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Dependence, diversification and regionalism : the Association of Southeast Asian Nations Crone, Donald K. 1981

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DEPENDENCE, DIVERSIFICATION AND REGIONALISM: THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS by DONALD KENDALL CRONE M.A., P o r t l a n d S t a t e U n i v e r s i t y , 1975 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY i n THE FACULTY OF GRADUATE STUDIES Department o f P o l i t i c a l S c i e n c e We a c c e p t t h i s t h e s i s as c o n f o r m i n g t o t h e r e q u i r e d s t a n d a r d THE UNIVERSITY OF BRITISH COLUMBIA September 1981 © Donald K e n d a l l Crone, 1981 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r a n a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l m a k e i t f r e e l y a v a i l a b l e f o r r e f e r e n c e a n d s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s m a y b e g r a n t e d b y t h e h e a d o f m y d e p a r t m e n t o r b y h i s o r h e r r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t b e a l l o w e d w i t h o u t m y w r i t t e n p e r m i s s i o n . D e p a r t m e n t o f P o l i t i c a l S c i e n c e  T h e U n i v e r s i t y o f B r i t i s h C o l u m b i a 2 0 7 5 W e s b r o o k P l a c e V a n c o u v e r , C a n a d a V 6 T 1W5 D a t e Setember 9 , 1981 D E - 6 ( 2 / 7 9 ) i i ABSTRACT One of the most pressing problems of developing countries i s t h e i r economic and p o l i t i c a l dependence on the major global powers, which i s thought to impose severe constraints on the a b i l i t y of LDCs to pursue autonomous development. This t h e s i s explicates and examines one strategy to reduce dependence, as i t i s developed and pursued by the members of the Association of Southeast Asian Nations (Indonesia, Malaysia, the P h i l i p p i n e s , Thailand and Singapore). The elements of t h i s strategy are d i v e r s i f i c a t i o n of economic r e l a t i o n s and r e s t r u c t u r i n g of memberships i n i n t e r n a t i o n a l organizations. P o l i c i e s leading to d i v e r s i f i c a t i o n i n the areas of i n t e r n a t i o n a l trade and foreign d i r e c t investment are described, and evaluated through s t a t i s t i c a l a nalysis of trade and investment flows f o r the period 1967 to 1978. The evolution of ASEAN i s examined, p a r t i c u l a r l y as i t bears on economic issues. Patterns of memberships i n global and regional i n t e r n a t i o n a l organizations and transnational associations are examined f o r evidence of a greater capacity f o r c o l l e c t i v e behavior on the part of the ASEAN members. The study concludes that there has been modest progress toward reducing the s t r u c t u r a l basis of dependence, although there are numerous l i m i t a t i o n s to d i v e r s i f i c a t i o n . The ASEAN members remain dependent, but le s s so. Their strategy may o f f e r an a l t e r n a t i v e to other c o l l e c t i v e s e l f -r e l i a n c e strategies pursued by Third World nations. i i i TABLE OF CONTENTS Page ABSTRACT i i TABLE OF CONTENTS i i i LIST OF TABLES . . v ACKNOWLEDGEMENTS v i i CHAPTER 1. DIVERSIFICATION, DEPENDENCE, AND REGIONALISM 1 The ASEAN Members . . . . . . . . . . . . 3 Organization of the Study . . . . . . . . . . . . . 7 Notes 12 CHAPTER 2. INTERNATIONAL THEORY AND THE STRATEGY OF DIVERSIFICATION 14 Three Schools of International P o l i t i c a l Economy . . 17 Economic Nationalism . . . . . . . . . . . . . . . 17 Dependency . . . . . . . . . . . . . . . . . . . . 19 Interdependence . . . . . . . 24 Theory and Method of Study 29 A Composite Strategy of D i v e r s i f i c a t i o n . . . . . 29 Methods of Inquiry . 31 Regionalism, and the Limits of D i v e r s i f i c a t i o n . . . 36 Notes 39 CHAPTER 3. ASEAN: BUILDING AND USING A REGIONAL ORGANIZATION . . 43 Origins and Development 44 ASEAN Economic Programs . . . . . . . . . . . . . . 53 Internal Economic Programs . . . . . . . . . . . . 53 External Economic Programs . . . . . . . . . . . . 61 Notes 69 CHAPTER 4. TRADE DEPENDENCE AND POLICY . 77 Trade P o l i c i e s f o r D i v e r s i f i c a t i o n . . . . . . . . . 82 The ASEAN Organization . . . . . . . . . . . . . . 82 Singapore . . . . . . . . . . . . . . . . . . . . 86 The P h i l i p p i n e s . . . . . . . . . . . . . . . 88 Malaysia . . . . . . . . . . . . . . . . . . . . . 93 Indonesia . . . . . . . . . . . . . , • ••• • • ••• • 96 Thailand . . . . . . . . . . . . . . . . . . . . . . 101 i v Page CHAPTER 4. TRADE DEPENDENCE AND POLICY Trade Patterns; Toward D i v e r s i f i c a t i o n ? ,' . , . . 105 Effectiveness of P o l i c i e s - ••• 117 Limits to D i v e r s i f i c a t i o n . . . . . . . . . . . . . 119 Notes . 123 CHAPTER 5. INVESTMENT DEPENDENCE AND POLICY . . . 130 Control of Foreign Investment: P o l i c i e s and Strategies . . . . . . . . . . . . . . . . . . . 134 Indonesia . . . . . . . . . . . . . . . . . . . . 135 Malaysia . . . . . . . . . . . . . . . . . . . . 140 The Ph i l i p p i n e s . . . . . . . . . . . . . . . . . 145 Singapore 149 Thailand . . . . . . . . 153 P o l i c i e s Pursued Through ASEAN . . . 155 Investment Patterns: Toward D i v e r s i f i c a t i o n ? . . . 161 Effectiveness of P o l i c i e s on Investment 170 Limitations on D i v e r s i f i c a t i o n . . . . . . . . . . 172 Notes 175 CHAPTER 6. DEPENDENCE AND GLOBAL ORGANIZATIONS 186 An Approach to Power i n Global Organizations . . . 186 The Importance of Organization . . . . . . . . . 186 A Note on Methods 191 ASEAN i n Intergovernmental Organizations . . . . . 195 Non-governmental International Organizations . . . 205 ASEAN Regional Non-governmental Organizations . . . 213 ASEAN Chambers of Commerce and Industry 220 The Regional Industry and Commodity Clubs . . . . 228 Conclusion 233 Notes - . . . 235 CHAPTER 7. DEFENSIVE REGIONALISM AND THE LIMITS OF DEPENDENCE . 242 International Economic P o l i c y Orientations . . . . 243 ASEAN as Defensive Regionalism 249 Defensive Regionalism and the Limits of Dependence 262 Notes 266 SELECTED BIBLIOGRAPHY . 268 V TABLES Page 1. ASEAN Members: Selected S t a t i s t i c s , 1978 4 2. ASEAN: Directions of Trade (in percent) 107 3. ASEAN: Asymmetry of Trade with Large I n d u s t r i a l Nations . . . 108 4. SINGAPORE: Di r e c t i o n of Trade (in percent) 110 5. PHILIPPINES: Di r e c t i o n of Trade (in percent) 112 6. MALAYSIA: Di r e c t i o n of Trade (in percent) 113 7. INDONESIA: Di r e c t i o n of Trade (in percent) . . 114 8. THAILAND: D i r e c t i o n of Trade (in percent) 116 9. ASEAN I n d u s t r i a l i z a t i o n 131 10. INDONESIA: Cumulative Foreign Investment, Percentage D i s t r i b u t i o n 164 11. MALAYSIA: Cumulative Foreign Investment, Percentage D i s t r i b u t i o n 165 12. PHILIPPINES: Cumulative Foreign Investment, Percentage D i s t r i b u t i o n 167 13. SINGAPORE: Cumulative Foreign Investment, Percentage D i s t r i b u t i o n 168 14. THAILAND: Cumulative Foreign Investment, Percentage D i s t r i b u t i o n 169 15. ASEAN Representation i n Global Organizations (in percent) . . . 189 16. Range of Memberships i n ASEAN IGO Network 197 17. Shared ASEAN Memberships i n Intergovernmental Organizations . . 199 18. Density of Shared Memberships i n IGOs, Country IGO Networks (in percent) 201 19. C e n t r a l i t y of ASEAN Members i n ASEAN IGO Network (in percent) . 203 20. ASEAN Membership i n Non-Governmental International Organizations, 1977, by Type of Organization 207 21. ASEAN NGO Network, 1977 211 v i Page 22. ASEAN Regional Non-governmental International Organizations . . 215 23. Global Economic P o l i c y Orientations and Available LDC Strategies 244 ACKNOWLEDGEMENTS I have incurred many debts of gratitude. A major one i s due my committee, Kal H o l s t i , Stephen Milne and Mark Zacher, f o r t h e i r i n s i g h t , constructive c r i t i c i s m s , and attention to d e t a i l s , delivered despite personal inconvenience, s a b a t t i c a l leaves, and unreasonable deadlines. The I n s t i t u t e of International Relations, U n i v e r s i t y of B r i t i s h Columbia, and the I n s t i t u t e of Southeast Asian Studies, Singapore, provided i n s t i t u t i o n a l support without which research i s impossible. The Un i v e r s i t y of B r i t i s h Columbia and the Killam Foundation supplied that most invaluable of commodities, money, to fund the project. P a t r i c i a Morison converted sloppy d r a f t s into a respectable manuscript. Many others have given moral support and understanding. Thank you, a l l . 1 CHAPTER 1 DIVERSIFICATION, DEPENDENCE, AND REGIONALISM P o l i t i c s i s f o r most of us a passing parade of abstract symbols, yet a parade which our experience teaches us to be a benevolent or malevolent force that can be close to omni-potent. ^ - Murray Edelman A "New International Economic Order" has become the symbol of hope f o r most of the Third World states, holding out a promise of r e d i s -t r i b u t i o n of global economic power to the less advantaged. Thus, the focus of "development" has s h i f t e d , from an emphasis i n the 1960s on the domestic blockages which prevent Third World states from equalling the p o l i t i c a l power and wealth of the West, to a scrutiny of the structure of the i n t e r n a t i o n a l economic system as an element hindering greater progress i n c l o s i n g the gap between r i c h and poor states. Yet, despite the e f f o r t s of a Third World c o a l i t i o n to change the in t e r n a t i o n a l system, such as i n the UNCTAD serie s and the North-South Conferences, l i t t l e progress i s 2 evident. An economic order i n which Third World states remain dependent on those major global powers which manage the global system remains a symbol, abstract rather than concrete, of the malevolent force of i n t e r -national p o l i t i c s . Many writers have addressed the issue of dependence, with l i t t l e 3 consensus on i t s existence or e f f e c t s . Others have provided case studies focusing on p a r t i c u l a r countries and t h e i r i n t e r a c t i o n s with global 4 economic actors, mostly multinational corporations. A l l of these studies 2 have a common assumption that economic and p o l i t i c a l f a c t o r s are intertwined i n the ana l y s i s of i n t e r n a t i o n a l p o l i t i c s . Yet, as N a z l i Choucri has pointed out, the f i e l d of in t e r n a t i o n a l p o l i t i c a l economy i s l a r g e l y an emerging one, with r e l a t i o n s h i p s between economics and p o l i t i c s yet to be sytematically delineated.^ Dependence i s c e r t a i n l y c e n t r a l to development: a lack of autonomy over economic and p o l i t i c a l elements of p o l i c y f r u s t r a t e s attempts to adapt growth to l o c a l circumstances. But t h i s type of p o l i t i c a l economy i s as uncharted as the r e s t . This study takes a rather d i f f e r e n t approach to the to p i c . No e f f o r t w i l l be made to prove that dependence has had negative (or p o s i t i v e ) e f f e c t s , or to describe the d e t a i l s of inte r a c t i o n s between dependent countries and stronger actors attempting to dominate them. Instead, what follows i s an analysis of the p o s i t i o n of a group of Third World states i n the i n t e r n a t i o n a l political-economic system, and a d e s c r i p t i o n of the p o l i c i e s undertaken to cope with economic dependence and penetration. What i s of in t e r e s t here are changes i n the patterns of dependence, with depen-dence taken simply as r e l a t i o n a l i n e q u a l i t y . Since the existence of a pattern implies a corresponding structure,^ t h i s i s an examination of st r u c t u r a l change as i t i s affected by economic i n t e r a c t i o n s . It i s , there-fore, neither a study of exc l u s i v e l y systemic f a c t o r s , as i s the case with most dependency studies, nor ex c l u s i v e l y actor i n t e r a c t i o n s , as with the case studies of multinational corporations. The focus here i s on how, and to what degree, Third World states can change the structure of the system that has all o c a t e d them dependent r o l e s . The perspective developed here i s that dependence i s a phenomenon of power r e l a t i o n s between developed and developing states. Stronger states exercise t h e i r c a p a b i l i t i e s by molding the structure of i n t e r n a t i o n a l 3 7 p o l i t i c a l and economic r e l a t i o n s to t h e i r advantage. In the sense that 8 structures r e f l e c t power, dependence i s also, as James Caporaso maintains, a s t r u c t u r a l phenomenon. As developing states learn to make more e f f e c t i v e use of t h e i r power c a p a b i l i t i e s , the structure of the system w i l l be changed. The appropriate point to study dependence, then, i s at the l e v e l of structures. As structures are r e l a t i v e l y enduring patterns, dependence i s not l i k e l y to disappear quickly; but i t i s s i g n i f i c a n t i f these struc-tures are changing toward less dependence, i n d i c a t i n g a s h i f t i n the pattern of power r e l a t i o n s . The ASEAN Members The states chosen f o r t h i s a nalysis are the f i v e members of The Association of Southeast Asian Nations (ASEAN). These are: Indonesia, Malaysia, the P h i l i p p i n e s , Singapore and Thailand. The members vary widely i n c e r t a i n respects: Singapore i s almost a c i t y - s t a t e with s l i g h t l y over two m i l l i o n residents, while Indonesia spans three thousand miles of the equator with a correspondingly large population; Singapore can hardly be c l a s s i f i e d "poor" by the standard of per c a p i t a GDP, but Indonesia c e r t a i n l y can (see Table 1); the P h i l i p p i n e s and Thailand are r e l a t i v e l y homogeneous i n the ethnic composition of t h e i r populations, while Malaysia and Indonesia are quite fragmented; three d i f f e r e n t c o l o n i a l powers had, or s t i l l have to some degree, decisive influence i n shaping the modern states. S t i l l , the f i v e states share two things which make t h i s study worthwhile: a r e l a t i v e l y s i m i l a r v i s i o n of future economic growth; and a regional organi-zation to a s s i s t i n t h e i r objectives. The shared economic v i s i o n revolves around growth through export led development. Each of the f i v e states i s committed to some version of Table 1 ASEAN Members: Selected S t a t i s t i c s , 1978 Population Gross Domestic Product Exports Foreign Investment (million) t o t a l 00 percapita t o t a l (b) %GDP t o t a l (b) %GDP Indonesia 145.1 49,289 340 11,643 23.6 5,760 11.7 Malaysia 12.3 15,472 1,258 7,413 47.9 2,880 18.6 P h i l i p p i n e s 46.4 23,438 505 3,384 14.4 1,820 7.8 Singapore 2.3 7,726 3,359 10,132 131.1 1,700 22.0 Thailand 45.1 21,843 484 4,054 18.6 445 ' 2.0 (a) Stock of fo r e i g n d i r e c t investment of OECD countries, end 1978. (b) M i l l i o n s of $U.S. Sources: Population - United Nations, Demographic Yearbook, 1979 (New York: UN, 1979); GDP - United Nations, Yearbook of National Accounts S t a t i s t i c s , 1979, Volume II (New York: U.N., 1980); Exports - International Monetary Fund, Directions of Trade: Annual (Washington, D.C.: IMF, 1979); Foreign Investment - Organization f o r Economic Cooperation and Development, Development Cooperation: 1980 Review (Paris: OECD, 1980), p. 165. 5 an open economy, although with a large measure of state c o n t r o l and involve-ment. They have developed a high degree of involvement with the i n t e r -national economic system through trade and investment t i e s , and depend on in t e r a c t i o n with the outside world f o r a substantial degree of t h e i r wealth, both earned and c a p i t a l . Together, they exported over $36 b i l l i o n worth of goods and services i n 1978, over 31% of t h e i r c o l l e c t i v e GDP. The OECD countries report over $12 b i l l i o n o f ' d i r e c t foreign investment i n the ASEAN countries, almost 11% of the ASEAN GDP. In addition, they are a l l , with the exception of Singapore, consumers of loans from foreign banks; the Phil i p p i n e s , Indonesia and Thailand are among the most heavily i n debt of a l l developing countries. The int e r n a t i o n a l economic system i s c l e a r l y of vast importance to them a l l . With t h e i r large exports, and over 250 m i l l i o n combined population, they are of some importance to the i n t e r n a t i o n a l eco-nomic system, too; but not equally so. They may hold investment and loans hostage, or withhold some commodities important to t h e i r trade partners, but the e f f e c t would be disastrous f o r them, and only inconvenient to t h e i r f a r larger economic partners. A part of t h e i r shared economic v i s i o n , then, i s a substantial degree of dependence. Coping with dependence i s part of t h e i r common bond. To a large degree, the f i v e ASEAN states also agree on a common strategy to maximize t h e i r a b i l i t y to p a r t i c i p a t e i n the i n t e r n a t i o n a l economic system, and minimize t h e i r dependence. They have focused on d i v e r s i f i c a t i o n of t h e i r economic partners as a means of c o n t r o l l i n g the p o l i t i c a l influence of any one. Through t h i s strategy they are attempting to f o s t e r economic growth while increasing t h e i r p o l i t i c a l independence. A large part of t h i s study i s devoted to describing how the ASEAN states have gone about implementing t h i s strategy, and assessing the r e s u l t s . I f i t can be e f f e c t i v e i n 6 reducing the degree of dependence, d i v e r s i f i c a t i o n w i l l be of i n t e r e s t to other s i m i l a r l y situated countries, although no claim of unive r s a l panacea i s made here. At t a i n i n g greater independence through d i v e r s i f i c a t i o n i s an important part of the shared ASEAN economic v i s i o n . The ASEAN organization i t s e l f i s the second major component of the shared Southeast Asian strategy of development. ASEAN was formed i n 1967 as a developmental regional association, i n the pattern of many other Third World regional organizations. But while most of these organizations appear to l i m i t t h e i r objectives to regional economic r a t i o n a l i z a t i o n i n order to permit greater growth among themselves, ASEAN has become an impor-tant instrument of i t s members' in t e r n a t i o n a l economic bargaining. Large parts of t h i s study take the founding date of ASEAN as the s t a r t i n g point f o r analysis of s t r u c t u r a l change as a matter of convenience, although seeking explanation i n e a r l i e r periods where necessary, even though ASEAN did not become c e n t r a l to the members' economic diplomacy u n t i l the early 1970s. In a sense, t h i s i s a study of regionalism and i t s uses i n South-east Asia. At the same time, t h i s i s not s t r i c t l y a study of regionalism. Asian regionalism has attracted i t s share of academic attention i n the l a s t few years. Kegley and Howell have constructed a typology of the dimensions of regional i n t e g r a t i o n i n Southeast Asia, and suggest that s o c i e t a l i n t e r -dependence, a t t i t u d i n a l integration, and intergovernmental cooperation are the major d i s t i n c t types of in t e g r a t i o n emerging from t h e i r f a c t o r a n a l y s i s . Howell and Solidum have each studied e l i t e a t t i t u d e s i n ASEAN as an element contributing to the development of regional policy.''' 1 H i l l , following the t r a n s a c t i o n a l i s t t r a d i t i o n , was unable to detect signs of increasing i n t e -gration, comparing the mutual exchanges of ASEAN with t h e i r external 7 exchanges." James Schubert has applied the f u n c t i o n a l i s t approach to Asian regionalism, and found that the ASEAN members are quite integrated compared 13 to t h e i r Asian neighbors. While a l l of these studies are informative, they l a r g e l y share the t e l e l o g i c a l loading of the regional i n t e g r a t i o n 14 15 l i t e r a t u r e , and are bound by the f a i l u r e of that l i t e r a t u r e ' s l o g i c . "Regionalism" i n t h i s study i s simply used to describe observable coopera-t i o n i n domestic and in t e r n a t i o n a l p o l i c y , rather than carrying an implica-t i o n of economic and p o l i t i c a l u n i f i c a t i o n . ASEAN i s seen as part of a strategy of for e i g n p o l i c y which responds t o the s i t u a t i o n of i t s members i n a global society. ASEAN i s important, but i n many ways i t i s ' a peak organization of the f i v e members, rather than a separate actor. The main characters are the f i v e member states themselves, which created a regional organization to serve t h e i r i n t e r e s t s , and w i l l maintain that organization as long as i t continues to serve t h e i r i n t e r e s t s . The d r i v i n g forces behind the organi-zation's a c t i v i t i e s are the p o l i c i e s of the members; rather than detracting from the importance of the organization, t h i s affirms i t . ASEAN i t s e l f i s treated both as an e s s e n t i a l part of the members' strategy of development, and as simply the s i x t h actor i n the cast. Organization of the Study While the units analyzed are the f i v e states plus t h e i r common regional organization, the discussion i s organized around several major issues, of p a r t i c u l a r importance to the general topic of dependence and i t s reduction. Chapter 2 examines the general strategy of d i v e r s i f i c a t i o n as a t h e o r e t i c a l method of reducing dependence. Based on a survey of the major 8 streams of l i t e r a t u r e i n the in t e r n a t i o n a l p o l i t i c a l economy t r a d i t i o n , a composite strategy of d i v e r s i f i c a t i o n is. advanced which draws on in s i g h t s from a broad range of writers, as t h e i r work applies to the s i t u a t i o n of developing countries. This discussion i s o l a t e s three major domains f o r the ap p l i c a t i o n o f ' p o l i c i e s ' o f d i v e r s i f i c a t i o n : trade r e l a t i o n s , f o r e i g n invest-ment r e l a t i o n s , and memberships i n various types of i n t e r n a t i o n a l organi-zations. In each case, a pattern of concentration of r e l a t i o n s , p a r t i c u -l a r l y where that c o n c e n t r a t i o n 1 i s on large economic powers, i s i d e n t i f i e d as contributing to continued weakness, while a pattern of greater d i v e r s i -f i c a t i o n i s more l i k e l y to strengthen the s t r u c t u r a l p o s i t i o n of the developing country. Methods of inquir y f o r each issue area are s t i p u l a t e d . F i n a l l y , the r o l e of regionalism i s brought into the discussion, and the l i m i t a t i o n s of a strategy of d i v e r s i f i c a t i o n are considered. Chapter 3 returns to the topic of regionalism, and sets the context of the ASEAN organization i n Southeast Asian p o l i t i c s . The o r i g i n s and development of the organization are described, which leads to the con-c l u s i o n that, at the present time, the major value of the regional organi-zation i s i n enhancing the members' external economic diplomacy. The major economic programs of ASEAN are described, both those focusing on economic cooperation among the members and those coordinating economic cooperation with external states, i n order to provide a basis f o r l a t e r discussion of ASEAN a c t i v i t i e s i n p a r t i c u l a r domains of d i v e r s i f i c a t i o n e f f o r t . The extensive involvement of the ASEAN organization i n the economic a f f a i r s of i t s members i s apparent, giving content to regionalism i n Southeast Asia. Chapters 4, 5, and 6 examine the three substantive domains of d i v e r s i f i c a t i o n . Chapter 4 describes the evolution of p o l i c i e s on trade f o r each state, and the a c t i v i t i e s of ASEAN i n t h i s area, drawing together 9 the reasons why each state turned to a p o l i c y of d i v e r s i f i c a t i o n at a p a r t i c u l a r time. Actual trade patterns are analyzed with simple descrip-t i v e s t a t i s t i c s to determine the extent of d i v e r s i f i c a t i o n , and i t s timing, and the effectiveness of the states' p o l i c i e s i s assessed. The various factors i n h i b i t i n g d i v e r s i f i c a t i o n of trade partners are discussed. Chapter 5 examines the topic of foreign investment. P o l i c i e s ' o f each state are presented as they r e l a t e to the control of foreign invest-ment, domestic concerns over fo r e i g n domination of l o c a l productive assets, and the necessity of preserving an adequate flow of c a p i t a l from without to supplement l o c a l finance. The tension between a fear of for e i g n domination and achieving adequate domestic economic growth i s re l a t e d to the adoption of a p o l i c y of d i v e r s i f i c a t i o n . ASEAN's f i n a n c i a l a c t i v i t i e s are described. Data on the sources of foreign investment f o r each state are analyzed to determine the extent and type of d i v e r s i f i c a t i o n a c t u a l l y achieved, and t h i s i s r e l a t e d to the p o l i c i e s of the states. Economic and p o l i t i c a l l i m i t a -t ions to d i v e r s i f i c a t i o n i n the domain of investment are considered. Chapter 6 returns to the realm of i n t e r n a t i o n a l organizations. I t looks at the patterns of the ASEAN states' p a r t i c i p a t i o n , through member-ship, i n intergovernmental organizations since 1967 to determine whether, and to what degree, they have become a bloc i n the community of nations. Since the methodology of t h i s chapter d i f f e r s from those preceding i t , the approach i s explained. The transnational organizations having an ASEAN membership, both those involving the ASEAN members with outside p a r t i c i -pants and those within the region,-are described i n some d e t a i l . The structure of the ASEAN members' p a r t i c i p a t i o n ' i n i n t e r n a t i o n a l organizations i s r e l a t e d to the theme of d i v e r s i f i c a t i o n , although with a s l i g h t l y d i f f e r e n t emphasis from trade and investment d i v e r s i f i c a t i o n . 10 Chapter 7 concludes the study. A framework f o r the comparison of the various i n t e r n a t i o n a l economic p o l i c y orientations i s presented, and the strategy of the ASEAN states placed i n t h i s wider context. The ASEAN states are held to be pursuing a p o l i c y best described as defensive regionalism. The major find i n g s of the study are reviewed and integrated. F i n a l l y , t h i s study i s discussed i n the context of s t r u c t u r a l power and dependence. The theme of t h i s study, c o n t r o l l i n g dependence through d i v e r s i -f i c a t i o n and regionalism, i s central to the i n t e r e s t s of many Third World states. As c r i t i c i s m of the " e x p l o i t a t i v e " nature of the i n t e r n a t i o n a l economic system mounts, and attempts to redress the grievances of the Third World continue, a l l possible options need to be systematically explored. It does not appear that the r i c h e r states are l i k e l y to concede to the demands of the South, as they are a r t i c u l a t e d i n UNCTAD or the North-South Conferences. I f the strategy of the ASEAN states i s e f f e c t i v e i n reducing dependence, i t may have wider a p p l i c a b i l i t y . Although a l l strategies have t h e i r l i m i t a t i o n s , the one elaborated here has the singular advantage that i t does not r e l y on the largesse of the i n d u s t r i a l states f o r i t s implemen-t a t i o n . This study explores a novel strategy. So f a r as I am aware, no other study has addressed the same problems ser i o u s l y , i n Southeast A s i a or elsewhere. Studies of Third World regionalism abound, but not from the perspective of instruments of foreign p o l i c y ; debate over what dependence i s , and how to reduce i t , continues, but not focused on s p e c i f i c states or groups of states. This study should advance both the study of regionalism i n the Third World and consideration of concrete methods of reducing dependence. In a narrower context, much of the research on ASEAN and i t s members i s drawn together, supplemented, and focused on a broad theme. The subjects of Southeast Asian p o l i t i c s and the Third World i n the in t e r n a t i o n a l system are l i m i t l e s s , but t h i s study should add something to each. This i s not a study or "proof" of dependency, but rather an exploration of some aspects of dependence. The dependency school asks questions about how the i n t e r n a t i o n a l system a f f e c t s the structure of domestic p o l i t i c s i n the Third World, and answers them through h i s t o r -i c a l - s o c i o l o g i c a l a n a l y s i s . Dependence as construed here, on the other hand, asks questions about the structure of i n t e r n a t i o n a l r e l a t i o n s h i p s and how that influences the int e r a c t i o n s of states, i n p a r t i c u l a r whether the pattern of these r e l a t i o n s h i p s have become more equal -less dependent, and how, through the e f f e c t s of Third World domestic and foreign p o l i c i e s . The answers c e r t a i n l y draw on aspects of dom-e s t i c p o l i t i c s , but as sources of for e i g n p o l i c i e s , the major focus of dependence an a l y s i s . While dependency looks at the e f f e c t s of the system on the Third World, I am examining the pressures of the Third World on the system. NOTES Murray Edelman, The Symbolic Uses of P o l i t i c s fJJrbana, I I I . : U n i v e r s i t y of I l l i n o i s Press, 1964), p. 5. See Robert Mortimer, The Third World C o a l i t i o n i i i International P o l i t i c s (New York: Praeger, 1980), and Robert Rothstein, Global Bargaining: UNCTAD and the Quest f o r a New International Economic Order (Princeton: U n i v e r s i t y Press, 1979). For a thorough, i f not d i s i n t e r e s t e d , review, see R. Dan Walierei, "The P o l i t i c a l Economy L i t e r a t u r e on North-South Relations," International  Studies Quarterly 22 (December, 1978): pp. 587-624. For a review of many of these studies, see H. J e f f e r y Leonard, " M u l t i -national Corporations and P o l i t i c s i n Developing Countries," World  P o l i t i c s 52 ( A p r i l , 1980): pp. 454-483; Robert T. Snow, "Southeast Asia i n the World System: Origins and Extent of Export Oriented I n d u s t r i a l i z a t i o n i n the ASEAN Countries," Paper, Association f o r Asian Studies (Washington, D.C.: 1980). N a z l i Choucri, "International P o l i t i c a l Economy: A Theoretical Perspec-t i v e , " Ole H o l s t i , Randolph Siverson and Alexander George, eds., Change i n the International System (Boulder: Westview Press, 1980), pp. 103-129. See Kenneth Waltz, Theory of International P o l i t i c s (Reading, Mass.: Addison-Wesley, 1979), pp. 79-101, on p o l i t i c a l structures. For examples, see Robert 0. Keohane and Joseph S. Nye, Power and Indepen- dence: World P o l i t i c s i n T r a n s i t i o n (Boston: L i t t l e , Brown and Co., 1977), e s p e c i a l l y Part I I . James Caporaso, "Dependence, Dependency and Power i n the Global System: A S t r u c t u r a l and Behavioral Analysis," International Organization 32 (Winter, 1978), p. 22. See Organization f o r Economic Cooperation and Development (OECD), Develop- ment Cooperation, 1980 Review, p. 221, and Far Eastern Economic Review, March 20, 1981, pp. 46-7. Charles Kegley, J r . , and Llewllyn Howell, J r . , "The Dimensionality of Regional Integration: Construct V a l i d a t i o n i n the Southeast Asian Context," International Organization 29 (1975): pp. 997-1020. Llewellyn Howell, J r . , " A t t i t u d i n a l Distance i n Southeast A s i a : S o c i a l and P o l i t i c a l Ingredients i n Integration," Southeast A s i a 11 (1974): pp. 577-608; E s t r e l l a Solidum, "The Nature of Cooperation Among the ASEAN States as Perceived Through E l i t e Attitudes - A Factor f o r Regionalism," Ph.D. Thesis (University of Kentucky, 1970). 