The Role of the Philippines in the BIMP-EAGA Growth Triangle and the Dynamics of ASEAN Political Economy

University of Wollongong Theses Collection University of Wollongong Theses Collection

University of Wollongong Year 

The role of the Philippines in the BIMP-EAGA growth triangle and the dynamics of ASEAN political economy

Adriana Elisabeth University of Wollongong

Elisabeth, Adriana, The role of the Philippines in the BIMP-EAGA growth triangle and the dynamics of ASEAN political economy, PhD thesis, Department of History and Politics, University of Wollongong, 2008. http://ro.uow.edu.au/theses/52

This paper is posted at Research Online. http://ro.uow.edu.au/theses/52

THE ROLE OF THE PHILIPPINES IN THE BIMP-EAGA GROWTH TRIANGLE AND THE DYNAMICS OF ASEAN POLITICAL ECONOMY

A thesis submitted in partial fulfilment of the requirements for the award of the degree

DOCTOR OF PHILOSOPHY

from

UNIVERSITY OF WOLLONGONG

ADRIANA ELISABETH, MASTER OF SOCIAL SIENCE

DEPARTMENT OF HISTORY AND POLITICS 2008 CERTIFICATION

I, Adriana Elisabeth, declare that this thesis, submitted in partial fulfillment of the requirements for the award of Doctor of Philosophy, in the Department of History and Politics, University of Wollongong is wholly my own work unless otherwise referenced or acknowledged. The document has not been submitted for qualifications at any other academic institution.

Adriana Elisabeth

21 April 2008

i TABLE OF CONTENTS

Pages THESIS CERTIFICATION i

TABLE OF CONTENTS ii

LIST OF TABLES, FIGURES & CHART iv

LIST OF ABBREVIATIONS v

ABSTRACT x

ACKNOWLEDGEMENTS xii

INTRODUCTION 1 Background of Study 1 Research Methodology 15 Key Research Issues 21

CHAPTER I. THE ESTABLISHMENT OF BIMP-EAGA 31 Regionalism and the Formation of EAGA 35 The Area of EAGA 42 The Aims of EAGA 51 The Structure of EAGA 54 Some Progress in EAGA Activities 56 The Implications of EAGA 59

CHAPTER II. THE GROWTH TRIANGLE AND PHILIPPINE POLITICS 68 Discrimination Policy Against Mindanao 68 Ramos’s Political Leadership and BIMP-EAGA 72 Philippine Macro-Economic Policy 87 Philippine Political Culture 90 Religion and Politics in the Philippines 98 Chinese Sub-Culture in the Philippines 101 EAGA and the Mindanao Crisis 104 Military and Politics 112 EAGA: Expectation or Desperation? 115

CHAPTER III. THE PHILIPPINES AND ASEAN RELATIONS 119 The Establishment of ASEAN 120 ASEAN and Previous Regional Associations 123 Problems within ASEAN 127 ASEAN and Its Prospects 139 ASEAN and EAGA 142 Philippine Foreign Policy and ASEAN 144 The Estrada Administration (1990-2001) 152 The US and the Philippines 156

ii The Arroyo Administration and EAGA 166 Philippines-ASEAN Relations: Some Possible Scenarios 170

CHAPTER IV. BIMP-EAGA AND REGIONAL DEVELOPMENT PLANNING 175 Liberalism Capitalism 176 The Interpretation of Global Capitalism in Southeast Asia 179 Progress of EAGA Economic Activities 186 EAGA and Some Exiting Problems 199 1. Export Processing Zones and Growth Triangles 199 2. Corruption and the Vulnerability of EAGA 206 3. Corruption and Poverty 215 Economy and Armed Conflict 217 EAGA and Wider Regional Factors 219 The Role of China 224 The Mindanao 2000 Plan 227 1. Policy Formulation, Aplication, and Coordination 236 2. The Role of Private Sector 237 3. Evaluation and Monitoring Mechanism/Scheme 238 4. The Availability of a Database of EAGA Economic Activities 239 5. The Problem of Migration 239

CHAPTER V. THE FUTURE OF BIMP-EAGA 241 EAGA from an Optimistic Point of View 241 GMA Special Envoy and Agenda for EAGA 243 EAGA from a Pessimistic Point of View 246 1. The Mindanao Armed Conflicts 247 2. Religious Conflicts in Indonesia 249 3. The Regional Approach to Combating Radical Religious Movements 251 The Future Prospects of EAGA 253

CONCLUSION 258 The Decay of EAGA 259 Is EAGA still Relevant? 266

BIBLIOGRAPHY 270

APPENDICES 293 Appendix 1: The List of Respondents 293 Appendix 2: The List of Libraries/Information Center 295

iii LIST OF TABLE, FIGURE & CHART

TABLES Table 1. The Early Action Plan of BIMP-EAGA 45 Table 2. The EAGA Spatial Development Plan 46 Table 3. Poverty Levels in the Philippines (1991-1997) 84 Table 4. Annual per Capita Poverty in the Philippines (1997 - 2003) 85 Table 5. Poverty Incidence of Families in the Philippines (1997 – 2003) 86 Table 6. Poverty Incidence of Population in the Philippines (1997 – 2003) 87 Table 7. ASEAN Member Countries’ per Capita GDP (US dollars, billions) 1996 & 1999 131 Table 8. ASEAN Member Countries’ per Capita GDP (US dollars) 2000-2004 132 Table 9. EAGA in the Global Circles 179 Table 10. Policy Implication and EAGA Projects (1994-2006) 187

FIGURES Figure 1. MAP OF THE PHILIPPINES 14 Figure 2. MAP OF THE BIMP-EAGA AREA (before the inclusion of the other Indonesian provinces) 43 Figure 3. MAP OF THE BIMP-EAGA PROVINCES 52

CHARTS Chart 1. The EAGA Development Strategy: Monitor and Review 48 Chart 2. The Structure of EAGA 54

iv LIST OF ABBREVIATIONS

ACED Archdiocesan Ecumenical and Inter-religious Dialogue

ADB Asian Development Bank

AFP Armed Forces of the Philippines

AFTA ASEAN Free Trade Area

AFTA-CER ASEAN Free Trade Area (Australia and New Zealand) Closer

Economic Relations

AIA ASEAN Investment Area

AICO ASEAN Industrial Cooperation

AIPO ASEAN Inter-Parliamentary Association

AMC Area Marketing Cooperative

AMM ASEAN Ministerial Meeting

APEC Asia Pacific Economic Cooperation

APT ASEAN Plus Three

ARF ASEAN Regional Forum

ARMM Autonomous Region in Muslim Mindanao

ASA Association of Southeast Asia

ASEAN Association of South East Asian Nations

ASG Abu Sayyaf Group

BAPPENAS Badan Perencanaan dan Pembangunan Nasional

BGF Barrio Guarantee Fund

BIMP-EAGA Brunei Darussalam, Indonesia, Malaysia, Philippines - East

ASEAN Growth Area

CAT Central Azucarera de Tarlac

v CBCP Catholic Bishop’s Conference of the Philippines

CPP Communist Party of the Philippines

CU Customs Union

EABC EAGA Business Council

EAGA East Asean Growth Area

EOI Export Oriented Industrialisation

EPZ Export Processing Zone

EU European Union

FDI Foreign Direct Investment

FTAA Financial or Technical Assistance Agreement

G-7 Group of 7

GDP Gross Domestic Product

GEM Growth with Equity in Mindanao

GMA Gloria Macapagal Arroyo

GRP Government of the Republic of the Philippines

GT Growth Triangle

HRD Human Resources Development

IACC Inter-Agency Anti-Graft Coordinating Council

ICMI Ikatan Cendekiawan Muslim Indonesia

I-EAGA Indonesia-East ASEAN Growth Area

IID Initiative for International Dialogue

IMF International Monetary Fund

IMS-GT Indonesia, Malaysia, Singpore – Growth Triangle

IMT-GT Indonesia, Malaysia, Thailand – Growth Triangle

IRD Inter-Religious Dialogues

vi IT Information Technology

ITO International Trade Organisation

JI Jemaah Islamiyah

JPDCI Janoub Philippines Development Corp Inc.

JVA Joint Venture Agreement

KAPET Kawasan Pengembangan Ekonomi Terpadu

KEPPRES Keputusan Presiden

KPPSI Komisi Persiapan Penerapan Syariah Islam

LDC Less Developed Country

LGC Local Government Code

LGU Local Government Unit

LIPI Lembaga Ilmu Pengetahuan Indonesia

LPG Liquid Petroleum Gas

MAPHILINDO Malaysia, Philippines, Indonesia

MEF Malaysian Employers Federation

MEDCO Mindanao Economic Development Council

MNC Multi National Corporation

MNLF Moro National Liberation Front

MILF Moro Islamic Liberation Front

MOA Memoranda of Agreement

MOU Memoranda of Understanding

MT Metric Tons

NAFTA North American Free Trade Area

NCCP National Council of Churches in the Philippines

NDF National Democratic Front

vii NGO Non Governmental Organisation

NIC New Industrialised Country

NPA New People’s Army

NRM New Religious Movement

OECD Organization for Economic Cooperation and Development

OIC Organisation on Islamic Conference

PAL Philippine Airlines

PARECO Presidential Assistant for Regional Concern

PCAGC Presidential Commission Against Graft and Corruption

PCGG Presidential Commission on Good Government

PCI-Bank Philippine Commercial International Bank

P-EAGA Philippines-East ASEAN Growth Area

PLDT Philippine Long Distance Telephone Company

REPELITA Rencana Pembangunan Lima Tahun

RIA Regional Integration Agreement

RMS Republik Maluku Selatan

SARA Suku, Agama, Ras

SEATO South East Asia Treaty Organisation

SEC Security and Exchange Commission

SIJORI Singpore, Johor, Indonesia

SN Samahang Nayon

SOCSARGEN South Cotabato, Sarangani, General Santos City

SOMM Senior Officials and Ministers Meeting

TAC Treaty of Amity and Cooperation

UN United Nations

viii UR-GATT Uruguay Round of the General Agreement on Tariffs and Trade

VFA Visiting Forces Agreement

WB World Bank

WMC Western Mining Corporation

WTO World Trade Organisation

ZOPFAN Zone of Peace, Freedom and Neutrality

ix Abstract

The title of the dissertation is The Role of the Philippines in Growth Triangle and the

Dynamics of ASEAN Political Economy. It looks into the role of the Philippines in establishing the first growth quadrangle in South East Asia or the Brunei, Indonesia,

Malaysia, Philippines - East ASEAN Growth Area (BIMP-EAGA or simply EAGA).

There was no EAGA without Philippine enthusiastic in proposing the idea. EAGA became the first sub-regional economic cooperation to back up Philippine national development program; that is the Philippines 2000 and the NIC-hood vision. The establishment of EAGA represented Philippine foreign relations with regional countries, and the Association of South East Asian Nation (ASEAN) as the longest running regional association.

The relevance of EAGA was in controversy. The affirmative perspective ensured that

EAGA was built in economic term to promote trade, investment and tourism for the regional countries, which experienced similar historical of colonialism, and cultural and religious backgrounds. Some achievements have been made through many numbers of working groups’ meetings, expositions and conferences since the EAGA formation in

1994 until now.

On the other hand, the pessimistic perspective highlighted the negative impacts of the

EAGA growth quadrangle. The failure of poverty eradication was one of the social impacts. EAGA seems to be more hopeless when indicated to problems, which exist at the national, regional and global levels and related each other. Crony capitalism, inter- religious conflicts and process of democracy are major domestic issues that have

x affected the EAGA business activities, besides the Asian Crisis in 1997. The practice of crony capitalism is related to domestic political culture and the influence of market orientation or economic liberalism. Global war against terrorism is another international factor, which affected regional political development.

The future of EAGA is clearly dependent on to what extents member countries can cope with their domestic problems. Similar phenomenon happened with ASEAN in which its function as regional economic integration has been subordinated by the dominance of political disputes bilaterally and multilaterally.

xi ACKNOWLEDGEMENTS

I would like to acknowledge with gratitude the guidance, encouragement and understanding provided by my supervisors, Professor Adrian Vickers and Dr. Peter

Sales throughout the years.

My thanks also go to my Australian, Indonesian and Filipino friends for making my research a valuable and rewarding experience.

I wish to extent my appreciation and thanks to my mother, Evie and my husband,

Tonny, who have provided moral support and patient. Finally, I would like to express my deepest appreciation to my lovely daughters, Sandra and Prissy for their continuos care and support.

xii

INTRODUCTION

Background of the Study

The Brunei Darussalam, Indonesia, Malaysia, the Philippines–East ASEAN Growth

Area (BIMP-EAGA or simply EAGA) was built with as much confidence as other sub- regional economic cooperation projects, such as the Indonesia, Malaysia, Singapore–

Growth Triangle (IMS-GT) and the Indonesia, Malaysia, Thailand–Growth Triangle

(IMT-GT). The concept of growth triangles is relatively new in Southeast Asia. It first appeared in 1989 with the establishment of the IMS-GT, originally called SIJORI, after the component countries, Singapore, Johor (Malaysia) and Riau (Indonesia). These growth triangles are outcomes of the Association of South East Asian Nations

(ASEAN), unlike other cross-regional economic zones, such as the Mekong Project, which links Cambodia, Vietnam, Laos and southern China around the shared resources of the Mekong River.

ASEAN is the only extent regional economic organization in Southeast Asia. However,

ASEAN’s economic activities have some limitations because of political and security matters. As a sub-regional planning body of ASEAN, economic activities of EAGA have also been limited by political and security issues, which develop at the individual sub-regions, within the sub-regions, and the global level. Therefore, it is important to examine the significance of EAGA as part of the ASEAN development planning bodies, and part of the globalisation process. Development in the regional context can be understood in terms of economic integration and economic interdependence and these will be examined with reference to the establishment of EAGA. The establishment process has had similar characteristics to that of other sub-regional economic integration

initiatives, including geographical proximity, economic complementarity, outward- looking development strategy, acceleration of economic reform and open-door policy, and political decentralisation.1 Yaw A. Debrah, Ian McGovern and Pawn Budhwar also mentioned similar characteristics of sub-regional economic integration. There are “four main pre-requisites for the success of a growth triangle: geographical proximity, economic complementarity, strong political commitment and effective policy coordination, and adequate infrastructure and resources”.2 The capability of EAGA, is a measure of the success or failure of such regional development processes, particularly as regards four major issues: trade, investment, tourism, and people movement or mobility. This thesis attempts to enhance our understanding of the dynamics of

Southeast Asia’s political economy by focussing on EAGA as one component part of

ASEAN, and then on the actions and motivations of the Philippines as the pioneer of

EAGA.

The growth triangles provide an alternative model of sub-regional cooperation because they require co-operation between bordering areas within countries rather than of entire countries. They are generally viewed as part of an attempt to establish an ASEAN free- trade area. BIMP-EAGA covers the provinces of the eastern part of Indonesia that border the eastern part of Malaysia and the southern part of the Philippines; it was established in October 1994.3 States and businesses are two important actors in EAGA.

EAGA states are the facilitators, while businesses are the engine of EAGA cross-border economic transactions in promoting trade, investment and tourism. For the Philippines

1 See Edward Chen & C.H. Kwan (1997). Asia’s Borderless Economy, The Emergence of Sub-regional Zones, St. Leonards: Allen & Unwin, p. 2. 2 Yaw A. Debrah, Ian McGovern & Pawn Budhwar (2000). “Complementarity or competition: the development of human resources in a South-East Asian Growth Triangle: Indonesia, Malaysia and Singapore”, the International Journal of Human Resource Management (2 April 2000), pp. 316-317. 3 The whole of Brunei Darussalam (B-EAGA) is included because it is the smallest among EAGA countries; see Figure 2, Map of the BIMP-EAGA Area.

in particular, EAGA economic activities are an important part of national development programs.

Such cross-border economic transactions have basic characteristics, such as deriving from “the evolution of natural economic linkages; [they are] limited in substantive and geographic scope…political and economic complexities; modest participation in more than one growth triangle; outward-looking orientation; and sub-regional initiatives related to general forms of regional cooperation”.4 For these reasons, BIMP-EAGA functions like a miniature ASEAN, and like ASEAN, EAGA is caught up in the political and economic complexities of country-to-country relationships. Paradoxically, closer relations between the countries involved have developed partly as a consequence of the Asian financial and economic crisis in 1997, as will be shown in later chapters.

However, this same crisis means that, especially in close border and boundary areas, domestic problems in one country can very quickly affect another country, such is the case when Indonesian undocumented workers enter Malaysia through the border area of

West and East Kalimantan. One of the push factors is problem of unemployment in

Indonesia, which caused the workers going and trying to earn better money in Malaysia.

Most studies on the growth triangle model focus on economic matters. This is reasonable, given that economics are the basis of the growth triangle model. However, the economic aspects are related to political and security problems. Both of these require greater attention, as they have exerted the most pressure on sub-regional economic cooperation at many different levels. EAGA has attempted to develop trade, investment and tourist activities, for example, in what are some of the most troubled

4 George Abonyi (1996). “The Challenges of Growth Triangles for Regional Institutions”. In Imran Lim ed. Growth Triangles in Southeast Asia, Strategy for Development. Kuala Lumpur: ISIS Malaysia, pp.5-6.

areas of both Indonesia and the Philippines. The Indonesia-EAGA (I-EAGA) provinces, which are mostly located in the eastern part of Indonesia, are where communal, religious and violent conflicts have occurred. The I-EAGA provinces border on and have received refugees from Indonesia’s major zones of conflict since the late 1990s:

Ambon (Moluccas), Poso (Central Sulawesi) and Papua. On the Philippines side,

Mindanao (the largest island of the southern Philippines) is the major area of the

Philippines-EAGA (P-EAGA), but Mindanao is the area where on-going armed conflict has occurred.5

The establishment of P-EAGA is a good example to use in order to examine how

Philippine leadership can be in formulating sub-regional development policy, and how such leadership could finally integrate sub-regional countries of Southeast Asia through

EAGA economic cooperation. The P-EAGA is also a good example to prove that the

Mindanao problem could be solved without using a military approach, particularly because solving that problem necessitated dealing with poverty. Poverty in Mindanao

(and in other EAGA areas) is a result of a development gap. Therefore, one of EAGA’S longer term plans is to deal with that development gap, in particular through poverty alleviation. During the Ramos presidency (1992-1998), the P-EAGA brought relatively positive impacts to Mindanao following the 1996 peace agreement that could temporarily terminated the armed conflict. When the 1997 Asian financial crisis hit many countries in Asia, but not the Philippines, the P-EAGA benefited border trade areas, especially the border area with Indonesia.

5 The armed conflict is between the Moro (or Muslim groups) and the Armed Forces of the Philippines (AFP).

The progress of the P-EAGA was affected by the global war on terror where Mindanao has been the basis of terrorist activities and also the battle ground for combating terrorism in Southeast Asia. Since the September 11 tragedy, Mindanao has become one of the focuses of the global “war against terror” declared by George W. Bush, the

President of the United States of America (USA). In the US policy to quash Al Qaeda,

Mindanao ranks second to Afghanistan as the place to combat terrorism and prevent its spread throughout Asia. Compared to the previous growth triangles in Southeast Asia, the P-EAGA has been the most conflicted area. Mindanao and Palawan are the two main P-EAGA areas where most of Philippine agricultural products come from, but it is also where armed conflicts between the Philippine military the Moro separatist movements mostly occur. The P-EAGA formation, in some stage, could reduce tensions between the conflicted parties, particularly under the 1996 peace agreement, which was signed between the Government of the Republic of the Philippines (GRP) and the Moro

Muslim group or the Moro National Liberation Front (MNLF). After the formation of

EAGA in 1994 until the September 11 tragedy in 2001, the progress of EAGA economic activities was relatively limited. However, since the declaration of US global war policy against terrorism in 2001, the P-EAGA sub-region was also included in the

US target area for combating terrorism because of the existence of the ASG (Abu

Sayyaf Group) – a local terrorist group in the Southern Philippines. In summary, the conflict in Mindanao has an international dimension, especially in relation to the

Muslim world and neighbouring countries, and also regarding the war on terrorism at the international level.6

6 See “Philippines, the International Context” (September 2002), Global IDP, p. 1. (accessed 29 June 2004).

The terrorist activities had a negative implication to the limited progress of the EAGA economic plans because of the terrorist mobility within the EAGA areas. On the other side, regarding the issue on terrorism, EAGA had been revitalised as a forum, primarily to prevent the spread of terrorism in Southeast Asia. This was different from the objectives of EAGA sub-regional economic zones. EAGA is economically potential, but its potential has security implications, which depends on how the EAGA planners administer the cooperation. Amitav Acharya is one of the few authors who wrote about the security implications for trans-national economic activities in the growth triangles.7

This is what Acharya tried to show, that like other trans-national economic activities, growth triangles have the potential to promote peaceful inter-state relations, but at the same time, there are inter and intra-state conflicts have also the potential to disrupt economic activities. 8 Acharya points out that besides bilateral conflicts or inter-state tensions, “there are also signs that the emergence of certain types of trans-national economic activity might foster greater intra-state tensions, such as domestic political problems”.9 He refers here to smuggling, but also to potential encouragement or support for separatist or terrorist groups by groups within neighbouring countries. There is evidence for this in Indonesia and the Philippines where there are serious internal conflicts in the areas just discussed. The internal conflicts in Indonesia and the

Philippines share similarities in their basic characteristics, since they are problems of political identity and conflicts over natural resources, and they are also linked by the kinds of activities to which Acharya refers. This thesis will expand Acharya’s argument by focussing on the implications of these trans-national elements within the dynamics of politics in the Philippines.

7 Amitav Acharya (1996). “Security Implications of Transnational Economic Activities Associated with the Growth Triangles”. in Lim, op. cit., pp.27-38 8 Ibid., pp. 29-30. 9 Acharya op. cit., pp. 33-36.

The Philippines and Malaysia have a long-standing territorial dispute over Sabah in the northern part of Borneo. The two countries have been carrying on negotiations and consultations, but no clear result has yet been achieved.10 The potential for conflict between Indonesia and Malaysia has also existed since the period 1961-1966, when

Malaysia aimed to integrate Brunei, Sabah and Sarawak under the umbrella of the

Malay Lands Association (Persekutuan Tanah Melayu). Malaysia’s political move was strongly rejected by Sukarno, the first Indonesian president. This rejection led to

Confrontation between Indonesia and Malaysia, which formally started when the

Indonesian Minister of Foreign Affairs, Soebandrio announced Indonesia’s opposition to the formation of the new state of Malaysia.11 The resulting conflict also involved internal disputes within Brunei, and was only resolved after Sukarno was replaced by

Suharto. In later years, Malaysia successfully laid claim to Sipadan and Ligitan islands.12 Political tension between the two neighbouring countries also arises because of the continuing presence of Indonesian undocumented migrant workers in Malaysia.

These workers, who come to Malaysia illegally, have been deported several times, although both sides dispute the circumstances of these deportations, with Indonesia claiming that the Malaysian government covertly encourages the illegal workers in order to keep labour costs down, and then acts against them when it is politically or economically expedient. Tensions are heightened by Indonesian reports that while in

Malaysia, some of these workers have also suffered from acts of violence, such as torture, sexual harassment, and murder.

10 See www.epilipinas.com. “Philippines’ Claim to Sabah” (accessed 6 January 2006). 11 See http://id.wikipedia.org. “Konfrontasi Indonesia-Malaysia” (accessed 6 January 2006). 12 In recent times, there has been another territorial dispute between Indonesia and Malaysia over the Ambalat block in what Indonesia claims are the waters of its part of the island of Borneo, Kalimantan.

Unresolved problems regarding bilateral disputes, in combination with ongoing violent domestic conflicts, could have been predicted to have an impact on the effectiveness of

EAGA from its inception. However, these intra-state and inter-state conflicts did not discourage EAGA planners, who, as this thesis will show, saw EAGA as a solution to the problems.

From ASEAN’s in 1967 until the end of 1980s, it was primarily focussed on the economic sector. However in that period it achieved limited progress because of territorial disputes and bilateral conflicts, and because of internal conflicts within the member states. In 1989, regional development planning under ASEAN was then shifted to the sub-regional level through the formation of SIJORI/IMS-GT, which was then followed by the establishment of EAGA in 1994. Although the main objectives of sub- regional development planning are to accelerate national development programs through trade and investment, the reality shows that politics and security are major factors in determining the effectiveness of sub-regional economic cooperation, including in the case of EAGA. The lack of political analysis of the growth triangles is one reason for undertaking the present study.

A second reason for writing this thesis is that while the formation of BIMP-EAGA seems to mirror the key components of ASEAN, in fact this growth triangle contrasts with ASEAN, because ASEAN aims to establish open regionalism. BIMP-EAGA was formed for sub-regional economic cooperation because ASEAN had made so little progress in promoting regional economic development.

EAGA has been chosen as the unit of analysis because it is the first quadrangle in eastern ASEAN that was initiated by the Philippines. The Philippines is the only member of the EAGA quadrangle that has not been involved in other sub-regional economic zones. The Philippines’ idea for EAGA was that it would accelerate the

Philippines’ national development program and promote Mindanao as a new economic zone. Therefore this study, as well as being a contribution to the political economy of

ASEAN, especially aims at contributing to the understanding of the political economy of the Philippines. This aims comes because of, but also despite the fact that there are very limited writings on the latter subject. The limitations of these writings mean that there are many difficulties in examining EAGA from the Philippines’ point of view.

The establishment of EAGA is linked to Philippine foreign policy. Since the closure in

1991 of America’s military bases in the Philippines, at Subic Bay and Clark Field, the

Philippine state decided to pay more attention to Asia, especially to ASEAN. The

Philippines’ involvement in EAGA is the clearest evidence of this. The Philippines was more than just a participant country, it was the pioneer that proposed the idea to Brunei for the first time in 1992. The establishment was formally achieved two years later, in

March 1994 during the ASEAN Head of Governments and Senior Ministerial Meeting in Davao City, Mindanao. The Philippines’ ambition was also related to a vision of achieving the status of a new industrialising country (NIC), a status exemplified by the achievements of South Korea, Taiwan and Singapore as emerging economic forces in the region. Former President Fidel Ramos, who was the central figure of EAGA, decided on deregulation and privatisation policies in order to make the country one of the NICs of East Asia. EAGA is thus associated with the implementation of national policies designed to meet the challenges of the Philippines economy, in particular

through the Mindanao 2000 program, which was one of the chief policies put forward during the period in which EAGA was developed. As will be shown, EAGA was a political tool to gain regional support in dealing with the Mindanao crisis in terms of peace and order, and to achieve this it aimed to solve economic disparity and social discrimination. This was consistent with statements made by President Ramos that foreign relation and domestic preferences should be regarded as equivalent in terms of their interrelationship in policy formulation.13

The establishment of EAGA would probably not have happened without the

Philippines’ efforts, its enthusiasm, and its political leadership in the region. Thus, this thesis also means to provide and enhance an understanding of the dynamics of the

Philippines’ political economy within Southeast Asia. It will focus on the period 1992-

2004. This period has been chosen because during that time policies toward EAGA fluctuated due to political transformations in the Philippines. The period begins with the

Ramos administration and continues up to the first period of the Gloria Macapagal

Arroyo (GMA) presidency (2001-2004).14 Ramos came to power in 1992 and continued as president until 1998. EAGA unfortunately lost its most eminent backer during the

Estrada presidency (1998-2001) when it was downgraded by an all-out war policy against the Moro insurgency. Estrada’s successor, President Gloria Macapagal Arroyo gave signs that the growth area should be revived, but this approach has fallen victim to circumstances.

13 Gina R. Pattugalan, “A Review of Philippine Foreign Policy under the Ramos Administration”, Kasarinlan, A Philippine Journal of Third World Studies (1999), v.14, nos.3 & 4, p. 132. 14 President Gloria Macapagal Arroyo came to power in 2001 after the impeachment of former president, Joseph Estrada. She continued his presidency until June 2004 and was re-elected for the period 2004- 2010.

Although EAGA includes Malaysia and Brunei Darussalam, this study does not focus on those two countries because it is not seen as crucial to the political or economic development of either. Malaysia has the IMS-GT and IMT-GT, and so any discussion of

Malaysia would necessitate examining it in relation to these two entities before EAGA.

Malaysia, Indonesia and Singapore showed enthusiasm in promoting trade and investment through the IMS-GT as the first sub-regional economic cooperation in

Southeast Asia, and for these countries, particularly Indonesia and Singapore, the IMS-

GT has continued to play a significant role. Malaysia was the engine of IMT-GT, playing a role parallel to that of the Philippines for EAGA. Malaysia and Brunei

Darussalam are important members because of their investments in EAGA, but there has been no direct correlation between EAGA regional development planning and their national development programs. This is why it is more significant to discuss EAGA in terms of the Philippines national development programs and its political and economic dynamics.

In the Indonesian case, EAGA has also not been a significant part of national development planning. In any case Indonesia’s economic planning has undergone significant shifts since the fall of the Suharto regime in 1998 put an end to the country’s rolling series of five-year plans (REPELITA).

My field research on the EAGA quadrangle was done during 1995-1999 in Indonesia and the Philippines. I am a member of the Indonesian Institute of Sciences (Lembaga

Ilmu Pengetahuan Indonesia or LIPI) Center for Political and Regional Studies, and in that role carried out annual surveys of EAGA from the Indonesian side. The Center’s name has now been changed to the Research Center for Politics, and it no longer carries

out research on growth triangles, but rather has shifted its attention to issues of federalism connected with Indonesia’s regional autonomy policy that was formulated in

1999 and implemented after 2000. This change shows that EAGA is not of major significance to Indonesia.

As a LIPI researcher, I had the opportunity to study EAGA and its relevance in accelerating development in the eastern part of Indonesia, especially in North and South

Sulawesi Provinces. During the first year (1995-1996), the LIPI project aimed to describe the concept of a growth triangle. This was an introductory investigation about the concept as a model of economic cooperation for developing the eastern part of

ASEAN. The following year, the focus was more specific, on the development of

Indonesia’s exports in the zone. In 1997-1998, the study of EAGA concentrated on the bureaucratic organisation and regulation in some of the provinces in eastern Indonesia that are included in EAGA, namely West and East Kalimantan, and North and Southeast

Sulawesi. Foreign investment strategy in the eastern Indonesia region was the topic for the year 1997-1998, and finally, there was an evaluation of the sub-regional economic cooperation from the Indonesian perspective in 1998-1999. The study was sponsored by the National Planning Body, Bappenas (Badan Perencanaan Nasional). It primarily resulted a list of potential sectors on which Indonesia could rely for its part of the development, such as the marine tourism industry and construction. Problems were also identified, such as lack of policy and regulation harmonisation, inadequate infrastructure and bureaucratic red tape. I have made several subsequent visits to the region as part of other projects.

When I conducted my fieldwork in North and Southeast Sulawesi, I found that the concept of EAGA was not widely known or understood in the region. Thus it was my role to introduce the idea of EAGA to some of the local institutions and local officials, such as the immigration official who did not know about EAGA until I introduced it to him. This is a measure of how little impact EAGA has had on Indonesia, and all the indications are that its effects in Malaysia are similar.

When I had the opportunity to do the fieldwork in Mindanao, specifically in Davao City and General Santos City (from March to May 2000), I found that EAGA had greater local significance than the literature indicated. In that period, from key resource persons and local newspapers, I became aware of how much the local conditions dominated

EAGA activities. Officers and staffs from the local governments and private institutions

(such as the Mindanao Economic Development Council/MEDCO and the Mindanao

Business Council/MBC), enthusiastically explained programs and plans in order to prepare and implement the EAGA activities.

This thesis is primarily based on my field research and related secondary sources. My perspective changed from that of Indonesia to that of the Philippines. Moreover, to understand the political motivation of the Philippines as the initiator of EAGA, the thesis aims to address a gap in the literature on Philippine studies in Indonesia, which is still very limited. Perhaps, its most important contribution is to provide a better understanding about the Philippines from the perspective of its neighbouring country.

When the study began in early 1999, the proposal for EAGA was still a feasible one.

The transnational cooperation had a lot of economic potential with limited political influence. However, after my fieldtrip to Manila, Davao City and General Santos City in

2000, the implementation of EAGA seemed more problematic. The key problems, such as lack of adequate infrastructure, lack of capital, policy disharmony and overly- complex decision-making processes, remain unresolved not only in the Philippines, but also in Indonesia and Malaysia. Accomplishment of the original goals is also difficult because of several different factors operating at global, regional and domestic levels, as will be explained in the chapters of this thesis.

Figure 1. MAP OF THE PHILIPPINES

Research Methodology

This study is based on qualitative research carried out primarily through literature review, my previous research in Indonesia and fieldwork in Manila, Davao City and

General Santos City, and the latter involved discussions and in-depth interviews.

The timeframe of this study is from 1992-2004, which is divided into three different periods: firstly, the beginning of EAGA (1992-1998), including the implementation of

Early Action Plan (EAP) and Short Term Plan (STP), that is from 1992 to 1998.

Secondly, the implementation of Medium Term Plan (MTP), that is from 1996 to 1999.

Thirdly, the implementation of Longer Term Plan (LTP), that is from 1999 to 2004.

EAGA reached better achievement in terms of its commenced and preparation of its activities during the Ramos administration (1994-1998). If it is compared to the other administrations, the Estrada administration, for example, the EAGA activities had almost no progress, while President Estrada also tried to abolish the EAGA office in

Mindanao. Under the GMA administration, EAGA was revitalised, but it was not for the economic purposes. The revitalisation of EAGA was then used for combating terrorism in Southeast Asia.

When I started my research on EAGA in 1999, there was little literature on the topic and in the following years this has remained the case, except for news and information about the progress of EAGA from some websites. I assume that during the first five years of EAGA the planners focused more on a program of development and spreading information within government institutions and the private sector about the zone, in order to provide a better understanding of its activities. Unfortunately, after 1999, there were still people and institutions that had not even heard about it. This lack of literature

on EAGA became the biggest challenge in undertaking this study. In order to understand EAGA activities, in particular from the Philippines’ perspective, this study combines observation (fieldwork) and material such as official documents and newspapers. The discussions and in-depth interviews were carried out with a view to providing critical analysis of the documents.

Since there is such a lack of EAGA literature, the best place to get information about

EAGA has proven to be the departments of Foreign Affairs for the respective countries, although the ASEAN Secretariat also has many planning documents. However, during my study in 1999-2003, MEDCO (the EAGA office in Mindanao) provided more relevant documents rather than the Department of Foreign Affairs in Manila.

The major literature on growth triangles comes from studies carried out by analytical bodies based in the Asia-Pacific region as part of analyses of regional development planning. The first significant study involving EAGA came from the Australian government’s East Asia Analytical Unit (EAAU) 1995 overview of Growth Triangles of

South East Asia.15 Chapter five of this study provides a brief historical background, and then outlines EAGA’s objectives, a profile of each EAGA country, and examines

EAGA’s strengths, intra-regional trade and investment, prospects and challenges. At the end of the report, there are descriptions of Australia’s interests in EAGA, the strongest link being cooperation between Darwin and EAGA in the meat industry, live cattle exports, and computers and telecommunication equipment.16 The chapter also includes discussion of Australia’s effort to develop trade and business links between the ASEAN

Free Trade Area (AFTA) and the body concerned with Australia and New Zealand

15 East Asia Analytical Unit (EAAU) (1995). Growth Triangles of South East Asia, Canberra: Australia’s Department of Foreign Affairs and Trade. 16 Ibid., pp. 81-85.

Closer Economic Relations (CER). The study claims that the EAGA quadrangle, under the umbrella of ASEAN, primarily aimed to accelerate economic development at the sub-regional level, as part of the AFTA, and this analysis is consistent with the report’s economic focus on free trade zones.17 The report’s stance has since been superseded by new Australian policies under the Howard Government. Instead of cooperation between

Australia and EAGA as a significant way to increase Australia’s regional relations in trade and business, Australia has established free trade agreements bilaterally with

Singapore (2004) and Thailand (2005). These agreements mean that EAGA is now of little interest to Australia.

Other growth triangles were the subject of studies by the Asia Development Bank

(ADB). The ADB produced a study of EAGA in 1996.18 The ADB report’s was a very biased Integrative Study, in which the political interests of the funding body were dominant. The ADB’s unofficial slogan of ‘no political funding for free’ makes clear that the political reward from every cent that may be spent is calculated beforehand. The report was published when EAGA was at its most progressive moment, only two years after its formation. The study focused more on hopes that EAGA could gain, but the practical suggestions were very limited. The ADB report was unfortunately the only one that the ADB ever did. During the period 1996-2000, there was no investment report from EAGA countries in Mindanao, especially in Davao City.19 The reason could be because there was not enough funding to do further research, or that there have been no achievements important enough to be published.

17 Ibid., pp. 85-86 18 Asian Development Bank (1996) v.I “Integrative Report, East ASEAN Growth Area Brunei Darussalam, Indonesia, Malaysia, Philippines” and v.III “Productive Sectors Agriculture, Fisheries, and Forestry Industrial Development Tourism, East ASEAN Growth Area Brunei Darussalam, Indonesia, Malaysia, Philippines”. 19 Davao Investment and Promotion Center (14 April 2000), Davao City, Mindanao.

The Australian report was soon followed by a study published by the Malaysian

Institute of Strategic and International Studies, edited by Imran Lim, Growth Triangles in Southeast Asia, Strategy for Development.20 This book was primarily put together by protagonists in EAGA, although it included an article by Anwar Maaruf entitled

“BIMP-EAGA: Problems, Opportunities and Prospects”. Maaruf, even at that stage, argued that there were more problems than opportunities and prospects in EAGA. The problems he outlined included perceptions of unequal benefits; inadequate infrastructure; diversity in immigration policies; multiplicity in decision-making; and problems of social and security.21 His article differed from the EAAU report, which when it analysed the problems and challenges that EAGA planners must consider, identified them as the development gap; lack of transparency and bureaucracy in investment processes (particularly in Indonesia and the Philippines); inadequate transportation facilities; and the security problem of piracy that had the potential to discourage trade and investment within EAGA area.22

From the Malaysian perspective, EAGA was predicted to achieve dynamic economic development in the two or three decades from its formation, and the initial analyses argued that its many challenges could be overcome. Based on its strengths, namely political commitment and economic complementarities, EAGA could take advantage of its many opportunities and prospects for collaboration in developing natural resources and traditional trade links.23 In the ISIS book, a key Philippines player in EAGA, Paul

Dominguez, provided an optimistic perspective on the establishment of EAGA because

20 Imran Lim, ed. (1996). Growth Triangles in Southeast Asia, Strategy for Development, Kuala Lumpur: ISIS. 21 Anwar Maaruf, “BIMP-EAGA: Problems, Opportunities and Prospects” in Ibid. pp. 63-65. 22 ADB, op. cit., p. 80 23 EAAU, op. cit., Maaruf, op. cit., 65-67.

he argued that as a development strategy, EAGA was in line with the principles of

GATT. In other words, EAGA needed to be seen as part of a global economic framework, and as a logic consequence of the East and Southeast Asian, or ESEAN, economic trends. Dominguez quotes the view of ISIS chairman Tan Sri Dr. Mohamed

Noordin Sopiee that the East and Southeast Asian nations have “shifted their global economic weight from the western capitalist economies to the ESEAN economic bloc”.24 ESEAN is thus also seen to be growing as a potential market for the world’s goods and services, as well as foreign direct investment (FDI). ESEAN would thus, in this view, become integrated not only by trade, investments, technology, financial and capital movements, but also by the growth of tourism.25

In 1998, Philippines journalists Marites Vitug and Criselda Yabes wrote a travel book on EAGA. As its title—Jalan-Jalan, a Journey through EAGA—suggests, the book basically describes tourism in EAGA provinces/countries, which it is intended to encourage. However, the book also provides historical background and a description of economic and political conditions of some provinces and cities in EAGA, such as

Balikpapan, Banjarmasin and Pontianak in Kalimantan on the Indonesian side, and

Marawi, Palawan and the Sulu islands of Mindanao, and Tawi-Tawi on the Philippines side.26

The most useful studies for analysing EAGA are those that help us to understand its economic role under the umbrella of ASEAN. The optimistic views of the formation of

EAGA have been challenged by the fact that the ASEAN countries and China, Japan,

24 Paul G. Domiguez “East Asean Growth Area: the Philippine View”, in Lim op. cit., pp. 74-75. 25 Ibid., p. 75. 26 Marites D. Vitug and Criselda Yabes (1998). Jalan-Jalan, A Journey through EAGA, Pasig City: Anvil Publishing.

and North Korea (known collectively as the ASEAN Plus Three, APT) are working towards an East Asian regional trading arrangement.27 This contradicts the essence of

EAGA, which aims for strategic development at the sub-regional level. The development of growth areas, such as IMS-GT, IMT-GT, and BIMP-EAGA, was to

“narrow the gap in the level of development among member states and to reduce poverty and socio-economic disparities in the region”.28 Within ASEAN it self there are significant differences in terms of economic capability. EAGA planners, therefore, tried to reduce these disparities through this sub-regional arrangement. The East Asian regional trading arrangement would most likely cause more development gaps and increase regional poverty. The wider ASEAN integration should cause a decline in

EAGA activity.29

These studies, as already indicated, focus on economic developments, but the problems they identify point to the importance of political factors in shaping the regional economy. Thus my own analysis is based on a theoretical framework heavily influenced by studies of the political economy of Southeast Asia, in particular the studies produced in Australia by authors such as Rodan and Hewison.

The five chapters of my study discuss the theme of the growth triangle from the

Philippines perspective. As mentioned above, the data was obtained from various sources, including interviews that were primarily done in the Philippines during the

27 Hadi Susastro (2001). “Towards an East Asian Regional Trading Arrangement”, in Simon S.C. Tay, Jesus P. Estanislao and Hadi Susastro (eds). Reinventing ASEAN, Singapore: ISEAS; Paul J. Davidson (2002). ASEAN, the Evolving Legal Framework for Economic Cooperation, Singapore: Times Academic Press. 28 Davidson, op. cit., p. 133. See also the Hanoi Plan of Action 1998, and the Hanoi Declaration on Narrowing Development Gap for Closer ASEAN Integration 2001. 29 See James Parsonage (1997). “Trans-state Developments in South-East Asia: Sub-regional Growth Zones”, in Garry Rodan, Kevin Hewison & Richard Robison (eds). The Political Economy of South East Asia, An Introduction, Oxford: Oxford University Press, pp. 272-273.

fieldwork. A list of the names of respondents who were able to give their time and the institutions where most information came from is provided as an appendix. Respondents were divided into several categories, such as intellectuals, university students, non- governmental organisations (NGOs) activists, journalists, local governments’ officials, business people, informal leaders, members of separatism movements, and ordinary people.

The capital city of the Philippines, Manila, originally was to be the only place where the fieldwork would be done, because the P-EAGA is part of Philippine national development programs. However, since Manila did not provide much information regarding the preparation and implementation of the EAGA activities, Davao and

General Santos City were the best alternatives to obtain more accurate records of the issues. I finally decided to visit Mindanao, although negative views of Mindanao affected my decision at the beginning due to the on-going clashes between the military and the Moro liberation forces. As my time in Mindanao was very short (less than three weeks) I could not approach two of the most important people who played key roles in the emergence of EAGA, Paul G. Dominguez, presidential assistant for Mindanao and chair of MEDCO under the Ramos government; and Lourdes S. Adriano, senior policy analyst, Growth with Equity in Mindanao (or GEM). This institution was meant to help

Mindanao fulfil its aim to be the promised-land.

Key Research Issues

I realised from the literature that it would be necessary to reconcile what appear to be key policy differences between the bodies involved at the different levels of EAGA, since there seem to be major discrepancies between its broader regional role and its

local implementation. On the local level, these discrepancies were manifested as differences or policy misunderstandings between government and the business or private sector. There are two possibilities as to why these discrepancies arose. The first is because development is a multi-dimensional concept with social, economic and political dimensions, such that a narrow economic focus would inevitably produce misunderstandings. Moreover, on each level there are conceptual problems, such as how to measure levels of development and/or determine whether development is a process or a state. The second is from social and economic perspectives, arguments have been made by Jan-Erik Lane and Svante Ersson that development refers to the achievement of a country in which it is desirable to work and live. Development, in this view is asserted in terms of the achievement of incomes and costs of living, benefits from modes of production, attitudes, and behavioural patterns, and social-economic relations at state, family and neighbourhood levels.30 Moreover, in this analysis, gross domestic production (GDP) per capita does not always indicate the social and economic realities of development. The national and ASEAN development studies quoted above focus more on the achievements of higher rates of GDP, and hence concentrate on free trade as the answer to regional problems.

Globalisation has influenced both ASEAN, and EAGA, primarily through the concept of free trade. Some other characteristics of globalisation which also affect the Southeast

Asian region are economic and political interdependences, and the development of advanced information and communication technologies. In globalisation processes, numbers of actors also increase, particularly the non-state actors (from the private sector and trans-national companies). However, states in EAGA territories mostly have a

30 Jan-Erik Lane & Svante Ersson (1990). Comparative Political Economy. London: Pinter Publishers, pp. 43-44; see also Gunnar Myrdal (1968). Asian Drama I-III, New York: Pantheon Books, p. 1840.

dominant role in national development process, and they are usually influenced by international institutions, such as the IMF, the WTO, the World Bank. This influence leads to studies that identify crony capitalism as the cause of many problems of inequality. Therefore, international relations theory is not always about inter-state relations, it also needs to grapple with development in terms of domestic processes.31

In the Philippines’ case development planning has been focussed on indicators such as

GDP. Even these, however indicate that the Philippines’ economy is now heavily skewed away from any national basis of development, although the planning discussed here attempts to address this problem. A study of the 1990s shows that

Overseas workers’ remittances constituted over 5% of Philippine GDP from 1995 to 1997. By 1997, these had reached 7% of GDP. Portfolio capital inflows were a meager 1% of GDP in the first year of the Ramos administration, but by 1995 these constituted 5% of GDP, moving up 8% in 1996 and 1997. Net portfolio capital flows (net of outflows) reached a peak of 2.54% of GDP in 1996, the year that the economy registered its highest growth in the 1990s.32

Thus the Ramos administration was starting from a very low base, but attempting to address the problem of relying on overseas workers’ remittances by finding alternative strategies. It is important to understand such changes as part of the Philippines’ political and economic interests in regards to the establishment of EAGA, because without the

Philippines’ initiative, there would be no EAGA quadrangle. It is also important to analyse the rational and irrational aspects of establishing EAGA, particularly in promoting trade, investment and tourism, and dealing with issue on migration (people mobility) within the EAGA area. These in part have come about because ASEAN has been unable to carry out regional development planning in a significant way. To what

31 Anna Dickson (1997). Development and International Relations. Cambridge: Polity Press, pp.19-23. 32 Maria T.D. Pascual (1999), p. 155.

extent does EAGA have the ability and capability to concretise development planning at the sub-regional level? In order to know the process of economic development in the

EAGA quadrangle, there is a model of development within the growth triangles, that is called the “flying geese pattern or model”.33 This model describes the dynamic of specific industrial structures in East Asian countries. The flying-geese model originally represents the life cycle of a particular industry by the trends in the value or volume of imports, production and exports.

The level of imports first rises and then declines. The same rise and fall pattern is later

repeated by domestic production and by exports. When plotted against time, imports,

domestic production and exports form a pattern of overlapping invested V-shape curves

like wild geese flying in orderly ranks. The analysis can be simplified by referring to an

indicator of comparative advantage.34

The realisation of the flying-geese model needs the following major conditions: “(1) geographical proximity; (2) diversity in the level of economic development; (3) an open economic system favouring international trade and investment”.35 These conditions to some degree fit with the EAGA sub-regions.

The other framework of this study is to analyse policy formation and application, in particular, regarding the following indicators: trade, investment, tourism, and people movement. How did policy makers make decisions, and to what extent was the policy changed or transformed by changing conditions? Then, how was the policy implemented? The following chapters address these questions.

33 Edward Chen & C.H. Kwan (1997). Asia’s Borderless Economy, The Emergence of Sub-regional Zones, St. Leonards: Allen & Unwin, pp. 5-7. 34 Ibid., p. 5 35 Ibid., p. 7

Chapter I describes the historical background of the growth triangle and the differences in geographical characteristics between Southeast Asia and southern China where the concept originated. It explains the process of promoting EAGA since 1992, and other countries’ (Brunei, Indonesia and Malaysia) responses towards the Philippines’ proposition up to the establishment of EAGA in 1994. This chapter also covers the institutional structure of EAGA, which consists of ministers, senior officials and heads of working groups, all with links to the national secretariats. Working groups in thirteen different sectors have the most important functions in developing EAGA activities.

Their key aims are to promote trade, investment and tourism in the region. This chapter discussed EAGA’s initial achievements in terms of the holding of meetings, exhibitions and projects, and EAGA monitoring and evaluating framework. The last section identifies in general terms, the problems or challenges that are discussed in more detail in the subsequent chapters.

Chapter II discusses Philippines politics in general and the problems related to EAGA in particular. It shows that there was a close link between Philippine politics and the formation of EAGA, although the government of the Philippines has a different motivation from that of the ASEAN planners, since the Philippine government saw

EAGA as part of Philippine national development programs. The discussion of

Philippine politics includes the political forces, political system, political culture and political leadership over three different periods --- the Ramos, Estrada and GMA administrations ---. Relations between the business sector and politics, and the business sector and the military, are part of the political system and political culture in the

Philippines. Philippine macro-economic policy and the Chinese business network are also part of Philippine political economic considerations.

The discussion in this thesis of the Mindanao crisis is dominated by the clashes between

Moro and government/military. These clashes are seen as part of a larger problematic which results from what participants view as a major national economic gap between the “rich” (Luzon) and the “poor” (Mindanao) that has existed for years. Exploitation and discrimination remain actual and potential for creating political instability. The lack of governmental capacity to coordinate/accommodate different interests of the three groups Muslims, Christians and Lumads (indigenous peoples) who occupy the southern

Philippines, is a trigger for many of the conflicts in the area in which EAGA is situated.

Chapter III investigates Philippines-ASEAN relations in order to give the next level of context to EAGA, since ASEAN is the umbrella organisation of EAGA. This chapter provides historical background to the attempts at regional integration in Southeast Asia.

The Philippines was one of the founders of ASEAN and the initiator of EAGA.

Therefore, Philippine foreign policy, especially towards its Asian neighbours, is a major factor in understanding EAGA. Because the Philippines has a very long and close history with the US, its foreign policy is also linked to US interests in the region, which have the potential to create dilemmas if ASEAN policy and US policy differ.

