1
Chapter II
THE STATE OF HUMAN DEVELOPMENT IN SOUTHEAST ASIA: PROGRESS AND DISPARITIES (PRELIMINARY DRAFT)
INTRODUCTION
This chapter examines the progress and disparities of Southeast Asian countries on a set of human development and good governance indicators. It uses data from various sources, notably the global Human Development Reports from 1990-2003, Asian Development Outlook, and Kaufmann, Kraay, and Mastruzzi (2003). It also examines the disparities among countries in the region across these indicators and the correlation between these indicators in the context of understanding the state of human development and good governance in Southeast Asia.
HUMAN DEVELOPMENT IN SOUTHEAST ASIA: DISPARITIES, TRENDS, ACHIEVEMENTS
The state of human development in Southeast Asia could be described as one that is characterized by large disparities across several variables, notably in terms of social and economic indexes, economic performance, and governance indicators. The trend in human development index appear to be generally towards improvement since 1975, but a closer look at disaggregated data on several dimensions indicate more gaps and disparities among countries in the region. Economic performance and good governance indicators also vary significantly, with countries ranked higher in the human development index (HDI) doing better in general.
Southeast Asia in the Context of East Asia
The disparities among the ten ASEAN member countries must be seen in the larger context of the East Asia region, which includes China, Japan, and South Korea. Taken together as the East Asian 13 (ASEAN + 3), the extreme variations in mean values across six human development indicators among these countries is shown in Table II.1a and II.1b below, most notably in terms of per capita GDP (PPP$), per capita health expenditures, and education- related indexes. Cambodia, Myanmar, and Laos are clearly lagging behind the rest of East Asia.
Table II.1a shows that the thirteen East Asian countries together have higher coefficients of variation for per capita GDP (PPP$) and per capita health expenditures at 0.98 and 1.27 respectively. Public expenditure on education also has a relatively high coefficient of variation at 0.46 and 0.48 for the years 1990 and 1998-2000 respectively. 2
Table II.1a Human Development Indicators for ASEAN + 3 (East Asia 13)
GDP Public Life Per Capita Education per Expenditure on HDI Expectancy Health GDI Index capita Education at birth Expenditure (PPP$) (% of GDP) Countries 1990 2001 2001 2001 2001 1990 1998-2000 2000 2001
Singapore 0.819 0.884 77.8 0.87 22680 -- 3.7 913 0.880 Brunei -- 0.872 76.1 0.89 19210 -- 4.8 618 0.867
Malaysia 0.720 0.79 72.8 0.83 8750 5.2 6.2 310 0.780 Thailand 0.705 0.768 68.9 0.88 6400 3.5 5.4 237 0.766 Philippines 0.713 0.751 69.5 0.90 3840 2.9 4.2 167 0.748
Vietnam 0.603 0.688 68.6 0.83 2070 -- -- 130 0.687 Indonesia 0.619 0.682 66.2 0.80 2940 1.0 -- 84 0.677
Cambodia 0.512 0.556 57.4 0.64 1860 -- 1.9 97 0.551 Myanmar -- 0.549 57.0 0.72 1027 -- 0.5 24 -- Laos 0.449 0.525 53.9 0.63 1620 -- 2.3 52 0.518
Japan 0.906 0.932 81.3 0.94 25130 -- 3.5 2009 0.926 S. Korea 0.814 0.879 75.2 0.96 15090 3.5 3.8 899 0.873 China 0.624 0.721 70.6 0.79 4020 2.3 2.1 205 0.718
Mean 0.680 0.738 68.87 0.822 8818.23 3.07 3.49 441.92 0.750 STD 0.14 0.14 8.41 0.10 8661.37 1.40 1.68 561.23 0.13 CV 0.20 0.18 0.12 0.13 0.98 0.46 0.48 1.27 0.17
Source: HDR 2003
Table II.1b Average Values for Social and Economic Indicators ASEAN + 3 (China, Japan, South Korea) or East Asia 13
China/Indonesia Japan Social and Economic Malaysia Cambodia South Korea Indicators Philippines Myanmar Singapore Thailand Laos Brunei Vietnam
Human Development Index 0.892 0.730 0.540 (2001) Per Capita GDP (PPP$, 2001) 20,527 4,670 1,502 Per Capita Health Expenditures 1,109 188.83 57.67 Education Index 0.915 0.840 0.660 Public Expenditure on Education 4.0 4.48 1.57 (% of GDP) Gender-related Development Index 0.887 0.730 0.540
Source: HDR 2003 3
In terms of per capita GDP (PPP$), the disparity between the high HDI and medium HDI countries in East Asia is also very large. Specifically, Japan, South Korea, Singapore, and Brunei’s combined average per capita GDP (PPP$) is five times more than the combined average of China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam and roughly thirteen times more than those of Cambodia, Myanmar and Laos.
East Asia vis-à-vis Europe
In contrast, the 33 countries of Europe, as shown in Table II.2, fare better in terms of disparities among the same set of indicators. The high HDI countries (EU-15) of the region only has a little more than twice the average per capita GDP (PPP$) of the medium HDI countries (Accession-11), and a little over ten times more than the lower medium HDI countries (CIS-7).
Table II.2 Average Values of Social and Economic Indicators Various Groups of European Countries
Social and Economic EU-15 Accession-11 CIS-7 Indicators
Human Development Index 0.924 0.835 0.722 (2001) Per Capita GDP (PPP$, 2001) 26,447 11,443 2,404 Per Capita Health Expenditures 2,064 660 110 Education Index 0.966 0.925 0.887 Public Expenditure on Education (% of GDP) 5.35 5.07 3.7
Gender-related Development Index 0.920 0.833 0.706
Source: HDR 2003
The significant disparities between East Asia and Europe is also shown in Table II.3, which summarizes the mean, standard deviation, and coefficient of variation measures for the two regions across HDI and per capita GDP (PPP$). The coefficient of variation in HDI of Europe 33 is only 9.7 percent while that of East Asia 13 is almost twice that of the former, or 18.4 percent. ASEAN 10 has a coefficient of variation twice that of Europe 33. 4
In terms of per capital GDP (PPP$), East Asia has a higher coefficient of variation (98.2%) than Europe (71.6%). Even much higher coefficient of variation is noticeable for ASEAN 10 countries for per capita GDP, which stands at 109%.
Table II.3 Summary Measures for Europe 33, East Asia 13, and ASEAN 10
Social and Economic Standard Coefficient Mean Indicators Deviation of Variation (%)
HDI (2001) Europe 33 0.851 0.082 9.7
HDI (2001) East Asia 13 0.738 0.135 18.4
HDI (2001) ASEAN 10 0.707 0.130 19.0 Per Capita GDP (PPP$, 2001) Europe 33 16,359 11,714 71.6
Per Capita GDP (PPP$, 2001) East Asia 13 8,818 8,661 98.2
Per Capita GDP (PPP$, 2001) ASEAN 10 7,040 7,747 109.0
In general, Europe has a much higher level of human development than East Asia, which could be attributed primarily to its longer process of development. Disparities between higher income and lower income countries is more pronounced in East Asia than in Europe, even as one scholar noted that the process of convergence is very strong in EU and non- existent in Southeast Asia (Karras 1997). Much of the strength of EU’s convergence could be attributed to its more rigid and institutionalized integration process. Meanwhile, the lack of convergence among countries in Southeast Asia apparently serves as a major obstacle to more effective regional cooperation and integration.
Clustering Southeast Asian Countries on HD Indicators
The state of human development in Southeast Asia could be characterized mainly as one with wide disparities across countries in the region based on a set of social and economic indicators. The ten countries of Southeast Asia may be clustered together into four groups based on their HDI rankings and six other human development indicators as summarized in Table II.4.
Singapore and Brunei – the smallest countries in the region both in terms of population and geographic size – rank the highest in terms of the seven indicators (HDI, life, education, GDP, human poverty index, gender 5
development index, and gender empowerment measures). These two countries fall in the “high human development” category based on HDI rank, life expectancy, education, and GDP values, which are closer to that of Japan and South Korea in East Asia and to some developed countries in the European Union.
Malaysia, Thailand, and the Philippines belong to a second cluster of upper “medium human development” countries in the region that may appear to have a wider range of difference in their HDI ranking but are essentially much closer and less variant in terms of life, education, and GDP indexes.
Vietnam and Indonesia belong to a third category, which may be called medium “medium human development” countries. Although they appear to have a big difference in terms of HDI ranking, their life, education, and GDP indexes are much closer.
Cambodia, Myanmar, and Laos belong to the last group of countries (lower “medium human development”) in the region whose HDI ranking, life, education, and GDP indexes are quite close. These countries also have a higher level of human poverty index (HPI) relative to the other Southeast Asian countries, most notably Cambodia and Laos.
Table II.4 The State of Human Development in Southeast Asia, 20011
Country HDI Life Educ GDP HPI GDI GEM
Singapore 28 0.88 0.87 0.91 6 28 26 Brunei 31 0.85 0.89 0.88 …. 31 ….
Malaysia 58 0.80 0.83 0.75 …. 53 45 Thailand 74 0.73 0.88 0.69 24 61 55 Philippines 85 0.74 0.90 0.61 28 66 35
Vietnam 109 0.73 0.83 0.51 39 89 …. Indonesia 122 0.69 0.80 0.56 33 91 ….
Cambodia 130 0.54 0.64 0.49 73 105 64 Myanmar 131 0.53 0.72 0.39 45 …. …. Lao PDR 135 0.48 0.63 0.46 66 109 ….
Source: HDR 2003
1 Source: Hadi Soesastro, "Talking Points on the State of Human Development in Southeast Asia", paper presented at the Southeast Asia Human Development Report Inception Workshop, UNDP and ISDS, Shangri-La Hotel, Manila, Philippines, 18-20 August 2003. Values in Table 1 were taken from Human Development Report (HDR) 2003. 6
Trends in Human Development in Southeast Asia
Over the last decade or so, the HDI rankings of Southeast Asian countries have not changed significantly on average. However, Cambodia and the Philippines had the widest range of fluctuation in HDI ranking over the last 12 years (at 35 and 30, respectively). Table II.5 is a summary of HDI rankings of Southeast Asian countries based on Human Development Reports between 1991-2003. Figure 1 provides a chart of the changes in HDI rankings of these countries.