13 12. H. Monte H i l l , "Community Formation Within ASEAN," International Organization 32 (1978): pp. 569-575. 13. James N. Schubert, "Toward a 'Working Peace System' i n Asia: Organiza-t i o n a l Growth and State P a r t i c i p a t i o n i n Asian Regionalism," International Organization 32 (1978): pp. 425-462. 14. Ernst B. Haas, "On System and International Regimes," World P o l i t i c s 37 (1975): pp. 147-174. 15. Ernst B. Haas, "Turbulent F i e l d s and the Theory of Regional Integration," Internationa1 Organization 30 (1976): pp. 173-212. 14 CHAPTER 2 INTERNATIONAL THEORY AND THE STRATEGY OF DIVERSIFICATION None of the s t a t e s i n Southeast A s i a i s , or l i k e l y ever w i l l be, a s i g n i f i c a n t power i n the g l o b a l system. They are, t h e r e f o r e , confronted with a dilemma a r i s i n g from t h e i r r e l a t i v e weakness. I f they p a r t i c i p a t e i n the g l o b a l system, e s p e c i a l l y i n economic matters, they must i n t e r a c t w i t h the more powerful s t a t e s and t h e i r strong i n t e r e s t s , and lose some degree of independence and autonomy i n adapting t o the needs of these powerful agents. I f they withdraw from the g l o b a l system, t h e i r l i k e l y f a t e i s s t a g n a t i o n , r a t h e r than more r a p i d economic growth which i s r e q u i r e d t o improve m a t e r i a l welfare and c o n t r i b u t e t o s o c i a l s t a b i l i t y . Dependence or d e s t i t u t i o n would appear t o be the choice, n e i t h e r of which i s p a r t i c u l a r l y a t t r a c t i v e . The ASEAN s t a t e s have chosen t o l i n k themselves t o the g l o b a l system. They i n v i t e f o r e i g n investment; they seek t o expand f o r e i g n trade; they choose t o become i n v o l v e d i n a wide range of i n t e r n a t i o n a l o r g a n i z a -t i o n s . Yet, i n an age of strong n a t i o n a l i s m , none of these s t a t e s wishes t o s a c r i f i c e any autonomy t o gre a t e r dependence. They i n v i t e the v e h i c l e s of dependence, but hope t o avoid the worst of the consequences. D i v e r s i f i c a t i o n i s the apparent means by which the ASEAN s t a t e s hope to minimize t h e i r dependence on t h e i r l a r g e r , more i n f l u e n t i a l economic p a r t n e r s . Later chapters w i l l examine the d e t a i l s of t h i s s t r a t e g y i n s p e c i f i c areas. The goals of t h i s chapter are t o examine the IS major bodies of writing on i n t e r n a t i o n a l p o l i t i c a l economy f o r i n s i g h t s on d i v e r s i f i c a t i o n , and to provide the conceptual basis f o r analysis of i t s effectiveness and l i m i t a t i o n s as a strategy. There are, of course, several meanings of the term d i v e r s i f i c a -t i o n . The one which comes most immediately to mind i s economic d i v e r s i f i -cation, or the widening of the base of the economy through the production of a l a r g e r v a r i e t y of goods and se r v i c e s . A second meaning i s the defensive balancing of investments, based on the assumption that a given amount of investment spread over a number of d i f f e r e n t types of s e c u r i t i e s i s safer than concentrating on a single type. Both of these meanings are to be found i n d i c t i o n a r y d e f i n i t i o n s , but neither i s exactly what i s meant here. The p a r t i c u l a r conception of d i v e r s i f i c a t i o n used here concerns the geographical concentration of foreign t i e s , or the pattern of economic r e l a t i o n s with foreign states. This i s i n d i r e c t l y r e l a t e d to the f i r s t type of d i v e r s i f i c a t i o n mentioned above, i n that the more d i f f e r e n t types of product a given nation produces, the greater the p o s s i b i l i t y of exporting to a wider v a r i e t y of customers i n the world. And the same would be true the wider the v a r i e t y of imports required. But t h i s type of d i v e r s i f i c a t i o n i s e s s e n t i a l l y an economic problem (although with p o l i t i c a l linkages), and i s not the focus of t h i s work. The second meaning of d i v e r s i f i c a t i o n mentioned above i s a c t u a l l y c l o s e r to the type examined here, as p o r t f o l i o d i v e r s i f i c a t i o n i s a defensive strategy to reduce p o s s i b l e losses. Investment losses are, of course, economic ones, and so are some of the losses being insured against by geographical d i v e r s i f i c a t i o n ; d i s r u p t i o n of trade r e l a t i o n s with an important foreign market, f o r example, would have s i g n i f i c a n t economic consequences. 16 However, i t i s the primary purpose to examine geographical d i v e r s i f i c a t i o n as a p o l i t i c a l strategy to reduce the p o t e n t i a l consequences of economic r e l a t i o n s , by l i m i t i n g the magnitude of influence any foreign actor derives from i t s economic t i e s with a given state. Geographical d i v e r s i f i -c a tion i s a p o l i t i c a l strategy to reduce the degree of dependence. Although d i v e r s i f i c a t i o n i s treated here as a p o l i t i c a l strategy, i t should be c l e a r that i t i s not the only one f o r c o n t r o l l i n g dependence. Others are producer c a r t e l s , withdrawal from foreign economic contacts, regional pacts, n a t i o n a l i z a t i o n of foreign assets, pursuit of a new i n t e r -national economic order, and e x p l o i t a t i o n of a great power's l o c a l s t r a t e g i c i n t e r e s t s . 1 Each of these s t r a t e g i e s has, at one time or another, been followed by some Southeast Asian state: Indonesia i s an OPEC member; ASEAN i s a regional pact; Burma kept i t s e l f l a r g e l y i s o l a t e d ; foreign assets have been, on occasion, n a t i o n a l i z e d ; the NIEO i s supported; and U.S. s t r a t e g i c i n t e r e s t s have been held hostage to more l u c r a t i v e support. Although these other s t r a t e g i e s also come into play, d i v e r s i f i -cation appears to be a fundamental part of the strategy of the ASEAN states, and l a r g e l y unexamined to date. In the following sections the three major approaches to i n t e r -national p o l i t i c a l economy, economic nationalism, dependency, and i n t e r -dependence, w i l l be examined as to t h e i r views on the strategy of d i v e r s i -f i c a t i o n . The assumptions about the nature of the i n t e r n a t i o n a l economic system of each approach w i l l be summarized, the e x p l i c i t or i m p l i c i t avenues to strengthen a p a r t i c u l a r state's p o s i t i o n i n the i n t e r n a t i o n a l system w i l l be explored, and conclusions f o r d i v e r s i f i c a t i o n w i l l be drawn. The perspective developed below i s that the strategy of d i v e r s i f i -cation i s supported by each of these t h e o r e t i c a l p o l i c y approaches, and 17 and that each approach o f f e r s unique yet overlapping r a t i o n a l e s f o r a r e d i r e c t i o n of economic t i e s . Three Schools of International P o l i t i c a l Economy Economic Nationalism Economic nationalism, harkening back to mercantilism, i s the oldest school of p o l i t i c a l economy. One might also observe that, as a basis f o r actual p r a c t i c e by developed as well as developing countries, i t i s also the most widely adhered to of the economic doctrines. I t s appeal derives from a f i r m l y r e a l i s t i c conception of the nature of the i n t e r -national economic system and from p r e s c r i p t i o n s designed f o r the maximum short term benefit to national economic actors. The m e r c a n t i l i s t s , and more modern neo-mercantilists and economic n a t i o n a l i s t s a l i k e , cast the i n t e r n a t i o n a l economic system i n s t a t i c terms, where the gain by one i s at the expense of a loss by another. The goal of a l l nations i s to gain strength through economic growth, led by a strong state, which intervenes to produce desirable r e s u l t s . In the age of mercantilism, t h i s was construed to be a surplus of exports over imports, thus accumulating wealth. However, the German H i s t o r i c a l School, led by F r i e d r i c h L i s t , saw the economy i n more sophisticated terms and aimed at 2 organic development to produce a strong national economy. This was a process of national competition as seen by Alexander Hamilton, which j u s t i f i e d protectionism to spur the development of manufacturing i n the American economy. Or consider L i s t ' s r a t i o n a l e f o r mercantilism as the 3 route to German u n i f i c a t i o n : 18 Nations are thus the victims of each other, and s e l f i s h p o l i c y i s c o n t i n u a l l y disturbing and delaying the eco-nomical development of nations. To preserve, to develop, and to improve i t s e l f as a nation i s consequently, at present, and ever must be, the p r i n c i p a l object of a nation's e f f o r t s . But some of them, favored by circum-stances ... have adopted and s t i l l persevere i n a p o l i c y so well adapted to give them the monopoly of manufactures, of industry and of commerce, and to impede the progress of less advanced nations .... This has a thoroughly contemporary r i n g about i t , despite the archaic s t y l e . A developed economy i s the basis of a strong state, and t h i s must be achieved at the expense of others - i n the early m e r c a n t i l i s t version, by exporting more than importing, but i n the l a t e r economic n a t i o n a l i s t version, by d i s p l a c i n g those states occupying the more i n d u s t r i a l i z e d niches. As G i l p i n contends, mercantilism seeks f o r s e c u r i t y through 4 economic means, and the concern f o r s e c u r i t y i s the basis of a r e a l i s t worldview. The p r e s c r i p t i o n s of the m e r c a n t i l i s t s and economic n a t i o n a l i s t s were designed to contribute to the b u i l d i n g of a strong national economy through manipulation of foreign trade by the state. A surplus of exports over imports was to be achieved by state control over valuable export commodities and high t a r i f f s to reduce imports. This was supplemented i n the nineteenth century by a concern to f o s t e r the development of manufac-tur i n g i n d u s t r i e s with t a r i f f p o l i c i e s , the " i n f a n t industry" argument. In contemporary terms, dependence on foreign imports, p a r t i c u l a r l y those which could serve as the basis of m i l i t a r y power, was to be avoided, while the national economy grew equal i n strength to others. G i l p i n observes that, i n part, the a t t r a c t i o n of economic nationalism as a doctrine derives from a s e n s i t i v i t y within governments to the dangers inherent i n becoming overly dependent on the global economy.^ Economic nationalism i s the 19 preferred doctrine of the weak. However, not ju s t the weak concern themselves with increasing state power through the manipulation of trade r e l a t i o n s . Albert 0. Hirschman's analysis of the p o l i c i e s of German trade p r a c t i c e s during the interwar period c l e a r l y i ndicates that state power can be enhanced by creating dependence, p a r t i c u l a r l y with smaller states, by encouraging concentrated trade on a b i l a t e r a l basis. The "influence e f f e c t " of foreign trade, as he terms i t , derives from the power to disrupt exports and imports with the smaller partner, creating a s i t u a t i o n where the threat of economic loss encourages p o l i t i c a l compliance. Although German prac t i c e s were informed by the H i s t o r i c a l School of economic n a t i o n a l i s t s , t h i s was an extension of the cen t r a l concern over state power rather than an a p p l i c a t i o n of the e x i s t i n g economic doctrine. The doctrine of the weak was converted to use by the strong. The s t r a t e g i c i m p l i c a t i o n f o r the weak i s obvious. As Hirschman points out, the small state should avoid having too large a share of i t s 7 trade with any one large country. This i s the root of a strategy of geographical d i v e r s i f i c a t i o n as a means of avoiding, or minimizing, dependence. Thus, the i m p l i c i t conclusion of the doctrine of mercantilism and economic nationalism recommends the sort of d i v e r s i f i c a t i o n examined here. D i v e r s i f i c a t i o n properly becomes a part of the doctrine of economic nationalism f o r the weak. Dependency Dependency as a body of writing has a r e l a t i v e l y more recent o r i g i n i n the experience of new states, l a r g e l y i n La t i n America. The verbiage of dependency has come to characterize a wide range of c r i t i q u e s 20 of i n d u s t r i a l i z e d - s t a t e behavior, by more moderate Third World states as well as the more r a d i c a l . I t s appeal as an i n t e r n a t i o n a l p o l i t i c a l economic doctrine has at le a s t two bases. F i r s t , by c l e a r l y p o l a r i z i n g the world into i n d u s t r i a l - s t a t e oppressors and developing-state oppressed, i t a t t r i b u t e s many of the i l l s of the l a t t e r to the h i s t o r i c a l r o l e of the former, which must appeal to e l i t e s struggling to cope with the problems of modernization. Second, many of the p r e s c r i p t i o n s are e n t i r e l y compatible with the n a t i o n a l i s t i c f e e l i n g s of formerly c o l o n i a l populations, and therefore have strong domestic appeal. Dependency frames the contemporary i n t e r n a t i o n a l economic system i n i t s h i s t o r i c a l context, as a stage of development following the c o l o n i a l era. Because of extensive economic penetration of the colonies (and other subordinate t e r r i t o r i e s ) by the metropolitan powers during the c o l o n i a l era and a f t e r , developmental choice has been l i m i t e d by the structure of r e l a t i o n s r e s u l t i n g from that penetration. Past economic development i n the Third World was direc t e d to meet the needs of the i n d u s t r i a l i z i n g nations, which r e s u l t e d i n emphasis on the e x p l o i t a t i o n of the col o n i e s ' resources f o r export to the manufacturing sectors abroad, and repression of manufacturing i n the Third World. The basic economic i n f r a s t r u c t u r e was set by t h i s pattern. For example, r a i l and road networks were b u i l t from export ports to relevant resource areas, making i t d i f f i c u l t a f t e r decolo-n i z a t i o n to reorient the economy from trade to production a c t i v i t i e s . This pattern of economic development was f a c i l i t a t e d by foreign ownership and investment, which f r u s t r a t e d the growth of a domestic entrepreneurial c l a s s , and removed whole sectors of the economy from e f f e c t i v e national c o n t r o l . National p o l i c y e l i t e s l o s t a s i g n i f i c a n t degree of influence over domestic economic and p o l i t i c a l a f f a i r s , as those who were aware of 21 the locus of r e a l economic power became more ex t e r n a l l y oriented and responsive.to the s o c i a l and economic needs of the metropolitan countries. Economic, s o c i a l and p o l i t i c a l growth patterns were d i s t o r t e d from what would have occurred i n the absence of the i n t r u s i o n of the c o l o n i a l powers, and the decolonized t e r r i t o r i e s were linked to the needs of the i n t e r -national c a p i t a l i s t system. Extensive linkage to foreign economic systems, then, has the e f f e c t of t y i n g the dependent economy to an external frame of reference. 9 As Theotonio Dos Santos defines the s i t u a t i o n : By dependence we mean a s i t u a t i o n i n which the economy of c e r t a i n countries i s conditioned by the development and expansion of another economy to which the former i s subjected. The r e l a t i o n s of interdependence between two or more economies, and between those and world trade, assumes the form of dependence when some countries (the dominant ones) can expand and can he s e l f - s u s t a i n i n g , while other countries (the dependent ones) can do t h i s only as a r e f l e c t i o n of that expansion, which can have ei t h e r a p o s i t i v e or a negative e f f e c t on t h e i r immediate development. The smaller economic siz e and les s advanced character of the dependent economy make i t peripheral to the developed economy, and thus both more subject to d i s l o c a t i o n s a r i s i n g from changes i n the dominant economy and unable to a l t e r the pattern of r e l a t i o n s through independent act i o n . Because of the h i s t o r i c a l development of economic r o l e s i n the i n t e r -national economy, re i n f o r c e d by contemporary d i s p a r i t i e s i n power, the Third World states are confined to a peripheral and unequal set of r e l a t i o n s within the i n t e r n a t i o n a l economic system. Even under the most favorable circumstances, the best that can be achieved i s a measure of "associated-dependent" development within the e x i s t i n g system, which allows economic growth without p o l i t i c a l autonomy. 22 The p r e s c r i p t i o n s of dependency writers are designed to a l t e r t h i s s i t u a t i o n i n i t s e n t i r e t y . Perhaps as a r e s u l t of the Marxist assump-tions of e a r l y dependency wri t i n g , the question of relations, between states was given only cursory attention i n favor of r e l a t i o n s among classes within the state. A s o c i a l i s t r e v o l u t i o n to displace the comprador c l a s s and lead to i n t e r n a l e q u a l i t y and withdrawal from the c a p i t a l i s t world-system were the only solutions advanced. This outlook assumed the nation-a l i z a t i o n of f o r e i g n assets, which struck a responsive note i n many develop-ing countries. However, as the option of j o i n i n g the s o c i a l i s t i n t e r n a t i o n a l system began to lose i t s gloss with, charges of s o c i a l i s t imperialism and reactions against developments i n Cuba, more d e t a i l e d consideration was. given to a l t e r n a t i v e patterns of r e l a t i o n s between states. "Delinking" and " s e l f - r e l i a n c e " are the elements of an emerging p r e s c r i p t i v e strategy which sets out a systematic r e s t r u c t u r i n g of r e l a t i o n s between Third World and i n d u s t r i a l i z e d states. 1''' The f i r s t element, delinking, involves severing most, i f not a l l , of the previous r e l a t i o n s with the i n d u s t r i a l countries. Trade, a i d , invest-ment and technology t r a n s f e r s , employment of f o r e i g n nationals, and r e l a t i o n s with i n t e r n a t i o n a l bodies which might compromise a state's autonomy are a l l targets f o r elimination. This might he s e l e c t i v e , doing away with, the worst offenders f i r s t , or wholesale, as part of the national r e v o l u t i o n which changes the domestic pattern of c l a s s r e l a t i o n s that perpetuates external dependence. The goal i s l e s s to eliminate transactions with: for e i g n actors completely than to reduce the: magnitude to a l e v e l e a s i l y c o n t r o l l e d by the state f o r national purposes. Although, a i d and finance linkages are to be avoided, exports necessary to pay f o r absolutely required imports and c a r e f u l l y c o n t r o l l e d , small foreign p r o j e c t s , as parts 23 of larger state projects, are seen as r e l a t i v e l y uncompromising. In t h i s way, the state regains control over f o r e i g n influences, and can proceed with autogenic development. The second element, s e l f - r e l i a n c e , i s di r e c t e d toward replacing the previously foreign a c t i v i t i e s with l o c a l l y sustained ones of a non-e x p l o i t i v e nature. The major focus i s the development of domestic capa-b i l i t i e s , but s e l e c t i v e r e - l i n k i n g with i n t e r n a t i o n a l actors i s also recognized as necessary. Since a l l r e l a t i o n s between unequal partners are seen as inherently e x p l o i t a t i v e , r e l a t i o n s with the i n d u s t r i a l i z e d nations are to be kept to a minimum i n favor of exchanges with other developing countries. Thus, exports channeled through multinational corporations are to be avoided i n favor of free market exchange; "appropriate" technologies are to be adopted over MNC packages; and exports should be c a r e f u l l y d i v e r -s i f i e d to insulate the national economy from powerful partners. Since other developing countries are also r e l a t i v e l y weak, and therefore l i k e l y to be more equal partners, r e l a t i o n s with them should be expanded. More trade, more exchange of technology and information, common i n s t i t u t i o n s , and regional int e g r a t i o n schemes as v e h i c l e s f o r negotiating accords with developed countries should a l l be sought as part of " c o l l e c t i v e s e l f -r e l i a n c e . " With these changes, a new i n t e r n a t i o n a l economic order of a less e x p l o i t a t i v e nature can be achieved, and r e l a t i o n s between i n d u s t r i a l and developing countries can be reduced and c o n t r o l l e d . This i s balanced by expanded r e l a t i o n s among developing countries, to be established on the p r i n c i p l e of mutual advantage rather than e x p l o i t a t i o n . The strategy of d i v e r s i f i c a t i o n i s e x p l i c i t l y advocated by dependency writers i n several forms. As with economic nationalism, diver-s i f y i n g trade, p a r t i c u l a r l y exports, among a large number of nations i s 24 recommended. Furthermore, trade i n general should be d i v e r s i f i e d away from the i n d u s t r i a l nations, e s p e c i a l l y to avoid control by MNCs, and toward other developing countries. In addition, the i n s t i t u t i o n a l basis of i n t e r -national p o l i t i c a l i n t e r a c t i o n i s to be d i v e r s i f i e d to give greater weight to organizations of developing countries, both regional and global in scope. The r a t i o n a l e f o r d i v e r s i f i c a t i o n i n the writings on dependency i s s l i g h t l y d i f f e r e n t from that of economic nationalism, i n that the goals of greater state autonomy and "organic development" are steps to a t t a i n domestic economic j u s t i c e , a d i s t i n c t i o n more important to domestic p o l i t i c s than foreign p o l i c y . D i v e r s i f i c a t i o n i s a c e n t r a l element of a foreign p o l i c y program to erase dependency. Interdependence Interdependence, grounded i n the assunptions of c l a s s i c a l l i b e r -alism, i s the dominant approach to i n t e r n a t i o n a l p o l i t i c a l economy i n the developed West. This doctrine f i n d s strong appeal i n arguments of economic r a t i o n a l i t y , which o f f e r s concrete advantages to the dominant states in the i n t e r n a t i o n a l economic system. At least to some degree, the other two doctrines discussed above are reactions to the r e s u l t s of the p r a c t i c e of l i b e r a l i s m . The c l a s s i c a l school of economic l i b e r a l i s m viewed the world economy i n terms analogous to advocates of domestic l a i s s e z f a i r e p o l i c i e s . The i d e a l s i t u a t i o n was unobstructed trade based on comparative advantage, and the free flow of a l l f a c t o r s of production across n a t i o n a l borders. A l l r e s t r i c t i o n s placed on economic i n t e r a c t i o n s by governments were undesirable, d i s t o r t i n g the operation of the open market and decreasing 12 general economic welfare. Furthermore, i t was thought that mutual 25 dependence induced by free and open trade would lead to i n t e r n a t i o n a l peace. Interdependence i s an attempt to describe and analyze the e f f e c t s of a world economy which, at least among Western nations and t h e i r a s s o c i -ated economic partners, i s characterized by l i b e r a l i s m as modified by the r i s e of the welfare state. Basing i t s analysis on an unprecedented growth i n World exchange and interconnectedness r e s u l t i n g from a p o l i t i c a l structure established and supported by the United States a f t e r World War I I , the growth and spread of multinationsl business enterprise, and the increasing involvement of a widened range of p u b l i c and p r i v a t e actors i n the i n t e r -13 national economy, the interdependence l i t e r a t u r e points to a substantial erosion i n the a b i l i t y of governments to exercise s u f f i c i e n t control over t h e i r economic p o l i c i e s , domestic as well as i n t e r n a t i o n a l . Governments, although s t i l l sovereign i n the l e g a l sense, are thought to have l o s t autonomy due to interpenetration i n the global economic system. More accurately, the p r i c e s of autonomy and independence are judged to have been s u b s t a n t i a l l y r a i s e d . Prodded by i n c r e a s i n g l y active domestic i n t e r e s t groups and the requirements of a welfare state, governments must intervene to adjust f o r the d i s l o c a t i o n s a r i s i n g from i n t e r n a t i o n a l transactions with a reduced assortment of e f f e c t i v e p o l i c y instruments. The r e s u l t i s p o l i c y i n t e r -14 dependence over a wide range of economic and p o l i t i c a l issues. P o l i c y i s set, not so much by states acting i n t h e i r own i n t e r e s t s (as i n the mercan-t i l i s t world), but by networks of governmental and p r i v a t e actors, i n t e r -national i n scope, concerned to further t h e i r separate i n t e r e s t s through cooperation. Economic p o l i c y has become i n t e r n a t i o n a l i z e d , both i n the sense of being d i r e c t l y influenced by events o r i g i n a t i n g beyond a state's borders, and i n the sense that foreign actors frequently p a r t i c i p a t e . None 26 of t h i s would surprise economic nationalists, or dependjstas, as t h e i r view of the nature of the global economic system assumes that i n e q u i t i e s a r i s e from the operation of an open i n t e r n a t i o n a l economy, and that state i n t e r -vention i s required to preserve national i n t e r e s t s . 1 ^ There i s at least some convergence i n world views among the major contending approaches. There are also some s i m i l a r i t i e s of a n a l y t i c a l approach, but not of p r e s c r i p t i o n s . The interdependence school presents a framework to analyze the e f f e c t s of interconnection among the various parts of the global economy that has two major parts to i t . F i r s t , the primary r e s u l t of systemic:., interdependence i s an increased s e n s i t i v i t y of a given national economy to the surrounding i n t e r n a t i o n a l system. The greater the degree of interconnectedness, the more r a p i d l y and completely are impulses from the int e r n a t i o n a l system transmitted to domestic economies. A country drawing on the in t e r n a t i o n a l petroleum market f o r i t s en t i r e energy requirements has l i t t l e b uffer when OPEC r a i s e s p r i c e s . S e n s i t i v i t y has costs, but some states have more a l t e r n a t i v e s than others i n adjusting to these costs. A state with adequate domestic resources to adjust to the e f f e c t s of s e n s i t i -v i t y , f o r example a surplus of coal, may be only marginally a f f e c t e d by s e n s i t i v i t y . A state not having these resources i s said to be vulnerable, the second dimension of analysis of interdependence. 1^ S e n s i t i v i t y imposes short-term costs, while v u l n e r a b i l i t y imposes longer-term costs. Since the states with fewer underlying c a p a b i l i t i e s s u f f e r both short and long term costs, a system of interdependence" benefits the economically more powerful roughly i n proportion to the degree of asymmetry of interdependence. This p a r a l l e l s the argument made be economic n a t i o n a l i s t s and dependency writers speaking on behalf of the weaker and less developed states. 27 The p r e s c r i p t i o n s of interdependence analysts are almost p r e c i s e l y the opposite of dependency. The basic o r i e n t a t i o n of c l a s s i c a l l i b e r a l economics i s toward expanding the degree of freedom i n the i n t e r n a t i o n a l economic system and the int e g r a t i o n of i n d i v i d u a l economies within i t . Thus nations should reduce t a r i f f b a r r i e r s to trade while attempting to expand those exports i n which they have a natural advantage, free the move-ment of f a c t o r s of production such as c a p i t a l , technology and manpower, and otherwise act to increase the economic r a t i o n a l i t y of the system i n order to maximize wealth f o r the system, and f o r t h e i r part of i t . Interdependence analysts are more r e a l i s t i c than c l a s s i c a l l i b e r a l s , i n that they recognize that no matter what the si z e of the t o t a l product, there w i l l be p o l i t i c a l c o n f l i c t over the d i s t r i b u t i o n . This c o n f l i c t i s resolved i n the context of "regimes" which may be formal organizations with a broad mandate or informal and p a r t i a l sets of understandings. In e i t h e r case, regimes are governing arrangements which r e f l e c t the d i s t r i b u t i o n of c a p a b i l i t i e s among p a r t i c i p a n t s (the structure) of that portion of the 17 i n t e r n a t i o n a l system. As Keohane and Nye put i t : International regimes are intermediate f a c t o r s between the power structure of an i n t e r n a t i o n a l system and the p o l i t i c a l and economic bargaining that takes place within i t . The structure of the system (the d i s t r i b u t i o n of power resources among states) profoundly a f f e c t s the nature of the regime. The regime, i n turn, a f f e c t s and to some extent governs the p o l i t i c a l bargaining and d a i l y decision making that occurs within the system. Nations act to manipulate other's v u l n e r a b i l i t i e s , p o t e n t i a l as well as 18 actual, as an i n t r i n s i c part of the bargaining process. Economic c a p a b i l i t i e s are transformed into p o l i t i c a l power. R e l a t i v e l y equal capa-b i l i t i e s (balanced v u l n e r a b i l i t i e s ) lead to higher incentives to use c r i s e s as a means of breaking the i n e r t i a , while asymmetrical c a p a b i l i t i e s allow 28 19 hegemons to dominate the system. Thus, r e l a t i v e l y weaker nations, such as most of the developing nations, are condemned to perpetual disadvantage, as they do not generally possess the underlying c a p a b i l i t i e s to manipulate the i n d u s t r i a l countries' v u l n e r a b i l i t i e s , despite the existence of i s o l a t e d exceptions ( c a r t e l s , s t r a t e g i c minerals, e t c . ) . So f a r as I am aware, none of the interdependence l i t e r a t u r e addresses the issue of d i v e r s i f i c a t i o n as a defensive strategy. Cooper's "defensive response" to interdependence i s to r e t a i n the a b i l i t y to f r a g -20 ment the domestic market from the i n t e r n a t i o n a l system, e s s e n t i a l l y the response of economic n a t i o n a l i s t s . Extending the l o g i c of interdependence, however, does y i e l d i n s i g h t s relevant to d i v e r s i f i c a t i o n . F i r s t , s e n s i t i -v i t y i s to some degree avoidable. Retaining r e s t r i c t i o n s On imports, f o r example, would keep demand lower and cushion the e f f e c t s o f systemic p r i c e increases; so would shopping f o r imports i n lower cost markets. This implies that d i v e r s i f y i n g imports toward other low-wage developing countries would be advantageous. Second, i f v u l n e r a b i l i t y i s fundamentally a matter of differences i n underlying c a p a b i l i t i e s , d i v e r s i f y i n g to other developing countries would reduce the gap, allowing more equal bargaining. Third, even i f v u l n e r a b i l i t y i s not completely avoidable, i t i s only r a t i o n a l to spread i t widely; focusing economic transactions on a few countries minimizes the p o t e n t i a l f o r a favorable outcome i n disputes. By extension, the i n t e r -dependence l i t e r a t u r e would suggest that weak countries should act to d i v e r s i f y so as to reduce t h e i r degree of connection with the stronger i n -d u s t r i a l countries together, or any one of them alone. Reducing the gap i n underlying c a p a b i l i t i e s through d i v e r s i f i c a t i o n of partners i s a l o g i c a l defense to the e f f e c t s of interdependence. 