Political disharmony and lack of policy coordination are some of the problems with which EAGA needs to deal. The last part of this chapter is about the similarities and differences between ASEAN and EAGA. These need to be highlighted in order to understand Philippines-ASEAN relations. The relevance of EAGA has become controversial because the Philippines’ bilateral relations with some member countries are not always stable. The Philippines and Malaysia, for instance, disagreed in the case

of Nur Misuari, the former governor of the Autonomous Region of Muslim Mindanao

(ARMM), who entered Malaysia illegally after the clash between his supporters and the

Philippine military in November 2001. The Malaysian federal authorities in Sabah refused to process his illegal visitor status in the country, although the Philippine government had asked it to do so. Philippine-Indonesian relations have also been disrupted by illegal Filipino’s fishing vessels in Indonesian waters. Thus bilateral issues intrude on ASEAN’s broader regional aspirations.

Chapter IV examines the relationship between domestic and external factors in terms of broader regional issues and major global factors that have an impact on EAGA regional development planning. A key external factor is the role of China in the region, especially because it is going to take over much of Japanese economic power in the coming years. China provided some of the model for EAGA, but it is seen as both a source of benefit and a threat to ASEAN.

External elements are closely associated with the ineffectiveness of EAGA, especially since it is difficult to make a clear differentiation between one level of operation of

EAGA and another, because all of them are connected through relations of cause and effect. The regional attempts to implement economic liberalism and the counter-veiling force of the war against terrorism are the two major global elements that are having a direct effect on EAGA. The global war against terrorism has the potential to change the focus of EAGA from economic to political and security “cooperation”. From a liberal economic perspective, governments have key roles in development process through their policies, but the reality mostly demonstrates that the policies are not effective in creating equal distribution of income. Moreover, as the political economy framework

shows, in the case of the countries that participate in EAGA, economic liberalisation has facilitated the growth of crony capitalism.

Political culture and political systems provide hospitable environments for crony capitalism. Corruption, collusion and nepotism are the results of governments that attempt to channel international capital to their own members. These developments potentially bring about economic stagnation. The inability of EAGA to function has come about because of the inability of governments to create political and economic stability at the national or local level. These caused anti-government or separatist movements in the Philippines and Indonesia, which have regional impacts. Each of these insurgencies not only motivates political movements in other countries, but also gives rise to illegal trade or smuggling, piracy and other trans-national crime. EAGA

(state and private sector) was unable to deal with problems and tensions regarding the smuggling and illegal trade within EAGA. One of the most critical problems is illegal or undocumented migrant workers from Indonesia to Malaysia.

In relation to the issue on migration, EAGA government planners have sponsored policy and institutional reforms aimed to provide a basis of free movement not only for the people, but also for the goods within the EAGA areas. For example, the EAGA sub- economies have conducted unilateral and multilateral meetings to formulate the migration policies, and “the most significant were the removal of travel taxes, the toll reduction of rates for long-distance calls, the applications of a standardized port tariff schedule for shipping vessels plying the Indonesia Mindanao water routes, and

sponsorships of cultural and trade missions”.36 This compares with SIJORI/IMS-GT, the migration policy focused more on providing cheap labour in the context of resource complementarity within the IMS-GT, especially between Indonesia and Singapore.

Singapore decides that Batam37 should be its industrial zone, while Indonesia provided the labour, mostly from Java.38

Chapter V is about the possible future of EAGA. In controversies about the future of

EAGA, the Philippines remains the most important actor, not only as its founder, but also as the most active member, the source which continually provides data and information about the progress and activities of EAGA. Although economic activities in

EAGA continue, it is hard to make a clear judgement about the future of EAGA since no objective measurements for assessing EAGA’s outcomes are provided by EAGA teams. The ADB report provided the scheme for evaluating and monitoring, but it was only available for the EAGA Early Action Plan, which was started from the establishment of EAGA in 1994 till 1996. At the same time, political and economic conflicts remain critical, making it difficult to evaluate EAGA in its own right. EAGA’s future is an open question and whether it is seen as optimistic or pessimistic depends very much on the perspective with which it is viewed. The optimists argue that EAGA remains feasible because of traditional, cultural and religious relations, which most member countries had long been involved in before EAGA was formed. Most positive comments come from governments (central and local) and business people. The second, pessimistic perspective is more cognisant of existing problems on several different

36 Lourdes S. Adriano (25 October 1999). “Mindanao Economy in Perspective, Mindanao’s Industry and Trade: Trends, Prospects and Agenda for Action under the Estrada Administration”, Kalinaw Mindanao (Mindanao Development), p. 3. 37 Batam is located in Riau Province, Indonesia, and it is only approximately 45 minutes from Batam International Port to Singapore by ferry. 38 See N.A. Phelps (2004). “Triangular diplomacy writ small: the political economy of the Indonesia- Malaysia-Singapore growth triangle”, the Pacific Review, v.17, no.3, p. 355.

levels, all of which have affected EAGA. Intellectuals, students, NGO activists, informal leaders and opponents of the relevant governments mostly express their disagreement with and despair for EAGA, since they see it as not having achieved anything.

In conclusion, EAGA is viewed optimistically by those who hold that opening up of trade can change politics. It is natural that local businessmen who stand to benefit would champion this view. The pessimistic perspective argues that the EAGA quadrangle is an imitative model that did not take into account the differences in political systems and economic capabilities. In this view, it is not possible for EAGA to make much progress because of ongoing conflicts in some provinces.

EAGA must be supported politically if its economic purposes are to be achieved. If the problems or conflicts cannot be resolved, EAGA and ASEAN will both be shown to be symbols for sub-regional integration and regional integration without meaning. The failure of EAGA will show that bilateral economic relations are more effective rather than multilateral relations in Southeast Asia.

Thus, I argue that a number of conditions should be fulfilled to make EAGA successful.

First, EAGA must reduce the influence of economic liberalism by making its primary objective poverty alleviation. Second, EAGA needs to create joint actions to deal with the on-going economic crisis, and with trans-national crime. This is because an EAGA that wants to promote its region must also share responsibility for solving internal problems, especially the ones that have regional impacts.

30 CHAPTER I THE ESTABLISHMENT OF BIMP-EAGA

The Brunei Darussalam, Indonesia, Malaysia, Philippines–East ASEAN Growth Area is a growth triangle. It is more properly a growth quadrangle having been converted of its founders into East ASEAN Polygon.39 Growth triangles are also called sub-regional economic zones, natural economic territories, or extended metropolitan regions.40 The growth triangle has become a dominant model of economic cooperation in Southeast

Asia since it was proposed in 1989. Singapore Prime Minister Goh Tjok Tong, introduced the model into the region through the formation of SIJORI (Singapore–

Johor–Riau) or the Indonesia, Malaysia Singapore–Growth Triangle (IMS-GT). The

EAGA, established in 1994, was the third growth triangle after the formation in 1992 of the Indonesia, Malaysia, Thailand–Growth Triangle (IMT-GT) or the “Northern

Triangle”, involving Medan, Penang, and Phuket. A most recent development has been the Mekong Delta Sub-region, formed in 1996.

39 The word “polygon” refers to some areas that have been expanded. For example, I-EAGA, which formerly included three provinces—West and East Kalimantan, and North Sulawesi—was expanded to include all other provinces in the eastern part of Indonesia: Sulawesi island, the Maluku islands and West Papua. Thus it includes some “new” provinces created because of the independence movements, particularly since 1997, such as North and South Maluku, and Gorontalo in Sulawesi. 40 M. Thant, M. Tang & H. Kakazu (1994). Growth Triangles in Asia, a New Approach to Regional Economic Cooperation. Oxford: Oxford University Press, p. 2. According to Abonyi, sub-regional economic cooperation can essentially involve initiatives in limited or localised economic integration or in border crossing area. Economic transactions in the border area has some basic characteristics: 1. Sub- regional economic cooperation tends to consistent with the evolution of ‘natural economic linkages’ among neighbouring countries. The flow of investment and trade go in a very real sense, both responding to and facilitating emerging trans-border economic activities. 2. Because sub-regional economic zone is limited in substantive and geographic scope, the problems are easier to be managed. Besides, the activity of economy goes more informal compared to the trading bloc. 3. Sub-regional economic cooperation provides more modest participation because one country can involve in more than one growth triangles, such Indonesia and Malaysia. 4. Investment has an outward-looking orientation and trade can create more markets. 5. Trade can also be expended, so growth triangle becomes a broader regional strategy. The broader strategy can also link in more general forms of regional cooperation, such as AFTA. Abonyi, op. cit., pp. 5 & 6.

31 The EAGA quadrangle is relatively new not only to Southeast Asia, but also more broadly to the East Asian region. Its immediate precedent was the Southern China

Growth Triangle, a sub-regional economic zone including Taipei, Hong Kong and four special economic zones in South China: Shenzhen, Zhuhai, Shantou in Guangdong and

Xiamen in Fujian. It was proposed in 1979 as part of the Chinese economic reforms and open door policies. Another related zone is the Tumen River Delta Triangle or North

East Asian Regional Economic Cooperation zone, which embraces Jijin, Liaoning, and

Heilongjian provinces of China, plus South Korea, North Korea, far eastern Russia,

Mongolia and Japan. It has existed since 1992. The last example of these zones is the

Mekong Basin formed in 1996, which stretches from south western China to southern

Vietnam. It is also called the Mekong Basin cultural village since it includes several regional cultures and traditions, namely the Chinese, Thai, Burmese, Cambodian,

Vietnamese and Laotian.41

EAGA is the first quadrangle not located on the Asian mainland. The EAGA

Quadrangle embraces the whole country of Brunei Darussalam, East Kalimantan, West

Kalimantan and North Sulawesi of Indonesia, Sabah, Sarawak and the Federal Territory of Labuan of Malaysia, and the Mindanao area and Palawan islands of the Philippines.

The other growth quadrangle of mainland Southeast Asia is the Golden Quadrangle – the confluence of Yunnan, Laos, Thailand and Myanmar. The formation of EAGA was inspired by the ideas of Manuel Garcia and Vicente Paterno. In 1970, Garcia was a congressman from Davao, and a member of the Davao City Chamber of Commerce. He was looking for an alternative to the unequal trade relations between Manila (or Luzon and Cebu) and Mindanao. After travelling to some neighbouring countries—Singapore,

Indonesia, and Malaysia—he promoted the “Look-South” concept in order to reduce the

41 See Infothai CM Co., Ltd. (27 October 2005). 32 trade imbalance between the South and the North of the Philippines. He focused on trade and tourism among provinces and cities of Southern Philippines, Indonesia and

Malaysia; specifically, Davao City, Manado, and Kota Kinabalu.42

Ex-Senator Vicente Paterno shared Garcia’s opinion about the need to help neglected areas. He presented his ideas on how to develop Mindanao into “the promised land” to a

Senate committee on development in Mindanao. With funding from the United States

Agency for International Development (USAID), he conducted an international business convention promoting trade and investments in Mindanao. According to Paterno, the mental barriers, had to be overcome by reducing Mindanao’s dependency on Manila.

His decision to promote Mindanao as the last frontier of the Philippines has stimulated the concept of EAGA as “the last frontier of Southeast Asia”.43

The EAGA is expected to accelerate economic growth in its “undeveloped” areas

(which exclude Brunei) because it was based on the strong foundations of sister city agreements. As one of EAGA’s founders, Paterno believed that EAGA is “a good seed”.44 The main challenge is how to maintain it, especially during difficult moments, such as the Asian crisis. He dreams of building an EAGA information centre, so people can easily get access to recent news regarding its activities. However, the cost would be very high, and Paterno does not think that he can afford it.45

42 Vitug & Yabes, op.cit., pp. 6-8. 43 Ibid., pp.8-11. 44 What Paterno meant by “a good seed” was that the formation of EAGA was a starting point for achieving opportunities in trade and investment. Similar cultural backgrounds is one advantage of EAGA he mentioned. Another advantage is that all EAGA members are members of ASEAN, known as the longest running economic regional cooperation arrangement in Southeast Asia. 45 Interview, Mandaluyong City, May 2000.

33 The EAGA has no one fixed base of operations. Its administration and various activities are carried out by different institutions in each country. Former president of the

Philippines, Fidel Ramos, for example, nominated the Mindanao Economic

Development Council (MEDCO) as the EAGA office, and the Mindanao Business

Council (MBC) as the secretariat.46 Chairman Paul Dominguez was appointed by

President Ramos as presidential assistant for Mindanao. As the chairman, he represented Malacañang in Mindanao, not only to develop Mindanao in general, but also specifically to deal with the realisation of EAGA. He was the most important person in EAGA, some journalists named him ‘the little president’.47 His other name in such accounts was “our man in Mindanao, the spirit and intent of EAGA”. His family history in Mindanao began when his grandfather came to the Sulu Zone of islands in

1918, and some of his relatives lived in Zamboanga. His mother was born on Jolo.

Dominguez was one of the EAGA founders together with Garcia and Paterno.

“Dominguez was enamoured with the whole idea of looking south and forming a growth area that would make his dream comes alive”.48

As a “new” approach to regional economic cooperation, EAGA had inspired President

Ramos. Based on Garcia and Paterno’s ideas, Ramos started to introduce and promote the idea in 1992. At that time, the Philippines’ domestic politics and economy were in crisis because of monopoly and political rivalry between national and regional powers.

The formation of EAGA was a laboratory for Philippines political-economic policies. If the policies were implemented, the asymmetrical relations between north and south in the country could be minimized. For these reasons, Ramos was enthusiastic about

46 MEDCO is a government institution, which provides information about the development of EAGA, while MBC represents the private sector. 47 Pagasa (July 1992) vol.1 no.10, p. 5 48 Vitug & Yabes op. cit., p. 11

34 advancing EAGA. According to Dominguez, Ramos played a catalytic role in its formation.49 The idea was proposed for the first time at the East ASEAN Heads of

Government meeting in Brunei Darussalam in October 1992. In early 1993, Ramos went to Malaysia and continued to promote it, and then did the same in Indonesia in the late 1993. Both Malaysia and Brunei confirmed their involvement in EAGA, Indonesia also supported the idea some months later.50 Hence, the Philippines is tagged the “prime mover” of EAGA, as Singapore was in the IMS-GT and Malaysia in the IMT-GT.51

Regionalism and the Formation of EAGA

According to Andrew Hussel, regionalism has three main theoretical frameworks: systemic theory, regional development theory, and domestic level theory. “Systemic theories see regionalism as a response to outside pressures and forces; regional theories focused on the development of regional interconnectedness and interdependence; and domestic level theories stress the impact of changes such as democratization on the tendency to regionalism and regional cooperation”.52

Based on characteristics and driving forces of regions and regionalism that Michael

Smith identified, EAGA was driven by trading blocks or market competition at the system or global level.53 Moreover, as shown by Hussel’s theoretical frameworks as they describe regionalism, EAGA was also driven by decentralisation as a result of democratisation processes, regional economic interdependence and inter-connectedness.

49 Dominguez, op. cit., p. 72. 50 Ibid., p.73. 51 Malaysia Prime Minister, Mahathir Muhammad first presented the IMT-GT proposal in 1991, EAAU, op. cit., p. 52. 52 Cited in Michael Smith (2001). “Regions and Regionalism”, in Brian White, Richard Little & Michael Smith (eds) (2001). Issues in World Politics (2nd. ed.). New York: Palgrave, p.72. 53 Ibid., pp. 56-57

35 On the question of whether political development should come before social and economic development, or whether the transformation should occur the opposite way, opinion is divided. Samuel Huntington argues that “political development in general is of dubious usefulness. To the extent that political development is thought of as an umbrella concept encompassing a multiplicity of different processes…these often turn out to have little in common except the label which is attached to them”.54 Philippine democracy is a model that sacrificed social and economic development for political development, which was viewed as the first priority. The People Power movement in

1986, for example, demonstrated Filipino political freedom. The movement was, however, orchestrated by business people and some representatives from the middle class to depose the Marcos dictatorship. Under the Aquino government, political issues were still dominant. She proposed economic projects, but they were postponed due to political instability, such as the several coups d’etat that threatened her presidency.

The term regionalism is complicated because “it usually involves not only geographic proximity but also a sense of cultural, economic, political, and/or organizational cohesiveness”.55 The formation of EAGA was also complicated by differences in political systems, economic growth and culture diversity, and persistent conditions regarding inadequate infrastructure, particularly sea transportation, and lack of policy coordination. From the point of view of economic cohesiveness, for example, EAGA countries have similarities in natural resources. One of EAGA’s economic features is that all member countries are rich in the natural resources that provide potential bases for industrial sectors, such as oil and gas, plantation, agriculture, fisheries and forestry.

However, disharmony in trade and investment regulations has caused more competition

54 Quoted in Ibid., p. 90; see also Samuel Huntington (1971). “The Change to Change: Modernization, Development and Politics”, Comparative Politics, 3, p. 304.

36 than cooperation, or no implementation of comparative advantage in managing similar commodities or products.

A sector with great potential is tourism, particularly eco-tourism, in the areas of marine tourism and “aqua-culture”. Besides tourism, natural resources are one of the basic economic features of EAGA and some governments are beginning to link these to industrial development. For this reason, EAGA governments accentuate infrastructure development, even though there are economic constraints that make the EAGA planners mindful of the limits of economic complementation and compatibility.

The following statements illustrate EAGA limitations in several sectors: wages, skills and productivity are mostly low; lack of educated human resources and entrepreneurial

capacity; traditional economic activity; and small scale economic industry.

A fundamental dilemma for EAGA is that while the Area is relatively labor abundant, it

is not the least labor cost location in the South or East Asia. Furthermore, much of

EAGA remains characterized by a low wage, low skill, and low productivity work

force. Mean educational attainment levels are currently low; the majority of the working

age population has received limited primary education or no formal education at all.

Managerial and technical skills are still in a short supply. Moreover, these constraints

are compounded by a general lack of entrepreneurial capacity within EAGA. In general

a dualistic industrial structure characterizes much of EAGA with a few notable large

formal sector industrial operations and a preponderance of agricultural, traditional and

informal economic activities. The indigenous private sector is small, but evolving.56

55 Theodore H. Cohn (2000), Global Political Economy Theory and Practice. New York: Longman, p.241 56 ADB, op. cit., vol. I, pp. 10-11.

37 The limitations of EAGA inhere not only in these economic characteristics, but also in the dynamics of politics, security and social economy that so often create uncertain in environments for conducting trade and investment. One of the problems is the on-going armed conflict in some EAGA provinces, in particular in the Philippines and Indonesia.

Since the beginning of EAGA, the planners in the Philippines have at the least held that the zone posses a dilemma or more likely had a pessimistic view that the idea of EAGA was unrealistic. This view comes despite the fact that when it was proposed it offered a breakthrough from the failures of national development programs, which had created greater gaps between rich and poor areas, such as between Luzon and Mindanao, and between the west and the east areas in Indonesia.

An optimistic perspective about EAGA’s formation contends that there are several sister city or twinning agreements among EAGA countries and that these agreements are a firm foundation for building multilateral sub-regional economic cooperation. Twinning or sister city agreements are not built into the framework of growth areas, but some such agreements have contributed to the formation of the Southeast Asian growth triangles.

The Johor-Singapore and Singapore-Riau links were two twinning policy schemes which Singapore initiated before initiating the SIJORI or IMS-GT in 1990. Market driven forces and government initiatives were two major factors in integrating the economic imperatives and political will of the participant countries.57 One of several sister city agreements that were established in the context of EAGA is that between

Davao City and Bitung of North Sulawesi, established on 24 September 1993. In 1992, the Philippines and Indonesia already had agreed to form the first sister city agreement

57 Thant, et al, op. cit., pp. 179-180.

38 between Davao City and Manado in North Sulawesi. In 1995, another twinning project was started between General Santos City and Bitung.58

From the optimistic perspective, EAGA serves as an alternative to ASEAN regional development planning at the sub-regional level. Because ASEAN has been dominated by political and security issues for more than twenty-five years, the planners of EAGA shifted their focus to sub-regional economic cooperation. Cultural similarities and close geographical location became the strongest motivation to bind the members to deal with regional development problems, particularly in trade, investment and tourism.

The EAGA is a sub-region of ASEAN. The Regional Integration Agreements (RIAs) of

January 1995 (signed by the OECD countries) classified ASEAN as a sub-region of

East Asian regional integration, while East Asia is part of the Asia Pacific region. The

Asia Pacific is then seen as integrated with the global trade regime. Based on the RIA criteria, EAGA is geographically part of ASEAN, East Asia and also the Asia Pacific region. This also means that the formation of EAGA was driven by the global trade regime—the Uruguay Round of the General Agreements of Tariff and Trade (GATT).59

On the other hand, East Asia (China, Japan, along with Taiwan, South Korea,

Singapore, and Hong Kong as the four NICs) does not see regional integration as very important. The reason is related to the role of the World Trade Organisation (WTO), which has restricted access to the developed countries’ markets for East Asian products.

58 A twinning policy between General Santos City and Bitung City was discussed at the 5th Anniversary of Bitung City in October 1995 in Bitung, North Sulawesi. It was an introductory meeting between local political leaders and some business people to study the possibilities of sister city agreement between the two cities. 59 Mindanao Focus (mfocus) (1998). “Globalization and Regionalization: a Baseline Study on BIMP- EAGA”, v.15, n.2, p. 1.

39 East Asian countries and Indonesia, Malaysia, the Philippines and Thailand (as the

ASEAN countries), see that

the WTO plays an important role in decreasing trade barriers, such as voluntary export

restraints that have restricted the access of East Asian goods to markets in the developed

countries; it provides for special and differential treatment for East Asian LDCs

(although the NICS are in the process of graduating to more developed country status);

and it offers smaller East Asian states some protection from the pressures of major

regional powers such as Japan and China.60

East Asian countries have no “duty” to be integrated in formal economic associations; however, there are two major trends in the world, which have to be viewed as major factors in the emergence of growth triangles. These are “regional economic cooperation and large flows of foreign direct investment (FDI)”.61 The trends have been forcing the formation of sub-regional economic cooperation. Therefore, the establishment of EAGA can be assumed to be a consequence of the practice of economic liberalism or the global trade regime.

Trading blocs are another influence in the emergence of EAGA. Together with liberalism, they have had considerable bearing on the development of free trade areas, which are in turn one attribute of globalisation. Examples of such regional economic integrations are customs unions (CU), common markets, economic unions and political unions.62 Trading blocs such as the European Union (EU) have driven the emergence of growth triangles. The EU has notably increased exports and capital flows within its member countries. But growth triangles are different from trading blocs. Trading blocs

60 Cohn, op. cit., p.262. 61 Thant, et al, op. cit., p.3. 62 Cohn, op. cit., pp.35-37.

40 have some fundamental elements, such as “large volumes of internal trade; similar laws and regulations governing trade and investment flows; relatively close per capita income levels of member countries; geographical proximity (the central element); political commitment and policy coordination”.63 However, growth triangles are mostly the opposite. While EAGA countries are relatively close geographically, this natural proximity has not been backed up by proper transportation and communications facilities. The EAGA quadrangle has lacked transportation and communications access since the beginning, while transportation and communication (in terms of infrastructure and advanced technology) are important for providing trading blocs. In other words, most of the requirements for trading blocs are actually problems for growth triangles.

These pre-requisites are going to be addressed by the EAGA governments.

The informality of growth triangles means their formations have “a lower cost and in less time than formal trading blocs, which typically involve many years of discussion and preparations” before the establishment.64 “One country can also form several growth triangles to test various approaches to regional cooperation, such as Indonesia and Malaysia that both established several triangles at the same time”.65 Although sub- regional economic zones are usually cheaper, they have some expenses at first because of inadequate infrastructures and lack of policy harmonisation. Problems come afterwards not only because of the already existing problems, but also because of the social problems that result from the impacts of growth triangles, such as appropriation of land, demolition of slum areas, and the development of black markets or underground economies.

63 Thant, et al, op.cit., pp.7-8. 64 Ibid., p.8.

41 The Area of EAGA

The area of BIMP-EAGA covers approximately 1,560 square kilometres; with a population of more than 27 million in 1994, which grew to 45.69 million in 1996.66

This population, according to planners, is a potential market for accelerating economic growth. In 1995, the labour force was estimated at 11.3 million, and predicted to be around 18 million by the year 2010.67

The differences in population come because of the expansion of the areas of EAGA as

Indonesia came to designate all provinces in the eastern part of the archipelago as development areas of EAGA. 68 (See Figures 2 and 3). This decision was related to the

Indonesian national program to develop the eastern part of its territory, because previously the Indonesian government had focused its national development policy on the western parts.

65 Ibid. 66 Adriana Elisabeth et al (1996) Segitiga Pertumbuhan di Kawasan Timur ASEAN, Executive Report, No. 26/96, Jakarta: PPW-LIPI. 67 Mary Luz Menguita Feranil (1998). “Globalization & Regionalization: the Case of Philippines- EAGA”. in Bataaw, Economic and Social Indicators of Mindanao, Globalization and Foreign Investments in Mindanao, v.11, nos.3-4, Davao City: the Alternate Forum for Research in Mindanao (AFRIM) Inc., p.2. 68 ADB, op. cit., v.1, p.30.

42 Figure 2. MAP OF THE BIMP-EAGA AREA (before the inclusion of the other Indonesian provinces)

EAGA countries share the same ecological zones. Brunei, Indonesia and Malaysia share common land borders in Borneo, while their maritime boundaries adjoin the

Philippines, and the Sulu Sea and Celebes Sea can be considered as a single zone.

In Indonesia, the EAGA section used to be under the Ministry of Trade and Industry with the Minister as the coordinator. In each growth area the BAPEDA or the District

Planning Body functions as the operating office of EAGA, and the head of the body is

43 also the coordinator of EAGA. Indonesia did not seem to be as ready as the Philippines was to take up the functions necessary for such coordination. Indonesia has a similar development policy to the “Philippines 2000”, called the Economic Development

Integrated Region or “Kawasan Pengembangan Ekonomi Terpadu” (or KAPET).

“Philippines 2000” was an integrated policy from the centre to regional/provincial development policy, while KAPET is more like an “instant” policy, intended primarily to deal with problems of economic inequality between the western and eastern regions of Indonesia. Thirteen provinces are included in KAPET, but the implementation of

KAPET has not been completed. Up to 2001, fewer than five provinces had been established by presidential regulation or Keputusan Presiden (or KEPPRES), such as

KAPET Manado-Bitung, North Sulawesi; Sanggau, West Kalimantan; and Biak, West

Papua.

The EAGA Development Strategy (EDS) has a Vision (point 1), Goal (point 2) and

Objectives (point 3) as follows:

1. the realization of sustainable and socially acceptable economic development which leads to the full participation of EAGA in the ASEAN development process. 2. in the short to medium term, to ensure that EAGA is a major location in ASEAN for high value-added agro-industry and natural resource-based manufacturing, and high grade tourism, and in the longer term, to ensure that important non-resource-based industries are established in EAGA. 3. to accelerate private sector-led economic development, improve export competitiveness and enhance the attractiveness of EAGA to local and foreign investment based on economic complementarities; shared natural resources, information and technology; joint action to cater for the increase in demand, and joint action to overcome constraints; and the specialization and regionalization of production.69

69 Ibid., p.136.

44 The EDS is a strategy to determine to what extent the EAGA planners have been able to implement the programs. The EDS provided monitoring and review scheme to evaluate the implementation of EAGA activities. The first program of EAGA was formulated in the Early Action Plan (EAP) that is the period of preparation, undertaken over a period of two years. The EAP was not the only program of the EDS, because there are also Short-, Medium- and Long-Term Plans (STP, MTP and LTP respectively).70 The following tables show plans on trade, investment and tourism by public and private sectors, and also the EAGA scheme of monitor and review.

Table 1. The Early Action Plan of BIMP-EAGA71

The STP and the MTP projects are also called the spatial development plans or activities, which have three different types. Type A: reinforces existing development patterns/growth corridors. Type B: facilitates and/or forges closer intra-EAGA physical integration. Type C: potentially opens up new generally underdeveloped/unexploited areas and opportunities.72

70 The MTP was undertaken in a period of between three to five years, and the LTP project covers more than five years. 71 The Asian Development Bank (December 1996), Integrative Report, pp.186-187. 72 Ibid, pp.180-181.

45 Table 2. The EAGA Spatial Development Plan73

Regarding the implementation of the EAP and the STP, the Asian Development Bank formulated frameworks for monitoring, evaluation and impact assessment, which consisted of four criteria to indicate the development policy relevance at national, regional and local levels. They are:74

73 Ibid., pp.180-181. 74 Ibid., pp.203-209.

46 (1) The Logical Framework Method (LFM). The LFM evaluated the

project goals, purpose, outputs and activities.

(2) Evaluation principles of EAGA containing criteria of economic

performance (costs and benefits of projects, policies and programs);

efficiency, effectiveness; and strategic benefit.

(3) Summary of the benefits of the EAP and STP to evaluate direct and

indirect benefits of effects to employment and income creation,

resources management, and participation of private sectors.

(4) The roles of the individual EAGA subregions. This is to assess the

capability of the individual subregions in creating mutual benefits

and interdependences based on different economic structures and

natural resource management.

47 Chart 1. The EAGA Development Strategy: Monitor and Review75

75 Ibid., p.208.

48 During 1994-1996, individual EAGA subregions committed to the realisation of short term EAGA projects. There were a total of 98 projects from nine sectors of EAGA cooperation76, including some individual projects and joint projects between two or all member countries. The projects were distributed into several sectors and based on the geography of the EAGA subregions. For example, the P-EAGA formulated Integrated

Tourism Development Plans for 1995-9677 and one of the policy implications from this was the certification of a travel tax that produced the cheapest airfare within the EAGA areas.78

In order to provide an adequate infrastructure for the tourist sector, Brunei renovated its International Convention Center and held the “BIMP-EAGA Trade and Tourism Fair” in Bandar Seri Begawan in October 1999. The exhibition showed off a number of firms and companies in catering equipment, computer and electric, handicraft and consumer goods. B-EAGA also hosted “the Second Tourism Strategic Planning and Workshop” to formulate and implement joint tour schemes and marketing programmes. Because there had been a decline in passenger traffic, the working group of the Air Linkages considered some incentives to reduce landing charges and grant the Fifth Freedom Traffic Rights (FFTR) to EAGA airlines on a bilateral basis, such as between Indonesia and Brunei. Then in 2001, the EAGA countries created the “Visit EAGA Year”, which was incorporated into the “Visit ASEAN Millennium Year 2002”. 79

Besides the tourist industry, EAGA has potential investment and trade opportunities, for example, since 1994 till March 1997, investment in P-EAGA reached approximately US$2.3 billion, which made Mindanao a major investment destination. However, probably not all investors were assured of implementing their investments. In order to manage investment and trade in P-EAGA, Manuel Garcia, from the House special

76 The sectors are trade; investment; tourism; agriculture, fisheries and forestry; financial services; transport and communications; power and energy; human resources; and industrial development. 77 See EAGA-Philippines Integrated Tourism Development Plans 1995-1996. 78 Inquirer Mindanao (24 August 1996). “Travelling to foreign shores? Take off from here”, p. 7. 79 Hotel Online Special Report (September 1999). “The Rise of Sub-Regional Tourism - Bloc by Bloc”, PATA, pp. 3-4 (accessed September 4, 2006).

49 committee on EAGA, tried to create a Philippine Coordinating Council for BIMP- EAGA, which was funded by the Japan International Cooperation Agency (JICA). Until January 1997, there were 155 MOUs (memorandums of understanding), MOAs (memorandums of agreement) and JVAs (joint-venture agreements) in the P-EAGA areas, mostly in the agro-industrial sector and also in the production, processing and export of agricultural products, such as rice, corn, oil palm, coconut, mango, pineapple and vegetable. The products were mainly exported to Brunei. 80

In order to support EAGA investment opportunities, the Securities and Exchange Commission (SEC) approved the EAGA Philippine Fund. The Commission recommended that EAGA be free to apply “for a secondary license as an investment company and from registering its shares to be sold to institutional investors. The EAGA Fund was initially geared towards investing in a wide range of projects with an original envisioned capital of US$500 million to be sourced from multilateral and bilateral development agencies and large government-owned funds. However, the fund was aborted due to the Asian currency crisis”.81

The EAGA countries also agreed to strengthen intra-regional trade in energy commodities, such as building infrastructure, and electric power transmission in border areas, such as in East Kalimantan.82 The Sabah Energy Corporation, for example, “established its core business to produce and supply energy, such as natural gas, electricity, and coal in a reliable and safe manner. The company might expand its business through direct participation or on a joint-venture basis”.83

Although each individual sub-region tried to fulfil its commitment to realise EAGA’s economic activities, especially before the 1997 Asian crisis, political issues tended to be more and more dominant while economic priorities have been sidelined.

Decentralisation and federalism, for instance, have been very controversial in Indonesia,

80 Inquirer Mindanao (15 November 1997). “EAGA: Bane or boon?”, p. 3. 81 BWorld (16-17 July 1999). “Top SEC body gives go signal for EAGA Fund”, p. 6. 82 Elektro Indonesia, Sajian Khusus ( July 1997). “Kerjasama Tenaga Listrik Sektor Swasta ASEAN di Daerah Perbatasan Kalimantan” (8th ed.),p. 1-2 (accessed 18 September 2006). 83 WeekendReview Manager (November 30, 1999). “EAGA Weekend Review, 2 firms on Mindanao power project/RP-Brunei sea route to open/Miri, Bintulu, Rajang ports in cooperation”, p. 1. (accessed 6 December 1999).

50 and the implementation of regional autonomy regulations after 1999 have compounded national development problems. The debate over changes to regional autonomy did not consider how to provide more appropriate regulations regarding the implementation of

EAGA in which decentralisation was one of the important elements. Conflicts of interest have unfortunately delayed the policy in relation to EAGA. Due to the uncertain conditions, business people or the private sector—the engine of EAGA—find it impossible to accelerate economic development. It will be some time before the EAGA vision, goal and objectives become “normalised”.

The Aims of EAGA

The EAGA has the major goals of attracting investment in the region, and promoting trade and tourism among member countries. The BIMP-EAGA Inaugural Senior

Officials and Ministers Meeting (SOMM) in Davao City in March 1994, has formulated the objectives in this way: “to facilitate free movement of people, goods and service, share common infrastructure and natural resources, and pursue economic complementation”.84

The EAGA has the advantages of historical, cultural and traditional or informal trade links that member countries have shared long time before it was formed. These advantages created an optimistic view amongst the planners that EAGA could run efficiently. It was planned as “building on existing trade and investment links with the sub-region; increasing investment inflows (domestic and foreign) to the sub-region and promoting export-oriented industrialisation; promoting the joint development of the

84 (accessed 21 January 2000).

51 sub-region’s extensive natural resources; and increasing incomes and promoting more balanced development both nationally and in the sub-region”.85

Figure 3. MAP OF THE BIMP-EAGA PROVINCES

85 EAAU, op. cit., p.68.

52 The EAGA quadrangle was always intended to be based on a common cultural identity.

The planning documents nominate this as a “Malay cultural grouping”. This definition involves several problems. Compared with the sense of Chinese culture in the Southern

China growth triangle, the culture of the EAGA zone is not all that homogeneous. The label of “Malay” is culturally applied to Muslims populations. While all the EAGA countries have strong Muslim populations, these do not necessarily dominate in the

EAGA zone. Indonesia may be the country with the biggest Islamic population in the

Asian region, but the EAGA parts of Indonesia in fact have sizeable Christian populations, particularly in Manado. Moreover, it is difficult to name the ethnic majority in Indonesia, as various ethnographic accounts make clear:

While a core-periphery relation may exist between Java and the so-called Outer Islands, Java itself is made up of various ethnic groups who share religious dominance with all other Islamic ethno-linguistic groups in most parts of Sumatra and other islands with the exception of a few like Sulawesi and Bali. At the micro- level, the variety in inter-ethnic relations is also pronounced.86

On the other hand, Muslim populations are the minority in the Philippines while

Christians make up the majority, and although Mindanao has the largest Muslim populations, these are still a minority within these provinces. Moreover the various

“tribal” ethnic groups in the area do not identify with Malay culture, and some of these are neither Christian nor Muslim.

86 Miriam Coronel Ferrer (1999). “Introduction, the Plurality of Coexistence in Southeast Asia”. In Miriam Coronel Ferrer (ed.) Sama-Sama Facets of Ethnic Relations in South East Asia. Quezon City: Third World Studies Center, p. 2.

53 The Structure of EAGA

The EAGA structure is composed of ministers headed by the trade ministers; senior officials; national or interim EAGA secretariats; and the lead agencies’ heads of delegations. (Chart 2).87

Chart 2. The Structure of EAGA

The ministers function as the policy-making body and set the ministerial meeting agendas. Senior officials represent their respective countries in the senior officials meetings. National secretariats are in charge of coordination and documentation of all

EAGA related affairs in the country. For instance, MEDCO serves as the interim secretariat for the Philippines. In Brunei, the BIMP-EAGA Unit of the Ministry of

Industry and Primary Resources serves as the secretariat, while Indonesia has the Office of the Coordinating Minister for Production and distribution, and Malaysia has the

Economic Planning Unit of the Prime Ministers’ Department. Finally, the thirteen

87 Feranil, op. cit., p.3.

54 working groups constitute the different lead agencies that promote investments and identification of resources.88

From the original planning, EAGA decided on four major areas for developing, for which each country has respective responsibility. Brunei has the responsibility for air linkages, Indonesia for sea linkages, transportation and shipping service, Malaysia for tourism, and the Philippines for fisheries and construction. There are other fields of cooperation in EAGA: environmental protection and management, and telecommunications, which are the responsibility of Brunei. Indonesia leads in the area of people mobility and forestry, Malaysia is responsible for energy, human resources development and capital formation and financial services, and the Philippines is in charge of agro-industry.89

The working groups support these priorities. They are supposed to “examine and suggest coordinated development schemes in each of these areas; examine the mobility of people, environmental protection and management, energy, construction and construction materials, telecommunications, human resource development, agro- industry, capital formation, financial services and forestry.”90 East and West

Kalimantan (Indonesia) and Sabah and Sarawak have potential forestry sectors.

Agricultural plantation development is shared between North Sulawesi and Mindanao and Palawan. Energy or oil and gas development is shared between Brunei and

88 There are two versions of the numbers of the EAGA working groups. One is that EAGA has twelve lead agencies or working groups (see, e.g., Feranil, op. cit., p.3 and Mindanao Focus (mfocus) (1998). “Globalization and Regionalization: a Baseline Study on BIMP-EAGA,” v.15, n.2, p.16). However, this latter study also features a table showing thirteen working groups in each EAGA country. The structure refers to the thirteen working groups the same as the table that listed them very clearly. 89 Feranil op. cit., pp. 3-4. See also Baseline Study on BIMP-EAGA, op. cit., p.2. 90 EAAU, op. cit., p. 69.

55 Sarawak; and tourism or eco-tourism development is shared between West Kalimantan and Palawan.

Some Progress in EAGA Activities

Between EAGA’s first official expression in 1992 and its formation in 1994, member countries were optimistic that it was going to accelerate development processes in each country. The EAGA Business Council (EABC) was established in 1996 to further this end. It was established as the information centre for such EAGA activities as business meetings, conferences, and exhibitions, project monitoring, and publishing any business news, although its activities have primarily been based in the Philippines. Governments are the facilitators for EAGA, providing the infrastructure and policies to deal with the sub-region development programs. The engine of growth is the private sector. Thereby, the EABC promotes and monitors trade and investment activities.

The EABC Senior Officials Meetings attend to small business enterprises (SMEs). The association members that have the responsibility to organise the domestic small and medium size enterprises are mostly the chambers of commerce and industry. The EABC sets up linkages with the working groups. A full-time secretariat was also set up in order to provide proper and accurate economic information about EAGA trade and investment, which also means maintaining regular contact within the EAGA business sector.91

The ADB conducted an integrative study of EAGA in 1996, two years after its establishment. It was a comprehensive study, covering the profile, program or action plan, policy and evaluation or assessment. However, the study came a little early,

91 BIMP-East ASEAN Business Council (30 July 1996) “Documents on Its Organisation”, pp.3-6.

56 because there were a very limited number of projects to be followed up. Therefore, the report indicated investment opportunities in many different sectors, such as agriculture, fisheries, forestry, tourism and industry, but without being able to predict realistically what would happen in those areas. It also focused on constraints that EAGA needs to deal with, such as economic issues (labour costs, skills and productivity), policy and procedures, trade restrictions and different investment regulations.92

According to the ADB report, GDP per capita in EAGA was US$16,000 for Brunei in

1994; Indonesia – US$763 (1993); Malaysia – US$3,406 (1994); and the Philippines –

US$952 (1994). In 1995, the figures mostly changed, except for Brunei. They increased to US$1,010 for Indonesia, US$4,240 for Malaysia and US$1,050 for the Philippines.93

However, with the currency turmoil, these figures may have significantly changed since then.94

During the period 1994-1996, the list of MOU or MOA, and (JVA) between the

Philippines and other EAGA countries reached 135 projects (or 154 agreements including the Initiatives for International Dialogue or IID (Preliminary Draft)). There were 20 projects between Brunei Darussalam and the Philippines; 39 projects between

Indonesia and the Philippines; 57 projects between Malaysia and the Philippines; one project among Indonesia, Malaysia and the Philippines; and four projects among Brunei

Darussalam, Indonesia, Malaysia and the Philippines.95 Investments in the Philippines increased from US$762,288 in 1995 to US$2.91 billion in 1996, in the sectors of

92 ADB, op. cit., pp. 8-11. 93 Ibid., p. 70. 94 Feranil, op. cit.; Bataaw, op.cit., p.3. 95 Baseline Study on BIMP-EAGA (1997), op. cit., pp.1-17 (attachments).

57 agricultural industry, construction and construction materials, sea linkage expansion, fisheries, tourism and energy.96

General Santos City, was chosen as the leading commercial fish centre, especially for tuna. The city is called the Tuna City of the Philippines. It has the biggest international fish port in Southeast Asia. The port includes facilities for canning and sashimi processing. Production reached approximately 72,000 tons per year with a value of

US$150 million in 1997. The port facilities have been improving with investment from

Japan. The “new” infrastructure aims to increase the facilities for sashimi exports in particular to North Asia, and “to access other fishing grounds in cooperation with

Indonesian companies”.97 In the tourism sector, Ekhran Berhad of Malaysia is one of the biggest investors in the Philippines. The major resort and hotel location is in

Katipuan, on Samal Island. However, there is no clear indication about the project’s status, whether it is part of the P-EAGA or has been manipulated in order to be retrospectively made part of the EAGA project.

EAGA activities have been slowing down since the Asian crisis in 1997. The Foreign

Equity Investment during the period of 1995-1999 listed only Malaysia as investing in the Philippines. There is a 40 percent share of Petronas (Malaysia) and a 60 percent of the Energy Philippines Inc. in the distribution facility for LPG gas, with other projects classified as being to develop new infrastructure, or being service-oriented. Other investors were from Japan (in sashimi tuna and communications products), the USA (a

96 Rommel Hipolito, Ruby R. Lora & Mary A. Arnado (April 2000). “The BIMP-EAGA: Poised for Recovery?”. Preliminary Draft, Davao City: the Initiatives for International Dialogue, Part II, pp. 9-10. 97 ADB, op cit., vol. III, p. 42.

58 contract breeder), the United Kingdom (in coconut oil), and South Korea (spare parts for car products, and banana chips).98

The activities of EAGA also embrace sporting and recreation events, such as the East

ASEAN Mayor’s Golf tournament, the BIMP-EAGA Mountain Biking competition, and the BIMP-EAGA Friendship Games. A statue of Filipino hero Jose Rizal has been displayed in Bitung City, North Sulawesi since 1999 as a symbol of friendship between

Davao City and Bitung City. The event was one of the EAGA social events.99

Although EAGA faces some challenges, a “positive” perspective holds that EAGA is not going to discontinue its activities. For instance, the International BIMP-EAGA

Conference on privatisation in Brunei Darussalam, in May 2000, asked the members to decide on priority areas regarding the privatisation and private sector investment.

According to the report, Indonesia was the only member country that has not yet identified or revived some projects, and this was attributed to its inability to recover from the financial crisis.100 Most EAGA countries also lack capital, except Brunei. This fact has not reduced their willingness to complement each other. The working groups are still the key players in managing the EAGA activities.

In the case of investment rules and regulation, financial services in EAGA have not been developed professionally. For example, financial institutions or commercial banks have only limited amount of credit, which are insufficient to support a large-scale

98 “Foreign Equity Investment Davao City, 1995-1999”. Davao Investment & Promotion Center. Fieldtrip, 14 April 2000. 99 Information from Mr. Suhardi, local staff at the Indonesian Consulate General, Davao City, April 2000. 100 “Projects up for private sector investments”, EAGA Weekend Review (June 16, 2000).

59 operation. However, the institutions often do not want to help the operations of small and medium enterprises (SMEs).

The Implications of EAGA

The establishment of EAGA has national and regional implications. Regionally,

EAGA’s Development Strategy provides a vision of economic development. As part of the Southeast Asian region, EAGA is a key part of ASEAN development strategies.

From the economic perspective, EAGA has been forced to be realistic with the implementation of the WTO-GATT. However even the most realistic of assessments do not take full account of the local development issues, particularly those that affect

EAGA’s role in the Philippines and Indonesia.

As far as regionalism is concerned, the formation of EAGA is also related to the Ramos government’s ambition for the Philippines to achieve NIC-hood. Since the 1980s

Philippine governments have confirmed their adherence to the structural adjustment polices prescribed by the International Monetary Fund (IMF) and the World Bank (WB) to deal with economic recovery. Such policies provided the momentum for the

Philippines to aspire to NIC-hood, even though this seems an unrealistic dream. The

Philippine Senate signed the GATT in December 1994. The adherence to the Breton-

Woods organizations’ demands and the signing of GATT demonstrate that the vision of

EAGA is related to “the framework of liberalization, international competitiveness, and economic integration”, as EAGA documents note.101 The economic data of the

Philippines’ growth in GDP per capita are starkly contradicted by the reality of poverty and social inequality, realities which did not figure in the economic growth planning of the Ramos administration.

There are some key factors in sub-regional economic zones: “geographical proximity; high complementation in economic structures and outward-looking development strategies among/in participating countries”.102 But unfortunately, these factors do not match local conditions. For example, Indonesia and the Philippines share a border, but decentralisation has not yet been implemented completely in either country, meaning that a zone such as EAGA on the margins of both states is too far away for central authorities in Jakarta and Manila to be worried about it. A related problem is that EAGA has no business information centre to provide accurate and relevant data about “market opportunities, technical specifications and regulatory controls”.103 This means that there is no coordinating body to act as an alternative to national investment bodies.

Development theory classifies two different levels of development: core and peripheral developments. Core development refers to centres of political and economic power,

where major decisions are taken, policies formulated and the institutions and symbols of political primacy are concentrated, usually in a capital city. It might take the form of economic centrality, whereby the location becomes the core of an economic system – a focus of wealth and accumulation of capital; a nursery of commercial enterprise; a center of a transportation network; a market; an attraction for those industrial activities and financial institutions which stand to gain from the economies of agglomeration at a central location.104

Peripheral development is the implementation of transformation processes in areas outside the central power but which remain dominated by the core. The relationship

101 Hipolito et al, op. cit., pp.6-7. 102 E. Chen & C.H. Kwan (1997) Asia’s Borderless Economy, the Emergence of Sub-regional Zones, St. Leonards: Allen & Unwin, p. 2. 103 ADB, op. cit., p.127. 104 D.J. Dwyer (ed.) (1990). South East Asian Development: Geographical Perspectives, New York: Longman, p. 15.

61 between core and periphery is that “cores are the powerhouses of development, transmitting pulses of energy outward through peripheral systems, or acting as ‘growth poles’ within regional structures”.105 However, the relations are more complicated, for example, in the context of historical colonialism, where peripheral areas have usually been controlled and exploited by cores as the result of colonialism. Modern development theory says that the impact of colonialism and economic capitalism divides the world between the developed or core and the undeveloped or peripheral.106

Differentiation between core and periphery also happens at sub-regional, and national or local levels, such as in Indonesia between the western region as the core and eastern region as the periphery, or in the Philippines between the north as the core and the south as the periphery.

The EAGA does not formally limit the numbers of provinces or areas it takes in. In the case of I-EAGA, for example, Indonesia has the largest numbers of provinces (ten) in the cooperation. More areas require greater efforts, especially in coordinating development policies and actions. The lack of real decentralisation in Indonesia indicates a lack of political commitment. For example, foreign investment agreements worth more than a certain amount must have approval from Jakarta. Local governments have no authority to sign investment agreements. While federalism remains a controversial issue in Indonesia, I-EAGA cannot be free from problems of delegation of authority and of policy coordination.

Indonesia designed the platform for EAGA under the Suharto administration, but in practice, these foundations of decentralisation are increasingly the subject of great

105 Ibid., pp. 16-17. 106 Ibid., p.15.

62 debate. Despite the ideals of central planners, not all the provinces involved in EAGA were ready for it in terms of human resources, natural resources, creating good governance and accountability, and abolishing bureaucratic red-tape. The advent of the decentralisation or regional autonomy policy has created corruption at local levels as local politicians imitate the extractive attitudes of Suharto’s Jakarta-based administration. A number of critics in Indonesia have predicted that regional autonomy was set up to fail, that it is a political trap that the status-quo forces—i.e. remnants of the New Order Regime—are going to use to reinstate a system of centralisation.107

P-EAGA was also affected by a decentralisation process (a form of federalism). The process gave more space or autonomy to managing their regions. The results have included the Autonomous Region of Muslim Mindanao (ARMM). Since P-EAGA was partly meant to promote Mindanao as a single economic zone in the Philippines, the

ARMM was also included in the promotion. After the establishment of the Mindanao

Business Conference in Butuan City in 1996, for example, there were projects in the four ARMM provinces funded to a total amount of P 383 million.108 They were: (1) cassava contract growing program in Talayan, Sultan Kudarat and Parang in

Maguindanao (P 300 million); (2) rural telephone service in Tawi-Tawi (P 80 million);

(3) banana chip processing plant in Parang (P 3 million).109

Besides sharing the same geography, all EAGA countries have outward-looking development strategies. However, in terms of economic structures, not every member

107 Reflection and Book Launching at the Indonesian Institute of Sciences, Jakarta, 7 December 2001. 108 Currency equivalents in December 1996: US $ 1 = P 25.00. 109 “Mindanao gets P14-Binvestment package”The Philippine Star (15 September 1996), pp. 6-7. The conference signed three resolutions, approved by Former Philippine President, Fidel Ramos. One of the resolutions asked government and private sector to assist Mindanao farmers in “widening access to long- gestating crops”. The other resolution reaffirmed government to keep supporting EAGA, in particular the EAGA travelers to be free from travel tax payment.

