives and pro-royalists have turned to a gaggle of Thai nationalists and alt-right American journalists to reaffirm their political positions. Thai hardliners rail against the conspiracy to topple monarchy in favour of a globalist corporate-led government ushered in by Thaksin and his shadowy backers. Trump’s reliance on the same marginal outlets, such as Infowars—hosted by alt-right radio host Alex Jones—combined with his disregard for an informed free press, not only resonates with key segments of the Thai elite; these global conspiracy theorists share much of the same world. At the same time, strong man politics appear all the rage and with two from which to choose, a King and a Prime Minister, Thailand would appear to be ahead of the game.

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Secretary of State Rex Tillerson, the highest level American diplomat to visit Thailand since a 2014 coup, met Thai Foreign Minister Don Pramudwinai in Bangkok

Secretary of State Tillerson has already indicated that the State Department is considering dropping “democracy” from its global mission. On Tuesday, he kept his word. His meeting with Prime Minister Prayuth and Foreign Minister Don Pramudwinai has served to de facto legitimate both the ruling Junta and the anti-democratic forces that support it. Having spent a decade seeking to extinguish Thaksin-linked electoral politics, Thailand’s once liberal elite now sits comfortably alongside the most powerful populist movements of the age. History, with its faux teleology proclaiming the inevitable progression toward liberal democracy—so critical to the American balancing act during the Cold War and as embodied so brilliantly by King Bhumibol—has reached its natural conclusion. A dead end.

Dr Matthew Phillips is based in the Department of History & Welsh History at Aberystwyth University. His book, Thailand in the Cold War, looks at the role that Thai and American consumers played in securing the alliance.



Martin Khor looks back at the East Asian Financial Crisis 1997

July 5, 2017

Martin Khor looks back at the East Asian Financial Crisis 1997


It is useful to reflect on whether lessons have been learnt and if the countries are vulnerable to new crises.

IT’S been 20 years since the Asian financial crisis struck in July 1997. Since then, there has been an even bigger global financial crisis, starting in 2008. Will there be another crisis?

The Asian crisis began when speculators brought down the Thai baht. Within months, the currencies of Indonesia, South Korea and Malaysia were also affected. The East Asian Miracle turned into an Asian Financial Nightmare.


Despite the affected countries receiving only praise before the crisis, weaknesses had built up, including current account deficits, low foreign reserves and high external debt.

In particular, the countries had recently liberalised their financial system in line with international advice. This enabled local private companies to freely borrow from abroad, mainly in US dollars. Companies and banks in Korea, Indonesia and Thailand had in each country rapidly accumulated over a hundred billion dollars of external loans. This was the Achilles heel that led their countries to crisis.

These weaknesses made the countries ripe for speculators to bet against their currencies. When the governments used up their reserves in a vain attempt to stem the currency fall, three of the countries ran out of foreign exchange.

They went to the International Monetary Fund (IMF) for bailout loans that carried draconian conditions that worsened their economic situation. Malaysia was fortunate. It did not seek IMF loans. The foreign reserves had become dangerously low but were just about adequate. If the ringgit had fallen a bit further, the danger line would have been breached.

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Prime Minister Dr. Mahathir Mohamed and Finance Minister Daim Zainuddin introduced selective capital controls and pegged the Ringgit at RM3.80 to USD1.00.


After a year of self-imposed austerity measures, Malaysia dramatically switched course and introduced a set of unorthodox policies.These included pegging the ringgit to the dollar, selective capital controls to prevent short-term funds from exiting, lowering interest rates, increasing government spending and rescuing failing companies and banks.

This was the opposite of orthodoxy and the IMF policies (The Washington Consensus). The global establishment predicted the sure collapse of the Malaysian economy. But surprisingly, the economy recovered even faster and with fewer losses than the other countries. Today, the Malaysian measures are often cited as a successful anti-crisis strategy.

The IMF itself has changed a little. It now includes some capital controls as part of legitimate policy measures.

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The Asian countries, vowing never to go to the IMF again, built up strong current account surpluses and foreign reserves to protect against bad years and keep off speculators. The economies recovered, but never back to the spectacular 7% to 10% pre-crisis growth rates.

Then in 2008, the global financial crisis erupted with the United States as its epicentre. The tip of the iceberg was the collapse of Lehman Brothers and the massive loans given out to non-credit-worthy house-buyers.

The underlying cause was the deregulation of US finance and the freedom with which financial institutions could devise all kinds of manipulative schemes and “financial products” to draw in unsuspecting customers. They made billions of dollars but the house of cards came tumbling down.

To fight the crisis, the US, under President Barack Obama, embarked first on expanding government spending and then on financial policies of near-zero interest rates and “quantitative easing”, with the Federal Reserve pumping trillions of dollars into the US banks.

It was hoped the cheap credit would get consumers and businesses to spend and lift the economy. But instead, a significant portion of the trillions went via investors into speculative activities, including abroad to emerging economies.

Europe, on the verge of recession, followed the US with near zero interest rates and large quantitative easing, with limited results.

The US-Europe financial crisis affected Asian countries in a limited way through declines in export growth and commodity prices. The large foreign reserves built up after the Asian crisis, plus the current account surplus situation, acted as buffers against external debt problems and kept speculators at bay.

Just as important, hundreds of billions of funds from the US and Europe poured into Asia yearly in search of higher yields. These massive capital inflows helped to boost Asian countries’ growth, but could cause their own problems.

First, they led to asset bubbles or rapid price increases of houses and the stock markets, and the bubbles may burst when they are over-ripe.

Second, many of the portfolio investors are short-term funds looking for quick profit, and they can be expected to leave when conditions change.

Third, the countries receiving capital inflows become vulnerable to financial volatility and economic instability.

