October 2018

ISSN 2502-0722 Issue 40/ October 2018 + Against All Odds, the The Hope Coated ASEAN and the IMF: INFOGRAPHIC New Southbound Policy with Challenges - Working Together to Unlock Digital Focus on ASEAN and ASEAN’s Continued Taiwan looks south Economy Potential as Key Driver of Engagement with Taiwan to ASEAN Region’s Economic Growth A Note From the Editor 1 Articles 2 ASEAN and the IMF: Working Together to 2 Unlock Digital Economy Potential as Key Driver of Region’s Economic Growth The Hope Coated with Challenges - 8 Taiwan looks south to ASEAN Against All Odds, the New Southbound 13 Policy and ASEAN’s Continued Engagement with Taiwan Infographic 18 Focus on ASEAN 18 ASEAN Round-Up 20 Indonesia says death toll in Sulawesi quake 20 rises past 2,000 Indonesia opens 2018 Asian Para Games in 21 heartwarming ceremony A note from the editor Thinking ASEAN is a monthly publication Dear readers: that aims to provide insightful, cogent and Welcome to the October 2018 issue of the monthly Thinking ASEAN! engaging perspectives on issues central to contemporary Southeast Asia and the Whilst we may be winding into the final few months of the year, there will be no rest for the ASEAN member states. It is a product of The region as all interested stakeholders gear up for next month’s ASEAN Summit and Related Habibie Center, with the generous support Meetings in Singapore. Having said that, the ten ASEAN Leaders did gather on the Indonesian of the Republic of Korea’s Mission to ASEAN. island of Bali this month, as part of the Annual Meetings of the International Monetary Fund and World Bank Group (IMF-WBG); providing an important opportunity for Indonesia and ASEAN The content of Thinking ASEAN does not to showcase its economic opportunity and potential to the world. reflect the official opinion of The Habibie Center or institutions related to the In this sense, our lead article this month looks at the Annual Meetings of the IMF-WB and publication. The Habibie Center was founded is written by Nika Pranata (Researcher, Economic Research Center – Indonesian Institute of by Indonesian President Bacharuddin Jusuf Sciences (LIPI)). Entitled ‘ASEAN and the IMF: Working Together to Unlock Digital Economy Habibie in 1999 as an independent, non- Potential as Key Driver of Region’s Economic Growth’, the article traces the mistakes made by governmental and non-profit organization ASEAN Member States and the IMF during the Asian Financial Crisis, the lessons learned from to promote the democratization and it, and how the two sides can work together to unlock the region’s digital economy potential. modernization of the country. Meanwhile the second article is by Shan-Hua Yu (National Chengchi University, Taipei) who Responsibility for the information and views writes on ‘The Hope Coated with Challenges – Taiwan looks south to ASEAN.’ Taipei has long expressed in Thinking ASEAN lies entirely with sought closer relations with ASEAN member-states, launching the ‘New Southbound Policy’ the author(s). For comments, suggestions since 2016. The article makes the case for Taipei to ensure the policy stays regardless of and prospective contributions, the Managing diplomatic challenges. Editor of Thinking ASEAN can be reached at Lastly, Hana Hanifah (Researcher, ASEAN Studies Program, The Habibie Center) responds [email protected]. by providing a Southeast Asian view with an article entitled, ‘Against All Odds, the New Southbound Policy and ASEAN’s Continued Engagement with Taiwan.’ Her article focuses on the question of why and how ASEAN countries have been able to sustain good relations with Taiwan despite all the challenges. Project Supervisors As usual, we present an infographic that this month covers Focus on Rahimah Abdulrahim ASEAN. Executive Director, The Habibie Center Don’t hesitate to drop me a line at [email protected] if you have comments, input, or prospective submissions. Hadi Kuntjara Deputy Director for Operations, Happy reading! The Habibie Center Best regards from Jakarta Editor in Chief A. Ibrahim Almuttaqi Thinking ASEAN Team Askabea Fadhilla Fina Astriana Muhamad Arif FIND OUR UPCOMING Hana Hanifah Vierna Tasya Wensatama AGENDA ON Wirya Adiwena Lany Sekar @habibiecenter Anissa Dini The Habibie Center was founded by Bacharuddin Jusuf Habibie and family in 1999 as an independent, non- governmental, non-profit organisation. The vision of The Habibie Center is to create a structurally democratic society founded on the morality and integrity of cultural and religious values. The missions of The Habibie Center are first, to establish a structurally and culturally democratic society that recognizes, respects, and promotes human rights by undertaking study and advocacy of issues related to democratization and human rights, and second, to increase the effectiveness of the management of human resources and the spread of technology. Issue 40/ Oktober 2018 2 ASEAN and the IMF: Working Together to Unlock Digital Economy Potential as Key Driver of Region’s Economic Growth IMF Source: el-universal.com Nika Pranata, Researcher, Economic Research