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SIMON 1 ANALYSIS Volume 9, Number 5 THE ECONOMIC CRISIS AND SOUTHEAST ASIAN SECURITY: CHANGING PRIORITIES Sheldon W. Simon THE NATIONAL BUREAU OF ASIAN RESEARCH © 1998 by The National Bureau of Asian Research. ISSN 1052-164X Printed in the United States of America. The National Bureau of Asian Research, a nonprofit, nonpartisan institution, conducts advanced policy research on contemporary and future issues concerning East Asia, Russia, and U.S. relations with the Asia-Pacific region. NBR does not advocate policy positions, but rather is dedicated to providing expert information and analysis for effective and far-sighted policy decisions. The NBR Analysis, which is published five times annually, offers timely reports on countries, events, and issues from recognized experts. The views expressed in these essays are those of the authors, and do not necessarily reflect the views of other NBR research associates or institutions that support NBR. This report may be reproduced for personal use. Otherwise, its articles may not be reproduced in full without the written permission of NBR. When information from this report is cited or quoted, please cite the author and The National Bureau of Asian Research. Funding for this publication was provided by the Henry M. Jackson Foundation. Publishing and production services by Laing Communications Inc., Redmond, Washington. NBR is a tax-exempt, nonprofit corporation under I.R.C. Sec. 501(c)(3), qualified to receive tax-exempt contributions. This is the fortieth NBR Analysis. For further information about NBR, call or write: THE NATIONAL BUREAU OF ASIAN RESEARCH 4518 University Way NE, Suite 300 Seattle, WA 98105 Tel: (206) 632-7370 Fax: (206) 632-7487 Email: [email protected] http://www.nbr.org FOREWORD The East Asian economic crisis has resulted in an important shift in relative power in Southeast Asia. Collapses in currency and stock markets in Thailand, Indonesia, and Malaysia—core states of the Association of Southeast Asian Nations (ASEAN)—are likely to bring dramatically slower if not negative economic growth in 1998 and 1999. Virtually all of the ASEAN states have abandoned programs to modernize their armed forces through the acquisition of late-model combat aircraft and naval vessels. China, meanwhile, has weathered the Asian crisis relatively unscathed, with a slower but still substantial economic growth rate of 5.5 to 7 percent predicted for 1998. Since the expansion of China’s power in economic and military terms was one of the primary motivations for ASEAN unity, it is striking that the shift in relative power brought on by the economic crisis appears to have coincided with a weakening rather than strengthening of ASEAN cohesion. At a moment when we might expect ASEAN members to take initiatives in security cooperation, such as joint arms purchases and deployments, Thailand, Malaysia, Indonesia, and others have instead shifted priori- ties to internal affairs. Simultaneously, the addition of Burma and Vietnam to ASEAN has raised divisive issues within the Association. In this issue of the NBR Analysis, Sheldon Simon, professor of political science at Arizona State University and Director of NBR’s Southeast Asian Studies Program, dis- cusses this lost opportunity for enhanced security cooperation and analyzes the po- tential sea-change in the security environment in Southeast Asia in the wake of the economic crisis. His study is based on extensive investigation of national arms acqui- sition programs and on interviews with defense specialists in the region and in Wash- ington, D.C. “If security is considered in economic and political terms, then ASEAN’s security is seriously threatened,” Professor Simon concludes. ASEAN states will con- tinue to rely, albeit reluctantly, on the U.S. military presence as the mainstay of their external security, particularly in monitoring the critical sea lines of communication (SLOCs). This study has been funded by grants from the Henry M. Jackson Foundation, the U.S. Information Agency, and the Center for Nonproliferation Studies of the Monterey Institute of International Studies. Richard J. Ellings Executive Director The National Bureau of Asian Research 3 SIMON 5 THE ECONOMIC CRISIS AND SOUTHEAST ASIAN SECURITY: CHANGING PRIORITIES Sheldon W. Simon Abstract The Asian economic crisis of 1997–98 has had profound implications for Southeast Asian security. ASEAN political cohesion, armed forces modernization, and the quest for greater security autonomy have all been challenged by the region’s most serious economic crisis since World War II. The economic crisis presents an intra-regional problem that has not been addressed cooperatively. Rather, concerns about the transboundary implications of the region’s political and economic disarray have