Table II.5 HDI Rankings of Southeast Asian Countries, 1991-2003
Country 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Ave R
Singapore 37 40 43 43 35 34 26 28 22 24 26 25 28 32 21 Brunei 42 41 44 44 41 36 38 35 25 32 32 32 31 36 19
Malaysia 52 51 57 57 59 53 60 60 56 61 56 59 58 57 10 Thailand 66 69 74 54 58 52 59 59 67 76 66 70 74 65 22 Philippines 84 80 92 99 100 95 98 98 77 77 70 77 85 87 30
Indonesia 98 98 108 105 104 102 99 96 105 109 102 110 112 104 16 Vietnam 99 102 115 116 120 121 121 122 110 108 101 109 109 112 23
Myanmar 106 111 123 130 132 133 131 131 128 125 118 127 131 125 26 Lao PDR 128 129 141 133 138 138 136 136 140 140 131 143 135 136 15 Cambodia 140 136 148 147 153 156 153 140 137 136 121 130 130 141 35
Note: Ave = mean over the last 12 years; R = range Source: HDR, 1991-2003.
Although HDI rankings of Southeast Asian countries have not changed that much, the trend in human development index appear to have improved significantly since 1975 for most countries in the region. Indonesia had the most significant improvement (at 0.22) in terms of the difference in HDI values from 1975 to 2001, followed by Malaysia (0.18), Singapore (0.16), Thailand (0.16), Vietnam (0.11), the Philippines (0.10), and Laos (0.10), respectively. Cambodia has the least improvement in human development index (0.04). Table II.6 is a summary of HDI trends in the region. Note that the HDI values appear to be consistent with the four clusters of countries in the region as noted earlier over the period covered. 7
Figure 1. HDI Ranking of Southeast Asian countries, 1991-2003
180
160
140
Singapore 120 Brunei Malaysia 100 Thailand Philippines Indonesia 80 Vietnam Myanmar 60 Lao PDR Cambodia
HDI Ranking (higher number lower rank) 40
20
0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 AVE Year
Source: HDR 2003
Table II.6 HDI Trends in Southeast Asia, 1975-2001
HDI Rank Country 1975 1980 1985 1990 1995 2001 D
28 Singapore 0.722 0.755 0.782 0.819 0.858 0.884 0.16 31 Brunei ...... 0.872 ..
58 Malaysia 0.615 0.658 0.692 0.721 0.759 0.790 0.18 74 Thailand 0.612 0.650 0.673 0.705 0.739 0.768 0.16 85 Philippines 0.647 0.680 0.684 0.713 0.731 0.751 0.10
109 Viet Nam .. .. 0.582 0.603 0.646 0.688 0.11 112 Indonesia 0.464 0.526 0.578 0.619 0.659 0.682 0.22
130 Cambodia ...... 0.512 0.543 0.556 0.04 131 Myanmar ...... 0.549 .. 135 Lao PD. .. .. 0.422 0.449 0.485 0.525 0.10
Note: D = difference between 2001 HDI values and earliest available HDI values in Table 3. Source: HDR 2003
The ten countries of Southeast Asia also vary significantly across several social and economic indicators. Table II.7a shows that although the average 8
HDI values of Singapore and Brunei is not really that very far from those of Malaysia, Thailand, the Philippines, Vietnam, and Indonesia, the two groups differ enormously in terms of the mean per capita GDP (PPP$) and per capita health expenditures. However, indicators related to education do not show a wide variation between these two groups. Cambodia, Myanmar, and Laos are clearly the laggards in all six indicators. Their average per capita GDP (PPP$) is only 30 percent of the mean of five medium HDI countries, while their mean per capita health expenditures is only 8 percent and 31 percent of the average of the high and medium HDI countries, respectively.
Table II.7a Average Values for Social and Economic Indicators ASEAN 10, 2001
Malaysia Thailand Cambodia Singapore Social and Economic Philippines Myanmar Brunei Indicators Vietnam Laos Indonesia
Human Development 0.540 Index (2001) 0.890 0.740
Per Capita GDP (PPP$, 2001) 1,502 20,945 4,800 Per Capita Health Expenditures 765.50 185.60 57.67
Education Index 0.880 0.850 0.660
Public Expenditure on 1.57 4.25 3.95* Education (% of GDP)
Gender-related Development 0.880 0.730 0.540 Index
Note: * = Average public expenditure on education were computed using values for Malaysia, Philippines, and Thailand only; no values for Indonesia and Vietnam available in 2001.
Source: HDR 2003
Using human development indicators as shown in Table II.7b, it is clear that the variations among the ten ASEAN countries are significant for two variables: per capita GDP (PPP$) and per capita health expenditures. For both indicators, the coefficients of variation are 1.10 and 1.09 respectively. Public expenditure on education (as % of GDP) also varies significantly among the ten countries at 0.55 and 0.53 for 1990 and 1998-2000. 9
Table II.7b Human Development Indicators for ASEAN 10
GDP Public Life Per Capita Education per Expenditure on HDI Expectancy Health GDI Countries Index capita Education at birth Expenditure (PPP$) (% of GDP) 1990 2001 2001 2001 2001 1990 1998-2000 2000 2001
Singapore 0.819 0.884 77.8 0.87 22680 -- 3.7 913 0.880 Brunei -- 0.872 76.1 0.89 19210 -- 4.8 618 0.867
Malaysia 0.720 0.79 72.8 0.83 8750 5.2 6.2 310 0.780 Thailand 0.705 0.768 68.9 0.88 6400 3.5 5.4 237 0.766 Philippines 0.713 0.751 69.5 0.90 3840 2.9 4.2 167 0.748
Vietnam 0.603 0.688 68.6 0.83 2070 -- -- 130 0.687 Indonesia 0.619 0.682 66.2 0.80 2940 1.0 -- 84 0.677
Cambodia 0.512 0.556 57.4 0.64 1860 -- 1.9 97 0.551 Myanmar -- 0.549 57.0 0.72 1027 -- 0.5 24 -- Laos 0.449 0.525 53.9 0.63 1620 -- 2.3 52 0.518
Mean 0.643 0.707 66.82 0.799 7039.70 3.15 3.63 263.20 0.720 STD 0.12 0.13 8.23 0.10 7747.17 1.73 1.93 286.66 0.13 CV 0.19 0.18 0.12 0.13 1.10 0.55 0.53 1.09 0.17
Source: HDR 2003
Economic Performance
In terms of economic performance, Southeast Asian countries have performed well between 1990-2001 based on GDP growth rates (see Table II.9), most especially the ASEAN-4 (Cambodia, Myanmar, Laos, and Vietnam). Among the ASEAN-6, Brunei and the Philippines were the laggards in the region during this period. In terms of total GDP and GDP per capita (both US$ and PPP$), Cambodia and Laos had the lowest among ASEAN countries in 2001 as shown in Table II.8. It is also clear from Table 8 that, although Southeast Asian countries still lag behind Japan, South Korea, and China in terms of total GDP, the GDP per capita Singapore is much closer to that of Japan and South Korea. China’s GDP per capita is closer to that of the Philippines.
The disparities in the economic performance of Southeast Asia and Northeast Asian countries are clearly shown in Figures 2a, 2b and 2c, which present graphically the values in Tables II.8 and II.9. Clearly, China and Japan dwarfs the rest of the region in terms of GDP (Figure 2a). However, in terms of GDP per capita (Figure 2b), Singapore and Japan are ahead in East Asia. In terms of GDP growth rate, China is clearly the leader in the pack, followed by Vietnam and Myanmar, which are the leading countries in Southeast Asia for the period 1990-2001. Prior to the 1990s, the clear leaders in the region were China and South Korea, while Thailand, Singapore, Indonesia, and Vietnam were the ones in the ASEAN. 10
Table II.8 GDP of East Asian Countries 2001
GDP GDP GDP per capita GDP per capita HDI EAST ASIAN (US$b) (PPP$b) US$ (PPP$) RANK COUNTRIES 2001 2001 2001 2001
28 Singapore 85.6 93.7 20,733 22,680 31 Brunei Darussalam ...... 58 Malaysia 88.0 208.3 3,699 8,750 74 Thailand 114.7 391.7 1,874 6,400 85 Philippines 71.4 301.1 912 3,840 109 Viet Nam 32.7 164.5 411 2,070 112 Indonesia 145.3 615.2 695 2,940 130 Cambodia 3.4 22.8 278 1,860 131 Myanmar ...... 135 Lao PDR 1.8 8.8 326 1,620
9 Japan 4,141.4 3,193.0 32,601 25,130 30 Korea, Rep. Of 422.2 714.2 8,917 15,090 104 China 1,159.0 5,111.2 911 4,020
Table II.9 GDP Growth Rates of East Asian Countries, 1975-2001
GDP GDP per capita GDP per capita Growth Rate (PPP$) (PPP$) HDI EAST ASIAN (%) Highest Value Year RANK COUNTRIES 1975-2001 1990-2001 1975-2001 Highest
28 Singapore 5.1 4.4 23,804 2000 31 Brunei -2.2 -0.7 .. .. 58 Malaysia 4.1 3.9 8,996 1997 74 Thailand 5.4 3.0 6,763 1996 85 Philippines 0.1 1.0 3,946 1982 109 Viet Nam 4.9 6.0 2,070 2001 112 Indonesia 4.3 2.3 3,267 1997 130 Cambodia 2.1 2.2 1,860 2001 131 Myanmar 1.8 5.7 .. .. 135 Laos 3.3 3.9 1,620 2001
9 Japan 2.6 1.0 25,309 2000 30 South Korea 6.2 4.7 15,090 2001 104 China 8.2 8.8 4,020 2001
Source: HDR 2003
Singapore has the highest GDP per capita in Southeast Asia at US$ 22,680 (in purchasing power parity, 2002 figures) and third highest in Asia after Japan and Hong Kong. Although a high income country with GDP per capita levels 11 closer to OECD countries than developing countries, it is classified by the OECD as a “more advanced developing country”. However, high income levels does not necessary correlate with high human development. Singapore has a score of –7 for the difference between the rankings based on GDP per capita in PPP and the HDI rank. A negative figure would indicate that Singapore’s GDP per capita rank was higher than the HDI rank. If the negative differences were large, it would seem to suggest that the country is more “developed” in income terms compared to human development.