63 country is in a position to complement the others. The 1997 Asian financial and resulting economic crisis, and domestic political and security problems affected the economic structures, which also created limitations in promoting trade, investment and tourism within EAGA.

Chen and Kwan argue that the emergence of growth triangles occurred because of

“acceleration of economic reform and open-door policies in the socialist countries after the end of the Cold War”.110 Although ASEAN is known for its regional economic cooperation, politics was the major driving force behind its formation in 1967. Political competition between the United States (capitalist bloc) and the Soviet Union

(communist bloc) forced ASEAN countries to combine together to create a “neutral” bloc. However, the super power competition affected the neutrality of ASEAN since member countries, especially the Philippines, had been under US domination through their colonial history or the influence of the Vietnam conflict. Furthermore, political issues, particularly territorial disputes (such as between Malaysia and the Philippines over Sabah, and between Malaysia and Indonesia in the case of neighbouring islands) have been significant. Such chaotic developments within Asia stand in strong contrast with economic reform and the open-door policies that have emerged in neighbouring socialist countries, especially China’s open door-policy of market socialism through which it has become more competitive in global markets while ASEAN countries have fallen behind.

The establishment of EAGA is a direct spin-off from the regional proposal of AFTA, the finalisation of which is aimed for 2010. 111 EAGA has the same aims as ASEAN’s

110 Ibid., p. 2. 111 Baseline Study on BIMP-EAGA, op. cit., p.1.

64 general regional economic policies, that is to promote trade, investment and tourism in the region. Each EAGA country is also forced to accelerate its adherence to free trade.

Therefore, development programs on local, national and regional levels have been created to provide linkages, primarily to further the concept of a liberal global economy.

The domination of political problems has constantly disrupted ASEAN regional development programs, including AFTA. Therefore, forms of sub-regional economic cooperation, such as EAGA, have become an alternative to making the whole of

ASEAN an accelerated free trade zone. The sub-regional cooperative programs are meant to achieve their aims by promoting trade, investment, and tourism in the

“undeveloped” areas of member countries, as a pre-condition to ASEAN integration, since these “underdeveloped” areas are seen as the major source of political problems.

The EAGA as a sub-regional grouping is to some extent a product of ASEAN’s problems. Given ASEAN’s commitment to preserving the sovereignty of member nations, regional interests have to be based on national interests. However, each individual country has different domestic priorities or agendas. But despite EAGA’s many problems, it was built with a “positive” perspective. The aims, institutional structure and development strategy are some indications that demonstrate the optimistic side of the EAGA quadrangle. Another indication of EAGA progress appeared between

1996 and 1998 in the P-EAGA. Mindanao is the most conflict-ridden area in the

Philippines. However, the achievement of 1996 peace negotiation between the

Philippine government and the MNLF, made Mindanao seem to be more conducive to do business. In the 2001 and 2002 peace process, the Philippine government and the

Moro Islamic Liberation Front (MILF) negotiated the framework of the Philippine

65 territorial integrity and constitution.112 While military operations have intensely increased in order to handle the operation of the ASG in Jolo and Basilan, southern

Philippines.113 In 2003, however, the military operation in Mindanao not only targeted the ASG, but also the MILF. The peace process between the Philippine government and the MILF was then interrupted by the MILF guerrillas who attacked Siocon city in

Mindanao in 4 May 2003. The MILF speaker, Eid Kabalu argued that the attack was a response towards the high intensity of military campaign against the MILF.114

In conclusion, the establishment of EAGA was one of the Philippines’ political achievements not only in the context of its national development program, but also in its relation to ASEAN. The P-EAGA was synergic with Philippine government intentions to build Mindanao as a new economic zone through the “Mindanao 2000” Framework.

The Philippines has been the most enthusiastic member in promoting trade, investment and tourism of EAGA. The members of EAGA put their efforts into making EAGA an effective organization based on its vision, aim and goal. In the first five years, EAGA had achieved some progress in terms of working group meetings and exhibitions in each member country. But the activities of EAGA run quite slowly because of factors such as lack of harmony in regulations among the members and lack of infrastructure. The limitation of the EAGA countries were recognized in the original plans, but these did not deter the planners from its formation.

Although growth triangles have not yet become “permanent” forms of regional or sub- regional integration, they have became part of the “new” approach of economic

112 See “Philippines, the International Context” (September 2002). Global IDP, p. 1 113 See “Philippines, Peace and Order in Mindanao: Abu Sayyaf groups and Conflict over Land” (September 2002), Global IDP, p. 1 (accessed 29 June 2004. 114 See Kompas (7 May 2003). “Filipina Batalkan Rencana Perundingan Damai dengan MILF”, p. 1

66 interdependence or inter-state interactions in sub-regions of South East Asia. Yet, the approach has clear weaknesses. Since free trade has produced more inequality rather than fair trade, the liberal approach that underpins EAGA contributes to unfair trade competition within ASEAN and even at sub-regional levels.

The effectiveness of the EAGA development programs depends on several factors. The first factor is political leadership and commitment of national leaders to support it. This has been clearest when the development planning of EAGA was put back under the

Estrada administration because Estrada had no clear vision, not only of Mindanao as the main area of P-EAGA, but also of national development for the Philippines as a whole.

The second factor is the on-going internal conflicts in some EAGA provinces. The third factor is the existence of crony capitalism within EAGA. As long as crony capitalism still exists, it is almost impossible to see that how EAGA members will benefit from the

EAGA quadrangle. The following chapters show just how much these latter factors have impeded EAGA.

67 CHAPTER II THE GROWTH TRIANGLE AND PHILIPPINE POLITICS

As discussed in the Introduction to this study, the EAGA planners were very optimistic that development planning at the sub-regional level could be done through trade, investment and tourism, with no reference to the political context of these developments. In this chapter, the formation of EAGA will be discussed in the context of the Philippine political system, in particular its political leadership, central and local government relations. This system will be examined in terms of political and security problems, especially in Mindanao. The problem of poverty remains at the heart of these issues. Internal political problems in the Philippines had substantial impact on EAGA’s economic activities during and after the Ramos presidency.

The formation of EAGA was part of a Philippines development program to promote

Mindanao, the nation’s “underdeveloped region”, as a new economic zone. Towards the end of the Ramos’ presidency his political reputation diminished due to his failure to oversee the recovery of the Philippine economy. The alleviation of poverty, particularly in Mindanao, was one of the most sensitive issues for his government. Besides attempting to counter poverty, Philippines-EAGA faced political and security instability in Mindanao due to the insurgency conducted by the Moro (Muslim) groups.

Discrimination Policy against Mindanao

Mindanao, which is formally declared by the Philippines’s constitution to be essential to its territorial integrity, is not automatically as part of the Philippine nationalism, particularly when Spanish colonialism came to the islands and treated the Muslims as

68 second-class citizens. According to Jawali, “the problem in Mindanao is ideology that is rooted in history”.115 That is why when the Spaniards came to the islands and encouraged Catholic missions, they were opposed by indigenous Muslims. The tensions became more serious when the Muslims were branded as pirates, murderers and robbers.116 From the point of view of the Muslim groups, the formation of a free Islamic state is the only way to find peace. According to Jawali, the Islamic state will be based on the Koran as the basis for the fundamental law.117

Political discrimination against the Moro was continued under American colonisation in the Philippines. The Islamic insurgency against the independent Philippine state was first manifested in the early 1950s.118 The situation in Mindanao worsened due to the declaration of martial law by former President Marcos in 1972. By and large, the condition in Mindanao worsened not only in terms of politics, but also because the people mostly received very limited access to employment, education, health and social facilities or social security services. If Mindanao is essential to the Philippine national integrity, Mindanao must be developed in all aspects. In other words, the Mindanao crisis is also a socio-economic issue because of development disparities between the northern and the southern parts of the Philippines. Social resentment is one way to explain the situation, generated by limited access for the southern people.

The peace process in Mindanao began after the fall of the government of President

Marcos. There were various attempts to solve the Moro insurgency. The peace talks

115 H.S. Jawali. “The Anatomy of the Mindanao Problem”. Philippine Daily Inquirer (April 1, 2000). 116 Mangondato-Sharief op. cit., p.10. See also O. D. Corpuz (1982). Filipina. Kuala Lumpur: Dewan Bahasa dan Pustaka Kementrian Pelajaran Malaysia, p.31-32. The Spanish named the Muslim Filipinos Moors or Moros. 117 Jawali, op.cit.

69 continued under the Ramos presidency. One of the major approaches was a decentralisation program known as the establishment of the Autonomous Region of

Muslim Mindanao (ARMM). Peace negotiations between the Philippine government and the MNLF in 1992-1996 finally led to an agreement to establish autonomy in the

Southern Philippines.119 The larger autonomous area for the Muslims in Mindanao comprises thirteen provinces, and fourteen cities and villages, which located in Lanao del Sur, Lanao del Norte, Maguindanao, Sulu and Tawi-Tawi, Basilan, Zamboanga del

Sur, Zamboanga del Norte, North Cotabato, South Cotabato, Sultan Kudarat, Davao del

Sur and Palawan.120

The Tripoli Agreement of 1976 was immediately implemented by putting a “stop to shootings, ambuscades, killings, and war. The environment of war was transformed into a hope-filled expectation for an enduring peace settlement in the Southern

Philippines”.121 When President Marcos was deposed in 1986, his successor, Corazon

Aquino, had the opportunity to put the agreement into the 1987 Constitution (Article X,

Sections 15 to 21 of the 1987 Philippine Constitution). In August 1989, President

Aquino signed the Republic Act 6734, and based on that law, the first ARMM elections of plebiscite was held in November 1989, and local Moro political leader and former

MNLF commander Nur Misuari was elected as the governor of ARMM. The formation of ARMM was then completed.122

118 T.M. McKenna (1997). “Appreciating Islam in the Muslim Philippines, Authority, Experience, and Identity in Cotabato”. In R.W. Hefner & P. Horvatich. Islam in an Era of Nation-States, Politics and Religious Renewal in Muslim Southeast Asia. Honolulu: University of Hawaii Press, p.53. 119 Ibid, pp.3-8. 120 Fidel V. Ramos (1996). Break not the Peace, the Story of the GRP-MNLF, Peace negotiations 1992- 1996. Manila: the Friends of Steady Eddy, pp. 186-187. 121 Eliseo R. Mercado, Jr., OMI (10 January 2000). op.cit., p. 2. 122 Ibid., p. 3.

70 In order to support the ARMM, Local Government Code (LGC) was passed into law in

1991. This Code devolves national power, particularly in decision-making processes to

Local Government Units (LGUs). Along with the passage of this bill, there were the

Republic Act 116 and Organic Act, especially to improve the functioning of the LGUs in the ARMM provinces. However, the provisions were not effective because the

ARMM LGUs had no capacity to understand and enforce the provisions.123

The peace process in Mindanao was interrupted by several reasons. The first is political rivalry between the Islamic groups, one was the pro-autonomy and the other was pro- independence in Mindanao.124 From a legal constitutional point of view, the formation of ARMM was a result of decentralisation process (which ran from the Tripoli

Agreement of 1976 to the Local Government Codes or LGC of 1991). However, the peace agreement or the autonomy that the GRP delivered through the creation of the

ARM, was not accepted by the other major insurgency movement, that is the Moro

Islamic Liberation Front (MILF) because of its political demand for independence.125

Clashes between the military (the Armed Forces of the Philippines—AFP) and the

MILF continued. More recently, kidnappings and bombings have occurred not only in

Mindanao, but also in Manila. The responsibility for this has been laid at the feet of the

MILF and also the ASG,126 a Muslim extremist organization which has since been linked to Al-Qaeda and the Jemaah Islamiyah group of Indonesia.

123 Letty Tumbaga (August 1999). “The Autonomous Region in Muslim Mindanao: In Crisis”, Politik, A Magazine for Policymakers, v.6 n.1, Quezon City: the Ateneo Center for Social Policy, pp. 20-21 124 See Manny Mogato (May 1999). “Mindanao: Torn between Autonomy and Independence”, Focal Point, Politic Magazine, vol. 5, no. 4, pp. 23-25. 125 Country Report (July 2000). “Philippines”, London: the Economist Intelligence Unit, p. 14. 126 Ibid., pp. 14-15.

71 Ramos’s Political Leadership and BIMP-EAGA

The establishment of the EAGA quadrangle was evidence of Ramos’ strong leadership and personal ambition. EAGA was a well-known issue in the Philippines. The concept was closely associated with President Ramos as the person who proposed the idea to the

ASEAN countries that became members of EAGA. His eagerness led to his image as prime mover of EAGA, giving him a status alongside that of prime minister of

Singapore Goh Tjok Tong for the IMS-GT, and Mahatir Muhammad for the IMT-GT.

However, President Ramos seemed to be the only leader who was determined to use

EAGA as a tool to deal with domestic economic and political crises. Ramos’ dedication to EAGA was a positive aspect of his leadership. However, there were criticisms of his policy from various quarters, notably from Filipino academics, NGO activists, and the urban poor, particularly those who were victims of urban demolition schemes. In other words, although EAGA was a well-known issue, people had different understandings of what government development policy meant.

From a political point of view, development is a complicated concept. Democracy is usually identical with political development, but it is not easy to determine that democracy has been achieved. The Philippines is the only Southeast Asian country that has adopted American style democracy, the presidential system, and legislative, executive and judiciary administrations. However, in reality, Philippine politics does not allow real political freedom. Politics is largely a tool for regulating competition among the political elite or ruling class and their business friends, especially presidential cronies.

72 Isabelo Crisostomo explains that President Ramos had “the traditional leadership qualities, such as integrity, moral purpose, experience, and a sense of history,”127 that would enable him to overcome the limits of the previous presidents. He named Ramos a

“builder, reformer and peacemaker”. Compared to his predecessor, President Corazon

(Cory) Aquino, who focused more on political diplomacy to overcome national problems, Ramos focused more on economic empowerment. His vision was expressed through his economic diplomacy, and was followed by the development program expressed in the “Philippines 2000” Framework.

The “Philippines 2000” vision was intended to transform an agricultural economy into an industrial one. The agricultural sector is 80 per cent of the economy. According to this vision the agricultural workforce would be shifted from being unpaid and self- employed/low paid hired workers to being high-wage, high skilled employees in industry and services. The first stage was to increase agricultural productivity. The framework for this vision was articulated in the medium-term Philippines Development

Plan of 1993-1998 and a long-term industrial policy. The medium-term plan priority areas were macroeconomic stability, human resource development and effective governance. Fiscal policy was the starting point of the government’s macro-economic policies, a program to reduce the public-sector deficit. Monetary and exchange rate policies were integrated with the fiscal policy. The income tax system was another device directed at lowering average tax rates and implementing a wider and more comprehensive tax base through value-added tax and taxation reform. Privatisation was

127 Isabelo T. Crisostomo (1997) Fidel Valdez Ramos, Builder, Reformer, Peacemaker, Quezon City: I Crisostomo & J. Kriz Publishing, p.i.

73 one of the programs designed to increase government revenue, and to achieve efficiencies. Reduction of subsidies was one of the privatisation policies.128

The long-term strategy focused on a package of trade and industrial policies intended to make domestic firms more competitive at the international level. The policy pushed the

Philippines to move faster on liberalisation in goods, services and securities. The

Philippine Senate ratified the country’s commitments to the WTO, which included

“replacement of remaining quantitative import restrictions by tariffs, except for rice”.129

Ramos’s economic diplomacy was intended to make the Philippines into a new industrialising country (NIC). Free trade, liberalisation, privatisation and deregulation were aspects of the global economy that Ramos was determined to use to deal with the

Philippine economic crisis.130 The Philippines committed itself to being part of free- trade area, AFTA, in ASEAN. Under the AFTA-CEPT (Common Effective Preferential

Tariff), tariff rates would range from zero to five per cent by the year 2002. The timeframe was later revised when this was not achieved. The Philippines also became a member of the Asia-Pacific Economic Cooperation (APEC). In other words, the

Philippine economic vision was influenced by liberalism.

The establishment of EAGA was part of Ramos’s economic diplomacy framework, particularly related to the commitment to AFTA. Although EAGA arose after the vision of NIC-hood, it was also meant to institute a global trend in a regional context. As a component of economic diplomacy, the Philippines government hoped that EAGA

128 Dante B. Canlas (1996). “Economic Policy Reforms, and Philippines 2000”, in Tan T. Meng, et al (eds). Business Opportunities in the Philippines, Singapore: Prentice Hall, pp. 24-26. 129 Ibid., pp. 26-27. 130 Hipolito, op. cit., part 1.

74 could be used to mobilise regional solidarity for the Philippines’ development program.

Mindanao was a problem because the Muslims’ political demands had already badly affected national integration. By developing Mindanao, Ramos hoped he could restore peace and order.

The name of the Philippines 2000 program was written in white paint in various places in the south, such as on the roofs of schools and other public buildings, thus publicising the program.131 Mindanao became a legitimate investment destination. The business sector came to consider it as a target for long-term investments, particularly in manufacturing, a part of the economy from which Mindanao could earn more profits than from agriculture. Between 1975 and 1992, manufacturing in Mindanao had been undeveloped. It grew between three and four per cent during the period of 1993-1994, and in 1995 it was predicted to be higher than four per cent, although this prediction proved over-optimistic.132

Mary Feranil wrote in her positive article on developments, “Globalisation and

Regionalisation in the Case of Philippines-EAGA” that the Mindanao 2000

Development Program, the Philippine Tourism Master Plan and the Philippine Fisheries

Code of 1998 were all designed to intensify EAGA.133 According to General Equity on

Mindanao director, Lourdes Adriano, they did contain some objectives of the EAGA establishment.134 As suggested by economists in Mindanao, EAGA was intended to break the patterns of discrimination between the rich North and the poor South, through trade and providing access to social benefits such as education and health. However

131 Fieldtrip to Davao City and General Santos City, April 2000 132 Inquirer Mindanao (17 August 1996), “We Have Just Completed the Turnaround”. 133 Feranil, op. cit.

75 EAGA itself has no policy on poverty alleviation, because its focus is on trade and investment. Nevertheless, the Mindanao 2000 Plan had such as a policy, but it had failed to eliminate poverty by the end of the Ramos administration, and certainly had not achieved all the aims of “Philippines 2000” by the end of the year 2000. The failure was blamed on the Asian crisis in 1997. While it is possible that the crisis might have hindered the elimination of poverty, a more likely reason is the persistence of cronyism and the dominance of dynastic power blocs in Philippine political culture.

The Mindanao development plans could be integrated in EAGA because the EAGA aims to speed socio-economic growth and establish cross-border trade among the less developed sub-regions. This meant that Mindanao, which is the major of the P-EAGA area, is also one of the less developed sub-regions. In other words, the establishment of

EAGA indirectly contributed to the success of the peace process in Mindanao, in particular by the ARMM provinces’ participation in the EAGA investment program.135

The Tripoli Agreement was the first basis for an ARMM.136

Regarding the rebel movements in Mindanao, the EAGA vision did not include specific goals to deal with the issue, but one of the visions included the economic aim of developing the Moro/Muslim people, especially those who live in the four ARMM provinces, which are part of the P-EAGA. The existence of EAGA would then be possibly used to provide a place or forum for discussing political and security matters, including religious conflicts, particularly which have regional implications. Therefore,

134 Lourdes S. Adriano (October 1999) “Mindanao’s Industry and Trade: Trends, Prospects and Agenda for Action under the Estrada Administration”. Kalinaw Mindanaw, pp. 3-4. 135 See Rexsel Sorza (2003). “Muslim Mindanao to Witness Economic Boom: Investors”, IOL Correspondent, p. 1 (accessed 22 September 2003). 136 See Eliseo R. Mercado, Jr., OMI (10 January 2000). Mindanao Peace Process, p.2

76 the EAGA member countries need to develop relationships of mutual cooperation amongst them not only to deal with economic instability and socio-political problems at the national level, but also regarding the separatism, terrorism, and religious issues.

Local Government Units in Mindanao, especially in Davao and General Santos City, are the main facilitators of EAGA programs. The private sector, in the form of the members of the Mindanao Business Council, is the engine of the programs. Government officials believe that EAGA has good prospects, as the Davao Mayor, Benjamin de Guzman explained in an interview. He argued that physical infrastructure has been improving to support trade and investments. Electricity, roads and bridges are some of the government facilities developed for the industrial sector. Politics and security in

Mindanao, especially Davao, were quite stable at the time of our interview in the year

2000. He denied that the electricity blackout in early April 2000 was an act of political sabotage, saying it was rather a technical accident.137 Before the fighting between the

MILF and military’s resurfacing in April 2000, the Mayor and some business people in

Mindanao seemed to pay no attention to the impact of the fighting. However, after the

April clash, the business sector asked the two parties to stop fighting because without peace and order, Mindanao would be unable to attract investment. Local government asked all elements of society to try to create conditions for peace in Mindanao. The city mayor changed his statement about political stability in the area. Only a week after my interview, he asked people to create a secure environment, so the situation would not deteriorate further.

As the local governments mostly believe that EAGA is still relevant, so does the business sector in Mindanao. Activity has been slowing down since the economic crisis

77 of 1997, therefore, EAGA members have had to work very hard to improve their economic performance. Besides a number of meetings, exhibitions, and memoranda of understanding, there are some projects that have on the ground links to EAGA investments. Three years after the establishment of EAGA, Malaysia became the biggest investor. The first Malaysian investment was in a hotel resort in Kaputian,

Samal Island. The second is the development and establishment of a palm oil plantation, oil mills and refineries between Janoub Philippines Development Corp.Inc (JPDCI) and

Malaysia’s Lembaga Tabung Haji; and the marketing of milk fish between Silver Fish

Marketing, General Santos City and LS Gaudiel Dealings, Malaysia. The next investor was Indonesia, which had business in the milk fish trade between Naga Emas Trading

Ltd. Co., Philippines and PT. Luckindo Makmur Bahagia, Manado, Indonesia.138

Although governments and the business sector mostly have been optimistic about the future of EAGA, some segments of the latter express ignorance of it. They know about

EAGA, but do not really understand what it is all about or how it could help or increase their business. They do not care about it since they have been running their business since before EAGA was formed. The business sector was not consistently informed about the concept even though business is supposed to be the engine of EAGA.

Business people do not even know about how EAGA functions.139

Intellectuals and students, NGO activists, and religious leaders question whether EAGA can benefit people in a real sense. In terms of physical infrastructure, Davao City has many modern buildings, shopping centres and hotels. But the workers only had incomes

137 Interview, City Mayor’ Office, Davao City, 17 April 2000. 138 Feranil, op. cit., p.7. 139 Interview with Mr. Tirso Abecia, General Santos City, 26 April 2000.

78 while the building was in process. After that, most have become income-less after losing their jobs.140

A very cynical view of “Philippines 2000” and EAGA comes from people who have been the victims of demolition or relocation projects. As part of the global capitalist system, EAGA has failed to create a better life for poor people who are the biggest groups in the growth areas. A number of projects under the name of EAGA have contributed to the increase of demolitions of housing areas and slums where the poor lived; exploitation of labour through low wages; unemployment; prostitution and sex tourism. Neither governments nor the private sector really intend to overcome these problems. Economic liberalism has created more problems than solutions.

The poor have never had the right to live in permanent dwellings even on their own land, and the following account indicates the kind of changes brought about through development in the EAGA area, the International Airport at Tambler, General Santos, is an example of demolition, which had social impacts:

The demolition took place in June 1994 in Upper Tambler, which involved the displacement of 150 families (Moro and Christian) residing within the designated buffer zone for the new International Airport project being built with USAID funds. The process of demolition was very inhumane because the people’s homes were bulldozed. Furthermore, the families were relocated to the area of the International Fish port project, where the area was not settled.141

The local government of General Santos offered to the affected people a resettlement site located at Barangay Fatima, Uhaw, a previous cattle ranch, near the International Airport. The people refused because there is no assurance of their relocation site, the government agency (Department of social Welfare and Development) did not show any papers of the land for the relocation site as an evidence [sic] that they have right to stay

140 Interview with Ateneo de Davao University students, 17 April 2000.

79 and live forever. Aside from the far distance of the market they fear to fail to sustain their livelihood due to a long distance resettlement site from the seashore. Before the eviction, the Moro people enjoyed clean water from the spring, they caught coral, fish, shells and other marine products from the sea nearby, including milk fish (bangus fry) and other families worked at coconut plantation and planting root crops and vegetables.142

The International Airport and International Fish port in General Santos were built under the Mindanao development program, but the projects were also tagged EAGA activities based on their functions as infrastructure for helping trade between Mindanao and its neighbouring countries.

Although there is no exact data on whether EAGA in itself has contributed to the increase in numbers of sex workers, there is no doubt that foreign investors have caused a boom in the sex industry. Different types of sex transactions from the most expensive to the cheapest on the street, in pubs and nightclubs are easily seen in General Santos.143

According to GABRIELA, the National Alliance of Women, sex tourism and sex trafficking grew during the Ramos government. The numbers of commercial sex workers reached 2,000 and another 2,000 worked as “freelancers” in Davao alone.144

When governments fail to provide employment, the sex industry became one of the most lucrative ways to earning an income. Sex tourism seems to be one of the major products of the increase in tourism under EAGA. Local social worker Father Mudji

Sutrisno argues that when women and children are exploited in this business, it is a strong indication that government is totally incapable of providing welfare for the

141 ARIU Unpublished Assessment Report. “The Moro People under the Development”. 142 Ruta Aoshima (May 1994), Report on Development in SOCSARGEN 143 My fieldtrip, Davao City and General Santos City, 11-30 April 2000. 144 Liza Maza, GABRIELA Secretary General (February 1998), “On the Intensifying Sex Trade in the Philippines”, Press Statement, p. 1. Women from different socio-economic backgrounds have been forced into prostitution: college graduates, pre-pubescent girls, indigenous women, and housewives.

80 people. The Asian crisis magnified this problem, for example the numbers of Indonesian migrant women who have been working in sex industry has increased here, as well as in places such as Singapore and Malaysia.

From 1994 until 1999, EAGA privatised projects in each member country except

Indonesia. Trade and investment activities did not stop even in the crisis period. One factor that affects the actualisation of EAGA is political instability and corruption in government, especially in Indonesia and the Philippines. Although the political affects almost EAGA activities, nobody tends to discuss this openly. Initiatives International

Dialog (IID), an NGO based in Davao City, made a report about the progress of EAGA in 2000, but it focused on the economics. The report was not an objective description, primarily because it did not explain what has affected EAGA activities other than the

Asian crisis in 1997. Black market activities (illegal trade and smuggling), for example, are one important reason for the impairment of EAGA. Policy cannot be properly coordinated if no consideration is given to the existence of the underground economy.

Indonesia and the Philippines face some illegal trade and smuggling problems because they have different immigration regulations. However, this seems difficult to overcome because each government is busy with its own internal problems. Decentralisation in

Indonesia, for instance, is still in process. The provinces have not yet adopted uniform procedures regarding immigration, but at the same time, the central government in

Jakarta has been unable to deal with the smuggling that occurs in the other part of the islands. EAGA cannot wait until complete policy harmonisation is achieved because there is a natural dimension to trade.

81 Since its orientation is towards profit-making, EAGA was always going to fail in reducing poverty, despite its supposed links to the Philippines 2000 program.

Consequently, social problems will likely remain unsolved and become yet more complicated in the future. The growth of the sex trade and of so-called “slum clearances” demonstrate that the Ramos government did not want to deal with the real problems created by the impacts of economic liberalism.

Discrimination in the global system is not the only reason for the inequality of economic distribution in the Philippines. The landlord system in its political system was a factor in the economic crisis, as will be discussed below. Both the global system and national phenomena contributed to the lack of a ‘trickle-down’ effect. The poor have no opportunity to benefit from systems of global liberalism, as they privilege only the

‘haves’. There is no chance to create a positive-sum game in which both parties are winners, because there is no space for the poor to have a better life, meanwhile the rich use their resources only to earn more and more for themselves. The poor are becoming poorer, while the rich becomes richer. Inequality has existed for years without any real proposals from government to change it.

Those critiques lead to a conclusion that the Ramos government was identical with every other government of the Philippines. It was an agent of the global system, and took a heartless approach, particularly to the victims of the economic principles. Politics has been manipulated in order to ensure the interests of the elite, and economics have been conducted according to political interests.

82 Ramos’s commitment to EAGA was contradicted by the reality that his economic program was unable to deal with the problem of poverty, in particular in Mindanao.

According to Maria Diokno-Pascual, poverty alleviation or social reform program are important indicator by which to assess Ramos economic project, because they are related to the strategy for reducing existing income equalities and improving distribution of the growth benefits. “Because it failed to address poverty and social inequality, the Ramos economic project was not sustainable. It collapsed before the general-turned-president could bid farewell to Malacanang”.145 The following table shows the size of the poor population and the incidence of poverty in the Philippines during the period of 1991–1997, and poverty estimates for 2000-2003. The numbers of poor and the incidence of poverty mostly increased from 1991 to 1994. In 1994–1997, the figure seemed to decrease in some provinces, but the magnitude remained high, especially in most Mindanao provinces. However, the GMA administration claimed that poverty in the Philippines has declined since 2000-2003.

According to Ralph Recto, the Ramos and Estrada governments were unable to combat poverty, unemployment, hunger, homelessness and ignorance, because both had maintained the same “excessive borrowings, more taxes, higher interest rates, skewed spending for agriculture and the interminable budgetary support to government corporations”.146 Poverty remains a critical problem for the GMA government too. The

145 Maria T. Diokno-Pascual (1999). “Fidel’s Failed Economy”, in Kasarinlan, A Philippine Journal of Third World Studies, v. 14, nos. 3 & 4, University of the Philippines, pp. 155-156 146 “RP’s Per Capita Income Hardly Rose Since 1980”, Philippine Daily Inquirer (14 December 2001). Philippine per capita income was 12,595 pesos in 1980. The figure increased to 12,913 in 2001. However, the country’s per capita income decreased because the Philippine peso decreased in value over the 21 years.

83 Social Weather Station survey in 2001 noted that 60 per cent of Filipinos are still

poor.147

Table 3. Poverty Levels in the Philippines (1991-1997)

Source: National Statistical Coordination Board of the Philippines

147 “Poll Says Fewer Filipinos are Poor, but Life is Worse”, Philippine Daily Inquirer (19 December 2001). The percentage was 66 per cent in July 2001. It declined to 63 per cent in September 2001. The figure worsened from the early of 2001: 56 per cent said that quality of life were worse now than it was

84 Table 4. Annual Per Capita Poverty in the Philippines (1997 - 2003)

Source: National Statistical Coordination Board of the Philippines

12 months earlier. Only approximately 30 per cent said that they had the same quality of life as a year before, and 14 per cent had better lives. See also previous tables.

85 Table 5. Poverty Incidence of Families in the Philippines (1997 – 2003)

Source: National Statistical Coordination Board of the Philippines

86 Table 6. Poverty Incidence of Population in the Philippines (1997 – 2003)

Source: National Statistical Coordination Board of the Philippines

Philippine Macro-Economic Policy

Government policy on EAGA has not been consistent. President Ramos built EAGA, but his successor, Estrada, failed to maintain and develop it. Signs of EAGA’s revival appeared under the Arroyo presidency, but the same internal and regional problems that bedevilled the zone under Ramos continue. The three administrations formulated different policies, but most of these policies failed because of contradictions between

87 national politics and regional development in Mindanao not only in the context of

EAGA, but also in relation to the Mindanao crisis.148

Paul Dominguez, Ramos’s presidential assistant in Mindanao, was very optimistic upon the formation of EAGA, but he realised that there were problems in implementing the

Philippine macro-economic policies at a local level. The national problems have caused the country’s weakness in regional trade. Besides “the low equilibrium trap, the

Philippines has the lowest share in trade among the EAGA countries, the most trade restrictions among countries in Southeast Asia, and the lowest fixed resource endowments”.149 A more positive figure for Philippine trade competence will be difficult to achieve because of regional turmoil resulting from domestic economic and political uncertainties. Physical and social infrastructure in Mindanao has been limited and lopsided in terms of budget allocation, despite the fact that infrastructure development is important, especially for the agricultural sector and the less progressive regions (Region 9, which includes Basilan, Zamboanga del Norte and Zamboanga del

Sur, Region 12 which includes Lanao del Norte, North Cotabato, and Sultan Kudarat, and the ARMM proper, composed of Lanao del Sur, Maguindanao, Sulu, and Tawi-

Tawi).150 Asymmetrical relations in the financial sector are another constraint that sets back trade activities in Mindanao. For example problems between bank head offices and their branches in Mindanao have created financial constraints for Mindanao’s SMEs.151

148 Tri-People Consortium for Peace, Progress and Development of Mindanao (TRICOM) (1998). Defending the Land, Lumad and Moro People’s Struggle for Ancestral Domain in Mindanao. TRICOM, SNV, ICCO & AFRIM, pp. 8 & 10-12; and “Restoration of Peace and Respect for Basic Human Rights: the Continuing Struggle of the Tri-people in Mindanao”, Tabang Mindanaw (Oct-Dec 2000), n.12 v.1 p.1. 149 Dominguez, op. cit., p. 84. 150 Mark Turner, R.J. May & Lulu R. Turner (eds) (1992). Mindanao: Land of Unfulfilled Promise, Quezon City: New Day Publishers, p. 8; IBON Philippines Profile, 1st ed. (1996), p. 5. 151 Adriano, op. cit., pp. 3-4

88 Jane Hutchison has made similar statements about the implementation of macro- economic policies and economic regulations in the Philippines. The policies have reduced the Philippines’ capacity to compete with other countries. The policies were inappropriate and inefficient because the strategy was only suitable for capital-intensive manufacturing for the internal market. The comparative advantage of agricultural and export manufacturing has been reduced. As will be discussed below, the rent-seeking activities of the political elite also help to explain the Philippine economic crisis because its pattern is contradictory to the application of market principles and the development of international economic cooperation.152 In general, the implementation of Philippine macro-economic policy has been inconsistent with economic liberalism.

The other weakness in Philippine economic policy derives from the intensity of government intervention in the economy. This is connected to the rent-seeking. A patrimonial capitalism system or paternalistic and feudalism system is still being perpetuated, meaning that adjustments to economic activities have to be made for the benefit of the traditional oligarchy. The main result of this is mismanagement.153

Paternalism is an important dimension of Philippine political culture, but the impact has been extended to the economic sector, causing high-level crime, such as corruption and black marketeering. Because of these crimes, the Philippines is known as a “weak” state, because of its inability to deal with them. Problems of poverty and unemployment are another indication of the state’s weaknesses.

152 Jane Hutchison (1997). “Pressure on Policy in the Philippines”, in Rodan et al, op. cit., pp. 64-67. Rent-seeking is the effort applied to competition in the political arena over sources of rent, particularly quotas, tariffs and public monopolies. 153 Ibid., p. 85 Eric Rowe (1969) Modern Politics, An Introduction to Behaviour and Institutions. London: Routledge & Kegan Paul, pp. 12. Political culture is also defined as “the system of empirical beliefs, expressive symbols, and values which defines the situation in which political action takes place”.

89 Philippine Political Culture

Political and security instability in Mindanao is related to Philippine political culture.

Political culture is “a pattern of individual values, beliefs and emotional attitudes”.154

Significant dimensions of Philippine political culture include issues that embrace national identity, regional identity, the Muslim and Chinese subcultures, and patterns of trust and obligation. The domination of American legacies made Philippine nationalism ambiguous because its Asian identity was not clearly identified, although most inhabitants of the Philippines were of Malay ethnicity before the Spanish arrived on

Cebu in 1521. Islam was introduced in Mindanao and Sulu islands, where it superseded influences from Hinduism and Buddhism, and in the middle of the fifteenth century,

Islam reached the northern Philippines. However the Spanish conquest saw the extension of Christianity, with Islam being pushed back. Since Malay identity is closely related to Islam, that aspect of Filipino ethnicity has largely disappeared, and most

Filipinos seem to be proud to be “the most westernized man of Asia”, to quote former president of the University of the Philippines, Salvador Lopez, who added that Filipinos took pride “in expressing American political and cultural finery”.155

The Spanish ruled in the Philippines from 1565 to 1898. The history of Philippine nationalism is often dated back to April 27, 1621 when an armed battle was occurred in

Mactan, because Lapu Lapu, the chieftain of Mactan Island refused to pay tribute as a vassal of the Spanish king.156 Opposition to the Spanish conquest continued. Filipino

154 David Wurfel (1988). Filipino Politics: Development and Decay. Quezon City: Ateneo de Manila University Press, p. 24, see also Lucian Pye & Sydney Verba (1965). Political Culture and Political Development. Princeton: Princeton University Press, p. 513. 155 Wurfel, op. cit., p. 25. 156 Usha Mahajani (1971). Philippine Nationalism, Esternal Challenge and Filipino Response, 1566- 1946. University of Queensland Press, p.16.

90 nationalists demanded national sovereignty against the sovereignty of Spain and of the

United States.157

Spanish motivations for colonizing the islands were a mixture of economic (land- grabbing over spices and other products) and religious (influence of the European

Catholicism).158 Catholicism had a great impact on the formulation of Filipino nationalism. Filipinos’ conversion to Christianity became “the totality of the process” of the Spanish colonialism. Conversion had special implications for shaping Filipino attitudes to the Malays of the South, who were called by the Spanish term “Moro”.

Norma Mangondato-Sharief, the regional chairman or managing commissioner on the

Commission on Higher Education at the ARMM (based on Cotabato City, Mindanao), writes about “the need to correct historical distortions against Islam and Muslims in the

Philippines”. The distortions were needed because of misunderstandings about Islam and history of Islam. These misunderstandings created a mostly negative image, which expressed in descriptions about the Moro people. It was no wonder if the Philippine government policy seemed to be against the Moro, because it was a reflection of the misunderstandings. The following descriptions were usually labelled for the Moro people:

ruthless, incompetent savages, brutal, cruel, ravaging, murderers, robbers, intractable, slave-traders, blood-thirsty and notorious pirates, piratical raiders, barbarians, brigands, marauders, ignorant, treacherous, Christian killers, smugglers, fanatics, outlaws, lawless, violent, backward, unscrupulous, infidels, terrorists, fundamentalists, kidnappers, hold-uppers, uncivilized, heedless, and primitive”.159

157 Ibid., 20. 158 Ibid., p.12. 159 N. Mangondato-Sharief (July 12, 2000). “The Need to Correct Historical Distortions against Islam and Muslim in the Philippines”. The 6th International Philippine Studies Conference, Philippine Social Science Center, Quezon City, p. 10

These negative visions of Muslims primarily stem from a one-sided perspective that the

Spaniards created to increase Catholic influence in the Philippine islands. Tensions or conflicts between the Muslims and Christians/Catholics were then impossible to avoid in the Philippine domestic politics. Therefore, the Moro rebellion had also the image of a religious conflict between the Muslims and Christians, particularly in Mindanao.

Religious tensions and armed conflict (between the military and the Moro), were not the only issues in the Mindanao crisis because there is also social-cultural problems between the Christians, Muslims and the Lumads (indigenous peoples of Mindanao).160

The Lumad population is around 18 per cent of the total population in Mindanao, the

Muslim Moro is 20 per cent, and the Christian is 62 per cent.161 The Lumad people it declined from 18 per cent in 1970 to less than six per cent in 1980 of the total population of Mindanao and Sulu.162 The Lumad became a minority because of excessive migration from the Visayas. Therefore, the peace process in Mindanao have to consider to the existence of the three groups of people (two of them are ethnic minorities: the Muslims and the Lumads), because they are diverse in culture and have different value systems. Perhaps, one of the difficulties and sensitivities in dealing with the Mindanao crisis was in accommodating the “the tri-people”, that is to accommodate

160 The Christians (from the Visayas and Luzon) have been living in Mindanao since 1922. The American government encouraged them to move to Mindanao. During the Ilaga-Muslim war in the 1970s, the Christians were also victimized by the political violence. “Lumad is a Cebuano Visayan term meaning native or indigenous”. “Mindanao: Land of Promise”, (April 1999). p. 3. The Lumads consist of 18 different ethno- linguistic groups. 161 See Political Situation in the Philippines in Spectre Interview, “Update of the Philippines“, p. 3. (accessed 27 March 2006). See also different figures for the total population of Mindanao: 14.5 million: indigenous people are 30 per cent; Lumad (indigenous non-Christians) 10 per cent; and Moro (Muslim Filipinos), 18 per cent or 2.6 million. “Mindanao: Land of Promise”, (April 1999). 162 See http://www.c-r.org/accord/min/accord6/muslim.shtml (April 1999). op.cit., p. 3.

92 their cultures and traditions as well as their understandings of the political and economic processes in Mindanao.

In the context of self-determination, the Lumad is struggling for their ancestral lands or territories, but have not regained those lands because they have limited power to face the Philippine government, military, and business companies. For example, they opposed against the Philippine National Oil Company, which proposed the Mt. Apo

Geothermal Plant construction in their domain area of 73,000 hectares. The company’s first exploration began in April 1987. In order to secure the area, the company lobbied the Ramos government to form a paramilitary group, composed of Lumad. The group’s name was ‘Mindanao Defenders’.163 Instead of fulfilling the demands of the Lumad, the

Philippine government hired them to be part of the company. However, most of them keep fighting for their religious and traditional lands.

Reciprocity, kinship, patron-client and personal relations are the key to understanding

Filipino political culture. David J. Steinberg called these values “the rules of the road”.164 It is impossible to understand Philippine politics and society without understanding paternalism and personal relations. The influence of oligarchy or political clans, especially in the economic sector, has shaped Philippine politics.165 Paternalism can also been seen as an American-influenced patron-client system, but it is an important value in traditional Filipino political culture. The system is indeed important in most other Asian countries, but Philippine patron-client relations include reciprocity of obligation, interpersonal relations, kinship relations, and a fictive kinship system,

163 James F. Eder (October 31, 1994). “Indigenous Peoples, Ancestral Lands and Human Rights in the Philippines, Cultural Survival Quarterly, Issue 18.2, p. 5. 164 David J. Steinberg (1994). The Philippines, A Singular and A Plural (3rd ed.). Oxford: Westview Press, chapter 1.

93 which prizes the roles of “godfathers” (compadre) or emphasises godparenthood

(compradrazo). Many analysts focus on connecting this compradrazo system to the importance of trust and obligation, expressed through the debt of gratitude or utang na loob, as the key to explaining Filipino political culture. This notion works “to motivate individuals to repay favors at great personal cost – in the trustful expectation that others would reciprocate. The heaviest debt outside the family was to others who had given selfless aid in time of crisis”.166

In popular culture, the values of trust and obligation have shifted to distrust and exploitation because of the existence of what analyst label ‘bossism’. Reciprocity of obligation is still observed in Philippine villages or traditional rural areas, but distrust seems to be relatively high in urban society. Philippine society is a place where a system of bossism or local “strongmen” has been sustained. The term “local strongmen” is similar in meaning to the role ascribed to urban machine bosses in Bombay, ranch and hacienda owners in Chiapas, cocaine barons in Colombia, gangster-politicians in

Thailand, and the mafia in Italy. The bosses play dominant roles in the distribution and local resources, and economic activities. Joel Migdal described local strongmen into two illustrations.

First, local strongmen have flourished in “weblike” societies, which “host a melange of fairly autonomous social organizations” in which “social control” is effectively “fragmented” and by which states are kept weak and ineffective. This pattern of fragmented social control, it is claimed, often crystallized in the course of colonial rule

165 Niels Mulder (1997). Inside Philippine Society, Interpretations of Everyday Life. Quezon City: New Day Publishers, pp. 87-88 166 Ibid., p. 34; and Steinberg (op. cit., pp. 3-4) explains it this way: “Relationships in the Philippines are defined in a “we-they” framework to a greater degree than in the West. A Filipino’s loyalty is the plural identity of his family. The web of kinship and fictive-kinship creates the social environment. The Filipino knows far more about the extended family from which he comes and far more about the network in which he operates than does a mobile American who believes that relationships, even with one’s immediate family, can be turned on or off like a spigot. A Filipino’s sense of obligation lessens by gradual degrees as people are further removed from his nuclear family and close associates”.

94 and integration into the world capitalist economy, most notably in the emergence of large landowning classes.

Second, local strongmen come to exercise social control by delivering key components for the strategies of survival of the local population. The strongmen not only enjoy legitimacy and support among the local population but also exist to satisfy the population’s needs and demands for their services.167

According to Hagopian and Fox, in a society where paternalism and patron-client relations are dominant, local strongmen not only have central roles but are also the patrons for society in small towns, districts or provinces, and at the national level. Using coercion and violence, the bosses aim to secure political domination, achieve capital or economic accumulation, and dominate social relations. Former president Ferdinand

Marcos’s authoritarian regime, for example, created political families that enjoyed monopolies in several different economic areas through land-ownership, commercial networks, logging or mining concessions, and transportation companies. These ‘cronies’ had deep social roots. Fraud and vote buying or money politics in election process were some of the indicators of the political violence that President Marcos and his political clans used to maintain power.168

Local strongmen are not the only element that has eliminated the practice of trust and obligation in Philippine society. According to historical materialist explanations, social inequality and material scarcity lead to the degradation of patron-client relationships.169

Landlord-tenant relationships in the Philippines demonstrate socio-economic disparities because of the highly exploitative use of the tenants for the benefits of the landlords.

167 John T. Sidel (1999). Capital, Coercion, and Crime, Bossism in the Philippines. Stanford: Stanford University Press, pp. 1-3. Local strongmen have other names: brokers, caciques, mafia, rural bandits, chiefs, landlords, rich peasants, clan leaders, za’im, effendis, aghas, and kulaks. 168 Ibid., pp. 1, 3 & 6. 169 Ibid., p. 7.

Agricultural cooperatives or Samahang Nayon (SN) aimed to overcome this problem by establishing cooperative relationships among tillers, and creating social and economic structure to increase productivity and farm income. The failure of landlords to provide services in production, processing, marketing, distribution, and credit caused the failure of the SN program. Government-initiated cooperatives, such as the agricultural cooperatives were unable to reduce unequal relations between landlords and tenants, because of the political function that the cooperatives had to fulfill to gain voters for election purposes.

The area marketing cooperatives (AMCs), which were established by the SN’ Barrio Guarantee Fund (BGF), for example, only had a meager capital. It was also difficult to convince the SN members to contribute to the BGF when they could not get any benefit in return. The absence of funds led to the dependence of the cooperative leadership on the assistance of government agencies.170

People chose leaders based on his/her ability to control and access government resources. Moreover, the members of the SN did not want to give their time and effort to the organization, preferring instead to get something from the organization, which goes against the very rationale of the cooperative. The SN required the participation of all members. The recipients give their support based on what they get from the politicians. Pecuniary favours that are distributed are also referred to as “pork barrel

170 Teresa Encarnacion Tadem (1998). “Confronting Patronage Politics in Cooperative Development: The Buscayno Experiment”, Philippine Political Science Journal, nos.39-42, pp. 1. The SN was established under the martial law Presidential Decree (PD) No. 27.

96 funds” which are generally used for electioneering purposes. In the cooperative arena, this is seen in the use of the organization to attain political objectives.171

The condition of farmers in the sugar industry shows these exploitative relations at work. The Conjuangco family belongs to the economic classes that control the sugar industry in the Philippines. They own the Central Azucarera de Tarlac (CAT) sugar mill in Tarlac. Local sugarcane growers must bring the sugar to CAT, and the Hacienda

Luisita, sets the price for the product. The Hacienda Luisita is located in Capas and covers 11,316 hectares of land and has its own sugar central, which is capable of refining 7,000 tons of sugar everyday. The farmers are captives in their own land because they cannot process and market their product, except by bringing them to the

CAT and Hacienda Luisita. The farmers also have no ability to make direct contacts with the Central but must do it through planters who give them tickets from the CAT.

The tickets are basically approvals that the sugar products that the farmers bring are going to be milled.172

The contradiction between national and local policy in Mindanao is an illustration of how Philippine political culture is influenced by social values. The oligarchy that has dominated Philippine political economy is one of the challenges to developing EAGA because trade and investment are concentrated for the benefits of families or cronies.

171 Ibid., pp. 1-2. “In the 1950s, there was the problem of the government’s Agricultural Credit and Cooperative Financing Administration (ACCFA), which was tasked to organize farmers into the Farmers Cooperative Marketing Associations (FACOMA). The ACCFA was to lend farmer members credit through the FACOMA. The farmers were granted these loans based on the pledge that they would deliver their next crop to FACOMA warehouses or deposit unhusked rice (palay) as collateral. Local politicians, however, hindered the success of the FACOMAs by dominating the rural organizations. As a consequence, many debtors, believing their loans were political favors, responded with political obligation, not repayment”. 172 Ibid., p. 14.

97 Philippine politics has discriminated against Mindanao. Its status as “the land of promise” has never been fulfilled, despite the fact that Mindanao “has been a major performer and a primary contributor to the country’s production capacities”.173 Some

Mindanao leading commodities are agricultural crops – 21 per cent, food items – 23 per cent, heavy manufacturing – 17 per cent.174 However, Mindanao’s economic contribution has not given the area equal status with the northern islands. As long as the unequal political status of Mindanao remains, Mindanao is going to be exploited for

Luzon-centred political interests.

Religion and Politics in the Philippines

Catholicism is another characteristic of Philippine national identity that is a legacy of

Spanish colonialism. Although the Philippines is a secular country, which formally separates religion from political affairs, many cases show the roles of Catholic leaders/churches in various political events. The Catholic Church has become very rich from being landowners and running charitable foundations during the Spanish occupation. Philippine society experienced dominance by Catholic institutions, such as the banking institutions that loaned money, taking land as collateral.175 The dominance of Catholicism remains in Philippine society not only in terms of religious ceremony, but also in education, economy and politics.

The role of the church was shown in the People Power Revolution of February 1986, during which the Archbishop of Manila, Cardinal Jaime L. Sin, the most eminent religious leader in the Philippines, gave his support to Corry Aquino, the widow of a murdered Marcos opponent, to force President Marcos to step down. The movement

173 Turner et al, op. cit., p. 7. 174 Adriano, op. cit., p. 4.

98 successfully forced out the Marcos dictatorship. The second People Power Movement in

January 2001, when Gloria Macapagal Arroyo took power, replacing President Estrada, was similarly backed by the Catholic Church and Cardinal Sin.