led ASEAN’s two most democratic states—Thailand and the Philippines—to challenge the Association’s nonintervention norm on the grounds that bad economic policies and political chaos in any single member can spill over and affect others, thus delaying the region’s economic recovery and under- mining its political stature. ASEAN armed forces have also shifted their orientation from the development of air and naval power projection to a reemphasis on ground forces for domestic social control. Mutual suspicions exacerbated by the economic crisis have undermined earlier interest in collaborative security and even arms control measures that could have been systematically addressed because of large-scale regional defense budget cuts. Finally, the economic setback to the development of an independent Southeast Asian defense capability vis-à-vis China implies the necessity of a sustained U.S. naval and air presence in the region well into the twenty-first century. Introduction Southeast Asia’s current security environment is characterized both by enhanced coopera- tion and lingering uncertainty over the interests and strategies of outside powers. Within the region as well, neighboring states view each other as both security partners and problems. Moreover, the withdrawal of U.S. forces from the Philippines has helped to create a perception that the U.S. seeks to diminish its role in the region. The apparent shift of American priorities from regional security issues to questions of internal Southeast Asian politics has also contrib- Sheldon Simon, professor of political science at Arizona State University, is one of America’s foremost scholars of interna- tional security in Southeast Asia. He is author and editor of numerous books and articles, including: Southeast Asian Security in the New Millennium (1996, with Richard J. Ellings), East Asian Security in the Post-Cold War Era (1993), and The Future of Asian-Pacific Security Collaboration (1988). Field research in Southeast Asia for this study was funded by grants from the Henry M. Jackson Foundation (Seattle) and The U.S. Information Agency. The author also wishes to thank Mark Frazier, director of research at NBR, for his assistance on the early phases of this project. © 1998 by The National Bureau of Asian Research 5 6 NBR ANALYSIS uted to this perception. The region’s position as a strategic transshipment point for Middle East oil, and its own potential energy resources, make it a vital area for both developing and indus- trialized countries. [Prior to 1997,] economic dynamism and increasing defense budgets had turned the ASEAN states and China into a high-growth market for arms suppliers. While defense budgets in nearly every industrial nation have registered significant declines in the post-Cold War era, in Southeast Asia the prosperity of the past decade had been trans- lated into higher defense budgets for all members of the Association of Southeast Asian Nations (ASEAN) except the Philippines, which was only slowly recovering from the profligacy of the Marcos era. Until the recent economic meltdown, economic dynamism and increasing defense budgets had turned the ASEAN states and China into a high-growth market for arms suppliers. Acquisitions have included surface vessels and submarines, late model combat aircraft, and up- to-date armor—at a time when governments in the region declared that external security threats have been at their lowest levels in decades. Why at a time of low external threat and with the inauguration of a major cooperative security institution (the ASEAN Regional Forum or ARF)1 were Southeast Asian states accelerating their arms acquisitions? What are the implications of these acquisitions for regional stability and great-power involvement? The Crisis and the Security Environment The regional economic crisis that began in the second of half of 1997 has provided an oppor- tunity to slow this competitive arming. Without any conscious international coordination, but rather as a product of vastly reduced resources, by 1998 virtually all Southeast Asian states had abandoned the acquisition of modern combat arms from external suppliers. For the foreseeable future, hard currency defense purchases seem infeasible. However, can the serendipity of re- duced Southeast Asian defense budgets caused by region-wide economic malaise be transformed into arms control agreements and/or cooperative security arrangements? The former require formal understandings that a lower level of regional armaments provides as much security as continued competitive arming, while the latter would create new multilateral security ties that would maximize the use of each country’s combat ships and aircraft on a cooperative basis. The foregoing might be ways out of Southeast Asia’s

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