Although the negative difference in Singapore’s case is not very large in 2002, they were larger during the 1991-2000 period (ranging from –11 to –22). Oil exporting countries in the Middle East tend to have large negative differences e.g. Qatar (-19), Kuwait (-17) and united Arab Emirates (-25).
Figure 2a. GDP of East Asian Countries 2001
6000
5000
4000
GDP (US$b) 3000 GDP (PPP$b) GDP (US$b)
2000
1000
0
Laos Brunei Japan China Malaysia Thailand Singapore Viet Nam Indonesia Cambodia Myanmar Philippines South Korea East Asian Countries 12
Figure 2b. GDP Per Capita of East Asian Countries
35000
30000
25000
20000 GDP per capita (US$) GDP per capita (PPP$) 15000 GDP Per Capita (US$)
10000
5000
0
Laos Brunei Japan China Malaysia Thailand Singapore Viet Nam Indonesia Cambodia Myanmar Philippines South Korea East Asian Countries
Figure 2c. GDP Growth Rate in East Asia, 1975-2001 and 1990-2001
10.00
8.00
6.00
4.00 1975-2001 1990-2001 2.00 Growth Rate (%)
0.00
Laos Brunei Japan China Malaysia Thailand Singapore Viet Nam Indonesia Cambodia Myanmar -2.00 Philippines South Korea
-4.00 ASEAN 10, Japan, Korea, China 13
Despite impressive growth rates in the East Asian region, however, data on public expenditures reveal a disturbing picture: total debt servicing was between 6.2 to as much as 17.5 percent (in 2001) of the GDPs of five countries – Thailand, Indonesia, the Philippines, South Korea, and Malaysia – while military spending was much higher for Brunei, Singapore, Cambodia, and Myanmar (between 3.0 to as much as 6.1 percent in 2001).
Understandably, the countries that spent more on debt servicing were those hit very hard by the Asian financial crisis in 1997. According to the Asian Development Bank’s 2003 outlook, the recovery in the economies of Southeast Asia was generally much stronger in 2002 that anticipated as GDP growth rate for the region was at 4.1%, which was 1% higher that forecast a year before. Specifically, Malaysia, Thailand and, to some extent, the Philippines, demonstrated a stronger recovery growth even as Singapore moved out of recession. Indonesia, Laos, and Vietnam showed only marginal improvement from 2001 levels, while the GDP growth rate of Cambodia declined from 6.3% in 2001 to 4.5% in 2002. Overall, the economic recovery in Southeast Asia was due to a combination of factors: increased domestic consumption, significant improvement in exports (most notably high export growth to China), and generally low inflation (except for Indonesia). These positive factors are expected to help the countries in the region to sustain their economic recovery between 2003-2004 (ADO 2003).
Table II.10 Public Expenditures on Education, Health, Military and Debt Service
Education Health Military Debt Service (% of GDP) (% of GDP) (% of GDP) (% of GDP) Countries 1990 1998-200 1990 2000 1990 2001 1990 2001
Singapore .. 3.7 1.0 1.2 4.8 5.0 .. .. Brunei .. 4.8 1.6 2.5 6.7 6.1 .. .. Malaysia 5.2 6.2 1.5 1.5 2.6 2.2 9.8 7.1 Thailand 3.5 5.4 0.9 2.1 2.3 1.4 6.2 17.5 Philippines 2.9 4.2 1.5 1.6 1.4 1.0 8.1 10.9 Viet Nam .. .. 0.9 1.3 7.9 .. 2.7 3.7 Indonesia 1.0 .. 0.6 0.6 1.8 1.1 8.7 10.7 Cambodia .. 1.9 .. 2.0 3.1 3.0 2.7 0.6 Myanmar .. 0.5 1.0 0.4 3.4 2.3 .. .. Laos .. 2.3 0.0 1.3 .. 2.1 1.1 2.5 Japan .. 3.5 4.6 6.0 0.9 1.0 .. .. South Korea 3.5 3.8 1.8 2.6 3.7 2.8 3.3 6.2 China 2.3 2.1 2.2 1.9 2.7 2.3 2.0 2.1 Source: HDR 2003 14
Thailand, which had the highest public expenditure in Southeast Asia to service debt at 17.5% in 2001, has been managing its debt stock quite well over the last three years. The country’s external debt amounted to US$59.3 billion at the end of 2002, which was down from US$67.5 billion in 2001. The ratio of public sector debt to private sector debt has also been falling, from 41.7% in 2001 to 38.5% at the end of 2002. The Thai government has announced plans to further lower its public debt target to 54.6% of GDP in 2003 and cited better than expected growth performance and the repayment of more than Baht 37.4 billion in government debt as reasons for the lower target (ADO 2003).
Indonesia has also been making some progress in debt management. The fiscal burden of servicing debt has been an important feature of the government’s budget in the post-1997 crisis years. Roughly 5.3% of GDP in 2002 were for interest payments and represented one the major expenditures in the national budget. Even so, due to appreciating exchange rate vis-à-vis the US currency and increases in the nominal GDP, the country’s government-to-debt ratio declined significantly from 98% in 2000 to about 72% in 2002. The Indonesian government also made some notable progress in 2002 with plans to make future repayment of its external and domestic debt more manageable (ADO 2003).
Singapore’s economy has been going through a difficult time since the Asian financial crisis of 1997-1998. The city-state experienced two recessions in 1998 (-0.9%) and in 2001 (-1.9%). Although the economy registered a robust rebound in 1999 and 2000, economy recovery has been interrupted by a sequence of external shocks including the September 11 terrorist attacks in the US, the Iraq war and more recently the Severe Acute Respiratory (SARS) outbreak. The GDP index has fallen from a high of 0.99 in 1998 to 0.89 in 2001 but it has improving slightly to 0.91 in 2002 and 2003. Given increased global competition (especially from emerging markets such as China and India) and rapid technological changes, many economists predict that the era of robust and sustainable economic growth is now over for Singapore. The city-state will need to make the necessary economy restructuring in order to remain competitive.
In this light, an Economic Review Committee (ERC) was set-up by the Singapore government in December 2001 to examine how Singapore could reinvent itself in the face of these growing challenges. The ERC - comprising members from the government, labor movement and the private sector - was to undertake a comprehensive review of existing economic strategies and policies as well as identify new ways to develop a vibrant and competitive private sector. The final report of the ERC entitled, “New Challenges, Freash Goals – Towards a Dynamic Global City” was published in February 2003. The report identified 6 main areas that are critical in the remaking Singapore into a globalized economy. These areas are: 1) expanding external linkages to major developed economies in order to expand markets and attract investments; 2) improving microeconomic competitiveness including lowering taxation rates and other business costs; 3) promoting 15 entrepreneurship, creativity and innovation; 4) strengthening and upgrading
Figure 3. Expenditure on Education, Health, Military, Debt Service
20.0
18.0
16.0
14.0 Education 1998-2000 Health 2000 12.0 Military 2001 Total Debt Service 2001
10.0 % of GDP
8.0
6.0
4.0
2.0
0.0
Laos Brunei Japan China Malaysia Thailand Singapore Viet Nam Indonesia Cambodia Myanmar Philippines South Korea East Asian Countries manufacturing and services industries; 5) investing and improving the education system; and 6) economic restructuring including dealing with structural unemployment.
Meanwhile, Japan clearly leads the region in terms of expending a higher percentage of its GDP to health (4.6% in 1990 and 6% in 2000) vis-à-vis military expenditures. The minimal spending on its military needs may be attributed to certain constitutional constraints and its strong military alliance with the United States, which effectively provides a security umbrella for the country’s external defense.
Among ASEAN countries, Malaysia clearly leads the group in terms of higher expenditure on education followed by Thailand, Brunei, the Philippines, and Singapore. Between education and health, countries in East Asia (except Japan) apparently spent more on education. In general, health expenditures had very minimal increase between 1990 and 2000 for most countries in the region and remained almost constant for others (notably Malaysia, Indonesia, and the Philippines) even as it decreased for Myanmar. 16
Accounting for Disparities in Health and Education Expenditures2
Several factors have influenced the amount of public spending on health and education in Southeast Asia: distorted priorities (high defense spending in Cambodia, Laos, and Myanmar crowd out the social sector); internal pressure not to cut spending despite high budget deficits (Thailand, Philippines, and Indonesia); the importance of safety nets (policy and structural adjustments included funding for the social sector in Indonesia and Thailand); and access to foreign aid (e.g. direct assistance to Myanmar for social services).
The case of Cambodia is an illustration of a country said to have ‘distorted’ priorities. Excessive public expenditure on defense from 1994 to 1998—between 3.3 and 5 percent of GDP annually—crowded out the social sectors. In 1998, public spending on health and education accounted for only 0.7 percent and 1.3 percent of GDP, respectively. Data in the appendix indicates that this trend has not changed significantly in the following years. To make matters worse, actual expenditure for education—and even more so for health—falls short of budgeted levels.
Myanmar’s military spending is also high. In 1997, for instance, public expenditure on defense accounted for 7.6 percent of GNP. Meanwhile, past spending on health and education had averaged about 0.5 percent of GDP. Myanmar’s budget has strained social sector provisions, resulting in low educational attainments and inadequate health care. Myanmar has to rely on donor assistance—particularly from the EU—to support basic service provision.
In Indonesia, the government tried to maintain the same real level of spending for basic education as in pre-1997 years through a ‘stay in school’ campaign in 1998, which included target scholarships for the poorest children; and block grants to schools to compensate for reduction in parental contributions and increases in costs of inputs. The Indonesian government used part of the Policy Reform Support Loan from the World Bank in 1998 to support the purchase of food and essential drugs, including vaccines and drugs needed for communicable disease control.