The Catholic Bishop’s Conference of the Philippines (CBCP) has played a significant role in peace talks regarding the Moro insurgency, especially in the recent developments around the Bishop Ulama Forum, which was created in 1996.176 The Forum brings together Christian leaders (Roman Catholic, Lutheran, Methodist, and Philippine local/traditional eclectic), and Muslim leaders in regular dialogues to reduce cultural friction between Muslims and Christians. Peace education is the main focus of the

Forum and the education program began in 1997 with nine Catholic schools as the pilot schools. In 1998, twelve schools adopted the peace curriculum and in 1999 it was seventeen schools. The Forum is not the only one to bridge cultural differences. There are other dialogue forums, such as the Inter-Religious Dialogues (IRD), which embraces the two religions and tribal or indigenous people, and the Archdiocesan Ecumenical and

Inter-religious Dialogue (ACED), which focuses on dialogues between Catholic priests and Ulama (or Muslim teachers).177

Peace negotiations have been the main program for dealing with peace and order in

Mindanao from the Ramos presidency onwards. In April 2000, the Catholic Archbishop of Manila wrote a press statement on the Mindanao problem, which appealed to the Abu

Sayyaf Group (ASG) and government officials to return to the negotiating table at the

175 Steinberg, op. cit., p. 83, and Wurfel, op. cit., p. 5. 176 Interview with Sr. Marion, San Pedro Church, Davao City, 17 April 2000. The Bishop Ulama Forum was not successful during its first year because not many Muslim participants wanted to join. The other reason was because of suspicion and rejection that came from both the Muslims and Christians, especially the traditional Catholic priests. 177 Interview with Sr. Marion, op. cit.

99 time when some hostages were killed by the ASG. A similar suggestion came from

Pope John Paul II, who wrote a letter to the Archbishop of Cotabato, Orlando B.

Quevedo, asking for the release of the hostages and extending condolences to the families of a Catholic priest, Father Roel Gallardo who was tortured and killed by the

ASG in Basilan.178 Peace negotiations have been interpreted differently by the CBCP and the Philippine government. From the CBCP side, peace must include the ASG, and so it is conducting peace talks with the MILF. The current government has eventually come around to confirming this policy.

The influence of the Catholic church in Philippines society has also been challenged by the emergence of El Shaddai since the 1970s. This indigenous religious movement is a result of a revivalism of Christianity that began more than three decades ago. The

National Council of Churches in the Philippines (NCCP) convened a national consultation on the new religious movements of which El Shaddai is one. It is the most powerful charismatic and fundamentalist movement especially in this political context because of its reaction to secularism and its divine secularism on modern society.

Elections and issue-based political mobilisations are two types of El Shaddai political involvement. El Shaddai Prayer Movement that claims to have around 10 million constituents not only in the Philippines, but around in the world, has been involved in two presidential elections. In 1992, it held prayer rallies to support President Ramos, and in 1998, its movement brought President Estrada into power. The involvement of El

Shaddai in political mobilisation has caused ambiguity about the relations between religion and politics. The movement grew significantly, although many in the Catholic

178 Statement of the Holy Father regarding the Mindanao situation to Archbishop Orlando B. Quevedo, CBCP President, Circular No. 2000-38, May 5, 2000.

100 hierarchy were cynical about the development of the movement.179 Protests against the impeachment of Estrada in the late 2000 came from his El Shaddai supporters, particularly because Velarde was Estrada’s spiritual advisor.

Informal or religious leaders do not really care about EAGA. However, in a general sense, they are interested in educating people about politics. Therefore, a Catholic

Church program, called the Social Action Center, is trying to teach people to have the ability to see and most importantly to do something if they know that a certain government policy may not benefit their society.180

Chinese Sub-Culture in the Philippines

The Chinese are one of the Philippine’s most significant sub-cultures. In economic terms, Chinese dominate business and this domination has created anti-Chinese sentiment, because their success is seen as a threat. The existence of the Chinese has no direct connection with the EAGA formation, but resentment towards Chinese businessmen has caused insecurity in Philippine politics both at the national and local levels, including in Mindanao.

Anti-Chinese sentiment emerged in the Spanish colonial era, when there were a number of anti-Chinese pogroms. These were basically an excuse for the failure of Spanish economic policies. In more recent times local Chinese people became legitimate as

Filipinos as they became fully integrated in politics in order to support their business, not just as political donors. The success of Chinese in economic fields has created social

179 Grace Gorospe-Jamon (1999). “The El Shaddai Prayer Movement: Political Socialization: In a Religious Context”. Philippine Political Science Journal, v.20, n.43, pp. 85-89. Brother Mariano “Mike” Velarde is the founder and leader of the El Shaddai DWXI – Prayer Partners Foundation International, Incorporated (PPFI).

101 resentment rather than appreciation, as it has in many other Southeast Asian countries, including Indonesia and Malaysia. Expressions of anti-Chinese feeling vary from verbal to concrete actions. General Jose Almonte was an example of a leader who expressed his sentiment about the influence of Chinese business in Philippine society – “the country should not be a milking cow of the Chinese”.181 Kidnappings and killings are some actions that have been driven by anti-Chinese sentiment. In September 1992, two young Chinese students – Kenneth Yu Go and Myron Uy Ramos were killed, and a high school student, Charlene Sy was killed in January 1993.

The vulnerability of the Chinese community was never more evident in this gruesome crime [the September 1992 killings]. First of all, the abduction happened in Chinatown…Secondly, the ransom payment did not ensure the safety of the victims’ lives. Thirdly, the victims were badly tortured before they were killed. Lastly, Go belonged to a low-key middle-class family while Ramos’ father is a mere employee. It was the last straw for the Chinese community that galvanized it into action.182

Following these deaths, the Chinese community moved into mass action because they could not continue to be complacent, and they were impatient over previous killings that were unable to be prevented. The Movement for the Restoration of Peace march with the 1992 funeral march. It embraced many Chinese students, and business people also joined. The event was a remarkable milestone in Philippine history because Chinese and

Filipinos joined the rally. The Filipino middle class spearheaded the Filipino Action

Against Crime in February 16, 1993, which coincided with the closing ceremonies of the national summit on peace and order at the Philippine International Convention

Center. The cases of kidnapping in Manila decreased after the mass action for only two months, from March to April. Between May 11 and November 15, 1993, there were at

180 Interview, Social Action Center, San Pedro Church, Davao City, 17 April 2000. 181 Teresita Ang See (1997). Chinese in the Philippines, v.II, Manila: Kaisa Para Sa Kaunlarang, Inc, pp. 123-127. 182 Ibid., p. 129.

102 least two victims of kidnappings every month. One of the victims was a Taiwanese,

Jack Chou, kidnapped in May 1993, and for whom a ransom of P10 million was paid in

Hong Kong.

The situation was much worse in Mindanao, especially from November 8 to 15, 1993, when there were seven victims, including an American researcher, Charles Walton.183

Fears about relations between Chinese business and Philippine politics are based on security concerns, from the Chinese view, but there is no other motivation for the criminals than the ransom payment received from the crimes. While Almonte says that the Chinese have exploited the Philippines, the Chinese have also been exploited because of the many crimes against the community that the Philippine National Police has failed to deal with.

Although there is no clear indicator about the connections between Chinese sub-culture and the P-EAGA, anecdotal evidence suggests that it is important, especially in the case of the role of Filipino-Chinese in Mindanao. Firstly, there are Filipino-Chinese

Chambers of Commerce and Industry in the Philippine islands, including in Northern

Mindanao, Southern Mindanao and South Western Mindanao. Each region has some regional executives. The existence of the chambers shows that the Filipino-Chinese has significant role in Philippine economic sector, and the member organisations are incorporated into various business manufacturing and industries, such as textile, automotive, glassware, cotton, cosmetics, fish canners, foodstuffs, construction and printing.184

183 Ibid., p. 130

103 Secondly, the Chairman Emeritus of the Federation of Filipino-Chinese Chambers of

Commerce and Industry, Inc. is Lucio Tan. He is the owner of one of the biggest conglomerates in the Philippines, who started his business in 1950s and now has branches in several fields, including banking, beer manufacturing, agriculture, reality, chemicals, travel, liquor, textiles, and hotel, etc.185 Tan’s position in the chambers is probably based on his experience and reputation in Philippine business sector. He also had close access to some Philippine politicians, including former President Marcos and

President Estrada. For example, he got incentives from the Marcos government to build

Fortune Tobacco in 1970s. During the Estrada presidency, Tan was honoured by the president as one of the Philippine biggest taxpayers.186

EAGA and the Mindanao Crisis

Philippine traditional political analysis focuses on political activities at the national level, and the influence of national political decisions towards local and regional developments. Contradictions between national, local, and regional politics are a key characteristic of Philippines politics, especially in Mindanao.187

Security is one of the most significant factors in the Mindanao crisis. Anti-Islamic feeling is growing very strongly. Although the military approach has mostly ruined

Mindanao, it remains the most favoured means by which to restore peace and order. The security approach was less dominant during the Ramos administration. The peace

184 Member Organizations, The Federation of Filipino-Chinese Chambers of Commerce and Industry, Inc. 2005-2007, pp. 1-4 (accessed 16 April 2007). 185 Corporate Officers of the Federation of Filipino-Chinese Chambers of Commerce and Industry, Inc. 2005-2007 , and Special Report (October-December 2000). “The Company He Keeps”, vol. VI, no. 4, pcij.org, p. 3. http://www.pcij.org/imag.SpecialReport/cronies2.html (accessed 16 April 2007). 186 Special Report (October-December 2000), Ibid., p. 3.

104 agreement between the government and the MNLF in 1996 was a successful event and the climax of the whole peace talks process. President Ramos might have been the only leader to make efforts to create peace. However, this lasted only until the end of the peace agreement in 1999. Soon after President Estrada came to power, the military approach re-emerged.

The Philippine government only recognises two main groups of Islamic organizations: the MNLF and the MILF (the hard-line group), but these are not the only groups the government deals with, because of the existence of the ASG. The ASG was founded in the early 1990s. According to Abdurajak Janjalani Abubakar, “His interpretation of

Islamic sources is characterized by a ‘deconstruction’ of passive ta’wil of jihad”.188

Many people believe that they are just bandits who are targeting for ransoms in their kidnappings, hostages and killings of foreign tourists and local people, as occurred in

April 2000 and May 2001. The ASG also gains material resources from the drug trade to sustain their military operations. The group even has poppy fields, located in Basilan and Sulu islands.

As mentioned earlier, the MNLF demands full autonomy for Mindanao, while the MILF demands an independent Islamic state.189 In order to create the Islamic state in

Mindanao, the former leader of the MILF, Hashim Salamat proposed a referendum to the United Nations. He was inspired by the referendum in East Timor, and the result was East Timor became an independent state. Around a year after the UN held the

187 Herman J.S. Kraft (1999). Book Review of Patricio N. Abinales (1998). “Images of State power: Essays on Philippine Politics from the Margins”. Quezon City: University of the Philippines Press. Philippine Political Science Journal, vol.20 no. 43, p. 167. 188 Julkipli M. Wadi (1996). “Philippine Political Islam and the Emerging Fundamentalist Strand”. Social Science Information v.24 nos. 1-2, January-June, p. 32.

105 referendum in East Timor, Salamat asked for a similar referendum in Mindanao sponsored by the UN, but was rejected.190 He got strong reactions from some senators who were against his idea, saying that the UN does not want to sponsor a plebiscite because it means interfering in the internal affairs of a country.191 However, the UN did interfere in the East Timor case in 1999. That event inspired Salamat to call the UN to do the same in Mindanao.

Salamat’s proposal to the UN was strongly rejected by some opposition leaders, such as

Daisy Avance-Fuentes (Deputy Speaker), and Lualhati Antonino (Representatives), both from South Cotabato. According to them, the Moro will never win their demands since they are only a minority.192 Constitutionally, Mindanao is part of Philippine national territory, so the political claim endangers the Philippine national integrity.193

Therefore, the Philippine government will never approved any demand for an independent state, and never will.

Father Bernas, a Jesuit priest who played an important role in designing the 1987

Constitution, cites the constitutional argument against independence. According to him, the Moro separatist movement has never been overcome completely either by the colonials—the Spanish and the American—or by Philippine governments themselves.

He is sure that there will be no independent state in Mindanao because it is against the national constitution. Moreover, the Moro movement cannot get “international support”

189 Crisostomo op. cit., pp. 54-55. The MNLF did not only claim over four provinces as stated in the Republic Act 6734, but also over nine others in Mindanao. The MNLF refused the ARMM based on the 1976 Tripoli Agreement. 190 Philippine Daily Inquirer (27 March 2000) 191 Efren Danao, PerseusEcheminada (28 March 2000) “Senators hit MILF call for UN-sponsored polls” The Philippine Star 192 The Manila Times (13 February 1999), “No to Independent State in Mindanao”; TRICOM, op. cit., p. 3.

106 for a proposal of independence because international law acknowledges and respects the existence of the Philippine Constitution.194 His comment is contradicted by the fact that the Organisation of Islamic Countries, OIC, gave its support to the MNLF. The OIC role in the peace process and agreement in 1996 indicated international support, particularly from Muslim countries. So far, the Moros have had no support from

Western countries, particularly the US, or the United Nations.

The Mindanao crisis became more complex because of internal conflicts within the

MNLF. There was conflict between Nur Misuari and Parouk Hussin at the end of the peace agreement in 1999. Misuari’s supporters created political intrigue to stir up in order to charge Misuari with corruption, and they accused him of not being fully committed to the ARMM. The accusation came from a number of his supporters who shifted their support to the MILF. Misuari’s popularity as the governor of ARMM was greatly reduced, and he was no longer the leader of MNLF, the “majority” group of the

Moro peoples. Since then Misuari has been marginalised. Hussin then replaced Misuari as governor of ARMM. The internal conflict within the MNLF caused the Misuari group to lose its bargaining power with the Philippine government. Disunity among the

Moro groups made them fail to gain their political demands.

Because of the disunity among the Moro groups, the Philippine government tends to negotiate only with the group that is moderate and more “solid” at a certain time. For instance, the peace agreement of 1996 was ratified between the Ramos administration and the MNLF,195 but the MILF strongly disagreed with the 1996 agreement because

193 The 1987 Constitution of the Republic of the Philippines. Article 10. Sections 1, 15-21, pp. 34, 36-37 (accessed 14 March 2007). 194 Interview, Jesuit Residence, Ateneo de Manila, Quezon City, 28 April 2000. 195 Rigoberto Tiglao (23 February 1995). “Hidden Strength”, Far Eastern Economic Review, p. 22

107 according to the MILF, the MNLF could not represent the Muslims community since they insisted on a different political agenda (independence versus full autonomy). For the MNLF or the majority group, by having full autonomy, they hoped to deliver a better standard of living in the area of the ARMM. Since the MNLF lost its popularity, the Macapagal Arroyo administration was holding peace talks with the MILF.196

However, peace talks or peace agreements in Mindanao are unlikely to satisfy all the

Islamic groups because of different political demands.197

During the peace agreement (1996-1999), the Philippine government demonstrated its capability in dealing with the political situation in Mindanao. However when former

President Estrada declared an All-Out War policy in Mindanao from May 2000 until

January 2001, the peace process in Mindanao was destroyed. The war declaration was only a “short” policy because Estrada was impeached on corruption charges that forced him to resign. The most important point of the policy was Estrada’s assumption about

Islam. His assumption led him to believe that all Moro/Islamic groups were his enemy.198 The policy also demonstrated Estrada’s lack of knowledge and sensitivity about the historical background of the Moro culture and struggle in the Philippines.

Although the Moros are Muslims, they have no single culture, only a single Islamic community.199

196 M. Mogato (May 1999). “Mindanao: Torn between Autonomy and Independence”. Politik Magazine vol.5 no.4. 197 Some people say that peace negotiations are only a temporary achievement. The more pressing task is to create peace after an agreement because each group continues with its own political agenda. 198 Interview, Jesuit Residence, Ateneo de Manila, Quezon City, May 2000. Estrada declared that “Islam is the same, they are all enemies”. The AFP is suspected of being responsible for the on-going clashes between the Moros and the military, although there is no clear indication that the military intends to sustain the conflict. When President Estrada declared his policy, it illustrated that he had no intention of ending the conflicts. However, Father Bernas argued that Estrada did intend to overcome the crisis, but his mistake was that he did not know how to do it.

108 Fernando R. Capalla, Archbishop of Davao, commented on the incompetence of the

Estrada government, particularly in dealing with the Mindanao crisis. According to him,

“there are many intelligent persons in the Philippines, but they are unfortunately not in power at the moment”.200 He compared President Estrada with President Marcos, who was much more tactical, primarily because he successfully carried out negotiations with the Islamic countries. The Tripoli Agreement of 1976, for instance, was a tremendous achievement of his administration, although it was not implemented completely during

Marcos presidency.

The Catholic Church led the people power movement to force Estrada’s resignation in

January 2001. Then Vice-President, Macapagal Arroyo joined the movement against her president. The peace movement gained something in having her predecessor replaced.

President Macapagal Arroyo had been involved in peace processes to deal with the insurgencies since she was the vice-president.201 She used peace as a symbol to mobilise people and she claimed that her mobilization was not a violent movement.

However, her policy is ambiguous. She agreed to hold peace talks with the Moros and the communist groups, but she targeting the ASG in military operations. The military situation is, however, confusing because the ASG has numbers of young Muslim militants who have transferred from other Muslims groups. The ASG is different from the MNLF or the MILF, but they have the same enemy, the Government of the Republic of the Philippines. Many people believe that the military approach will only lead to the

Moro groups becoming more united.

199 Melvin Mednick (1974). “Some Problems of Moro History and Political Organization”, in Peter G. Gowing & Robert D. McAmis (eds.) The Muslim Filipinos, Their History, Society and Contemporary Problems. Manila: Solidaridad Publishing House, p. 16. 200 Interview with Arcbishop of Davao City, Davao City, 28 April 2000. 201 According to Archbishop Capalla, Macapagal Arroyo agreed to cease-fires in Mindanao and went back to peace dialogue involving all elements – national & local governments, religious leaders both Christians and Muslims, the MNLF, the MILF, and the NPA.

109

The Moro rebel groups have guerrilla tactics that they share with other rebel groups, the

New People’s Army (NPA), the military wing of the Communist Party of the

Philippines (CPP). Their tactics are hardly to deal with. For example, the government believes that the MILF and the ASG are associated.202 Their guerrilla strategy means more unpredictable irregular actions, not only because of their linkages, but also because the Moro rebel movement has been working together with the NPA, which has a strong base throughout the southern islands.

The existence of the Moro insurgency was burdensome for the Philippine government.

This is primarily because the AFP is not a solid body due to on-going friction within the

Philippine military. Meanwhile, the military is the only power that the government has to deal with the Moro movements. One investigation claims that the ASG has collaborated with one of the military factions in creating political chaos, especially in their major bases in Basilan and Sulu islands.203

In Philippine history no single government has been able to resolve the Mindanao crisis permanently. As far as EAGA is concerned, cooperation is difficult to develop because

Mindanao has a permanent political image as a conflict area. The following table shows some different policy approaches taken by governments of the Philippines. Although the implementations of the military or security strategy are various, the approach is dominant and the struggle between the two parties remains a critical political issue.

202 P.M. Sales (2000). “War in Mindanao”. Asia-Pacific Defence Reporter, Oct/Nov, p.7. 203 If the collaboration between Philippine military and the ASG is true, the political agenda is based on the military interests, while the ASG itself has no agenda at all.

110 Table 5. Philippine’s Government Policies in dealing with the Mindanao Crisis

Administrations Policies/Approaches Ferdinand Marcos military Political Diplomacy - Corazon Aquino military political/referendum - - Fidel Ramos military political/peace talks Diplomacy economic Joseph Estrada military - - - Gloria M. Arroyo military political/peace talks Diplomacy economic

The Moro insurgency has caused troubles for EAGA, firstly because it demands that government policy be changed. Secondly, the Moro rebel groups are based in

Mindanao, the main area of EAGA. Although some in the business sector believe that the economic activity has slowed down since the economic crisis and the continuation of the peace and order problem, they still have a strong belief in the future of EAGA.

However, just when EAGA will recover, nobody knows.

The global war against terrorism has brought a new dimension to the southern problem.

The establishment of US bases in Mindanao under the Visiting Forces Agreement

(VFA) has brought more insecurity not only for the Philippines, but also for the

Southeast Asian region. Firstly, it means that Mindanao is seen more as a battle ground than as a business location, particularly since joint military exercises between Philippine and American soldiers began following the September 11 attacks. Secondly, the US military presence has ensured on-going political instability in the form of protests against President Macapagal Arroyo, who agreed to the American involvement in combating the ASG on Basilan and Sulu. Thirdly, militant Islamic groups in Southeast

Asia seem to share an enemy, the Western world, especially the US, because anti- terrorism has become synonymous with anti-Islam, according to Jaffar Umar Thalib, the

111 leader of Ahlus Sunnah Wal Jamaah – the Holy War troops or Laskar Jihad in

Indonesia.204

Military and Politics

The AFP plays a significant role in much political decision-making in the Philippines.

The “People Power” revolutions to oust both President Marcos and President Estrada were examples of political outcomes being determined by the wishes of the military, who in both cases chose one side.205 The AFP is also a “contributor” to the on-going clashes in Mindanao. Some people say that peace negotiations are only a temporary achievement. The more critical task is to create peace after the agreement since each group will continue with its own political agenda. This is because the AFP has necessarily its own strategy of Total War.206

Senator Ramon Magsaysay, Jr. explains the role of military in politics in EDSA II or

“people power” that brought Gloria Macapagal Arroyo into power in January 2001. The military claims a legitimacy to be involved in politics as it has played a major role on many political occasions. The first people power revolution that ousted Marcos in 1986 was an instance of military involvement in Philippine politics. It is justified on the basis of a “judgement call” or “extra-constitutional initiative,” although who were the caller and the initiator remain unclear. The military has consistently created a vision of civil society’s inability to manage politics. “When the society was getting frustrated and freaked out because of injustice, the military stepped in. If the people cannot rise up as

204 http://asia.cnn.com/2002/WORLD/asiapcf/southeast/05/04/indonesia.arrest/index.html ( 4 May 2002), “Indonesia Militant Leader Arrested” 205 Philippine Daily Inquirer (January 9, 2002), “Military Politicized” 206 P.M. Sales (1993). “Caught in the Crossfire: the Peace Zone Experiment in the Philippines as a Means of Conflict Resolution”. Working Paper No.133. Canberra: Peace Research Center, the Australian National University, Research School of Pacific Studies, p.7

112 one because they are being cheated, then the military can justify its move”.207 In other words, the military in the Philippines has become highly politicised. The military perspective is different from a civilian perspective because militarism has authoritarian values: “blind obedience, dependence upon elitism, and inhumane feeling or brutality”.208 Therefore, the claim that the military makes over civil politics is not value free.

While the Philippine military is involved in politics and is collaborating with the ASG, terrorist activities and crimes such as drug smuggling, cannot be solved. The criminal sector is an element of the Philippine economy, alongside the formal and informal sectors. The formal sector can be measured by Philippine gross national product (GNP), and state functions, such as tax payments. The informal sector consists of similar economic activities, and may begin to add to these through undervaluing sales or the non-issuing of receipts in order to reduce tax. But the extreme end of the informal sector is criminal activities, such as drug trafficking, theft, kidnapping and murder. The military have been involved in all of these.209

As the military has most likely collaborated with the ASG and is involved in criminal activities, the Philippine government can be threatened with instability because of the disloyalty of the military. The military is loyal to a legitimate regime, not to the nation as a function of defence. In other words, using extra-constitutional initiatives, the military can orchestrate political chaos to justify taking over in critical situations. The

Philippine military adds to its authoritarian military values with criminality. In its

207 Philippine Daily Inquirer (9 January 2002), “Military Politicized” 208 C. Wright & T. Augarde (1990). Peace is The Way, A Guide to Pacifist Views and Actions, Cambridge: the Lutterworth Press, pp. 25-26 209 “The Tri-Sectoral Economy”, Philippine Daily Inquirer (September 3, 2001), p. 1.

113 relations with the ASG, the Philippine military has committed acts of terror with the aim of to manipulating the ASG for political ends.

The table indicates that degree of military involvement in each period of Philippine government was very dominant. Marcos’ authoritarian regime had the most coercive military approach, especially under martial law. However, his administration did not necessarily take a whole-heartedly military approach to Mindanao. The security approach in Mindanao diminished during the Aquino government, although the referendum did not satisfy the Moro people. The Mindanao security issue was a low priority because there were other internal problems that required her attention, such as the communist insurgency, rightist military rebellions, and economic crisis. During the

Ramos administration, military operations were reduced significantly as a result of the peace agreement that was ratified in 1996. But military policy re-emerged under the

Estrada government. The importance of the military approach is difficult to measure under the Arroyo administration, firstly because she has targeted military operation only at the ASG. However, the global war against terrorism that was declared after the

September 11 tragedy could result in a complex military policy at the domestic level, especially because the VFA has facilitated US military training in Mindanao. Following the September tragedy, the Philippine government has re-launched a military offensive not only against the armed gangs of Abu Sayyaf, but also against the MILF.210 In addition, the separatist movement that was led by the MNLF in November 2001 against the ARMM referendum could mean that the security operation will extend to that group

210 Political Situation in the Philippines in Spectre Interview, “Update of the Philippines“, p. 1. (accessed 27 March 2006).

114 as well. The Philippine government suspected the MNLF (and the ASG) along with the military attack in Jolo, southern Mindanao in February 2005.211

Due to the on-going conflict in Mindanao, the P-EAGA would not be a good place for investors. Therefore, according to Jesus Dureza, MEDCO Director and new Mindanao adviser to President GMA, the only way to attract investors in Mindanao is to stop war.212 Along with Dureza’s advise, the Mindanao Business Council held a formal press conference some weeks after the May clash, and asked that the fighting stop, as they believe that that is the most important factor in attracting investments back to the area; it had already lost around one billion pesos in just one week. It was not easy to achieve this goal, however, because the Estrada administration did not have the sensitivity and knowledge about the real situation in Mindanao. Under the All-Out War policy, the escalation of the conflict between the military and the MILF became a reality. The

Chamber of Commerce and Industry Secretary in Davao City said that the economic crisis and the peace and order problems mean that EAGA members need to work very hard in order to keep it running. The efforts must be even greater if the on-going conflict cannot be stopped.213

EAGA: Expectation or Desperation?

EAGA experienced its greatest triumphs when President Ramos was in power until the financial crisis of 1997. An optimistic view says that EAGA remains relevant. Although activities have declined because of the crisis, it still has good prospects. The EAGA

Business Council made regular reports on trade and investments in some member

211 Kompas, “Filipina: Pemerintah meingkatkan upaya pemberantasan kelompok pemberontak di Selatan” (26 February 2005). 212 Philippine Daily Inquirer (May 6, 2000). 213 Interview, Davao City, April 2000.

115 countries until at least the year 2000. It held a number of seminars and exhibitions. The working groups conducted seminars based on various topics for which each country took responsibility.

According to Paterno, the prospects of P-EAGA would depend on the ability to restore peace and order in Mindanao. However, the EAGA sub-regions, which have mostly similar cultural backgrounds, religion, and are located relatively close together geographically, have to benefit the similarities and advantages, for example, how to make EAGA the best alternative or forum for the Philippines to discuss issues of

Islamic movements in Southeast Asia. According to Wahab, director of the Moro

Resource Center in Cotabato City, “EAGA could be one way to solve the conflict because all EAGA countries are members of ASEAN solidarity”.214 He means that solidarity among the ASEAN countries could possibly be mobilized via the EAGA membership.

A more pessimistic point of view argues that EAGA creates more problems than solutions. It is easy to criticise EAGA, and the criticisms are difficult to answer.

Although President Ramos put a lot of effort into promoting EAGA, many people said that it was just political propaganda.215 Furthermore, the policy change from the Ramos government to the Estrada government added to the decline of EAGA activities. Estrada changed the role of PARECO to MEDCO in 1998, to deal with Mindanao development program including the EAGA. Some programs have been run by MEDCO. However, it does not have a specific measurement of the progress of EAGA. When I interviewed one staff member, he said that a more permanent assessment model has been designed.

214 Interview with Mr. Wahab, General Santos City, April 2000.

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When President Estrada took power, he did not have clear plans to govern the country in all sectors, including the Mindanao development program and the realisation EAGA.

According to a senior journalist in Manila, Estrada might have held only five cabinet meetings during his presidency, proving that he did not understand the importance of planning in governing a country. She was doubtful that the President understood the word “policy”.216

A similar comment came from Archbishop of Davao City, Fernando Capalla, who added that President Estrada lacked knowledge about the real situation in Mindanao.217

One day before, my interview with him, there was a meeting between the Bishop-Ulama

Forum in Davao City and Vice-President Arroyo. The meeting focused on the urgency of a cease-fire throughout Mindanao, and the important of peace talks among all elements, including the government, the military, churches, Moro people and the

National Democratic Front (NDF).

President Estrada’s lack of awareness and insensitivity about the situation in Mindanao led him to dismiss the dream of the area becoming the most likely place to enhance the

Philippine economy as a whole. Furthermore, under the Estrada government, poverty alleviation programs were manipulated for his political interests and personal gain. He was then impeached on corruption charges.

215 Virginia Miralao, Open Forum, CAPSTRANS Conference, University of Wollongong, December 2000. 216 Interview with Marites Vitug, Quezon City, 10 April 2000. 217 Interview, op. cit.

117 It is believed that the economic crisis is one reason for the decline, however, some say that this is just a justification by the government to cover up its failure regarding the implementation of its programs in Mindanao, especially EAGA. Other commentators say that EAGA was the victim of national government policy when President Estrada closed the formal office of EAGA in Davao City soon after he was elected in June 1998.

The closing of the EAGA office illustrated the limited interest of Estrada and his cabinet members in the historical value of the EAGA formation in Philippine politics, especially in dealing with the Luzon-Mindanao dichotomy. But political rivalry was another reason for the abolition of the EAGA office. Estrada is known as a Marcos crony, while

Ramos, who was head of the AFP during the Marcos regime, supported Marcos’ opposition under the leadership of Corazon Aquino. In other words, Ramos was

Estrada’s competitor. Estrada policy on EAGA was a “show of force” against Ramos’s policy.

In conclusion, the formation of EAGA was a good example of political bargaining of the local power with the central power the Philippines. Ramos, the central figure of P-

EAGA, was the most important leader, who could realize the local political demands by forming EAGA. Its formation has both economic and political meaning for the

Philippines. In the economic context, EAGA parallels the Philippines national development programs, including the development programs for Mindanao. In the context of politics, EAGA can prove the Philippines’ commitment to ASEAN and provide a means to maintain its existence in Southeast Asia.

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CHAPTER III THE PHILIPPINES AND ASEAN RELATIONS

The Philippines was one of ASEAN’s founders. Although since the formation of

ASEAN in 1967, the Philippines regarded its relations with ASEAN as a foreign relations priority, these relations were not optimised because Philippine foreign relations were for historical reasons more focused on the US, particularly up to the

1970s. While the establishment of EAGA was not the Philippines’ first contact with

ASEAN, it proved Philippine commitment to ASEAN as well as being coherent with

Philippine national development objectives in Mindanao. This chapter explains

Philippine-ASEAN relations before and since the formation of EAGA. Was the formation of EAGA just a regional trend or it could effectively support accelerated regional development at the sub-regional level?

Relations with ASEAN involve Philippine foreign policy in the longest running regional association in Southeast Asia. The Philippines has bilateral relations with individual countries within the region, but its relations with ASEAN offer the Philippines significant support in dealing with domestic political problems that affect regional stability and security. During the period 1992 to 2001, Philippine relations with the rest of Southeast Asia were focused mostly on political and security concerns. Restoring peace and order in Mindanao became part of the P-EAGA concern in terms of keeping the area remains attractive for traders, investors and tourists.

ASEAN was founded in Bangkok, in August 1967. It was not the first regional grouping in the Southeast Asian region, but is the longest running economic organisation in the

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area. It is built on principles of peace, non-interference and mutual respect. These principles are defined as the “spirit” of the association. Integration and promotion of development stability and security of Southeast Asian region have been ASEAN’s major aims. The establishment of regular meetings for regional dialogue, an increased number of member countries, support for cultural activities and the ASEAN Regional

Forum (ARF) are some of its achievements.

However, case studies of how regional planning is implemented reveal underlying problems. Bilateral and multilateral disputes, economic disparity and internal issues have remained problems for ASEAN. Moreover, since the monetary crisis, the events in

East Timor, and now the multiplication of separatist movements in Indonesia, the

Philippines and Malaysia, there are questions about the role and even the future of

ASEAN. Does ASEAN still have meaning and purpose? Is it still relevant to the needs of the region? Perhaps ASEAN, if it is to continue, needs to redefine its objectives and formulate a more suitable way for the future. Although some argue that “ASEAN will not fail”218, others are more pessimistic about its credibility, which has been eroding since its failure to offer appropriate responses to realities in the region, especially the economic crisis and East Timor.219 Recent developments, such as the separatist movements in Aceh, Ambon and West Papua and the Moro rebellion in Mindanao will provide further challenges for the organisation.

The Establishment of ASEAN

When ASEAN was formed in Bangkok in 1967, there were only five member countries:

Indonesia, Malaysia, the Philippines, Singapore and Thailand. Seventeen years later

218 Asiaweek, 6 August 1999 219 The Australian, 8 September 1999

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(1984), Brunei Darussalam became a member. Vietnam joined in 1995, and in the following two years ASEAN welcomed Myanmar and Laos as new members.

Cambodia followed in 1999, but only after much controversy following a coup.

The original members expressed their aims and purposes in the Bangkok Declaration of

1967. Generally, they wanted to develop economic, social and cultural ties, and to provide regional peace and stability in the Southeast Asian region. To these ends, they intended to promote active collaborative and mutual assistance and to provide training and research facilities for each country. In addition, they declared their intention to work together in agriculture, industries and trade. They also wanted to support the study of Southeast Asia, and to maintain close relations and beneficial cooperation with other regional and international bodies.220

The development of ASEAN has been gradual, a major step being the Declaration of the

Zone of Peace, Freedom and Neutrality or ZOPFAN Declaration, signed in Kuala

Lumpur, in November 1971. ASEAN agreed to enhance a peaceful, free and neutral zone by protecting the region from the proliferation of nuclear weapons by signing the

Southeast Asia Nuclear-Weapon-F ree Zone (SEANWFZ) or the Treaty of Bangkok, in

15 December 1995, which entered in force in 28 March 1997.221 In a broader context, the treaty could then support international peace and security. The ZOPFAN Action

Program was put in place in July 1993 at the 26th ASEAN Ministerial Meeting in

Singapore.222

220 http://asean.or.id/history/leader67.htm (8 August 1967). 221 See Treaty on the southeast Asia Nuclear Weapon-Free Zone, http://www.asean.or.id/politics/pol_agr7.htm (accessed 8 November 1999) 222 Ibid.

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ASEAN produced the Treaty of Amity and Cooperation in Southeast Asia and the

Declaration of ASEAN Concord in 1976. The Treaty of Amity and Cooperation was proposed to intensify the fundamental principles. These principles are: first, mutual respect for the independence, sovereignty, equality, territorial integrity and national identity of all nations; secondly, the right of every State to lead its national existence free from external interference, subversion or coercion; thirdly, non-interference in the internal affairs of one another; settlement of differences or disputes by peaceful means; renunciation of the threat or use of force; fourthly, effective cooperation among themselves. The Concord focused more on how to sustain political stability in the region. As such, it has provided the basis for an action program in the areas of politics, the economy, social and cultural and information, security and the improvement of

ASEAN infrastructure.

ASEAN announced the Manila Declaration in 1987 to reaffirm its commitment to these landmark decisions. After 20 years, the regional identity of ASEAN had been widened remarkably but intra-regional disputes had also increased significantly. This led members to reaffirm their commitment to ASEAN and to protect the fundamentals of economic development as well as the stability and security of the region. The relationship with its seven dialogue partners (Australia, Canada, China, the European

Union, India, Japan, New Zealand, Russia, South Korea and the US), and intra-ASEAN functional cooperation, were also major foci of the declaration.

The ASEAN Plus Three (ASEAN plus Japan, South Korea and China) held the Sixth summit meeting in Hanoi in December 1998 to address the Asian economic crisis. The intention had been to offer help to ASEAN member countries. ASEAN--Japan relations

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had been promoted and strengthened so that Japan would help ASEAN countries to overcome the crisis. Moreover, the Japanese government announced assistance measures for Asia in July 1997 to a total amount of US$ 44 billion, most of which have been implemented, despite there being no concrete measures determining how the assistance was to be administered. In October 1998, Japan added short, medium and long-terms packages of assistance for approximately US$ 30 billion for Asian economic recovery. These additional packages were also called the New Miyazawa Initiative.

Since November 2000, the ASEAN Plus Three has agreed to provide information technology (IT) cooperation under the e-ASEAN initiative. A multilateral five-year IT project including the Asia e-Learning Initiative, was proposed by Japan in July 2000.

This IT cooperation is worth US$ 15 billion.223

In its first nine years, ASEAN seemed to have a consolidated its purposes. The Bangkok

Declaration, for example, contains only general statements about how to achieve its aims. However, in the following years, ASEAN defined more specific goals based on real issues that had been developing within the region and at the international level. In

1992, ASEAN agreed to the formation of the AFTA. All declarations show the intention of ASEAN to strengthen its position through consolidating and the maintenance of a clear pattern of conduct.

ASEAN and Previous Regional Associations

Since ASEAN is the longest serving Southeast Asian association, it might be presumed to have had positive impacts on the region, especially when compared with previous regional associations. Before the formation of ASEAN in 1967, there were several other regional associations, such as the Southeast Asia Treaty Organisation (SEATO) in 1954,

223 “ASEAN Ministers call WTO Round”, ASEAN Law and Regional Integration (5 May 2001) pp. 1-2. 123

the Association of Southeast Asia (ASA) in 1961, and MAPHILINDO in 1963, although none survived more than a few years. SEATO, for instance, was doomed by

1977. ASA and MAPHILINDO lasted even less time. When ASA was collapsed in

1963, MAPHILINDO was set up in the same year. However, it did not survive more than three years because Malaysia rejected it in June 1966 over the territorial dispute for

Sabah.224 Like its predecessor associations in Southeast Asia, ASEAN was built because of politics driven by the Cold War. However, it did not include the US as a major participant. In other words, its participating nations see ASEAN as a relatively

“independent” body that might pursue Asian interests more than Western interests.

ASEAN is also different from the former organisations, in that is the only regional organisation set up within an economic framework. Since 1967, however, political and security issues have become more dominant than economic issues; such was the

Cambodia case where ASEAN contributed to ending the series of conflicts in the former

Indo-China region. This might indicate its commitment to creating peace in Southeast

Asia in accordance with the ZOPFAN treaty and its principles. ASEAN foreign ministers held several meetings to address the Cambodia conflict and facilitated dialogue between Vietnam and Cambodia. They also suggested that the United Nations continue its involvement in the process of self-determination for the Cambodian people.

The ASEAN foreign ministers meeting in Kuala Lumpur in February 1973 stated their respect for the independence, sovereignty, unity, territorial integrity and neutrality of

Laos and Cambodia (then the Khmer Republic).225 The first ASEAN Summit Meeting in Bali discussed the fall of Indo-China at the beginning of 1975. This was a quick

224 Adriana Elisabeth (1994). “Defining Regional Security from the ASEAN Perspective; Philippine Foreign Policy: the Effect of the Removal of American Miltary Bases from Subic and Clark”. MA thesis, Hobart: University of Tasmania, p. 35. 225 http://www.aseansec.org/print.asp?file=/politics/ammvie73.htm (15 February 1973).

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action taken to anticipate the impact of this issue on the region.226 On 12-13 January

1979, there was a special ASEAN foreign ministers meeting in Bangkok addressed the escalation of conflict between Vietnam and Cambodia, which affected regional peace and stability, particularly because of the refugees and illegal immigrants from the conflict areas. The meeting called for an immediate and total withdrawal of foreign forces—that is, of Vietnamese from the territory of Cambodia—and “affirmed the right of the Cambodian people to determine their future by themselves free from interference or influence from outside powers in the exercise of their rights of self-determination”.227

The Cambodian conflict created border problems in parts of Thailand because of the refugees, so the ASEAN foreign ministers held an informal meeting in Jakarta in May

1984 to demonstrate their solidarity with Thailand and “supported Thailand’s action in the exercise of its legitimacy rights of self-defence and Thai independence, sovereignty and territorial integrity”.228 The ASEAN foreign ministers lastly made a statement on the Cambodia issue which repeated “their call to Vietnam to seek a political settlement on the basis of the total withdrawal of Vietnamese forces, national reconciliation among all Cambodians, and the exercise of self-determination by the Cambodian people.

National unity can be achieved only through the participation of all Cambodians in the act of self-determination to be held under international supervision”.229 ASEAN asked for continued UN involvement in the political settlement in Cambodia, as well as an

ASEAN initiative to sponsor dialogue between Vietnam and the Coalition Government of Democratic Cambodia.

226 John Wong (1979). ASEAN Economies in Perspective, a Comparative Study of Indonesia, Malaysia, the Philippines, Singapore and Thailand, London: MacMillan Press Ltd. 227 http://www.aseansec.org/print.asp?file=/politics/ammpd79.htm. The problem of Indo-Chinese refugees was discussed at the special ASEAN foreign ministers meeting in Bangkok on 13 January 1979. 228 http://www.aseansec.org/print.asp?file=/politics/ammk84.htm (8 May 1984). 229 http://www.asemsec.org/print.asp?file=/politics/ammk85.htm (12 February 1985).

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If ASEAN’s most prestigious moment was the ending of the war in Cambodia, then the expansion of its membership was another achievement, as is its record as the longest economic integration in the region. ASEAN has now 10 member countries, ASEAN-10 as it is called. The enlargement of ASEAN is one example of its effectiveness in encouraging unity among Southeast Asian countries. The expansion of membership has followed the aspirations of the five original members. Today, all Southeast Asian countries are members of ASEAN, and it is different from former associations in the region because it does not include other Asia-Pacific countries, such as Pakistan,

Australia, New Zealand, or the US, as SEATO did. However, while ASEAN is an independent regional integration in terms of membership, it also hosts the ASEAN dialogue forum, which embraces some western countries, such as Australia, New

Zealand, the European Union, and the US; and the ASEAN plus three with Japan, South

Korea and China.

ASEAN can also be assessed according to structural or administrative factors. The reputation of ASEAN has been widely recognised because of its machinery. Some of the best-known functions are those involving the foreign ministers: annual meetings, standing committees, ad hoc and permanent committees, and a national secretariat for each country. ASEAN has carried out its functions effectively. ASEAN economic and functional cooperation covers several different meetings and issues—the ASEAN economic ministers meetings, the ASEAN Free Trade Area (AFTA), agriculture, customs, energy, finance, immigration, investment, tourism, transportation and communication, culture and information, drugs, environment, labour, rural development and poverty eradication, science and technology, and social development. ASEAN has

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external relations with Japan, Australia, the European Union, and the US in addition to the ASEAN dialogue forum.

The ASEAN Regional Forum (ARF) is more evidence pointing to the effectiveness of the machinery. According to Clad, the ARF is the only multilateral pan-Asian forum that discusses regional security matters. This forum plays a significant role, particularly in dealing with the ZOPFAN.230

Besides this machinery, ASEAN has already set up a number of programs and cooperative efforts to deal with certain matters, such as culture, education, business

(trade and investment), and politics. This includes the ASEAN Investment Area (AIA), the ASEAN Industrial Cooperation (AICO), the ASEAN Information Infrastructure

(AII), the ASEAN Inter-Parliamentary Association (AIPO). In July 2000, ASEAN established a non-profit organisation, which was named the ASEAN Foundation.

Problems within ASEAN

Although the extension of ASEAN seems to have been successful in accommodating the different political and economic interests of various “new” member countries, it is difficult to conclude that ASEAN has truly promoted economic development, political stability and security in the region. The existence of ASEAN has been threatened by several characteristics of its members, including the different political systems, religions and levels of economic growth. Most of these problems, such as border disputes, refugees, trade competition, illegal workers and smuggling, still exist after 32 years of

230 James Clad (1989) Behind the Myth: Business, Power and Money in Southeast Asia, London: Unwin Hyman

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ASEAN. Unfortunately, ASEAN still has no capacity to cope with internal conflicts; bilateral problems are still dominant, making it hard to form a basis for harmony.

The weakness of ASEAN in coping with problems shows that the core principles of the solidarity of ASEAN are not adequate to manage the association. For instance,

Indonesia and Malaysia had to bring their border dispute over Sipadan and Ligitan islands to the International Court of Justice in 1998. Both claim the islands as part of their geography, and Malaysia has built a tourist industry on the islands.231 On the other hand, up to the year 2001, Indonesian government regulations—PP No. 38/1996 and

UU No. 47/1999—did not list the islands as part of district of Nunukan, East

Kalimantan. Noor Syamsuagang, a political observer from the University of

Mulawarman, at Samarinda (East Kalimantan) says that the “excluding” of the two islands from the Indonesia map was to show respect for international law because the bilateral dispute has not been settled. The same respect, however, was not afforded by the Malaysian government.232 Conflict over Sipadan and Ligitan was not only of interest to Indonesia and Malaysia. The Philippines has also shown an interest in intervening in the island dispute, primarily because it had a similar problem with

Malaysia regarding its claim to Sabah in 1963. The Philippines had to drop that case, although that did not mark the end of the dispute between the two countries. Manila has never formally renounced its claim, and still claims that Sabah is part of Philippine territory based on the rule of southern Philippine sultanate in the 15th century.233 If the

Philippines participated in the island dispute between Indonesia and Malaysia, it would

231 D.M. Ong (1999). “International Court of Justice, Case between Indonesia and Malaysia Concerning Sovereignty over Pulau Ligitan and Pulau Sipadan”. Journal of Marine and Coastal Law, v.14, n.3, Kluwer Law International. 232 Suara Pembaruan Daily (4 October 2001). “Sipadan dan Ligitan tak Masuk di Peta Kabupaten Nunukan”. 233 “Philippines seeks to intervene in Malaysia-Indonesia Island Dispute”, Philippine Daily Inquirer (27 March 2001).

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not be an objective intervention since the Philippines has openly demonstrated its intention to put pressure on Malaysia because it has never been satisfied regarding the

Sabah case.

The Sabah dispute is not the only thing that has disturbed Philippines-Malaysia bilateral relations. Their relationship has not been conducted “honestly” since the Philippines is convinced that Malaysia supports the Moro movement in Mindanao. The “Malaysia-

Mindanao” connection is a consequence of political and religious development in

Southeast Asia. Since the collapse of communism in 1980s, religion, ethnic and national identity has spurred “new” conflicts, especially in developing countries. Islam political and religious movements in Indonesia, the Philippines, Malaysia, and Thailand are some conflicts that have been transformed from international to domestic levels.234 Similar phenomena have appeared as a “Malaysia-Indonesia” connection in the smuggling of guns from Malaysia through Setangkai Island in the southern Philippines to support the

Holy War troops or Laskar Jihad in Ambon. These links are part of wider terrorist support, and Malaysian citizens working with different Indonesian groups have also been responsible for bomb blasts in different parts of Indonesia from 2001 onwards.235

The fact that Muslims form a sub-culture in Philippine society has encouraged relations with Muslim Malaysians in which Islam becomes the main point of cultural identity. It is a logical consequence that there is a kind of solidarity between Muslim Malaysia and the Muslim Filipinos, and calls for protection of the Moro as “minority” group in the

Philippines. Armed conflict between the Moro and the AFP has shown up political

234 Hefner & Horvatich op. cit., chapter 1. 235 Suara Pembaruan Daily (18 August 2001). “Akan Dibawa ke Maluku, Malaysia Tangkap 15 Penyelundup Senjata”

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discrimination against Muslim Filipinos, but also has drawn attention to the operation of

Islamic groups in the region as part of an established network.

The limitations of ASEAN can also be seen in the South China Sea conflict. China,

Malaysia, the Philippines, Brunei, Taiwan and Vietnam, claim this area as part of their territory, mostly basing their arguments on historical factors. However, disagreement among the claimants revolves around natural resources—the South China Sea has rich oil deposits.236 The Philippines especially has fears about China, which has built permanent military structures on Mischief Reef, part of the disputed Spratly islands. The

Philippines national security adviser, Roilo Golez called for international pressure to force China to remove these structures from the reef. International pressure has come in the form of US involvement in the Spratlys dispute. US representative, Dana

Rohrabacher, a senior member of the Congress International Relations Committee, has promised to support the Philippines in terms of weapons and equipment. This has intensified the dispute between the US and China, especially after Rohrabacher made statements alleging that, “Chinese communists had ousted Philippine (former) President

Estrada and the Philippine political system during his time. China was also accused of selling drugs to the Philippines. This was problem that Estrada had to deal with China”.

These statements offended the Philippines and China.237 China objected strongly to US interference because the dispute is a problem between China and the relevant countries in the region. Here, ASEAN really faces a dilemma, primarily because it has no concrete proposal to overcome this problem. Moreover, it is difficult to find a solution that will satisfy all countries, if ASEAN promotes only one country's interest, then the

236 “RP to Revive Claim over Mischief Reef”, Philippine Daily Inquirer (2 April 2001). 237 “RP Fears China Building Structures in Scarborough”, Philippine Daily Inquirer (24 February 2001).

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others will not accept it. This will then create another source of dissatisfaction among the claimants.

Many countries in the Southeast Asian region went through difficult times during the monetary and economic crisis, particularly the Philippines and Indonesia. ASEAN was unable to cope with the economic difficulties because of the differences in economic growth and political systems. In terms of the per capita GDP (Gross Domestic Product), for example, Singapore was the richest of the ASEAN countries before and after the crisis. Brunei was the second richest, followed by Malaysia, Thailand, the Philippines, and Indonesia. In 1996 the GDP of the “new” ASEAN countries remained below that of the original members.

Table 7. ASEAN Member Countries’ per Capita GDP (US dollars, billions ) 1996 & 1999

238 http:///www.aseansec.org/stat/table1.htm. Selected ASEAN Indicators (1996) 239 Asiaweek, April 30, 1999 or IBON (1999) Facts and Figures, “ASEAN Investment Area: for the ASEAN”, v.22, nos.9-10, (May 15-31). Economic profiles of ASEAN Member Countries April 1999, p. 4.

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Table 8. ASEAN Member Countries’ per Capita GDP (US dollars) 2000-2004

Source: IMF World Economic Outlook and EconStats, http://www.econstats.com/weo/V015.htm

ASEAN has not yet made a significant contribution to promoting the economic growth of its member countries, except Singapore, Thailand and Malaysia. However, ASEAN has established regional development programs such as the ASEAN Investment Area,

ASEAN Trade and Business Area.