29 Theory and Method of Study A Composite Strategy of D i v e r s i f i c a t i o n Each of the major approaches to i n t e r n a t i o n a l p o l i t i c a l economy o f f e r s some support to d i v e r s i f i c a t i o n as a defensive strategy on the part of weaker states. By combining i n s i g h t s , we can construct a composite strategy of d i v e r s i f i c a t i o n which can then inform the following case study. As a defensive strategy, i t . c o u l d t h e o r e t i c a l l y inform the actions of a l l states at times, but since the p a r t i c u l a r i n t e r e s t here i s focused on weaker states, the formulation w i l l be t a i l o r e d to t h e i r s p e c i a l case. A l l three economic doctrines support the idea of trade d i v e r s i f i -cation. Economic n a t i o n a l i s t s are p r i m a r i l y concerned e i t h e r to b u i l d the power of the state through focused trade r e l a t i o n s , or by extension, to reduce the p o t e n t i a l power of other states by'not allowing concentrated trade r e l a t i o n s to evolve. Dependency analysts are concerned to reduce the i n t r u s i o n of the i n t e r n a t i o n a l c a p i t a l i s t system, as represented by the major i n d u s t r i a l powers, by d i v e r s i f y i n g trade generally toward other developing countries, and s p e c i f i c a l l y among the various major economic powers; i n contrast to economic n a t i o n a l i s t s , they are less concerned to expand trade. The l o g i c of interdependence supports a strategy of cushion-ing s e n s i t i v i t y by c o n t r o l l i n g trade, p a r t i c u l a r l y through r e s t r i c t e d imports and trade d i v e r s i f i e d generally to less powerful economic actors; at the same time general d i v e r s i f i c a t i o n of economic r e l a t i o n s i s a l o g i c a l antidote to v u l n e r a b i l i t y . However, as with the m e r c a n t i l i s t s , interdepen-dence writers fundamentally recommend the expansion of trade, as a means of increasing the degree of int e g r a t i o n within the system, and hence the "economic p i e . " Thus a composite defensive strategy i n the realm of trade 30 would seem to include geographical d i v e r s i f i c a t i o n ' i n two forms: balance among the i n d u s t r i a l (or other economically strong) nations; and s h i f t away from the i n d u s t r i a l nations toward smaller and developing nations. A concern with the pattern of f i n a n c i a l r e l a t i o n s i s also evident. Dependency analysts proscribe extensive loan and foreign investment r e l a t i o n s i n s o f a r as possible, and recommend that those remaining be e i t h e r n a t i o n a l i z e d or subjected to state control i n a ca r e f u l manner. Foreign aid should be rejected e n t i r e l y . Absolutely necessary foreign technology should preferably come from other developing countries, and that allowed from developed countries should be from diverse sources. Interdependence writers r e j e c t l i m i t a t i o n s on volumes of investment (or loans), but do support d i v e r s i f i c a t i o n of sources to control v u l n e r a b i l i t y . The common thread i s d i v e r s i f i c a t i o n of sources, and from a Third World standpoint, t h i s would include at least c a r e f u l state c o n t r o l . Economic n a t i o n a l i s t s would probably also support extensive controls. The composite strategy, then, i s to d i v e r s i f y investment at least among the major developed countries, s h i f t as much as possible to other developing countries, and impose domestic controls. One l a s t area, membership i n i n t e r n a t i o n a l organizations, remains. The dependency school advocates disengagement from p o t e n t i a l l y compromising in t e r n a t i o n a l organizations, such as f i n a n c i a l i n s t i t u t i o n s and peacekeeping forces, and b u i l d i n g regional and global i n s t i t u t i o n s among developing countries, with the goal of enhancing bargaining power v i s - a - v i s the developed states. Since the i n s t i t u t i o n a l t i e s of many developing countries are with universal organizations and t h e i r former c o l o n i a l powers, t h i s implies another arena of geographical d i v e r s i f i c a t i o n . A benefit implied by the s t r u c t u r a l approach to dependency would be breaking the e l i t e t i e s to 31 the i n d u s t r i a l nations, and replacing them with, t i e s focused on l o c a l 21 i n t e r e s t s . The interdependence l i t e r a t u r e supports changes i n organiza-t i o n a l r e l a t i o n s h i p s too, s p e c i f i c a l l y creating or j o i n i n g i n s t i t u t i o n a l f o r a to manage the e f f e c t s of interdependence ("regimes"); f o r most devel-oping countries, t h i s too would represent d i v e r s i f i c a t i o n . A composite strategy includes regional organization where possible, expanded organiza-t i o n a l t i e s to other developing countries, and j o i n t mechanisms to bargain over the e f f e c t s of interdependence with, the i n d u s t r i a l states. In each of these three areas -- trade, f i n a n c i a l t i e s , and i n t e r -national organizations, there i s a strategy to defend the weak based on d i v e r s i f i c a t i o n . For the most part, the form of d i v e r s i f i c a t i o n i s to reduce t i e s to the stronger i n d u s t r i a l nations, and expand r e l a t i o n s with other weaker developing nations. Those t i e s remaining with strong nations should be balanced among several of them, and i n common with other develop-ing nations. Methods of Inquiry A defensive strategy of d i v e r s i f i c a t i o n f i n d s t h e o r e t i c a l support in the body of i n t e r n a t i o n a l p o l i t i c a l economy writings. Using t h i s t h e o r e t i c a l framework, the body of t h i s work w i l l explore how t h i s strategy works i n p r a c t i c e . The conceptual framework needs f i r s t to be t r a n s l a t e d into an operational method of inquiry, before case studies can be analyzed. The major a n a l y t i c a l focus i s the strategy of d i v e r s i f i c a t i o n . It w i l l be studied i n three s p e c i f i c p o l i c y areas, trade, f i n a n c i a l t i e s , and i n t e r n a t i o n a l organizations. In the case of trade, s t a t i s t i c s are a v a i l a b l e f o r both exports and imports between a l l (or almost a l l ) nations f o r the entire postwar period. These can be aggregated i n various ways f o r 32 an a l y s i s . In the case of f i n a n c i a l r e l a t i o n s , r e l i a b l e s t a t i s t i c s are more d i f f i c u l t to obtain. Figures f o r public and pr i v a t e debt are not a v a i l a b l e i n r e l i a b l e form with debtor and c r e d i t o r nations i d e n t i f i e d f o r any sub-s t a n t i a l period of time; furthermore, with, the p r a c t i c e of handling debt through consortia of banks becoming more common, i t i s d i f f i c u l t to deter-mine which nations are the c r e d i t o r s , and i n what amounts. Therefore, debt w i l l not be considered, even given i t s increasing importance to developing countries. Much of the foreign aid extended has also been m u l t i l a t e r a l i z e d , and i t w i l l also be omitted. Perhaps the most important form of f i n a n c i a l t i e i s d i r e c t foreign investment; f i g u r e s f o r t h i s form of economic r e l a t i o n have been gathered. Foreign investment w i l l provide the basis of analysis of f i n a n c i a l t i e s . Data on memberships i n i n t e r n a t i o n a l organizations are a v a i l a b l e , and these w i l l be used to develop the theme of organizational d i v e r s i t y , e s p e c i a l l y among the f i v e ASEAN members; ad d i t i o n a l d e s c r i p t i v e material w i l l be provided on the development of transnational organizations under the ASEAN umbrella. In the cases of trade and investment, d e s c r i p t i v e material examining the development of p o l i c y w i l l precede the s t a t i s t i c a l sections. This w i l l allow the comparison of p o l i c i e s with r e s u l t s . The concept of d i v e r s i f i c a t i o n has l i t t l e a n a l y t i c a l meaning i n a s t a t i c sense. D i v e r s i f i c a t i o n i s something which occurs over time; there-fore, the study must be secular. Since one informing aspect of the study i s the r o l e of regional organizations among developing countries, the formation of ASEAN (in 1967) marks the i n i t i a l point f o r s t a t i s t i c a l a n a l y s i s . In the case of trade the period extends up to 1979, the most recent year f o r which data are a v a i l a b l e . Foreign investment s t a t i s t i c s are not c o l l e c t e d by any in t e r n a t i o n a l agency, and coverage extends to the most recent date f o r which data were av a i l a b l e f o r each of the f i v e countries. Information on 33 memberships i n i n t e r n a t i o n a l organizations i s likewise a v a i l a b l e up through 1979. This choice of a time period allows f o r at least a ten year period f o r patterns to show change. The s t a t i s t i c a l analysis of geographical d i v e r s i f i c a t i o n f o r trade and investment i s straightforward. Data can be presented f o r various geographic regions i n terms of percentages of the t o t a l f o r the year under consideration. This allows d i r e c t comparison over time. In addition, Hirschman's index of geographical concentration i s presented, which allows 22 f o r analysis of trends which might not be obvious on inspection. Analyzing organizational memberships requires a somewhat d i f f e r e n t approach, as the data do not lend themselves to an i d e n t i c a l treatment, and the focus i s s l i g h t l y d i f f e r e n t from that of trade and investment. What has been adopted here i s a modified version of s o c i a l network theory, which has been used as the basis of d e s c r i p t i v e studies of transnational and domestic 23 c o a l i t i o n s and groups. Network theory casts a s o c i a l system as a structured set of r e l a t i o n s h i p s which may vary over a number of measures (range, density and c e n t r a l i t y ) of r e l a t i v e closeness, which can change over time. I t w i l l be used to i n d i c a t e the structured nature of r e l a t i o n -ships i n the s o c i a l system of i n t e r n a t i o n a l organizations among the ASEAN countries. Conclusions as to the nature and extent of d i v e r s i f i c a t i o n and commonality i n organized memberships can then be drawn. The framework of interdependence theories has been adopted f o r use i n the analysis of trade and investment issues as a matter of conven-ience. Dependency research i s b a s i c a l l y h i s t o r i c a l - s o c i o l o g i c a l , although there have been numerous attempts to use quantitative techniques to v a l i d a t e some of the theses, mainly those to do with the e f f e c t s of 24 dependency on growth of the economy; most of these have been c r i t i c i z e d 34 f o r t h e i r inappropirateness. S e n s i t i v i t y and v u l n e r a b i l i t y seem to cap-ture the major e f f e c t s of interconhectedness among nations quite well, and the l a t t e r term has been used i n a s i m i l a r sense by at least one dependency 2 6 writer. In using these terms, I w i l l define t h e i r meanings a b i t more rig o r o u s l y than do t h e i r o r i g i n a t o r s , however, i n order to apply them to the s t a t i s t i c a l base. S e n s i t i v i t y w i l l be taken as the degree to which a country i s connected to the subsystem of the major i n d u s t r i a l nations i n i t s economic r e l a t i o n s (trade and investment). This should indi c a t e the ease with which extraneous costs can be transmitted to the weaker country. Reducing s e n s i t i v i t y , then, involves d i v e r s i f y i n g away from those major i n d u s t r i a l nations. V u l n e r a b i l i t y w i l l be taken as the degree to which economic r e l a t i o n s are concentrated with any p a r t i c u l a r country; t h i s indicates the p o t e n t i a l cost of d i s r u p t i o n of r e l a t i o n s , and the degree of i n e q u a l i t y of p o t e n t i a l p o l i t i c a l influence. Reducing v u l n e r a b i l i t y , then, involves d i v e r s i f y i n g r e l a t i o n s so that the r e l a t i v e p o s i t i o n of a formerly dominant partner i s reduced. For d i v e r s i f i c a t i o n to be an e f f e c -t i v e strategy to counter dependence, both s e n s i t i v i t y and v u l n e r a b i l i t y should be lessened. Of the two, v u l n e r a b i l i t y i s the more important, as i t i s translated into influence i n bargaining contexts, while s e n s i t i v i t y i s a more general i n d i c a t o r of the degree of interconnection. As with many s o c i a l science terms, there i s no c l e a r d e f i n i t i o n of dependence. It obviously implies something less than independence, but the conceptual waters have become muddied with competing claims and d e f i n i t i o n s of dependence, dependency and asymmetrical interdependence; a l l have some bearing on a structure of r e l a t i o n s characterized by a degree 27 of i n e q u a l i t y . It does seem useful to follow Caporaso's suggestion that dependence should be used to r e f e r to i n e q u a l i t i e s i n foreign p o l i c y 35 c a p a b i l i t i e s , and dependency be reserved f o r reference to the more encom-passing domestic d i s t o r t i o n s from developmental i d e a l s argued by the 28 (primarily) Latin American school of analysts. The l a b e l asymmetrical interdependence i s i n i t s e l f a semantical contradiction. Although there i s an obvious continuum of p o s s i b i l i t i e s between equal and unequal, two nations ei t h e r share the mutuality of interdependence, or they don't, and one of 29 them i s dependent. Dependence here w i l l r e f e r to a situation, of r e l a t i o n a l inequal-i t y , generally between advanced i n d u s t r i a l states and the Third World states, but not e x c l u s i v e l y so; dependence may also characterize r e l a t i o n s between large and small i n d u s t r i a l states, or large and small Third World states. The c r i t e r i o n of dependence i s r e l a t i o n a l i n e q u a l i t y , which may _ lead to p o l i t i c a l domination. As a condition, dependence can be observed i n an unequal pattern of r e l a t i o n s , and reversed by a l t e r i n g that pattern i n the d i r e c t i o n of more equality. That patterns of r e l a t i o n s are s i g n i f i c a n t resources of power i s supported by recent attempts to assay the r o l e of power i n the i n t e r n a t i o n a l system. It has been suggested that the a b i l i t y to set the structure of r e l a t i o n s between two countries i s i n i t s e l f a s i g n i f i c a n t power resource. This leads to a d i s t i n c t i o n between two l e v e l s of influence analysis, " d e c i s i o n a l power" which i s manifested i n a s p e c i f i c instance of bargaining, and " s t r u c t u r a l power" flowing from the pattern of r e l a t i o n s between the 30 i n t e r a c t i n g p a r t i e s . These two l e v e l s are c l e a r l y mutually contingent; a s p e c i f i c bargain may include a l t e r a t i o n s to the o v e r a l l structure, or the structure may constrain the p a r t i c u l a r bargain. Methods of research therefore d i f f e r . Investigating differences in d e c i s i o n a l power would ne c e s s a r i l y focus on the range of f a c t o r s which determine the outcome of 36 p a r t i c u l a r negotiations; a "bureaucratic p o l i t i c s " approach, would probably be most appropriate. Examining s t r u c t u r a l power requires a focus on the longer term patterns of economic and p o l i t i c a l r e l a t i o n s ; that i s the focus of t h i s study. Other studies have focused on the general f o r e i g n p o l i c y 31 behavior of nations under conditions of dependence; t h i s one concentrates on a strategy of changing s t r u c t u r a l power on the part of dependent nations. This study, then, neither addresses the domestic issues r a i s e d by the dependency school nor makes p r e d i c t i v e claims about the outcomes of p a r t i c u l a r negotiating s i t u a t i o n s f o r the ASEAN states. It i s quite possible that the ASEAN states w i l l continue to exhibit the symptoms of domestic s o c i a l and economic d i s t o r t i o n pointed to by the dependency school, despite the success of a strategy of d i v e r s i f i c a t i o n . I t i s equally possible that they w i l l conclude bad bargains with stronger (or weaker) states, i n f o r e i g n r e l a t i o n s or areas with d i r e c t domestic consequence, even i f d i v e r s i f i c a t i o n leads to a lessening of i n e q u a l i t y i n s t r u c t u r a l power. It does seem possible that reducing dependence through a process of e f f e c -t i v e d i v e r s i f i c a t i o n would eventually r e s u l t i n more equal bargaining s i t u a t i o n s , and more favorable outcomes to the formerly dependent states; i t also seems possible that i n the long term better bargains would allow a measure of autogenic development to emerge, erasing the symptoms of dependency. But these are future scenarios, and r e l y on the w i l l and choices of leaders in those dependent countries analyzed here. Regionalism, and the Limits of D i v e r s i f i c a t i o n Six p o l i t i c a l e n t i t i e s are the subjects of t h i s study, f i v e states i n Southeast A s i a and ASEAN, t h e i r common organization. The patterns of r e l a t i o n s f o r the f i v e states w i l l be analyzed through a p p l i c a t i o n of the 37 framework set out above, but analysis of a regional organization i s some-what more d i f f i c u l t . The development and a c t i v i t i e s of ASEAN w i l l be described, and further discussed i n each chapter. But perhaps the most important aspect of ASEAN i s simply i t s existence. In the same sense that a union reduces the v u l n e r a b i l i t y of each, employee toward t h e i r employer, a regional organization, by increasing the s i z e of the bargaining u n i t , reduces the v u l n e r a b i l i t y of i t s members toward outside states. It auto-m a t i c a l l y changes the structure of r e l a t i o n s between i t s members and others i n a favorable manner, i f i t i s active and e f f e c t i v e i n becoming an alternate forum f o r external p o l i c y on behalf of i t s members; i t . must be both used and accepted. Thus, while evidence on the effectiveness of states' p o l i c i e s can be presented, evidence that a regional organization i s contributing to reductions i n dependence i s more l i m i t e d to the exis-tence of a continuous, high l e v e l of a c t i v i t i e s which binds the members together, and serves t h e i r common purposes. A "paper organization" w i l l l i m i t , rather than further, attempts to reduce dependence. D i v e r s i f i c a t i o n also has i t s l i m i t s . It may reduce the degree of i n e q u a l i t y between p a r t i c u l a r states, and i t may reduce the s e n s i t i v i t y of a p a r t i c u l a r state to the larger i n d u s t r i a l nations, but i t i s u n l i k e l y to erase dependence. A cynic might say that nothing, short of a massive and dramatic change i n the d i s t r i b u t i o n of economic c a p a b i l i t i e s and m i l i t a r y power, w i l l erase the dependence of smaller, economically less developed states on the major i n d u s t r i a l powers. As long as some states exercise v a s t l y more influence on world a f f a i r s than others do, they are capable of changing the " r u l e s " to preserve t h e i r r e l a t i v e p o s i t i o n . Since d i v e r s i f i c a t i o n assumes continued i n t e r a c t i o n with these powers, i t i s contingent on t h e i r permission, on t h e i r willingness to perpetuate the 38 e x i s t i n g system. Perhaps more immediately important, d i v e r s i f i c a t i o n addresses the p o l i t i c a l influence of p a r t i c u l a r states, but not the c o l l e c t i v e influence of a l l foreign states. Without some r e s t r i c t i o n s pn the magnitude of foreign influences, a strategy of d i v e r s i f i c a t i o n could win the b a t t l e , but lose the war. It i s suggested that a strategy of d i v e r s i f i c a t i o n can reduce dependence on p a r t i c u l a r foreign states. I f pursued systematically, i t can also reduce the magnitude of in e q u a l i t y of i n f luence with, many of the more important states. But i s i s a marginal strategy i n the sense that i t reduces the degree of d i s p a r i t y . Used by a weak state, i t w i l l not convert weakness into strength, or change lead into gold. D i v e r s i f i c a t i o n may simply make the most of endemic weakness. 39 NOTES 1. For discussion of various a l t e r n a t i v e s , see David Blake and Robert Walters, The P o l i t i c s of Global Economic Relations (Englewood C l i f f s : P r e n t i c e - H a l l , 1976), pp. 168-196; W. Howard Wriggins, "Third-World Strategies f o r Change: The P o l i t i c a l Context of North-South Inter-dependence," W.H. Wriggins and Gunnar Adler-Karlsson, eds., Reducing  Global Inequities (New York: McGraw-Hill, 1978) pp. 21-120. 2. Useful discussions of mercantilism and economic nationalism are to be found i n Robert G i l p i n , "Economic Interdependence and National Security i n H i s t o r i c a l . P e r s p e c t i v e , i n Klaus Knorr and Frank Trager, eds., Economic Issues and National Security (Lawrence, Kansas: Regents Press of Kansas, 1977); R. Dan W a l l e r i , "The P o l i t i c a l Economy Lit e r a t u r e on North-South Relations," International Studies Quarterly 22, 4 (December 1978), pp. 596-599; Harry Johnson, "A Theoretical Model of Economic Nationalism i n New and Developing States," P o l i t i c a l  Science Quarterly 80, 2 (June 1965), pp. 169-185. 3. Quoted i n Jacob Oser and William Blanchfield, The Evolution of Economic Thought, Third E d i t i o n (New York: Harcourt Brace Jovanovich, Inc., 1975), p. 206. 4. G i l p i n , p. 28. 5. Ibid., p. 50. 6. Albert 0. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: U n i v e r s i t y of C a l i f o r n i a Press, 1945), pp. 13-52. 7. Ibid., pp. 31, 85. 8. For discussions of dependency theories, see Ronald Chilcote, "Dependency: a C r i t i c a l Synthesis of the L i t e r a t u r e , " L a t i n American Perspectives 1, 1 (1974), pp. 4-29; Charles K. Wilbur, ed., The P o l i t i c a l Economy  of Development and Underdevelopment (New York: Random House, 1973); Ronald C h i l c o t e and Joel Edelstein, eds., La t i n America: The Struggle  with Dependency and Beyond (Cambridge: Schenkman, 1974), pp. 1-99. 9. Quoted i n Wilbur, p. 109. 10. Fernando Cardoso, "Associated-Dependent Development: Th e o r e t i c a l and P r a c t i c a l Implications," i n A l f r e d Stepan, ed., Authoritarian B r a z i l (New Haven: Yale Un i v e r s i t y Press, 1973), pp. 142-176. 11. See Carlos Diaz.-Alejandro, "Delinking North and South: Unshackled or Unhinged?" i n Diaz-Alejandro, ed., Rich and Poor Nations i n the World  Economy (New York: McGraw-Hill, 1978), pp. 87-162; Thomas Biersteker, " S e l f - r e l i a n c e i n Theory and Practice i n Tanzanian Trade Relations," International Organization 34, 2 (Spring, 1980), pp. 229-264. 40 12. For discussion of the-various t h e o r i s t s and t h e i r p o l i c i e s , see Oser and Blanchfield, pp. 42-142. 13. Richard Rosecranee and Arthur Stein, "Interdependence: Myth or R e a l i t y ? " World P o l i t i c s 26 (1973), pp. 1-27; Alex Inkeles, "The Emerging S o c i a l Structure of the World,"World P o l i t i c s 27 (1975), pp. 467-495; Richard Cooper, The Economics of Interdependence: Economic P o l i c y i n  the A t l a n t i c Community (New York: McGraw-Hill, 1968); Richard Cooper, "Economic Interdependence and Foreign P o l i c y i n the Seventies," World  P o l i t i c s 24 (1972), pp. 159-181. 14. Robert Keohane and J.S. Nye, Power and Interdependence: World P o l i t i c s i n T r a n s i t i o n (Boston: L i t t l e , Brown and Co., 1977); Edward Morse, Modernization and the Transformation of International Relations (New York: Free Press, 1976); Karl Kaiser, "Transnational P o l i t i c s : Toward a Theory of Multinational P o l i t i c s , " . I n t e r n a t i o n a l Organization 25 (1971), pp. 790-817; Richard Cooper, "Trade P o l i c y i s Foreign P o l i c y , " Foreign P o l i c y 9 (1972), pp. 18-36. 15. Interesting support f o r t h i s view'is provided i n John Gallagher and Ronald Robinson, "The Imperialism of Free Trade," Economic History  Review, Second Series, 6 (1953), pp. 1-15, and Jeanne Laux, "Global Interdependence and State Intervention," Brian Tomlin, ed., Canada's  Foreign P o l i c y (Toronto: Metheun, 1978). 16. I am following Keohane and Nye's d e f i n i t i o n s . As I w i l l argue l a t e r , the more l o g i c a l d i v i s i o n i s to define s e n s i t i v i t y as the degree of connection, and v u l n e r a b i l i t y as the costs (or p o t e n t i a l costs) of connection with a p a r t i c u l a r actor. 17. Keohane and Nye, p. 21; Robert Keohane, "The Theory of Hegemonic S t a b i l i t y and Changes i n International Economic Regimes, 1967-1977," Ole H o l s t i , Randolph Siverson and Alexander George, eds., Change i n the International  System (Boulder, Cole: Westview Press, 1980). 18. Keohane and Nye, pp. 16-18. 19. Edward Morse, " C r i s i s Diplomacy, Interdependence and the P o l i t i c s of International Economic r e l a t i o n s , " World P o l i t i c s 24 (1972). pp. 123-150. 20. Cooper, "Foreign P o l i c y , " p. 169. 21. Johan Galtung, "A S t r u c t u r a l Theory of Integration," Journal of Peace Research 4 (1968), pp. 375-395. 22. Det a i l s on the index are discussed i n Hirschman, e s p e c i a l l y Index A, pp. 155-162, and i n James Caporaso, "Methodological Issues i n the Measurement of Inequality, Dependence, and E x p l o i t a t i o n . " Steven Rosen, James Kurth, eds., Testing Theories of Economic Imperialism (Toronto: Lexington Books, 1974, pp. 87-114. 41 23. For the basic theory, see: Jeremy Boissevain, Friends of Friends: Networks, Manipulators and C o a l i t i o n s (Oxford: B a s i l Blackwell, 1974), and J . Clyde M i t c h e l l , ed., S o c i a l Networks in Urban Situations (Manchester: Manchester Uni v e r s i t y Press, 1969); ap p l i c a t i o n s include: William Averyt, "Eurogroups, C l i e n t e l a , and the European Community," International Organization 29 (1975), pp. 949-972; Peter Busch and Donald Puchala, "Interests, Influence and Integration," Comparative  P o l i t i c a l Studies 9 (1976), pp. 235-254; Peter Busch, "Germany and the European Economic Community::; Theory and Case Study," Canadian  Journal of P o l i t i c a l Science 11 (1978), pp. 545-574; Glenda Rosenthal, The Men Behind the Decisions (Lexington: D.C. Heath, 1975); Steffan Schmidt, et a l . , Friends, Followers and Factions: A Reader i n  P o l i t i c a l C l i e n t e l i s m (Berkeley: U n i v e r s i t y of C a l i f o r n i a Press, 1977); Hellen Wallace, William Wallace, and Carole Webb, eds., P o l i c y  Making i n the European Communities (New York: Wiley, 1977). 24. Wallerei, pp. 613-619 surveys the r e s u l t s of these. 25. Raymond Duvall, "Dependence and Dependencia Theory: Notes Toward Pre c i s i o n of Concept and Argument," International Organization 32 (1978), pp. 51-78. 26. Dennis Goulet, The Cruel Choice (New York: Athenecon, 1971). 27. For an argument that a l l have the same o r i g i n s , and roughly the same meaning, see David Baldwin, "Interdependence and Power: A Conceptual Analysis," International Organization 34 (1980), pp. 471-506. 28. James Caporaso, "Dependence, Dependency, and Power i n the Global System: A S t r u c t u r a l and Behavioral A n a l y s i s , " International Organization 32 (1978), pp. 13-44. 29. The confusion here i s a l i k e l y r e s u l t of the developed country focus of interdependence studies, which y i e l d s a range of cases narrower than i f developing countries had been included. Keohane and Nye (1977), argue that weak states are frequently able to manipulate the vulner-a b i l i t i e s of stronger states to advantageous ends, conjuring up a problematical v i s i o n of the erosion of stronger-state dominance of the i n t e r n a t i o n a l system. See K.J. H o l s t i , "A New International P o l i t i c s ? Diplomacy i n Complex Interdependence," International  Organization 32 (1978), pp. 513-530, and Stanley Michalak, J r . , "Theoretical Perspectives For Understanding International Interdepen-dence," WorW_2pJ^tics 32 (1979), pp. 136-150. 30. See Caporaso (1978), pp. 27-31, Robert Keohane and J.S. Nye, "World P o l i t i c s and the International Economic System," C. Fred Bergsten, ed., The Future of the International Economic Order (Lexington, Mass.: D.C. Heath Co., 1973); and T. Baumgartner and T.R. Burns, "The Structuring of International Economic Relations," International  Studies Quarterly 19 (1975), pp. 126-159. 42 31. N e i l Richardson, Foreign P o l i c y and Economic Dependence (Austin: U n i v e r s i t y of Texas Press, 1978); N e i l Richardson and Charles Kegley, J r . , "Trade Dependence and Foreign P o l i c y Compliance: A Longitudinal An a l y s i s , " International Studies Quarterly 24 (1980), pp. 191-222; Michael Dolan, Brian Tomlin, Maureen Appel Molot and Harald Von Riekhoff, "Foreign P o l i c i e s of A f r i c a n States i n Asymmetrical Dyads," International Studies Quarterly 24 (1980), pp. 415-449. 