Due to a big revenue shortfall in 1998 following the Asian financial crisis, the Philippine government imposed austerity measures, cutting allocations by as much as 25 percent. But mindful of possible adverse effects, it exempted the basic social services sector—basic education and primary health. Despite this favorable policy, the social sector failed to maintain its share of the national budget. Trends in education financing in the Philippines are likewise not encouraging. With rapid expansion of publicly funded state colleges and universities, tertiary education is crowding out the budget for elementary education. In a similar vein, Viet Nam has protected social sector spending even if the overall budget has fallen.
2 The first six paragraphs of this section of the chapter were adopted from Gonzales and Mendoza (2002). 17
Malaysia’s relatively strong fiscal and debt management policies allowed it to weather the early effects of the financial crisis, slowing down contraction. Malaysia has run budgetary surpluses for the past five years, sheltering social expenditures. The impetus for this is reliance on a regulatory regime that expands private provision of social services.
The human development education index for Malaysia has been steadily rising over the past 10 years reaching 0.83 in 2003. Malaysia clearly places a lot of emphasis on education - expenditure on education takes up a sizeable chunk of the government’s budget. From 1999-2003, an average of 25% of total government expenditure was spent on education. Primary education is compulsory in Malaysia and the country provides free education at primary and secondary school levels. In 2003, the enrolment rates in primary and secondary schools are 92.4% and 58.2% respectively. Recent education reforms include: 1) introduction of merit-based university entrance requirements in 2002 (prior to this, there were racial quotas for university places), and 2) enhancement of Malaysia’s global competitiveness, science and mathematics were taught in English, starting in primary schools, from 2003.
Life expectancy at birth is Malaysia continue to improves. According to the Malaysia Department of Statistics, a Malaysian born in 2003 is expected to live up to 71 years for males and 75.5 years for females. The infant mortality rate has also fallen from 7 per 1,000 live births in 1999 to 5.6 in 2003 reflecting improvements in healthcare services.
Public healthcare services are fairly good. There is an extensive network of primary healthcare services in the country which is supported by 116 government hospitals with about 29,000 beds. However, there is an acute shortage of manpower in the healthcare sector. (In 2002, there was 17,442 doctors, 35,280 nurses, 7,319 assistant nurses and 9,360 midwives.) Only 32 out of 45 designated government hospitals were able to provide five basic specialized medical care due to manpower shortages.
In the Mid-term Review of the Eighth Malaysian Plan, the government plans to expand the number of places in health training institutions. For example, the recent completion of three new training institutions will add 5,000 training places. Shortage of health manpower will also be tackled by promoting the use of information and communications technology (ICT) in the delivery of healthcare.
Malaysia responded quickly to the global alert on SARS in 2003 and was also able to successfully contain the epidemic. As a result, Malaysia had only 5 cases of SARS with 2 confirmed deaths from the disease (worldwide cases totaled 8,096 with 774 deaths). The country’s experience gained during the Nipah virus outbreak five years earlier may have contributed to the efficient containment of the SAR virus. Efforts to contain the virus include preparing and disseminating reference materials on SARS, providing guidelines on the 18 clinical management of SARS and public health surveillance. Malaysia also participated in bilateral and regional collaboration and worked closely with the World Health Organization (WHO).
Singapore’s achievements in education are impressive. UNDP education index for Singapore remains high at 0.87 over the past 4 years. He education index measures a country’s relative achievement in both adult literacy and combined primary, secondary and tertiary gross enrolment. In 2002, Singapore’s adult literacy stands at 93.7% and combined enrolment ratio stands at 87.3% (Yearbook of Statistics Singapore 2003). Meanwhile, school expectancy (i.e. the number of years a 6 year old child can expect to enroll in his or her lifetime given current enrolment rates) in 2002 was 12.9 years.
Reforms in the education sector have been implemented over the past few years. School curriculum have been modified to enhance the skills of students as well as to promote greater creativity. Meanwhile university admission system has been broadened to take into account of other components (such as co-curricular activities and project work) besides the standard entrance examinations. The government is also planning to establish specialized independent schools for students with specialized talents viz. sports and art schools.
Governance in Southeast Asia
Following the Asian financial crisis in 1997, good governance surfaced as an important variable in sustaining future growth and stability in the region. While institutional weaknesses were not necessarily the cause of the financial crisis, the lack of governmental accountability and transparency, corruption, highly centralized control, and poor policy coordination exacerbated the crisis. Southeast Asian governments felt new governance pressures as a result of higher debt levels and increased budget deficits. Specifically, they were forced to practice greater efficiency in the use of public resources amidst increased clamor for more transparency and accountability in government transactions, as well as greater demands for reasonable regulatory practices. These pressures, along with greater civil society initiatives in curbing corruption, resulted in dramatic changes in the region’s political leadership following the Asian financial crisis (Gonzales and Mendoza 2002).
Governance is basically defined as the exercise of economic, political, and administrative powers in managing the state’s resource endowment. This is done through institutionalized processes and mechanism in which civil society groups and individuals articulate their interests, exercise their rights, perform their obligations, and mediate their differences (UNDP 1998 and Shah 1998).
Good governance has five components: 1) transparency, which refers to the guaranteed free flow of information and where institutions and processes are directly accessible to those concerned with them; 2) accountability, which 19 refers to responsibility of decision-makers in government, the private sector, and civil society to the public and to institutional stakeholders; 3) the rule of law, which refers to the fair and impartial enforcement of rules and legal frameworks; 4) efficient and effective governance, which refers to the ability of institutions and processes to produce outcomes that meet needs while making the best use of resources; and 5) participatory process, which refers to mediation of differences and reaching a broad consensus on political, economic, and social priorities (UNDP 1998).
Kaufmann, Kraay, and Mastruzzi (2003, hereafter referred to as KKM 2003) defined governance broadly as the traditions and institutions by which authority in a country is exercised. They came up with six clusters of indicators that in a way unbundle the six dimensions of good governance: 1) voice and accountability; 2) political stability and absence of violence; 3) government effectiveness; 4) regulatory quality; 5) rule of law; and 6) control of corruption.
The first cluster is intended to capture the first part of KKM’s definition of governance: the process by which those in authority are selected and replaced. They referred this as “Voice and Accountability”, and include in it a number of indicators measuring various aspects of the political process, civil liberties and political rights. These indicators measure the extent to which citizens of a country are able to participate in the selection of governments. They also included in this category indicators measuring the independence of the media, which serves an important role in monitoring those in authority and holding them accountable for their actions.
The second governance cluster is labeled “Political Stability and Absence of Violence”. In this index KKM combined several indicators that measure perceptions of the likelihood that the government in power will be destabilized or overthrown by possibly unconstitutional and/or violent means, including domestic violence and terrorism. This index captures the idea that the quality of governance in a country is compromised by the likelihood of wrenching changes in government, which not only has a direct effect on the continuity of policies, but also at a deeper level undermines the ability of all citizens to peacefully select and replace those in power.
The third and fourth clusters summarize various indicators of the ability of the government to formulate and implement sound policies. In “Government Effectiveness” the following indicators were combined: responses on the quality of public service provision, the quality of the bureaucracy, the competence of civil servants, the independence of the civil service from political pressures, and the credibility of the government’s commitment to policies. The main focus of this index is on “inputs” required for the government to be able to produce and implement good policies and deliver public goods.
The fourth cluster, which is referred to as “Regulatory Quality”, focuses more on the policies themselves. It includes measures of the incidence of market unfriendly policies such as price controls or inadequate bank supervision, as 20 well as perceptions of the burdens imposed by excessive regulation in areas such as foreign trade and business development.
The last two clusters summarize in broad terms the respect of citizens and the state for the institutions which govern their interactions. Included in the “Rule of Law” are several indicators that measure the extent to which agents have confidence in and abide by the rules of society. These include perceptions of the incidence of crime, the effectiveness and predictability of the judiciary, and the enforceability of contracts. Together, these indicators measure the success of a society in developing an environment in which fair and predictable rules form the basis for economic and social interactions, and importantly, the extent to which property rights are protected.
The final cluster, referred to as “Control of Corruption”, measures perceptions of corruption, conventionally defined as the exercise of public power for private gain. Despite this straightforward focus, the particular aspect of corruption measured by the various sources of indicators differs somewhat, ranging from the frequency of “additional payments to get things done,” to the effects of corruption on the business environment, to measuring “grand corruption” in the political arena or in the tendency of elite forms to engage in “state capture”. The presence of corruption is often a manifestation of a lack of respect of both the corrupter (typically a private citizen or firm) and the corrupted (typically a public official or politician) for the rules that govern their interactions, and hence represents a failure of governance according to KKM’s and the UNDP’s definition.
This section of the chapter presents a set of estimates of six dimensions of governance in Southeast Asia covering eleven countries (including East Timor) based on KKM (2003) data sets from 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. KMM assigned the individual measures of governance perceptions to six categories capturing key dimensions of governance, and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. The governance indicators presented here are an update and expansion of Kaufmann’s and Kraay’s previous works (Kaufmann, Kraay and Zoido-Lobatón (KKZ) 1999a,b and 2002 and Kaufmann and Kraay 2002).
Voice and Accountability
From Table II.11 and Figure 2, it is clear that the trend in Southeast Asia is generally poor as far as voice and accountability measures of governance are concerned. Only three countries (the Philippines, Thailand, and to some extent Singapore) scored positively in this dimension, but their scores are not that impressive. Myanmar, Vietnam, Laos, and Brunei scored negatively in this dimension primarily due to their closed political system. The military junta in Myanmar for instance continues to dominate the political landscape in that country, Vietnam and Laos have adopted the Chinese model of a one- 21
Table II.11 Voice and Accountability in Southeast Asia, 1996-2002
Countries 2002 2000 1998 1996
Singapore (SGP) 0.510 -0.051 0.010 0.385 Brunei (BRN) -0.822 -1.072 -1.139 -0.915 Malaysia (MYS) -0.275 -0.272 -0.246 -0.046 Thailand (THA) 0.196 0.253 0.106 0.013 Philippines (PHL) 0.166 0.400 0.465 0.165 Vietnam (VNM) -1.357 -1.532 -1.638 -1.244 Indonesia (IDN) -0.489 -0.518 -1.335 -1.085 Cambodia (KHM) -0.558 -0.353 -0.868 -0.646 Myanmar (MMR) -2.045 -2.117 -1.925 -1.643 Laos (LAO) -1.733 -1.429 -1.265 -1.036 Timor L’este (TMP) 0.190 ......
