Asian economic crisis altered political landscape

By Joe Cochrane, IANS

Jakarta : On most evenings on a leafy street in the Indonesian capital's exclusive Menteng district, a running television set can be seen through the huge bay window of the biggest house on the block.

Support TwoCircles

Inside sits former president Suharto, who once saved Indonesia from an armed communist takeover in 1965 but whose ultimate legacy is a mixed bag of massive economic growth, human rights abuses and corruption. While his rise to power was subtle and crafty, his downfall three decades later was sudden and violent.

The pro-democracy demonstrators who refused to leave Jakarta's streets – and Suharto's security forces, who refused to mow them down with gunfire – certainly led to his resignation in May 1998. But the end began nearly a year before with the sudden onset of the Asian economic crisis in July 1997.

"It was a critical factor why we could bring him down," said Jusuf Wanandi, vice chairman of the Centre for Strategic and International Studies in Jakarta. "With 8 or 9 percent economic growth, despite the corruption, Suharto was able to co-opt the elite. With the financial crisis, he could not fulfil that, so we had a better chance to get rid of him."

While the crisis was mainly an economic nightmare – it forced countless banks and businesses to fold and sent millions tumbling back into poverty – it also shook the political foundations of not only Indonesia but also Southeast Asia to their core.

Ten years after the crisis, the political fallout is still unfolding in Thailand.

Former prime minister Chuan Leekpai and his Democrat Party, although not in power when the crisis struck on July 2, 1997, were assigned clean-up duty and later were faulted for being too willing to take the World Bank and International Monetary Fund (IMF) medicine of fiscal cuts, leading to a deeper recession and hundreds of bankruptcies.

Blamed for the post-crisis mismanagement, the Democrats lost to upstart business tycoon Thaksin Shinawatra in the January 2001 general election.

"They were seen by businessmen as really failing in their duty," said Chris Baker, author of Thailand's Boom and Bust. "It created that kind of space for someone like Thaksin where he could say, 'Hey, I'm new'."

The Thaksin saga continues today. While he returned Thailand to its place as one of the region's top economies, he also ran roughshod over democratic institutions, the media and human rights. He was ultimately ousted in a military coup in September while travelling abroad and now faces corruption charges back home.

Thailand, now under a military-appointed administration, is drafting a new constitution and preparing for new elections on Nov 25.

Malaysia also saw a prominent political figure go down – and to prison. Long-serving prime minister Mahathir Mohammed had a very nasty and public falling out with his one-time heir apparent, deputy premier Anwar Ibrahim.

While Anwar publicly disagreed with Mahathir's decision to reject a controversial economic bailout from the IMF during the crisis, the rivals were already battling over control of Malaysia's ruling United Malays National Organization and thus the prime minister's seat.

Both men had large business patrons, but Anwar was amassing huge grassroots support, through which he could mount a challenge for the premiership more quickly. Ultimately, Mahathir won out, and Anwar was arrested, tried and convicted on sodomy and corruption charges.

The economic crisis "was one of many issues", political analyst Terrence Gomez said. "Mahathir was already trying to stem Anwar's ascendancy. There was a power struggle already, and then when the crisis occurred, there were differences over (which corporations) should be saved and which should be bailed out."

Gomez added that the legacy of the crisis in Malaysia today is that the state has much larger control over publicly listed companies and Mahathir's relentless moves to concentrate more power in the executive branch remains.

Like in Thailand, voters in the Philippines went with new political blood after the economic crisis despite economic reforms put in place by outgoing president Fidel Ramos. They elected former screen idol Joseph Estrada.

But Estrada was ousted in a military-backed mass uprising in 2001 after being impeached on corruption allegations. Perhaps in a delayed reaction to the 1997 crisis, Estrada's ouster actually sparked calls for political reform in the Philippines.

Current President Gloria Macapagal Arroyo and other politicians have proposed a shift to a parliamentary form of government from the presidential system. On the other hand, democracy groups called for electoral reforms, mainly the automation of elections in the country, to minimize cheating after vote-rigging allegations against Arroyo.

The political landscape in South-East Asia's main economies, aside from Singapore, is far different today than 10 years ago. On the other hand, minnows such as Cambodia, Myanmar, Laos and Vietnam, given their authoritarian regimes, remain unchanged.

But that hasn't stopped some analysts from contending that the 1997 crisis, besides forcing painful economic reforms, also resulted in political changes.

"The whole region is not wholly democratic," Wanandi said. "If there's a movement, there's not one straight line for democracy, but since Indonesia is 45 percent of the region, it's a big prize. If we can sustain that (democracy), it will be the model for the region."