43 CHAPTER 3 ASEAN: BUILDING AND USING A REGIONAL ORGANIZATION The Association of Southeast Asian Nations i s a r e l a t i v e new-omer to the i n t e r n a t i o n a l p o l i t i c a l environment of Asia. It has developed slowly, but surely, to become a cen t r a l feature i n Southeast Asian p o l i t i c s , p a r t i c u l a r l y i n the foreign p o l i c i e s of i t s f i v e members. Although each of the members conducts much of t h e i r foreign p o l i c y independently, and each i s u l t i m a t e l y responsible f o r domestic development p o l i c i e s , the regional organization has become progressively more important as the ve h i c l e f o r j o i n t e f f o r t s i n foreign p o l i c y and development. ASEAN has been woven into the f a b r i c of national p o l i c i e s and str a t e g i e s , p a r t i c u l a r l y those examined here. The regional organization i t s e l f i s an excellent s t a r t i n g point f o r a study of the changing r o l e of i t s members i n the i n t e r n a t i o n a l p o l i t i c a l system. Its very existence i s a signal that these states are more a c t i v e l y attempting to shape the nature of t h e i r i n t e r n a t i o n a l en-vironment. As discussed above (Chapter 2), the evolution of ASEAN into a regular part of the i n t e r n a t i o n a l economic diplomacy of the members has a d i r e c t bearing on t h e i r a b i l i t y to pursue courses of action designed to reduce dependence on larger states. This chapter surveys the o r i g i n s and development of ASEAN, and then focuses on the economic programs pursued through the regional organization, both those designed f o r the members 44 only, and those which are directed toward outside states. Not a l l of the discussion of ASEAN and i t s programs i s contained here. Some of the a c t i v i t i e s and programs of ASEAN are reserved f o r following chapters, where they are better understood i n the context of the p o l i c y problems raised there; t h i s chapter frames those l a t e r references to ASEAN. Regionalism i s suggested as an element of a program to reduce dependence between small, l e s s developed states and larger, more developed states. It i s t h i s aspect of ASEAN which w i l l be the focus of discussion. Origins and Development ASEAN i s the l a t e s t stage i n an evolutionary process of community formation i n Southeast Asia. It i s a culmination of previous attempts at regionalism as well as the accumulated experience of the association i t s e l f . The pace of cooperation has been determined i n part by domestic p o l i t i c a l concerns of the members and i n part by responses to i n t e r n a t i o n a l s t i m u l i ; i t i s where these two elements coincide that ASEAN has made i t s greatest progress. At the same time, there have been factors.of a d i v i s i v e nature which have m i l i t a t e d against f a s t e r c o l l a b o r a t i o n . In order to understand the present l e v e l of development of ASEAN programs, one must f i r s t look b r i e f l y to the o r i g i n s of regionalism, the domestic and i n t e r -national f actors i n promoting and retarding regionalism, and the i n t e r e s t s of the members i n developing a regional association. ASEAN, formed i n 1967, i s e s s e n t i a l l y an extension and amalgama-t i o n of p r i o r attempts to create regional i n s t i t u t i o n s . Following World War I I , a number of regional associations were grafted onto the Asian system by external powers. These were l a r g e l y functional organizations i n the economic sphere, such as the U.N. Economic Commission f o r Asi a and 45 the Far East (now the UN Economic and S o c i a l Commission f o r A s i a and the P a c i f i c - ESCAP) and the Colombo Plan, or s e c u r i t y organizations such as SEATO and the Anglo-Malayan Defense Agreement. 1 The major e f f e c t on regional cooperation would appear to be that these early ventures exposed the new states to various forms of cooperation, creating an environment of 2 experience conducive to l a t e r cooperative e f f o r t s . A d i f f e r e n t set of regional i n i t i a t i v e s emerged i n the 1960s, characterized by several attempts to create organizations at the behest of l o c a l states. The Association of Southeast Asia (ASA) was established i n 1961 by Thailand, the P h i l i p p i n e s and Malaya, forshadowing i n many respects the l a t e r structure and purpose of ASEAN. In 1963 Maphilindo, a "Greater Malayan Confederation," was set up by Malaysia, the P h i l i p p i n e s and Indonesia, only to die the following year under the weight of c o n f l i c t among the three members. The Asian and P a c i f i c Council (ASPAC) attempted to bind Japan, Taiwan, Malaysia, Thailand, the P h i l i p p i n e s , South Vietnam, South Korea, A u s t r a l i a and New Zealand, together i n 1966, but the p o l i t i c a l d i s a b i l i t i e s of i t s anti-communist stance became too onerous f o r the P h i l i p p i n e s , Malaysia and Thailand; as China emerged i n the 1970s to be a 3 major Asian power, i t was not be so b l a t a n t l y affronted. Though none of these organizations survived i n Southeast Asia, t h e i r formation indicates the desire to create the basis f o r increased regional i n t e r a c t i o n among Southeast Asian states i n p o l i t i c a l and economic a f f a i r s , through l o c a l sponsorship of loosely-structured associations. Along with the p r o l i f e r a -t i o n of functional i n t e r n a t i o n a l organizations, which included some of the Southeast Asian states, these provided experience i n organizing regional i n t e r e s t s f o r mutual b e n e f i t . ASEAN i t s e l f i s seen by many as an extension and enlargement of 46 ASA, as the p a r a l l e l s i n organizational structure, goals, and membership 4 i n t e r e s t s are s t r i k i n g . Even much of ASEAN's early business was essen-t i a l l y that set by ASA and simply c a r r i e d over to the larger forum.^ However, the s i m i l a r i t y with ASA should not be overemphasized, as both organizations are extremely vague i n s e l f - d e f i n i t i o n , and the ASA i n f a c t accomplished l i t t l e , leaving i t s organizational structure as the major bequest. Had i t i n fac t done much, there i s some l i k e l i h o o d that t h i s would have d i s c r e d i t e d i t s inheritance, as Indonesia was convinced that i t was a front f o r SEATO, and had refused to j o i n on those grounds.^ Nevertheless, i t seems to be the case that ASA, as well as ASPAC and Malphilindo, did contribute to an increase i n communication among the states of the region, and added to t h e i r experience i n i n i t i a t i n g coopera-t i v e behavior. ASEAN, then, d i d not spring from uncultivated, s o i l , but emerged rather as the dominant hybrid of numerous cross-breedings. Much has been made of the fa c t o r s i n h i b i t i n g the development of regionalism i n Southeast Asia. In f a c t , one i s moved to sympathize with 7 Indonesian President Suharto's lament: I f e e l that i t i s a p i t y that so many foreign analysts place f a r too much emphasis upon noting the differences between member-countries and then proceed from these observations to conclude that ASEAN i s an i m p o s s i b i l i t y . The l i t a n y of problems c i t e d i s long: diplomatic disputes such as the boundary debate between the P h i l i p p i n e s and Malaysia, and the h o s t i l i t i e s g i n i t i a t e d by Indonesia a f t e r the creation of the state of Malaysia; 9 competitive rather than complementary economies; mutual att i t u d e s of " d i s t r u s t , suspicion, fears and even animosity";"^ the c o l o n i a l legacy of 11 12 p o l i t i c a l and economic i s o l a t i o n ; the neocolonial legacy of dependence; 13 14 ethnonationalism; nationalism and the c o n f l i c t of national i n t e r e s t s . 47 In short, "Southeast Asian regionalism has been i n h i b i t e d by a broad array of p o l i t i c a l , economic, and c u l t u r a l factors." 1*' Despite t h i s apparently insurmountable environment, regionalism and ASEAN have survived, and to a degree prospered. The degree to which ASEAN has prospered i s , however, another contentious issue. On top of the factors l i s t e d above c u r t a i l i n g region-alism there are numerous c r i t i c a l evaluations of the performance of the association i t s e l f . I f regional cooperation i s i n part a matter of b u i l d i n g experience, some would argue that t h i s experience has contributed l i t t l e to s e t t i n g the agenda f o r further cooperation. Several analysts point to the e x c r u c i a t i n g l y slow pace of accomplishment as measured by the implementation of ASEAN recommendations, many of which are i n themselves of l i t t l e consequence. 1^ The primary cause of t h i s lack of performance i s seen to be defects i n the i n s t i t u t i o n a l structure, i t s e l f a r e f l e c t i o n of hesitance on the part of the members i n accelerating regionalism: too highly decentralized and l o o s e l y coordinated; constantly changing venues and turnover of personnel i n h i b i t i n g the development of a transnational 17 outlook; an overloaded bureaucratic structure. In addition, general uncertainty due to a narrow base of support l i m i t e d to top e l i t e s , and the r e a l p o s s i b i l i t y of changes i n these e l i t e s damaging commitment, 18 produce a d e l i b e r a t e l y slow pace. One analyst concludes ambiguously: "ASEAN"s su r v i v a l i s i n i t s e l f an achievement that might be said to 19 counterbalance the organization's r e l a t i v e l y slow pace of a c t i o n . " ASEAN's s u r v i v a l , however, i s not simply a matter of i n e r t i a . There are p o s i t i v e contributing f a c t o r s . One i s a degree of commonality in the perception of major problems. The f i v e states share concerns regarding threats to t h e i r independence, s t a b i l i t y and s e c u r i t y --48 20 i n t e r n a l as well as external. Furthermore, t h e i r perceptions of sec u r i t y and s o c i a l s t a b i l i t y are linked together as a set, and approaches to the issue of economic development are i d e n t i c a l , creating a core of 21 preconditions f o r regional cooperation; these conclusions, i n t e r e s t i n g l y , were based on a study conducted i n the same time period (1959-1969) as many of the pieces c i t e d above that came to p r e c i s e l y the opposite conclusion. That t h i s commonality of perception continues and i s having some e f f e c t i n forging p o l i t i c a l w i l l to act as a region i s noted i n more 22 recent evaluations. Motivations, i f not a l l behavior, i n the ASEAN area have served to create a bond among the members. A major set of s t i m u l i to regionalism i s derived from the inter n a t i o n a l system, and appears to be a domestic response to perceptions of common external threats. External threats are accorded a prominent r o l e i n the formation and continuation of ASEAN, but at the same time, as 23 r e s t r a i n t s to the pace of cooperation i n i s o l a t e d instances. The theme of weakness i n the face of a h o s t i l e i n t e r n a t i o n a l system i s recurrent, as for example i n the remarks of Thanat Khoman, then Foreign Minister of Thailand, at ASEAN's inception: through ASEAN, " i n d i v i d u a l weakness and impotence w i l l gradually be replaced by a greater combined strength ... i t becomes in c r e a s i n g l y necessary f o r the small and weak nations to close 24 t h e i r ranks and pool t h e i r l i m i t e d means and p o t e n t i a l . " In the same l i n e , ASEAN i s seen as a "product of a combination of common fears and weaknesses, not of common strength," and as a case of " c o l l e c t i v e p o l i t i c a l w i l l " imposed by a "common concern with external e x p l o i t a t i o n 25 of i n t e r n a l weaknesses." The f i r s t of these external threats i s a r e s u l t of changes i n 49 the balance of power among the major i n t e r n a t i o n a l a c t o r s i n the Asian arena. The announced withdrawal of B r i t a i n , along w i t h f e a r s of Chinese dominance, were instrumental i n the i n i t i a t i o n of ASEAN; one author goes so f a r as t o suggest that ASEAN was an attempt to avoid being included i n 26 the Chinese sphere of i n f l u e n c e . U.S. withdrawal, and the r e u n i f i c a t i o n of Vietnam, were c e r t a i n l y key s t i m u l i t o the timing of ASEAN's more a c t i v e phase set out at the B a l i Summit i n 1976. Again i n 1979, Vietnam's i n v a s i o n 27 of Kampuchea e l i c i t e d common perceptions of danger and j o i n t a c t i o n , f o r example, i n the U.N. The major response to these s e c u r i t y t h r e a t s has been to accept and promote the e a r l i e r Malaysian concept of a Southeast Asi a n "Zone of Peace, Freedom and N e u t r a l i t y " i n order t o encourage an e q u i l i b r i u m of the major powers i n the r e g i o n which would a l l o w a l l t o be a c t i v e t o 28 v a r y i n g degrees, but none to dominate. Secondarily, there has been i n c r e a s i n g c o o r d i n a t i o n of m i l i t a r y and i n t e l l i g e n c e a c t i v i t i e s , although 29 t h i s i s kept s t r i c t l y b i l a t e r a l and f o r m a l l y o u t s i d e of ASEAN auspices. To the degree that ASEAN i s seen as strong and s t a b l e , so the t h i n k i n g goes, 30 outside powers w i l l not have an i n c e n t i v e to intervene. The second of these t h r e a t s i s e x t e r n a l i n o r i g i n but i n t e r n a l i n e f f e c t . Domestic p o l i t i c a l and economic s t a b i l i t y , r e f e r r e d t o as " r e s i l -i ence" by the Indonesians, i s menaced by p o t e n t i a l r e v o l u t i o n s . Economic development as a route to domestic s t a b i l i t y , i s , as van der Kroef puts i t , 31 the l e i t m o t i v of ASEAN s e c u r i t y p o l i c y . Domestic challenges from i n s u r -gent and p o t e n t i a l l y r e v o l u t i o n a r y peasants must be defused by r a p i d eco-nomic growth which allows wider d i s t r i b u t i o n of wealth. Since a l l f i v e s t a t e s are h e a v i l y penetrated by e x t e r n a l economic a c t o r s , expectations are focused on growth led by i n t e r n a t i o n a l trade and investment, and more e a s i l y r e a l i z e d as a r e g i o n a l group which supplements the bargaining 50 strength of any single member. It would appear that the balance between those forces i n h i b i t i n g and those forces impelling regional cooperation reached a dec i s i v e point i n the early 1970s. As expressed by the Malaysian Deputy Prime Minis t e r i n 32 1971: [ R]egional cooperation i s now widely recognized ... as an impor-tant instrument, i f not an imperative i n the development of nations, p a r t i c u l a r l y those that are small. That way only can we r i s e e f f e c t i v e l y to challenge and provide an a l t e r n a t i v e to the threat of domination by the big countries with t h e i r power-f u l economies. For reasons linked to economics, but derived from s e c u r i t y considerations as well as wealth, ASEAN moved into a more active period, marked by burgeoning programs over a wide spectrum of a f f a i r s . It i s a commonplace observation that l i t t l e of substance was undertaken by ASEAN p r i o r to 1976, when the second decade was launched with fanfare and more substantive programs. Yet, the f i r s t decade was hardly wasted. ASEAN was l a r g e l y concerned with less p o l i t i c a l , less dramatic, l e s s v i s i b l e programs which contributed an i n f r a s t r u c t u r e f o r , and experience at, cooperation. By 1975 o f f i c i a l committees existed f o r food and ag r i c u l t u r e , shipping, communications, transportation, tourism, finance, commerce, science and technology, mass media, and s o c i o c u l t u r a l a c t i v i t i e s . Each was engaged i n modest cooperative ventures, which brought responsible o f f i c i a l s from a l l f i v e countries together, something which i s u n l i k e l y to have happened without ASEAN. In addition, a p a r a l l e l set of non-governmental organizations were springing up to l i n k p r i v a t e c i t i z e n s i n each of the countries, covering almost every conveivable type of a c t i v i t y : these include such organizations as the Committee f o r ASEAN Youth Cooperation, the ASEAN Federation of Women, the ASEAN Motion Picture Producer's Association, the ASEAN Cardiologist?s Federation, and the ASEAN 51 Consumer's Protection Agency (t h i s subject i s further discussed i n Chapter 6). These organizations l a i d the groundwork f o r wider cooperation. By the end of the 1970s any casual t r a v e l e r through the region could hardly avoid exposure to the idea that there were extensive bonds among the ASEAN members through such p u b l i c i z e d items as ASEAN Book F a i r s , s p e c i a l ASEAN A i r f a r e s and ASEAN Sports F a i r s . Despite the " n o n - p o l i t i c a l " image of the early years of ASEAN there was i n f a c t some degree of p o l i t i c a l cooperation before 1975. As early as 1971 the M i n i s t e r i a l Meetings included discussions of the need 33 fo r consultation i n preparation f o r i n t e r n a t i o n a l f o r a . By 1973 there were several e f f o r t s undertaken i n t h i s d i r e c t i o n , including j o i n t 34 strategy sessions f o r the GATT, j o i n t approaches toward the modification 35 of the EEC's trade preference system f o r developing countries, and 36 common p o l i c y agreements f o r UN conferences and the General Assembly. In addition, from 1971 on the Foreign Ministers met yearly to discuss p o l i t i c a l problems of j o i n t concern. Nominally t h i s was outside the ASEAN framework i n order to protect the image of l i m i t e d economic and so c i o c u l t u r a l cooperation as set out i n o r i g i n a l d e f i n i t i o n s of the 37 organization. But s t a r t i n g i n 1973 ASEAN took a j o i n t stand i n opposing Japan's increased production of synthetic rubber which was seen as threatening the market f o r natural rubber; t h i s was eventually resolved i n ASEAN's favor through extensive j o i n t diplomacy, aided by increases i n 38 petroleum p r i c e s which made the Japanese industry less v i a b l e . The u t i l i t y of ASEAN as an instrument of i n t e r n a t i o n a l economic diplomacy was being a c t i v e l y explored i n t h i s period. These i n i t i a l successes, allowing the M i n i s t e r i a l Conference i n 39 1974 to report the f i r s t concrete achievements, were given a f i l l i p by 52 the u n i f i c a t i o n of Vietnam. Prime Minister Lee of Singapore reported that the regional i n t e r n a t i o n a l s i t u a t i o n i n ea r l y 1975 drew the ASEAN members cl o s e r together i n the economic, diplomatic and p o l i t i c a l f i e l d s . By the end of the year the Economics Ministers met and approved a program of economic cooperation, s e t t i n g the agenda f o r the f i r s t summit i n 41 February 1976 at B a l i . This summit brought the heads of government together under ASEAN auspices f o r the f i r s t time, and was followed by another the next year (1977) i n Kuala Lumpur. Not only did they serve to focus world attention on the ASEAN organization, but they p u b l i c l y marked the t r a n s i t i o n of ASEAN from l i m i t e d informal cooperation to a wide-ranging program of formal projects, f o r the most.part economic i n nature. According to the f i n a l communique of the B a l i meeting, i t became "es s e n t i a l f o r the members to move to higher l e v e l s of cooperation, e s p e c i a l l y i n p o l i t i c a l , economic, s o c i a l , c u l t u r a l , s c i e n t i f i c and 42 technological f i e l d s . " One might search f o r f i e l d s not included. ASEAN was no longer wary of a t t r a c t i n g i n t e r n a t i o n a l attention; that was p r e c i s e l y what was required f o r the future. ASEAN, then, i s the culmination of r e g i o n a l i s t e f f o r t s i n Southeast Asia. It exi s t s i n an environment marked by both negative and p o s i t i v e f a c t o r s , and has developed at a r e l a t i v e l y slow pace. At the same time, the challenges of economic development, s t a b i l i t y , and i n t e r -national security are of such g r a v i t y as to impel1 the members to continue t h e i r e f f o r t s toward more unity. Its a c t i v i t i e s range across a wide spectrum of s o c i a l and c u l t u r a l i n t e r e s t s , but have become focused on economic and p o l i t i c a l a f f a i r s . ASEAN i s an open-ended association of convenience, designed to meet the needs of the members through concerted i n t e r n a t i o n a l action. 53 Asean Economic Programs The programs i n i t i a t e d at the B a l i Summit and the follow-up i n Kuala Lumpur the next year form the basis of ASEAN economic cooperation. For convenience, these can be divided into those programs dire c t e d at increasing the scope of economic a c t i v i t y among ASEAN members, or i n t e r n a l programs, and those aimed at increasing the l e v e l of coordination of inte r n a t i o n a l economic diplomacy, or external programs. The major points of these programs w i l l be outlined below, however i t should be kept i n mind that the d i v i s i o n i s an a r t i f i c i a l one created f o r ease of discussion; i t i s my contention that the major purpose of a l l ASEAN economic programs i s i n increasing ASEAN leverage i n the in t e r n a t i o n a l system. Internal Economic Programs The Declaration of ASEAN Concord signed at the B a l i Summit i s generally seen as the i n i t i a t i o n of ASEAN economic cooperation, as i t i d e n t i f i e s the major areas of future e f f o r t s and d i r e c t s the economics ministers to consider the means of implementation. However, the blueprint f o r the i n t e r n a l economic programs has much e a r l i e r o r i g i n s . At the Second M i n i s t e r i a l Meeting of ASEAN, i n 1968, a proposal f o r a study of 43 po t e n t i a l ASEAN economic cooperation by the UN was accepted. Two years l a t e r the r e s u l t was returned to the ASEAN governments, and kept confiden-44 t i a l f o r another two years; eventually i t was published by the U.N. The study was done under the supervision of a Cambridge economist, Austin Robinson, with a great deal of consultation with a wide v a r i e t y of ASEAN economists, government o f f i c i a l s , and other figures i n the region. According to one of the p a r t i c i p a n t s , the emphasis was on working out 54 pragmatic areas of cooperation which were most l i k e l y to win acceptance 45 among the governments rather than laying out the academic p o s s i b i l i t i e s . The study was again considered by the ASEAN Ministers i n 1972 and 1973, and an expert group appointed to consider implementation i n 1974; by 1975 the 46 report was being reformulated f o r the:Bali Summit. The major techniques of cooperation were i d e n t i f i e d as s e l e c t i v e trade l i b e r a l i z a t i o n , package 47 deals of major i n d u s t r i a l projects, and i n d u s t r i a l complementation schemes. These remain the main programs of ASEAN i n t e r n a l economic cooperation. The P r e f e r e n t i a l Trade Agreement (PTA), signed i n Manila at the 48 end of February 1977, took e f f e c t on January 1, 1978. The general purpose i s gradually to free i n t r a - r e g i o n a l trade from the presently widely divergent t a r i f f b a r r i e r s . The key dispute i s how gradual t h i s i s to be, and t h i s was r e f l e c t e d i n the s e l e c t i o n of means f o r implementation. Singapore and the P h i l i p p i n e s i n i t i a l l y advocated a formula whereby t a r i f f s would be lowered by some set amount on a l l items, across the 49 board; the suggested amounts var i e d from 10 to 15%. This would lead d i r e c t l y to a free trade zone. Indonesia alone found t h i s unacceptable, as the e x i s t i n g i n e q u a l i t y among the members might rebound to Indonesia's ultimate disadvantage i f exaggerated by free t r a d e . ^ Notwithstanding some c r i t i c i s m from other ASEAN members, notably the Philippines,*'* the t y p i c a l ASEAN pattern was followed, and Indonesia as the least f l e x i b l e 52 member was l e f t to present the working paper on the trade program. The r e s u l t was the item-by-item approach advocated by the U.N. report. Although Singapore dropped the more ambitious across the board 53 approach at the B a l i Summit, the government went ahead with the idea on 54 a b i l a t e r a l basis with Thailand and the P h i l i p p i n e s i n e a r l y 1977, leaving i t open to accession by the other members as they saw f i t . This 55 attempt at acc e l e r a t i o n e l i c i t e d a h o s t i l e response from Indonesia, and the arrangements were suspended i n the i n t e r e s t s of ASEAN s o l i d a r i t y . ^ Singapore indicated i t s early enthusiasm f o r economic cooperation, but, as was to happen often, was restrained. Nevertheless, the pace of implementation of the PTA has since increased from the i n i t i a l l i s t of 71 products, f i r s t to 2000 a year, and most re c e n t l y to 3000 products a year, with each to be " s i g n i f i c a n t l y traded" i n the r e g i o n . ^ Indonesia's continuing reluctance to be dragged into a free trade area i s perhaps indicated by a u n i l a t e r a l increase of t a r i f f s on some 400 items i n early 57 1979, but the program i s progressing more to the s a t i s f a c t i o n of the other members. The economic e f f e c t s of the PTA are subject to some dispute. In addition to the trade provisions outlined above, there are arrangements to encourage long-term quantity contracts financed at p r e f e r e n t i a l rates among ASEAN purchasers, s t i p u l a t i o n s f o r ASEAN preferences i n the sources of governmental purchases, and the i n c l u s i o n of any ASEAN i n d u s t r i a l products i n p r e f e r e n t i a l t a r i f f arrangements. These provisions are l a r g e l y unused to date, leaving the trade area the only s i g n i f i c a n t one. However, the r e l a t i v e l y small cuts i n t a r i f f s , mostly 10% of e x i s t i n g l e v e l s , and the extremely large number of items to be i n d i v i d u a l l y negotiated under the scheme (a po t e n t i a l of several m i l l i o n ) have brought i t s effectiveness 58 into question. The apparent lack of r e a l economic impact r a i s e s the c r e d i b i l i t y of early reports that the free trade proposal was designed to give a boost to outside perceptions of the seriousness of ASEAN , . 59 regionalism. The Declaration of ASEAN Concord sets out that "Member states s h a l l cooperate to e s t a b l i s h large-scale ASEAN i n d u s t r i a l plants, 56 p a r t i c u l a r l y to meet regional requirements of e s s e n t i a l commodities." These are the showcase projects of ASEAN, the high v i s i b i l i t y regional import-substitution manufacturing plants, designed to produce on a regional l e v e l what i s not economical at the national l e v e l , and free each of the members from the necessity of importing some large scale manufactured products from the i n d u s t r i a l countries. A number of p a r t i c u l a r products were i d e n t i f i e d by the UN report as economically f e a s i b l e and desirable f o r i n d u s t r i a l development, and these formed the basis f o r both the l i s t which the economic ministers were dire c t e d to consider and f o r the i n i t i a l d i s t r i b u t i o n . ^ These were urea plants f o r Indonesia and Malaysia, superphosphates f o r the P h i l i p p i n e s , d i e s e l engines f o r Singapore and soda ash f o r Thailand, each a l l o c a t e d a f t e r extensive bartering among c o n f l i c t i n g national a s p i r a t i o n s . It was also established that the financing of the projects should be j o i n t , with the host country contributing 60% of the equity and each of the other members 10%. The o r i g i n a l projects each had some a p p l i c a t i o n to a g r i c u l t u r e , i n l i n e with the emphasis i n the Declaration of ASEAN Concord on basic commodities, " p a r t i c u l a r l y food and energy." The subsequent h i s t o r y of these ventures has been mixed. Japan provided a boost by o f f e r i n g US $1 b i l l i o n i n unspecified types of soft financing a f t e r Prime Minister Fukuda's meeting with ASEAN i n 1977; two conditions, f e a s i b i l i t y and j o i n t ASEAN sponsorship, were imposed, both of which have become somewhat problematic.^ 1 The Indonesian project, already started as a national project before a l l o c a t i o n , i s so f a r the closest to implementation, with the Malaysian project also approved, and the Thai e f f o r t close to the f i n a l stages; each of these, however, i s 6 2 subject to doubts as to t h e i r economic v i a b i l i t y . Immediate discord 57 broke out over the Singapore d i e s e l plant, p a r t i c u l a r l y as Indonesia already had s i m i l a r plants planned or i n operation, but eventually v i r u t a l l y a l l of the other members objected as they planned s i m i l a r 63 national projects. As a r e s u l t , Singapore w i l l go ahead with the plant as a non-ASEAN project, and w i l l p a r t i c i p a t e i n the other regional industries only to the extent of 1% of equity, preserving the regional 64 nature of the projects i n form, but not i n f a c t . In addition, the Ph i l i p p i n e s ' o r i g i n a l project has been dropped as uneconomical, and i s slated to be replaced by expanding e x i s t i n g integrated pulp and paper m i l l s . ^ But there again, several of the ASEAN members have expressed some int e r e s t i n the same project, and i t i s uncertain that the planned regional monopoly (or dupoly i n urea) w i l l be maintained.