MEAN -0.565 -0.669 -0.783 -0.605 STD 0.847 0.832 0.814 0.689
Source: KKM 2003
Figure 2. Voice and Accountability in Southeast Asia (1996-2002)
1.000
0.500
0.000 SGP BRN MYS THA PHL VNM IDN KHM MMR LAO TMP
-0.500 2002 2000 1998 -1.000 1996
-1.500 KKM Point Estimate (positive values better)
-2.000
-2.500 SEA Countries
Source: KKM 2003 22 party political system, and Brunei is the only absolute monarchy in the region. These relatively closed political systems are not likely to liberalize any time soon and may even resist calls for democratization and greater participation of civil society in political decision-making.
Singapore appears to be an anomaly in the region among authoritarian political systems in Southeast Asia because it scored very high on accountability. Much of this could be attributed to the high level of transparency as part of the principles of governance adopted by its political leadership. In fact, good governance in the island city-state is built on three interrelated factors, namely: accountability and transparency, long-term social orientation, and social justice. The country is also known for its meritocracy and incorruptibility. As one specialist on Asia had put it, government in Singapore is held as a trusteeship rather than an agency of special interest (Weatherbee 2004).
Indonesia is a stark contrast to Singapore in that it suffers from a crisis of governance where all the symptoms of state decay are apparently present. These include: loss of de facto control over parts of the country, increased crime rate, emergence of non-state agents of coercion, unconstrained corporate and public corruption, and institutional incapacity. In the midst of these stands an immobile government that seemed to have no vision or direction and has neither the political will nor the capacity to address fundamental challenges to governance. The stasis in the Megawati government could also be attributed to contending political forces that prevent decisive action and to an enormous bureaucracy that remains strongly resistant to change. Specifically, the multi-partisan composition of the cabinet combined intra-party feuding and ideological differences have rendered the Megawati government immobile (Weatherbee 2004, Smith 2003).
Political Instability and Ethnic Conflicts
Political stability is another dimension of governance that has an impact on economic and social development. In Southeast Asia, the countries that have been unstable between 1996 and 2002 are Indonesia, Myanmar, Cambodia, and the Philippines (Table II.12 and Figure 3). Ethnic tensions in the region had in fact increased in the last decade, which implies poor conflict management in these countries. Moreover, ethnic conflict in Indonesia and the Philippines have also hurt their economic growth and could even worsen especially if international investors equate ethnic conflict with political instability, prompting them to withdraw their investments from the region (Gonzales and Mendoza 2002).
An imperative of good governance is to provide for domestic security that ensures the physical safety and legal rights of all citizens. On this dimension, Indonesia’s political stability and domestic security continue to be at risk given that a poorly led and poorly trained police force could not arrest the increasing tide of criminality in the country. This has led to a decline in the 23 confidence of the Indonesian people on state institutions of law and order, thus prompting them to take the law into their own hands for self-defense through the formation of militia groups, increased vigilantism, and even mob justice. Complicating this internal security situation are increased ethnic tensions and sectarian violence since the downfall of Suharto in 1998 that range from random acts of arson and bombings to some type of ethnic cleansing. Exacerbating the situation is the tendency of Megawati administration to appease military interests and showed no sign of attempting to reform the military establishment (Weatherbee 2004, Smith 2003).
In Cambodia, political instability remains precarious as contending political parties fail to form a coalition government following the elections in 2003. To a large extent, the instability in the country stems from the animosities of Cambodian factions that have been engaged in civil war for twenty years since the 1970s. This prolonged conflict continues to curtail access to social services and economic opportunities for Cambodians as the government is unable to govern effectively. Consequently, this has increased poverty and retarded economic growth (Gonzales and Mendoza 2003, Osborne 2003).
Table II.12 Political Stability in Southeast Asia, 1996-2002
Countries 2002 2000 1998 1996
SGP 1.275 1.528 1.405 1.292 BRN 1.103 1.255 1.431 0.858 MYS 0.505 0.333 0.551 0.924 THA 0.548 0.282 0.320 0.214 PHL -0.490 -0.318 0.088 -0.049 VNM 0.489 0.426 0.615 0.376 IDN -1.374 -1.855 -1.518 -0.339 KHM -0.251 -1.224 -1.372 -1.100 MMR -1.377 -1.414 -1.053 -0.924 LAO -0.125 0.399 0.982 0.961 TMP -0.936 ......
MEAN -0.057 -0.059 0.145 0.221 STD 0.926 1.128 1.099 0.821 Source: KKM 2003 24
Figure 3. Political Stability in Southeast Asia (1996-2002)
2.000
1.500
1.000
0.500
0.000 2002 SGP BRN MYS THA PHL VNM IDN KHM MMR LAO TMP 2000 1998 -0.500 1996
-1.000
-1.500 KKM Point Estimate (positive values mean more stability) -2.000
-2.500 SEA Countries
Source: KKM 2003
In Myanmar, the military-led State Peace and Development Council (SPDC) continues to dominate the political scene in the country even as it attempts to parry international pressures (including those from ASEAN) for democratic reforms. In September 2003, newly installed Prime Minister General Khin Nyunt announced a seven-stage roadmap to democracy that will pave the way for a national reconciliation process involving all political parties including the National League for Democracy (NLD) led by Aung San Suu Kyi and peace talks with ethnic rebel groups. Part of the reconciliation process is calling a National Convention of all political parties and ethnic groups that will design a new constitution of Myanmar. So far, the military junta has forged a peace agreement with 17 ethnic groups that have been fighting the central government in Yangon. However, it remains to be seen whether reconciliation with the democratic forces led by the NLD could really prosper.
A major obstacle to the roadmap is apparent the lack of consensus among the military rulers on the speed of democratic reforms in the country. For one, the top leader of the ruling junta, Senior General Than Swe, seem to be not in a hurry to convene the National Convention even as he is not prepared to give a role to Suu Kyi in the reconciliation process. Should the roadmap to democracy fail, the political legitimacy of the ruling military would continue to be challenged and also exacerbate the economic conditions of the country. In fact, the SPCD in recent years has resorted to infrastructure construction to 25 enhance its legitimacy that necessitated the printing of unrevealed amounts of local currency. This in turn contributed to uncontrolled inflation and the use of “corvee labor” that was denounced by the international community in 2002. Public expenditure on infrastructure has also lessened (in absolute and per capita terms) the government’s budget for social services such as health and education, which are supposed to be as important priorities of the SPCD (Steinberg 2003).
Government Effectiveness
There appears to be a wide disparity among Southeast Asian countries in terms of government effectiveness as can be gleaned from Table II.13 and Figure 4. Data from KKM (2003) indicate that the most effective government is that of Singapore, followed by Brunei and Malaysia. Thailand and the Philippines scored the lowest among those in the positive side of the scale. Indonesia and the CMLV countries (and more recently East Timor) are in the negative side of the scale, with Myanmar as consistently the most ineffective government in the region.
Table II.13 Government Effectiveness in Southeast Asia, 1996- 2002
Countries 2002 2000 1998 1996
SGP 2.262 2.477 2.588 2.037 BRN 0.955 1.053 0.133 1.009 MYS 0.924 0.683 0.765 0.805 THA 0.280 0.205 0.112 0.313 PHL -0.064 0.096 0.218 0.094 VNM -0.267 -0.266 -0.230 -0.182 IDN -0.558 -0.495 -0.584 0.077 KHM -0.560 -0.272 -1.044 -0.691 MMR -1.285 -1.314 -1.640 -0.909 LAO -0.796 -0.666 -0.338 -0.127 TMP -0.777 ......
MEAN 0.010 0.150 -0.002 0.243 STD 1.027 1.059 1.138 0.862
Source: KKM 2003 26
Figure 4. Government Effectiveness in Southeast Asia (1996-2002)
3.000
2.500
2.000
1.500
1.000 2002 2000 0.500 1998 1996 0.000 SGP BRN MYS THA PHL VNM IDN KHM MMR LAO TMP
-0.500
-1.000
KKM Point Estimate (positive values mean more effectiveness) -1.500
-2.000 SEA Countries
Source: KKM 2003
Singapore’s high level of government effectiveness may be attributed to the small size and scope of government, high pay for the upper crust of its quality bureaucracy (which is twice those in Malaysia, four times, those in Thailand, and five time those in the Philippines), and high level of accountability. In contrast, the CMLV countries are the least effective. For instance, Myanmar – despite its poor planning capacity – the state substantially controls most sectors of the country’s economy (e.g., energy, heavy industry, rice trade) and the business environment is generally unfriendly (Gonzales and Mendoza 2002).
Regulatory Quality
Southeast Asian countries that scored positively in government effectiveness also performed well in this dimension of governance. Table II.14 and Figure 5 essentially mirror the same performance of Singapore, Brunei, Malaysia, Thailand and the Philippines in regulatory effectiveness, while the CMLV countries and East Timor were on the negative side of the scale. 27
Table II.14 Regulatory Quality in Southeast Asia, 1996-2002
Countries 2002 2000 1998 1996
SGP 1.894 2.265 1.648 1.950 BRN 1.053 0.271 -0.059 2.200 MYS 0.576 0.349 0.566 0.696 THA 0.340 0.680 0.270 0.377 PHL 0.096 0.345 0.710 0.342 VNM -0.690 -0.607 -0.583 -0.545 IDN -0.682 -0.427 0.101 0.186 KHM -0.428 0.044 -0.218 -0.304 MMR -1.855 -1.372 -1.249 -1.031 LAO -1.238 -1.181 -1.178 -1.075 TMP -1.264 ......