Diversity in economic growth has delayed the achievement of economic recovery and structural reforms, despite the Hanoi Declaration, in which the ASEAN + 3 agreed to help ASEAN countries to recover from economic difficulties. ASEAN and Japan held the fourth Japan-ASEAN Summit meeting in Hanoi in December 1998 to address the financial crisis, where Japan agreed to help ASEAN countries to overcome the Asian crisis. Japanese direct investment has significantly developed ASEAN industries, such as in Singapore, Malaysia, the Philippines and Indonesia.240 Despite such programs as the Japanese IT aid already discussed, most ASEAN member nations do not feel that

240 Kyoko Sheridan (ed.) (1998). Emerging Economic Systems in Asia, A Political and Economic Survey,

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they have received real outcomes from Japanese aid.241 Although in a real sense

ASEAN has not made many achievements economically, particularly in developing and accelerating economic growth in the region, it still maintain its image of regional integration.

Economic programs are now focussed on an agenda of liberalisation as the solution to the problems of the Asian Crisis. Many ASEAN programs overlap with other proposals at the sub-regional level, including for example, the ASEAN Investment Area (AIA) and the growth triangles. Both AIA and EAGA were proposed to enhance the attractiveness and competitiveness of regional and sub-regional zones for promoting

FDI. The AIA agreement was signed in October 1998 at the 30th ASEAN Economic

Ministers Meeting as the counterpart of AFTA. The implementation of the agreement is supervised and coordinated by the AIA Council. The AIA draft set the year 2020 as the date to realise the ASEAN Vision 2020 that is, “a completely liberalized ASEAN economy, accommodating and giving equal economic treatment to all countries of the world, the same year set by the WTO as the deadline for developing countries to open to world trade and investments every aspect of their economies”.242

The impacts of the financial crisis remain critical in Indonesia and the Philippines.243

On-going political instability related to the religious and ethnic conflicts has been one factor in the persistence of economic difficulties because the regional economy has structural weaknesses that contributed to the financial turmoil. According to Suthad

Setboonsarng, one of these structural weaknesses is poor governance.

Sydney: Allen & Unwin, pp. 137-139. 241 “ASEAN Ministers Call WTO Round”, ASEAN Law and Regional Integration (5 May 2001) p. 2. 242 IBON Facts & Figures (May 1999), v.22, nos.9-10, p. 7. 243 Rajiv Kumar & Bibek Debroy (July 1999). “The Asian Crisis: An Alternative View”, Economics and

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Lack of good governance has been a code word used for the presumed region wide practice of using non-transparent processes as a basis for awarding lucrative commercial deals, usually based on political or family connections. This is supposed to have encouraged lending to companies connected to the powers that be regardless of the intrinsic viability of those companies and their projects. 244

Insufficient governance is one of the political factors that create lack of transparency or poor management of EAGA, especially related to cronyism or family connections.

As the realisation of AFTA came in 2002 (ahead of its scheduled year, 2003), ASEAN has had only a limited time to prepare for its implementation, while there are serious conditions that must be considered. According to Wong, the patterns of trade and production show that ASEAN has only a small capacity for increasing exports. For more than 20 years, ASEAN economies have served to support the advanced countries’ export markets. Moreover, the difficulties in policies of import substitution, taxation and balance of payments among some ASEAN members cause trouble for trading on the regional level. Lastly, most foreign aid and loans, which come from the developed or industrialised countries, are often used to pay for imports from these donor countries.245

Clad argues that the disability of ASEAN comes from some old-fashioned problems, such as political succession, sovereignty and territorial integrity.246 Thus, it is imperative that ASEAN provides a way to accommodate the differences between members. The problems seem to be more complicated the more members ASEAN has.

Development Resource Center, Economic Staff Paper n.59, ADB, p. 1. 244 S. Setboonsarng (1998). “ASEAN Economic Cooperation, Adjusting to the Crisis”. www.aseansec.org/secgen/articles/ssadjust.htm, pp. 6-7. The other weaknesses are low productivity and declining competitiveness, especially vis-à-vis other regions of the world; and weakness in the financial sector, particularly inadequate supervision of financial institutions and lack of adequate disclosure; third, poor governance. 245 Wong, op. cit. 246 Clad, op. cit.

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The differences tend to be much greater since the ASEAN 10 completion. Therefore,

ASEAN needs to find a way to engage various interests with different historical background, political systems, economic growth and technological development.

However, the ASEAN spirit is not strong enough to motivate members to provide for each other in developing their economic interests. This is because the main principle of transaction is profit not solidarity. Most ASEAN countries have relatively small volumes of internal trade, despite the diversity in their economic profiles. ASEAN exports in 1999 were more than seven times lower than the G-7 exports in the same year; that is, US$ 336 billion for ASEAN compared to US$ 2,647 billion for the G-7.247

This makes it hard for ASEAN to compete with other regional economic blocks.

ASEAN benefits only those regional countries that have the strongest economic power, such as Singapore and Brunei.

The lack of grass-roots programs is another criticism leveled against ASEAN: it has been mostly unpopular below the level of government. The lack of grass-roots programs means that ASEAN has failed to fulfill the needs of the people who live in the worst poverty. In other words, ASEAN is good at hosting meetings, but the impacts of those meetings remain very limited for the majority of the Southeast Asian populations.

Drug abuse figures demonstrate ASEAN failures to address growing drug use.

According to the World Bank, there were several reasons for the increase in intravenous drug use in the region: cheap heroin supplies, deepening poverty and social desperation as a result of the 1997 economic crisis, and no effective law enforcement to deal with

247 Asiaweek, April 30, 1999. The G-7 consists of the US, Japan, Britain, Germany, France, Italy and Canada.

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the problem.248 Links between drug use and poverty demonstrate the lack of action by

ASEAN states over drug use, which has been a major problem in the region. Programs such as information sharing and joint monitoring have failed to cope with poverty and other social problems, which potentially drive the increase in drug abuse. Lack of effective law enforcement is related to the involvement of officials or military personnel in the heroin trade. This is also the reason for the inability for ASEAN states/governments to completely deal with the drug trade. Narco-politics dominates the political elite who are involved in and benefit from the illegal drug trade.

The same routes that are used for drug running are used for the arms trade. Poso and the continuing jihad in Ambon were supported by connections in Mindanao that provided illegal trade in guns, which were transferred from border areas between Sangihe and

Talaud islands, North Sulawesi, and Mindanao.249 There has been concern about

Philippine relations with Indonesia in the case of other terrorist activities. An

Indonesian citizen, Fathur Rohman al Ghozi was sentenced to 12 years imprisonment for illegal possession of explosives. He was suspected to have connection with the Al-

Qaeda. The arrest of three other Indonesians, Abdul Jamal Balfas, Tamsil Linrung and

Agus Dwikarna on charges of bringing bomb-making equipment to the Philippines is in a process of negotiation between the two governments, although only one person,

Dwikarna, has not been released by the Philippine police.250

248 “ASEAN to Address AIDS and Drug Scourges”, ASEAN Law and Regional Integration (22 November 2000). 249 www.detik.com/peristiwa/adil/lapsus/2002/01/20020109-154038.shtml (9 January 2002) p. 3. Some guns (AK-47s and M-16s) were from the MNLF. The peace agreement in 1996 stopped the fighting between the MNLF and Philippine military. Unused ammunition from the MNLF was passed over to the conflict areas in eastern Indonesia. 250 The Jakarta Post (29 April 2002). “Philippines Explains Arrest of Indonesians over Terrorism Allegations”.

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Illegal gun trading from Mindanao to Maluku is difficult to stop because Indonesian navy personnel are involved in it. Similarly, the narco-politics that involves some

Philippines generals is also impossible to stop because these generals are collaborating with their supposed enemies, the ASG. They simply blame the ASG if they are in

“danger” of exposure. The ASG, on the other hand, takes cover under the military, while both parties benefit from the drug trade.251

Poverty and ecological problems continuity to affect ASEAN. EAGA as the sub- regional forum of ASEAN, has the same vision to accelerate the realisation of AFTA and the ASEAN Vision 2020. However, declining fertility rates and poverty during the period of 1990-2010, for instance, are predicted to affect growth and trade in developing economies, particularly regarding the implications for the environmental quality of

Asian countries. Chemical and mining products are the basis of the poorest sector in terms of comparative advantage. The uncontrolled use of chemical products, such as fertiliser or pesticide, has decreased the quality of agricultural exports due to soil degradation in rural areas. As far as trade liberalisation is concerned, “agriculture is a sector where environmental effects of trade policy can be unanticipated and significantly costly, particularly when new and dangerous species of insects, viruses, plants and animals may be imported to regions where they have no natural predators”.252 Besides the unanticipated cost, the overuse of chemicals in the agricultural sector also impacts on plantation labourers who are the victims of the misuse of chemical products. Philippine agriculture is one of the biggest, environmental offenders, for example in a banana plantation formerly located in Hermosa village,

251 Lara Climaco (16 May 2005). “Where drugs and terror mix”, Philippine News.com. 252 Douglas H. Brooks (1998). “Challenges for Asia’s Trade and Environment”, Economic Staff Paper n. 57, Asian Development Bank, Economics and Development Resource Center, pp. 10-11

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General Santos City, Mindanao farm workers were refused compensation after an accident caused by the misuse of chemical products.253

In the case of East Timor, ASEAN has again shown weakness in coordinating a coherent response where human rights problems become obvious. Some sources indicate that most of the member countries actually wanted to do something concrete to help Indonesia, but the non-interference principle barred them from intervening in

“domestic affairs”. Some said that they did not know how to act in this case.254 This has become a controversial problem since Thailand and the Philippines have been proposing a more flexible principle that would take human rights into account. On the other hand,

Indonesia and Malaysia stick to the old ways. Moreover, Indonesia pressured ASEAN countries to take up its role in the case, since ASEAN has no clear procedure regarding this kind of issue. Compared to the reaction of ASEAN in the Indo-China crisis, the

East Timor case proved the inconsistency and ambiguity of ASEAN regarding the problems of human rights abuse.

The case of East Timor was not the only case of human rights abuse in the region.

ASEAN must pay more attention to several issues, such as corrupt regimes and graft or corruption issues, and repression of political opponents in Indonesia, the Philippines and

Myanmar, and impunity and accountability, such as the problems facing Cambodia in relation to the Khmer Rouge. ASEAN has a human rights commission, and has held several dialogues between the governments (Track I), and second track diplomacy

(Track II) between governments and think-tank from the region. However, dialogue between government representatives and members of civil society including NGOs

253 The banana plantation was relocated to Davao in 1986. 254 Susastro, Hadi (2001) “Towards an East Asian Regional Trading Arrangement”, in Simon S.C. Tay,

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(Track III) remain unfulfilled.255 The failure of Track III dialogue arises because authoritarian regimes, such as that in Indonesia during the New Order period, do not encourage civil society participation in political processes. The discouragement of civil society has marginalised the civil movements/struggles. On the other hand, some of the movements, including the NGOs activists have been branded anti-government.

ASEAN and Its Prospects

After more than 30 years since its formation, ASEAN has had some achievements, such as the establishment of regular meetings for regional dialogue, the enlargement of its membership, and the ARF. However, case studies of how regional planning should be implemented reveal underlying problems. Bilateral and multilateral disputes, economic disparity and internal issues remained problems for ASEAN.256 Moreover, since the monetary crisis, the events in East Timor, and the tragedy of September 11, 2001, there are questions about the regional role and even the future of ASEAN.

The regional role of ASEAN mostly depends on how it can create a more realistic program to deal with the growing issues in each country that affect regional political stability and security. There are some adjustments that ASEAN could make. Primarily,

ASEAN needs to redefine its objectives not only to accelerate regional economic growth, and develop culture and regional peace, but also to clearly include the political aspect as the main concern. In terms of principles, especially the respect for self- determination, ASEAN needs to be more consistent in how it deals with similar issues

Jesus P. Estanislao and Hadi Susastro (eds). Reinventing ASEAN, Singapore: ISEAS 255 ASEAN Law and Regional Integration (25 April 2001). “ASEAN and Human Rights” 256 Adriana Elisabeth (23 November 1999). “ASEAN: Is it still Relevant?”. Presentation, Postgraduate Seminar, University of New South Wales, Sydney.

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in different countries, such as the Cambodia issue in the past and separatist movements in Indonesia and the Philippines now.

Regional political dynamics, that is, the multilateral conflicts, such as the South China problems, bilateral problems of smuggling and illegal trade, and the global campaign against terrorism, tend to dominate ASEAN agendas more than the economic development problems. Even the Asian financial and economic crisis of 1997 did not shift attention towards the political dynamics that would enable the ASEAN economies to recover. Politics was understood only in terms of power struggles, without political will and more important without any political ability to use power to create prosperity.

This has been true for years: politics has never been on the side of the people. EAGA is perfect only as a blue print, in reality most programs did not attend to the people’s needs.

If ASEAN can not take care of the economic aspects, which can not easily be separated from the political issues, it would be better to focus more on specific aspects that are more “real” and applicable, such as cultural, education and health issues. In the context of economy, it is important to keep continuing bilateral relations among ASEAN countries because the economic diversities within ASEAN make it impossible to build a beneficial association for all members. Similarly, the political and security problems are more suitably solved through bilateral relations too, because of the diversities in members’ political systems and security problems. ASEAN needs to pay more attention to conflict mechanisms since there are many on-going bilateral and multilateral disputes.

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It is also hard to see ASEAN being like the European Community because this requires that certain criteria be met, such as large volumes of internal trade, harmonisation of laws and regulations in trade and investment, stable distribution of income and employment in the case of adjustment, establishment of transportation and telecommunication networks, and political commitment.257 Most ASEAN countries are still far from meeting these criteria, internal trade is small, there are no final laws and regulations for harmonisation, distribution of income and employment is unstable, networks of transportation and communication are poor and member countries have various histories of colonialism and political systems.

There is an option to establish ASEAN as a discussion or dialogue forum rather than an economic organization, which would mean that ASEAN does not need to hold annual meetings or maintain a standing committee and permanent committees, but rather only requires ad hoc committees and a national secretariat. The secretariat would act as the motor to carry out the mechanisms of ASEAN, while the committee could be a site for meetings based on the number of issues that exist and must be followed up immediately.

As a dialogue forum, ASEAN could work more efficiently and effectively, because it could discuss respond to actual cases as quickly as possible. This means that ASEAN would have to work very hard because it is almost impossible to reduce the list of problems in a short time. There is even a real possibility that these will be more complicated, for example if more parts of Indonesia seek independence.

ASEAN has proved its positive role, especially to keep its unity in diversity. However, there are major corrections that need to be made in the next phase of ASEAN in terms of its formation, objectives and function. If ASEAN cannot redefine its role

257 Thant et al, op. cit. 142

appropriately, it will no longer be relevant, except as a symbol of regional integration.

Since that is the concern, some commentators strongly believe that ASEAN should be dissolved, but that remains a very controversial option.

A recent ASEAN Summit Meeting in Brunei Darussalam in November 2001 agreed to support sub-regional economic co-operations, or growth zones, as a way of creating more active participation in the development process, particularly in relation to combating terrorism. The last statement was made with EAGA in mind.

ASEAN and EAGA

In terms of complementarity, EAGA countries are facing problems because they are in fact competitors in many areas, for instance, having the same marine tourism and eco- tourism industries. Although they have some policy adjustments and joint holiday packages arrangements, different political systems and trade and business regulations make any real cooperation difficult. Sub-regional economic integration is not guaranteed by geographic proximity.

In terms of membership, ASEAN is richer than EAGA. However, it has many more difficulties in accommodating different political and economic interests. For example, in terms of economic growth, EAGA has three different groups of countries—Brunei as the richest, Malaysia as the middle, and Indonesia and the Philippines are the poorest.

ASEAN is more complex. Singapore is the most advanced country in the region, followed by Thailand, Brunei and Malaysia, Indonesia and the Philippines, Vietnam,

Laos, Cambodia, and Myanmar (or Burma) are the lowest according to all indicators.

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Conditions in the Philippines are similar to those in Indonesia. Agriculture is the main sector. The major agricultural area is in Mindanao, where more than 50 per cent of products are going to other areas of the country. However, ironically the country has been importing rice from Thailand and Vietnam since 1990s.258 The Philippines buys several agricultural and daily products from Indonesia as well, such as corn, onions, soy sauce and detergent, but most reach the Philippines through illegal trade because through this means buyers can get lower price.259

Both ASEAN and EAGA are implicated in the structural problems of the world system.260 EAGA is meant to accelerate the AFTA, but it is similar to the ASEAN

Investment Area.261 They overlap and so their relationship is confusing. Building and running programs that have similar targets of getting more investments into the areas are wasting money and time. Indonesia and Malaysia are also involved in two other growth triangles, IMS-GT and IMT-GT. Instead of sticking to one cooperation, these participants have felt was better to get involved in others to maximise benefits.

However, it would have been more sensible to make one cooperative program work before moving onto others. Indonesia in particular does not have the capability to participate in more than one sub-regional organisation.

ASEAN and EAGA both focus on high-level programs, but, for except Brunei, the

EAGA quadrangle mostly consists of peripheral areas. The EAGA “backdoor” areas are so as the result of central power domination, which does not delegate authority to local government in Mindanao. Neither ASEAN nor EAGA have programs for eradicating

258 Philippine Daily Inquirer (24 May 2001). 259 Information from official government, City Mayor office (17 April 2000), Davao City. 260 “Alternatives to Globalization”, Proceedings of International Conference on Alternative to Globalization (7-10 November 1998), Tagaytay City: IBON Foundation Inc., p. 16

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poverty. The business sector is the engine of EAGA, and it gets the greatest advantages from it. Moreover, the imposition of liberal economics was also part of the source and exploitation of the poor.

In many developing countries, such as Indonesia and the Philippines, the political system determines the economic sector. At the same time, the economic sector manipulates the political system to gain the biggest profits possible. This is the source and the purpose of the exploitation in terms of labour wages, demolition, and social services.

If ASEAN faced a critical situation regarding its “passive” role in the East Timor case, its situation is going to become much worse unless it can deal with the domestic political instability that most countries have been facing in the last 5 years. The principle of non-interference has failed to stop these conflicts. ASEAN adheres too strictly to the belief that internal problems belong only to each country. The regional impacts of internal problems have not convinced the ASEAN governments that there are problems with that principle.

Philippine Foreign Policy and ASEAN

Philippine-ASEAN relations reached a relatively high point under the Ramos government. President Ramos put into action the comprehensive economic liberalisation program—of deregulation and privatisation—that has been proposed under the previous government. The EAGA was a clear example of a manifestation of the Philippines’ foreign policy towards Southeast Asia and how that policy was based on an economic liberal approach.

261 IBON (15-31 May1999). Facts &Figures, vol.22, nos. 9-10. 145

When Ramos said that foreign policy was parallel to domestic priorities, he probably wanted to argue that there were domestic issuse which could not be resolved internally, especially since adjoining countries faced similar issues, such as border trade issues or goods and people movements in border areas, including international terrorism. In other words, domestic problems that have regional/international dimensions would probably be effectively resolved through regional cooperation.

Ramos’s approach shows that there is a connection between EAGA, the Philippines’ national development program and foreign policy. This is because both the P-EAGA and the Philippine national development program were partly designed to address social economic crisis in Mindanao and Palawan. Therefore, the Philippines 2000 national development program and the concept of EAGA were promoted to complement each other. When the EAGA concept was proposed regionally, positive responses came from

Malaysia, Brunei and Indonesia.262 The regional response heightened the Philippines’ reputation for political leadership and promoted the image of national and regional security in conducting trade and investment within the region.

The formation of EAGA was also related to the peace agreement of 1996. The Ramos government was able to prove its capability in dealing with the Mindanao crisis not only through a peace process or peace talks, but also by formulating a regional design, that is the formation of the EAGA sub-regional economic cooperation.

The 1996 peace agreement improved the Philippines’ professional diplomatic relations, especially with Indonesia. The Philippines asked Indonesia to be the mediator in the

262 Dominguez, op. cit., see the chronology of events leading to the formation of BIMP-EAGA, 1992- 1994, p. 73

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peace process between the Philippine government and the MNLF in 1996. The fact that

Indonesia has the biggest Muslim population among ASEAN countries, that is 88 per cent of a total population of 228.4 million, was a major political consideration for the

Philippines.263 Besides, Indonesia and the Philippines have long-established cultural relations, particularly in the shared border areas—Mindanao and North Sulawesi—and religious relations based on continued acknowledgement of the fact that Indonesian

Muslims from Ternate, North Maluku, brought Islam to the Sulu Archipelago before the

Spanish occupation.

Informal bilateral relations between Indonesia and the Philippines had begun before the formation of ASEAN with the movement of people from Sumatra, Kalimantan, and

Sulawesi islands to Mindanao.264 These relations were firstly based on economic interests or trade relations, and on people’s search for a better life. These are the historical, cultural, geographical, economic and political factors behind the Philippines’ political consideration of Indonesia for this political role rather than other ASEAN countries. Indonesia was the chair in the Islamic Conference Organization (OIC) in

1993, so Ramos took very strategic political action by asking Indonesia to play a role in the process, not only because as the chair of the OIC, but also because Indonesia is the biggest Islamic country in Asia. It might be easier to deliberate on Philippine interests with the Islamic countries, and to negotiate with the Moro people. Noer Hasan

Wirajuda, who was the Director of International Organisation, Political Directorate

General, Department of Foreign Affairs of Indonesia, made the same comment about the Indonesia’s role. “Muslims are majority in Indonesia, it could easier to understand

263 Raymond Bonner & Jane Perlez (January 23, 2002). “Al-Qaeda Seeks Niche in Indonesia, Officials Fear”, The New York Times, p. 1 264 Corpuz, op. cit., p. 27.

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problems of the Islamic people in Southern Philippines”.265 Ironically, from the fall of the Suharto regime in 1998 up to now, the Indonesian government has been unable to cope with its own religious issues, including conflicts among the Muslims and

Christians in Ambon and Poso.

There are different Moro groups making different claims. The Moro political claims have never been approved by Philippine national government. The Philippine

Constitution of 1987 gives legitimacy to the state’s authority over Mindanao as part of the Philippines’ national territory, especially in relation to defence and security matters.266 However, the Constitution is not the only source of political legitimacy for

Philippine national government taking military action against the Moro. ASEAN support is important in giving regional support to Philippines’ claims for territorial integrity because ASEAN’s regional support is part of international recognition, which every nation needs.267

The Philippines’ bilateral relations with regional countries are not always reliable, especially in dealing with regional security issues. For example, the Mindanao conflict has disrupted regional security because of links between Muslim groups in the

Philippines and similar groups in Southeast Asia. Clashes between certain Muslims and

Christian communities in Poso, Central Sulawesi, and in eastern Indonesia (soon after

265 AdrianaElisabeth (1997). “Proses Penyelesaian Masalah Moro dan Peranan Indonesia”. Profil Indonesia. Jurnal Tahunan no. 3, Jakarta: Center for Information and Development Studies (CIDES), pp. 277-278. 266 The 1987 Constitution of the Republic of the Philippines, Article X, Local Government, Autonomus Regions, Sections 15-21. Section 21. “The preservation of peace and order within the regions shall be the responsibility of the local police agencies, which shall be organized, maintained, supervised, and utilized in accordance with applicable laws. The defense and security of the regions shall be the responsibility of the National Government.” 267 Interview (4 May 2000), Father Bernas, Jesuit Residence, Ateneo de Manila. He believed that the Moro political claim for independence will not be achieved because the Philippine Constitution, which declares Mindanao to be part of the country’s territory, is acknowledged and respected by international

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the bloodshed in Ambon, Maluku in 1998), have involved some ex-members of the

MILF and MNLF who mingled with local fighters. The gun-running connections between the different areas have already been discussed. In other words, inter-religious conflict in Mindanao has extended to the regional level because of the extremist Islamic networks in Southeast Asia.

The regional impact of the Moro conflict has created misunderstandings among the people in Indonesia and the Philippines. There was assumption that the Moro, who are

Muslims, have offered political solidarity to the Indonesian Muslims. The perception seems to have a basis in fact and accords with growing ethnic, religious and national conflicts in Southeast Asia in the post-Cold War era where Islam has emerged as the political enemy of the Western world after the collapse of communism in the 1980s.

The Moro rebellion is seen as a manifestation of the growing national identity movements against the Philippine government, which has been anxious about the existence of Muslims as a sub-culture. Political anxiety about the future of the Muslim world in Southeast Asia has prolonged armed conflicts or military interactions between the Islamic groups and national governments, such as between the Muslim secessionists in Mindanao and the Philippine government.268

The 1996 peace agreement was a concrete diplomatic exercise that the Ramos administration carried out successfully. The role of Indonesia indicated a political disharmony between the Philippines and Malaysia, the Philippines had not asked

Malaysia to be the peace mediator although Malaysia is a Muslim country. Firstly, it was because relations between the two countries had not been going smoothly not only

law. 268 Hefner & Horvatich op. cit., pp. 3-4.

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because of the territorial dispute of Sabah, but also because of the Mindanao-Malaysia connections. A possible political calculation was that if Malaysia was the mediator, there would no fair judgment from Malaysia towards the Moro separatist movement, and perhaps there would be continued Malaysian support for the movement. In other words, the Philippines followed a perfect strategy by inviting Indonesia. Disharmony between Malaysia and the Philippines was hidden by Indonesia’s position as the OIC chair.

Indonesia’s political position in the OIC gave political benefits to both Indonesia and the Philippines. Firstly, Indonesia got sympathy from the Philippines for being a successful mediator in the peace process. The result was the Philippine government and the MNLF could finally come to an agreement. The achievement of the peace agreement also created harmony within ASEAN. However, criticisms of the Ramos government came from the MILF because the MNLF could not represent all Muslims groups, since they have different political agendas. If each group has set up its own political claim, no agreement is going to satisfy any of them at all.

Secondly, the Philippines then asked Indonesia to be the OIC chair. By asking

Indonesia, the Philippines forestalled political animosity from Malaysia. However, this gesture was also meant to hinder further trouble in Philippines-Malaysia relations that might affect regional security. The Mindanao problem affected Philippines-Malaysia bilateral relations, primarily when the Philippine government believed that Malaysia has given regular material supports to the Moro liberation movement. However, Malaysia created political disagreement with the Philippines when Nur Misuari was deported

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from Malaysia in January 15, 2002 after having gained illegal entry into Sabah.269

Misuari, former governor of the ARMM came to Sabah without legal documents after his supporters launched a revolt in Jolo in 19 November 2001. While at the same time, a referendum was being held to elect a new governor of the autonomous regions.

Misuari’s visit to Sabah was possibly interpreted as evidence of links between

Malaysian Islamic militants and the Moros. The local government of Sabah arrested

Misuari, but did not bring him to court, although President Macapagal Arroyo preferred him to be prosecuted under Sabah law. Misuari was then jailed in Manila until now.

From the settlement of the Cambodian issue in 1975 to 1996, ASEAN had no need to assume a regional function as a peace-keeping body. The role of Indonesia in Mindanao peace process might be seen as a contribution to ASEAN. Nevertheless, illegal fishing by Filipino fishermen in Indonesian waters has disrupted Indonesian-Philippine bilateral relations though the case has not become a diplomatic issue. According to the

Philippines Foreign Undersecretary, Benjamin Domingo, the Indonesian warning to the

Filipino fishermen was based on security of territory. The fishermen were unable to differentiate sea borders between Indonesian and Philippine waters due to the overlapping territory.270

Although there was limited reporting of EAGA activities during the period of 1996-

1998, the peace builder and reformer image of Ramos’ political leadership spread through the Southeast Asian. Moreover, his presidency became popular, especially during the Asia Pacific Economic Cooperation (APEC) of 1996 in Manila. He was very

269 INQ7.net (2 January 2002). “Misuari’s Return Expected by Jan. 15, Says Perez”, 270 “DFA Concerned about Indon Warning to Pinoy Fishermen”, Philippine Daily Inquirer (January 4, 2001).

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confident when he offered Manila as the information business center of APEC. It was because he knew that the business sectors were on his side. Although the idea was not realised, the Philippines’ regional and international reputation was enhanced. The

Philippines became a proper place for doing trade and investment.

The list of achievements of Philippine foreign relations was very long under the Ramos government. The first was the deregulation and privatisation program under EAGA. Its formation was also intended to accelerate AFTA. The second was the Philippines 2000 as the national development program. However, EAGA has been criticised in terms of social and economic benefits to people. In general, Philippine foreign policy was no more than a political instrument for legitimating the global system. During the APEC

Summit, for example, the Noble Peace Prize Winner, Jose Ramos Horta from East

Timor, was unable to attend the meeting due to security reasons. Ramos’ attitude expressed his appreciation to Indonesia, particularly to the former Indonesian president,

Suharto, because Indonesia was actively involved in the peace process.271 This was also his way of expressing ASEAN solidarity. Although the Philippines had a moral duty to give permission for Horta to attend, it did not want to do so because its political and economic dictated otherwise. The Philippines did not want to take any risk that could possibly affect the image of the country as an ideal place for doing business. Lack of political ethics was levelled not only at the Ramos government, but also to the

Philippines for its role in ASEAN regarding the East Timor case because ASEAN did not take a proper response about the barbaric dispute in East Timor. Filipino critic

Bernas called this “ASEAN solidarity for wrong”.272 The Philippines also privileged US military operations in the islands also for security reasons.

271 Elisabeth, “Proses Penyelesaian…” p. 279. 272 Joaquin Bernas (1999) A Living Constitution, the Ramos Presidency, Pasig City: Anvil, pp. 136-137.

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The Estrada Administration (1998-2001)

The Ramos government was able to resolve some of the Mindanao ‘multidimensional’ problems. It succeeded in restoring peace in Mindanao through the 1996 peace agreement, but in socio-economic terms, some problems remained. The condition in

Mindanao worsened during the Estrada administration. The Mindanao conflict, which is rooted in the Philippines’ national history, continued. The Estrada administration took a different approach compared to the Ramos administration. Under the all-out war policy, the Estrada government ended peace talks. Besides the repressive policy, the roots of the problem in Mindanao, namely development gaps and poverty, which have not completely been resolved under the Ramos administration, were becoming potentially worse during the Estrada administration.

The foreign policy of the Estrada administration had three pillars: to enhance national security, strengthen economic diplomacy, and protect the rights, welfare, and interests of overseas Filipinos. The Estrada government foreign policy overview of 1999 did not mention the EAGA. Only in the Post-Ministerial Conferences (PMC) with ASEAN’s

Dialogue Partners on July 28-29, 1998, was Asian financial crisis discussed. The conference agreed to establish social safety nets, especially for those countries that mostly affected by the crisis. ASEAN economies had to concentrate on trade, emergency measures, and several other projects, such as education, environment, science and technology, and human resource development. The rest of the list focused more on regional security issues, such as drug’s production, processing, trafficking, and use. The 31st ASEAN Ministerial Meeting (AMM) in 24-25 July, 1998 declared that

ASEAN would be a drug-free area by the year 2020. Regarding the political issues, the

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5th ASEAN Regional Forum (ARF) on 27 July, 1998 achieved some consensus: “new confidence-building measures agreement, nuclear test in South Asia, and the admission of Mongolia as an ARF member”.273

In terms of EAGA documentation, the Department of Foreign Affairs in Manila had neither complete reports on EAGA nor someone who was in charge. One possible reason was because MEDCO, which was located in Davao City (one of the biggest cities of the growth areas), has the authority to handle Mindanao development and

EAGA. However, as long as Manila is the capital city of the Philippines, it must have a person who is capable or representing EAGA, at least under the ASEAN desk, particularly because the Philippines was the initiator of EAGA. It was terribly unprofessional to argue that there was no person who could take care of EAGA because of a temporary move. The person who was supposed to be at the EAGA desk was

“away” when I tried to conduct an interview. In anticipation of such absences, the library of the department of foreign affairs needs to be ready to update the reports on

EAGA systematically. From 1996 to 2000, there was only one report on EAGA, that was a seminar proceeding, which was held in 1996.274 The only other report was the

Integrative Study of EAGA funded by the ADB in 1996. The unavailability of the

EAGA reports points to a lack of coordination among the government bodies.

The neglect of EAGA was firstly related to political competition between the Estrada government and the Ramos government based on political clans. The second is that a political misperception of Mindanao has persisted in Philippine politics since Spanish

273 D.L. Siazon, Jr., Secretary of Foreign Affairs (7 January 1999). “Philippine Foreign Policy Overview”. Manila: http://www.dfa.gov.ph/oth/finchit.htm. 274 Fieldtrip (March 28, 2000).Department of Foreign Affairs and the Library, Manila

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constantly regarded Mindanao as the unknown region.275 Estrada’s presidency was marked by a lack of professional management and of processes of prioritizing decisions.

There was no continuation of policy and action on the issue of EAGA. Political transformation also meant changes of policy and action in almost sectors. EAGA was underestimated significantly. Another characteristics of Estrada’s political administration, was lack of knowledge about the real problems of the country. Yet,

President Estrada blamed the media for publishing things that were not substantial but related rather to his personality, to his family and cronies.276

If Malaysian investment in Mindanao was mostly set up under the EAGA scheme, particularly during the Ramos administration, Brunei’s investment, in shopping mall and office buildings in General Santos City, came under the Estrada government.

However, the development process was challenged when the people demonstrated against the government policy. The demonstration was not only because the deal forced them to move from the areas, but also because the land was sold to Brunei. The government itself lost rights over the land. The case illustrated the unfair game between the capitalist – Brunei - and the non-capitalist, the victims of the demolition. The

Philippine government at both local and national levels was the key player in the game.

This was also another indicator of a corrupt system, because no foreign investment has ever given the people opportunity to rise above the poverty line. It also indicates how a corrupt government can be very cruel towards its people. Therefore, it is wrong to assess the national development program according to the amount of physical infrastructure, such as shopping centers and sky scrapers. For an agricultural society like the Philippines, these sorts of facilities do not touch their daily life directly.

275 Duc D’ Alencon (1986). Luzon and Mindanao, Manila: National Historical Institute, p. 49. 276 Asiaweek (2 July 1999), p.21

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Philippine foreign policy during the Estrada administration failed to promote and sustain good relations with other ASEAN countries. Lack of diplomatic skills caused bilateral political tension, which affected EAGA and failed to restore peace and order in

Mindanao. Philippine-Malaysia relations were bad when Estrada criticized Malaysia

Prime Minister Mahatir Muhammad in the case of his opposition leader Anwar Ibrahim.

Ibrahim was arrested on political charges and sexual offenses. Estrada showed support for the opposition leader, when his wife visited Manila. From a moral perspective,

Estrada has a choice to support anyone who is unfairly charges. However, he did not have strong evidence to defend his decision. Every visitor should be treated politely, but hosting a visit from the wife of an opposition leaders a different matter from hosting a formal political leader.

If morality was the basis for the Estrada government’s political attitude, there was a double standard. Estrada and his cronies took a repressive approach to their own opposition. Political ‘jingoism’ (violence and intimidation) was used against someone who had the potential to oppose his administration. During the presidential election of

1998, there was information about a person who was killed because he had Estrada’s picture when he was gambling in a casino, but news about the incident was not published. During the Estrada’s administration, casino, nightclub and sex industries boomed, but Estrada political career was ended in his impeachment in connection with corruption charges from the gambling game. Edsa People Power II forced Estrada from the presidency.277 He was forced to step down at the beginning of his second year. It was the shortest presidential term that the Philippines had ever had.

277 “Nation Fetes ‘Mother’ of Edsa II”, Philippine Daily Inquirer (21 February 2001). The icons of people power, Jaime Cardinal Sin and former Presidents Cory Aquino and Fidel Ramos led the Filipinos in the

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The Estrada government did not have a solution to deal with the inter-religious conflict that affected EAGA. The Estrada government had ruined its political relations with

Malaysia over the case of political opposition movement. Lack of attention to the development and acceleration of EAGA held back Philippine-ASEAN relations, and this administration distinguished itself as the worst in terms of regional relations. If

Ramos was the “winner”, Estrada was the “loser” not only in EAGA, but also in the broader context of ASEAN. Furthermore, at the global level, he was a failure, seen by his impeachment on corruption charges in January 2001.

The US and the Philippines

As a country that was granted its independence from the US, the Philippines has clearly been under America’s influence in almost every way. From 1898 until 1991, US-

Philippines military relations were arranged under several agreements: the 1947

Military Bases Agreement (MBA), the 1951 Mutual Defence Treaty, and the 1953

Mutual Defence Assistance Agreement of the Manila Pact. The MBA was reviewed in

1956, 1966, and in 1979 to give more responsibility for security to the Philippines, in response to complaints from anti-American groups. The Communist Party of the

Philippines and its military organisation, the New People’s Army argued that US-

Philippines military relations were one-sided because the Filipinos received neither adequate payment nor respect. The US military bases became a controversial issue in the Philippines. US-Philippines military relations are possibly related to the Philippines’

“psychological dependence” on the US, not only in terms of military relation, but also

peaceful people power movement which deposed former President Estrada and installed the Vice President Gloria Macapagal Arroyo as the 14th Philippine President.

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because the US granted the Philippines its independence.278 The end of the MBA between the Philippines and the US in September 1991, led to a formal moment of a more balanced relationship between the two countries.279

According to observers like Jose Almonte, Philippine-US relations have changed more in economic terms than in military ones since the removal of the US military bases.

Developments in the Asia-Pacific have changed the directions and priorities of

Philippine foreign relations, including the political impact of the development of a free market system, which shifted ASEAN politics from anti-communism to incorporation with former so-called communist enemies such as Vietnam. Agreement on the economic rules of open markets under the WTO and the AFTA have resulted in the

Philippines’ giving priority to economic matters and changing its attitude to ASEAN, especially the ASEAN 10 or the concept of one Southeast Asia.280

The Visiting Forces Agreement, which was ratified in May 1999, has put the

Philippines in a more problematic position both at the national and regional levels. For example, during the military exercise between Philippine and American troops in

February 2000, criminal offences were committed by American soldiers, although no specifics have been given about the abuses. Legal action was not taken because

“Philippine courts have no effective jurisdiction over US soldiers in the Philippines”.

The agreement allowed “the resumption of the exercises, granted Philippine courts the

278 Larry Niksch (August 1990). “Philippines may be the Big Loser”. Asia-Pacific Defence Reporter, v.XVII, n. 2, p. 7; Leif Rosenberger (Winter/Spring, 1989). “Toward a US-Soviet Agreement in the Philippines”, SAIS Review, p. 214. 279 Interview (9 October 1995). General Santos City Mayor, Rosalita Nuñez, Bitung, North Sulawesi, Indonesia. 280 Jose T. Almonte (1999). “New Directions and Priorities in Philippine Foreign Relations”, www.asiasociety.org, pp. 1-2 & 7

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right to try the crimes of off-duty American troops and gave the US jurisdiction over crimes committed here by its soldiers”.281

US-Philippines military relations have been much closer since the beginning of the global war on terrorism, especially the actions against the Abu Sayyaf guerrilla group in

Mindanao. The Philippines was the first country in Southeast Asia, the second in Asia after Afghanistan where the US has established an overseas military operation to fight terrorism, specifically the ASG. There is evidence of a regional terrorism network that is involves relations between the ASG and the Al-Qaeda.282 In April 2002, 340 US military engineers arrived on Basilan following around more than 600 US troops who had come to the island earlier in the same month. By the middle of May 2002, the total

US troop strength in the Philippines reached almost 4,000 personnel. The US engineering brigade wanted to build roads and airport facilities on the island. According to Marine Lieutenant Colonel Brian Hearnsterger, commander of the engineering brigade, the rebuilding of physical infrastructure was to help the Philippines to eliminate terrorism.283 The US won public opinion and a positive image of its presence in the

Philippines on the basis of the continuing bilateral relations. The Americans have engaged in the politics of misinformation as a strategy to create powerful symbols of their fight against crime by insisting that the ASG be held responsible for the terror.284

Similarly, the Philippine government has imposed a pro-bases policy in the framework of the need to deal with the global war by using the VFA as the context for inviting the

US presence.

281 “Abuses Feared During VFA War Games”, Philippine Daily Inquirer (21 January 2000). According to Roland Simbulan, the American bases brought more insecurity for the Filipino. 282 “U.S. Focus on Southeast Asia Raises Questions about Role”, The Wall Street Journal (5 February 2002) p. 1. 283 “US Boosts Philippines Presence”, CNN.com (20 April 2002). 284 Murray Edelman (2001) The Politics of Misinformation, Cambridge: Cambridge University Press, p. 8.

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The existence of ASEAN and EAGA potentially impinges upon America’s regional interests, however the anti-terrorism mission needs these regional forums to coordinate joint action. President Macapagal Arroyo’s efforts to bring together some ASEAN countries for the task demonstrates the connection between US foreign policy and regional associations. The Philippines in turn receives some compensation for the in military training and ammunition access, and trade access. The US Philippines bases were replaced in the south, that is in SOCSARGEN (South Cotabato-Sarangani-General

Santos City) immediately after US military forces were pulled out from the previous locations.285 The Philippines’ response to the September 11 attacks was an indicator of the Philippine political status as a political client of the US colony.

The Moro insurgency and the separatist movement in Indonesia make it difficult to eliminate the image of conflict between Christians/Western and Muslims/Islam, especially in the context of the US military presence in the Philippines and the global war against terrorism. Concrete evidence has been sought in the Philippines in relation with Indonesia, Malaysia, because they are suspected to be nurturing terrorism. The US mission of anti-terrorism in the Philippines was too little too late since the connections between the ASG and militant Islamic groups in Southeast Asia had been developed before the September attacks. The Al-Qaeda Asian network started in the early 1990s.

The network developed rapidly in the Asia-Pacific region after Osama bin Laden moved to Afghanistan from Sudan, in May 1996.286

285 Philippine Daily Inquirer (15 November 1997). “US Bases Through the Backdoor?” 286 Rohan Gunaratna (January 2002). “Al-Qaeda: the Asian Connection”, in Jane’s Intelligence Review: Al-Qaeda’s Asian Network, p. 1. The formation of the Asian network was driven by three developments: Al-Qaeda recruited Asian as well as Arab veterans of the Afghan anti-Soviet jihad; Osama campaigned on a pan-Islamic platform that drew recruits from both Middle Eastern and Asian states; and from the early 1990s, Osama developed links with two groups – the MILF and the ASG, which had already established terrorist and insurgent capabilities in the Philippines.

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According to some sources, GMA is already exhausted by the rebellion, not only by the

Moros, but also by the Communists. In many cases, the two groups are working together against the national government. If the Moro claims are for full autonomy or an independent state, the communists want to change the whole national system, which is practically fully monopoly capitalist. This critique is linked to the liberal capitalist system at the global level. Since GMA came to power in 1999, the opposition groups

(NDF, CPP, NPA and certain military officers) have tried to topple her from her presidency three times – in 2003, 2004 and early 2006. Twenty years after the downfall of former president, Ferdinand Marcos in 25 February 1986, she declared a state of emergency on 24 February 2006.

The September 11 tragedy, which triggered the mission against anti-terrorism or “anti-

Islam”, has influenced ASEAN. Joint military training between the US and the

Philippines seems to be a test case for the competence of ASEAN in implementing its principles of non-interference, and creating Southeast Asia as a neutral and free zone.

ASEAN has no capability to oppose the implementation of global mission within the region firstly because Philippines-US military training is carried out on the basis of bilateral relations. The non-interference principle bars ASEAN from intervening in the domestic politics of member countries.

EAGA as an ASEAN sub-regional cooperation has been in a critical position vis-à-vis the global war on terror because the P-EAGA embraces Basilan and Sulu islands where the joint military action has mostly been concentrated. EAGA is possibly going to be used as a sub-regional political and security forum although it was built according to

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economic objectives as President Macapagal Arroyo has asked for the participation of

EAGA countries in fighting terrorism. The GMA administration’s attitude to the ASG is not only an expression of Philippine national policy, but also of how the Philippines takes political action in accordance with the US mission in the region.

The EAGA formation has no connection with US interests in the region, because the purpose of P-EAGA was partly to develop Mindanao as new growth area. The aims for promoting trade, investment and tourism among EAGA countries indicate an economic approach to facing up to the Mindanao crisis. However, the Philippines had been in a long and very close relationship with America.287 The Philippines has been trying to make an “independent foreign policy”,288 but Philippine foreign policy seems to remain under US influence. However, since the US, or the world’s policeman, declared the neo- realist goal of attacking terrorism, the rest of the world seems to have responded similarly to the global policy. In other words, US neo-realist policy is going to slow down the realisation of EAGA goals since there is no time limit on the global war mission. The Macapagal Arroyo government asked for the US involvement in combating terrorism in the Philippines, and extended similar joint military action to some other ASEAN countries.

EAGA has an economic agenda to promote trade and investment. However, several factors, such as the Asian financial and economic crisis of 1997, and political chaos in some countries, particularly in the Philippines and Indonesia, have affected the activities of EAGA, which have been slowing down as a result. After the economic crisis in 1997 and up until 2001, for example, Indonesia was the only country that had not made a list

287 Interview (4th May 2000), Joaquin G.Bernas, S.J., Jesuit Residence, Ateneo de Manila, Quezon City. 288 Bernas, A Living Constitution, op. cit., p. 110.

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of companies which wanted to be privatised.289 Therefore Indonesia was not prepared to participate in the EAGA privatisation program which was an integral part of the development program in finance and investment.

The establishment of EAGA confirmed the Philippines’ growing foreign relations trend to move towards ASEAN. This came after the country’s commitment to the AFTA. An inter-connection between foreign policy and domestic priority was demonstrated in the case of EAGA. The Philippines’ political interest in EAGA was to reduce tensions between Manila and Mindanao through a development approach.

The Philippines foreign relations in ASEAN and EAGA must be considered as characteristics of the regional and sub-regional economic models. As part of the global system, ASEAN and EAGA are the “slaves” of globalisation. Another similarity is that both stick to high-level orientation programs, and have overlapping programs of development areas. However, ASEAN is different from EAGA in terms of regional and sub-regional levels. ASEAN is the umbrella of EAGA. ASEAN has now 10 member countries, while EAGA has only four members. In terms of their membership, ASEAN has more diverse problems than EAGA though it looks the same regarding differences in political system, and economic growth.

Foreign policy reflects domestic and international events. The diversionary theory of war argues that foreign policy decisions are really meant for domestic political purposes as a “scapegoat” phenomenon.290 Many countries, including the Philippines bring the

289 “International BIMP-EAGA Conference and Privatisation”, WeekendReview Manager (16th June 2000). http://www.brunet.bn/org/bimpeabc. 290 Charles W. Kegley & Eugene R.Wittkopf (1999). World Politics, Trend and Transformation (7th ed.). London: MacMillan Press Ltd., p.132.

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perspective of realism into their foreign relations. On behalf of national development goals, domestic circumstances are manipulated to gain regional or international political and economic support. They are continually abused in the interests of the elite who conspire with other political forces – military and private sectors.

One example of the implications of this theory is the case of Philippines-US military relations. Military agreement between the Philippines and the US is restricted under the

1987 Philippine Constitution, which states that, “foreign military bases, troops and facilities shall not be allowed in the Philippines” except with the agreement of the

Senate.291 The constitution is in accordance with the concept of the ZOPFAN to which

ASEAN countries are supposed to be committed.292 The removal of the US bases from the Philippines was a good sign for its relations with ASEAN, because as a member, the

Philippines was not encouraged to facilitate military bases permanently. President

Aquino also failed to get Senate agreement for other defence treaty renewals with the

US. However, in reality, the US-Philippines military relationship continues. In the Cold

War context, the US had an interest in keeping a presence in South East Asian region by maintaining its military relations with the Philippines as well as with other regional countries – Singapore and Thailand. On the other hand, the Philippines also benefited from financial compensation from the US in return for maintaining its regional defence and security interests. In other words, neither the Philippine Constitution nor the

ZOPFAN allows military intervention in the Philippines or within ASEAN, but in this case, national interest was more dominant in determining bilateral relations.

291 Bernas, op. cit., p. 117 292 The Declaration on the Zone of peace, Freedom and Neutrality ZOPFAN was signed in Kuala Lumpur on 27th November 1971 and the Program of Action on ZOPFAN adopted at the 26th ASEAN Ministerial Meeting in Singapore in July 1993.

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The end of the Military Bases Agreement in 1992 was the moment of the Philippines’ closest relations with Asia. President Marcos’s had been the first government that made a foreign policy orientation towards ASEAN. However, during the Aquino government

(1986-1992), the Philippines was still unable to make more concrete its relations with

ASEAN, except in the policy to support the realisation of AFTA. The need for political consolidation meant that the Philippines did not pay much attention to ASEAN. The establishment of EAGA under the Ramos administration in 1994 was a symbol of

Philippines’ awaken attitude towards the region.

The detachment of America’s bases from the Philippines brought about a more balanced relation with the US. Former General Santos City Mayor, Rosalita Nunez was very confident about this point when interviewed prior to the US actions against Abu Sayaf.

But in reality, the scheme did not create a more balanced relation. Nunez was just too ambitious about it. The Philippines remains dependent upon US political, economic and military power. If there were to be any mutual defence treaty between the two, it was possible only under the principle of non-interference, because it was based on the framework of bilateral relation. The fact is that Philippine-US relations remain as close as they were before the termination of the military agreement. One reason was because the US has been continued its presence through another form of “cooperation”, that is the VFA.

Thus, Philippines’ foreign policy in Asia was created not primarily because of the political will to be part of Asia, but because of those internal and external factors.

According to Parenas, Philippine foreign policy refocused on economic diplomacy with the main goals of enhancing access to foreign markets and to attracting foreign

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investments into the Philippines. Although the Philippines supports the realisation of

AFTA, it is difficult to assess Philippines-ASEAN relations regarding the economic aspect, primarily because ASEAN members tend to compete for the same market.

Secondly, the Philippines was not ready to compete since its economy has not yet recovered.293

Former President Aquino was blamed for her inability to carry out the economic diplomacy that she herself proposed. Some domestic political instability, such as the

Moro separatist movement and the rightist military rebellions, provided justification.

The Aquino administration focused its national policy priority on consolidation and reconciliation processes. As a consequence, during that administration, the Philippines turned into a “non-active” member of ASEAN. In order to deal with the economic crisis, the Philippines pursued bilateral relations with individual country, such as

Brunei, Indonesia and Singapore, and with non-ASEAN countries, such as Taiwan and

Hong Kong. Japan has been the second largest investor in the islands after the US.

Besides the ZOPFAN, ASEAN is committed to a non-interference principle that does not allow any country to intervene in the domestic issues of another country. Every nation has the right to build bilateral relation with any foreign country based on its national interests. But this principle is against the ZOPFAN. The weakness of the principle also creates ambiguities in assessing if bilateral relations are truly needed for the solution of domestic problems, or there is an external factor that tends to intrude in the domestic sector. Since no country can ignore the US influence on Philippine foreign

293 J.C. Parrenas (1993). “Transition and Continuity in the Philippines, 1992”. Southeast Asian Affairs, p.280.

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policy, the Philippines could find its in a difficult position over its use of the ASEAN principle of non-interference to support its internal political and security policies.