^ Given the d i f f i c u l t i e s , i t i s hardly surprizing that the second round of projects o r i g i n a l l y contemplated has been allowed to l i e fallow. C o n f l i c t i n g national a s p i r a t i o n s have not been overcome by regional harmony. It i s not merely the intransigence of national i n t e r e s t which have i n h i b i t e d the ASEAN i n d u s t r i a l projects. The complexity of planning 67 i s also considerable, and world economic conditions change r a p i d l y , a f f e c t i n g the f e a s i b i l i t y of the projects. The Thai project, f o r example, was investigated by Japanese i n t e r e s t s long before i t was set as a cooperation project, and required yet another 2% years of study by a 68 Canadian f i r m before acceptance. The Indonesian project was already a national project with a completed f e a s i b i l i t y study before "ASEANization"; s t i l l , i t i s not yet i n production, nor has the financing with; Japan been s e t t l e d . The crawling pace and national c o n f l i c t s have had a t o l l on ASEAN unity. Singapore has found i t necessary to declare that i t must 58 make i t s own arrangements to maintain the required pace of economic progress to ensure i t s s u r v i v a l i n the global economic arena, apart from 69 ASEAN. The centerpiece economic program i s d i v i d i n g , rather than u n i t i n g , ASEAN i n the regional economic sphere. The i n d u s t r i a l complementation schemes, the f i n a l major area of 70 cooperation, are the least developed. As a supplement to the larger i n d u s t r i a l projects of the ASEAN industry program, these projects seek to create transnational production within ASEAN,, with some parts of a larger product produced i n several ASEAN countries; i n some cases, i t i s envis-ioned that s p e c i a l i z a t i o n within a p a r t i c u l a r product l i n e w i l l be coordinated t h i s way. Through t h i s program the various strengths of the manufacturing sectors i n each country w i l l be maximized and wasteful competition w i l l be minimized. The projects w i l l be smaller i n s i z e , and b u i l d on e x i s t i n g national c a p a b i l i t i e s . In contrast to the high degree of government involvement i n the i n d u s t r i a l projects, the complementation program i s l e f t l a r g e l y to the private sector f o r i t s planning, i n i t i a t i o n , and implementation. Since the r o l e of the pri v a t e sector w i l l be discussed more f u l l y i n Chapter 6, only an overview of progress and the major p o l i t i c a l issues w i l l be considered here. To date, very l i t t l e concrete cooperation has been achieved. Early agreements to coordinate and exchange information i n several 71 ind u s t r i e s , p a r t i c u l a r l y s t e e l , glass and petrochemicals, have not been widely followed up with other sectoral agreements. Although a large number of products have been i d e n t i f i e d as p o t e n t i a l complementation 72 products, none has been approved so f a r . Automotive parts are the most advanced i n the planning stages, and a serie s of a l l o c a t i o n s f o r each national industry has been suggested to avoid competition and increase 59 73 the regional content of auto manufacturing. With Japanese carmakers dominant, coordination i s necessary with t h e i r industry association, which 74 has yet to have been achieved. Closest to approval are two " t r i a l p r o j e c t s " i n the manufacture of carburetors and seal-beam headlights to 79 t e s t the functioning of complementation. The slow pace of the i n d u s t r i a l projects seems to be r e p l i c a t e d i n the complementation schemes, with an ad d i t i o n a l hindrance: not only must governmental approval be secured, but transnational coordination of the p r i v a t e sectors i s also required, adding another layer to the problem. One major problem has been i n securing guidelines f o r complemen-t a t i o n which are acceptable to the f i v e governments and to each pr i v a t e sector. The task of formulating these guidelines has been passed back and f o r t h between the ASEAN organization and the p r i v a t e sector representative, the ASEAN Chambers of Commerce and Industry (ACCI) several times, so f a r 76 without successful r e s o l u t i o n . Each country seems to have d i f f e r e n t ideas on the allowable proportion of foreign investment, with a l l but 77 Singapore favoring some formula mandating majority ASEAN ownership. As a r e s u l t , Singapore vetoed the complementation guidelines i n Jakarta i n mid-1979, f o r c i n g an extensive review and delay of project implementa-78 t i o n . The second major problem i s Singapore's fear of the erosion of i t s i n t e r n a t i o n a l market p o s i t i o n should i t proceed with many complemen-t a t i o n projects. Since each project would involve t a r i f f and other concessions, including some form of monopoly guarantee f o r the regional market, the p r i v a t e sector i n Singapore i s quite concerned that the r e s u l t would be to force them to purchase higher cost inputs f o r manufactured exports, r e s u l t i n g i n a l e s s competitive i n t e r n a t i o n a l 60 marketing position.''' This i s also a domestic issue i n Singapore, as the government i s seen as more w i l l i n g to compromise than the p r i v a t e sector i s . Reversing i t s e a r l i e r enthusiasm, Singapore has replaced Indonesia as the least w i l l i n g to engage i n regional i n d u s t r i a l i n t e g r a t i o n . There i s , however, an emerging area of ASEAN cooperation which Singapore finds quite a t t r a c t i v e , and which may counter d e c l i n i n g enthusiasm f o r ASEAN economic programs. As an as p i r i n g f i n a n c i a l center, Singapore has led cooperation i n the banking sector. I n i t i a l e f f o r t s i n t h i s area were l i m i t e d to the establishment of an ASEAN Swap F a c i l i t y i n 1977 (which apparently has never been used). More ambitious i s a current attempt to e s t a b l i s h an ASEAN Finance Corporation to a s s i s t i n the 80 c a p i t a l i z a t i o n of development projects throughout the region. This f i t s with Singapore's v i s i o n of i t s e l f as a center f o r the d i f f u s i o n of finance and technology i n ASEAN. The major i n t e r n a l ASEAN economic programs, then, are a l l plagued by slowness, i n t e r n a l d i v i s i v e n e s s , and marginal economic bene f i t s . It i s apparent that the major benefits of these programs are not to be found i n rapid economic in t e g r a t i o n of the members into some-thing resembling an economic community i n the near future. Nor, I would suggest, i s t h i s the inten t i o n of the members i n pursuing these programs. Rather, i t seems evident that they are being exploited f o r t h e i r e f f e c t i n the wider i n t e r n a t i o n a l economic sphere. To the degree t h a t the ASEAN members appear to be b u i l d i n g the basis of a future economic association t h e i r attractiveness to major i n t e r n a t i o n a l economic actors i s enhanced. This image can be turned to good use at the bargaining table. The PTA r a i s e s the p o s s i b i l i t y of enhanced regional trading f o r any company with a regional base, and costs f o r those outside. The i n d u s t r i a l projects 61 signal decreased r e l i a n c e on major i n d u s t r i a l countries f o r some products, encouraging the s h i f t of industry to the region. Complementation schemes guarantee a regional market f o r an increased range of products with monopoly p o s s i b i l i t i e s . In each case, i t i s the image of economic robustness which i s being c u l t i v a t e d to a f a r greater extent than the r e a l i t y . At least i n the short term, the primary gain to the members of ASEAN from the i n t e r n a l economic programs are i n external economic r e l a t i o n s . External Economic Programs Coordination of i n t e r n a t i o n a l economic p o l i c i e s among the ASEAN members developed slowly before 1976, but as has been pointed out above, was of some s i g n i f i c a n c e i n the ea r l y 1970s. As ea r l y as 1971 coordination of representatives at regional and in t e r n a t i o n a l f o r a was i d e n t i f i e d as a "necessity" by the Foreign Ministers, "so that members of ASEAN would always present a united stand to advance t h e i r common interest."®''' But on the whole, ASEAN kept a low p r o f i l e i n a f f a i r s thought to be " p o l i t i c a l " . A l l of t h i s changed with the B a l i Summit. P o l i t i c a l cooperation was reaffirmed, and i n several ways made the central element of cooperation 82 emphasized by the heads of government. The Declaration of ASEAN Concord e n t i t l e d a major section "Joint Approach to International Commodity Problems and Other World Economic Problems," and the follow-up meeting of Economic Ministers a month l a t e r d e t a i l e d a program of diplomatic conferences to be c a r r i e d out with major countries and groups. Further, i t was agreed to adopt j o i n t approaches to a wide v a r i e t y of i n t e r n a t i o n a l 83 bodies on economic issues. However, with so much promised at B a l i i n so many areas of cooperation, external cooperation on economic issues was 62 l e f t more or les s unattended u n t i l the 2nd ASEAN Summit i n Kuala Lumpur and the following meeting of Economic Ministers i n August and September of 84 1977. By t h i s time, the value of external cooperation had acquired a new f i l l i p : "In our external r e l a t i o n s we share common views .... It i s easier p s y c h o l o g i c a l l y to deal with ASEAN's external partners than to sort out the intr a r e g i o n a l arrangements between the ASEAN partners" (Prime 85 Minister Lee). With the major ASEAN i n t e r n a l programs i n stagnation, external cooperation offered a means of v i s i b l e and quick success. The "dialogues" have been the major instrument of formal cooperation with external actors. R e s p o n s i b i l i t i e s f o r coordinating these intermittant conferences are divided among the members: Indonesia f o r Japan and the EEC; Malaysia f o r A u s t r a l i a and West Asia; the Ph i l i p p i n e s f o r the USA, Canada, and the Group of 77; Singapore f o r New Zealand; 86 Thailand f o r the UNDP and ESCAP. The substance of these meetings i s set j o i n t l y , but as the ASEAN machinery i s neither extensive enough, nor delegated enough authority to conduct them, primary r e s p o n s i b i l i t y f a l l s 87 to a p a r t i c u l a r ASEAN member. The stated objective i s to e s t a b l i s h regular means f o r economic c o l l a b o r a t i o n i n order to b u i l d up long term, 88 complementary economic r e l a t i o n s h i p s with the more developed countries, but the intent i s obviously to exercise c o l l e c t i v e p o l i t i c a l w i l l f o r the benefit of the members. There are numerous areas i n which some concrete gain has been achieved. Group p a r t i c i p a t i o n i n in t e r n a t i o n a l organizations and confer-ences has enhanced the image of ASEAN as a bloc. Common objectives have been pursued i n conferences such as UNCTAD a f t e r extensive preliminary meetings to resolve separate p a r t i c u l a r i n t e r e s t s , r e s u l t i n g i n group 89 support f o r each country's s p e c i a l problems. In addition, the 63 coordination and monitoring of various technical assistance programs extended through U.N. agencies has been the goal of meetings with the 90 UNDP, ESCAP, the ADB, FAO and UNIDO. The wide range of economic development among ASEAN members allows the group to argue f o r programs ben e f i t i n g a l l that would be d i f f i c u l t to win from i n t e r n a t i o n a l agencies i n d i v i d u a l l y . With economic partners the most benefit has come from A u s t r a l i a , probably because of i t s r e l a t i v e l y weak p o s i t i o n i n the global p o l i t i c a l and economic order. This i s one of the oldest r e l a t i o n s h i p s f o r ASEAN, dating from early 1974, and produced the f i r s t extension of aid f o r 91 technical cooperation to the group. The r e l a t i o n s h i p has, however, not remained altogether harmonious. An ea r l y demonstration of ASEAN s o l i d a r i t y was an objection to Au s t r a l i a n trade protectionism against Malaysia and the P h i l i p p i n e s i n l a t e 1976, which was followed by an i n v i t a t i o n to meet with the ASEAN heads of government a f t e r t h e i r 1977 Summit to press the issue. F r a s i e r ' s i n a b i l i t y to meet ASEAN demands cooled h i s i n i t i a l enthusiasm at the prospect of i n c l u s i o n i n regional development plans, e s p e c i a l l y with the a p p l i c a t i o n of sanctions by Malaysia and the Phi l i p p i n e s i n the form of a slow-down of approval f o r imports of Aus t r a l i a n goods. ASEAN was reportedly "growing weary" of Au s t r a l i a ' s 92 desire f o r close t i e s , but unwillingness to extend incentives. Lee made i t quite e x p l i c i t that the tenor of r e l a t i o n s with A u s t r a l i a would depend on the r e s o l u t i o n of economic issues, and, i n the context of stat i n g ASEAN desires, warned that A u s t r a l i a was becoming " l e s s relevant" 93 to ASEAN. This blunt threat prompted A u s t r a l i a to extend special quotas to the ASEAN ind u s t r i e s affected, and to e s t a b l i s h " e a r l y warning" l i n k s between the ASEAN Ambassadors and the Aust r a l i a n Cabinet to allow 64 ASEAN to make representations on i n d u s t r i a l p o l i c y changes before 94 decisions were f i n a l . A u s t r a l i a also undertook to sponsor trade and investment f a i r s i n an attempt to respond to c r i t i c i s m that these areas 95 of exchange were being i n h i b i t e d by lack of government support. Before these disputes were placated, an agreement between Quantas and B r i t i s h Airways on d i r e c t discount a i r f a r e s between London and A u s t r a l i a r a i s e d charges of damage to Singapore's a i r l i n e and t o u r i s t trade. Clumsy e f f o r t s to o f f e r concessions to the other ASEAN countries i n order to prevent the emergence of a united front behind Singapore f a i l e d , and i n fa c t produced a s p e c i a l ASEAN Economic Ministers meeting 96 on the subject. Group sanctions were again threatened, and attacks launched d i r e c t l y at A u s t r a l i a and i n d i r e c t l y at "developed country protectionism" at the conveniently timed UNCTAD V meeting i n Manila i n 97 May 1979. A favorable compromise was accepted by ASEAN on behalf of 98 Singapore before the end of the year. ASEAN had again demonstrated that i t was capable of obtaining r e s u l t s even when the i n t e r e s t s threatened were those of a si n g l e member. The higher p r o f i l e of ASEAN and a f e e l i n g that A u s t r a l i a ' s r o l e as spokesman f o r the A s i a - P a c i f i c area was in c r e a s i n g l y being usurped by ASEAN has reportedly led to some re-examination by A u s t r a l i a of t h e i r r o l e i n the region. The r e l a t i v e p o s i t i o n of A u s t r a l i a i n i n t e r -national fora, t h e i r r o l e as a conduit between the developed countries and the less developed of the region, and t h e i r r e l a t i v e weight with the U.S., a l l seen as t r a d i t i o n a l r o l e s f o r A u s t r a l i a , are f e l t to be diminished by 99 the emerging weight of ASEAN p o l i t i c a l muscle. Perhaps Aus t r a l i a n enthusiasm f o r the concept of a P a c i f i c Community i s i n part accounted f o r by i t s promise to provide a new basis of attachment i n Asia and the 65 P a c i f i c , compensating f o r the erosion of more t r a d i t i o n a l connections. C l e a r l y , A u s t r a l i a has emerged as a r e l a t i v e l o s e r i n i t s disputes with ASEAN, and some realignment of power posit i o n s i n the P a c i f i c has resulted. On the other hand, f o r ASEAN A u s t r a l i a has proved the value of unity, both i n s p e c i f i c economic issues and as a f o i l to demonstrate diplomatic aggressiveness without the repercussions that could r e s u l t from challenging a major economic actor. No other r e l a t i o n s h i p has been marked by the same degree of acrimony, although that with Japan, " i n spite of 'symbolic' cooperation and 'generous' aid extended by Japan to ASEAN, i s by no means cordial."'''^''" Long-standing disputes over the degree of access to the Japanese market, exacerbated by a chronic balance of trade d e f i c i t on the part of ASEAN, have appeared r e g u l a r l y on the agendas of the ASEAN-Japan Forum. Only very l i m i t e d concessions have been won, with the introduction of a new t a r i f f scheme featuring a desired cumulative rules of o r i g i n clause the major 102 trade benefit, and t h i s only i n 1978. Japan's promise to "represent" ASEAN's i n t e r e s t s i n the Geneva Round of MTN negotiations f a i l e d to gain any s i g n i f i c a n t advantages, and eroded any attempt by Japan to project an 103 image of ASEAN's protector against the other developed countries. The major outstanding issue i s ASEAN's quest f o r a commodity p r i c e s t a b i l i z a t i o n agreement with Japan, known as STABEX. A proposal patterned on the Lome Agreement was advanced by ASEAN i n 1977 and 104 reportedly on the verge of approval i n mid-1978. But t h i s s t a l l e d with the prospects of a Common Fund emerging from UNCTAD V, and negotiations were unproductive. Press reports placed the blame on ASEAN's lack of preparation f o r scheduled t a l k s and• the P h i l i p p i n e s ' desire to await the outcome of UNCTAD, which they were hosting] but interviews presented a 66 reversed picture of P h i l i p p i n e i n t e r e s t and Japanese reluctance to commit anything to STABEX before seeing how f a r UNCTAD would g o . 1 0 5 Regional observers represent Japan as being more sympathetic to an UNCTAD approach as i t f i t s more c o n s i s t e n t l y with the global, rather than regional, posture 106 that Japan would l i k e to project. The issue remains unresolved, and the whole tenor of r e l a t i o n s between Japan and ASEAN i s being subjected to a new s t r a i n with the development of cl o s e r t i e s between Japan and China, bumping ASEAN to 107 fourth place i n Japan's declared hierarchy of regional i n t e r e s t s . The re l a t i o n s h i p with Japan seems to be characterized by mutual recognition of importance, but with each side paying p a r t i c u l a r attention to a fir m bargaining image i n order to make minimal concessions. Even the new, 1981 Japanese plan f o r focusing a i d to ASEAN has been received with considerable 108 reservation. Although ASEAN has gained advantages from Japan, they have been f a r fewer than those sought. In contrast, r e l a t i o n s with the more distant EEC have been most amicable, i f les s productive. Despite growing i n s t i t u t i o n a l i z a t i o n of the form of the r e l a t i o n s h i p and p o l i t i c a l support from Germany within the Community, very l i t t l e aside from minor concessions has been won by ASEAN in trade i s s u e s . B u t the EEC as the "senior r e g i o n " 1 1 ^ has taken an active i n t e r e s t i n ASEAN, and i n addition to sponsoring a major study of i n d u s t r i a l complementation between the two a r e a s 1 1 1 and giving seminars on 112 the t r a n s f e r of technology, i t i s the only major partner which consis-t e n t l y deals with ASEAN as a uni t y instead of focusing on b i l a t e r a l 113 r e l a t i o n s with the members. Growing i n t e r e s t on both sides i s indicated by ASEAN-EEC In d u s t r i a l Cooperation Conferences i n 1977 and 1978, the f i r s t extension of development assistance from the EEC i n 1978, 67 114 and the negotiation of a cooperation agreement. Despite some scepticism on the part of ASEAN that the economic r e l a t i o n s h i p i s not being al t e r e d from a b a s i c a l l y c o l o n i a l pattern, 1 1*' i t i s c l e a r l y being given p r i o r i t y and high hope f o r the f u t u r e . 1 1 * ' So f a r the concessions granted have been more of form than substance, but t h i s i s equally appreciated by ASEAN f o r i t s diplomatic u t i l i t y . Other dialogues have progressed smoothly, and i n the absence of major substantive disputes. New Zealand has extended technical cooperation and has agreed to sponsor a program of ASEAN trade promotion on a continu-117 ing basis. Canada has i n i t i a t e d a s o l i d program of technical coopera-118 t i o n and some investment promotion. A minor concession to ASEAN was made by the U.S. i n continuing a tax d e f e r r a l f o r U.S. corporations operating abroad which had been scheduled f o r c a n c e l l a t i o n , and contacts 119 between the private sectors of the U.S. and ASEAN were f a c i l i t a t e d . ASEAN has won some support which the more developed members would not have been e l i g i b l e f o r , and has u t i l i z e d established b i l a t e r a l r e l a t i o n s to gain access f o r the views of the group. Overall, i t would appear that ASEAN has been able to achieve some s o l i d economic success and greater diplomatic leverage acting as a 120 " c o l l e c t i v e bargaining f o r c e . " C e r t a i n l y there are more signs of success i n external actions than there seem to be i n i n t e r n a l economic 121 cooperation. The benefits of guaranteeing that ASEAN views w i l l be heard i n the developed countries, and i n b o l s t e r i n g the bargaining p o s i t i o n of ASEAN over that of the i n d i v i d u a l states, were emphasized by 122 several trade and development o f f i c i a l s i n the region. ASEAN's 123 effectiveness i n external r e l a t i o n s i s re c e i v i n g general recognition. 68 The process of regional development i n Southeast Asia, then, has produced an organization which i s incr e a s i n g l y e f f e c t i v e i n b u i l d i n g a base f o r more e f f e c t i v e negotiation i n the i n t e r n a t i o n a l economic sphere. This i s a r e s u l t of an extensive period of low-level cooperation on a wide front of projects i n the 1950s and 1960s which contributed to the creation of ASEAN and provided a background of cooperative experience. In addition, a wide range of common problems i n domestic and in t e r n a t i o n a l p o l i t i c s has contributed to a substantial degree of commonality i n the perception of problems and approaches. ASEAN has slowly extended the range of cooperative ventures to include almost every conceivable area - c u l t u r a l , s o c i a l , economic, p o l i t i c a l and even sec u r i t y . By the mid-1970s the e a r l i e r hesitant and low-profile stance i n the in t e r n a t i o n a l system was abandoned f o r p r e c i s e l y the opposite, bolstered by a new surge of regional p r o j e c t s . While progress i n i n t e r n a l economic areas has been slow and plagued by disputes, i t has had an e f f e c t of enhancing the image of ASEAN i n the i n t e r -national economic system, and has drawn increasing attention to the organi-zation. External economic diplomacy has been c l o s e l y coordinated, producing r e s u l t s probably beyond the a b i l i t y of any of the members acting alone. As a g r o u p o f developing countries, regionalism has been more focused on redressing the unbalanced r e l a t i o n s h i p s between the members and t h e i r developed partners than on economic in t e g r a t i o n . Regionalism has emerged as a convenient diplomatic t o o l i n Southeast Asia. 69 NOTES 1. Discussions of early regionalism are to be found i n : William Bucklin, "Regional Economic Cooperation i n Southeast Asia: 1945-1969" (Ph.D. Thesis. Michigan State University, 1972), pp. 11-64; Peter Lyon, "ASEAN and the Future of Regionalism." Lau Teik Soon, ed., New  Directions i n the International Relations of Southeast Asia: The  Great Powers and Southeast Asia (Singapore: Singapore U n i v e r s i t y Press, 1973), pp. 156-159; Somsakdi Xuto, Regional Cooperation i n  Southeast A s i a : Problems, P o s s i b i l i t i e s and Prospects (Bangkok: I n s t i t u t e of Asian Studies, Chulalongkorn University, 1973), pp.20-43. 2. E s t r e l l a Solidum, "The Nature of Cooperation Among the ASEAN States as Perceived Through E l i t e Attitudes - A Factor for Regionalism" (Ph.D. Thesis. U n i v e r s i t y of Kentucky, 1970), p. 34. 3. On ASA see: Bernard Gordon, The Dimensions of C o n f l i c t i n Southeast As i a (Englewood C l i f f s : P r e n t i c e - H a l l , 1966), pp. 141-177; Vincent Poll a r d , "ASA and ASEAN, 1961-1967: Southeast Asian Regionalism," - Asian Survey 10, 3 (March 1970): 244-255. On Maphilindo and ASPAC Michael L e i f e r , Dilemmas of Statehood i n Southeast Asia (Vancouver: Uni v e r s i t y of B r i t i s h Columbia Press, 1972), pp. 135-144. 4. Solidum, " E l i t e Attitudes"; Somsakdi, "Regional Cooperation"; P o l l a r d , "ASA". 5. Lyon, "ASEAN", p. 157. 6. ASA met only four times; on Indonesia's p o s i t i o n , see Gordon, "Dimensions," p. 167. 7. "Opening Address", Regionalism i n Southeast Asia (Jakarta: Centre for Strategic and International Studies, 1975), p. 7, 8. Gordon has the best treatment of these, pp. 9-40, 68-119. 9. Shee Poon Kim, "A Decade of ASEAN, 1967-1977," Asian Survey 17, 8 (August 1977), p. 765; Michael L e i f e r , "The ASEAN States and the Progress of Regional Cooperation i n Southeast A s i a , " Bernard Dahm, Werner Draghn, eds., P o l i t i c s , Society and Economy i n the ASEAN  States (Wiesbaden: Otto Harrassowitz, 1975), p. 3. 10. Lau Teik Soon, "ASEAN and the Future of Regionalism," i n h i s New Directions i n the International Relations of Southeast Asia: The  Great Powers and Southeast Asia (Singapore: Singapore Un i v e r s i t y Press, 1973), p. 167. 11. Frank Golay, "Economic Underpinnings of Southeast Asia," Wayne Raymond, K. Mulliner, eds., Southeast Asia, An Emerging Center of World  Influence? Economic and Resource Considerations (Athens, Ohio: Ohio Univ e r s i t y Center f o r International Studies, 1977), pp. 4-6. 70 12. Malcolm Caldwell, "ASEANization,"Journal of Contemporary Asia 4, 1 (1974), pp. 36-70. 13. Arnfinn Jorgensen-Dahl, "Southeast A s i a and Theories of Regional Integration" (Ph.D. Thesis, A u s t r a l i a n National University, 1975). 14. Russell F i f i e l d , National and Regional Interests i n ASEAN (Singapore: I n s t i t u t e of Southeast Asian Studies, 1979)., pp. 25-44. 15. Bucklin, p. 43, The following section i s the best treatment of the subject. -16. P a r t i c u l a r l y Hans Indorf,'ASEAN: Problems and Prospects (Singapore: I n s t i t u t e of Southeast Asian Studies, 1975), pp. 45f; Ernest Corea, "The Road From B a l i , " Gordon Means, ed., Development and Underdevelop- ment i n Southeast A s i a (Ottawa: Canadian Council f o r Southeast Asian Studies, 1976), p. 180. 17. Arnfinn Jorgensen-Dahl, "ASEAN 1967-1976:: Development or Stagnation?" P a c i f i c Community 7, 4 (July 1976), pp. 527-528; Indorff, pp. 2-3; Shee Poon Kim, pp. 763-764. 18. Shee Poon Kim, p. 765. 19. Corea, p. 180. 20. Xuto, pp. 15f. 21. Solidum, p. 243. 22. Alejandro Melchor, J r . , "Assessing ASEAN's V i a b i l i t y i n a Changing World," Asian Survey 17, 4 ( A p r i l , 1977), pp. 422-423; Russel F i f i e l d , "ASEAN: Image and R e a l i t y , " Asian Survey 19, 12 (December 1979), pp. 1207-1208. 23. Jorgenson-Dahl (1975), pp. 337-338, (1976), p. 524. 24. "Address," Sarasin Viraphol, Amphan Namatra, Masabide Shibusa, eds., The ASEAN: Problems and Prospects i n a Changing World (Bangkok: I n s t i t u t e of Asian Studies, Chulalongkorn University, 1976), pp. 4-5. 25. Shee Poon-Kim (1977), p. 755; Melchor, p. 423. 26. Jorgenson-Dahl (1977), p. 427; Malaysia's Prime Minister, Tunku Abdul Rahman, suggested ASEAN to meet the threat from China - Shee Poon Kim, (1977), p. 753n. 27. As r e f l e c t e d i n the Jo i n t Statements, Special Meeting of ASEAN Foreign Ministers, Bangkok, Jan.12, 1979, reproduced i n ASEAN: Travel, Trade  and Development 2, 4 (1979), p. 18. 71 28. A recent statement of t h i s concept i s Carlos P. Romulo, "A Perspective on ASEAN," Asi a P a c i f i c Community 2 ( F a l l , 1978): 1-6; see also Marvin Ott, The Ne u t r a l i z a t i o n of Southeast Asia (Athens, Ohio: Center f o r International Studies, Ohio University, 1974); Sheldon Simon, Asian Neutralism arid U . S F o r e i g n P o l i c y (Washington, D.C: American Enterprise I n s t i t u t e f o r Public P o l i c y Research, 1975); Dick Wilson, The Neu t r a l i z a t i o n of Southeast Asia (New York: Praeger, 1975); Michael L e i f e r , "The ASEAN States: No Common Outlook," International A f f a i r s 49^ 4 (October 1973): pp. 600-607; Tan S r i Muhammad Ghazali Shafie, "ASEAN's Response to Security Issues i n Southeast A s i a , " Regionalism i n Southeast Asia : (Jakarta: Centre f o r Strategic and International Studies, 1975), pp. 17-37; Interview with Malaysian Prime Minis t e r Razak, Far Eastern Economic Review, J u l y 18, 1975, p. 28. 29. Sheldon Simon, "The ASEAN States: Obstacles to Security Cooperation," Orbis 22, 2 (Summer 1978): pp. 415-434; Justus van der Kroef, "ASEAN's Security and Development: Some Paradoxes and Symbols," Asian A f f a i r s 9, 2 (June 1978): pp. 143-160, and "ASEAN's Security Needs and P o l i c i e s , " P a c i f i c A f f a i r s 47, 2 (1974): 154-170; T.B. M i l l a r , "Prospects f o r Regional Security Cooperation i n Southeast A s i a , " M.W. Zacher, R.S. Milne, eds., C o n f l i c t and S t a b i l i t y i n Southeast Asia (New York: Doubleday, 1974), pp. 451-467. 30. Michael L e i f e r , "Regionalism, the Global Balance and Southeast A s i a , " Regionalism i n Southeast Asia (Jakarta: Centre f o r Strategic and International Studies, 1975), pp. 55-70. 31. van der Kroef, p. 147. 32. Tun Ismail, at the Fourth M i n i s t e r i a l Meeting, Manila, March 12, 1971 -quoted i n Jorgensen-Dahl, p. 423. 33. Indorf (1975), p. 12. 34. Reported i n S t r a i t s Times (Malaysia) August 2, 1973; Foreign A f f a i r s Malaysia 6, 3 (Sept. 1973), pp. 13-14. 35. S t r a i t s Times, Nov. 10, 1973. 36. The UN Sugar Conference, f o r example - S t r a i t s Times (Malaysia) Aug. 24, 1973; General Assembly, S t r a i t s Times, Sept. 5, 1973. 37. Far Eastern Economic Review (FEER), J u l y 20, 1967, pp. 151-153; Indorf (1975), pp. 23-24. 38. S t r a i t s Times (Malaysia), J u l y 8, August 7, and Nov. 19, 1973; Foreign A f f a i r s Malaysia 7, 1 (March 1974), pp. 44-45. 39. As i a Research B u l l e t i n (ARB), May, 1974. 72 40. ARB, Aug. 1975; FEER, Aug. 8, 1975, p. 18. 41. ARB, Dec. 1975, p. 152. 42. Reprinted i n ARB, March 1976 (paragraph 5). 43. Indorf (1975), p. 12, Table I. 44. Journal of Development Planning 7 (1974), passim. 45. Dr. Vichitvong na Pambhejara, then employed as a senior economist by the Thai government; interviewed i n Singapore, Sept. 1979. 46. ASEAN, 10 Years ASEAN (Jakarta: 1978), p. 36; Dick Wilson, p. 173; New S t r a i t s Times, May 17, 1975. 47. For assessments of the Robinson Report ( a l t e r n a t i v e l y c a l l e d the Kansu Report), see: H.W. Arndt, Ross Garnaut, "ASEAN and the I n d u s t r i a l i z a -t i o n of East A s i a , " Journal of Common Market Studies 17, 3 (March 1979):. pp. 195-197; S.Y. Lee, Ann Booth, "Towards an E f f e c t i v e Programme f o r ASEAN Cooperation from 1978 to 1983," Paper presented at 3rd Conference of the ASEAN Economic Associations (Kuala Lumpur, 1978). 48. Text i n ARB, March 1977, pp. 302-303. 49. FEER, Nov. 21, 1975, p. 51. 50. S t r a i t s Times, Jan. 25, 1976; New Nation, Jan. 28, 1976; FEER, March 26, 1976, pp. 27-28. 51. New Nation, Dec. 27, 1975, c a r r i e d exerpts from a column from "a source close to Marcos" attacking the Indonesian leadership f o r dragging t h e i r feet on the PTA, hurting P h i l i p p i n e i n t e r e s t s , and commenting that: "In the past Indonesia's neighbors have done most of the y i e l d i n g to her." 52. S t r a i t s Times, Jan. 29, 1976. 53. FEER, Feb. 6, 1976, p. 18. 54. FEER, Feb. 18, 1977, p. 33. 55. Lim Chong Yah, "Singapore's P o s i t i o n i n ASEAN Economic Cooperation," U n i v e r s i t y of Singapore S t a f f Seminar Paper, 1979, pp. 15-16. 56. These are set at quarterly meetings of the Economics Ministers; t h i s recent boost reported i n Business Times (Singapore), Sept. 16, 1979. 57. S t r a i t s Times, Apr. 23, 1979. 73 58. See, f o r example: ARB J u l y 1977, p. 342; Arndt and Garnaut, p. 206; Lim, pp. 17-18; ASEAN Business Quarterly 3 (1978), p. 16. 59. FEER, March 12, 1976, pp. 48-49. 60. The t h i r t e e n items considered by the ASEAN ministers from the UN report are l i s t e d i n Amado Castro, "The Meaning of Economic Cooperation i n ASEAN," ASEAN Trader (Manila: ASEAN Trade F a i r , 1978), pp. 35-36; the Jo i n t Press Communique of the B a l i Summit, section 10 ( i i i ) , sets the agenda f o r the Second Meeting of the Economics Ministers, which al l o c a t e d the i n i t i a l p r o j e c t s . The actual UN recommendations are contained i n "Economic Cooperation Among Member Countries of the Association of South East Asian Nations: Report of a United Nations Team," Journal of Development Planning 7 (1974), pp. 107-150. 61. FEER, Aug. 19, 1977, pp. 27-29. 62. See the evaluative essays on each of the projects i n Mohamed A r i f f , Fong Chan Onn, R. T h i l l a i n a t h a n , eds., ASEAN Cooperation i n I n d u s t r i a l  Projects (Kuala Lumpur: Malaysian Economic Association, 1977), pp. 111-150. 63. Lim Chong Yah, "ASEAN's Package Deal I n d u s t r i a l Projects," A s i a P a c i f i c Community 2 ( F a l l 1978), pp. 135-136; H.W. Arndt, "ASEAN I n d u s t r i a l P r o jects," A s i a P a c i f i c Community 2 ( F a l l 1978), pp. 124-125. 64. FEER, Oct. 10, 1978, p. 61. 65. ASEAN B r i e f i n g 19 (Feb. 1980); FEER, Jan. 27, 1978. 66. Lim (1978), p. 137. 67. A r i f f , et a l . , parts 1, 2 examine approaches to planning and a l l o c a t i o n . 68. FEER, As i a 1979 Yearbook, p. 83. 69. As stated by Tan Boon Seng, Singapore's ASEAN Director, i n FEER, Asia 1979 Yearbook, p. 70. 70. It seems i r o n i c that the UN Team c i t e d t h i s area as the most promising and " p a r t i c u l a r l y well-suited to ASEAN conditions," Journal of Devel- opment Planning 7 (1974), p. 58. 71. Glass - Amado Castro, "Regional Cooperation i n Southeast Asia: Impli-cations f o r World Leadership," Raymond and Mulliner, p. 55; s t e e l -ARB, A p r i l 1977, p. 315; Petrochemicals - Abdul Rahman bin Yusof, " E f f e c t i v e Program f o r ASEAN I n d u s t r i a l Cooperation 1978-1983," Paper presented at 3rd Conference of the Confederation of ASEAN Economic Associations (Kuala Lumpur 1978), p. 6. 72. ASEAN Business Quarterly 4 (1978), p. 48. 74 73. S t r a i t s Times, Feb. 27, 1979. 74. FEER, Feb. 15, 1980, p. 48. 75. Asian Wall Street Journal, Sept. 5, 1979; S t r a i t s Times, Feb. 28, 1979. 76. Thomas A l l e n , The ASEAN Report, Volume II (Hong Kong: Dow-Jones, 1979), pp. 62-63; ASEAN-CCI Handbook (Bangkok: Jo i n t Standing Committee on Commerce and Industry, 1978), p.' 45; Asian Wall Street Journal, Sept. 5, 1979. 