MEAN -0.200 0.037 0.001 0.280 STD 1.114 1.040 0.880 1.118
Source: KKM 2003
Figure 5. Regulatory Quality in Southeast Asia (1996-2002)
2.500
2.000
1.500
1.000
0.500 2002 2000 0.000 1998 SGP BRN MYS THA PHL VNM IDN KHM MMR LAO TMP 1996 -0.500
-1.000
-1.500 KKM Point Estimate (positive values better quality)
-2.000
-2.500 SEA Countries
Source: KKM 2003
Singapore has the friendliest regulatory structure in the region, while the Philippines, Malaysia and Thailand have apparently relaxed many of their stringent and market-unfriendly policies. Clearly, the command economies in the region, Laos, Myanmar, and Vietnam, are still bogged down by a 28 number of restrictive policies. One of the reasons for the maintenance of state control of the economies in Laos and Myanmar, for instance, is that the ruling party or junta would want to prevent the emergence of alternative centers of power that may emerge in the private sector. Both countries have in fact not undertaken market-oriented liberalizing reforms. Meanwhile, Vietnam’s liberalization policy, doi moi, which dates back to the mid-1980s, is limited only to marketing of goods and services. Essentially, the state still determines the economic inputs to production and processing of goods. Although Cambodia is the only market economy among the CMLV, much of its economy is still dominated by illegal activities (casinos, narcotics, and illegal logging, for instance) even as it still lacks the basic infrastructure such as roads and power grids (Gonzales and Mendoza 2002, Haas 2004).
The cost of business entry in Southeast Asia as a fraction of GDP per capita also varies in the region. For instance, registration costs in Thailand and Singapore are comparable to those of OECD countries, while it is more expensive to do so in Vietnam and Indonesia. To some extent, the number of procedures to register a business in the region correlates with income per capita. Thus, lower income economies such as Vietnam, the Philippines, and Indonesia have more procedures. Although some have argued that while stricter regulation of entry could bring about better quality of products, better environmental records, or sharper competition, it could also lead to higher levels of corruption and bigger size of the unofficial economy. This is because costly regulations deter entry into the formal sector and reduce competition (Gonzales and Mendoza 2002).
In the long run, costly regulations deter the entry of foreign direct investments that create jobs and reduce unemployment, especially for poor countries in the region. The lack of adequate employment opportunities at home could then drive many people to explore overseas employment as migrant workers, which is the case for the Philippines and Indonesia. They become vulnerable to a number of risks, including physical abuse, rape (especially in the case of women workers), and white slavery. Human trafficking of women and children, especially the poor and uneducated, is another consequence of lack of job opportunities that stems from inadequate employment-generating investments.
Rule of Law and Control of Corruption
A big disparity also exists among Southeast Asian countries as far as rule of law is concerned. Table II.14 and Figure 6 show that Singapore tops the region in this dimension of good governance, followed by Brunei, Malaysia, and Thailand. Indonesia and the Philippines, along with East Timor and CMLV countries, are on the negative side of the scale. Myanmar and Laos consistently scored the lowest in the region in this dimension. Control of corruption is related to the rule of law, and it is not surprising that Table II.15 and Figure 7 somewhat mirrors the performance of Southeast Asian countries (except Thailand) in the same manner. 29
Table II.15 Rule of Law in Southeast Asia, 1996-2002
Countries 2002 2000 1998 1996
SGP 1.751 2.117 2.239 2.015 BRN 0.645 0.943 0.915 0.669 MYS 0.577 0.549 0.817 0.800 THA 0.300 0.428 0.398 0.464 PHL -0.498 -0.500 -0.040 -0.109 VNM -0.393 -0.737 -0.806 -0.472 IDN -0.802 -0.898 -0.974 -0.338 KHM -0.860 -0.736 -0.728 -0.864 MMR -1.620 -1.141 -1.058 -1.253 LAO -1.050 -1.017 -1.071 -1.292 TMP -1.106 ......
Mean -0.278 -0.099 -0.031 -0.038 STD 0.989 1.066 1.109 1.037
Source: KKM 2003
Figure 6. Rule of Law in Southeast Asia (1996-2002)
2.500
2.000
1.500
1.000
0.500 2002 2000 1998 0.000 1996 SGP BRN MYS THA PHL VNM IDN KHM MMR LAO TMP
-0.500
-1.000 KKM Point Estimate (higher value more rule of law)
-1.500
-2.000 SEA Countries 30
Prior to the Asian financial crisis, there was a more positive perception of rule of law in the region. As Southeast Asian countries experienced tremendous growth, confidence in their legal institutions also increased. However, some weak points within the region emerged, such as the erosion of judicial independence and the rise in corruption levels.
Indonesia and the Philippines are on the negative scale of both indexes given that in these countries, economic rent-seekers are perceived as having primarily responsible for undermining the institutions that are designed to keep them out. The concentration of wealth in a few families in these countries (including Thailand) also explains their poor ratings in the two dimensions of good governance. This is so because wealth concentration, combined with the interlocking links between owners and government officials, overshadows the independence of legal institutions. Specifically, in the context of “state capture”, legal institutions are subverted and are less likely to evolve in a manner that promotes transparent and market-based activities. According to one study (Claessens, Jankov, and Lang 1999), there is also a strong correlation between the share of the largest 15 families in total market capitalization, on one hand, and the efficiency of the judicial system, the rule of law, and corruption, on the other (Gonzales and Mendoza 2002).
Thailand’s score in both indexes (positive in the rule of law but negative in control of corruption) is somewhat intriguing. The country is quite strong in terms of judicial independence but still has problems with controlling
Table II.16 Control of Corruption in Southeast Asia (1996-2002)
Countries 2002 2000 1998 1996
SGP 2.304 2.501 2.516 2.039 BRN 0.321 -0.146 0.059 0.342 MYS 0.375 0.183 0.747 0.480 THA -0.153 -0.340 -0.119 -0.297 PHL -0.525 -0.492 -0.349 -0.368 VNM -0.680 -0.751 -0.620 -0.599 IDN -1.161 -1.087 -0.993 -0.439 KHM -0.904 -0.565 -1.270 -0.871 MMR -1.368 -1.252 -1.299 -1.087 LAO -1.251 -0.907 -0.702 -0.871 TMP -0.530 ......
MEAN -0.325 -0.286 -0.203 -0.167 STD 1.051 1.070 1.144 0.925 31
Figure 7. Control of Corruption in Southeast Asia (1996-2002)
3.000
2.500
2.000
1.500
1.000 2002 2000 0.500 1998 1996 0.000 SGP BRN MYS THA PHL VNM IDN KHM MMR LAO TMP
-0.500
KKM Point Estimate (higher values mean better) -1.000
-1.500
-2.000 SEA Countries
corruption. The emergence of Prime Minister Thaksin’s Thai Rak Thai party has raised questions about corruption, governance, and press freedom (Cronin 2004). Since the acquittal of Thaksin by the Constitution Court in 2001 of assets concealment charges, public confidence in Thailand’s democratic institutions appears to have sagged. The National Counter Corruption Commission, which indicted Thaksin, continues to perform its job well in dealing with graft allegations against Thaksin’s cabinet members and prominent bureaucrats. It has demonstrated exceptional mettle in the face of fierce and powerful critics and enemies (Thitinan 2003).
In Vietnam, the Nam Cam scandal in December 2001 revealed an organized criminal network engaged in a number of criminal activities such as murder, drug trafficking, prostitution, gambling, extortion and fraud. It involved high-ranking party and state officials that extended from Ho Chi Minh City to Hanoi, Haiphong, and other provinces and cities. This scandal resulted in the expulsion of members in the Vietnamese Communist Party and arrest of twelve party members including senior police officials. More importantly, it has also tarnished the reputation of Ho Chi Minh City as the country’s center for economic reform and renovation (Thayer 2003). The Nam Cam scandal essentially points to the level of corruption in Vietnam’s ruling party and state bureaucracy that extends to the criminal underground economy of the country.
Corruption also has an impact in the health and education welfare of the 32 poor. In their study of the relationship between corruption and health and education outcomes in the Philippines, Azfar and Gurgur (2004) concluded that corruption lowers the immunization rate of children, delays the vaccination of newborns, prevents the treatment of patients, discourages the use of public health clinics, reduces satisfaction of households with public health services, and increases waiting time of patients at health clinics. Corruption also has a negative effect on education outcomes: it reduces test scores, lowers national ranking of schools, raises variation of test scores within schools and reduces satisfaction ratings. They also argued that corruption affects public services in rural areas in different ways than urban areas, and that corruption harms the poor more than the wealthy.
NARROWING THE GAPS THROUGH REGIONAL COOPERATION AND INTEGRATION
This is a clear indication that there is great divergence in the basic economic and social infrastructure in East Asia. This observation also applies in the case when only Southeast Asian countries are considered since the summary measures are approximately the same. The relatively huge disparity among these countries is a hindrance to more effective regional economic integration and regional cooperation. For example, activities at the regional level require special types of capabilities on the part of participating countries for the preparation, assessment, and implementation of regional integration or cooperation agreements. A relatively low value of the HDI may indicate that the country does not possess the necessary capabilities.
Hence, it is important to push towards more convergence in key economic and social conditions to provide an enabling environment for successful regional integration and cooperation. The next chapters of this report focuses on the role of regional cooperation and integration in narrowing the gaps in human development in Southeast Asia. 33
Special Sections (Boxed Essays)
Box 1: Poverty Reduction in Malaysia
Development with Growth: The Challenge of Poverty Reduction in Malaysia
The success of poverty reduction program in Malaysia
Malaysia has been one of the developing countries in Asia that had recorded an impressive and successful poverty reduction programme. The country’s incidence of poverty has drastically declined over the past three decades. In 1970, while 49.3 per cent of the population were officially poor, this figure was brought down steadily to 20.7 per cent in 1985 and 8.7 per cent in 1995 and 5.1 per cent in 2002. Incidence of hard core poverty stands at 0.4 per cent in 2002. In spite of the Asian economic crisis in 1997, poverty rate in 2003 stands at 4.5 per cent.
1995 1997 1999 2002 Incidence of poverty (1) 8.7 6.1 7.5 5.1 Incidence of hardcore poverty 2.1 1.4 1.4 0.4 (2)
Notes: 1. The poverty line income in 2002 was RM529 for Peninsular Malaysia, RM690 for Sabah and RM600 for Sarawak. 2. Incidence of hardcore poverty is estimated using half the poverty line income.
Source: Eighth Malaysia Plan, 2001-2005, Mid-Term Review of the Eighth Malaysia Plan, 2001-2005.
