A new nationalism in Southeast Asia.

• Author: Kumar, Sree
• Position: Opinión

The effects flowing from the financial crisis of 2008 are still with us. Europe is trying, with much difficulty, to straighten its financial affairs while the US has had to weather stop-start efforts to do the same. The news from the financial centres is grim, at best. Asia, meanwhile, seems to show some resilience but even here Japan appears to continue with its long struggle to reform its economy. In recent months China has also begun to suffer from the effects of the downturn in the West.

Amidst this state of affairs, Southeast Asia seems to be doing better than most. Many reasons have been posited for this state of affairs including the role that China has played in the region by being a buyer of commodities. But the history of economic growth in Southeast Asia also points to the fact that it had weathered a financial crisis of its own in 1997. Lessons were learnt at that time. Some of those lessons have been instructive.

An excessive reliance on financial markets and portfolio flows was dampened as countries in the region became wary of funds and fund managers. The 1997 crisis began with the loss of confidence in the Thai currency and the Thai economy and then spilled over to the rest of the region. Malaysia instituted capital controls for a time while it restructured its economy. Indonesia had to be bailed out by the International Monetary Fund. In all three countries political changes followed from the impact of the financial crisis. In Thailand, new political actors became active with the rural population becoming a determining feature of the political landscape. The cleavage between the urbanised middle class and the rural population became more stark as power shifted between different parties--the red and yellow shirts. This shifting political movement has not ended. It continues to dominate the Thai political landscape.

In Malaysia, while there was no political instability as such, the party in power had to weather internal dissension over the decision to institute capital controls. In the event, those in favour of broad-based IMF reforms rather than capital controls were eased out. The effects of that decision are now more apparent. It gave birth to a coalition of opposition parties with a leadership to match. The following elections brought more opposition members into parliament, and the loss of several states within the Federation to opposition parties. This was a new phenomenon in a country which, for a long time, had been...