77. New Nation, A p r i l 27, 1978; ASEAN-CCI, "Report of the 1st Plenary Meeting of the ASEAN-CCI Working Group on I n d u s t r i a l Complementation" (Singapore: June 16, 1976), pp. 23, 50, 58-66. 78. Author interview, MIDA (Kuala Lumpur, October 1979). 79. Author interview, Secretary General, Singapore Federation of Chambers of Commerce and Industry (Singapore, September 1979). 80. See Michael Skully, ASEAN Regional F i n a n c i a l Cooperation: Developments i n Banking and Finance (Singapore: I n s t i t u t e f o r Southeast Asian Studies, 1979); reports on new proposals are contained i n FEER, Feb. 1, 1980, pp. 34-37, Feb. 15, 1980, pp. 60-61, and Jan. 30, 1981, p. 46. 81. Point 6 of the J o i n t Communique of the 4th M i n i s t e r i a l Meeting (March 1971), quoted i n Sinaga, p. 23. 82. Chia Siow Yue, Singapore and ASEAN Economic Cooperation (Bangkok: UN Asian and P a c i f i c Development I n s t i t u t e , 1978), section 6.1. 83. Joint Communique, Kuala Lumpur (March 9, 1976). 84. ASEAN, 10 Years ASEAN (Jakarta: ASEAN Secretariat, 1978), p. 305. 85. Quoted i n Charles Morrison, A s t r i Suhrke, Strategies of Su r v i v a l : The Foreign P o l i c y Dilemmas of Smaller Asian States (St. Lucia: U n i v e r s i t y of Queensland Press, 1978), p. 283. 86. 10 Years ASEAN, pp. 228-229. 87. However, the ASEAN Secretariat i s e s t a b l i s h i n g some contact with other regional groups outside of the dialogue format - S t r a i t s Times, May 2, 1979. 88. 10 Years ASEAN, p. 220. 75 89. The most recent UNCTAD pre-caucusing i s reported i n New Nation, May 3, 1979; see a l s o R.J.G. Wells, "ASEAN Commodity Trade P o l i c i e s : O bjectives and S t r a t e g i e s , " Paper, 3rd Conference of the Federation of ASEAN Economic A s s o c i a t i o n s (Kuala Lumpur, Nov. 24, 1978). 90. 10 Years ASEAN, pp. 228-229; S. Rajaratham, "ASEAN E x t e r n a l R e l a t i o n s , " ASEAN Trader (Manila: ASEAN Trade F a i r , 1978), p. 30. 91. A$5 m i l l i o n was committed t o f i v e p r o j e c t s at the f i r s t dialogue i n Canberra, A p r i l 1974; another A$10 m i l l i o n f o l l o w i n g the 1977 meetings. 92. S t r a i t s Times, J u l y 1, J u l y 16, 1977; Arndt and Garnaut, pp. 200-201. 93. Interview, FEER, Feb. 24, 1978, pp. 34-35. 94. FEER, March 17, 1978, p. 42, and Nov. 24, 1978, pp. 44-47. 95. Reports i n New S t r a i t s Times, Aug. 24, 1978; S t r a i t s Times, Oct. 20 and Nov. 6, 1978; FEER, Nov. 24, 1978, p. 47. 96. S t r a i t s Times, Oct. 20, 1978, Jan. 11, 12, and 20, 1979; New S t r a i t s Times, Jan. 5, 1979. 97. FEER, Mar. 9, 1979, p. 51; S t r a i t s Times, Feb. 23, May 8, and May 9, 1979. 98. New S t r a i t s Times, Sept. 10, 1979. 99. "Report From Canberra," New S t r a i t s Times, March 7, 1979. 100. FEER, Dec. 21, 1979, pp. 47-59, Feb. 1, 1980, pp. 24-25, and Feb. 29, 1980, pp. 34-36. 101. Mohamed A r i f f , "ASEAN's E x t e r n a l Economic R e l a t i o n s - the Quest f o r a Common Approach," Paper (Kuala Lumpur: Malaysian Economic A s s o c i a t i o n , 1979), p. 6. 102. 10 Years ASEAN, pp. 225-226; FEER, Oct. 20, 1978, pp. 56-58. The clause i n question t r e a t s products made i n s e v e r a l stages i n d i f f e r e n t ASEAN c o u n t r i e s as e l i g i b l e f o r GSP b e n e f i t s , a major b e n e f i t f o r Singapore. 103. FEER, J u l y 18, 1978, p. 97. 104. FEER, J u l y 25, 1977, pp. 18-22, and June 23, 1978, p. 90. 105. FEER, Oct. 20, 1978, pp. 56-58; author i n t e r v i e w s , M i n i s t r y o f Trade, Manila (October 1979). 106. A r i f f (1979), p. 7. 107. As stat e d by Ohira, a f t e r the U.S., PRC and Republic of Korea - S t r a i t s Times, Sept. 5, 1979. 76 108. FEER, October 31, 1980, pp. 50-51, November 21, 1980, pp. 42-43, January 9, 1981, pp. 22-27, January 16, 1981, pp. 48-50. 109. Malcolm Subhan, "ASEAN-EEC Relations," Southeast Asian A f f a i r s 1977 (Singapore: I n s t i t u t e f o r Southeast Asian Studies, 1977), pp. 49-63; FEER, A p r i l 21, 1978, pp. 38f. 110. FEER, J u l y 25, 1975, p. 43. 111. To be undertaken by the Economist I n t e l l i g e n c e Unit - FEER, Dec. 1, 1978, p. 57. 112. The f i r s t i n mid-1977 - FEER, Sept. 30, 1977, pp. 50-51; the second i n October, 1978. 113. Author interviews, MIDA (Kuala Lumpur, October 1979); M i n i s t r y of Trade (Manila, October 1979). 114. ASEAN Business Quarterly, 1979, pp. 24-25; " J o i n t Declaration of the 1st M i n i s t e r i a l Meeting, ASEAN-EEC" (Nov. 21, 1978) i n ASEAN Travel,  Trade and Development 2, 4 (1979), pp. 9-17; FEER, March 21, 1980, pp. 96-97. 115. "ASEAN and the EEC," E d i t o r i a l , New S t r a i t s Times, Feb. 6, 1979. 116. FEER, Feb. 23, 1979, p. 37; "ASEAN and the EEC: Working Toward A Growth Pact," Asian Finance (Hong Kong) 5, 2 (Feb. 1979), pp. 113-115. 117. 10 Years ASEAN, pp. 227-228; New S t r a i t s Times, Feb. 27, 1979; New Nation, J u l y 6, 1978. 118. 10 Years ASEAN, pp. 223-224; S t r a i t s Times, Feb. 6, 1977; New Nation, June 11, 1977; Douglass Small, "The Developing Dialogue Between Canada and ASEAN," International Perspectives (March/April 1978), pp. 28-31. 119. U.S. Department of State, B u l l e t i n , Sept. 28, 1978, pp. 19-25. 120. The phrase i s common to A r i f f (1979), p. 12 and Arndt and Garnaut, p.199. 121. Morrison and Suhrke, p. 283. 122. MIDA, Kuala Lumpur (Oct. 1979); M i n i s t r y of Trade, Manila (Oct. 1979); ASEAN Director, P h i l i p p i n e s (Oct. 1979). 123. See FEER, Asi a 1978 Yearbook (Hong Kong: FEER, 1979),p. 74; Michael Haas, "The ASEANization of Asian International Relations," A s i a P a c i f i c  Community 6 ( F a l l 1979), pp. 73-86. 77 CHAPTER 4 TRADE DEPENDENCE AND POLICY The p o s i t i o n of Third World states i n the in t e r n a t i o n a l economic system has become a contentious p o l i t i c a l issue over the l a s t decade, generating a barrage of impassioned accusations and desperate pleas, but only marginal change. The cry of "Trade, not a i d " resounds through i n t e r n a t i o n a l f o r a as developing countries attempt to overcome external obstacles to t h e i r national economic growth and welfare. This i s p a r t i c u l a r l y important to that group of countries engaged i n an attempt to expand and develop t h e i r economies through trade with the global economy, with the members of ASEAN serving as primary examples. The linkage between domestic pressures to improve economic welfare and i n t e r n a t i o n a l economic diplomacy i s p a r t i c u l a r l y close. There have been consistent attempts to change the structure of the i n t e r n a t i o n a l trading system i n favor of the less-developed over the l a s t several years, centered on UNCTAD, with l i t t l e progress achieved. S p e c i f i c bargains such as the Lome Pact have been struck, but these of course have l i m i t e d coverage, and i f anything, make the s i t u a t i o n worse fo r other developing states. Trade dependence has not been reduced by the actions of the general i n t e r n a t i o n a l community, leaving the burden of e f f o r t s on i n d i v i d u a l states to formulate p o l i c y and pursue strategies designed to improve t h e i r s i t u a t i o n s as best they can. Trade dependence i s not a new concern, and strategies to 78 control i t s p o l i t i c a l e f f e c t s have been advanced. Albert 0. Hirschman masterfully analyzed the p o l i t i c a l consequences of trade r e l a t i o n s , and the r e s u l t s of concentration of national trade on few partners i n 1945,* and Raul Prebisch advocated regional import s u b s t i t u t i o n as the route to 2 reduced L a t i n American dependence on the U.S. i n the early 1960s. For 3 4 the ASEAN states, both Weinstein and Wong have pointed to the p r e c a r i -ousness of overdependence on Japan, a concern which has often been voiced i n various ways i n the region. The i m p l i c i t strategy i s the res t r u c t u r i n g of trade to reduce the overbearing impact of any one partner through d i v e r s i f i c a t i o n and freeing regional trade, a course designed to minimize the i n e q u a l i t y of economic p o s i t i o n and p o l i t i c a l influence between small, less developed states and large i n d u s t r i a l ones. Additional support f o r t h i s strategy i s offered by major approaches to i n t e r n a t i o n a l p o l i t i c a l economy. The dependency school advocates disengagement and s e l f - r e l i a n c e to reduce the degree of penetra-t i o n and concurrent loss of autonomy,** a course resembling the early import-su b s t i t u t i o n i n d u s t r i a l i z a t i o n p o l i c i e s of the ASEAN states, rejected f o r i t s l i m i t a t i o n s on growth. The interdependence approach points to asymmetry i n two facets of a r e l a t i o n s h i p as the keys to r e l a t i v e p o l i t i c a l influence.^ " S e n s i t i v i t y interdependence" i n t h i s context i s l a r g e l y a matter of r e l a t i v e s i z e ; the larger economic e n t i t y i s less influenced by changes i n the r e l a t i o n s h i p than the smaller, and thus less p o l i t i c a l l y s e n s i t i v e to thexither's p o l i c y preferences. " V u l n e r a b i l i t y interdependence" i n trade can be interpreted as a r e s u l t of concentration i n partners; the larger the r e l a t i v e r o l e of a given partner, the more s i g n i f i c a n t the p o t e n t i a l d i s l o c a t i o n s of changes, and the greater that partner's p o l i t i c a l influence. S e n s i t i v i t y , then, can be equalized by the 79 formation of a larger trading bloc and trading r e l a t i v e l y less with the largest economic powers, while v u l n e r a b i l i t y can be minimized through d i v e r s i f i c a t i o n of major trading partners. The ASEAN states are highly dependent i n t h e i r structure of trade. They are l a r g e l y commodity exporters to the i n d u s t r i a l machines of the developed countries, which l i m i t s t h e i r p o t e n t i a l export markets. In the mid-1970s, f o r example, the share of commodities to t o t a l exports 7 f o r ASEAN was as follows: Indonesia 97.8%; Malaysia 69%; Ph i l i p p i n e s 71%; Singapore 53.7%; Thailand 73.3%. They are linked to the i n t e r -national trading system c l o s e l y , and thus quite s e n s i t i v e to i t s general influence. Although not a completely accurate index, the proportion of g t h e i r t o t a l trade to GDP indicates the magnitude of t h i s s e n s i t i v i t y : Indonesia 37.2%; Malaysia 77.9%; Ph i l i p p i n e s 35.7%; Singapore 27 4%; Thailand 43.1%. The asymmetrical nature of the s e n s i t i v i t y r e l a t i o n s h i p with the major i n d u s t r i a l nations i s i l l u s t r a t e d by the r e l a t i v e s i z e of 9 trade on each side as a proportion of t o t a l trade: i n 1978 the U.S. took 17.7% of ASEAN's trade, while ASEAN was only 4% of the U.S. trade market; i n the same year, the EEC accounted f o r 14.3% of ASEAN's trade, and ASEAN 1.1% of the EEC's; Japan's share was 24.9% of ASEAN trade, while ASEAN was 10.5% of Japan's. Trade partners f o r each country have tended to be over-whelmingly the major i n d u s t r i a l nations, often with one of these c l e a r l y dominant, which heightens p o l i t i c a l v u l n e r a b i l i t y . Trade dependence f o r the ASEAN members i s a matter of being narrowly economically developed, extremely s e n s i t i v e to the in t e r n a t i o n a l trading system i n an asymmetrical fashion, and p o l i t i c a l l y vulnerable to p a r t i c u l a r i n d u s t r i a l nations. They are so dependent on the in t e r n a t i o n a l system as to have l i t t l e or no control over i t s e f f e c t s . 80 The response of the ASEAN members has been conditioned by a new economic nationalism. The old nationalism, which emphasized decolonization and the tr a n s f e r of economic a c t i v i t y from Chinese m i n o r i t i e s to "na t i o n a l " ethnic groups, 1^ has not e n t i r e l y faded away, and has been to a degree i n s t i t u t i o n a l i z e d . 1 1 But as Singapore's Rajaratnam predicted i n 1969, nationalism has become more national-development oriented and inter n a t i o n -12 a l l y manifested; one of the authors of a major work on economic nationalism i n Southeast Asia now argues that the emphasis has s h i f t e d from control of resident a l i e n s to issues such as dependence on Japan f o r 13 trade. The new economic nationalism melds domestic and in t e r n a t i o n a l issues, i n the modern fashion. One i n t e r e s t i n g aspect of t h i s process i s the r e i n t e r p r e t a t i o n of national security, a goal t r a d i t i o n a l l y pursued through m i l i t a r y means, as derived from domestic development. As one Southeast Asian scholar puts i t , summarizing the views of regional leaders:, "The concept of strengthening s e c u r i t y i n order to make possible development must...be discarded i n favor of a more r e a l i s t i c and promising notion that develop-14 ment i s s e c u r i t y . " Faster economic development, providing the resources to defuse the primary s e c u r i t y threat to the ASEAN governments, from domestic opposition by m i l i t a n t , armed groups protesting economic ineq u a l i t y , requires a greater degree of i n t e r n a t i o n a l cooperation. This requirement i s r e f l e c t e d i n the Declaration of ASEAN Concord. "The s t a b i l i t y of each member state and of the ASEAN region i s an e s s e n t i a l contribution to i n t e r n a t i o n a l peace and security. Each member state resolves to eliminate threats posed by subversion to i t s s t a b i l i t y , thus strengthening national and ASEAN r e s i l i e n c e . " As "economic self-defense," ASEAN cooperation i s seen as a means to guard 81 t h e i r economic s t a b i l i t y and independence against "superpowers and economic giants," 1*' while one leader contends that "a consensus ex i s t s among the governments of the member states that ASEAN i s the appro-p r i a t e mechanism f o r evolving appropriate defensive strategies to minimize the dis r u p t i v e e f f e c t s of rapid changes i n ... the developed countries." 1*' Domestic i n s t a b i l i t y i s being countered by regionalism. One of these "defensive s t r a t e g i e s " seems to be the d i v e r s i f i -cation of economic r e l a t i o n s away from the two economic superpowers -Japan and the U.S., but p a r t i c u l a r l y Japan. Public demonstrations against the incr e a s i n g l y v i s i b l e presence of Japan i n the region by n a t i o n a l i s t i c mobs i n the ea r l y 1970s i l l u s t r a t e one basis f o r t h i s strategy, but at the same time governmental f r u s t r a t i o n with the lack of 17 follow-up on the Fukuda Doctrine seems equally important. The r e s u l t has been a p o l i c y aimed at a t t r a c t i n g attention from what the ASEAN nations term the "middle powers" of Europe i n order to balance Japanese 18 dominance, and ASEAN's p o s i t i o n i n i n t e r n a t i o n a l r e l a t i o n s generally. Interestingly, the basis of the argument has been picked up by the Soviets to j u s t i f y a greater r o l e f o r s o c i a l i s t nations i n the region: "under these conditions, a c t i v a t i o n of trade with such an a l t e r n a t i v e supplier of manufactured goods as the s o c i a l i s t states would, no doubt, 19 weaken the economic d i k t a t of the c a p i t a l i s t powers." The new nat i o n a l -ism has resu l t e d i n a desire to balance the economic r e l a t i o n s of the region more equally through d i v e r s i f i c a t i o n of partners and i n the elevation of ASEAN as an instrument of economic defense. The general motivation f o r a strategy of economic defense i s found i n a combination of in t e r n a l and external p o l i t i c a l threats. This chapter w i l l describe i n more d e t a i l the evolution of 82 trade p o l i c i e s f o r each of the countries and the regional association leading up to d i v e r s i f i c a t i o n . In addition, trade s t a t i s t i c s f o r the period 1967 to 1979 w i l l be analyzed i n order to assess the effectiveness of these p o l i c i e s . F i n a l l y , the reasons f o r d i f f e r e n t degrees of success i n d i v e r s i f y i n g trade partners on the part of the f i v e ASEAN members w i l l be discussed. Trade P o l i c i e s For D i v e r s i f i c a t i o n The ASEAN Organization A few remarks seem desirable regarding the nature of p o l i c y making i n the ASEAN context. To regard the ASEAN organization i t s e l f as the i n i t i a t o r of p o l i c y would be misleading. ASEAN appears more often as a c o l l e c t i o n of states than a c o l l e c t i v i t y , which i s r e f l e c t e d i n the r u l e of unanimity i n a l l decisions; p o l i c y i n i t i a t i v e s come from the members, not the association i t s e l f . Public pronouncements often understate some members' posit i o n s while at the same time going f a r t h e r than the least enthusiastic would l i k e , concealing what may be s i g n i f i c a n t differences i n national p o l i c y under the cover of vague and diplomatic verbiage. Since there i s a decided bias against recognizing any country as a leader i n ASEAN, everyone becomes a follower; one anonymous o f f i c i a l revealed that his delegation had been s p e c i f i c a l l y i n s t r u c t e d not to take the i n i t i a t i v e on any issue, i n order to avoid a l i e n a t i n g the other members ( p a r t i c u l a r l y Indonesia). In order to discern p o l i c y i n ASEAN one must look to the actions of the association f o r areas of agreement, and then to the national p o l i c y makers f o r the d i r e c t i o n s they are l i k e l y to pursue. 83 Despite the d i f f i c u l t i e s , there are some in d i c a t i o n s of the nature of the trade p o l i c y pursued c o l l e c t i v e l y through ASEAN. The general content flows from the commitment made i n the Declaration of ASEAN Concord to (1.) j o i n t l y work to accelerate improved market access f o r ASEAN products, (2.) to adopt common approaches i n dealing with regional groups and i n d i v i d u a l economic powers, and (3.) to formulate j o i n t approaches to in t e r n a t i o n a l commodity problems, the reform of the in t e r n a t i o n a l trade system and the establishment of a new in t e r n a t i o n a l economic order. This cooperation i s designed "to improve the trade structure of i n d i v i d u a l states and among countries of ASEAN conducive to further development," a broad but vague mandate. S p e c i f i c p o l i c y preferences are l a r g e l y a v a i l a b l e only by inference from actions undertaken under ASEAN auspices. In the area of foreign trade cooperation t h i s includes the "dialogues" conducted with the major economic partners and in t e r n a t i o n a l organizations, trade f a i r s , i n d u s t r i a l cooperation conferences, and united fronts regarding s p e c i f i c economic disputes. The common themes which seem to emerge from these a c t i v i t i e s f l e s h out the g e n e r a l i t i e s of the Declaration's intent. The primary objective appears to be to increase the o v e r a l l flow of trade from the ASEAN states to a l l market countries by c u l t i v a t i n g and penetratingthermajor markets of Japan, the U.S. and Europe, and by gaining entry into other, n o n - t r a d i t i o n a l markets. The dialogues have focused on the reduction of s p e c i f i c b a r r i e r s to trade, increasing quotas and GSP 20 coverages, and extracting promises of increased imports. The same dominant concern i s r e f l e c t e d i n ASEAN p a r t i c i p a t i o n i n UNCTAD, discussions of the new i n t e r n a t i o n a l economic order, and negotiations surrounding 21 changes i n the GATT. In addition to sponsoring t h e i r own trade f a i r i n 84 Manila i n 1978, ASEAN has s o l i c i t e d support from dialogue partners to do the same, with the r e s u l t that there have been numerous f a i r s i n the EEC, A u s t r a l i a , New Zealand, and Japan. Since each ASEAN member i s s t r i v i n g to increase exports as the leading developmental sector, a focus on increasing the volume of trade i s cen t r a l to t h e i r common concerns, and reaches an easy consensus. The second major objective appears to be market d i v e r s i f i c a t i o n . As was mentioned above, the energy expended i n c u l t i v a t i n g r e l a t i o n s with the EEC i s j u s t i f i e d on the grounds that, r e l a t i v e to Japan and the U.S., Europe i s under-represented economically i n the ASEAN area and should be encouraged to balance the other two. At the same time, A u s t r a l i a , New Zealand and Canada have drawn ASEAN attention despite t h e i r marginal importance i n the present structure of trade; t h i s appears to be a r e f l e c -t i o n of the expectation that they w i l l each be more important to ASEAN i n the future as i t d i v e r s i f i e s trade r e l a t i o n s to the smaller i n d u s t r i a l 22 nations, an expectation which includes non-EEC Europe. Considerable e f f o r t has been devoted to attempts to broaden the base of trade partners. National p o l i c y also draws on the strength of ASEAN i n more p a r t i c u l a r ways. Each ASEAN country has a s l i g h t l y d i f f e r e n t set of established trade partners, and these connections are looked to by the other members as creating an "extension e f f e c t " of ASEAN membership which 23 w i l l a s s i s t i n d i v i d u a l e f f o r t s to d i v e r s i t y . Membership i n ASEAN i s thought to increase the perceived importance of each national market to new partners. This contribution may become more s i g n i f i c a n t i n the future as requests f o r a more formalized economic r e l a t i o n s h i p with ASEAN come from a number of areas outside the t r a d i t i o n a l arena, including at present South Asia, the South P a c i f i c Forum, and the Soviet Union. As one 85 P h i l i p p i n e o f f i c i a l commented: "Developing countries l i k e India and S r i Lanka come to us now f o r economic cooperation because of ASEAN, not 24 because of the P h i l i p p i n e s . " Thus at present ASEAN contributes both some d i r e c t e f f o r t s to d i v e r s i f i c a t i o n , and some i n d i r e c t e f f e c t s by-providing a larger p o l i t i c a l platform and a psychological boost to national p o l i c y . F i n a l l y , some reference should be made to the e f f e c t on d i v e r s i -f i c a t i o n which may r e s u l t from the freeing of in t r a r e g i o n a l trade through the P r e f e r e n t i a l Trade Agreements. This has t r a d i t i o n a l l y been the major focus of regional movements, from the EEC to the various Latin American customs unions. In the ASEAN case, there i s no evidence that t h i s w i l l be of s i g n i f i c a n t import i n the near future. Although regional trade i s already high f o r a group of developing states, e f f o r t s to reduce t a r i f f b a r r i e r s have so f a r been mostly symbolic and have not had a v i s i b l e e f f e c t on the pattern of regional trade. The entrepot trade of Singapore continues to be important, although le s s so, and the only other ASEAN member that puts much stock i n the growth of regional trade i s the Phili p p i n e s , presently the least involved. The others are convinced that the outside world w i l l continue to supply t h e i r major markets, at least i n the near future. Common ventures through the ASEAN organization have made some changes i n trade p o l i c y possible. E f f o r t s have been directed toward increasing the volume and range of trading partners, and eliminating s p e c i f i c obstacles to access i n major market areas. Expansion with d i v e r s i f i c a t i o n i s the evident p o l i c y consensus. However, ASEAN i t s e l f i s c l e a r l y supplementary to national trade p o l i c y , and f o r the development of trade p o l i c y i n the ASEAN area to be c l e a r l y set out i t i s necessary to 86 examine each country i n turn. Singapore Singapore has by f a r the longest-standing commitment to d i v e r s i -f i c a t i o n . D i v e r s i t y of trade partners has been a part of Singapore's p o l i c y almost from independence i n order to minimize the adverse e f f e c t s of undue dependence on any s i n g l e major partner. This i s i n part a r e s u l t of the p o l i t i c a l imbroglio surrounding i t s establishment as an independent state, which included the continuation of the Indonesian trade embargo against Singapore, started i n 1964 as part of Indonesian opposition to the creation of a Malaysia which included the North Borneo t e r r i t o r i e s . In addition, with the e j e c t i o n of Singapore from Malaysia i n 1965, a t a r i f f wall was erected to the Malaysian market, which had been Singapore's most important one. Surrounded by protected, i f not h o s t i l e , states, Singapore was forced to look to the outside world. The r e s u l t was a r e a l i z a t i o n that the path to s u r v i v a l led to d i v e r s i f i c a t i o n to the global 25 market. This concern has remained a h i g h - l e v e l , urgent one continuously since 1965, as i t was expected that the desired r e s u l t s would only achieved 26 i n the long term. The p o l i c y was never worked out c l o s e l y , but the 27 r h e t o r i c set d a i l y working patterns nonetheless. Trade p o l i c y has been reinforced by a p o l i t i c a l p o l i c y of balancing the presence of each major power with that of the others to as great an extent as p o s s i b l e . The government believes that competing i n t e r e s t s w i l l cancel each other out, with the r e s u l t that no single group w i l l be strong enough to pressure the government e f f e c t i v e l y . This has obvious economic benefits, as well as providing p o l i t i c a l defense; future s t r a t e g i c safety i s to a degree guaranteed by the presence of diverse 87 28 economic i n t e r e s t s . As a small state, the only way that Singapore saw to minimize the adverse e f f e c t s of any single large state's presence was to induce d i v e r s i t y , and i n v i t e them a l l i n . However cen t r a l a p o l i c y of d i v e r s i f i c a t i o n may have been i n Singapore's f i r s t decade, the major e f f o r t s to achieve i t seem to have been focused i n the l a s t several years. As l a t e as 1974 the Department of Trade was reported to have j u s t i f i e d the recruitment of more trade commissioners to be posted overseas by maintaining that "very l i t t l e has been done to 29 take advantage of foreign markets." And i n a 1975 interview, Prime Minist e r Lee, while recognizing that Europe could serve a purpose to balance the U.S. and Japan, was reluctant to do more than " f a c i l i t a t e a d m i n i s t r a t i v e l y " c l o s e r t i e s with Europe, as he maintained that a l l ASEAN countries did, i n face of the p o s s i b i l i t y of losses of GSP p r i v i l e g e s and 30 GATT provisions. No mention was made of s p e c i f i c means ava i l a b l e to implement a p o l i c y of d i v e r s i f i c a t i o n . By 1976 a p o s i t i v e strategy of trade development emerged. A domestic export drive was launched, focused on new market areas i n South America, the South P a c i f i c , West Asia, West A f r i c a and South Asia, as well as a more thorough approach to less explored regional markets i n the major 31 trade areas of the U.S. and Europe. By 1978 the government could respond to a parliamentary question on what i t was doing to d i v e r s i f y trade markets by pointing to 11 trade missions since 1976, the e s t a b l i s h -ment of three major overseas trade o f f i c e s with others under consideration, and reports from teams sent to investigate trade p o t e n t i a l i n A f r i c a , the 32 P a c i f i c and L a t i n America. In addition, the government trade company, Intraco, has been tapped to break new ground f o r Singapore's trade i n new market areas, and i n the command economies of China, Vietnam and Eastern 88 Europe through i t s own trade missions and j o i n t missions with the 33 Singapore Manufacturers Association (SMA). The SMA on i t s own sponsored a f i r s t trade mission, with government encouragement, to Lat i n America i n 34 1979, and negotiated both trade contracts and several j o i n t ventures. Thus i n more recent years the e a r l i e r p o l i c y has been put into a higher gear to f o s t e r d i v e r s i f i c a t i o n through trade missions, p u b l i c enterprize, and pr i v a t e associations. The o l d r a t i o n a l e of dependence reduction has also acquired a new twist with the f a s t pace of Singapore's growth as a trading power. A concern that the slow pace of growth i n the i n d u s t r i a l countries w i l l i n h i b i t Singapore's own growth seems to be adding economic l o g i c to the 35 p o l i c y : We must accept and adjust to the slower pace at which the developed countries are growing. Unless and u n t i l these countries make r e a l e f f o r t s to restructure t h e i r economies, protectionism w i l l remain a problem i n world trade. So we must knock on the doors of new markets i n the developing countries around us - i n Asia P a c i f i c countries, the Mideast and China. (Minister of Trade and Industry Goh Chok Tong) Thus, Singapore has as a matter of p o l i c y not only attempted to balance the major economic powers, but i s also engaged i n reducing the r e l a t i v e importance of o v e r a l l linkages to the major i n d u s t r i a l nations. D i v e r s i f i -cation, as both a p o l i t i c a l and an economic doctrine, seems to be a major active part of Singapore's trade p o l i c y . The P h i l i p p i n e s The P h i l i p p i n e s developed i t s p o l i c y of d i v e r s i f i c a t i o n l a t e r than Singapore, but has been a most enthusiastic ASEAN member i n t h i s regard. Rather than being a reaction to l o c a l p o l i t i c a l and economic threats as i n the case of Singapore, r e l a t i o n s with the U.S. as the sing l e 89 dominant partner f o r the P h i l i p p i n e s was the stimulus to d i v e r s i t y . Colonial t i e s , rather than fears of future dependence, provided the motive. Although U.S.-Philippine economic r e l a t i o n s have a long and contentious 36 his t o r y , developments i n the l a t e 1960s and early 1970s stimulated domestic debate over t h e i r immediate future, prompting Ferdinand Marcos to explore a l t e r n a t i v e s to the U.S.-oriented p o l i c y which would be acceptable i n the context of r i s i n g F i l i p i n o nationalism. In h i s 1966 State of the Nation address, he predicted the loss of the U.S. export market with the expiration of the Laurel-Langley Treaties i n 1974, and urged the s h i f t to new markets i n Europe and Asia. With h i s r e - e l e c t i o n i n 1969 evaluation of the consequences of dependence on the U.S. f o r economic r e l a t i o n s started, and a l t e r n a t i v e s were s e r i o u s l y explored, although some of the 37 measures eventually taken reversed previous, more n a t i o n a l i s t p o l i c i e s . The more immediate push to formulate a p o l i c y of economic defense came, however, with the opening of r e l a t i o n s between the U.S. and the People's Republic of China, which ended the era of U.S.