Factors that led to the success
Malaysia is a multi-ethnic society of 24 million people, comprising 65.1 per cent Bumiputra3--Malays and other indigenous groups of the country, 26 per cent Chinese, and 7.7 per cent Indians.4 Since its independence in 1957, the poor in the country has been concentrated largely in the Bumiputra population and found living in the poorer regions of Kelantan, Terenggany, Kedah and Perlis and also in Sabah and Sarawak. Studies revealed that in 1957, about 80 per cent of the Malays lived in rural areas compared to the other races and were mostly engaged in agriculture. By 1970, Malays constituted 72 per cent of the agricultural work force. This is in contrast to
3 Literally, “sons of the soil.” The terms Malay and Bumiputera are used interchangeably. 4 Malaysia: Department of Statistics, accessed from http://www.statistics.gov.my/english/framesetkeystates.htm. 34 the Chinese who worked in second and tertiary sectors and held nearly 63 per cent of administrative and managerial posts (Herderson, et.al 2002:5). The Malays also held about 1.5 per cent of the country’s equity, while the Chinese held around 23 per cent and the rest was owned by foreign investors (Jomo, 1998: 254).
The gaping inequalities among the country’s ethnic groups were said to have caused racial tensions that culminated in a series of race riots in May 1969, hence exposing the cleavages of the Malaysian society. Interpreting the racial divide as the principal cause of social upheave, policymakers set upon a strategy of ‘growth with equity’— to ensure that the benefits of the country’s economic development were equitably shared by all the racial groups. A dedicated poverty reduction programme became a core priority of the country’s successive governments and policy responses to address this issue had also been closely associated with Malaysia’s multi-racial composition. Two major policies were introduced to close the gap of racial inequalities and realise the goal of eradicating poverty.
National Economic Policy (NEP): 1970-1990
The NEP was implemented in 1970 with the two-fold goals. One was to reduce and eventually eradicate poverty irrespective of race, and the other was to sever the nexus between ethnicity and occupation. The policy was articulated with the introduction of ethnic quotas through the Industrial Coordination Act (ICA) of 1975 with the objective of advancing the Malay constituencies through a broad target of allowing them 30 per cent ownership of corporate equity by year 1990. These objectives were pursued through: the improvement of services such as housing, health, and public utilities to improve the quality of life of the poor; the promotion and adoption of capital- efficient modern agricultural techniques, together with the provision of marketing, credit, financial and technical assistance designed to improve agricultural productivity and thus the income of the poor.
The NEP also introduced a series of government regulations to help advance the plight of the majority Malay ethnic group, including an ‘affirmative action’ programme for them based on quotas in education, employment and the awarding of government contracts. Another aspect of the NEP was setting up of ‘trust agencies’ like the Amanh Saham Nasional (National Trust Fund) that would purchase and hold shared for the benefit of the Bumiputra. (Milne and Mauzy, 1999: 53, Herderson, et al. 2002: 7).
National Development Policy (NDP)
The NDP was the successor of NEP. Although the NEP failed to achieve its target of 30 per cent equity for the Malay by 1990, which by then only manage to gain 19.3 per cent, the NDP restated some of the NEP’s aims, such as promoting balanced development as well as eliminating social and economic inequalities. However, the NDP shifted its approach, focusing less on the transfer of wealth to more emphases on rapid development, and 35 strengthening the capacities of Bumiputera to manage their wealth effectively. More importantly also, there was also a shift in the focus of the anti-poverty strategy towards eradication of ‘hardcore poverty’.
The greater focus place on growth rather than setting targets for ethnic restructuring and income redistribution allowed Malaysia to pursue growth by setting a number of macroeconomic and sector targets. Through a combination of pragmatic policies that were adjusted pragmatically whenever growth started to falter, the country managed a 7 per cent average annual growth in GDP over the 1990s.
Moreover, according to a World Bank Study, aside from ensuring that the benefits of growth reached all segments of the population directly, without the need for “distributions” by the government or other agencies, priority was given to augmenting productive capacity rather than improving the consumption of groups that might otherwise be left behind. Hence, investments were poured into universal education, equitable distribution of land, expansion of small and medium scale enterprises, emphasis on rural growth through agricultural research and extension, infrastructure investment and access to loans. (The World Bank, 2004).
As a reflection of the relative strength of the Malaysian economy, unemployment rates in 2000 were officially down to 3.1 percent, a figure well beyond the NDP target of 4 per cent. In this regard, the flexibility of the labour market enabled growth to generate more employment and ensured that all groups of the population benefited. This also helped explain the gains in incomes across income groups and particularly in the bottom 40 per cent. Women, in particular, benefited from the opportunity to make the transition from low productivity self-employed work to wage labour. (The World Bank, 2004: 4). And, while poverty reduction was targeted to reduce to 7.2 percent in 2000, Malaysia exceeded expectation to achieve 5.5 per cent.
Current challenges to poverty-reduction program in Malaysia
While Malaysia’s record on reducing poverty has been good by regional standards, challenges remain. One of which is the ability to recognise and respond to the changes in the nature and composition of poverty in recent years. Herderson, et. al have noted that the growth of urban poverty in Malaysia is of growing concern, yet only gets limited responses from the government. The problem, he argues, lies with economic bureaucracy. So far, the core responsibility of poverty policy implementation had always resided in the Ministry of Rural Development hence reinforcing the idea that poverty is principally a rural issue. (Henderson, et al. 2002:21).
The other concern lies with the nature of the poverty-reducing programme which were in the past largely ethnically-based policies. Some scholars have argued that this type of policies no longer constitute a coherent basis of policymaking, given that new intra-ethnic divisions and inequalities found within the Malay community itself. (See for example, Roslan 2001). 36
Of immediate concern therefore is the development of state institutions that are capable of supporting and adapting to an increasingly complex social and production system in order to respond and introduce specifically tailored poverty reduction to address specific needs.
Efforts to address these concerns are being seen under the new administration of newly-elected Prime Minister Abdullah Ahmad Badawi. The government has announced a multi-pronged approach to wipe out poverty in Malaysia, specifically looking at providing help to ‘hardcore’ poor. Aside from the efforts currently undertaken by the Ministry of Rural Development, the Housing and Local Ministry are looking at providing shelters and education for the ‘hardcore’ poor found in urban areas. The other initiatives being considered are the setting up of a welfare foundation to help urban poor tackle housing problems and establishment of a think-tank to draw up specific action plans for development that would integrate poverty reduction programmes.
Box 2: Impact of Economic Restructuring on Singapore’s Labour Market
In just three decades, Singapore has successfully transformed its economy from a regional entrepot to a highly industrialised economy. From 1965-1997, the economy grew at an annual average rate of over 8.5 per cent. As a result of its high and sustainable economic growth, Singapore has clearly prospered – the city-state has one of the highest income per capita in the world. During most of this time, the Singapore’s labour market enjoyed full employment.
Singapore has been experiencing growth-recession economic cycles between 1997-2002. In recent years, intense global competition (especially from emerging markets such as China and India) and rapid changes in technology have created a volatile and uncertain external environment. Given that Singapore is a small open economy that is highly dependent on external demand, this new economic landscape would clearly have an impact on its domestic labour market. In fact, the labour market could go through alternating periods of high employment to rising unemployment, resulting in more rapid job displacements.
After a long period of full employment, Singapore has been experiencing rising unemployment rates since 1997. The annual average unemployment rates in 2002 and 2003 were 4.4 % and 4.7 % respectively.
The number of workers retrenched has been an upward trend over the past ten years as companies undertake corporate rationalization to stay internationally competitive. The number of workers retrenched in 2003 was 16,400. At the height of the Asian financial crisis in 1998, the number of retrenchments reached 29,086. 37
Source: Department of Statistics Singapore.
Singapore: Number of Workers Retrenched
35 29.1 30 25.8 25 19.1 20 16.4 14.6 '000 15 11 11.6 9.4 8.8 9.8 10 6.5 5
0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Ministry of Manpower Singapore.
Job displacements have affected both the manufacturing and services sectors. It is no longer just affecting the less educated workers. Professionals and other higher educated workers are also vulnerable to job displacements in recent years. According to the Ministry of Manpower Singapore, the annual average unemployment rate of workers with tertiary qualifications rose from 1.6% in 1997 to 3.9% in 2002. 38
Singapore: Unemployment Rate by Highest Qualification Attained 6
5
4
3
2
annual average (%) 1
0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Primary & below Secondary Tertiary
Source: Ministry of Manpower Singapore.
What are the implications of this new employment environment for Singaporean workers? Firstly, workers could experience temporary or permanent unemployment sometime during their working lives. Secondly, workers may no longer expect continuous rising incomes and may even suffer a reduction in earnings.
Workers that are able to be retrained and acquire new skills will gain employment in other industries or new industries. Ongoing economic restructuring in Singapore would likely result in major shifts towards industries that are more knowledge-intensive (particularly in the services sector). This would mean many of the new job opportunities require workers to be highly educated or skilled. Consequently, this could create long-term unemployment for workers who are not able to adapt to this new economic environment.
Singapore’s ageing population would also translate into an ageing workforce – this would also be a matter of policy concern for the Singaporean government. Hence, less educated and older workers are more vulnerable to long-term unemployment than younger and higher educated workers. According to the Ministry of Manpower Singapore, the annual average unemployment rates of workers aged 40 to 49 years and 50 years and above were both 4.4% in 2002. In 1997, the unemployment rates for the same age groups were 1.5% and 1.4 %. 39
Source: Ministry of Manpower Singapore.
The long-term unemployment rate (which refers to the percentage of the labour force who have been unemployed for at least 25 weeks) in Singapore rose from 0.3% in 1992 to 1.4% in 2003.
Table: Singapore Resident Long-Term Unemployment 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Annual Average 0.3 0.3 0.3 0.3 0.4 0.4 0.8 1.2 n.a. 0.9 1.4 1.4 Rate (%) Number of 4.2 4.2 4.5 4.0 5.5 5.7 11.8 18.4 n.a. 15.4 23.9 25.1 persons (‘000)
Source: Ministry of Manpower Singapore.