If and when investors pull some or a lot of their money out, there may be price declines, inadequate replenishment of bonds, and a fall in the levels of currency and foreign reserves.

A few countries may face a new financial crisis. A new vulnerability in many emerging economies is the rapid build-up of external debt in the form of bonds denominated in the local currency.

The Asian crisis two decades ago taught that over-borrowing in foreign currency can create difficulties in debt repayment should the local currency level fall.

To avoid this, many countries sold bonds denominated in the local currency to foreign investors. However, if the bonds held by foreigners are large in value, the country will still be vulnerable to the effects of a withdrawal.

As an example, almost half of Malaysian government securities, denominated in ringgit, are held by foreigners.

Though the country does not face the risk of having to pay more in ringgit if there is a fall in the local currency, it may have other difficulties if foreigners withdraw their bonds.

What is the state of the world economy, what are the chances of a new financial crisis, and how would the Asian countries like Malaysia fare? These are big and relevant questions to ponder 20 years after the start of the Asian crisis and nine years after the global crisis.


Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.
Read more at http://www.thestar.com.my/opinion/columnists/global-trends/2017/07/03/the-asian-financial-crisis-20-years-later-it-is-useful-to-reflect-on-whether-lessons-have-been-lear/#EEkW3MiZXu87cFZM.99

Thailand: Lese Majeste losing its magic

June 29, 2017

Thailand: Lese Majeste losing its magic

by Pavin Chachavalpongpun, Kyoto University


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Following the death of King Bhumibol Adulyadej in October 2016 and the enthronement of his unpopular son, now King Vajiralongkorn (pic above), the Thai Palace has continued to work intimately with its traditional ally — the military — to strengthen the position of the monarchy in politics during this volatile transitional period.

In the past months, Vajiralongkorn has vigorously intervened in the political domain. He ordered the amendment of the constitution to increase his power and to more easily facilitate his frequent visits overseas. The junta enthusiastically granted Vajiralongkorn’s wishes, and saw an opportunity to exploit the monarchy for its own political advantage.


The new king spends most of his time in the outskirts of Munich. Yearning for a quiet life in Germany, Vajiralongkorn soon discovered the aggression and intrusion of the European media. He has been constantly hounded by the paparazzi. On at least two occasions, images of him and his mistress in skinny tank tops revealing massive fake tattoos on their bodies emerged on the internet and appeared on the cover of a German tabloid.

These photos and video clips undoubtedly damaged the reputation of the newly crowned monarch and shook the political stance of the junta. It prompted the military government to introduce drastic solutions to stop the proliferation of the video clip and photos — threatening to block access to Facebook in Thailand and banning prominent critics of the monarchy.

Accordingly, the Ministry of Digital Economy and Society issued an order in April this year prohibiting Thais from contacting three critics of the monarchy — historian Somsak Jeamteerasakul, ex-journalist Andrew MacGregor Marshall and me. Thais were told not to befriend or follow us on Facebook, as well as not to click ‘Like’ or share our content online. Those violating the order could be charged with lèse majesté, a crime of injury to royalty punishable by 3 to 15 years in prison.

Shortly after the issuance of the order on 3 May, six Thais were arrested and charged with lèse majesté. Among them were university Professor Saran Samantarat and well-known lawyer Prawet Prapanukul. The lèse majesté law, as defined by Article 112 of the Criminal Code, has consistently been employed to attack enemies of the royal institution. This pattern of repression over the years has become normalised as a vicious device used to undermine opponents.

But overusing the law could be counterproductive to the military government and the monarchy itself. The sharp increase in lèse majesté cases indicates that the law might have lost its royal magic. It also suggests the rise of anti-monarchy sentiment among some Thais. More than 100 Thais are currently doing jail time on lèse majesté charges.

Vajiralongkorn has been on the throne for only 6 months, but his short reign has already seen the highest numbers of lèse majesté cases and the harshest punishment against violators of this law. Two weeks ago, a Thai court delivered a 70-year sentence to a Thai man accused of making a fake Facebook page and repeatedly offending the monarchy. He admitted his guilt and his sentence was reduced to 35 years.

The junta is relentlessly searching for ways to intimidate the public regarding any negative comments about the new king. Cyberspace has since become a primary battlefield, with the monarchy and the junta both hoping to win the war using the lèse majesté law as their desperate weapon.

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The His Majesty King Bhumibol was highly revered. He was charismatic, divine and enjoyed moral authority.

Of course, they are bound to lose. Under King Bhumibol, lèse majesté was used in a limited manner, at least prior to the 2006 coup that overthrew Thaksin Shinawatra. After 2006, the use of lèse majesté was more widespread, visibly becoming a political instrument against critics of the monarchy.

Bhumibol was highly revered. He was charismatic, divine and enjoyed moral authority. Royalists exploited those qualities of Bhumibol to justify cases of lèse majesté and harsh punishments against violators.

But Vajiralongkorn is not Bhumibol. Vajiralongkorn’s lack of charisma, divinity and moral authority makes the lèse majesté law less authoritative. As the new king behaves badly, the law becomes less sacred.

The military and royalists have arrived at a political deadlock. They are stuck with Vajiralongkorn. In the short term, there might be some attempts on the King’s part to construct a new public image, for example through a campaign like ‘Bike for Mom’. But such images of a supposedly engaging monarch stand in stark contrast with other darker portrayals of Vajiralongkorn — as a king inclined toward violence, an eccentric lifestyle and erratic moods.

It is too late for the palace to remake Vajiralongkorn’s personality. It is too late for the military and the royalists to refrain from using the lèse majesté law to defend the status of the monarchy. And it is too late to prevent Thais from talking openly about their king today.

Pavin Chachavalpongpun is Associate Professor at the Center for Southeast Asian Studies, Kyoto University.