Asean's Patthaya Fiasco

The abandonment of the summit meeting between the 10 Association of South East Asian Nations countries with the leaders of Japan, China and South Korea is not just a huge loss of face for the Thai government. It is a significant setback to cooperation in countering the impact of the global economic crisis on east Asia, as well as proving a catalyst for further developments in Thailand's long running political turmoil.

The fiasco in Thailand is also a setback for Asean's hope of making this get-together, which also includes the leaders of India, Australia and New Zealand, become established as the annual centerpiece of pan-Asian cooperation, an Asian G16 which would be watched by the world. Among side events, this meeting was supposed to have enabled China and Japan to discuss the North Korean missile issue.

The abandonment is a reminder of the fragility of political stability in several Asean countries even before the full impact of the economic downturn has been felt. Although Indonesia has just had well-conducted parliamentary elections, showing the remarkable progress its democracy has shown since the overthrow of President Suharto 11years ago, Malaysia's political tensions appear unresolved despite the recent change in prime minister.

The aborting of the meeting in Thailand will, among other issues, be a setback to a finalization of a US$120 billion fund which it is hoped will help shield countries in the region from currency crises, and allow them to sustain economic growth without worrying unduly about their balance of payments. Most of the money will be provided by the northeast Asian countries.

The fund will still most likely go ahead but primarily because the three northeast Asians have a self interest in it. All want to reduce their dependence on trade with a sickly west and so need to try to sustain growth in the neighborhood. All want to use their abundance of reserves to buy political influence. All want to show that Asian financial cooperation is a reality of which the rest of the world must take note. And Korea, as host of the next G20, wants to use Asean as a platform to promote its own influence in the world.

However, this says more about these three countries interests than about Asean's ability to initiate cooperation. Although free trade pacts and other worthy documents might suggest otherwise, the grouping lacks the influence that it once had when the likes of heavyweights Suharto, Singapore's Lee Kuan Yew and Malaysia's Mahathir Mohamad were its key players. Indonesia's President Yudhoyono might have some of the credentials to take a leadership role, but it is not in his consensual nature, nor of much interest to an Indonesia concerned mostly with domestic issues and reluctant to play an international role. Of the others, the Philippines is currently relatively stable, but is often viewed as a fringe player. Singapore's influence is still significant, but not as strong as previously. Vietnam's role is rising but from a very low base.

Inability to cooperate even extends to lack of a common front against China on South China Sea claims. Philippines, Vietnam and Malaysia have all recently irritated China by asserting their claims, but have made no effort to resolve their own overlapping claims. The Philippines has even signed an oil exploration deal with China which contravenes an Asean agreement.

Southeast Asia began the global crisis in a strong position, with large foreign exchange reserves and no big asset bubbles. But these trade-dependent economies remain very vulnerable to a prolonged recession, particularly in commodity prices and workers' remittances. So they need to line up now as many additional resources as they can. Fortunately the world's leading holders of foreign exchange are their neighbors. Unfortunately, even access to funds may be irrelevant if political turmoil intervenes, undermining private investment, consumer confidence and paralyzing decision-making.

Thailand, despite its broad-based economy, has suffered already from the struggle for power. That may intensify as the pro-Thaksin Red Shirts have openly challenged the monarchists and military, paralyzing the government of Abhisit Vejjajiva just as the anti-Thaksin Yellow Shirts paralyzed its predecessor. Malaysia's new prime minister was greeted by a lower rating in opinion polls than his predecessor, and by-election defeats for a ruling party shadowed by corruption, murder and arms deal scandals. In both countries fundamental governance issues remain in hot dispute.

So although there is no danger of a repeat of the Asian crisis of 1997/98, the summit fiasco is evidence that political problems in Southeast Asia have an international dimension.