-imposed i s o l a t i o n from s o c i a l i s t regimes followed by the P h i l i p p i n e s . With the declaration of martial law i n the P h i l i p p i n e s i n l a t e 1972, Marcos moved to s h i f t the whole framework of P h i l i p p i n e s ' economic r e l a t i o n s , turning toward a "development-oriented" foreign p o l i c y . The major features were increased regional cooperation, the opening of r e l a t i o n s with s o c i a l i s t countries, and increased " s e l f - r e l i a n c e " without excessive dependence on 38 any one country or group of countries. The foreign a f f a i r s ministry subsequently became a primary focus of "development diplomacy", with a v a r i e t y of tasks. Relations with s o c i a l i s t countries were expanded i n 1973 and 1974 with emphasis on the expansion of trade t i e s , export promotion, market d i v e r s i f i c a t i o n , 90 39 and new sources of economic assistance. The transformation of r e l a t i o n s with the U.S. toward the end of " s p e c i a l r e l a t i o n s " and the beginning of 40 "pragmatic r e l a t i o n s " was undertaken. An economic t r e a t y with Japan, s t a l l e d since 1960 f o r p o l i t i c a l reasons, was negotiated i n 1973, and renegotiated i n 1977 as Japan emerged as a new source of p o t e n t i a l dependence, to provide more formal r e l a t i o n s i n economic matters, but p r i m a r i l y to supply a firmer base f o r an a l t e r n a t i v e economic partner to 41 balance the U.S. Economic nationalism became the centerpiece of foreign p o l i c y as the P h i l i p p i n e s sought a wider p o l i t i c a l and economic base f o r development, a r e d e f i n i t i o n of r e l a t i o n s h i p s with the U.S. and Japan, and d i v e r s i f i c a t i o n to provide an a l t e r n a t i v e to overdependence on p a r t i c u l a r partners. The p o l i t i c a l r o l e of the for e i g n m i n i s t r y was subjugated to economic i n t e r e s t s . By 1976 a wider i n s t i t u t i o n a l basis had been established to support d i v e r s i f i c a t i o n . The I n s t i t u t e of Export Development of the Board of Investment, which had been supporting export d i v e r s i f i c a t i o n by 42 promoting A u s t r a l i a , the EEC and the Mideast since 1973, was supplemented by the creation of the P h i l i p p i n e Export Council ( P r e s i d e n t i a l Decree 941 of May 29, 1976). This body was designated to develop a strategy to promote, expand and d i v e r s i f y exports to e x i s t i n g and prospective markets by defining s p e c i f i c product and market targets, and to coordinate both government and p r i v a t e sector e f f o r t s i n the implementation and monitoring 43 of the new "National Export Strategy". For the f i r s t time, export goals were to be formally integrated into the planning process of the government, with the p a r t i c u l a r goal of d i v e r s i f y i n g trade away from the U.S., and now Japan; the l a t t e r had become the P h i l i p p i n e s ' largest trade partner i n 1975, creating anxiety over a new dependence r e l a t i o n s h i p . In order 91 to coordinate implementation, a network of Export Council Permanent Committees f o r p a r t i c u l a r product groups were set up s t a r t i n g i n 1977, which, i n conjunction with the P h i l i p p i n e International Trading Corporation and j o i n t export groups previously established i n some sectors (cement, bamboo products, h a n d i c r a f t s ) , are to work to meet trade guidelines 44 established by the Council, e s p e c i a l l y i n d i v e r s i f y i n g to new markets. The p r i v a t e sector i s to be r a t i o n a l i z e d and guided by government i n order to meet developmental and p o l i t i c a l goals, giving d e t a i l e d form to the general p o l i c y . The broad p o l i c y i s e x p l i c i t l y incorporated i n the current master development plan. Trade d i v e r s i f i c a t i o n and r a t i o n a l i z a t i o n are held up as primary aspects of the strategy f o r development, "to minimize undue dependence on p a r t i c u l a r countries" both as sources of supply and as 45 export partners. Long term goals f o r the geographical d i s t r i b u t i o n of 46 P h i l i p p i n e f o r e i g n trade are set out: by 1987 the U.S. and Japan are expected to account f o r only 50% of the P h i l i p p i n e s ' trade, ASEAN 10%, the Mideast 13% and Europe 16%, considerably more d i v e r s i f i e d than at present. I n s t i t u t i o n a l r e s p o n s i b i l i t i e s f o r a wide v a r i e t y of government agencies are c l o s e l y set out to involve a broad range of the p u b l i c sector i n t h i s e f f o r t ; the government trading arm, the P h i l i p p i n e International Trading Corporation, f o r example, i s given primary r e s p o n s i b i l i t y f o r tapping s o c i a l i s t markets, perhaps to insulate the p r i v a t e sector from the e f f e c t s of the p o l i t i c a l p o l i c y of a c t i v e l y pursuing these markets. Performance i n attainment of the goal of d i v e r s i f i c a t i o n i s monitored, and p u b l i c i s e d 47 i n the annual development report. An i n d i c a t i o n of the extremely long term nature of the goal-setting i s contained i n a speech by Vincente Paterno, then Minister of Industry, where he elaborated the desired 92 pattern of trade f o r the year 2000; targets include 45-55% of trade with the i n d u s t r i a l nations as a group, 20-25% with the re s t of ASEAN, and the rest with non-ASEAN Third World nations, a pattern which would substan-t i a l l y reduce the leverage of any sing l e i n d u s t r i a l nation, or the group 48 as a whole, i n favor of p o l i t i c a l l y less i n f l u e n t i a l economic partners. By a l l i n d i c a t i o n s the government i s serious i n i t s intentions to s h i f t progressively more of P h i l i p p i n e economic intercourse away from the U.S. and Japan i n p a r t i c u l a r . To a l i m i t e d degree, preferences are now accorded f o r government agency imports from other than the U.S. and Japan by the Board of Investment, despite generally higher prices f o r al t e r n a t i v e sources of supply; t h i s only a f f e c t s the public sector as the priv a t e sector w i l l generally not pay the higher p r i c e s , and resources to 49 subsidize private purchases are not a v a i l a b l e . Private sector purchasers are encouraged to f i n d n on-traditional suppliers, but e x i s t i n g contacts and the more aggressive marketing on the part of Japanese and American firms make the e f f o r t one which w i l l have an e f f e c t only over the very long term. The government i s able at t h i s time only to lead by example. In addition to organizing and d i r e c t i n g e f f o r t s on the domestic side, the government places some emphasis on the r o l e of international p o l i t i c a l i n i t i a t i v e s i n contributing to i t s development e f f o r t s . ASEAN i s seen as a v i t a l part of the development plan and receives firm support, both as a future market i n i t s e l f and as a booster f o r o f f i c i a l e f f o r t s to d i v e r s i f y into markets t r a d i t i o n a l l y close to other ASEAN partners, p a r t i c u l a r l y those i n Europe. 5^ 1 The UNCTAD-sponsored cooperative scheme among developing countries s t r i k e s a sympathetic response as a means to Ph i l i p p i n e " s e l f - r e l i a n c e " . "Economic Cooperation Among Developing 93 Countries" (ECDC) aims at r e i n f o r c i n g the p o l i t i c a l and economic s e l f -r e l i a n c e of developing countries through increased mutual trade and cooperation i n the areas of finance, production, i n f r a s t r u c t u r e and service development, technology and science.*'''' Study groups i n the P h i l i p p i n e M i n i s t r y of Trade are now working on the import p r o f i l e of developing countries, with the aim of expanding exports i n that d i r e c t i o n , and with the f i r m conviction that t h i s i s the most promising d i r e c t i o n f o r the P h i l i p p i n e s to a t t a i n i t s own development goals with the least 52 p o t e n t i a l p o l i t i c a l dependence. To a considerable degree, the f o r e i g n p o l i c y of the P h i l i p p i n e s has d i r e c t e d i t s e l f toward goals of economic self-defense. Malaysia Malaysia has expressed a desire to d i v e r s i f y external trade partners, but not with consistent e f f e c t , nor with the enthusiasm of Singapore and the P h i l i p p i n e s , and with considerably more r e s t r a i n t i n form. Economic nationalism has found i t s primary expression i n other more pressing areas, such as f o r e i g n investment, than i n r e s t r u c t u r i n g trade d i r e c t i o n s , although the l a t t e r i s again emerging as an area of concern. Soon a f t e r independence Malaysia sought to a l t e r the pattern of i t s trade away from heavy dependence on B r i t a i n which had resulted from c o l o n i a l t i e s . In addition, confrontation with Indonesia stimulated 53 a f o r e i g n p o l i c y of "external outreach" which included development and trade issues and prompted Malaysia to seek to widen trade t i e s . For example, economic r e l a t i o n s were opened with the Soviet Union i n 1967, long before other Southeast Asian countries were w i l l i n g to deal with 94 s o c i a l i s t regimes. By the end of the decade these e f f o r t s had resulted i n some d i v e r s i f i c a t i o n away from B r i t a i n ; imports, i n 1958 were 25% of 54 B r i t i s h o r i g i n , and i n 1969 only 10.6%. With the erosion of B r i t i s h influence, i n t e r e s t s h i f t e d to other areas, and trade d i v e r s i f i c a t i o n was accorded lower p r i o r i t y . International issues and fora became the new focus. By the l a t e 1960s, extensive rethinking of Malaysian foreign p o l i c y reoriented i t toward the Third World p o s i t i o n in economic issues. Malaysia became one of the o r i g i n a l supporters of UNCTAD, and to some extent a spokesman f o r the then " r a d i c a l " c r i t i q u e of the i n d u s t r i a l countries. The Finance Minister, Tan Siew Sin, addressed the IMF i n t h i s vein i n 1970:55 Whatever the s a c r i f i c e s needed, we must reduce our imports of manufactured goods from the highly i n d u s t r i a l i z e d countries, and we must do t h i s as quickly as possible. We must also form trading blocs which would be i n a p o s i t i o n to compete on more equal terms with the developed world. This r h e t o r i c , however, found expression i n few concrete forms; one of the few actions which can be i d e n t i f i e d as contributing to a change i n trade patterns was the establishment of a permanent trade mission i n Nairobi, which was to increase trade with developing A f r i c a , as part of the "united f i g h t " to gain a f a i r share of world trade f o r developing c o u n t r i e s . ^ I n s t i t u t i o n a l attention to the problem was not focused u n t i l l a t e 1972, when i t was found necessary to e s t a b l i s h a Committee of O f f i c i a l s on Foreign Investment and Trade to formulate p o l i c y among the 57 various departments involved with investment, trade and tourism; at the same time the M i n i s t r y of Trade f i r s t set up an i n t e r n a l d i v i s i o n to be 58 responsible f o r the expansion and d i v e r s i f i c a t i o n of trade. S t r a t e g i c problems of trade were l a r g e l y overshadowed by other n a t i o n a l i s t concerns. 95 Despite some continued support f o r a l t e r i n g the pattern of trade, the thrust of Malaysian nationalism was focused on the issue of foreign investment, and the d i s t r i b u t i o n of ownership i n Malaysia generally (see below, Chapter 5). Japanese dominance i n external economic r e l a t i o n s had replaced that of B r i t a i n of an e a r l i e r generation, and stimulated popular sentiment against Japanese business p r a c t i c e s which 59 resulted i n a c a l l by government leaders f o r "breaking new ground" with a l t e r n a t i v e partners and guarding against Japanese "domination" i n 1976. Local observers even accorded anti-Japanese f e e l i n g the status of being the only element d i r e c t i n g Malaysian external economic p o l i c y . ^ Even i f t h i s may exaggerate the actual case, the i n c r e a s i n g l y v i s i b l e r o l e of Japanese i n t e r e s t s appears to have resurrected an active p o l i c y concern about the structure of trade partners by the middle of the 1970s, to echo that of the early 1960s. The Third Malaysia Plan, admitting that exports to West Asia, East Europe, La t i n America and mainland China were n e g l i g i b l e as a r e s u l t of in a t t e n t i o n , promised a renewal of e f f o r t s to e s t a b l i s h c l o s e r and more active trade and economic r e l a t i o n s with these c o u n t r i e s , ^ a s i g n i f i c a n t step toward d i v e r s i f i c a t i o n . Nationalism appears to have s p i l l e d into the area of trade again at the end of the 1970s. Continued emphasis on expanding trade l i n k s f o r both new sources of supply and new o u t l e t s f o r exports i s u n l i k e l y to change i n the near future. It i s voiced as a p o l i c y basis, with Malaysia reported to be "eager to d i v e r s i f y " i t s trade market by the Deputy Minister of Trade and 62 Industry, and i t f i t s c l o s e l y with p o l i c y regarding foreign investment (see below, Chapter 5). Some r e l i a n c e i s placed on ASEAN as an instrument 63 i n achieving t h i s goal. However, the p o l i c y i s not to the exclusion of other i n t e r e s t s . Actual p r a c t i c e moderates the e f f e c t of d i v e r s i f i c a t i o n 96 with more narrowly economic considerations, as f o r example the "price s e n s i t i v e " import p o l i c y , which has res u l t e d i n an increasing share of 64 imports from Japan, the nominal target of economic nationalism. As part of t h i s pragmatism, Malaysia follows rather cautious l i n e s i n the enunciation of p o l i c y i n t h i s area. There appears to be a s e n s i t i v i t y to the necessity of preserving the present close r e l a t i o n s h i p s with the major i n d u s t r i a l nations, and a concern to not disrupt them through seeming h o s t i l i t y . ^ For Malaysia, Indonesia's cautious and pragmatic a t t i t u d e appears to set an example f o r the tone and pace of p o l i c y ; there i s a f e e l i n g that pushing too f a r and f a s t might alienate Indonesia from ASEAN.^ However, despite p u b l i c moderation, Malaysia i s searching f o r a more balanced r e l a t i o n s h i p with a l l economic power centers, and d i v e r s i f i c a t i o n i s one of the major conceptual bases of p o l i c y . Indonesia General support f o r the r e s t r u c t u r i n g of trade partners has grown slowly i n Indonesia, but hampered by pragmatic considerations, the p o l i c y has been marked by less e f f e c t i v e commitment than ei t h e r Singapore or the P h i l i p p i n e s . The focus of Indonesian economic p o l i c y has been confined almost e n t i r e l y to the domestic scene, e s p e c i a l l y i n the years following Sukarno's f a l l , which were marked by the necessity of rebuilding the shattered national economy. Internal economic problems led to a b e l i e f that foreign markets would be needed only a f t e r the large, under-67 exploited domestic market had been developed. With the largest p o t e n t i a l i n t e r n a l economy i n Southeast Asia, Indonesian planners gave l i t t l e a ttention to external f a c t o r s other than a i d . Even though the primary focus was i n t e r n a l , some consideration 97 was accorded to external trade, although at low l e v e l s . Some governmental measures to expand trade and export production were undertaken as early as 1970. Regulatory agencies were set up to license trade, set quotas and regulate markets, followed i n 1971 with the establishment of a National I n s t i t u t e f o r Export Development. The main targets f o r export growth at t h i s time were i n "Southeast Asia's new markets" - Japan, A u s t r a l i a , South Korea, Hong Kong and Taiwan, as these were i d e n t i f i e d as expanding f a s t e r than the U.S. or Europe i n import growth, and therefore more promising 68 partners. During the e a r l y 1970s Indonesian exports did expand con-siderably, but the major emphasis i n p o l i c y was i n r a t i o n a l i z i n g the domestic structures f o r export, rather than consideration of the pattern of external trade or the p o l i t i c a l consequences of that pattern. By the mid-1970s concern was beginning to r i s e on several fronts that trade p o l i c y was having an undesirable p o l i t i c a l e f f e c t . A f e e l i n g of anxiety over the growing preponderance of Japan as an economic partner produced the dilemma of reducing that r o l e to r e s t r a i n overdependence or going ahead and e x p l o i t i n g the opportunity; i t would be "preferable" to maintain a r e l a t i v e balance among external markets, but " f o o l i s h " not to 69 expand trade with Japan. Popular sentiment on the subject was expressed by mass r i o t s i n Jakarta during the Japanese Prime Minister's v i s i t i n January, 1974. Following these r i o t s , Suharto moved to expand r e l a t i o n s with the s o c i a l i s t nations and to give p r i o r i t y to American and even more to European economic presences to d i l u t e the strongly negative image of the Japanese.^ Japan's r o l e was not the only source of apprehension. During Adam Malik's tour of Eastern Europe i n J u l y of 1974, he expressed concern on a broader bas i s . "Worried" that a i d and investment a l l from the West 98 through the IGGI (Intergovernmental Group on Indonesia, chaired hy the Netherlands) would create an undue dependence on the West that could constrain Indonesia's "active and independent" foreign p o l i c y , he con-cluded that Indonesia needed trade from new, d i v e r s i f i e d sources, i n c l u d -71 ing Eastern Europe. This appears to have been a straw i n the wind intended f o r the consumption of those very Western partners, as a very " s e l e c t i v e " opening with the s o c i a l i s t states i s the most that the 72 Indonesian m i l i t a r y i s w i l l i n g to countenance f o r s e c u r i t y reasons. Nevertheless, i t was a symbolic opening that was required, as growing concentration of economic power, such as i n the EEC, COMECON and Japan, rai s e d the specter i n Indonesian minds that trade development on a global 73 scale would bypass the developing countries and foreclose future options. Indonesian readings of the pattern of global trade development created some concern f o r t h e i r future welfare. This concern, reinforced by developments i n international organizations, produced an a c t i v e search f o r a l t e r n a t i v e s . The f a i l u r e of the U.N. to produce concrete, u n i f i e d approaches to development of trade i n the i n t e r e s t of the developing countries that would allow them to deal e f f e c t i v e l y with the economic superpowers provided an impetus f o r 74 Indonesia to seek the development of solutions on a regional scale. A l i Moertopo, maintaining that an "economic t r i a n g l e " set conditions f o r developing countries, advocated greater regional i n f r a s t r u c t u r e to moderate competition among developing countries and serve t h e i r national i n t e r e s t , but he seemed uncertain as to exactly which regional framework. On the one hand, he suggested an " A s i a - P a c i f i c T r i a n g l e " composed of ASEAN-Japan-A u s t r a l i a , and on the other, greater ASEAN cooperation to the exclusion of outside powers, proposing s p e c i f i c a l l y that: "In the framework of i n t e r -99 75 national trade ASEAN has to formulate a p o l i c y of d i v e r s i f i c a t i o n . " The next year, 1974, he was elaborating another approach, focused on the complementary development of resources i n the region as a route to an 76 improved trade p o s i t i o n with the developed countries. Although none of these proposals was n e c e s s a r i l y mutually exclusive, throwing several r a p i d l y into the diplomatic wind would indicate that Indonesia was apparently searching f o r a so l u t i o n to the p o l i t i c a l consequences of excessive trade dependence, but unable to s e t t l e on, and follow, any one s p e c i f i c strategy. Instead, very d i f f u s e solutions, such as "regional r e s i l i e n c e , " which was taken as a capacity to absorb without excluding p o t e n t i a l h o s t i l e pressures and to n e u t r a l i z e them i n the process, were 77 advanced as the p h i l o s o p h i c a l basis of p o l i c y . Only i n the l a s t years of the 1970s has an approach which i s complementary to that pursued by other ASEAN states emerged. A mid-level Indonesian trade o f f i c i a l surveyed Indonesia's options i n the "post-detente" era, and advocated a more coherent p o l i c y mix. He observed that the e x i s t i n g environment of p o l i c y was based on a search f o r a balanced r e l a t i o n s h i p with a l l economic power centers i n order to avoid excessive dependence on any one, which was the basis of a " r e - e q u i l i b r a t i n g e f f o r t " i n the mid-1970s to correct the global balance. Analyzing Indonesia's options, he advocated a more cohesive ASEAN trade p o l i c y which would r e s u l t i n a better "pre-negotiating p o s i t i o n " with the major economic powers at the regional l e v e l , combined with a comprehensive strategy of d i v e r s i f i c a -t i o n on geographic and product l i n e s at the domestic l e v e l , as the best route to d i r e c t l y reduce Indonesian v u l n e r a b i l i t y to the p o l i t i c a l e f f e c t s 78 of economic r e l a t i o n s . This seems to portray the development of Indonesian p o l i c y accurately f o r the f i n a l years of the decade. In 1976 100 another export drive was launched, with two of the major goals heing the penetration of new markets to balance the old ones and renewed emphasis on the use of marketing i n s t i t u t i o n s organized to strengthen the p o s i t i o n of 79 i n d i v i d u a l exporters i n t h e i r dealings with, foreign partners. Repelita II I , the national plan f o r 1979 to 1984, emphasizes an export p o l i c y geared to d i v e r s i f i c a t i o n by product and market, supported by export promotion i n the Mideast, s o c i a l i s t countries, ASEAN and Europe "to reduce 80 the country's dependence on Japan and the U.S." In addition, efforts. undertaken p r i o r to Repelita III designed to d i v e r s i f y Indonesia's markets are to be continued, as f o r example a mission sponsored j o i n t l y by the Indonesian National Agency f o r Export Development and UNCTAD to A u s t r a l i a and New Zealand i n 1978 designed to provide alternate markets 81 f o r the timber industry. It would appear that Indonesia has s e t t l e d on a strategy of d i v e r s i f i c a t i o n , but whether t h i s choice i s f i n a l i s uncertain. The problem f o r Indonesia i n any strategy which sets out change in the pattern of external economic r e l a t i o n s i s i n p o l i t i c a l d i f f i c u l t i e s which might a r i s e . The weakness of the domestic economy has fostered a preference to wait u n t i l a stronger economy emerges which would allow the luxury of p o l i t i c a l measures that might well have negative short term economic e f f e c t s . I f Indonesia were to use any form of sanctions to d i r e c t a p o l i c y of d i v e r s i f i c a t i o n , or even make i t obvious that c e r t a i n partners were less desirable than others, the r e s u l t might well be negative, i n reducing the flow of assistance from the targets, which would be Japan and the U.S. This has resu l t e d i n a cautious, pragmatic approach to foreign economic p o l i c y . In addition, p r a c t i c a l d i f f i c u l t i e s i n obtaining trade c r e d i t s from new partners or a l t e r n a t i v e l y increasing the governmental r o l e i n financing exports pose a problem f o r a c t i v e l y 101 changing the pattern of trade. These p r a c t i c a l d i f f i c u l t i e s and pragmatic considerations were instrumental i n delaying implementation of a p o l i c y of 82 d i v e r s i f i c a t i o n which was preferred since 1969. I f the recent record of economic growth has allowed some departure from t h i s r e s t r a i n t , only continued economic growth i s l i k e l y to allow a p o l i c y of d i v e r s i f i c a t i o n to be i n s t i t u i o n a l i z e d . Renewed concern would l i k e l y stimulate a return to a p o l i c y of non-interference i n external economic matters. Thailand Thailand i s perhaps the l i m i t i n g case among ASEAN members i n the area of trade p o l i c y . Preoccupied with concerns of s e c u r i t y and govern-mental s t a b i l i t y , there has been l i t t l e p o l i t i c a l control over the flow of trade or economic a f f a i r s generally, with the p a r t i a l exception of 83 recent relaxations of r e s t r i c t i o n s on trade with China. Only very recently have economic a f f a i r s been accorded p r i o r i t y , and even now the focus i s on domestic, rather than i n t e r n a t i o n a l , p o l i c y . Trade i n p a r t i c u l a r has been marginal to p o l i c y concerns. Up through 1972 there were not even e f f o r t s to promote Thai exports by the government; i n that year an Export Promotion Committee was set up, but i t languished with disuse u n t i l the c i v i l i a n government revived i t with the 84 Prime Minister i n the chair i n 1975. It lapsed into i t s former obscurity with the return of the m i l i t a r y to government. S i m i l a r l y , trade negotiations were of very l i m i t e d u t i l i t y , as c l e a r guidance or plans f o r the foreign sector were r a r e l y forthcoming from the government, leaving 85 the negotiators i n a p o s i t i o n of forced p a s s i v i t y . Only i n the l a t t e r part of 1978 did governmental e f f o r t s to stimulate trade increase to the 86 point where they matched the magnitude of p r i v a t e e f f o r t s . The structure 102 of trade was l e f t almost e n t i r e l y to the i n v i s i b l e hand of the private sector. The lack of governmental response was not, however, a r e s u l t of a lack of s t i m u l i . From as e a r l y as l a t e 1972 anti-Japanese r i o t s became a p r i n c i p a l a c t i v i t y of the growing n a t i o n a l i s t movement, and the govern-ment aligned i t s e l f with the resentment of the Japanese economic p o s i t i o n 87 i n Thailand, at least p u b l i c l y . Some l i m i t e d response to t h i s sentiment i s r e f l e c t e d i n the Foreign Investment Committee's 1974 report expressing concern over Japanese dominance i n investment and trade, and expressing a 88 "preference" f o r d i v e r s i f i c a t i o n . On the same l i n e , the President of the Thai Board of Trade, Mr. Ob Vasuratna ( l a t e r Minister of Trade), joined i n the c a l l f o r guarding against renewed Japanese domination i n trade and 89 commercial r e l a t i o n s throughout Southeast Asia. One observer of Thai foreign p o l i c y reported that the increasing c r i t i c i s m of Japanese " e x p l o i t a t i o n " had, by 1976, produced a p o l i c y of d i v e r s i f y i n g economic 90 r e l a t i o n s f o r " s e l f - r e l i a n c e " . However, another observer recognized the presence of Thai anxiety over the predominant p o s i t i o n of Japan, but maintained that aside from t a l k about market d i v e r s i f i c a t i o n there was no 91 d i r e c t i v e p o l i c y as of l a t e 1979. The apparent conclusion i s that concern over the pattern of economic r e l a t i o n s existed i n the private sector, and was expressed through private organizations, but f a i l e d to produce government p o l i c y . Recent evidence indicates that the government i s slowly responding to public pressure, and taking more control of economic p o l i c y , at l e ast insofar as that involves reducing the impact of Japanese pre-dominance. In a move to reduce exports from Japan to Thailand, a long l i s t of "luxury goods", mostly o r i g i n a t i n g from Japan, was banned i n early 103 1978 ( l a t e r the ban was l i f t e d under pressure from the World Bank); t h i s e x h i b i t i o n of resolve prompted the formation of a Thailand-Japan Joint Study Committee on Economic Cooperation to resolve a wide range of 92 b i l a t e r a l disputes. The Thai government also approached the Group of 77 i n mid-1978 to explore the p o t e n t i a l market i n the developing countries, p a r t i c u l a r l y f o r manufactured products; West Asia, A f r i c a and Latin America were of p a r t i c u l a r i n t e r e s t as new trade partners to reduce the necessity 93 of r e l i a n c e on Japan. A new trade push was underway by l a t e 1978, with the Commerce M i n i s t r y under the leadership of Ob Vasuratna making an e f f o r t to i d e n t i f y new markets, planning to finance overseas export missions, and attempting to coordinate the e f f o r t s of other m i n i s t r i e s f o r a coherent 94 external economic plan. F i n a l l y , the government was supporting the establishmnet of Thai-owned trading firms as a means of reducing Thailand's dependence on Japanese trading houses, which cu r r e n t l y control up to h a l f 95 of Thailand's t o t a l trade. Anti-Japanese sentiment has apparently stimulated the government to attempt to exercise more p o l i t i c a l control over trade p o l i c y , i n an e f f o r t to d i v e r s i f y away from Japan and toward the Third World. The government seems to be breaking away from i n d i r e c t i o n i n economic p o l i c y i n other areas as well. The 4th National Economic and Soc i a l Plan, f o r 1977-1981, contemplates more cooperation with the other ASEAN members i n external and i n t e r n a l economic a c t i v i t i e s , which i s a departure from frequent inaction:in ASEAN economic a c t i v i t i e s of e a r l i e r 96 years. The e a r l i e r (and continuing) security-oriented in t e r e s t i n ASEAN 97 has been complimented with greater economic i n t e r e s t . A more c e n t r a l i z e d economic p o l i c y apparatus i s one of the major aims of the new Prem govern-ment, although the clique most involved with j o i n t ventures with 104 Japanese i n t e r e s t s was high i n the f i r s t cabinet, making i t uncertain 98 that a p o l i c y of d i v e r s i f i c a t i o n away from Japan w i l l be continued. Thailand has been slower than the other ASEAN members to formulate a p o l i c y to respond to the p o l i t i c a l consequences of external trade patterns. In large measure, the government has l e f t trade p o l i c y to p r i v a t e i n t e r e s t s , only acting to supplement t h e i r e f f o r t s i n the l a s t few years. Thailand, then, i s an example of pri v a t e sector leadership i n economic nationalism, with the government following f a r behind. To the extent that a p o l i c y of d i v e r s i f i c a t i o n has emerged as a basis of current p o l i c y , i t i s l i k e l y more a r e f l e c t i o n of commercial i n t e r e s t s and perhaps pra c t i c e s than a r e s u l t of s t r a t e g i c thinking. Whether the government w i l l continue on t h i s track i s uncertain. Each ASEAN member, then, supports a p o l i c y of trade d i v e r s i f i c a -t i o n , but the degree of implementation and emphasis i n national p o l i c i e s v a r i e s widely. Only Singapore and the Ph i l i p p i n e s have a c l e a r , long-standing commitment to d i v e r s i f i c a t i o n as a s t r a t e g i c p o l i c y . Malaysia and Indonesia have preferred to subordinate t h e i r e x i s t i n g e f f o r t s to d i v e r s i f y to pragmatic considerations of the a c c e p t a b i l i t y of t h e i r diplomatic stances to t h e i r major economic partners f o r the major portion of the recent past, emerging with apparent commitment to d i v e r s i f i c a t i o n only i n the l a s t few years. Thailand i s only now beginning to exercise p o l i t i c a l c o ntrol over trade p o l i c y , and appears to be leaning toward d i v e r s i f i c a -t i o n . Each, however, agrees on trade expansion. ASEAN a c t i v i t i e s r e f l e c t t h i s hierarchy of agreement. On the surface expansion of trade i s a p u b l i c i z e d goal, while the d i r e c t i o n of that expansion would appear to r e f l e c t an i n t e r e s t i n d i v e r s i f i c a t i o n without an e x p l i c i t statement to that e f f e c t . Only i n the l a s t few years, with the emergence of a national 105 consensus on d i v e r s i f i c a t i o n , has ASEAN also p u b l i c l y announced t h i s goal. Overall, the p o l i c i e s aimed at d i v e r s i f i c a t i o n i n ASEAN aim to change the structure of trade partners slowly. It i s expected that trade w i l l continue to grow and that i n t h i s context of growth more of the a d d i t i o n a l increments w i l l be with newer partners, leading gradually to a more balanced pattern. The governments of ASEAN are generally more active i n sponsoring trade missions and d i r e c t i n g the flow of trade, e s p e c i a l l y where the p r i v a t e sectors have not exploited opportunities. But t h i s i s also a conservative economic nationalism: none of the ASEAN members desires to discriminate o v e r t l y against the presently important i n d u s t r i a l countries and incur a damaging d i s r u p t i o n of economic r e l a t i o n s . The growing status of ASEAN i s expected to provide higher v i s i b i l i t y , and with i t s Third World and neutral c r e d e n t i a l s , enhance the leverage of the members. The ultimate goal i s to become t r u l y "interdependent" members of the global community - a degree of mutuality which can hardly be said to e x i s t at present. Trade d i v e r s i f i c a t i o n appears to now be the mutually accepted path to decreasing the p o l i t i c a l weight of preponderant economic partners. Trade Patterns: Toward D i v e r s i f i c a t i o n ? I f the p o l i c i e s of the ASEAN members are directed toward d i v e r s i f i c a t i o n of trade partners, the question a r i s e s of what e f f e c t t h i s may have had on the pattern of recorded trade. Has trade followed p o l i c y ? Or i s the i n t e r n a t i o n a l trading system too constraining? S p e c i f i c a l l y , i n l i n e with the t h e o r e t i c a l framework outlined above, three questions are to be addressed. F i r s t , has there been movement toward balancing the r e l a t i v e positions of the major trading partners, so that none accrues an 106 advantage due to v u l n e r a b i l i t y ? Second, has the o v e r a l l p o s i t i o n of the three dominant i n d u s t r i a l areas together receded, reducing the degree of s e n s i t i v i t y ? Third, has the o v e r a l l pattern of trade been d i v e r s i f i e d , so reducing p o t e n t i a l v u l n e r a b i l i t y to any p a r t i c u l a r area? In order to provide some answers to these questions, I have gathered trade data from the International Monetary Fund's Direct ions of Trade: Yearbook f o r the period of 1967 to 1979. The data are aggregated f o r each year and each ASEAN member into percentage t o t a l s f o r f i f t e e n u n i t s , defined by a combination of geographic and p o l i t i c a l c r i t e r i a . These are: USA, EEC, Japan (Large I n d u s t r i a l ) ; Canada, Other Western Europe, A u s t r a l a s i a , NICs (Small I n d u s t r i a l ) ; Latin America, West Asia, A f r i c a , South Asia (Third World); USSR, Eastern Europe, China, Indochina ( S o c i a l i s t ) ; ASEAN. Hirschman's index of trade concentration has been calculated f o r each year (Index of Dispersion) to provide a measure of 99 o v e r a l l d i v e r s i f i c a t i o n . Results f o r odd-numbered years only are presented i n Tables 4-8. The ASEAN region as a whole has become more vulnerable, and les s s e n s i t i v e . Although no sing l e major partner's r o l e has increased, that of Japan has declined much less than have those of the U.S. or the EEC. Japan's r o l e as the region's major trade partner has been maintained, and expanded r e l a t i v e to the r e s t , making the region as a whole p o t e n t i a l l y more vulnerable to Japanese pressure. At the same time, the reduction i n trade proportions with the U.S. and the EEC has resulted i n a de c l i n i n g degree of connection with the large i n d u s t r i a l areas. This reduction i n s e n s i t i v i t y has been small since 1971, and previous years are not exactly comparable due to underreporting of trade between Singapore/Malaysia and Singapore/Indonesia, 1^ which overstates the proportions of the remaining 107 Table 2 ASEAN: Di r e c t i o n of Trade (in percent)* 1967 1969 1971 1973 1975 1977 1979 Large I n d u s t r i a l (68. • 7) (71. 