Philippines-ASEAN relations may be understood by analysing US interests in Southeast

Asia. ASEAN makes much of being “free” from western members, especially compared to SEATO. However, it is difficult to see that ASEAN has been free from western influences, especially when the US has pursued its regional interests through its bilateral relations with the Philippines. The Philippine-US mission against terrorism has been set up in the context of bilateral relations. It seemed that ASEAN was ignored.

In the light of the 11 September tragedy, the Philippines-US relationship become much more important. Both have mutual interests. The Philippines has been facing the Moro rebellion movement for almost 30 years. The US global mission played a major role in having the Moros classified as terrorist group under the GMA administration. President

Macapagal Arroyo, frustrated by the ASG, eagerly responded to the US proposal to join military training exercises, and proposed that other ASEAN countries, Indonesia and

Malaysia, take similar joint actions. The US enthusiastically helped the Philippines to arrange a double mission—training and supplying the Philippines’ military at the same time as running its own campaigns.

The Arroyo Administration and EAGA

President Arroyo is trying to normalise Philippines-ASEAN relations. She has a special envoy to deal with countries in Southeast Asia. Paul Dominguez was her appointee for the region, and was known as the “little” president of EAGA. This appointment was a positive sign, although the reality did not support it. There has been no specific policy

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action to deal with EAGA, except an agreement with Mahatir Muhammad to revive the concept of the growth triangle. The Philippines and Malaysia agreed to improve the transportation and financial linkages in the growth areas, through the formation of

MayBank branch office in Zamboanga City. MayBank is the biggest bank in Malaysia.

The two countries also agreed to explore collaboration in palm oil production, combining the know-how and investment capital of Malaysia with a large pool of available labour in the Philippines. A tourism agreement was included in President

Macapagal Arroyo’s visit to Malaysia, especially to fly tourists from and to Shanghai-

Clark, Sabah-Clark and Shenzhen-Cebu twice a week starting in November 2001.294

The Macapagal Arroyo administration seems to have a better foreign policy orientation than the Estrada administration. Her visits to some ASEAN countries, and her presence in the ASEAN Summit Meeting in Brunei in November 2001 were a good start.

However, it is difficult to predict the two countries’ political relations in light of regional security problems: illegal trade, smuggling and border crossing issues, especially via the sea. For example, illegal trade in items such as detergents, onions and rice in the border areas between Indonesia and the Philippines have been difficult to stop.295 While President Arroyo has been in power for only a year or so, she indicates a strong commitment to ASEAN. After five years in her presidency, Arroyo is still committed to ASEAN.

Nevertheless, the American mission has influenced Philippine foreign relations in

Southeast Asia. President Macapagal Arroyo initiated joint actions with Indonesia and

294 Philippine Daily Inquirer (9 August 2001). “Macapagal, Mahathir Agree to Revive EAGA Growth Area”, 295 Illegal trade exists because the prices of the items are relatively cheaper than the prices from legal trades. Government officials in Davao provided this information, and people prefer to buy the items from the black-market.

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Malaysia with respect to the anti-terrorist mission and an agreement among them was signed in April 2002. The agreement illustrates Philippine loyalty to the US.

At the domestic level, Macapagal Arroyo’s policy in Mindanao was different from her government’s military policy to combat international terrorists, including the ASG. The policy towards the MILF, in particular, seemed to be more peaceful or negotiable. The ambiguous policy to deal with the Muslim insurgency in Mindanao shows the complexity of the conflict. Military operations against the ASG were a rejection of

President Macapagal Arroyo’s own stated desire to stop war in Mindanao.296

Furthermore, the recent fighting between the military and the MNLF in November 2001 forced the GMA administration to formulate different policies, particularly to deal with the supporters of the former governor of the ARMM, Misuari. Her political attitude towards the Moro groups is more problematic when the Moro supporters are affiliated to more than the three main groups. The Nationalist Islamic Command Council is a new splinter group from the MNLF.297 Although the Philippine government and the MILF agreed on the resumption of the peace talks, the MILF would not drop its separatist demands.298 This is another difficulty that the Philippine government needs to reconsider. If the Philippine government fails to maintain a consistent policy, it will be impossible to sustain peace in Mindanao.

The Mindanao conflict was very unique because of mobility of members or supporters from one rebel group to another. This characteristic gave rise to different policies and strategies by the Philippine government for dealing with each group. For instance, in the case of Misuari’s sacking, the Philippine government had to pay attention to Misuari’s

296 Philippine Daily Inquirer (25 January 2001). “Gloria urged: Never Again Declare War in Mindanao”. 297 Interview (March 22, 2000) with journalist Marites Vitug, Quezon City.

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followers, who are still loyal to him. Besides that, the MILF supporters were also from the MNLF, while the ASG also collaborates with both the MNLF and the MILF in some cases.

The second characteristic of the Mindanao conflict was tactics of the Moro groups in pursuing different political agendas. They usually collaborate with the CPP-NPA in order to fight the Philippine government, especially the military. A Consul General of

Indonesia in Davao City made a comment to illustrate the Moro strategy. He said that it is quite common for the Moros to create a common enemy—the Philippines government—before their political aim is achieved. However, after the goal is met, they struggle for their own political agenda.299 For the military, policy against the Moro was meant to combat the movement or the insurgents, however, the extremist groups probably understood it as an anti-Islamic policy. Consequently, religion remains an effective political tool to trigger political chaos, and religious conflicts are still going on in some EAGA sub-regions.

While President Macapagal Arroyo seems to be proud of her intention to pursue a peaceful solution, she needs to be aware of the military’s role, especially in the transition from the past government to hers. The military played a key role in her coming to government. No other political force has the ability to push its oppressive agenda—only the military that has the values of blind loyalty, authoritarianism and destruction.

298 Philippine Daily Inquirer (3 April 2001). “MILF won’t Drop Seccession Bid yet”. 299 Informal meeting with the Consulate General of Indonesia, Davao City (28 April 2000).

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President Macapagal Arroyo needs to pay more attention to the real situation of EAGA.

The Mindanao crisis is one urgent consideration, including the characteristics of the

Muslim people, the indigenous people or Lumad, and their interactions with the

Christians. The restoration process is a prerequisite to the actualisation of EAGA. On the other hand, if her government fails to create peace and order, then the Philippines is going to be driven further away from developing new economic zones. The reality of the Al-Qaeda Asian connection shows that the integrity of Philippine territory has been threatened because the ASG has international/regional support. This is a reality which did not have to be considered by GMA’s predecessors.

At the regional level, the agreement to revive the concept of the growth triangle is not enough. There are many agendas that need to be followed up, such as policy harmonisation among the EAGA countries, and building adequate infrastructure. If the

Philippines pays too much attention to the mission against terrorism, work on the

EAGA project is going to be diminished proportionally. The Philippines has not devoted much time to the realisation of AFTA. EAGA was meant to accelerate free trade in Southeast Asia, but existing problems and challenges do not help the

Philippines to prepare for that.

Philippines-ASEAN Relations: Some Possible Scenarios

Philippine-ASEAN relations do not change much from one government to another.

However, the Philippines supports the existence of ASEAN, particularly to gain regional support for its political and security problems. Its desire to make the

Philippines the “new” NIC or Asian tiger, will take more years to materialise because of the peace and order problem, and the legacy of the Asian financial crisis. Joint action

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for facing terrorism was a good sign of more concrete action between Indonesia,

Malaysia, and the Philippines. Thailand and Singapore may agree to join the mission too. In terms of the economy, ASEAN has not given so many benefits to the Philippines because of the vast difference in economic capabilities between ASEAN members.

Similarly to previous years, bilateral relations would seem to be more effective than multilateral relations. Trade relations with non-ASEAN countries remain important, especially with Japan, and now with China, and of course the US. Although ASEAN has not yet provided benefits for the Philippines, its foreign policy remains important because ASEAN has now been the symbol of regional integration for more than three decades.

In the future the Philippines is going to maintain close relations with the US in terms of economics, politics and culture. The US will “ask” the Philippines to be its eyes in

Southeast Asian. The Philippines will never be far away from US influences because the

Filipinos are mostly happy with the US heritage.

The Philippines is part of the world capitalist system that has been the source of inequality. External factors affect Philippine macro-economy policy, which is we can predict will also cause the inequality in development and distribution of income. A political culture of utang na loob and the role of landlords in the political and economic sectors, are the internal factors that influence the decision-making processes. Utang na loob or trust and obligation means that politicians are responsible to constituents.

However, the practice of money politics or vote buying during the election, make it only a temporary trust and obligation. Both constituents can easily shift their support to other buyers. It is pretty much the same as what the politicians do. Breaking political

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campaign promises is a very common phenomenon. Both are cheating each other; however, the people, especially the poor, are the victims in the whole process.

ASEAN has nothing to do with the domestic politics of its member countries, including the Philippines with its oligarchic system. However, in a global and interdependent world, the Filipinos, in particular the decision-makers must consider its external environments when formulating foreign relations:300 As key policy makers have shown, these external environments include first a global economic system with open market and free trade principles. This system could bring a good fortune for the Philippine oligarchy as well as for economic growth and national development, but equally it could also disturb the national development process in the Philippines. Secondly, advanced technological development makes faster and easier communication from people to people, and improves health and socio-economic prosperity. Thirdly, the post Cold War complexity creates more opportunities as well as problems in bilateral relations and regional integration. Fourthly international security concerns embraces number of issues, such as nuclear and chemical weapons, and conventional weapons, internal and external conflicts, and transnational crimes, including terrorism.

EAGA must come to terms with these global trends, especially in order to improve trade, investment and tourism. However, in reality, EAGA has to face problems of poverty that are almost impossible to alleviate. This is because the global economic system gives chances only to business people and investors to dominate trade and investment. The poor are easily manipulated and exploited for the sake of economic

300 Domingo L. Siazon, Jr. (7 January 1999). “Philippine Foreign Policy Overview”, Presentation of Secretary of Foreign Affairs of the Republic of the Philippines to the Members of the Diplomatic Corps, Manila, p.1.

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interests. In other words, poverty remains the biggest obstacle to the realisation of

EAGA.

Another obstacle for EAGA and ASEAN is that trade and investment remain under political domination. Although economic relations can be run based on natural and traditional relations, they are going to develop very slowly, particularly because of political instability. The optimistic point of view of EAGA’s future is predicated on the experience of traditional trade that existed long before the formation of EAGA.

Politically, ASEAN, in particular Indonesia and the Philippines, must face up to religious and communal conflicts in some areas. The connection between religion and politics is that religion is a political tool in order to gain certain interests. These conflicts caused regional insecurity and instability in Southeast Asia. If there is a conflict in terms of religion, it is definitely a result of political factors. The main objective of actors in such conflicts is to upset domestic stability and provoke conflicts of interest among politicians. The regional implications of the religious conflicts have to be seen from the regional network of the Islamic extreme groups. Inter-state policy has to be coordinated, for instance, to handle inter-religious conflicts that connect Moros, particularly the ASG and the MILF, and Holy War troops in Ambon. The September 11 tragedy encouraged their movements. Previously, their movements operated only at the national level, but since then, they have become regional and even international missions.

Although relations between religion and politics have caused regional insecurity, relations between economy and religion have a positive impact. For instance, the exhibition and a trade innovation on halal food products in Brunei in 2001 was

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301 significant proof that economies can learn from religion.F F This was a positive indication for the future of trade and investment for the region, because Muslim populations are the majority in Southeast Asia. The protest against the government decision policy to sell land to Brunei for investment in General Santos was a good example of the separation between religion and economic purposes. The people who protested were mostly Muslims. Brunei is seen as a Muslim country. Thus, they directly acted against other Muslims too.

In conclusion, the EAGA sub-regional development planning has been challenged by political and security problems, either communal (or violent) conflicts in the sub- regions, or trans-national crimes. The Philippines under the leadership of President

Macapagal Arroyo will continue its relations with ASEAN because it is the best way to show its regional commitment. The future of Philippine-ASEAN relations also depends on the extent to which the GMA administration has the capacity to keep EAGA activity going. President Arroyo has been trying to develop more concrete policies on EAGA, as

Ramos did. Besides the domestic issues, the Philippine government also commits to

ASEAN in combating terrorism. GMA’s policy to crush the terrorist group throughout the islands is related to her political commitment to ASEAN to combat transnational crime, including terrorism. If the Philippines and other ASEAN countries have the same commitment to maintain regional security and stability, there is possibility for EAGA activities to carry on.

301 WeekendReview Manager (1 March 2000). “Malaysia revives Bakun Dam Project/Halal Exhibition and Forum Rescheduled”

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CHAPTER IV BIMP-EAGA AND REGIONAL DEVELOPMENT PLANNING

BIMP-EAGA was designed to boost trade, investment and tourism in the eastern part of

ASEAN. It also aimed to limit disparities in development and to increase economic growth, to reduce poverty, to ensure mutual benefit from the use of natural resources and to create sub-regional stability in Southeast Asia. In a broader context, EAGA is related to ASEAN’s economic agenda, especially the implementation of AFTA. EAGA also aims to help maintaining the stability in Southeast Asian region primarily through strengthening its sub-regions. However, the EAGA regional development planning has been disrupted by several problems that occur at the international, regional and domestic levels.

Two major events at the international level have influenced the EAGA quadrangle.

They are liberal capitalism as the dominant world system, and international terrorism.

World capitalism or globalisation has been interpreted in its Philippines’ context as crony capitalism, in which rent-seeking and state intervention, are dominant economic activities. Crony capitalism as the regional interpretation of the world system has to deal with theories of development and modernization. In comparison to the previous strategy of economic processing zones (EPZs), for example, how does EAGA face problems of labour? How does EAGA represent an improvement over EPZs as local strategies?

Corruption is another problem for all EAGA countries. The question is does EAGA worsen the problem of corruption?

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The problems of EAGA are added to by violent provincial conflicts that have not yet been overcome. At the international level, terrorism has becomes a primary issue, along with the existence of terrorist networks in Southeast Asia, in particular in Indonesia,

Malaysia and the Philippines. Nodes of these regional networks are mostly in EAGA areas.

Liberal Capitalism

Liberal capitalism is the dominant system in global trade in terms of both bilateral and multilateral economic relations.301 The current global version of it began with the

Uruguay Round of the GATT in the 1940s, whose aim was to enhance an international liberal trade regime. This occurred after the end of the International Trade Organization

(ITO).302 EAGA together with ASEAN is influenced by economic liberalism, which stands for the values of the market or free trade, openness and competitiveness.

Economic liberals argue that “the state should have no economic role, but simply leave the economy alone, and allow business people to act however they please or the market should be ‘free’ from government interference”.303

Keith Rankin, writes (based on Adam Smith’s arguments in favour of economic liberalism) that economic liberalism has two ethics: truthfulness and the concept of self- interest. In reality, the ethical dimensions are distorted.304 Similarly, Rob Knight argues

301 Theodore Cohn (2000). Global Political Economy Theory and Practice, New York: Longman, pp. 359-360. 302 ITO failed to propose a competition policy in 1947-1948. Therefore, it changed to WTO in the 1960s. WTO, GATT and IMF are the three major international economic organizations. See Anne O. Krueger (1998). The WTO as an International Organisation, Chicago: University of Chicago Press. 303 Andrew Heywood (1998). Political Ideologies An Introduction (2nd ed.). London: MacMillan Press Ltd., pp.51-54. Economic liberalism opposes all forms of factory legislation, including restrictions upon the employment of children, limits to the numbers of hours worked and any regulation of working conditions. 304 Keith Rankin (10 November 1998). “Adam Smith and the Ethics of Economic Liberalism”, http://pl.net/keithr/rf98_AdamSmithLiberal.html, p. 2.

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that “economic liberalism is somehow linked to ‘big business’, which is wrong”.305 The concept is supposed to make trade barriers lower and thus make it easier for all businesses to start and operate. In practice, free market competition is manipulative and exploitative, for example, governments and industrial sectors often formulate regulations to manage competition, so the position of the companies are safe, while the consumers find it harder to get advantages.306

Global economic liberalism and EAGA development programs belong in contexts of different political cultures and economic capabilities. Economic liberalism fails to present a better alternative for affected countries, but it seems that they cannot avoid it.

The term “development” is usually associated with trade. When liberal capitalist groups set up trade mechanisms, profit directly goes to the capitalist groups. Therefore, trade as

“the engine of economic growth,” only suits those groups.307 “Free” markets are only free for the capitalists; competitiveness is only intended to result in more benefits for the capitalists. The relationship between trade and development consequently creates wider gaps between the core (developed or advanced industrialised countries) and the periphery (undeveloped countries) in which the core exploits the periphery.308

According to the economic liberal perspective, EAGA members must share the ideology and strategy of capitalism that come from Western or developed countries in order to achieve development.309 The adjustment of the global system, including the

305 Knight, Rob (2006) “Economic Liberalism”, Liberal Review, http://www.liberalreview.com/p. 2. 306 Ibid. 307 Dickson op. cit., p. 3. 308 A. Hoogvelt (1997) Globalisation and the Postcolonial World, the New Political Economy of Development. London: MacMillan Press, p.85. See also Cohn, op. cit. Liberal capitalism, which is also called world capitalism or globalisation, contributes to inequalities, but also creates efficiencies. In many industrial states, globalisation has resulted in an increase in overall income, but also in a rise in unemployment. 309 Kegley & Wittkopf, op. cit., p. 117. See also Cohn op. cit., pp. 362 & 367.

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development process in EAGA have created some complex problems for the majority of member countries due to their diverse geographical characteristics, political systems and cultures, and economic capabilities.

The emergence of EAGA was driven by regional factors. The first was the concept of the growth triangle, discussed in the previous chapters. The second regional factor that affected the emergence of EAGA was the role of Japan, especially since China declared the open door policy in 1970s. Japan as one of the biggest investors in Southeast Asia, has to take account of China (including Hong Kong and Taiwan), which is predicted to become the greatest economic power in Asia within the next few years.310

From a Philippine government perspective, EAGA is closely related to the process of globalisation, because it was a response to global trends of the GATT and regional trading blocs, such as the North American Free Trade Area (NAFTA). The following figure illustrates EAGA within global circles.311 EAGA is under the umbrella of

ASEAN, which is also committed to globalisation in the form of international trade liberalisation through the implementation of AFTA in 2002, as discussed in Chapter III above.

310 Chen & Kwan, op. cit., pp. 155 & 157. 311 Winston Jay Fuentes (1998). “Negotiating an Agenda for Peace and Self-rule in Moroland”, in Mindanao Focus, no. 4, Davao City: Alternate Resource Center, p. 5.

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Table 9. EAGA in the Global Circles

GATT

APEC

AFTA

EAGA

The Interpretation of Global Capitalism in Southeast Asia

Global capitalism has increased the gap between the rich and the poor not only at the global level, but also within the individual EAGA countries. In relation to trade and investment, the domination of neo-liberal capitalism means that the sub-regional economic cooperation of EAGA cannot reduce inequalities in the long term. As well in internal political circumstances cause the delay of trade policy coordination and adequate infrastructure improvements.

According to John Hobson, capitalism is unable to manage itself either at the domestic or international levels. His critique of classical liberalism is that capitalism creates power abuses because of the creation of monopolies. Monopoly is the source of unequal income distribution and “unproductive surplus”.312 This is primarily because the surplus

312 J. M. Hobson (2000). The State and International Relations, Cambridge: Cambridge University Press, p.76

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is domestically concentrated within a small number of elites — individuals or institutions — namely, politicians, business people (in particular corporations) and the military. These groups become the imperialists within the nation because the surplus does not produce equality, but rather makes the capitalist groups more abusive. The capital surplus is used to win or create more monopolistic investment through competition.

Competition is important for the success of capitalist economic transformation.

However, competition tends to give more access to monopolistic groups, particularly in centralised systems and closed societies. In the global capitalist system, monopoly has become a great concern because “the new industrial technologies required sufficiently large scales of production for efficiency that there would be relatively few firms in any economy, leading to concentrations in economic (and therefore political) power”.313

EAGA, in as much as it has unevenly entered global capitalism, has produced monopolies by crony capitalism — where market competition could mostly not be conducted openly and fairly.

EAGA, as one model of the economic integrations, could be analysed by using the

Coxian Triangle concept of indicators.314 Hans-Hurgen Bieling used the same concept to examine how the revitalisation of the European Monetary Union (EMU) provided a stronger base for a trans-national financial regime. EAGA would not be a trans-national regime like the EMU, but there are some indicators of the Coxian Triangle concept that are relevant to be applied in analysing the EAGA context. The first indicator is the state-

313 See Joseph E. Stiglitz (January 1999). Public Policy for a Knowledge Economy, London: Department for Trade and Industry & Center for Economic Policy Research, p. 10. 314 See R.W. Cox (1981). “Social Forces, States and World Orders: Beyond International Relations Theory”, Millennium 10 (2). Cox quoted the idea of Gramsci about ‘the extended state’, pp. 126-155.

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civil society complex. According to R.W. Cox, state and civil society do not oppose each other, but are closely intertwined. “The state in the narrow sense can be seen as the realm of binding political decision making, regulation and control, and civil society represents the many networks of communication and cooperation, which support and shape the content and direction of public policy”.315 EAGA has similar condition of the oppositional relations between the government and the society. In the most centralised cases, for example, society or the people are usually against the government policy because of unclear information about government planning. Social or popular participation would be more possible in a decentralised system, but many EAGA sub- regions have mostly centralised or hierarchical systems, especially in the decision- making processes.

The second indicator of the Coxian Triangle is social relations of production. The word

‘production’ is not only concerned with the physical production or goods, but also “the production and reproduction of knowledge and of the social relations, morals, and institutions that are prerequisites to the production of physical goods”.316 Social relations of production involve relations between managers and workers; firms and households; and between representatives of finance and the so-called ‘real-economy’.317

In EAGA, the private sectors have been set up to be the engine of EAGA, while the governments are the facilitators. This means that the dynamics of capitalist accumulation in EAGA will be in the hands of the private sectors. However, in the first ten years since the establishment of EAGA in 1994, the private sector was unable to play its optimum role because the concept of EAGA was relatively new. The

315 Hans-Jurgen Bieling (3 August 2006). “EMU, financial integration and global economic governance”, Review of International Political Economy 13, Routledge, p. 424. 316 Ibid., p. 424. See also R.W. Cox (1989). 317 Ibid., p. 425

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governments did not properly communicate the concept to each stakeholder in their sub- regions, particularly to local government units and business sectors.

The third indicator of the Coxian concept is world order. “World order should be conceived as the particular historical configuration of material power relations, inter- subjective meanings, collective images and international institutions. In this sense, world orders are largely determined by the strategies and conceptions of powerful national and trans-national forces – above states and trans-national corporations – to generalise and institutionalise all their respective world views”.318 In the case of EAGA,

‘trade’ and ‘investment’ refer to the world concepts of free trade and open markets, as formulated by the WTO. However, the world concepts or principles are not always applicable in the local level because of “tacit factors” (local economic, political and cultural factors)319, which could affect the transformation process of the universal principles into the local level. For example, local people, who have strong beliefs on their ancestral land, usually have to fight against certain economic agencies or private sector interests, whose want to use the lands for business activities.

The EAGA sub-regions were not ready for the implementation of free trade. Indonesia is still not ready to participate in AFTA because of resolved domestic political and economic conflicts. Because of that, Indonesia has asked for a delay in implementing

AFTA until 2010, the same time as the new members of ASEAN (Cambodia, Lao,

Myanmar and Vietnam) are expected to reach this goal. Some observers predict that

Indonesia will have no significant role in EAGA because it has no comparative

318 Ibid., p. 425. 319 See Stiglitz, op.cit. pp. 4-6. The analytical Background Report, Department for Trade and Industry (1998b) recognizes the importance of tacit knowledge or non-codified knowledge, and the difficulties in

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advantages in terms of matters such as production cost, quality of product and regulatory environment.

Where Indonesia appeared to operate corporations, it really operated a system that was outside that of free market capitalism. In the case of the oil business in Indonesia during the Suharto regime, competition was irrelevant because the corporations had been set up to be family firms. Pertamina was the sole state oil company, founded by Ibnu Sutowo, former general and one of the most powerful people in Indonesia. 320 The company was then run as a private business as recommended by Suharto. However, the business collapsed in 1975 for several different reasons—mismanagement and Sutowo’s political ambition amongst them—and he was retired. Afterwards, Pertamina’s oil imports and exports were carried out two small oil companies run by two of Suharto’s sons,

Bambang Trihatmodjo and Hutomo Mandala Putra, who were the stakeholders of Perta

Oil Marketing and Permindo Oil Trading.321

The case of the Indonesian oil companies contradicts Hobson’s analysis of neo-liberal political economy in which he argues that a positive role could be played by states or governments. States as well as capital can create monopolies. States should make positive interventions in order to control the domestic arena and in a broader context to maintain international cooperation and to secure peace.322 This is what Hobson believes is “constructive internationalism”.323

transferring it, but that can be a basis for a company’s competitive advantage. The tacit knowledge does not appear in textbooks. 320 Pertamina was not really a capitalist company, it was a state monopoly; it did not grow into monopoly, but was created as one. 321 John Colmey & David Liebhold (24 May 1999). Time Magazine, “The Family Firm”, p. 42. 322 Ibid., p.78 323 Hobson, op. cit., p. 74.

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On the other hand, the Indonesian case accords with the neo-classical perspective, which argues that when the state is repressive and intolerant, its intervention should not be encouraged. As an alternative, this view holds that individuals should determine their own needs and therefore, it is hoped that they will be self-reliant.324 People in EAGA partly share the same experience of coercive states, such as the Philippines under the

Marcos dictatorship and Indonesia under the New Order regime. Competition is unlikely to be free from intimidation in these conditions. Trade or other economic activities are coercive and unfair when social characteristics such as traditional culture and political culture contribute to the growth of political and economic privileges for limited groups. However, in Malaysia and Brunei Darussalam, which both have authoritarian features – Malaysia is almost a one-party state and Brunei Darussalam is a monarchy—the people have not experienced the same level of coercion or intolerance from the state as in Indonesia and the Philippines.

Relations between business and politics in the Philippines are not always based on business professionalism. According to Rupert Hodder, “profession is not a precondition for entry into business or politics. The non-professionals will also weave their relationships strand by strand into partisan support for an attempt at office, perhaps in local government or labour union, or in channels for supplies, marketing and capital”.325

Alejo Jose G. Sison describes cronyism in the Philippines as a matter of ‘political dynasties’ based on kinship ties. He gives the example of the Ramos-Shahani clan based in Pangasinan. When Ramos was the president of the Philippines, his sister Leticia

324 Heywood, op. cit., pp. 92-93. 325 R. Hodder (July 2000). “Business, politics, and social relationships in the Philippines: a gentle

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Ramos-Shahani, and his nephew Ranjit R. Shahani (Leticia’s son) ran as senate and congress candidates in the 1995 elections. Not only that, Ranjit’s cousin, Hermani R.

Braganza, was also a candidate for the first district of Pangasinan in the same year.326

This shows that there is no limit between public and private space and utility. Thus, legal monopoly and cronyism or individual networks in the Philippines are some of the most important factors in determining the course of economic transactions in the country.

The Philippines, especially under the Marcos government, was an example of how the state could not support liberalisation. When Martial Law was declared in September

1972, the Philippines moved into an abusive pretence of liberal capitalism. The Marcos presidency became “the agent of international liberal capitalist organizations” —the

IMF and the World Bank—which pushed the country to implement liberal capitalist principles, which Marcos manipulated to rob the state.

It was in the midst of this all-sided crisis of the postwar Philippine regime that the IMF and the Bank forced Marcos to devalue the peso in 1970 in the name of “liberalization” – a euphemism for opening up the economy to foreign investment and imports. … Ferdinand Marcos won a second term, but in the process he used up the government’s foreign exchange reserves and left the country with few resources to cover a huge trade deficit and to service or pay interest on the mounting external debt. Desperate, the government turned for assistance to the IMF and the World Bank. A “stand-by agreement” was negotiated, but only after the government agreed to a more than 60 percent devaluation of the peso relative to the value of the dollar.327

revolution?” South East Asia Research, vol. 8 no. 2, pp. 98-99. 326 Alejo Jose G. Sison (n.d.). “The Public and the Private in Contemporary Philippine Society, A Study on Political Dynasties”, Instituto Empresa y Humanismo, pp. 1-2. (Downloaded 16 January 2006). 327 W. Bello, D. Kinley & E. Elinson (1982) Development Debacle: the World Bank in the Philippines. San Francisco: Institute for Food and Development Policy, pp. 21-22.

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Under martial law, the Philippine government was powerful in economic management, especially in deciding trade and industrial policies. Before 1972, the government fostered the import-substitution industrialisation (ISI) program. The program intended to encourage Philippine industries to produce more for the domestic market than the global market. It was then changed to export-oriented industrialisation (EOI). The shift occurred under the supervision of the IMF and World Bank, which set a reform package of fiscal, trade and financial reforms. The international business institutions and interests involved pointed to the earlier successes of reforms in South Korea, Taiwan and Brazil.328

The Marcos administration declared the Investment Incentives Act of 1967 and the

Export Incentives Act of 1970. They were intended as foreign investment incentives. An

EPZ was built in Mariveles, Bataan in 1969. Multinational corporations were the targets to use the EPZ, which provides facilities combining “cheap labour, duty free raw material and intermediate goods imports, corporate tax holidays, accelerated depreciation rates on fixed assets, permanently subsidised infrastructure, and ready- made buildings for rent or purchase”.329

Progress of EAGA Economic Activities

Progress of the EAGA economic activities can be explained in terms of policy formulation and implication; study, research and report; programs and projects; the role of private sector in sub-regions transactions; and the EAGA Action Plan 2006-2010.

The following table shows the progress that EAGA made between 1994 and 2006.

328 Ibid., p. 127. 329 Ibid., p. 135

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Table 10. Policy Implication and EAGA Projects (1994-2006)

Sector Policy & Policy Study, Project, Seminar, Progress/ Modification/ Research, Exhibition Result Implication Report (1) (2) (3) (4) (5) All Sectors ADB Integrative *Monitoring Study (1996) & Evaluation Assessment based on: the EAGA Early Action Plan & the Short Term Plan

*The Medium Term Plan and the Longer Term Plan

ADB Technical Prioritizing Assistance (TA) Strategic 2002 Directions for BIMP-EAGA ADB Technical *The Regional Assistance (TA) Technical Completion Assistance Report (2004- (RETA) 2005) provided technical and logistical inputs in configuring

*EABC (EAGA Business Council) EABC is a focal point for private sector involvement, etc. Trade BIMP-EAGA SME Trade and Tourism in the New Millennium : International Seminar & Exhibition, Miri, Sarawak, Malaysia (12-15 October 2000)

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Regional Conference on BIMP-EAGA 2000, Kuching, Sarawak, Malaysia (18-19 October 2000) 2nd Davao Agri- Industrial Trade Exhibition (28 September-1 October 2000), the Davao Trade and Convention Center Regional Agri-Aqua Trade, Tecnology an Tourism Fair (9-14 October 2000), Zamboanga City, the Philippines 10th Mindanao Business Conference (20-22 September 2000), Cotabato City, the Philippines 7th ASEAN Summit (29-31 October 2001 Joint Statement Energy Trade Indonesia- Philippines (12 November 2001), Jakarta, Indonesia WTO, APEC and ASEAN, the first BIMP EAGA CIQS Conference (10-11 July 2002) BIMP-EAGA Senior Official Meeting (7- 9 August 2002), Manado, Indonesia 11th Senior Officials Agreed to Meeting (10-11 clustering the September 2003), working Davao City, the groups into Philippines. four: (1) Transport & Infrastructure; (2) Natural Resources; (3) Joint Tourism Development: (4) SME Developmen/

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CaCapital Formlation BIMP-EAGA Leaders Meeting (6 October 2003), Bali, Indonesia

Philippines-Japan Bilateral Free Trade Agreement (December 2004), Tokyo, Japan 1st BIMP-EAGA 2002 Exhibition and Conference in Malaysia 2nd BIMP-EAGA 2004 Philippines Exhibition and Conference (30-31 March 2004), Manila, the Philippines * 11th BIMP-EAGA Senior Official Meeting

* 8th Ministerial Meeting (September 2003), Davao City, the Philippines 1st Cluster Meeting on Natural Resources Development BIMP- EAGA (1 September 2004), Pontianak, Indonesia * Joint Communique, the 2nd BIMP-EAGA- Darwin Dialogue (22-25 May 2006), Darwin, Northern Territory, Australia

* BIMP EAGA Business Investment Seminar (2006) Uniform Port Brunei & Tariff (UPT) Indonesia Agreement: have granted - The Board of to reduce Directors of the dockage fees

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Philippines for Philippine Ports authority vessels (PPA) passed a 50% reduction of dockage fees in any Mindanao port for vessels from other EAGA ports ADB Aid (from the Japan Fund for Information & Communication Technology) to develop web-based trade & investment database. The project was started in 2004, and aims to help revitalize and sustain economic cooperation in BIMP-EAGA.

The database will be useful for business sector in accessing data on standardized customs-trade, and other cross border trade and investment information Investment The new geo- economic grouping of BIMP-EAGA Agreement: to improve existing investment policies, to attract more Investor The Fund Technical Working Group EAGA (30 May 1996) The Ceremonies of the Mindanao Business Conference (15 September 1996) Seminar, “Investment Opportunities in North Sulawesi and East Indonesia

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within the BIMP- EAGA” (26 September 1996) The Seminar on Promoting Investment Opportunities in East Indonesia Within The BIMP EAGA (26-30 September 1996) Trading Zone to spur development across the back waters of Southeast Asia is luring investor (Greatest Rewards Come With the Greatest Risks) (April 1997) Manila’s Social Reform Agenda (SRA) in Maguindanao, Sulu and Tawi- Tawi (11-17 May 1997) The ASEAN The 30th ASEAN Free Trade Ministerial Meeting Association (24-25 July 1997) The AEGA (15 November 1997) - MOAs, MOUs, JVAs The 30th ASEAN Economic Ministers Meeting and Agreement on the ASEAN Investment AREA (7-8 October 1998) Approved the EAGA Philippine The Securities Money Market Fund (16-17 July and Exchange Operations 1999) Comission Departments (SEC) has (MMOD) approved the Department of Finance (Dof) bid to set up the fund, but it was aborted due to the

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1997 Asian crisis. - Decision BIMP-EAGA making within Finance and government and Investment business sector Conference (25 October 1999) 2nd BIMP-EAGA Orchid Congress (1- 4 December 1999) Rules and Regulations Implementing the Davao City Investment Incentive (1994) Briefer on EAGA Initiatives for Review and/or Improvement of Trade and Investment Policies Integrated Economic Development Program for Mindanao (1999) Join Four–day Sabah International Expo (May 2000) The EAGA to Join the 2nd International Symposium and Exposition on Fruit and Vegetable Expo 2000 EABC Joins ADB Drive for Strategic EAGA SME Development (2000) BIMP EAGA Technical Working Group (12-14 June 2001) The 3rd Mindanao Investment Forum (24-30 June 2001) The 3rd BIMP EAGA Orchid

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Congress (25-26 July 2001) 2nd Presentation Food Pack and Bakery 2001 BIMP- EAGA Mindanao Exhibition Conference (16-19 August 2001) Rapat Koordinasi Pembangunan se- Kalimantan (21-22 August 2001)

- Regional The 2nd ARMM Economic Zone Business Congress Authority (21 August 2003) (REZA) The 11th BIMP- EAGA Senior Officials Meeting (10 September 2003) BIMP-EAGA The ASEAN Existing Business and Cooperation to Investment Summint Promote More (Intra-Asean Growth Active Business Areas and Asean Activities in Integration Efforts) Their Common (6 October 2003) Growth Area ADB Join Leaders of BIMP-EAGA Discuss (7 October 2003) Philippine Business Leaders Spearhead Drive for Family Planning ((March 2004) Record of Discussion Indonesia-Brunei (28-30 September 2004) - Easy Customs * 12th Senior Official Procedure & Meeting and 9th Regulation Permit Ministerial Meeting (25-26 November - Halal Poultry 2004), Balikpapan Industry * Business Forum BIMP EAGA (24

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November 2004), Balikpapan

* First Decade BIMP-EAGA Exhibition (24-26 November 2004) Balikpapan BIMP-EAGA Drafts Roadmap to Boost Focus- Industry * 13th BIMP-EAGA Senior Officials Meeting (17-22 September 2005)

* 10th BIMP-EAGA Ministerial Meeting (17-22 September 2005) BIMP-EAGA Business Council attended the Investment Promotion Seminar (21 November 2005), Tokyo, Japan * 2nd BIMP-EAGA Leaders Summit (11 December 2005), Kuala Lumpur, Malaysia

* BIMP-EAGA Informal Senior Officials Meeting National Secretariats Meeting BIMP-EAGA Summit to be held on the Sidelines Food Processing & Packaging Technology Expo (21-24 June 2006), Mindanao Business Gathering and Dinner 42nd Birthday North Sulawesi - MOU Ministerial Meeting Investment (30 November

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1994), Manado, Indonesia Japan Special Fund Supports Small and Medium Enterprises in BIMP-EAGA Joint Statement Trade and Investment Indonesia- Philippines (23 September 2006), Manado Indonesia Tourism P-EAGA Cheapest Integrated airfare tourism Development Plans (1995- 1996): - Travel taxes * BIMP-EAGA Trade and Tourism Fair in Bandar Seri Begawan (27-31 October 1999)

* 2nd Tourism Strategic Planning Workshop in Bandar Seri Begawan

* Fifth Freedom Traffic Right (FFTR) Brunei & Indonesia

* Visit EAGA Year 2001 (incorporated in the Visit Millennium Year 2002) P-EAGA Third * The Philippine- Action Plan and EAGA Joint Validation of the Tourism P-EAGA JTD Development Cluster Action Plan (11 March 2006) The China-ASEAN Expo (CAEXPO) The Joint Tourism Development Cluster has sumitted to the SOMM (November 2005)

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2006 ASEAN Tourism Forum (13- 21 January 2005) Tourism Loop Comprising Destination in the BIMP- EAGA (24 February 2002) Joint Statement of the 2nd BIMP-EAGA Summit (11 Desember 2005) ADB and the Government of Philippine Working Closely on BIMP-EAGA (14 August 2006) Consortium of Waterfront Developers eye Davao Seaport for BIMP EAGA Tourism 22 January 2003 Joint Tourism Development Cluster Meeting of BIMP- EAGA (17-18 July 2006) People Identification * Increasing Mobility/H areas for requirement uman cooperation in for human Movement highly skilled resources at sectors - labor all levels of intensive economic activities

* Some areas need special training (tourism & service industries) Preliminary Assessment: need to study the policy areas, and the role and contribution of the human

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factor in national and regional development * Direct Sea Increased Linkages between number of Zamboanga City & visitors of Sandakan by Aleson tourist arrivals & Sampaguita Shipping Lines (1994)

* Sea Travel & Services between General Santos City & Bitung (November 1996) Establishment of Cut down direct airlink travel time between Davao City & Kota Kinabalu by Malaysia Airlines (MAS) during 1995- 1997 Special Border The Philippines- *Open border Crossing Malaysia Border crossing Agreement Crossing & Border stations for Patrol Cooperation special border Mechanisms crossing arrangement

*Joint development efforts in the Turtle Island Heritage Protected Area (TIHPA) Mutual Each member Recognition of country agreed Skills Standards to issue a and Certification skills certificate that will facilitate employment and give preferential status to workers for overseas employment in other member countries

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The above table shows that trade, investment, tourism, human movement in EAGA have been growing since the EAGA establishment in 1994. However, the progress is not easy to evaluate, primarily because there was no a regular assessment of each sector or cluster. Thus, there are relatively few measurable outcomes in the right-hand column. In recognition of the lack of indicators of outcomes, the ADB provided a US $ 300.000 grant for a database project, as part of “the capacity building efforts in supporting the

BIMP-EAGA Facilitation Center and the East ASEAN Business Council (EABC)”.330

The table also shows that the EAGA development programs remain significant as a strategy to narrow development gaps in the sub-regions. The objective of EAGA is coherent with the Vientiane Action Programme (VAP) 2004-2010, which was adopted during the 10th ASEAN leaders Summit in Vientiane, Laos in November 2004. The leaders included regional cooperation measures toward the realisation of economic integration and narrowing of the development gap in ASEAN. As one of the outcomes of the VAP, the EAGA leaders formulated targets for narrowing the gaps, the BIMP-

EAGA Roadmap to Development 2006-2010.331 This five-year planning period of

EAGA has the following targets: “(1) increase intra-trade and extra-trade among EAGA focus areas by 10 percent; (2) increase investments in the EAGA sub-region by 10 percent; (3) increase tourism movement in the EAGA sub-region by 20 percent”. 332

In order to achieve the development targets, EAGA has set up strategic objectives as follows: “(1) to promote intra and extra trade, investments and tourism in selected priority sectors – agro-industry and natural resources, tourism, transport, infrastructure

330 Jeoffrey Maitem (22 November 2004). “BIMP-EAGA gets ADB aid”, Investment Indonesia Online, p. 1 (Downloaded 18 April 2007). EABC is the private sector organisation of BIMP-EAGA. 331 See BIMP-EAGA Roadmap to Development (2006-2010), p. 3.

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and ICT, with particular emphasis on SME development in the sectors; (2) to coordinate the management of natural resources for sustainable development of the sub-region; (3) to coordinate the planning and implementation of infrastructure support to economic integration, with active participation of the private sector; (4) to strengthen the BIMP-

EAGA institutional structures and mechanisms for effective implementation of the

EAGA roadmap and action plan”.333

EAGA and Some Existing Problems

1. Export Processing Zones and Growth Triangles

The export-processing zone is different from the form of development proposed in the growth triangle model. It is also less competitive in attracting foreign investment than the growth triangle. This is because a growth triangle consists of several countries, while there is only the host country in an EPZ. Most products that have been processed within the EPZ are for export. The existence of an EPZ affords some advantages to the host, namely foreign exchange earnings and field of occupation.334 A growth triangle that involves several national economies has the advantage of being able “to integrate resources from advanced and less advanced economies, such as capital, technology and human resources with land, natural resources and labour”.335 However, advanced countries do not always integrate their economic abilities with less advanced countries.

The comparative advantage of low-cost labour, for example, is a dark record for both the EPZ and growth triangle. The export-processing zones and growth triangles in developing countries become cheap labour pools that provide cheap producers and distributors for the commodities designed in the advanced capitalist countries. For

332 Ibid., p. 3 333 Ibid., p. 4 334 Thant et al, op. cit., pp.8-9.

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instance, labourers who worked the US food giant Dole’s plantation in Mindanao earned 15 cents an hour, but in Hawaii (where the parent body is located), the workers earned US$2.60 an hour. Those who worked in the Mindanao cannery received 20 cents an hour, while in the US they earned US$2.63 per hour.336

Foreign countries and foreign companies do not only force labour costs down, but they also do not pay tax to the host countries. The regional economic integration models have advanced technology and production processes, but in terms of wages, workers are not competitive because they are totally dependent upon developed countries that monopolise the world market.337

While EPZs are different from growth triangles, both have exploited international capital mobility.338 Gerardo Sicat, head of the National Economic Council during the

Marcos government, makes a similar argument about the exploitation of domestic markets and minimum wages. His criticisms were addressed to the Marcos technocrats who promoted export-led industrialisation, liberalisation (including comparative advantage), and foreign investment through the establishment of Philippine Kaohsiung

(EPZ). He called the promotion “modern labour laws”, which caused wages, that were already low, to fall even further.339

335 EAAU, op. cit., p.11-12. 336 IBON Foundation Inc. & Bagong Alyansang Makabayan (November 1998). “Alternatives to Globalization”. Proceedings of an International Conference on Alternatives to Globalization, Tagatay City, Philippines, pp. 16-17. 337 Ibid. 338 EAAU, op. cit., p. 9. 339 Bello et al., op. cit., p. 135.

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Milton Friedman said about unemployment that “there was a natural rate of unemployment that was beyond the ability of government to influence”.340 His statement was intended to discourage government policy designed to solve the problem.

Furthermore, government policies could also be the source of unemployment, and

Friedman’s argument is used as a justification for the discriminatory policy in dealing with the unemployment problem.

The case of illegal migrant workers in Malaysia is an example of the implications of this exploitation of low wages. Malaysia has more than 700,000 registered foreign workers from Bangladesh, India, Indonesia, the Philippines and Thailand. The government decided at the end of 1990s to reduce the number of Indonesian workers by half. The clashes that had occurred between Malaysian police and some of the Indonesians workers in January 2001, was one reason for the decision.341 However, the Malaysian

Employers Federation (MEF) asked the Malaysian government to reconsider its decision because they still needed Indonesian workers. In terms of costs (airfare, accommodation and salaries), Indonesian workers are cheaper than workers from other countries, such as Turkmenistan, Uzbekistan and Kazakstan. The Malaysian government decided in 2002 that the minimum wage for a worker should be approximately RM800 per month, including the airfare. Indonesian labourers usually agree to the amount because the Indonesian government is not consistent in applying a minimum wage specification.342 The Indonesian minimum wage is set differently from one province to the other. It is based on local wage rates per day or hour. The

340 Heywood, op. cit., p.93 341 ASEAN Law & Regional Integration (7 February 2002). “Malaysian Government to Take Charge of Hiring Foreigners”. 342 Tempo Interactive (16 February 2002). “Malaysia Still Needs Indonesian Workers”.

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Indonesian government tries to ignore the issue of labour migration to Malaysia and other countries.

From political and security points of view, agreement about hiring foreign workers based on government-to-government schemes is reasonable because the Malaysian and

Indonesian governments have ignored the issue up to now, especially the issue of illegal workers. Malaysian employers and the migrant workers do not find anything “unfair” about the illegal transactions. This is simply because local companies benefit from the low-payment towards the labourers. They also have no responsibility to provide pension payments. On the other hand, the workers can earn better incomes than in their own countries. The foreign labourers work in several different industries, such as the garment, electronic, crude palm oil, and glove production industries. Some also work as housekeepers or helpers, and in the sex industry.

From the workers’ perspective, the policy is unfair because they are the first to be blamed for the problems of ‘illegality’ and wage levels. However, this illegal business includes the agents or employers who have been recruiting them based on illegal procedures. For instance, under-age workers are made up, to convince immigration department that they are older; their ages are changed on the documents and they are provided with forged passports. The illegal trade in undocumented workers has been one of the transnational crimes occurring across the borders of EAGA and ASEAN.

Organisations behind the clandestine or illegal movements of people have ways of recruiting through promises of non-existent jobs, religious movements, match-making

(via e-mail or personal introduction), adoption and foreign training or internship. The recruiters’ targets are mostly women, who are forced to be prostitutes or domestic

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helpers later on, while the foreign training method recruits students to be trained overseas, where they then work without the benefit of a minimum wage or standard working conditions.343 Unfortunately, EAGA was not designed to address labour issues.

The EAGA planners only considered the acceleration of development program through trade and investment, without thinking any further about how to improve the skills of labourers so that they might compete better.

Organised crime groups have been involved in trafficking people, through border areas, producing fake documents and working permits, fiancée visas, smuggling people by chartered plane, family tours, cultural exchanges, religious pilgrimages, adoptions and foreign training/internships.344 There is a belief that police, military and immigration officers are involved in these crimes, protecting such transactions against the bans.345

According to Dwyer, an ideal perspective on development would link the theory and the real world. However, the practice is usually different from the ideal perspective in which policy development theory determines development planning in order to support the real world.346 EAGA regional development planning is influenced by a liberal perspective in order to justify the world system that reinforces the status quo of international capitalism.

343 Anselma S. Avenido, Jr. (1999). “Illegal Recruitment and Exfiltration: A Philippine Perspective”, Joint Meeting of CSCAP Working Groups, Wollongong: Maritime Cooperation and Transnational Crime, November, pp. 4-8. 344 Ibid., pp. 8-12 345 Ibid., p. 9. The most common exfiltration methods are the use of commercial planes carrying spurious travel documents provided by organised crime groups. Individuals now rely on criminal syndicates to smuggle them out of the country because of strict immigration and border controls. The syndicates procure fake income tax returns, birth/death certificates and bank account statements. They also bribe corrupt immigration and police personnel to ensure the departure of their clients. 346 D.J. Dwyer (1990). South East Asian Development. Essex: Longman Scientific and Technical, p.51. See also Jonathan Riggs (2003). Southeast Asia The Human Landscape of Modernization and

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Critical economic disparities between nations potentially affect the problem of poverty.

Although poverty has several different classifications, unemployment is one indication of poverty.347 Labour exploitation is similar to semi-unemployment, because workers have incomes, but the incomes are not enough to cover daily costs. However, the problem of unemployment cannot be solved because there is an assumption that the problems are tolerable to some degree. Regarding the comparative advantage in low wages, EAGA must be blamed for aggravating poverty.

Mindanao, the P-EAGA, has the greatest problems of poverty, poor psychical infrastructure, unemployment and lack of access to education and health services. Of the population of Mindanao, 55 per cent are considered poor and two thirds live in rural areas.348 The assessment of development programs does not only refer to physical infrastructure such as buildings, freeways and shopping malls. It must also be seen from the income and cost perspective. An income and expenditure survey in 1991 of South

Cotabato (Region XI, in Southern Mindanao) figured that an average family income was P41,893 of which they spent P35,738 per year. However, around three-fourths of the total number of families (approximately 1,580 families) had incomes below the average. The estimate for living costs showed that only fifteen per cent of families were able to manage their daily costs of P184.22. The next figure was even worse: “only 34%

Development (2nd ed.), London: Routledge. 347 Arsenio M. Balisacan & Shigeaki Fujisaki (eds.) (1999). Causes of Poverty, Myths, Facts & Policies, Tokyo: University of the Philippines Press, pp. 52-55. Poverty measurement can be income-based or outcome-based. Income-based measures are defined in terms of having enough income to spend on a specific minimum amount of food and non-food basic items of expenditure. Government or official estimates quantify a head-count ratio; the percentage of the population or families whose annual per capita incomes are below a critical amount of income necessary to satisfy a minimum amount of nutritional requirements (2,000 calories) and other basic needs. Outcome-based measures focus on the absence or lack of some minimum acceptable level of basic needs or on the lack of some basic capabilities to function. Poverty is seen as deprivation occurring in critical dimensions other than lack of material means, such as in capabilities and opportunities. UNDP uses the Human Development Index to measure three basic outcomes – health (life expectancy); knowledge (literacy); and standard of living (real per capita income). 348 http://www.usaid.gov/pubs/cp98/one/countles/ph.hmt (7 July 2006).

