The East Asian Economic Crisis: Security Implications

By Mochizuki, Mike M. | Brookings Review, Summer 1998 | Go to article overview

The East Asian Economic Crisis: Security Implications

Mochizuki, Mike M., Brookings Review

Although the economic convulsions in East Asia have not taken on the proportions of a security crisis, it would be premature to dismiss the possibility. Reasons for concern abound.

In the first place, the economic woes besetting Asia's developing countries may provoke internal political and social instability that could spill over into the international arena. Most worrisome is Indonesia. Even before the economic crisis, Indonesian politics was entering a delicate transition phase. Questions about President Suharto's health had spurred popular discontent over authoritarian rule and, with it, speculation about democratization in a post-Suharto era. But before an orderly succession could be mapped out, the economic crisis toppled the main pillar of Suharto's political legitimacy: successful economic development. Austerity measures imposed by the IMF as the condition for Indonesia's financial bailout added to the explosive mix. After social unrest escalated into violent rioting in Jakarta in May, Suharto reluctantly stepped down and transferred the reins of government to B. J. Habibie, his chosen successor.

Indonesia's geopolitical importance cannot be overemphasized. It is the world's fourth most populous country. It has been a moderate force in the Islamic world. It has served as a valuable counterweight to China, especially in territorial disputes in the South China Sea. About 40 percent of the world's commercial shipping goes through one of the four key straits in the Indonesian archipelago, as does the bulk of the oil that Japan and South Korea import.

President Habibie must now walk the tightrope between restoring social order and pursuing economic and political reform. Lacking a firm political base of his own, he will have to rely on the military to wield power. Although hardly anyone expects Indonesia to go the way of Yugoslavia, with state collapse and civil war, few anticipate a smooth transition to democracy. Economic stabilization may be the prerequisite for free and fair elections, but stabilization will be impossible unless the new government gains popular legitimacy by offering the hope of a more open political system. The very process of political liberalization, however, might unleash ethnic conflicts and separatist movements that will challenge Indonesia's ability to preserve national cohesion.

Other states the region are doing better at weathering the crisis politically. Last fall Thailand avoided a military coup and put in place a new government committed to implementing financial reforms to get its economy back on track. Upon his election as president of South Korea, Kim Dae Jung convinced his fellow citizens of the need to endure the immediate pain of austerity to lay the basis for a brighter future. The Malaysian government has so far succeeded in lowering economic expectations, despite President Mahathir Mohamad's charges of international financial conspiracy against his country. And in the Philippines, popular protests against economic liberalization have not damaged democratic processes. In fact, the newly elected president, Joseph Estrada, may be able to use his brand of populism to secure popular acquiescence to economic reform.

Much depends on how soon the economic situation can be turned around. If joblessness continues to rise sharply and food shortages worsen, social unrest will severely test these still fragile political systems.


The economic crisis could also cause interstate tensions to flare over the flow of migrant workers. Until recently, with growth rapid and unskilled labor in short supply, Malaysia, Singapore, and Thailand often turned a blind eye to the illegal entry of foreign labor. Of Malaysia's nearly 2.5 million foreign workers--more than 20 percent of its labor force--about 800,000 are believed to be illegal immigrants from Indonesia. And some 1 million unauthorized foreign workers, the great majority coming from Myanmar, labor in Thailand. …

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