Center – Indonesian Institute of Sciences (LIPI) Overview of ASEAN – IMF Relations overcome the root cause based on local IMF has been reforming and learning economic characteristics. from the past mistakes although they It has been two decades since the are still unsure the exact cause of occurrence of the Asian Financial Crisis This ineffective assistance has left a the Crisis and their response. Instead in 1997. The year marked close relations negative stigma of the IMF and its of heavily emphasizing on a detailed between ASEAN and the IMF. The intervention particularly for ASEAN requirement list of financial assistance assistance provided by the IMF in the Member States. This also has made the through loans, currently, the IMF has form of loans at that time was considered region try to be less dependent on the focused on finding the root cause of the ineffective. In fact, numerous criticsisms IMF’s assistance. One of the efforts to crisis and determining the appropriate came from economists and scholars reduce dependency was by forming that specific policies in order to resolve stating that the provided assistance ASEAN+3 that includes the 10 ASEAN the crisis as well as prioritizing social worsened the crisis (Gan & Li, 1999). Member States and three other large security programs to protect the poor Furthermore, Indonesia and Thailand Asian countries namely China, Japan, and and vulnerable. Noticing that Asian were the two worst affected ASEAN South Korea, in which the collaboration countries particularly AMS have played Member States (AMS) with Indonesia’s started in December 1997 and was an important role in the global economy, GDP declining by more than 13 percent institutionalized in 1999. Then, in 2000 the IMF has also improved its governance whilst Thailand’s GDP dropped more the ASEAN +3 and Hong Kong central and provided a greater say to Asian than 7% in 1998 (World Bank, 2018). banks made a cooperation regarding countries by raising the voting portion At that time, instead of formulating financial safety net called the Chiang Mai and representation of them. specific policies based on local economic Initiative (CMI). It is an agreement in the characteristics of the assisted countries, form of a network of bilateral currency Furthermore, in relations to the the IMF applied a one fit for all approach swaps and repurchase agreements among establishment of the ASEAN +3 and for every assisted country. its members to face international liquidity AMRO, both parties do not see each problem. Furthermore, this agreement other as a threat, but it is seen as a For instance, generally, the IMF obliged was then multilaterized in 2010 into a further potential of cooperation and the assisted countries to tighten its single contractual agreement named the collaboration. For instance, the IMF monetary policy by increasing interest Chiang Mai Initiative Multilateralization is often invited in the discussions and rates significantly and closing down or (CMIM) with the nominal amount of meetings of ASEAN +3. More importantly, capitalizing some private banks as well the agreement reaching USD 240 billion the IMF intends to strengthen the as reducing subsidies and social security. (AMRO, 2017). Recently, the cooperation regional safety net in the form of CMIM The IMF mistakenly treated the crisis is not only in terms of financial stability that has a size of USD 240 billion into a as a conventional macroeconomic crisis but has also widened into a regional global safety net by working intensively whilst the crisis itself was a financial crisis macroeconomic surveillance by with the ASEAN + 3 and CMIM. In in which the latter should be treated institutionalizing the former ASEAN+3 addition, the IMF member countries have differently (Sterland, 2017). In addition, into the ASEAN+3 Macroeconomic committed to provide additional bilateral the IMF also applied numerous and strict Research Office (AMRO) in 2016. loan resources to the IMF in order to conditions for assisted countries in order expand its financial assistance capacity to to be able to obtain economic stimulus Moreover, realizing that they made USD 1 trillion(Furusawa, 2017). for the IMF. Such requirements made the mistake with regards to its Asian assistance inflexible and hard to adjust to Financial Crisis approach, since then the Moreover, the latest approach of the IMF At that time, instead of formulating specific policies based on local economic characteristics of the assisted countries, the IMF applied a one fit for all approach for every assisted country. Issue 40/ Oktober 2018 4 in signaling the significance of ASEAN is related to financial and economic that by accident as the sector has proven to by choosing one of the most influential has ever been held by Indonesia. It was be the new source of global economic AMS, Indonesia, as the host country for held on October 12 – 14, 2018 in one of growth and is currently growing at a the 2018 Annual Meetings of the IMF and the well-known global tourist destination, breakneck pace.

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