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of total number of families shared 65% of total income, while the poorest 28% shared only 8% of total income”.349 In 1994, daily living costs increased to P258, but most wage salary earners did not get half of that amount.350 A woman who worked on an asparagus plantation in Bentung, Sulit near General Santos City, said that she earned less than half of the daily amount that families spend.351 The US Company Dole is the owner of the plantation. It is one of the most prominent companies in the Philippines, especially in juice canning.352

Dole Philippines Incorporation (or Dolefil) started in 1963 with more than 10,000 hectares of pineapple plantation in South Cotabato. The Castle & Cooke (C&C)

Company is Dole’s parent body, and is the biggest US plantation (or mega-plantation) in Mindanao. 353 Their pineapples were exported to Japan. In 1966, C&C joined with the Standard Philippine Fruit Corporation (Stanfilco), the pioneer in banana exports.

Most of the bananas are going to East and West Asia. Although Dolefil merged with

Stanfilco in 1980, Stanfilco is still used for the banana operations. In the 1970s, Dolefil processing facilities expended into tuna, prawns and shrimps, asparagus, guava, papaya, and cut flowers. Dole was a major Mindanao producer or investor before EAGA. In

1997, Dole closed some of its processing facilities, the dried fruit and nut divisions, due to market uncertainty, but EAGA did nothing to promote Dole. In fact, it also decreased.

349 IBON, (1995) Philippines Profile (1st ed.). Region XI Southern Mindanao, p. 99 350 IBON (1995) “The Economy in 1995 and 1996: End of the Climb and Going Down?”, p. 10. 351 Fieldtrip (April 2000) to the Dole pineapple and asparagus plantations, Bentung, Sulit. It is located approximately 30 minutes by car from the southern part of General Santos. 352 Fieldtrip, Bentung, Sulit, Southern Mindanao (25 April 2000) 353 IBON (1998). “Contract Growing, Intensifying TNC Control in Philippine Agriculture”, pp. 29-34. C&C engages in sourcing, distribution and marketing of high-quality branded food products through a number of wholly owned subsidiaries and divisions. It is one of the world’s largest companies, which markets fresh food products. Its food operations are consolidated in the Dole Food Company through four operating groups: Dole Fresh Fruit, Dole Fresh Vegetables, Dole Packaged Foods, and Dole Dried Fruit and Nut Company. Dole Fresh Fruit includes pineapple, bananas, grapes, apples, oranges, lemons and other deciduous, tropical and citrus fruits.

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Dolefil pineapple and banana lands cover over 20,000 hectares. Its land status is includes leases, farm management contracts, and contract growing arrangements.

Pineapple is the second largest product after coconut in SOCSARGEN or the South

Cotabato, Sarangani and General Santos areas. The volume and area of its production are 397 metric tons from 13,653 hectares.354 Dolefil pineapple is the biggest producer because its plantation covers more than half of the whole SOCSARGEN area.

2. Corruption and the Vulnerability of EAGA

The on-going internal problems of most EAGA countries have adversely affected the regional project to some degree. Political and economic problems have plunged individual countries into more serious situations. Corruption is one of the biggest challenges in terms of capital allocation and poor infrastructure. It is rampant among public servants, the corporate sector and within society.355 Although corruption has no direct impact on the regional development process, it is a potential risk. When corrupt politicians, officials and business people become a “web of criminal groups”356, it is hard to determine that development programs are “free” from dishonest interests. The

EAGA development program is also at risk because governments and business people have significant functions as facilitators and drivers of the cooperation. However, most of them have been accused to be some of the most corrupt states, such as Indonesia and the Philippines. Corruption has become common practice, which has an impact on law

354 IBON (1995), op. cit., p. 102. 355 See National Indicative Program 2005-2006 Philippines Country/Region (accessed 14 March 2007). 356 White et al, op. cit., p. 236.

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and order.357 It is difficult, perhaps impossible, to abolished because it has become systemic.

According to the ASEAN Secretariat, growth triangles face problems of lack of capital, complex decision-making processes, inadequate infrastructure, and policy coordination, and basic lack of understanding of the concept.358 The EAGA Development Strategy invites the private sectors to manage the process of “facilitative policy framework, adequate physical infrastructure, and effective commercial infrastructure”.359 The underlying problems remain acute, but the reality appears even more problematic. The strategy has engaged with the problems, however, the situation is critical if there is no indication of understanding of the culture of corruption in most EAGA countries.

Corruption is the main factor in the reality of poor infrastructure and lack of policy coordination.

Corruption applies to transactions between public servants and private persons to gain privileges or special treatment for the participants. These transactions include bribery, extortion and nepotism.360 Corruption is related to history, culture, and the specific circumstances in which it exists.361 Therefore, there are various ways to explain the case from one country to another. Corruption in the Philippines and Indonesia is explained differently. Political and economic conditions in Indonesia and the Philippines have been influenced by corruption on almost every level. However, corruption in the

357 See Country Strategy & Program Update 2002-2005: Indonesia/ADB (October 2002). 358 ASEAN Secretariat (1997). ASEAN Economic Co-operation Transition and Transformation. Singapore: Institute of Southeast Asian Studies, pp. 153-154. 359 http://www.brunet.bn/org/bimpeabc/welcome.htm (Downloaded 21 January 2000). 360 S.H. Alatas (1999). Corruption and the Destiny of Asia. Selangor Darul Ehsan: Prentice Hall, pp. 6-7. 361 Ibid., p.1.

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Philippines is based more on its traditional culture, while the New Order regime in

Indonesia created corruption from 1967 to 1998.

According to Alatas, there are three stages of corruption. In the first stage transactions are restricted to certain elements of government and corporations. The “informal” deals do not affect society, people can still live without participating in such transactions. In other words, such corruption is limited to upper circles of government and corporations.

At the second stage, however, society is forced to become involved in the system. This is where the black market appears. Alatas mentions train and airplane tickets that can be purchased more easily on the black market than the regular market. Illegal trade among people in border areas is another example of the black market. BIMP-EAGA eased cross-border trade regulations,362 but it also eased illegal trade, particularly in illegal workers or undocumented workers from Indonesia to Malaysia, and arms smuggling from the Philippines to Indonesia. Some agricultural products, such as corn and rise have been illegally exchanged between North Sulawesi and Mindanao.

The third stage is when corruption causes greater corruption. At this stage, corruption becomes rampant and the system tends to become corrupt.363 The condition of corruption at the second level systematically causes the third level, where corruption becomes routine for the whole society, including government, business, and the military. The AFP is one of the corrupt institutions in the Philippines. Some military personnel have been charged for inflating military budgets, providing vague documents

(for example to postpone retirement) and involvement in illicit drug trafficking and smuggling. There is a label—narco-politics—for military personnel who collaborate

362 Romeo A. Reyes (19 March 2005). The Jakarta Post, “Fast tracking ASEAN Economic Integration in BIMP-EAGA”.

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with politicians to smuggle narcotics in or out of the Philippines. President Arroyo was also accused of corruption in relation to her husband’s business. Because of that, her opponents tried to impeach her before the last presidential election in the Philippines in

2004.

Corruption is identical with money politics, especially in elections at both local and national levels. Elections are a corrupt institution because of the money that candidates have to spend in order to buy votes. In the Philippines, for example, to be a barangay

(village) captain, a candidate must spend five million pesos or more. The money comes partly from donations and illegal gambling. A barangay population is usually between

2,000 and 5,000 people. The LGU Code of 1991 did not decide on the compensation for barangay officials specifically, including compensation for barangay captains

(punong). However, they can earn around 12,000 pesos per month.364 It is clear that the money they earn after winning the election is greater than the amount that they must spend before in order to get there. However, in winning the election, they must make compensation to the people and institutions, including businesses, from whom the money partly came. Similar conditions prevail in Indonesia. In the 2005 district election, candidates for city mayor, for instance, had to spend between one to three billion rupiah.365 Certain persons or institutions that “supported” the candidates would be compensated later. Malaysia faces the same problem at election time, as Kamaruddin

Liusin states, the UMNO political party leader had to remind party members to stay away from corrupt practices during the election.366

363 Ibid., pp. 17-19. 364 Patricio P. Diaz (12 July 2002). In Mindanews. “Election: Institution of Corruption”. 365 1 million rupiahs is equal to almost US $ 12,000. 366 Kamaruddin Liusin (27 April 2004). New Sabah Times, “No Money Politics: Musa Sabah UMNO

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Corruption is the central issue in EAGA (and also in ASEAN), but by its nature is very difficult to document, so there are no concrete examples which can be used to measure any direct impact the corruption on the limited progress of the EAGA economic activities. The problem of corruption in most EAGA sub-regions is related to the practice of crony capitalism, which is relatively dominant in their political and economic system. The existence of crony capitalism gives possibilities for the state’s system to be more corrupt. For example, corruption is connected to the Philippine’s role in launching the proposal for sub-regional economic cooperation in the eastern part of

ASEAN countries. Widespread unscrupulousness in the country could limit the benefits of EAGA to small number of crony capitalists. If the costs of corruption cannot be reduced, then trade and investment policies and practices will clearly be influenced and directed to their crony interests. The Philippines, the “prime mover” of EAGA, will be unable to continue the development programs in its “undeveloped” areas of Mindanao.

Corruption in Indonesia is also very problematic. It is the reason for the on-going crisis there, the reason that Indonesia is the only country in the region that has not yet recovered from the financial crisis of 1997. Economic reforms, including banking and corporate sector reforms, and the restoration of international capital flows, shows that

Indonesia had made little progress in implementing reforms in all sectors, compared to

Malaysia, the Philippines Thailand, and South Korea.367

From the late 1980s to the early 1990s, Indonesia, Malaysia and Thailand were rampant with corruption scandals. Although economic growth increased rapidly, the benefits only reached the business people and political leaders who were involved in crony

Chief reminds members to stay out of corruption during party pools”. 367 Pradumna B. Rana (February 1999). East Asian Financial Crisis- An Agenda for Economic Recovery, Asian Development Bank: Economics and Development Resource Center, p. 12.

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capitalism and rent-seeking. The cost of corruption also hit the Philippines. 368 National development aims were constrained because of corruption, rent-seeking, the patron- client system and the politics of privilege.369 The Philippines has the greatest number of anti-corruption measures in place among the Asian countries. Anti-corruption bodies have been established depending on the political leadership of the time. The Marcos government created the Sandiganbayan (special antigraft court) and Tanodbayan

(ombudsman) in 1973, while the Aquino government created the Presidential

Commission on Good Government in 1986 and the Presidential Committee on Public

Ethics and Accountability in 1987. Tanodbayan was reborn in 1988. The Ramos presidency established the Presidential Commission against Graft and Corruption in

1994, and the Inter-Agency Anti-Graft Coordinating Council in 1997.

Although the Philippines has several anti-corruption agencies, it has failed to reduce corruption because neither the government nor the citizens make them work. This is because of “people’s way of life,”370 people are used to being corrupt. Corruption in the

Philippines is deeply rooted in a culture of what Filipinos call utang na loob or debt of gratitude, and patterns of trust and obligation.371 As traditional values, the trust and obligation have positive and negative sides. However, the ruling class has manipulated these values. Traditional patterns have been devastated because of feudalism. The

Spanish legacy was to divide the nation into two major groups of people: landlords

368 Gerald Caiden (2001). “Corruption and Governance”, in Gerald Caiden & O.P. Dwivedi & Joseph Jabbra (eds) Where Corruption Lives. Connecticut: Kumarian Press, p. 21. Public institutions’ loss of credibility, including the status of public officials; lack of trust in public institutions; loss of public ethics and dishonest government are some of the costs of corruption. 369 Mushtaq Khan & Jomo Kwame Sundaram (eds) (2000). Rents, Rent-Seeking and Economic Development Cambridge University Press, p. 209. 370 John S.T. Quah (2001). “Combating Corruption in the Asia Pacific Region”, in Caiden et al (eds), pp. 135-136. 371 Wurfel, op. cit., pp. 33-34.

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(owners of haciendas) and tenants.372 The landlords are usually the most powerful group in society. However, the landlords take no responsibility for the tenants, who use to have no choice but to depend on the landlords. In other words, the tenants have always existed for the benefits of the landlords.

The power of the haciendas exists in the political arena. The landlords are a very important influence on the political system. People who have little political awareness and are economically vulnerable are the target of the hacienda owners. Their domination in politics is much more stable where money politics and vote buying are common. The phrase “money is everything” is highly acceptable. In the election process, for instance, the landlords who have most money use it to demand more power by buying more votes in order to be the winner.

The culture of corruption is one possible reason for explaining the constraints within

EAGA operates. For example, poor physical infrastructures is not because of lack of capital, but more because of the extensive corruption that results in mismanagement of development funds or in the determining of construction priorities. General Santos City international airport, for instance, was built in 1996, but the operation of services was very limited. Until the year 2000, it was only used once for a commercial flight from

General Santos City to Davao City, and twice for cargo services carrying fish products to Manila.373 People who had lived in the area previously were transferred to temporary places in order to build it. Demolitions are constant in the name of development programs.

372 J. Putzel (1992). A Captive Land, the Politics of Agrarian Reform in the Philippines. New York: Monthly Review Press, p. 45

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Around six years after the formation of EAGA in 1994, roads between the two main cities, Davao City and General Santos City, which are as the major facility for public and trade transportation, remain poor. These roads are only two-lane. Some parts of the roads around Mt. Apo, are being redeveloped, which causes road congestion during the dry season. Presumably it is even more difficult during the rainy season.374 The

Philippines is the leading country in working groups of construction and construction materials, as well fishing cooperatives. It is ironic that the country is unable to provide the best road construction to support the EAGA activities within its own areas.

Lucio Tan, as the single biggest stockholder of Philippine Airlines (PAL), is an example of business and political relations, especially in terms of the bribes that the company pays the Securities and Exchange Commission (SEC) in order to protect it from being disqualified. He is one of the most prominent businessmen in the Philippines, who is the stockholder of 40 companies, including PAL.375 According to an SEC estimation in

1998, Tan had capital of around US$ 8 billion, including a tourism partnership between

PAL and Century Park Hotel groups. He is also listed as a stockholder of nine companies associated with the Century Park Hotel located overseas.376

Besides Lucio Tan, a number of Filipino businessmen are involved in the Philippine tourist industry, based on the SEC survey of 1998. Magnate John Gokongwei had assets of around P26 billion (approximately $US1billion in 1996); Henry Sy owned P10 billion in the hotel and gaming industry; Andrew Gotianun and Filinvest Development

Corporation is the country’s second biggest real estate developer, with capital of P10

373 Fieldtrip (April 2000), General Santos City, Mindanao, Southern Philippines. 374 Trip from General Santos City to Davao City (28 April 2000). 375 R. Hipolito & D.B. Eviota Jr, (1996). A Profile of Philippine Tourism Industry. Davao City: Initiatives for International Dialogue, p. 76

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billion. Ayala Land Inc. has long been the Philippines’ top property firm. Rebecco

Panlilio, John Robert Soprepena, William Gatchalian, and former Senator Juan Ponce

Enrile run their business in luxurious accommodation (resorts). Soprepena is also the prime developer in the eco-tourism industry, while Gatchalian is the majority holder of

Air Philippines.377 The list of Filipino conglomerates in the business of tourism covered some of those who could survive before the financial crisis hit Asia in 1997. Most remain in their position, including Tan, Ayala and Gatchalian.

The merger of the Philippine Long Distance Telephone Company (PLDT) with the

Hong Kong First Pacific, PCI-Bank (the sixth largest financial institution in the country), and the Equitable Banking group during the Estrada administration is another example of personal relationships in politics and business. Former President Estrada allowed several corporations to control the biggest national telecommunications firm.

His close friend Mark Jimenez was the person he trusted to deal with the PLDT case. A criticism of the president was that Jimenez who was known as a “deal-maker” or power broker, crony, agent and also a close advisor of the President, facilitated the PLDT transaction from which he earned $US50 million for his own benefit. Estrada remained loyal to Jimenez although the latter was linked to some stories of conspiracy, tax dodging and illegal contributions to several different candidates from the Democrat

Party in the US. One of the candidates was former American President, Bill Clinton.378

Estrada’s attitude illustrates how significant are the individual networks in business. As a businessman, Jimenez gained economic and political privileges from his connection with Estrada, who also protected his friend’s illegal activity in the US. The accusations

376 Ibid., p. 115 377 Ibid., pp. 113-115.

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of illegal activity against Jimenez caused anxiety in the US, especially regarding the

VFA, which had just been approved by the Philippine Senate. The VFA is significant for US regional interests; it gives the US military access and facilities, including joint operations with the AFP. If President Estrada was disappointed with the US accusations, he could probably have persuaded the Senate to cancel its approval and disrupt the VFA. One reason for US apprehension was President Estrada’s strong refutation of the criticism of Jimenez. From his own point of view, Jimenez was a national asset. President Estrada did not move from his statement defending him.

3. Corruption and Poverty

Poverty worsens when people become more and more abusive to one another. It seems that they deserve to be cheated. Corruption remains critical when no effort is made against it. Moreover, because corruption is a crime, those ordinary people involved also become criminals, just like the politicians, big businessmen and the military. One crime of exploitation is the informal or underground economy which operates because the formal economy is unable to promote a fair distribution of wealth.

The informal economy offers various opportunities for trading (or “swapping”) goods and services and for doing useful work. But importantly, the overlapping of informal economy shading off into illegality means that some of these opportunities are likely to be illegitimate. If one buys goods in an illegitimate context, some of what is bought is likely to be the product of serious crime. The items purchased may simply be bulk purchases or wholesale goods, but they may also be goods stolen from legitimate workplaces or the products of burglary or breaking and entering.

People come to the decision to commit an illegal purchase with more or less openness, more or less willingness, and more or less affinity or aversion. Although people are free to make choices in this context and are not compelled to act in any particular way, past experience of perceived rejection by the formal, regular economy, and rejection or

378 Asiaweek (2 July 1999), p. 22.

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alienation from its supposed welfare safety net, may provide sufficient justification to neutralise any initial moral qualms.379

The culture of corruption is also believed to be a source of poverty. The one-sided perspective of being loyal to or respect of rich people pushes poor people into absolute poverty, especially when the exploitation of the poor continues. Because of Christian theology, poverty has been misinterpreted. Christianity has dualistic thinking and hierarchical patterns, especially among Catholic theologians, such as differentiations between “subject and object, superior and inferior, spirituality and carnality, mind and body, culture and nature, and men and women”.380

Nur Misuari, former governor of ARMM, was also charged with corruption. When he was the governor, he spent most of his time outside the region (or the Philippines). The

ARMM is one of the poorest areas in Mindanao.381 It covers four provinces are known as the most undeveloped areas within the P-EAGA – Basilan, Jolo, Sulu and Tawi-

Tawi. Some of his former supporters claimed that the poor conditions were because of his misconduct in allocating development funding.382 Farouk Hamid replaced Misuari at the last referendum in 2002. However, we cannot predict the end of corruption under the new governor since corruption is rooted in Filipino traditional culture.

The conditions of corruption make it much more difficult to stop the cycle of structural violence. The system only advantages the politicians. In the EAGA countries, systems

379 Stuart Henry (1991). “The Informal Economy: A Crime of Omission by the State”, in Gregg Barak (ed.) Crimes by the Capitalist State, An Introduction to State Criminality, New York: State University of New York Press, p. 261 380 Lynn M. Kwiatkowski (1999). Struggling with Development, The Politics of Hunger and Gender in the Philippines, Quezon City: Ateneo de Manila University Press, p. 264. 381 http://www.bangsamoro.com/mvoice/my_101905_a.php (19 October 2005). 382 Interview (April 2000). Attorney Mechol Sadain, Islamic Center, University of the Philippines, Quezon City

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of corruption are benefiting crony capitalist groups including business people, especially big business. Although the private sector is the motor of EAGA, at the same time they are also the once benefiting the most from it.

It is not only the Philippines that must face rampant corruption, but also Indonesia.

High-level corruption in New Order Indonesia began to become obvious in 1967 when bank officials took bribes or commissions for loans that they gave to certain groups, including the bank owned by the armed forces.383 The internal situation quickly worsened due to the emergence of Cendana cronyism.384 The Asian crisis of 1997 that hit Indonesia particularly hard, created more negative economic indicators such as decline in exports, low trust in government and some private financial institutions, a slowing of investments and increase in prices.

Among the EAGA member countries, only Brunei has sufficient capital and involves the whole country in EAGA. The rest is an “undeveloped” area with relatively limited capital. Indonesia and the Philippines are unable to participate in the EAGA because of the extreme corruption that results in a lack of capital. In terms of capital allocation,

Brunei is the biggest investor within the EAGA, followed by Malaysia.

Economy and Armed Conflict

Armed conflict has had the impact of decreasing Mindanao’s economic activities.

According to the chairperson of the Mindanao Business Council, Joji B. Iligan, between

January and April 2000, “Mindanao did not make any new investment because of the

383 Alatas, op. cit., p.2. 384 Cendana is where former President Suharto and most of his children live. Since lobbying was also done in his house, Cendana became a bad image of being connected to the corruption, nepotism and collusion.

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clashes”.385 The fighting lost Mindanao traders around one billion pesos. One clash occurred between the Philippine military and the MILF in Central Mindanao, and as well as, there were kidnappings by the ASG on Basilan and Sulu islands, in April 2000.

Indonesia is not a hospitable place for doing business due to “separatist movements” and religious or ethnic conflicts in several provinces, especially in the growth areas, such as in Papua, Ambon and Poso. After the fall of Suharto, Indonesia became a very high-risk country. Domestic politics is influenced by elite conflicts between the executive and legislature. The democratisation process seems then to be the source of the on-going conflicts. Trade and investment are dampened. Some foreign investors have shifted their business to other countries, such as to Myanmar, Vietnam, and China.

The most recent event that has devastated EAGA’s activities has been the global war against international terrorism, which in the region has included on-going combat against the ASG. Although there have been several attempts to resolve the Mindanao conflict, an end to it remains distant first because of the different perceptions of the government and the Moro people about development policy, and secondly because the conflict has regional and global impacts.

For small business enterprises, however, there are still economic opportunities even during the conflicts. Limited capital means that costs are not high. In addition, trade is ‘ natural’ in the sense that it cannot be stopped completely; where there is supply and demand, there will always be producers and consumers. The conflicts have brought not only costs for the EAGA countries, but also benefits. For instance, during the first and

385 See Mike Frialde The Philippine Star (11 May 2000). “Mindanao traders lose P1 billion due to fighting”

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second year of the Asian crisis 1997-1999, Indonesian farmers in Sulawesi provinces experienced a boom in some agricultural products, such as vanilla, nutmeg and cloves.

EAGA and Wider Regional Factors

EAGA activities have been disrupted by other, wider regional factors. The first is that the growth triangle is not a concept original to Southeast Asia. It was adopted from the

Southern China model. The failure of sub-regional economic cooperation in EAGA comes from an inability to modify the concept for the region. The ASEAN Secretariat described the failure as an improper understanding of the concept of growth areas at the sub-national level, or “the perception of unequal benefits”.386 The misperceptions of the concept are caused by diversity in regional characteristics between EAGA and Southern

China. Growth triangles have key characteristics - geographical proximity, economic complementarity, political commitment and infrastructure.387 However, these characteristics are difficult to assess, especially with EAGA.

In terms of geographical proximity, the Southern China growth triangle is more strategic than EAGA. For example, a train from Shenzhen province to Hong Kong takes only 45 minutes. It takes a similar time to get to Fujian province from Taipei through the Taiwan Strait.388 The success story of the Southern China model is related to the close locations and sufficient infrastructure and transportation facilities. EAGA, in contrast, needs to re-examine most of the key characteristics of growth triangles, especially in regard to history and culture, political system, and economic opportunities.

386 ASEAN Secretariat (1997) op. cit., p. 153. 387 EAAU, op. cit., p. 9. 388 Thant et al, op. cit., p. 40.

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Although EAGA countries are relatively close to each other, infrastructure and transportation facilities remain inadequate, especially compared to Southern China.

North Sulawesi shares a border with Mindanao and Palawan. There is sea and air links between the two areas, including direct flights through only twice a week between

Davao City and Manado, compared with daily flights from Singapore to Jakarta or from

Hong Kong to Shenchan. Before EAGA, a flight from Manado to Davao City via

Jakarta took about eight hours and cost around US$1,070 return but since EAGA, the flight takes only 70 minutes and costs around US$260. The Pan-EAGA Multi-Modal

Transport Network System also manages some sea routes, such as the ferry from

General Santos City to Bitung (once a week), and Manado to Davao (four times a week), there are also regular shipping services between Sandakan and Zamboanga City and between Labuan and Cotabato City.389

Most EAGA countries have had port and airport facilities since 1994, and some have had ports since 1993, such as in Pontianak, Balikpapan, Samarinda, Tarakan and Bitung in Indonesia, and Davao, General Santos and Zamboanga in the Philippines.390 In 1999, the Malaysian company, Trans Pacific Air, planned to run flights from Kota Kinabalu to

Zamboanga City, with a travelling time of 80 minutes. The flights are shorter by around

12 till 15 hours than the ferry between Kota Kinabalu and Zamboanga City.391

The Philippines has some investments in Indonesia, such as in coconut factories, the food industry, resorts and tourism, and in fishing industry technology in North

Sulawesi. PT Jaka Sakti Buana is a joint venture between the Philippines and Indonesia that has been running a coconut factory in Airmadidi, North Sulawesi. There is also

389 Leaflet from MEDCO (April 2000) 390 ADB, op. cit., vol. IV p. 5.

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Likupang Resorts near Bitung, North Sulawesi, which is also a joint venture with the

Philippines. However, trade between the two countries is more like buying and selling rather than real joint venture, because Indonesian traders are still unprofessional, have limited networks, and lack sensitivity about consumer tastes. This is the reason why

Indonesia and the Philippines base their relations on a “barter” mechanism. Therefore,

Mr. Taufan Adityawarman, a Consul, suggests that Indonesia should enter more real joint ventures rather than just the buy-sell schemes. Indonesia also needs to increase it shareholdings.392

Compared with Southern China transportation, EAGA needs improvements both in access and services to attract foreign investors. A proposal from the Trans-Borneo and

Mindanao Railway Project was approved in 1999 to link roads between Kalimantan and

Mindanao. The project covers 3,640 kilometres of road in Borneo to connect the cities of Samarinda, Banjarmasin, Palangkaraya and Pontianak of Indonesia, Kuching, Miri,

Bintulu, Kota Kinabalu, Tawau and Sandakan of Malaysia, and Bandar Seri Begawan in

Brunei Darussalam. In Mindanao, it covers a total road length of 570 kilometres linking the cities of Davao, General Santos, Cotabato, Pagadian and Cagayan de Oro. The project that is proposed by a German consultant is still under construction and is planned to be completely operational by 2010.393

Besides geographical proximity, cultural affinity is also a characteristic of growth areas.

It can create better understanding and maintain business relationships.394 However, it is only a subsidiary factor especially for small investors because transactions are based

391 EAGA News (1998). 4th Quarter, Issue 7, p. 4 392 Mr. Taufan Adityawarman, Interview (12 April 2000), the Indonesian Consulate General, Ecoland, Davao City, Mindanao. 393 Ibid., p. 4.

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more on personal relationships. For larger investors, cultural similarity is not important since they rely more on bargaining power. This is what a survey of Hong Kong investors showed in the 1980s.395 The situation is totally different from that of EAGA.

Most EAGA countries have pluralist societies in terms of ethnicity, race and religion.

For example, Indonesia, Malaysia and Brunei are closely associated with Malay culture.

However, the Philippines has many influences from Western cultures, ie Spanish and

American cultures. Regarding ethnicity, Malaysia has three different main groups –

Malay, Chinese and Indian. Indonesia has even more than Malaysia, aside from these three groups, there is also the “indigenous” ethnic of Java, Bali, Sumatra, Kalimantan,

Sulawesi, Maluku and Papua. Pluralistic societies create more cultural constraints. Thus, cultural affinity is irrelevant in engaging business relationships within EAGA.

One of the ways that EAGA self-consciously tried to play on ethnic and religious regional affinities was regarding trade in halal food products. Such products are one alternative for future EAGA niche marketing. The first exhibition and forum of halal food was held in Brunei in April 2000, and Brunei will be the centre for the halal products and services. The EAGA Business Council (EABC) planned strict processing of halal products and includes experts from Islamic states, such as Malaysia, India,

Indonesia, Egypt, Saudi Arabia, and non-Islamic states, such as Australia, the

Philippines and Singapore. The EABC received financial approval for this from the

Islamic Bank of Brunei.396

394 EAAU, op. cit, p. 10. 395 Thant et al, op. cit, pp. 40-41. 396 “EABC also to Host International Exhibition and Forum on Halal Food in Brunei”, WeekendReview Manager (9 February 2000). p. 3, and “Halal Exhibition and Forum Gets State Backing”, WeekendReview Manager (18 February 2000). p. 3.

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Economics and religion had no relation in the case of one demonstration against local government in General Santos City in April 2000. The local government sold land to a

Brunei investor to build offices and shopping center. Most of the protesters were

Muslims who had been living there for years. Brunei is also known as an Islamic state, but this did not stop people protesting against the policy. They were fighting for their ancestral land. They knew that they were going to be the victims of demolition. Similar cases have arises many times in the name of development programs.397

Compared to Southern China, relations between ethnicity and religion are more problematic within EAGA. The complexity of ethnicity and religion in EAGA is a threat to the key characteristic of geographical proximity. Similar cultural and historical backgrounds do not automatically create a better collaborative environment because in pluralistic societies, governments need to implement more tolerant policies and practices. However, they have failed to be more sensitive to differences in ethnicity, race and religion. The EAGA governments need to implement tolerant policies to promote “mutual” social relations, and not just focus on economic goals. The geographical proximity characteristic of growth triangles also needs to be re-examined.

The lack of similarity between Southern China and EAGA occurs also because of diversion in economic complementarity. The idea refers to complementarity based on different “factor endowments, trade and investment patterns, and level of economic development”.398 Economic complementary within EAGA is in contrast with Southern

China. In particular, no EAGA country has the financial and commercial proficiency of

Hong Kong. In terms of capital and advanced technology, there is no country that has

397 Informal interview (2000), General Santos City 398 EAAU op. cit., p. 9.

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the considerable capital resources and advanced technology of Taipei. The only economic similarity that EAGA has with China is in terms of land availability.

Indonesia has an area of almost two million square kilometres. Malaysia and the

Philippines are the second and the third biggest areas with approximately three thousand square kilometres each.399

EAGA has very limited labour training facilities compared to China.400 The Philippines, for instance, has the Maritime Training Center, the EAGA Tourism Training Center and the Center for Petroleum Technology in Davao City and Zamboanga. Kuching and

Labuan have education centers, and Sarawak has approved the Curtin University of

Technology, Sarawak Campus in Miri. Indonesia, however, does not provide any such training centres. During the seventh EAGA Senior Officials Meeting, proposals for training institutions to improve human resources development (HRD) were presented to the ministers, senior officials and working groups of delegations, but there was no more information about their implementation. Language barrier is one problem related to the lack of education centre facilities. Indonesian students who want to improve their

English must go to the centres in Kuching.401

The Role of China

China is a regional factor that needs to be considered in the empowerment of EAGA, especially because it is becoming a greater economic power in the Asian region. China introduced a social market economy in the late 1990s through economic reforms in agricultural sector, in particular, and an open-door policy. The process had begun in

399 Ibid., p. 67. 400 Thant et al, op. cit., p. 39. 401 EAGA2 News (1998), p. 7

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1978. 402 According to Richard Pomfret, “the adoption of economic reforms was driven by pragmatism rather than ideological motives”.403 Market orientation and free competition have prompted Chinese economic pragmatism to develop faster. Goods with labels “Made in China”, found in most countries are the result of this pragmatism.

The Joint Venture Law of 1979 allowed direct foreign investment, especially in

Shenzhen province. Hong Kong investors came to China when wages and land prices increased due to the appreciation of the Hong Kong dollar against all currencies during the period from 1984 to 1985. China’s open-door policy allowed more activity by foreign companies, allowed them to repatriate profits, and liberalized imports and exports.404 By 1994, China was the seventh largest exporter in the world.405

Although China’s social market economy policy is very well known, the state’s communist ideology has not changed. China is still under the rule of communist party and state socialist infrastructure is still intact.406 Anti-Chinese feeling in Indonesia, particularly against Chinese investment, shows that the stigma of China as communist has not yet been eradicated completely in Indonesia. Anti-Chinese feeling was part of the effort by the New Order regime to remind people of the traumatic experience of the

Indonesian Communist Party movement in 1965, for certain political interests. The

402 Sheridan, op. cit., p.289. China had a centrally planned economy. Deng Xiaoping introduced the new economic policy on economy. Township and village enterprises (TVEs) have an important role as producers of consumer goods and building materials that farmers can get immediately. On the other hand, farmers are given more incentives when they add the supply to the TVEs. China has developed the model of TVEs in four provinces: northern Zhejiang, southern Jiangsu, Shandong, and some parts of Fujian and Guangdong. The manufacturing sector increased its nominal output from 20 per cent in 1978 to 1983 to 55 per cent in 1984, and then 46 per cent in 1985. However, it decreased to approximately 32 per cent in 1986. 403 Cited in ibid., p. 287. 404 Ibid., p. 291. 405 David S.G. Goodman (1996). “China’s Reform and Openness: the Prospects for Continental system Change”, in The Empowerment of Asia: Reshaping Global Society, Vancouver: the University of British Colombia, p. 110. 406 Ibid., p. 111.

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Suharto regime designed state policy to create disunity among the people, particularly to build antipathy between native Indonesians and Chinese.

Discrimination has influenced the economic sector. Indonesian Vice-President, Hamzah

Haz is one who opposed China investors interested in Indonesia. Although he did not state his reasons, his opposition to the Chinese investments was unrealistic. He refused foreign investment that could have helped with the economic recovery program. On the other hand, Rini Suwandi, Minister of Trade and Industry favoured the Chinese investments. Indonesia is more open to China since former president Gus Dur declared anti-discriminatory laws and practices towards Chinese in Indonesia. He told many

Muslim parties that they need to be tolerant of the Chinese in Indonesia. He was then called a defender of human rights because of his pluralist vision.407

Although there are some difficulties in understanding the relationship between economic and politics in China, the country has shown its ability to accommodate the market economy of capitalism with the state’s ideology of communist. Therefore, it has more freedom than when China was under the leadership of Mao Zedong. However, it is not enough to assure that China’s investment is more important than its ideology.

The transformation of China’s market economy has become a model for other socialist countries in the region, such as Vietnam. The Chinese economic area, or Greater China, including Hong Kong and Taiwan, was predicted to have more reservations on trade and foreign exchange more than Japan in 2002.408 EAGA has to pay more attention to the decisive factors behind China’s regional economic power. Chinese business networks

407 Human Rights Watch (20 October 1999). “A Human rights agenda for President Wahid”. 408 Chen & Kwan, op. cit., p. 155.

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have been established almost everywhere in the world, especially in the areas of China

Towns. These are central to their transactions both in developed countries and in developing countries. “China Town” is symbolic of the existence of Chinese networks in many different countries, and they made significant contributions to the national economic growth. In economic terms, there is no reason to reject Chinese investment.

The Mindanao 2000 Plan

The Mindanao 2000 Framework Plan was formulated after the formation of EAGA in

1994. The perception of unequal benefits arises because of limited publicity and different mechanisms between central and local governments. EAGA is a long-term cooperation that is intended to benefit not only central governments, but also local governments and people. As facilitators, the central and local governments are responsible for promoting the idea among the private sectors and people. The

Philippines under the Ramos government was probably the country most prepared to make concrete and persistent efforts in the growth area. It had a special office for

EAGA under the supervision of the presidential assistant in Mindanao. It also had the

Mindanao 2000 Framework Plan, part of the national development program, which was also addressed to trade especially within EAGA.

The Mindanao 2000 vision identified two dominant sectors: agriculture and agro- industries. Some complementary sectors were light manufacturing, tourism and finance.

Public and private sector investment was encouraged to raise capital. Besides this capital formation, human resources development and Mindanao’s natural resources were employed for continuing economic growth. The Mindanao 2000 mission was

the creation of the Mindanao Inc., a unique island-wide economic entity whose immediate beneficiaries are all Mindanaons, with the private sector serving as the

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engine of growth. Its goal is the transformation of Mindanao’s fragmented economy into an integrated, dynamic, and sustainable economy.

Anchored on private sector initiatives, it will pursue a “market-oriented diversification” towards higher value-added activities. Government will only provide the right environment for the private sector to flourish. Where interventions are needed, government action will be transparent so that bureaucracy can be held accountable by those who will be affected. The Mindanao 2000 had two priority areas, especially regarding infrastructure improvements: SOCSARGEN and the CIC (Cagayan de Oro- Illigan City Corridor). Other growth zones were Davao Gulf, Agusur, Greater Cotabato/Illana Bay, Panguil Bay-Mt. Malindang, Zamboanga-Sulu.409

Government initiatives and the private sector as the implementer of the Mindanao development program were presented as “a showcase of cooperation between government and non-government sectors, and an integrated, people-centered development plan. The plan had, however, lack of provisions for social development and equity”.410 Foreign investment, women’s issues, manpower development, land use and allocation, and an effect of polarisation were several reactions to the Mindanao

Plan.

Western Mining Corporation (WMC) was one of multinational corporations that was criticised because the company increased foreign investment, but did not increase

Philippine economic prosperity. The Mindanao Plan seemed to promote the WMC exploitation of the Mindanao’s mining (gold and copper).411 The WMC signed an agreement with a Filipino company in 1991 and applied for a Financial or Technical

Assistance Agreement (FTAA) under the Mining Act 1995 to get 100 per cent foreign

409 Social Science Information (January-June 1996). “Shifting Development Focus”, vol. 24, nos.1-2, p. 21. 410 Ibid., pp. 21-22. The Mindanao 2000 was redrafted on the basis of those critiques. The Social Reform Agenda was the committee to deal with the redrafting. 411 Ibid., p. 23.

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ownership for the mineral project.412 The FTAA application was approved, and WMC has 89,669 hectares area for the exploration, which is located in Tampakan, South

Cotabato.

The Mining Act has been opposed on the ground of nationalism, constitutionality, environmental and social issues, state ownership of minerals, and small-scale mining.

Although the criticism is mostly addressed to Philippine government policy and legislation, WMC as a non-state ownership, was also a target of NGO critics. These groups view the ruling as against nationalist interests because it is “encouraging non-

Filipino investment, and domination of the minerals industry; removing Filipino control over natural resources; and enabling profits from developing those resources to flow out of the country”.413 The Philippine Legal Rights and Natural Resources Center is also concerned about the impact of the Act on indigenous communities and their land rights.

“Full implementation of the law would likely set back the painstaking incremental gains made by people’s movements in the area of ancestral domain, community based tenure and local people’s movement”.414

On the other hand, WMC believed that the Philippines could benefit from international mineral companies, because they would develop a modern, best-practice mineral industry in which the Philippines could be involved and maintain its resources. In response to the criticism, WMC held community consultations and did development work with local people to spread better understanding of the potential impact of the

412 WMC (October 1997). WMC in the Philippines, Information Paper, no.1, pp. 3-5. The Mining Act 1995 or Republic Bill No: RA 7942 is designed to foster modern, large-scale mineral development and was part of the Ramos Government’s Philippines 2000’ program. The Mining Act aims to establish a legal framework for revitalising the minerals industry: to restore minerals production to levels that better reflect the Philippines’ geological endowment; build an export base generating wealth for the Filipino people; and provide the Philippine minerals industry with access to the best available technology. 413 Ibid., p. 8.

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mineral development process.415 The community programs provoked more criticism when churches or informal leaders declared were the mediators for WMC whose role was to influence the people.416

Although EAGA was part of the Mindanao Plan, there are many people who have no proper knowledge about EAGA. According to Tirso Abecia, a General Santos businessman, although he had heard about EAGA, he did not really understand what he supposed to do with it. He might not consider the idea since his business in (Manado and Bitung) Indonesia had been set up before EAGA was formed. He suggested that there should be monthly meetings in order to disseminate the ideas of the program, and that the private sector must be invited. He honestly said that he just wanted to get more information about the EAGA.417

EAGA has several programs for publicity, such as seminars, exhibitions, and a few projects, such as the Bakun Dam project, Ambon airport expansion program and the

Aqua-culture and Eco-tourism Zone consortium in Palawan.418 But many people challenge these plans since most of the projects do not benefit them. For instance, according to some students from the Ateneo de Davao University, the progress of

EAGA is not only about the numbers of (high-class) hotels or shopping malls. That is progress, but “how many people stay in the hotels?”419 Their argument demonstrates

414 Ibid., p. 11. 415 Ibid., p. 27. 416 Napsa Lita Salah informed me that a Catholic nun collaborated with WMC to convince locals to be pleased with the company because of compensation that they could gain for school facilities. However, the compensation was only a promise. A nun from the Oblates of Notre Dames in Lagao Parish, General Santos who “worked for” WMC, was not available to be interviewed. 417 Interview (April 24, 2000). Tirso Abecia, Director, Philippines Documentation of Export. General Santos City. 418 “Malaysia revives Bakun Dam Project”, op. cit., pp.1-3. 419 Interview (April 2000). Ateneo de Davao University. In 1998, Davao had another deluxe hotel – the Marco Polo that was built by Halifax Davao Hotel, Inc. and operated by Marco Polo Hotels Hong Kong.

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that people mostly do not understand local government policies with regard to EAGA projects. Implementation is seen as being against social ethics or people’s needs.

Another EAGA controversy was the case of the seaport and fishing port in General

Santos City. The city hosts the second largest fishing industry in the Philippines with total daily fishing of 300 metric tons (MT). The biggest fishing industry is in Navotas,

Manila with a total daily production of 500 MT. The annual fish yield of General Santos increased between 1991 and 1996. There were 25,000 municipal fishermen and 47 commercial fishing operators with a combined fleet of 5,000 fishing boats who controlled the multibillion-dollar fishing industry. 420 SOCSARGEN is one of the biggest contributors to the fishing industry. In 1991, there were 34 commercial deep-sea fishing firms with a combined fleet of over 600 commercial fishing vessels based in

General Santos, and 15,750 commercial fishermen. In municipal fishing, 34,773 fishermen owned and operated 9,863 vessels with an estimated production volume of

12,000 MT. Overall fish production (aqua-culture, commercial and municipal fishing) of Sarangani and South Cotabato provinces was P2.0 billion in 1993.421

The multibillion-dollar fishing industry obviously has no “respect” for small fishermen.

Small fishermen use bait for fishing rather than nets, because they are unable to afford nets that cost P 5,000 each. They have to spend approximately half a day (from 3 a.m. to

3 p.m.) to get two or three kilos of bait. The fish is sold at a very low price and it depends on the compradors or the buyers. Many fishermen work in the multibillion-

420 Philippine Daily Inquirer (April 5, 1997). “The City that Fish Built”, p. 2. General Santos’ fish production was 75,441 MT in 1991; 76,458 MT in 1992; 78,883 MT in 1993; 88,750 MT in 1994; 87,021 MT in 1995; and 95,947 MT in 1996. 421 IBON (1995) op. cit., pp. 105-106. Municipal fishermen used fishing gears: gill net, beach seines, hooks and lines, fish corrals, drift nets, tuna handlines, and troll lines.

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dollar fishing industry, although their jobs are not related to fishing.422 Moreover, the fishermen have to go far from the shore to catch more fish because the industry has expanded the fishing grounds from 100 kilometres offshore of the Mindanao Sea, Moro

Gulf, Sulu Sea and the Celebes Sea, to Indonesia and Papua New Guinea.

Lack of information about EAGA is also apparent in Indonesia, especially among local governments. Some local government officials, for example, did not know about the concept at all. Indonesia has a similar program to the Mindanao 2000. It is called the

Economic Development Integrated Zone (Kawasan Pengembangan Ekonomi Terpadu or KAPET).423 The program is proposed to promote the eastern region that is known to be a neglected area. Compared to the concept of EAGA, KAPET is still a “new” proposal for most provincial governments. It is more confusing because KAPET is usually related to the export-processing zone, while EAGA is not similar to the EPZ.

Limited information about the two programs means that local governments and private sectors are unable to respond.

Indonesia now has the Ministry of Eastern Indonesian Region Development. It means to focus on the empowerment of eastern provinces under the KAPET framework.

Although it is hard to find a program related to the growth area, the EAGA Business

Meeting in Manado in May 2000 was probably the only event that Indonesia has hosted since the Asian crisis of 1997. However, it did not succeed in terms of publicity. Only two mass media covered the event. The Department of Foreign Affairs was the host of

422 Philippine Daily Inquirer (5 April 1997). “The Fishermen Should Learn how to Respect the Sea”, p. 5. 423 Keputusan Presiden Republik Indonesia No.184 Tahun 1998 tentang Tim Koordinasi dan Sub-tim Koordinasi Kerjasama Ekonomi Sub-regional.

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the seminar. The EAGA has never been an “immediate” concern since there is no person who is in charge of it. EAGA is located in and under the ASEAN directorate.424

I-EAGA has been downgraded because of the federalism or decentralisation issue. The

“new” system has been re-positioning since the Wahid presidency. The push for autonomy has not come to an end through it is one important pre-condition for promoting growth areas. The Indonesian Institute of Science that used to conduct annual research on EAGA (in relation to the eastern Indonesian development program) has shifted to the issue of decentralisation as well. It seems that research on district autonomy is more urgent in Indonesia since no government has implemented the division of power between the centre and periphery. Studies of the possibilities of federalism have been more concrete than those of the growth triangle.

Views about and perceptions of EAGA vary in terms of knowledge and interest.

Different interests and expectations create different levels of understanding. The issue is more familiar in Mindanao than in Manila primarily because Mindanao is the major area in the P-EAGA. The same phenomenon has also occurred in Indonesia between

Jakarta and eastern Indonesia. It is difficult to differentiate clearly between the perceptions of the growth triangle in the centre and periphery. Some local governments probably support EAGA since they have signed sister city agreements with cities in

Malaysia and the Philippines. The agreements are viewed as foundations on which to built broader agreements, such as growth areas. However, when some local government officials have not even heard about EAGA, it is impossible to assess their participation in it.

424 Fieldtrip, Jakarta (September 2000). The Indonesian Department of Foreign Affairs in Jakarta has a sub-directorate for investment and development of sub-regional cooperation, in particular economic

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Despite the domestic political turmoil in most EAGA countries, traditional relations and bilateral relations are assumed to be effective. They have the foundations of historical and social cultural motivations. According to Casino, Brunei, Indonesia, Malaysia and the Philippines have the same original ethnicity and speak similar languages. In addition, they are geographically close to one another. Mobility of people and intermarriage happens significantly often. The influences of culture, religion and language also appear throughout the region. Although each country has grown differently, they are interconnected. These connections contain some hope and abilities that the EAGA needs to explore.425 Furthermore, these relations have been formalised under the twinning policy, a policy that is also called the sister city agreement. It explores the economic capacities of two cities that are relatively similar and have the opportunity and possibility to complement each other in trade and investment.

Government officials and the private sectors are mostly supportive of the concept and are optimistic about the future of EAGA. If EAGA has become “irrelevant”, it is mostly because of the Asian crisis. Working hard during a difficult time was one solution to bring EAGA back on track. Unfortunately, however, the optimistic perspective was not realistic because the crisis is not the only reason to deal with EAGA. The major condition that determines the fluctuation of economic activities is peace and order.

Many of my respondents, mostly local government and some business people, did not directly comment on the negative side of EAGA until the numbers involved in the conflicts really escalated and dampened trade and investment, such as occurred in

cooperation, under the Directorate General of ASEAN. 425 E. Casino (1999). “Melaka, Maluku and Manila – the Triangular World of Indonesian, Malaysians, Bruneians and Filipino”. Paper submitted to a BIMP-EAGA Regional Conference on Culture and Tourism. Malaybalay, the Philippines.

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Mindanao. On the other hand, students, NGO activists, and ordinary people, particularly the victims of development programs, are more negative about the idea of EAGA.

In conclusion, EAGA has some internal political problems, such as democratisation processes, religious and ethnic conflicts, ‘domestic’ refugees, problems of good governance and distrust of political leaders, which have had some impact on EAGA.

Regarding the economy, there are three problem areas: lack of understanding and overlap between different plans, corruption, and lack of resources/infrastructure.

The concept of EAGA needs to be disseminated among local governments, the private sector and the people, especially to remind the private sectors that they are to be the engine of EAGA. Otherwise, EAGA is identical to ASEAN. It will remain only a high- level program, and provide limited benefits for the citizens who are the biggest part of

EAGA. There must be more practical solutions to cope with inequality.

Economic liberalism in Indonesia and the Philippines has strengthened crony capitalism and the monopolies of the conglomerates and landlords. As a consequence, it is very difficult to deal with disparities in economic development in EAGA, although one of the aims of EAGA is to accelerate the economic development of member countries. The major problem that EAGA has to deal with is the problem of corruption, which is difficult to reduce because of crony capitalism and oligarchic systems in both these countries. These systems have been used to strengthen political and economic interests of the cronies. Corruption, which is already systemic, has created weak political institutions used to support the cronies.

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The existence of EAGA must be revitalized in order to increase its ability in dealing with the problems. The revitalization of EAGA must be focused on some following conditions that need to be reformed.

1. Policy Formulation, Application, and Coordination

In the first decade of EAGA, the economic policies were formulated to promote trade, investment, and tourism activities. These refer to the EAGA development goal of growing the economy and reducing poverty. EAGA has the same indicators as the other bodies concerned with economic integration in formulating development policy, which are more physical. According to the World Development Report (1998/1999) by the

World Bank, these indicators focus only on the tangible evidence of development i.e. physical building, such as infrastructure and factories. However, there is intangible evidence of development: knowledge, institution and culture, and these are related to education.426

Policy formation is related to decision-making processes, which strongly depend on political and economic systems. The system in most EAGA sub-regions is hierarchical and centralized, such as in the Philippines and Indonesia. Therefore, in general, the decision-making process are highly centralistic. The Philippine government had made a political effort to shift into a more decentralized system, but the facts show that this was only administratively, such as in the formation of the ARMM. Politically, the ARMM has limited power (and may even be called powerless) because the control of the

Philippine government over the ARMM remains high. A similar condition happens also in Papua, Indonesia. In 2001, the central government of Indonesia agreed to give special

426 Stiglitz (1999), op.cit., pp. 2-3

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autonomy for the Papuans. However, after more than five years, there is no significant transformation in the province in terms of education, health, economic empowerment, and infrastructure. The Papuans remain poor economically and socially. Thus, the

EAGA governments have to provide decentralized system, especially in the decision- making process, so the process will be more open and fair.