The Economic Review Committee (ERC) Sub-Committee Dealing with the Impact of Economic Restructuring was set-up specifically to assist Singaporean workers adapt to the new labour environment5. The Sub- Committee provided numerous policy recommendations which focused on 4 key areas:6 i) Employability of workers in a more volatile environment. ii) Transition of displaced workers back into new jobs. iii) Needs of workers during short periods of unemployment. iv) Creation of job opportunities for the most vulnerable workers.
5 The ERC was established in December 2001 to review Singapore’s economic strategies and recommend policies to restructure the economy. 6 Economic Review Committee (ERC) Sub-Committee Dealing with the Impact of Economic Restructuring, Final Report, 22 November 2002. 40
These policy recommendations were formulated by the Sub-Committee with the following aims:
• Making better labor market information available. • Enhancing information dissemination strategies. • Promoting the importance of labor market awareness. • Developing labor market awareness at a young age. • Building career counseling capabilities. • Re-aligning human resource practices with the new employment landscape. • Develop labor market intermediaries. • Enhancing awareness and usage of skills training support schemes. • Complementing employer-based training with individual-initiated training. • Extending training assistance beyond rank-and-file workers. • Enhancing effectiveness of adult learning. • Align financial planning with the new economic environment. • Providing support during transition to new employment. • Create jobs for less educated Singaporeans. • Enable children from lower income families to keep on track.
Box 3: The Problem of Ageing in Singapore
Life expectancy at birth is Singapore continue to improves. According to the Singapore Department of Statistics, a Singaporean resident born in 2002 is expected to live up to 79 years. A girl born in 2002 is expected to live longer than a boy born the same year (81 years for females and 77 years for males).
1990 2000 2001 2002 Crude Death Rate 4.7 4.5 4.4 4.4 (per 1,000 residents) Total Fertility Rate 1.83 1.60 1.41 1.37 Life Expectancy at Birth 75.3 78.1 78.4 76.7 (Years) Percentage of Residents Aged 65 Years and Over 6.0 7.3 7.4 7.5
Source: Department of Statistics Singapore.
As a result of declining fertility (1.4 births per woman) and low mortality rate (crude death rate was 4.4 per 1,000 residents), the Singaporean population is also getting older. About half of Singapore population were aged 35 years or older in 2002. From 1990-2000, the elderly population (aged 65 years and above) has increased an annual rate of 3.7%. Currently, 7.5% of Singapore residents are aged 65 years and over. Demographic projections indicate that by the year 2030, one in every five people in Singapore would be elderly. This would make Singapore one of Asia’s fastest ageing population. 41
Various initiatives have been implemented by the Singaporean government to deal with its ageing population. Most of these initiatives were based on a list of recommendations from a report by the Inter-Ministerial Committee on Ageing Population in November 1999. These initiatives include:
• Refocusing the national pension scheme, the Central Provident Fund (CPF), to serve its primary social objectives of providing retirement, medical needs and housing. • Adopting the “People-for Jobs Traineeship Programme” (launched in 2001) to assist older workers who were prepared to shift to a different sector where jobs were available. • Introducing a voluntary Supplementary Retirement Scheme (launched in 2001 to encourage Singaporeans to plan and save more for their old age. • Implementing the Primary Care Partnership Scheme (in 2000) to provide medical and dental care at low charges to low-income elderly Singaporeans. • Introducing the “ElderShield” insurance system to defray long-term healthcare costs. “ElderShield” (launched in 2002) is a severe disability insurance scheme
Box 4: Gender Equality in Singapore and Malaysia
In value terms, Singapore’s gender-related development index (GDI) is slightly lower 0.880 than the HDI (0.884) but have the same rank. This would indicate no significant gender disparity. In fact, Singapore is ranked higher in the gender empowerment index (GEM) than its HDI. (The GEM indicates whether women take an active role in economic and political activities.)
Female participation in economic activities had increased significantly over the past two decades. But female employment remains low in the industrial sector which have traditionally been male dominated. In the HDR 2003 report, female employment (from 1995-2001) in Singapore’s industrial sector was just 23 % with the remaining 77% in the services sector.
In 2003, the value of Malaysia’s gender-related development index (GDI) is slightly lower than its HDI but the former has a higher rank at 53. Malaysia is also ranked higher in the gender empowerment index (GEM) than its HDI at 45. Both gender-related indicators would indicate that gender disparity is not very wide in Malaysia.
Female participation in economic activities had increased significantly over the past two decades in Malaysia. However, female employment remains predominantly in the services sector. In the HDR 2003 report, female employment (from 1995-2001) in Malaysia’s agriculture, industrial and services sectors was 13%, 29% and 58% respectively. 42
Box 5: Voice and Accountability in Singapore
Singapore is by far the most developed country is Southeast Asia, with a per capita GNP of US$32,940—making it as one of the richest country in the world. Singapore has also been ranked among the top 5 countries in the world that are corruption free by Transparency International in its 2003 Corruption Perception Index (CPI) with the corresponding score of 9.4 ( 10 being the perfect score and representing highly clean country).
Since its independence in 1965, Singapore has had a single party government. Since its formation in 1959, the People’s Action Party (PAP) has maintained its political legitimacy on the government’s record of transforming Singapore from a city port into a leading regional financial centre. The PAP-led government is largely based on a platform of an honest and competent government. And, good governance in Singapore’s case has been translated into maintaining a fundamentally sound and high performing economy, professional and efficient civil service, and a sound legal system predicated on the sanctity of the rule of law.
But Singapore has also been described as a rich state with illiberal regime. According to Lam, “the PAP believes that only a one-party dominant system and depoliticised country can provide political stability and ensure Singapore’s viability in the race of intense global economic competition and geopolitical uncertainties (Lam, 1999: 260). And as noted by another analyst, the Singapore government takes the position that a technocratic approach would best serve the political leadership to depoliticise contentious issues in a “neutral and objective manner.” (Khong, 1995: 117).
Thus, while Singapore holds regular elections, its political system may not fully guarantee political and civil rights. As argued by Zakaria, it is possible to have a democratic system—i.e. reflected in the holding of regular elections—yet illiberal in that the elected government then proceeds to infringe on basic liberties. Elections are but, “an important virtue of governance, but they are not the only virtue” (Zakaria, 1997).
Since 1993, Freedom House has consistently considered Singapore as ‘partly free’ due to what it perceives as the government’s infringement on the civil and political rights of its people. In what follows, such assessment of Freedom is analysed further by applying the proposed framework formulated by the Institute of Strategic and Development Studies (ISDS), Philippines. (Tjhin, Arugay & Kraft, 2004). This framework, which is also known as the ‘democratic scorecard’, is translated into 3 key elements, namely:
(i) guaranteed framework of equal citizens rights (ii) institutions of representative and accountable government (iii) civil or democratic society. 43
The following analysis will only concentrate on the two elements, as the third one on civil and democratic society would be covered in the examination of the latter.
Equal Citizen Rights
• Common Citizenship One of the elements under the component of equal citizen rights is common citizenship. This means that all members of the society are ensured a common and inclusive citizenship. In this regard, Singapore guarantees full citizenship to natural born Singaporeans. In a further move to relax the country’s citizenship rules, the government has announced that children of Singaporean women married to foreigners and who are born overseas would have the right to become Singapore citizens. Prior to this ruling, only children of Singaporean males residing abroad were granted citizenship.
• Civil and Political Rights
The democratic scorecard-framework also looks at the observance and promotion of democratic regimes, of the rights of expression, movement, association and assembly; and see how these rights have been institutionalised by incorporating them into a country’s constitution and other statutes. One of these institutions is a functioning and independent human rights commission. (Tjhin, Arugay & Kraft, 2004: 15).
The issue of observing and promoting civil rights in Singapore based on the above framework is tenuous. The PAP’s use of state instruments such as civil defamation laws have retarded the growth of the opposition and have inhibited free expression. There have been criticisms regarding the use of the law of defamation to bankrupt political opponents and to weaken opposition parties.(Worthington, 2003: 125).
The Societies Act introduced in 1967 requires all civil societies to be registered, and classifying them between those geared for political and non- political activities. The Act also bars civil society organizations from making statements beyond the interest of their respectively defined constituencies, under the threat of deregistration. (Yeo,2002: 203).
Institutions of representation and accountable government
This component refers to the holding of free and fair elections, and also for procedures to ensure accountability of officials, both elected and non-elected, to the public.
As regards the latter, the Singapore government has always maintained a clean image of honesty and efficiency. There has been a zero tolerance of corruption in the civil service and this has been an essential part of its institutional culture. As observed by one analyst, 44
It is remarkable that the PAP rulers of Singapore…have administered it without succumbing to any abuse of power, arbitrary rule, corruption, mismanagement or disregard for the interest of Singaporeans. They have always ruled the island state with exceptional integrity, dedication and respect for the rule of law. (Vasil, 2000: 233).
With regard to holding free and fair elections, the PAP which has enjoyed landslide victories since the country’s first general election in 1968, has always maintained that elections have been fair and their success can be seen a consistent endorsement of their record in having a clean and efficient government. But the PAP critics claim otherwise.
Cherian George argues that the PAP has been able to achieve a remarkable electoral process by manipulating changes in the electoral framework, and circumscribing the bound of legitimate political discourse and action. (George, 2000:84). Strategies employed by the government range from the introduction of constitutional and institutional changes to the electoral system, to the use of state funds for the purpose of “pork barrel” politics. (Lam: 260; Worthington: 42). As regards the latter, the government has created the systems of: nominated members of parliament, non-constituency members of parliaments, group representative constituencies (GRCs) which have been considered by opposition of the PAP’s attempt to tweak the system, beef up its political support and co-opt potential opposition. (Case, 2003; Mauzy and Milne, 2002; Rodan, 1996).
In spite of these criticisms, the consistent success of PAP in the country’s general elections nevertheless reveals the fact that while there is a desire to see more openness and more political opposition in Parliament, not many Singaporeans are receptive to radical political change. As argued by one observer, given the country’s remarkable progress and prosperity in the past three decades, and for as long as the PAP government delivers, most Singaporeans would not want to replace it with the untested opposition. (Vasil, 2000:249). 45
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