Policy formulation and application are related to policy coordination. Lack of coordination in EAGA happens not only among the government units both at the national and local levels, but also between the government and the private sector. The government tends to be too dominant, while the private sector is not functioning as the engine of EAGA. In other words, the private sector had limited initiatives in implementing the trade and investment policies.

2. The Role of Private Sector

The revitalization of EAGA has a close relation to the role of private sector. After the first decade since the formation of EAGA in 1994, the private sector has not played a significant role. Therefore, it is essential that entrepreneurial capacities be developed.

According to Joji Ilagan-Bian, “BIMP-EAGA must build on the existing capacities of the local private sector. This means strengthening the development of small and medium enterprises (SMEs), that is to support enterprise and business development in the sub-regions. This is because the SMEs are assets in intensifying cross-border trade, investment and tourism activities”.427 The BIMP-EAGA Private Sector Development

Fund was formed to promote the private sectors initiatives. The first initiative was establishing a network under the Heart of Borneo (HB) Project “to maximise linkages,

427 Joji Ilagan-Bian (4 April 2004). “BIMP-EAGA getting better”, Inquirer Money/Top Stories, Inquirer.net, p. 1

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promote protected areas, maintain productive forests and forest connectivity, and ensure sustainable land use practices across the borders of Brunei, Indonesia and Malaysia”.428

Then, the EAGA ministers, who attended the 9th Ministerial Meeting regarding the First

Decade of BIMP-EAGA, 24-26 November 2004 in Balikpapan, Kalimantan, also agreed to force the private sectors to take more place in the EAGA development programs.429

The second initiative is because of domestic political instability. The continued relevance of BIMP-EAGA depends on the ability of each country to restore peace and order, because EAGA activities have declined due to on-going political instability, especially in the growth areas. The Philippines and Indonesia present the most urgent cases where political instability resulting from the separatist movements must be dealt with. The ending of these conflicts depends on strong political leadership to reduce government roles in the business sector and to create accountable public institutions. In other words, the Philippines and Indonesia have to deal with the problems of extreme corruption and cronyism, and their highly politicised militaries. These are the main obstacles to creating credible political leaderships or strong states.

3. Evaluation and Monitoring Mechanism/Scheme

The ADB Integrative Study had reported that the EAGA activities could be evaluated from several assessments and indicators. The evaluation and monitoring scheme was limited to the EAGA Early Action Plan. The problem was that not every single project had the evaluation and monitoring sheets about both the progress and problems or

428 Ibid., 429 Investasi di Kalimantan (27 November 2004). “Sepakati Dorong Peningkatan Peran Swasta, First Decade of BIMP-EAGA Berakhir”, p. 1

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obstacles during the implementation. One solution is that the evaluation and monitoring needs to be made regularly and based on each cluster.

4. The Availability of a Database of EAGA Economic Activities

The other weakness of EAGA was the unavailability of information and database about the economic activity, especially in trade, investment, and tourism. This is very significant to provide the private sectors and other stakeholders to get proper and quick information about the progress and potential things in EAGA. Therefore, the ADB agreed to study and make the database of EAGA trade and investment. The project has been starting in 2004.

5. The Problem of Migration

Migrants, particularly unauthorised migrants, have been part of the global movement of workers, an unresolved problem in EAGA. The problem of unauthorised (or undocumented) migrant workers has become more complex because of lack of policy formation and coordination among relevant departments/units at the central/national and local levels, and between the government and the private sector (recruiting agent). In the

IMS-GT, there were questions “whether Indonesia and Malaysia can develop appropriate HRD policies that can provide skills required by the employers in the IMS-

GT; and whether Johor and Riau’s training programmes can complement of Singapore to sustain the competitiveness of the Growth Triangle; and to what extent and in what ways Johor and Riau can learn from the Singapore experience (since Singapore has the most developed skills training programmes)”.430

430 Yaw Debrah, Ian McGovern and Pawan Budhwar (2000). “Complementarity or competition: the development of human resources in a South-East Asian Growth Triangle: Indonesia, Malaysia and Singapore”, the International Journal of Human Resource Management, v.11: 2 April 2000, pp. 320 & 323.

239

The three IMS-GT governments had made a brief overview of the main human development (HRD) policies and strategies to develop and share their human resources, and to provide formal context for the three governments in discussing the issue.

However, the issue of migrant workers remains a continuing problem between

Indonesia and Malaysia within the EAGA quadrangle.

It is clear that the HRD in EAGA is related to the quality of the workers, who are categorised as uneducated and unskilled, particularly in the case of the Indonesian migrant workers. Therefore, increasing the capacity of the labour force is very important. The capacity of the labour force has to be increased through education otherwise they will be unable to compete. The most important point of the process of human resource development is to educate the workers in terms of knowledge and skills, so they will be professional workers. By having appropriate knowledge and skills, the migrant workers may be able to anticipate discrimination, including the use physical violence by the employers as has occurred in many cases in the region.431

In conclusion, the EAGA development planning will remain relevant if there is a fundamental transformation regarding (1) the management skills (policy formation and coordination, evaluation and monitoring mechanism); (2) the ability in dealing with the unresolved problems and on-going issues.

431 See Sydney Jones (2000). Making Money off Migrants, the Indonesia Exodus to Malaysia, Hongkong: Asia 2000 Ltd. & Center for Asia Pacific Social Transformation Studies, University of Wollongong, Australia.

240 CHAPTER V THE FUTURE OF BIMP-EAGA

EAGA teams have not provided assessments to measure the progress of EAGA.

Therefore, it is not easy to make any clear judgment about the future of this the first quadrangle in South East Asia. Besides the lack of assessments, the future of EAGA is also affected by political and economic crises in participating countries, which remain critical and add to the difficulties of evaluating EAGA. Future expectations of EAGA are an open question, the answer to which depends on whether it is viewed from an optimistic or a pessimistic perspective.

From an optimistic point of view, BIMP-EAGA remains relevant because it was established at the right time, by the right person with a strong vision and received a good response from neighbouring countries. On the other hand, EAGA can be seen pessimistically because of the impact of the 1997 Asian Crisis, and the on-going armed and violent conflicts.

EAGA from an Optimistic Point of View

BIMP-EAGA was developed significantly during the Ramos administration from 1992-

1998. Its establishment in 1994 demonstrated Ramos’ political leadership in designing national and foreign policies to deal with Philippine economic crisis, including the

Mindanao crisis. EAGA was set up in accordance with the Philippines 2000 Plan to develop Mindanao into be a new economic growth area of P-EAGA. The formation of

EAGA reconfirmed the Philippines view of itself as a part of Asia since the country had pro-active roles in the formation of some former regional associations; that is the

241 SEATO and MAPHILINDO. EAGA is the only ASEAN sub-regional institution that the Philippines has been involved in since the formation of ASEAN in 1967.

The growth of EAGA during the Ramos presidency was determined by the peace agreement of 1996 between Philippine government and the MNLF, but which the MILF rejected. Although the MILF rejected the agreement, peace and order in Mindanao were temporarily restored, which encouraged the EAGA business activities. Former U.S.

President Bill Clinton made a statement on Ramos’s political leadership, which he said had succeeded in bringing democracy and development in the Philippines.432 The

EAGA quadrangle and the peace agreement were Ramos’s greatest political achievements. Some of the EAGA successes could be seen from the number of meetings, expositions, working group activities, and conferences that have been held since 1994 until recently. The EAGA Business Center (EABC), which is based in

Brunei, has regularly reported on EAGA activities.

Some argue that EAGA remains viable because of the traditional, cultural and religion relations that most member countries have been involved in since long before EAGA was formed. Positive comments come mostly from governments (central and local) and business people. Although the Asian Crisis in 1997 suspended trade and investment opportunities in EAGA, there were still projects that had a 2001 completion date, such as the upgrading or expansion of Brunei International Airport and the Pattimura Airport in Ambon; and the Bakun Dam project in Eastern Sarawak. EAGA has other on-going businesses too, such as the consortium of Palawan Aquaculture and Eco-tourism Zone, and Malaysian-Japanese-American LNG Consortium in Sarawak; the LNG (liquid natural gas) construction, has a two-stage completion schedule for 2002 and 2003; and

432 Crisostomo, op. cit., p. 1. 242 the waste-to-water processing project among Sabah, Mindanao and the Northern

Territory. 433 EAGA economic development has upcoming business opportunities with the Australia’s Northern Territory Government to carry out regional joint ventures.434

Trade, investment and tourism within BIMP-EAGA are not only conducted with the

EAGA countries, but also with Japan, China and South Korea. Furthermore, Australia is no longer an observer in EAGA, it became a partner of EAGA in 2004. Australia-

EAGA economic relations are an element of Australia-ASEAN relations, especially

Australia’s interest in being involved in the ASEAN + 3. EAGA could be a test run for

Australia becoming the fourth country in an ASEAN + 4 scheme.435

GMA Special Envoy and Agenda for EAGA

President Gloria Macapagal Arroyo has developed a strategy to bring peace in

Mindanao, but the strategy is mostly incapable of creating political stability. Her first step was the appointment of some Muslims from Mindanao to the central government, such as Simeon Datumanong as secretary of public works, and the Senate Minority

Leader, Teofisto Guingona as Vice-President. The appointment of Muslim representative in the Cabinet or central government bodies was to correct the sentiment of “the Imperial Manila”.436 However, the strategy did not automatically stop the Moro separatist movement. Different political claims among the Moro groups are one reason for the ineffectiveness of the government strategy.

433 Malaysia is represented by Petroliam Nasional (Petronas)/Malaysian National Petroleum. 434 EAGA WeekendReview Manager (4 February 2000). “Conference Gets Support of British High Commission in Brunei/International Exhibition and Forum on Halal Food”. 435 Northern Territory, Australia has formarly been decided as partner of EAGA in the Development Territory BIMP-EAGA Plus One, at the 12th Senior Official Meeting (SOM) in Balikpapan in 25 November 2004. 436 “Accent on Mindanao”, Philippine Daily Inquirer (8 February 2001). 243 Besides the appointment of Muslim representatives, President Arroyo directed a peace policy. She has actually been involving in the peace process or peace talks with the

Moro and communist rebels, since she was the Vice-President. At that time the rebel groups were no longer considered the government’s major enemy. The Philippine government then declared a unilateral ceasefire with the MILF in February 2001 and with the NPA in March-April 2001.437 Dialogue with the NDF, the CPP-NPA’s political wing, started on 27 April.438 However, the peace policy was criticised by the MNLF.

The policy was unrealistic because, from the MNLF point of view, the MILF is not the only group that exists in the Philippines and it could not represent the MNLF political claim for a full autonomy in Mindanao.439

The peace policy had some weaknesses, primarily because not all of the military supported the policy. While GMA asked the military (i.e. the AFP) to foster peace, part of the AFP has been collaborating with the government’s main enemy, the ASG, who are known to be kidnappers and smugglers facing a numbers of criminal charges.

Another weakness of the Philippine peace policy was because the policy was only formulated with the aim for dealing with the Moro rebel groups, not the communist rebels, even though the communist party was also involved in the dialogue process, and is now involved in a renewed struggle against the government, following a number of extra-judicial killings.440

437 “MILF No Longer Separatist – GMA”, Philippine Daily Inquirer (20 April 2001). President Arroyo had the “impression” that the MILF was no longer fighting for a separate Muslim state in Mindanao because the MILF had agreed to the formal resumption of talks with the government. 438 “Macapagal to Military Grads: Work for Peace”, Philippine Daily Inquirer (26 March 2001). 439 The same criticism was made by the MILF towards the MNLF when the 1996 peace agreement was signed between the Philippine government and the MNLF leader. 440 The leader of the CPP, Jose Maria Sison, has told the communist guerrillas not to stop fighting, especially against the Philippine political economic policy. 244 In an action outside the framework of the peace policy and action, President Arroyo took a military action against the ASG as part of the ‘Global War against Terror’. The global mission has focused Malacañang’s attention on Mindanao and ASG terrorism, which is linked to the Al-Qaeda network in Asia. The military action would encounter more difficulties in anticipating the terrorist global/regional networks. Therefore, the government policy needs to be reconsidered different and changeable strategies that the terrorists may have and conduct.

President Arroyo appointed Paul Dominguez as her special envoy to monitor regional development program through EAGA, and the Philippines’ bilateral relations with

Indonesia, Brunei and Malaysia. This was one of her foreign policies, part of her consideration to maintain good relations with ASEAN. At the national level, Arroyo has

Jesus Dureza as her Presidential Assistant for Mindanao, whose special task in take care of the EAGA trading bloc. Philippine governments and private sectors plan to market tourism under the “grand vision” of a package destination of the loop cities– Davao,

Manado, Bandar Seri Begawan and Kota Kinabalu. The package will also be promoted to China, South Korea and Japan.441

As the pioneer of EAGA, the Philippines has two important bodies – MEDCO as the secretariat of P-EAGA, and the Mindanao Business Council. More than that, in relation to the Mindanao 2000 Plan, it has been established the investment program through the

Mindanao Investment Plan (MIP) 2004-2006.

441 Jowel F. Canuday (24 February 2002). In MindaNews, ‘Come visit EAGA package tours planned’, p. 1. 245 President Arroyo’s confidence in the future of EAGA was also seen after her visit in

Kuala Lumpur in August 2001 when she and then Malaysian Prime Minister, Mahathir

Mohammad fully supported the revitalization of the BIMP-EAGA to push growth not only in Mindanao, but also in Malaysia and the other EAGA countries. The two head of states established and strengthened agreements in several sectors: air transportation, banking, agriculture, technology, tourism, capital investment, steel-corporation, sub-sea constructions and software companies.442

Although not all members of EAGA show the same progress, some achievements show how EAGA can function, for example, Malaysia and the Philippines have linked two places by providing air transportation from Kinabalu to Puerto Princesa. Layang-

Layang Flights (Malaysia) and Phoenix Airways (the Philippines) made the new air link in the early of April 2004.443 In 2005, Indonesia and Malaysia planned to build houses in the border areas between Entikong (Malaysia) and Nanga Badau (West

Kalimantan).444

EAGA from a Pessimistic Point of View

The pessimistic perspective is more an awareness of the existing problems and various factors on several different levels that have all affected the EAGA. Intellectuals, students, non-governmental organisation (NGO) activists, informal leaders and victims

442 Inq7.net (9 August 2001). “Macapagal, Mahathir agree to revive EAGA growth push”, pp. 1-2. Malaysia and the Philippines agreed to renew air transportations between Davao City (Mindanao) and Manado (North Sulawesi), and improve port facilities between Zamboanga City and Sandakan. Malaysia also agreed to establish branch office of MayBank, Malaysia’s biggest bank, and to expand Islamic Banking in the Philippines. The agreements also embraced collaboration in agriculture (palm oil), combining knowledge and technology, and investment capital of Malaysia for the Philippines’ labors, promote tourism (Shanghai-Clark, Sabah-Clark and Shenzhen-Cebu), National Steel Corp’s Iligan Plant, and Malaysian Multimedia Cyber Corridor Corp & Philippine Software Companies. 443 Inquirer News Service (April 19, 2004). “New Air Links to Boost RP-Asia Trade Ties”. 444 Neraca (20 December 2004). “ KERS BIMP-EAGA Akan Bangun Permukiman di Perbatasan”. 246 of urban demolitions mostly express their disagreement, desperation, and hopelessness about the prospects for EAGA.

BIMP-EAGA presented a shared vision of peace and development,445 but there are several obstacles, which will have to consider for the future prospect of EAGA. The first is the ongoing domestic political instability in EAGA sub-regions, particularly in the P-EAGA and I-EAGA provinces. The second is the possibility that EAGA will be used by the US, to mobilize regional power in order to block regional terrorism together with the growing threat of terrorism throughout the Southeast Asian region.446 The third is the disability of the EAGA leaders to formulate regional economic policy, especially to easily facilitate border crossing trade, to attract investors, visitors, and to provide better quality of human resources. The fourth is the unavailability of economic database to help serving traders, investors, visitors, who are interested in the EAGA potential economy.

1. The Mindanao Armed Conflicts

The Mindanao crisis and the global war have lost opportunities to develop P-EAGA; according to the Economist Intelligence Unit survey, the Philippines was considered one of the worst places to do business in Southeast Asia because of crime and violence as well as corruption. Moreover, President Arroyo had no specific policy on EAGA, although she named special envoys related to Philippine relations with countries in

Southeast Asia and Pacific regions. There is Rizalino Navarro, a special envoy to

445 See Statement of Tadao Chino, President ADB (6 October 2003). Appendix 2, “New Era of Sub- regional Economic Cooperation and Development in BIMP-EAGA”, Report on the First Leader’s Meeting, the 11th Senior Officials’ Meeting and the 8th Ministerial Meeting of the Brunei Darussalam, Indonesia, Malaysia, Philippines – East ASEAN Growth Area, Bali, p. 6. 446 President Arroyo has urged the EAGA countries to help the Philippines to combat terrorism in Mindanao as part of the US global war on terrorism. Mindanao is no longer the new economic area for the Philippines, but has changed rather into a battle zone against terrorism. Mindanao has been the second “war game” after Afghanistan to combat national (ie the ASG), regional and international terrorists. 247 Singapore, Thailand, Cambodia, Laos, Burma, Vietnam, Australia and New Zealand; and Paul Dominguez to Brunei, Indonesia, and Malaysia.447 Dominguez seems to have the most relevant task regarding the EAGA development planning. However, his function overlaps with the appointment of Jesus Dureza as presidential assistant for regional development.

Peace and order is not the only consideration in the Mindanao crisis. The problem of the

Three-Peoples (Muslims, Christians and Lumads), who are of different cultural backgrounds, needs to be considered in order to develop the P-EAGA economy. The

“underdeveloped” areas of Mindanao have been included in the central government policy in order to reduce the economic gap between the two regions and restore peace through the mini-Marshall Plan for Mindanao.448 Although it is still too early to assess the results, the plan will be unable to deal with the whole problem in Mindanao, even poverty cannot be alleviated completely since the roots of poverty and equity remain unaddressed.

The least ‘security’-focused approach was probably taken by the Ramos administration.

The peace agreement between the government and the MNLF in 1996 was a successful event and the climax of the whole peace talks process. President Ramos might be the only leader who has made real efforts in creating peace. However, his satisfaction lasted only until the end of the peace agreement in 1999. Soon after President Estrada came to power, the military approach reappeared, especially when he declared the all-out war policy against the Moros.

447 Philippine Daily Inquirer (24 January 2001). “Ramos, 6 Others Named Special Envoys”. 448 “Marshal Plan for Mindanao Bared”, Philippine Daily Inquirer (February 25, 2001). The mini-Marshal Plan comprises the economic aspects of government efforts to bring peace to war-ravaged areas. Poverty and inequity were the focus of the peace solution in Mindanao. The development plans included the development of seaweed farms in Mindanao, and the total electrification of Sulu. 248

2. Religious Conflicts in Indonesia

The Indonesian New Order regime had two extremely effective mechanisms for dealing with cases of ‘intolerance’, particularly those that implied anti-government activity.

Most people, who were not politically aware, were terribly intimidated. The first instrument was SARA an abbreviation of Suku (ethnic), Agama (religion) and Ras

(race). The second instrument was to label ‘communist’ anyone who was conducting anti-government activities. These two tools created insecurity and fear in people who expressed anything in thought or deed that could mark them as communists or instigators of SARA conflicts.

Psychologically, people were easily made prejudicial, suspicious and distrustful of one another. The slogan of unity in diversity was no more than political propaganda because diversity never created unity. On the contrary, diversity clearly illustrates various different potential conflicts based on ethnic, race and religion. Religion is being manipulated as a political tool by the regime. The explosive Ambon case, for instance, did not occur instantly or naturally. It has been orchestrated systematically and is also a manifestation of insecurity.449 The seeds of conflict were nourished and combined with the characteristics of the local people. Issues such as Christanisation, Islamisation and the spectre of the return of the RMS or Republic of the South Moluccas,450 have triggered communal conflicts.451

449 Komisi Kateketik Konferensi WaliGereja Indonesia (2001). Mediator dalam Kerusuhan Maluku, Jakarta: Sekretariat Kateketik KWI, p. 61. 450 RMS is an abbreviation of Republik Maluku Selatan (South Maluku Republic), a group of people who wanted to establish an independent state in Maluku in the 1950s. The Indonesian government/military classifies RMS as separatist group. 451 Komisi Kateketik, op. cit., p. 60. 249 According to Neils Mulder, a Catholic priest, it is wrong to see Indonesia as an Islamic country since there are so many different groups of Muslims. The first is the neo or new santri associated with the emergence of the Indonesian Muslim Intellectuals Association or Ikatan Cendikiawan Muslim Indonesia (ICMI).452 The second is the neo-revivalists, who practice Islam based on the Koran and Sunnah, as classical Muslim society did.453

The third is the transformists who were inspired by the liberation theology to try to understand development processes and not simply preach the Islamic teachings that people have to behave.454 The last group is the neo-modernists, who want to renew

Muslim society and focus on the relations between national development and education.455 This neo-revivalism seems to have similarities with the JI militants.

The fact that there are a number of Islamic groups in Indonesia, and the influence of JI on the militant groups, mean that regional security will mostly depend on the ability of the national government to deal with those militant or fundamentalist groups that interpret the Koran literally. However, the interpretation of the militant groups is still permissible as long as they do not intimidate people and create fear.

Laskar Jundullah is one of the militant groups in Indonesia. Laskah Jundullah or the mujahidin forces in Poso, Central Sulawesi is the military wing of the Preparatory

Committee for Upholding Islamic Law or Komite Persiapan Penerapan Shariah

Islam/KPPSI. It was formed in September 2000. It would originally enforce Islamic law among the members. Laskar Jundullah had close ties with the JI member in southern

Philippines. For recruiting the members, it drew on three networks: (1) Darul Islam,

452 Neils Mulder (2000). Indonesian Images, the Culture of the Public World, Yogyakarta: Kanisius Publishing House, pp. 117-120. 453 Ibid., pp. 115-116. 454 Ibid., pp. 116-117. 455 Ibid., pp. 113-115. 250 particularly the followers of Sanusi Daris, Kahar Muzakkars’ Defense Minister, who died in Sabah in 1988; (2) the hardline faction of the Indonesian Muslim Students organisation or Himpunan Mahasiswa Islam/HMI, known as HMI-MPO. Agus

Dwikarna and Tamsil Linrung, who arrested in the Philippines in March 2002, had

HMI-MPO backgrounds, and many others HMI-MPO members from South Sulawesi joined the jihad in Poso; (3) local Muslims from the Poso area, including the Komite

Perjuangan Muslim Poso (Committee for the Islamic Struggle in Poso) under the command of Adnan Arsal. The Laskar Jundullah (and Laskar Mujahidin in Ambon,

Maluku) had both guerrilla training and the capacity for rapid reaction. 456

3. The Regional Approach to Combating Radical Religious Movements

A number of approaches have been taken to combat terrorism, such as the ASEAN

Declaration on Terrorism in Phnom Penh in November 2002, which condemned the bombings in Bali and the southern Philippines. The ASEAN leaders also pushed the international community to support regional efforts to combat terrorism and to salvage the business environment in the region.457 The declaration strongly states that terrorism is not connected to certain religions and ethnicities. But it is not always correct that terrorism has no correlation with religion and ethnicity as we see in the case of the “civil war” in Poso, Central Sulawesi. There, religious symbols were used to provoke

Christians and Muslims, but there is a militant group leader, Adnan Arsal, who is against the practice of local syncretic culture of Pamona. Arsal moved from Mandar,

456 The International Crisis Group (ICG) (11 December 2002). “Indonesia Backgrounder: How the Jemaah Islamiyah Terrorist Network Operates in Poso and Maluku”, Asia Report n. 43, p.p. 2-3. 457 Department of Foreign Affairs of Indonesia, Refleksi Akhir Tahun 2002 dan Proyeksi Tahun 2003, Jakarta, (8 Januari 2003), p. 7. 251 South Sulawesi to Poso in 1970s. Thus, he is a dedicated and militant Muslim but he is an outsider in terms of ethnicity.458

Another effort to combat international terrorism was the ratification of the MOU between ASEAN and US Joint Declaration for Cooperation to Combat International

Terrorism on 1 August 2002. The ministers agreed to work together to face and crush terrorism.459

Bilaterally, individual countries such the Philippines have agreed to hold joint military exercises with the US, especially to fight the ASG in Mindanao under the Balikatan code. However, it is difficult to believe that the US did not dictate the agreement. The deployment of US troops in Mindanao since April 2002 is one indication of US regional interest in fighting terrorism in Asia.460 The joint military training between the US

Marines and Indonesian Navy in East Java was another indication of the US extension of its mission in Asia from Mindanao to Indonesia.461 Besides the bilateral agreement, there is also a tri-party approach among the Philippines, the MILF and Malaysia where the Philippines and the MILF are the actors in the conflict and Malaysia is the mediator.

Political issues still dominate within EAGA, and it is impossible to develop its economic activities without understanding the political impacts. Although politics is usually a sensitive matter for discussion, research and studies on EAGA needs to include consideration of the political aspects. Reports on the progress of EAGA are still limited. This is because EAGA is relatively new. Investigation into the impact of

458 Fieldtrip in Poso (14–20 June 2003). 459 Department of Foreign Affairs of Indonesia, op. cit., p. 8. 460 CNN.com (20 April 2002). “U.S. Boosts Philippines Presence”, p. 1. 461 Tempo Interactif (24 May 2002). “Indonesian Navy to Start Military Training with US Marines”. 252 political problems on EAGA development is difficult to find because EAGA governments tend to avoid discussing political conflicts. The political impacts make it difficult to assess the economic achievements of EAGA when political confrontation has been determined significantly by inter-state relations. EAGA has failed to maintain its status as a body for sub-regional economic integration. Historical background and aspects of culture have been recognised as the most important factors in maintaining

EAGA, but opportunities have been lost because of the political disharmony.

The Future Prospects of EAGA

The future of EAGA depends on the ability of member countries to manage the following problems: Firstly, the concept of a growth area must be disseminated widely to reduce the misunderstandings about the advantages and disadvantages. Limited knowledge about the growth area is a consequence of different mechanisms used by states and provinces to manage certain projects based on their economic goals.

Regarding the implementation process of autonomy, Indonesia is the only country that has not completed the reform processes, though ironically it is the largest territory in

EAGA. Inadequate infrastructure and poor information technology have created lack of information and tardiness in responding to and participating in the decentralization program. EAGA also has to re-examine some of its key policies since many of them have not been implemented, particularly in comparison with Southern China, the original area of the original growth triangle area.

Traditional bilateral trade relations existed before the formation of EAGA. The existence of EAGA unfortunately brings more problems for traditional traders. Policy formulation and coordination for anticipating problems in border areas remain

253 unresolved, although regulation is important from the perspective of business people.

Illegal fishing vessels are difficult to police. EAGA has to deal with the sea border or economic exclusive zones (EEZs) not only between Indonesia and the Philippines, but also between Indonesia and Malaysia. If the EEZs can be fully implemented, problems and tensions among member countries will potentially be eliminated, particularly those related to smuggling and other illegal trade.

Secondly, the EAGA quadrangle must anticipate the decision-making processes of the nation-states, which are influenced by international phenomena. International relations analysts argue that international or global phenomena affect the decision-making processes of nation-states, so we must analyse things on the global level.462 The trends in economic integration or trading blocs in many regions urge eastern ASEAN to cooperate through the EAGA quadrangle. However, the formation of EAGA was influenced by economic liberalism with its values of free trade and monopoly capitalism. The results of this global system are economic gaps between the core and peripheral areas that happen within national boundaries; that is in the Philippines (the north and south), and in Indonesia (the west and east). This economic disparity has caused massive poverty, which has been the major factor in the decline of economic growth. The Mindanao 2000 Development Plan was unable to reduce poverty significantly. According to Paul Dominguez, poverty reduction was 47 per cent in 1996, and it was predicted to decrease by 15 percent in 2010.463 At the national level, poverty increased by 2 million people between the period 1975-1996, and it fell to 31.8 percent in 1997. In 1998, poverty reduction was around six per cent and 6.5 million Filipinos

462 Kegley & Wittkopf, op. cit., p. 12 463 Ibid. 254 had jobs already,464 but many were still waiting for more work. However, the figures do not convince us that economic development program has provided a better life for

Filipinos. The growth of slum areas is one indicator that poverty has not yet been alleviated. Demolitions are other examples of the failure of EAGA. Many projects and multinational co-operations in Mindanao have created deterioration in the socio- economic conditions for many people. Moreover, the factories are often only temporarily located and are always ready to relocate to the next place.465

Although EAGA has no direct aims to poverty alleviation, trade and investment should include awareness of the problem of labour exploitation, especially of unskilled workers. Casual workers in particular have no secure conditions under the six-month contracts for which they must continually re-apply to keep the same jobs. The condition of immigrant workers is another major problem to be dealt with because it is linked to the problem of trans-national crime. Governments are involved in this illegal business through the income taxes that they earn from these workers. Therefore, many victims, who usually are workers, remain silent victims because the governments, which are supposed to protect them, are exploiting them for profit. If trade is always associated with the pursuit of profit then EAGA will follow the same path as ASEAN, which has failed to promote development programs that reach the grass-roots. Hence, EAGA is more relevant to the upper classes or politicians and conglomerates, which have established mutual relations to meet their different interests. Military personnel have gained privileges in politics and economics; have been a part of EAGA economic exploitation, particularly because personnel have functioned as “body-guards” for politicians; and many of them have received economic rewards.

464 “Fourth Quarter ’99 Economic & Political Situation”, Political Brief (February 2000), Institute for Popular Democracy vol. 8, no. 2, p. 1. 465 Interview with Napsa Lita, op. cit. 255

EAGA has failed to eradicate poverty because of “cooperation” between corrupt government and international “loan” bodies – the IMF, World Bank, and the ADB.

Illegal activity is closely associated with crony capitalism. The existence of extreme corruption means that illegal activity remains unchanged, and it is difficult to envisage economic development that is free from the interests of ruling or capitalist groups.

Black market or underground economics have appeared as the most likely alternatives for fulfilling economic needs. But black markets and poverty have ensured that EAGA remains the economic basket-case of Asia.

Thirdly, crony capitalism is another problem within EAGA. The impacts of bureaucratic red tape and monopoly have affected the development of growth areas because of poor public services and inadequate infrastructure. Parts of EAGA, also called “extended metropolitan regions”, face metropolitan problems. For example, local governments of

North Sulawesi in Manado found Jakarta central power ineffective in managing EAGA activities under the Coordinator Ministry of Economy in Jakarta. The Vice-Governor of

North Sulawesi, Freddy Sualang asked for the relocation of the EAGA Secretariat in

Manado during the visit of the Presidential Assistant for Mindanao, Jesus Dureza, in the capital city of North Sulawesi province in April 2002. However, this has not been realised because there was no response from the Indonesian government or governments of EAGA regarding operational funding. Regarding policy on EAGA, development has been determined differently. The members of the oligarchy see development as representative of the dynastic interests of their families and cronies. The Moro peoples have probably interpreted development as a process by which to achieve their political aim of full autonomy or an independent Islamic state. The victims of urban demolition

256 may see development as a struggle for freedom because of their governments’ neglect to provide them with permanent homes.

The future of EAGA also depends on how the member countries conduct their bilateral and multilateral relations. Philippines-ASEAN relations under the Macapagal Arroyo administration have mostly been dominated by security matters not only regarding the border disputes between the Philippines and Malaysia, but also the Moro rebellion, which has impacted on the regional security of Southeast Asia. Anti-terrorism, smuggling and illegal trade are the major regional problems that threaten the future of

EAGA. Regarding the EAGA quadrangle, President Arroyo and former Malaysian

Prime Minister, Mahatir Muhammad agreed to give full support to the growth areas.466

Not only the Philippines and Malaysia but also other ASEAN countries also agreed to support sub-regional cooperation to deal with some regional issues. The regional commitment was a positive sign in addressing the impact of the Moro insurgency. The agreement on anti-terrorism among Indonesia, Malaysia and the Philippines was one achievement of President Arroyo, designed to enhance regional countries’ capacity to combat terrorism throughout the region.

In conclusion, the future of EAGA will depend on the ability of the EAGA sub-regions in managing the economic sectors, and increasing their capabilities to help serving their own people. The future of EAGA will also depend on the ability in dealing with the on- going issues, which is to minimise the negative impacts that can affect the development process in the whole sub-regions.

466 Philippine Daily Inquirer (9 August 2001). “Macapagal, Mahathir agree to revive EAGA growth push”. 257

CONCLUSION

BIMP-EAGA, which was established in October 1994, was developed most significantly during the Ramos administration (1992–1998). Its establishment demonstrated Ramos’s political leadership capacities in his design of national and foreign policies to deal with the Philippine economic crisis, including the Mindanao crisis. EAGA was set up in accordance with the Philippines 2000 Plan to develop

Mindanao to be a new economic growth area of P-EAGA. EAGA was also part of

Ramos’ ambition to turn the Philippines to be one of the new industrialised countries in

Asia.

The growth of EAGA during the Ramos presidency was facilitated by the peace agreement of 1996 between Philippine government and the MNLF. Although the MILF rejected the agreement, peace and order in Mindanao were temporarily restored which encouraged EAGA business activities. Former US President, Bill Clinton stated that

Ramos’ political leadership was successful in bringing democracy and development in the Philippines. The EAGA quadrangle and the peace agreement were Ramos’ greatest political achievements. Some of the EAGA successes can be seen in the number of meetings, expositions, working group activities and conferences that were held from

1994 to now. EABC, which is based in Brunei, has regularly reported on EAGA activities.

The EAGA also confirmed the trend of the Philippines’ regional identity as a part of

Asia since the country had played a pro-active role in the formation of some of the earlier regional associations, including SEATO and MAPHILINDO. The EAGA is the

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only ASEAN sub-regional institution in which the Philippines had been involved since the formation of ASEAN in 1967. However, by the end of Ramos presidency, the

Philippine economy had failed to recover and EAGA seemed to lose its significance afterwards.

The Decay of EAGA

The establishment of EAGA brought optimistic expectations at the beginning, but these slowly changed into uncertainty. The uncertainty came from regional and national political and economic developments. The first was the Asian crisis of 1997. It was one of the most corrosive factors that slowed down trade and investment opportunities in

EAGA. The crisis was an opportune moment to indicate the abilities of each EAGA country. Indonesia and the Philippines faced the greatest difficulties in recovering political and economic health in the face of crony capitalism, the incapacities of political institutions, and the ongoing armed and communal conflicts.

The Asian crisis was not the only reason for the decline of trade and investment in

EAGA. The Mindanao crisis is the second factor in that decline. It meant that opportunities to develop P-EAGA have been lost. The Philippines, especially

Mindanao, is considered one of the worst business places in Southeast Asia because of crime and violence, as well as corruption. For the Philippines, opportunities to develop

EAGA slowed down after the end of peace agreement in September 1996 and particularly after the Ramos presidency came to an end. The Estrada administration had no intention to keep EAGA as the driving force to develop Mindanao and instead began the All-Out War policy throughout Mindanao in May 2000. The war policy challenged

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the function of EAGA as a sub-regional economic cooperation because the image of

Mindanao as a trouble spot has been stronger than its image as a business area.

In a broader context, the Philippines and ASEAN relations remained the first priority during the Estrada administration. However, his orientation was not clearly formulated, except the focus on the ASEAN Regional Forum, in which political and security matters are dominant. Consequently, EAGA was not considered as significant as it was by the previous government. It was predicted that EAGA would be able to overcome the economic difficulties, but enthusiasm slowly declined.

Peace and order is not the only consideration in the Mindanao crisis. The problem of the

Three Peoples (the Muslims, Christians and Lumads) who have different cultural backgrounds must be faced in order to develop the P-EAGA economy. As a neglected area, Mindanao has been included in central government policy in order to reduce the economic gap between the two regions and restore peace through the mini-Marshall

Plan for Mindanao. In more than ten years since the establishment of EAGA in 1994 the mini plan has been unable to overcome the problems. Poverty cannot be alleviated completely since the roots of poverty remain un-addressed.

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Under the GMA presidency, the Philippines had no specific policy on EAGA. Arroyo has only named special envoys related to Philippine relations with countries in the

Southeast Asia and Pacific regions. Her special envoy to Brunei, Indonesia and

Malaysia, seems to have the most relevant task—to encourage sub-regional development planning under the EAGA scheme—however, his task overlaps with the job of the presidential assistant, Jesus Dureza, in Mindanao.

If EAGA is to be defended, there are some problems that the member countries of

EAGA must consider or reconsider. Firstly, the concept of a growth area has to be disseminated widely to reduce misunderstandings about the benefits. Limited knowledge about the growth area is a consequence of different mechanisms between states and provinces for managing certain projects. Regarding the implementation of the autonomy process, Indonesia is the only country that has not completed the reforms.

Decentralisation is an issue that has been on trial and it is one of the key factors in planning and declining upon provincial trade and investment authority. Inadequate infrastructure and lack of transportation and communication technology is one cause for the lateness in responding to and participating in the program. EAGA must also re- examine some of its characteristics since many of them have not been implemented, particularly in comparison with the Southern China, the original model for the growth triangle.

Traditional bilateral trade relations existed before EAGA. The existence of EAGA unfortunately creates problems for traditional traders. Policy formulation and coordination for anticipating problems at border areas remain unresolved, although

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regulation is important from the perspective of business people. Illegal fishing is one of the problems that is difficult to address. EAGA has to deal with the sea borders or EEZ not only between Indonesia and the Philippines, but also between Indonesia and

Malaysia. If the EEZ is formulated, the problems and tensions among member countries will potentially be eliminated, particularly those of smuggling and other illegal trade.

Secondly, EAGA must anticipate the decision-making processes of the nation-states, which are influenced by international phenomena. The trends of economic integration and trading blocs in many regions encourage countries in eastern ASEAN to cooperate through EAGA. However, the formation of EAGA was influenced by economic liberalism with its values of free trade and its resulting encouragement of monopoly capitalism. The results of this global system are economic gaps between the core and peripheral areas that occur within national boundaries in the Philippines between the north and the south, and in Indonesia between the west and the east. These economic disparities have caused massive poverty, which has been the major factor in the decline of economic growth. The Mindanao 2000 Development Plan did not reduce poverty significantly. The figures of poverty in the Philippines, including Mindanao increases significantly. This does not convince us that economic development programs have provided a better life for Filipinos. The growth of slum areas is one indication that poverty has not yet been alleviated. Demolitions are another example of the failures of

EAGA. Many projects and MNCs in Mindanao have reduced the social-economic conditions of the people. More than that, they have to move to temporary locations.

Because of the temporariness, they must be ready for the next relocation to another place.

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EAGA has no direct aim to alleviate poverty, but the reality shows that trade and investment programs must anticipate the problem of labour exploitation, especially of unskilled workers. Casual workers in particular have no security under the six-month contracts that mean they must constantly re-apply for the same jobs. The conditions of immigrant workers are another major problem because they are part of trans-national crime. Governments have been involved in this illegal business because of the income taxes they receive from the workers. Therefore, many victims, who usually are the workers, remain silent victims because governments, which are supposed to protect them, have exploited them for profits. If trade is always associated with profit then

EAGA is similar to ASEAN, which has failed to promote development programs that reach the grass-roots level. EAGA is more relevant for the elite (politicians and conglomerates) that have established mutual relations to gain different interests. The military, which has gained economic and political privileges, has been part of the exploitation, particularly because many of personnel have functioned as “body-guards” for politicians, receiving economic benefits in return.

EAGA failed to eradicate poverty because of cooperation between corrupt government and international “loan” bodies—the IMF, the World Bank, and the ADB. Poverty and the black market have delayed the transformation of EAGA into the Asian economic basket-case.

Thirdly, crony capitalism is another problem within EAGA. Illegal activity is closely associated with crony capitalism. Extreme corruption means that illegal activity remains unchanged and it is difficult to discern economic development that is free from the

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interests of ruling or capitalist groups. The black market or underground economy has appeared as the most viable alternative for fulfilling economic needs.

The impact of red tape bureaucracy and monopoly has added to these problems involved in the development of growth areas because of poor public services and inadequate infrastructure. The local government of North Sulawesi in Manado found the central power in Jakarta ineffective at managing EAGA activities under the Coordinator

Ministry of Economy in Jakarta. The Vice-Governor of North Sulawesi, Freddy Sualang asked that the EAGA Secretariat in Manado be transformed during the visit of the

Presidential Assistant for Mindanao, Jesus Dureza, to the capital city of North Sulawesi province in April 2002. However, the transformation has not occurred because there was no response from the Indonesian government or the other governments of EAGA regarding operational funding. Regarding policy on EAGA, development has been determined differently. Members of the oligarchy understand development as representing the dynastic interests of their families and cronies. The Moro people have probably interpreted development as a process to achieve their political demand for full autonomy or an independent Islamic state. People who are the victims of the illegal demolition may see development as struggling for freedom of life because of their government refusal to in provide them with permanent places.

Regional development planning under EAGA must consider the domestic problem of corruption, particularly in Indonesia and the Philippines. Although there is no direct evidence of clear connections between large-scale corruption and EAGA, the problems of inadequate infrastructure, complex decision-making processes, lack of capital, and policy incoherence, are some of the general costs of the corruption that is widespread in

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some of the participating countries. Internal political problems have threatened the existence of EAGA, especially because political economy decisions are designed to provide power to the governing group. On the other hand, the business people benefit from the political system. The long-standing situation has unfortunately been understood as normal.

Fourthly, the development of EAGA also depends on how member countries conduct bilateral and multilateral relations. Philippines-ASEAN relations under the GMA administration have mostly been dominated by security matters, not only the border disputes between the Philippines and Malaysia, but also the Moro rebellion, which has impacts on the regional security of Southeast Asia. Anti-terrorism, smuggling and illegal trade are the major regional problems that potentially threaten the future of

EAGA. The regional commitment was a positive sign in addressing the impact of the

Moro insurgency. Since 2001, the Philippine government and the MILF have been involved in peace negotiations, mediated by Malaysia. The process has not been going smoothly because of Philippine domestic politics, which are usually volatile. The last coup attempt to topple the GMA presidency was one thing that further delayed the peace process.

Philippine-US relations have no direct influence on EAGA activity, because they are bilateral relations. However, the anti-terrorism agreement between the two countries is an important element of regional security and stability. President Arroyo has been successful in enhancing regional security to combat terrorism throughout the region.

The agreement between the US and the Philippines clearly reveals the US regional interests. The deployment of US troops in Mindanao since April 2002 is a strong

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indication of US interest in fighting terrorism in Asia. The joint military training between the US Marines and the Indonesian Navy in East Java, is another indication of the US extended mission in Asia.

The war against terrorism has obviously reached the Southeast Asian region. Although the anti-terrorism war is part of a global agenda of which almost all countries of

Southeast Asia agree to be part, it would retard the development of EAGA because

Mindanao has been occupied for the sake of the political and security anti-terrorism agenda. Consequently, the Philippines and the entire region have become vulnerable places in which to trade and invest.

Is EAGA still Relevant?

The relevance of BIMP-EAGA depends on the capacity of individual countries to restore peace and order, because EAGA activities have been declining due to the on- going political instability, especially in the growth areas. The Philippines and Indonesia are the most urgent cases, which need to deal with instability caused by the separatist movements in Mindanao and the inter-religious conflicts between Muslims and

Christians in Ambon, Poso, and Papua. Termination of the conflicts will be linked to strong political leadership that reduces government’s role in business to create accountability of public institutions. In other words, the Philippines and Indonesia have to deal with the problems of extreme corruption or cronyism and the high politicisation of the military in order to create credible political leaderships or strong states capable of solving their nations’ many problems.

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The future of EAGA is largely dependent on national power and regional capabilities.

Individual member countries have to manage their political and economic power to solve domestic issues, particularly problems that have regional impacts, such as unemployment and poverty, religious and ethnic conflicts (peace and order), and economic discrimination. Regional or sub-regional development planning will be determined by how domestic issues that have regional impacts are resolved As part of the global system, the EAGA development program is also integrated into the world system.

Some political issues have devastated the objectives of EAGA of promoting trade, investment and tourism. The Asian crisis that hit most of Asian countries in 1997 added to the problems. Domestic political uncertainty has been another component in prolonging the economic crisis. Politics has become a very dominant factor that influences economic policy. A number of political problems still exist, such as the border conflict between Malaysia and the Philippines over Sabah. The case has not been completely closed, but Malaysia has been paying money to the Philippines, especially to the Sulu Sultanate, who historically has authority over Sabah. This matter has not impacted badly on EAGA activity so far, probably because of the financial compensation that the Philippines receives from Malaysia.

The recent case of Moro separatism in Mindanao is one of the most disastrous factors in

EAGA’s struggle for relevance. The tension between Malaysia and the Philippines regarding this issue is based on accusations of Malaysian support for the Moro people, particularly in the form of material support for the insurgents. On the other hand,

Malaysia was disappointed with the Philippine government because of the political and

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moral support that former president Estrada gave to the Malaysian opposition leader,

Anwar Ibrahim, especially when the opposition leader’s wife visited the Philippines.

In conclusion, the formation of EAGA has attracted more negative than positive comment. The positive or optimistic point of view focuses on EAGA involvement in some possible business activities. On the other hand, the pessimistic perspective argues that the EAGA quadrangle is an imitation of earlier models that does not take into account the differences in political systems and economic capabilities. If the problems cannot be resolved, then EAGA will be similar to ASEAN. Both are symbols for sub- regional integration and regional integration. Bilateral economic relations are more effective than multilateral relations through EAGA, although some political issues affect the economic relations.

Since political and security issues are still dominant within EAGA, economic activities cannot be developed without understanding of the political impact. Although politics is usually a sensitive matter, research studies on EAGA must be aware of the political aspects. Reports on the progress of EAGA are still limited, because EAGA is relatively new. Investigation of the impact of political problems on EAGA development is difficult to find because EAGA governments tend to avoid discussing political conflicts.

The political disharmony makes it difficult to assess the economic achievements of

EAGA when political confrontation has significantly determined inter-state relations.

The EAGA has failed to maintain its status as sub-regional economic integration.

Historical background and cultural aspects are considered the most important factors in maintaining the EAGA development program, although many things indicate that trade and investment opportunities have been lost because of political disharmony.

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Some suggestions in relation with EAGA and the regional development planning are: first, EAGA must reduce the influence of economic liberalism by adopting the alleviation of poverty alleviation as an objective. Second, EAGA needs to activate joint actions to deal with the economic crises and trans-national crime. This is because if

EAGA means to promote the region, it must also mean to share internal problems, especially the ones that have regional impacts, such as economic crisis and trans- national crime, particularly the underground economy.

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292 APPENDICES

Appendix 1: The list of respondents

- Dr. Samuel K. Tan, Convenor, Mindanao Studies Program, Center for Integrative

and Development Studies, University of the Philippines, Diliman, Quezon City,

March 14, 2000.

- Attorney Mechol Sadain, Lecturer, Institute for Islamic Studies, University of the

Philippines, Diliman, Quezon City, March 17, 2000.

- Ms. Marites D. Vitug, Senior Journalist, Ateneo Center for Social Policy & Public

Affairs, Ateneo de Manila University, Quezon City, March 22, 2000.

- Mr. Rommel AB. Hipolito, Initiative for International Dialogue, Davao City, April

11 & 14, 2000.

- Mr. Taufan Adityawarman, Consul, the Indonesian Consulate General, Davao City,

April 12, 2000.

- Mr. Jason C. Magnaye, Supervising Economic Development Specialist, Mindanao

Economic Development Council (MEDCO) Regions IX, X, XI, XII, Caraga, and

ARMM, Davao City, Mindanao, April 13, 2000.

- Ms. Joanne Gonzales, Senior Economic Development Specialist, MEDCO, Davao

City, April 13, 2000.

- Ms. MA. Belenda Queza-Ambi, Division Chief, BIMP-EAGA Program

Management Unit C/CM Working Group Secretariat, Department of Trade &

Industry XI, Davao City, April 14, 2000.

- Mr. Augusto N. Miclat, Jr., Executive Director, Initiatives for International

Dialogue, and some of his staffs, Davao City, April 14, 2000.

- Mr. Benjamin de Guzman, Davao City Mayor, April 17, 2000.

293 - Sister Marion, Coordinator, the Archdiosesan Eucumenical and Inter-Dialogue

(ACED), Davao City, April 17, 2000.

- Corazon Mariposgue, Allen Guillen, Rosemarie Sajulga, Mona Labial, Sharifa

Ayessah Harrid-Rossdale, and Cherish Revisa, Ateneo de Davao University

Students, Davao City, April 17, 2000.

- Agor, Social Action Center, San Pedro Church, Davao City, April 17, 2000.

- Ms. Joji Ilagan-Bian, Chairwoman, Mindanao Business Council, Davao City, April

18, 2000.

- Ms. Trinidad F. Ola, Secretary General, Davao City Chamber of Commerce &

Industry, Inc., April 19, 2000.

- Wahab Guilal, Director, Mindanao Resource Center Cotabato City, interview was

hold in General Santos City, April 22, 2000.

- Mr. Tirso Abecia, Executive Director, Philexport Socsksargen Chapter, General

Santos City, April 24, 2000.

- Mr. Rodrigo O. Salangsang, City Administrator, General Santos City, April 24,

2000.

- Mr. Juni Hasan, General Santos City, April 25, 2000.

- Napsa Lita Sallah & Nor Milito, General Santos City, April 26, 2000.

- Archbishop Fernando Capalla, Davao City, April 27, 2000.

- Mr. Bambang, the Indonesian Consulate General, Davao City, April 28, 2000.

- Father Jaquin Bernas, S.J., Quezon City, May 4, 2000.

- Mr. Vicente T. Paterno, Chairman & President, Philippine Seven Corporation,

Mandaluyong City, May 10, 2000.

294 Appendix 2: The list of libraries/information centers

- Alternate Forum for Research in Mindanao (AFRIM) Office, Davao City

- Philippine Daily Inquirer, Mindanao Office, Davao City

- Mindanao Economic Development Council (MEDCO), Davao City

- Asian Development Bank Headquarters’ Library, Manila

- Department of Foreign Affairs’ Library, Manila

- IBON Philippines Databank & Research Center, Manila

- Ateneo de Manila University’s Library, Quezon City

- Center for Social Policy & Public Affairs Communication & Information Program,

Ateneo de Manila University, Quezon City

- Institute of Islamic Studies, University of Philippines, Quezon City

- Philippine Social Science Center, Quezon City

- Third World Studies Center, University of Philippines, Quezon City

295