1) (58. • 4) (58. • 6) (57. • 6) (56. 4) (55. .5) USA 20. 3 20. .8 15. .9 16. ,4 17. .6 17. ,7 16. .9 EEC 22. .2 21. 1 17. .4 16. .1 14. .6 14. ,5 13. .9 Japan 26. .2 29. .2 25. .1 26. ,1 25. .4 24. 2 24. .7 Small I n d u s t r i a l (15. 3) (16. 2) (11. 8) (12. 1) (12. •2) (12. 4) (11. 3) Canada 0. •9 1. 2 1. 1 0. ,7 0. ,8 0. 8 0. ,8 Other W. Europe 2. 6 3. 0 2. 0 2. 2 2. .1 2. 0 2. 2 Aus t r a l a s i a 4. 7 5. 0 4. 0 3. 8 4. 0 3. 5 4. 0 NICs 7. 1 7. 0 4. 7 5. 4 5. ,3 6. 1 4. 4 Third World (8. 3) (6. 5) (9. 0) (8. 4) (14. 0) (14. 5) (12. 9) Latin America 1. 1 1. 2 1. 0 1. 0 2. 1 1. 9 1. 5 West Asi a 3. 2 2. 7 4. 2 4. 0 8. 5 8. 9 8. 4 A f r i c a 0. 4 0. 7 1. 4 1. 5 1. 2 1. 3 1. 2 South Asia 3. 6 1. 9 2. 4 1. 9 2. 2 2. 4 1. 8 S o c i a l i s t (1. 1) CO. 7) (4. 5) (4. 5) (3. 4 ) (3. 1) (3. 1) USSR/E. Europe 0. 2 0. 1 1. 4 1. 4 1. 2 1. 1 1. 3 China 0 0 1. 8 2. 2 1. 9 1. 8 1. 6 Indochina 0. 9 0. 6 1. 3 0. 9 0. 3 0. 1 0. 2 ASEAN 6. 3 5. 3 15. 3 14. 2 12. 7 13. 5 14. 9 Index of Dispersion 47. 7 43. 1 38. 7 38. 6 38. 3 38. 0 37. 9 * Note: Percentages do not add to 100 due to unspecified trade included i n t o t a l s Source: International Monetary Fund. Directions of Trade: Yearbook. 108 Table 3 ASEAN: Asymmetry of Trade with Large I n d u s t r i a l Nations 1967 1972 1978 Trade with each, as % of ASEAN trade: USA 20.3 16.6 17.7 EEC 22.2 16.6 14.3 Japan 26.2 25.6 24.9 ASEAN trade, as % of trade of: USA 2.8 2.7 4.0 EEC 1.2 0.8 1.1 Japan 8.4 " 8.8 10.5 Source: International Monetary Fund. Directions of Trade: Yearbook. 109 areas. A modest degree of d i v e r s i f i c a t i o n has been achieved, l a r g e l y toward the s o c i a l i s t states*^* and other Third World areas, as evidenced by the consistent decline i n the index of dispersion. The p o l i t i c a l importance of trading r e l a t i o n s h i p s i s l a r g e l y a matter of the r e l a t i v e p o s i t i o n s of the partners, and i n some respects, t h i s i s changing i n favor of the ASEAN states. As Table 3 shows, ASEAN has become r e l a t i v e l y more important to Japan and the U.S. as a part of t h e i r global markets, while the U.S. and Japan have become less important to ASEAN. This i s not to say that they are by any means equal, only more so, with the balance s t i l l c l e a r l y weighted on the side of the i n d u s t r i a l nations. An equally important point f o r the p o l i t i c a l balance i s simply the existence of ASEAN as a p o l i t i c a l bloc on economic matters. As a group, ASEAN i s f a r more important to any trading partner than as i n d i v i d -ual nations: the separate shares of Japanese trade i n 1978, f o r example, range from a low of 1.3% f o r Thailand to a high of 4.1% f o r Indonesia, while ASEAN together takes 10.5% of Japan's trade. Thus, the continuing v u l n e r a b i l i t y of ASEAN toward Japan i s moderated by some s h i f t s i n r e l a t i v e importance, and the more evident cohesion of the regional associa-t i o n . The trade f i g u r e s f o r the region as a whole, then, reveal only modest progress toward d i v e r s i f i c a t i o n which would r e s u l t i n l i t t l e change i n p o l i t i c a l i n e q u a l i t y . The aggregate f i g u r e s , however, conceal s i g n i f i -cant differences among the ASEAN members i n t h i s regard. Singapore has achieved a widely d i v e r s i f i e d balance of trade. The narrowly dominant partner, the EEC, was nearly equalled by Japan i n 1967, and trade with the U.S. has increased so that the three large indus-t r i a l areas are presently c l o s e l y balanced, leaving Singapore i n no 110 Table 4 SINGAPORE: Di r e c t i o n of Trade (in percent) 1967 1969 1971 1973 1975 1977 1979 Large I n d u s t r i a l (49.9) (59.0) (42.2) (45.2) (41.8) (40.0) (40.1) USA 8.5 13.2 12.4 15.9 15.0 13.9 14.1 EEC 21.2 21,7 15.0 15.3 13.2 12.1 12.1 Japan 20.2 24.1 14.8 14.0 13.6 14.0 14.0 Small I n d u s t r i a l 24.8 23.3 14.0 14.7 15.8 16.4 14.5 Third World 15.0 10.9 13.4 13.4 21.3 22.9 20.4 S o c i a l i s t 3.4 1.6 8.3 6.8 4.1 3.1 3.3 ASEAN 6.9 5.0 22.0 20.0 17.1 17.4 19.4 Index of Dispersion* 36.1 38.6 35.2 35.2 34.9 34.7 34.7 * Note: Calculated on the basis of trade with the 15 units Source: International Monetary Fund. Directions of Trade: Yearbook. I l l p o s i t i o n of p a r t i c u l a r v u l n e r a b i l i t y toward any one. S i m i l a r l y , trade with the large i n d u s t r i a l nations has f a l l e n o f f i n favor of increases with other Third World states, r e s u l t i n g i n less s e n s i t i v i t y to the major i n d u s t r i a l nations than formerly was the case. With the single exception of the s o c i a l i s t states, Singapore's trade i s very close to an even balance among the various u n i t s of the global system, leaving further d i v e r s i f i c a t i o n open to p o l i t i c a l decisions. P a r t i c u l a r l y since 1973, d i v e r s i f i c a t i o n i s quite evident. The P h i l i p p i n e s has also moved toward a greater degree of d i v e r s i f i c a t i o n , as can be seen from Table 5. An i n i t i a l l y high degree of concentration on the U.S. has declined s u b s t a n t i a l l y , as has a balancing concentration on Japan which was increasing up to 1973. Although the EEC s t i l l lags behind as a balancer, there i s a reduced degree of v u l n e r a b i l i t y toward the U.S. or Japan presently. As a r e s u l t of the s h i f t s away from the U.S. and Japan, the P h i l i p p i n e s ' degree of concentra-t i o n on the major i n d u s t r i a l nations has declined, reducing the l e v e l of s e n s i t i v i t y to these sources. The increasing r o l e of Third World trade partners i s p a r t i a l l y due to increases i n petroleum p r i c e s , which i n t r o -duces another source of p o t e n t i a l v u l n e r a b i l i t y , but other trading areas are also becoming more important. The index of dispersion shows the largest s h i f t toward d i v e r s i f i c a t i o n of any ASEAN member, so progress i s substantial despite a continuing high l e v e l of p o t e n t i a l p o l i t i c a l vulner-a b i l i t y and s e n s i t i v i t y to the U.S. and Japan. Malaysia has changed the locus of p o t e n t i a l v u l n e r a b i l i t y i n a context of a mild degree of d i v e r s i f i c a t i o n (see Table 6 ) . E a r l i e r con-centration on the EEC has declined, only to be replaced by Japan, but to a lesser degree. Since 1973, the degree of concentration on the large 112 Table 5 PHILIPPINES: D i r e c t i o n of Trade ( i n percent) 1967 1969 1971 1973 1975 1977 1979 Large I n d u s t r i a l (81.9) (79.2) (78.8) (78.8) (70.1) (65.9) (66.6) USA 37.9 33.6 32.0 32.5 24.8 26.9 26.0 EEC 13.6 14.3 14.9 12.5 14.1 14.7 16.5 Japan 30.4 31.3 31.9 33.8 31.2 24.3 24.1 Small I n d u s t r i a l 8.5 10.6 11.5 11.4 10.5 11.7 11.8 Third World 5.2 5.0 5.2 6.5 13.8 12.3 11.5 S o c i a l i s t 0.3 0.1 0.2 1.3 1.5 4.6 2.8 ASEAN 4.2 4.6 4.2 2.1 4.0 5.3 5.1 Index of Dispersion 51.0 48.8 48.4 49.3 44.4 41.5 41.3 Source: International Monetary Fund. Directions of Trade: Yearbook. 113 Table 6 MALAYSIA: D i r e c t i o n of Trade ( i n percent) 1967 1969 1971 1973 1975 1977 1979 Large I n d u s t r i a l (64.2) (68.6) (50.1) (50.0) (52.5) (56.2) (57.9) USA 13.9 18.0 9.9 9.5 13.5 15.7 16,3 EEC 27.9 24.9 21.3 21.0 21.9 18.8 17.8 Japan 22.4 25.7 18.9 19.5 17.1 21.7 23.8 Small I n d u s t r i a l 17.3 19.9 13.6 13.9 13.5 12.6 11.1 Third World 13.2 7.2 9.8 6.1 8.9 9.5 7.8 S o c i a l i s t 0.3 0.1 5.4 7.0 5.1 4.5 4.6 ASEAN 4.9 4.2 20.9 19.9 19.9 17.1 17.4 Index of Dispersion 40.7 41.8 38.1 37.6 38.1 38.2 39.1 Source: International Monetary Fund. Directions of Trade: Yearbook. 114 Table 7 INDONESIA: D i r e c t i o n of Trade (in percent) 1967 1969 1971 1973 1975 1977 1979 Large I n d u s t r i a l (72.5) (78.4) (72.6) (72.2) (71.1) (70.6) (69.1) USA 18.2 22.3 15.7 16.5 21.4 22.2 18.5 EEC 29.7 22.7 17.5 13.5 10.9 13.0 9.9 Japan 24.6 33.4 39.4 42.2 38.8 35.4 40.7 Small I n d u s t r i a l 19.7 14.8 3.7 • 5.6 8.1 8.3 7.1 Third World 2.1 1.3 2.8 4.2 7.8 7.6 5.8 S o c i a l i s t 0.2 0.2 2.6 1.5 3.2 1.4 1.4 ASEAN 5.6 4.5 13.0 10.4 9.7 12.0 13.4 Index of Dispersion 44.8 47.2 48.1 49.0 47.3 46.0 48.0 Source: International Monetary Fund. Directions of Trade: Yearbook. i n d u s t r i a l nations has increased, a reversal of the trend of previous years. S i m i l a r l y , o v e r a l l d i v e r s i f i c a t i o n , which was evident up to 1973, has been almost t o t a l l y reversed since. Malaysia had achieved a reduction i n s e n s i t i v i t y through d i v e r s i f i c a t i o n i n the early 1970s, but the present trend i s toward increased concentration; d i v e r s i f i c a t i o n has not continued. Indonesian trade has become very much concentrated on a single partner, Japan. This i s apparently at the expense of reduced trade with a l l of Europe and most of East Asia. Although Indonesia i s a major exporter of petroleum to Japan, the s t r a t e g i c value of t h i s commodity i s u n l i k e l y to balance the t e n - f o l d difference i n t h e i r r e l a t i v e importance to each other; Indonesia i s quite vulnerable to Japan. A s l i g h t reduction i n o v e r a l l concentration on the large i n d u s t r i a l powers has apparently been accomplished through some increased trade with other Third World states, but the reduction i n s e n s i t i v i t y i s only marginal. Indonesia has not d i v e r s i f i e d , but the opposite, and has replaced the P h i l i p p i n e s as the least d i v e r s i f i e d i n i t s i n t e r n a t i o n a l trade of the ASEAN members. Thailand, has reduced both forms of concentration of trade, although i t remains moderately concentrated on Japan. The former l e v e l of concentration on Japan has been reduced by a s i g n i f i c a n t amount, moderating the p o l i t i c a l leverage of Thailand's primary trade partner. At the same time, concentration on the large i n d u s t r i a l nations has also declined, l a r g e l y i n favor of other Third World nations, reducing the l e v e l of Thailand's s e n s i t i v i t y to the most powerful trading nations. Although Thailand has not achieved a close balance among i t s largest trading partners, i t has d i v e r s i f i e d more than any other ASEAN country except the P h i l i p p i n e s . 116 Table 8 THAILAND: D i r e c t i o n of Trade (in percent) 1967 1969 1971 1973 1975 1977 1979 Large I n d u s t r i a l (66.6) (68.5) (66.1) (62.3) (60.7) (55.9) (56.0) USA 15.6 15.1 13.8 11.9 13.3 11.3 14.2 EEC 20.6 22.2 19.8 18.7 16.9 17.7 17.9 Japan 30.4 31.2 32.5 31.7 30.5 26.9 23.9 Small I n d u s t r i a l 12.3 13.8 13.2 15.5 12.3 12.4 11.0 Third World 8.3 7.4 9.5 9.0 16.3 17.7 15.4 S o c i a l i s t 2.3 1.7 2.5 2.7 2.0 3.2 3.8 ASEAN 10.3 8.3 7.9 10.2 8.6 10.2 11.7 Index of Dispersion 42.3 43.1 42.2 41.6 40.7 38.4 37.3 Source: International Monetary Fund. Directions of Trade: Yearbook. 117 Effectiveness of P o l i c i e s Generally, the analysis of trade data confirms that the o v e r a l l goals apparently pursued by the ASEAN members have been achieved to a moderate degree. Concentration on the largest trade partners has moderated, the degree of connection to the system of major i n d u s t r i a l powers has been reduced, and a generally wider dispersion of trade i s taking place. But, since there were substantive differences i n national p o l i c i e s regarding d i v e r s i f i c a t i o n of trade, i t should be useful to compare actual performance with these p o l i c i e s before discussing general l i m i t a t i o n s on the attainment of d i v e r s i f i c a t i o n i n trade. F i l i p i n o enthusiasm f o r a p o l i c y of d i v e r s i f i c a t i o n has been matched by s t r i k i n g r e s u l t s . Of the ASEAN members, the Ph i l i p p i n e s has achieved the most change i n each of the three areas: reduction of concen-t r a t i o n on the si n g l e largest partner, s h i f t i n g trade away from the large i n d u s t r i a l nations, and generally spreading trade more widely. D i v e r s i f i -cation i s p a r t i c u l a r l y apparent following 1973, which accords with the enunciation of s p e c i f i c p o l i c i e s i n l a t e 1972, and concrete p o l i c y steps i n the years thereafter. The p a r t i c u l a r sources of p o l i t i c a l concern, the U.S. and Japan, have both declined i n importance, although the l a t t e r more than the former. The goals set f o r these states by 1987 (50% together) have already been attained, although some of the other quotas, p a r t i c u l a r l y those f o r ASEAN and other Third World states, are quite f a r o f f . Although President Marcos i s probably quite deserving of much of the c r i t i c i s m leveled by n a t i o n a l i s t s , i n t h i s regard h i s regime i s not lacking i n progress. S t i l l , the P h i l i p p i n e s i s , a f t e r only Indonesia, the most dependent i n i t s pattern of trade i n ASEAN. Further d i v e r s i f i c a t i o n i s required before Marcos' stated goal of " s e l f - r e l i a n c e " becomes more than 118 r h e t o r i c . Thailand has, a f t e r the P h i l i p p i n e s , achieved the most d i v e r s i f i -cation of trade. This i s p a r t i c u l a r l y apparent since 1973, and l a r g e l y a r e s u l t of s h i f t s of trade with Japan to Third World areas. Since a coherent government p o l i c y has not been apparent, i t i s an i n t r i g u i n g speculation that t h i s i s a r e s u l t of n a t i o n a l i s t c r i t i c i s m of Japan; whether the r e s u l t s are due to private sector responses to t h i s pressure, or to Japan retrenching i n the face of opposition, i s not self-evident. Whatever the p r e c i s e linkage, Thailand moved from one of the more dependent ASEAN members to one of the less dependent, through, d i v e r s i f i c a t i o n . Singapore's concern to d i v e r s i f y i t s trade predates the period examined here, although given renewed emphasis i n the mid-1970s. Singapore was i n i n 1967, and continued to be i n 1979, the most d i v e r s i f i e d of the ASEAN countries, as i t continued to tap new markets. However, the trade data exhibit phases of d i v e r s i f i c a t i o n before the p o l i c i e s were enunciated; generally between 1973 and 1975, when the topic came to the surface i n 1974, and with the Third World at the same time, when the trade drive was announced i n 1976. Several informants described t h i s as the t y p i c a l pattern of behavior i n the timing of Singapore's p o l i c y announce-ments, explaining that a p o l i c y was only made pu b l i c a f t e r i t was well underway. Whatever the nature of timing, i t i s evident that Singapore's concern to continue d i v e r s i f i c a t i o n i s having r e s u l t s . The major trade partners are c l o s e l y balanced, and i n d u s t r i a l nations are being generally de-emphasized, through e f f e c t i v e d i v e r s i f i c a t i o n . Malaysian expressions of concern about trade concentration, and commitment toward d i v e r s i f i c a t i o n , have so f a r not been accompanied by r e a l change. Trade d i v e r s i f i c a t i o n was an active t o p i c during the whole 119 decade of the 1970s, while Japan was becoming more important as the major trade partner and concentration on the largest i n d u s t r i a l countries was increasing. P o l i c y appears to have had only a nominal e f f e c t on trade patterns. To be f a i r , Malaysia i s by a l l measures used here already w e l l -d i v e r s i f i e d r e l a t i v e to the other ASEAN countries (only Singapore i s more so), and the trade data do indicate somewhat wider d i v e r s i f i c a t i o n over the e n t i r e period; however, how much the l a t t e r i s an a r t i f a c t of under-reported trade with Singapore p r i o r to 1970 i s impossible to determine. At best, Malaysia i s only s l i g h t l y more d i v e r s i f i e d i n 1979 than i n 1967. Indonesian p o l i c y has been r e l a t i v e l y i n e f f e c t i v e . Throughout the 1970s d i v e r s i f i c a t i o n has been mentioned as a desirable goal of trade p o l i c y , but l i t t l e progress i s evident. Japan has remained by f a r the major trade partner, although s l i g h t l y less predominant; concentration on the large i n d u s t r i a l nations has remained high, although with a downward trend; o v e r a l l d i v e r s i f i c a t i o n has fluctuated, but remained c o n s i s t e n t l y low. From the beginning of the period examined to the end, Indonesia i s the only country to show changes contrary to d i v e r s i f i c a t i o n : concentration on the single largest partner i s higher i n 1979 than 1967, and o v e r a l l d i v e r s i f i c a t i o n less i n 1979. Indonesia i s not d i v e r s i f y i n g , but becoming more dependent. Limits to D i v e r s i f i c a t i o n Each ASEAN country, with the exception of Indonesia, e i t h e r has achieved some degree of d i v e r s i f i c a t i o n , or i s r e l a t i v e l y so already, i n d i c a t i n g that the goal i s not unattainable despite the existence of presumed r e s t r a i n t s i n the in t e r n a t i o n a l system. The extensive a i r i n g of the problems of the Third World i n trade development i n i n t e r n a t i o n a l f o r a 120 points to the i n d u s t r i a l countries as the source of i n h i b i t i o n s on the 102 growth of Third World trade, e s p e c i a l l y i n manufactured products. Dependence i s portrayed as a matter of the center keeping the periphery down. While at the general l e v e l t h i s may be the case, f o r the ASEAN states i t i s at most a p a r t i a l answer. The major determinant of trade partners i s s t r u c t u r a l , and derives from the chosen pattern of economic growth. Singapore aside, the ASEAN countries are each engaged i n b u i l d i n g an i n d u s t r i a l sector from l i t t l e or no base. This d i c t a t e s that imports w i l l be l a r g e l y c a p i t a l goods: f o r Indonesia 52.5%; f o r Malaysia 51.5%; 103 f o r the P h i l i p p i n e s 41.2%; f o r Singapore 39.5%; f o r Thailand 48%. Sources f o r these goods are l i m i t e d l a r g e l y to the major i n d u s t r i a l nations. Ranked according to cost i n the region, lowest to highest, t h i s means that these imports w i l l come from Japan, the U.S. or Europe. Diver-s i f i c a t i o n of imports away from Japanese goods i s expensive, and only the P h i l i p p i n e s has to a l i m i t e d degree encouraged the purchase of higher cost goods f o r p o l i t i c a l reasons. The concentration of imports i s s e n s i t i v e to global f a c t o r s , as a product of the i n t e r a c t i o n of i n d u s t r i a l i z a t i o n p o l i c y and oligolopy i n c a p i t a l goods. There are a number of factors which contribute to export concen-t r a t i o n , and f o r Indonesia, Malaysia and the P h i l i p p i n e s t h i s i s higher than import concentration. It i s most often a t t r i b u t e d to a narrow range of export commodities,"'"^ and c e r t a i n l y Indonesia's heavy re l i a n c e on petroleum f i t s t h i s scenario. However, the rest of the ASEAN countries are d i v e r s i f y i n g both the primary commodities they export, and increasing the proportion of manufactured products i n t h e i r exports, which should c o n t r i -bute to geographical diversification."'"^*' That exports s t i l l go mainly to 121 the large i n d u s t r i a l country buyers i s less a matter of necessity than habit, as the global market f o r materials i s inc r e a s i n g l y an open one: "Shortages of supply have replaced shortages of demand .... and the power 106 p o s i t i o n of suppliers and consumers has thus changed dramatically." This i s also apparently the conclusion of ASEAN trade o f f i c i a l s , as promotion of exports to a wider v a r i e t y of countries receives a much higher p r i o r i t y than d i v e r s i f y i n g imports. A s t r u c t u r a l problem does exist f o r the ASEAN members i n t h e i r attempts to d i v e r s i f y exports, but the constraints are easing. Developed country r e s t r i c t i o n s are not ex c l u s i v e l y responsible e i t h e r . There has reportedly been increasing concern i n Japan, f o r example, that t h e i r overdependence on ASEAN could have negative r e s u l t s , with the r e s u l t that attempts have been made to 107 d i v e r s i f y Japanese trade to other areas. The analysis of t h i s chapter b e l i e s the conclusion that trade dependence i s wholly a r e s u l t of the e f f e c t i v e s t r u c t u r i n g of the periphery by the center. There are r e a l s t r u c t u r a l constraints on the pattern of trade partners that give some, mostly i n d u s t r i a l nations, more 108 opportunity to take advantage of trade dependence than others. But patterns of trade do appear to be responsive to governmental p o l i c i e s . The degree to which trade i s concentrated i s p a r t l y a matter of how much control i s exercised by governments i n d i r e c t i n g economic a f f a i r s , rather than allowing them to be directed by external actors. Trade patterns even appear to be responsive to s o c i a l antagonisms i n the absence of government-a l c o n t r o l . The r e s u l t of p o l i c i e s designed to reduce the economic influence of p a r t i c u l a r partners i s an actual change i n the indicators of trade dependence i n the desired d i r e c t i o n . With the exception of Indonesia, the ASEAN members appear to be reducing the degree of t h e i r 122 trade dependence through d i v e r s i f i c a t i o n . 123 NOTES 1. National Power and the Structure of Foreign Trade (Berkeley: U n i v e r s i t y of C a l i f o r n i a Press, 1945). 2. Toward a New Trade P o l i c y f o r Development (New York: United Nations, 1964). 3. F r a n k l i n Weinstein, "Multinational Corporations and the Third World: The Case of Japan and Southeast A s i a , " International Organization 30, 3 (Summer 1976), pp. 373-404. 4. John Wong, ASEAN Economies i n Perspective: A Comparative Study of Indonesia, Malaysia, the P h i l i p p i n e s , Singapore, and Thailand (Philadelphia: I n s t i t u t e f o r the Study of Human Issues, 1979), pp. 12-24. 5. See Carlos F. Diaz-Alejandro, "Delinking North and South: Unshackled or Unhinged?" Rich and Poor Nations i n the World Economy (New York: McGraw-Hill, 1978). 6. Robert 0. Keohane and J.S. Nye, Power and Interdependence: World P o l i t i c s i n T r a n s i t i o n (Boston: L i t t l e , Brown and Co., 1977). 7. Indonesia, 1976; Malaysia, 1975; P h i l i p p i n e s , 1976; Singapore, 1975; Thailand, 1973. A l l figures from United Nations, S t a t i s t i c a l  Yearbook, 1977 (New York: United Nations, 1978). 8. Computed from IMF, Directions of Trade: Annual (Washington, D.C: IMF, 1977) and IMF, International F i n a n c i a l S t a t i s t i c s Yearbook: 1979 (Washington, D.C: IMF, 1979). 9. Computed from IMF, Directions of Trade: Annual (Washington, D.C, IMF, 1978) . 10. Frank Golay, et a l . , Underdevelopment and Economic Nationalism i n Southeast Asia (Ithaca: C o r n e l l U n i v e r s i t y Press, 1969). 11. For example, i n the Malaysian ethnic bargain. See R.S. Milne, Government and P o l i t i c s i n Malaysia (Boston: Houghton M i f f l i n Co., 1967), PP. 39-41. 12. S. Rajaratnam, "Beyond Nationalism, More Nationalism," S o l i d a r i t y (Manila) 4, 1 (January 1969), pp. 42-47. 13. Frank Golay, "National Economic P r i o r i t i e s and International C o a l i t i o n s , " G. Pauker, F. Golay, C. Enloe, eds., D i v e r s i t y and Development i n  Southeast A s i a (New York: McGraw-Hill, 1977), pp. 100-101. 14. Somsakdi Xuto, Regional Cooperation i n Southeast Asia: Problems, P o s s i b i l i t i e s , and Prospects (Bangkok: I n s t i t u t e f o r Asian Studies, Chulalongkorn University, 1973), p. 20. 124 15. Amado Castro, "The Meaning of Economic Cooperation i n ASEAN," ASEAN Trader (Manila: ASEAN Trade F a i r , 1978), p. 35. 16. Vincente Paterno, "Address," Regionalism i n Southeast As i a (Jakarta: Centre f o r Str a t e g i c and International Studies, 1975), p. 97. 17. Far Eastern Economic Review (FEER), Dec. 22, 1978, p. 37. 18. FEER, Feb. 23, 1979, pp. 37-39. 19. FEER, Sept. 7, 1979, p. 52. 20. The dialogues are summarized i n 10 Years ASEAN (Jakarta: ASEAN Secre-t a r i a t , 1978), pp. 220-229. 21. Mohamed A r i f f , "The New International Economic Order: ASEAN at the Crossroads," Paper, 3rd Conference of the Federation of ASEAN Econmic Associations (Kuala Lumpur, 1978), pp. 4-7. 22. E l i o s a Atienza, Commercial Secretary, M i n i s t r y of Trade, Manila (October 1979). 23. Romeo B u r i l l o , Assistant to Deputy Minis t e r of Trade, Manila (October 1979). 24. Atienza, c i t e d . 25. Chia Siow Yue, "Singapore's Trade Strategy and I n d u s t r i a l Development, with Special Reference to the ASEAN Common Approach to Foreign Economic P o l i c y , " Paper, 10th P a c i f i c Trade and Development Confer-ence (ANU, Canberra, 1979), p. 5; and her Singapore and ASEAN  Economic Cooperation (Bangkok: UN Asian and P a c i f i c Development I n s t i t u t e , 1978), section 2.62. 26. Author interview, Chia Siow Yue (September 1979). Dr. Chia frequently advises the Singapore government. 27. Gardiner Wilson, 1st Secretary, Canadian High Commission, Singapore (September 1979). 28. Lim Joo-Jock, et a l . , Foreign Investment i n Singapore: Some Broader Economic and S o c i o - p o l i t i c a l Ramifications (Singapore: I n s t i t u t e of Southeast Asian Studies, 1977), p. 221. 29. Trade Director Ridzwan Dza f i r , quoted i n New Nation, A p r i l 6, 1974. 30. S t r a i t s Times, Oct. 30, 1975. 31. S t r a i t s Times, Sept. 4, 1979. 32. S t r a i t s Times, Feb. 18, 1978. 125 33. S t r a i t s Times, March 8, 1979 and Sept. 4, 1979. 34. Business Times (Singapore), Sept. 21, 1979. 35. Interview, FEER, Aug. 10, 1979, p. 41. 36. For a F i l i p i n o n a t i o n a l i s t perspective, see Renato Constantino and L e t i z i a Constantino, The P h i l i p p i n e s : The Continuing Past (Quezon Ci t y : Foundation f o r N a t i o n a l i s t Studies, 1978); Benito Legarda, J r . , Roberto Garcia, "Economic Collaboration: The Trading Relationship," Frank Golay, ed., The United States and the P h i l i p p i n e s (Englewood C l i f f s : P r e n t i c e - H a l l , 1966), pp. 139-143. 37. Ralph Pettman, Small Power P o l i t i c s and International Relations i n South East A s i a (Sydney: Holt, Rinehart and Winston, 1976), pp. 114-125; court decisions r e s t r i c t i n g ownership by foreign nationals and t h e i r employment p r a c t i c e s were reversed, the Laurel-Langley Agree-ments were extended f o r nearly a year, and opposition n a t i o n a l i s t s severely repressed - see Robert Stauffer, "The P o l i t i c a l Economy of Refeudalization" David Rosenberg, ed., Marcos and M a r t i a l Law i n the  P h i l i p p i n e s (Ithaca: Cornell U n i v e r s i t y Press, 1979), pp. 209-211; Robert Stauffer, "The P o l i t i c a l Economy of the Coup: Transnational Linkages and P h i l i p p i n e P o l i t i c a l Response," Journal of Peace Research 11 (1974), pp. 161-177, argues that the coup was timed to prevent n a t i o n a l i s t s from d i s r u p t i n g r e l a t i o n s with the metropolitan nations. 38. Carlos Romulo, " F i l i p i n o Foreign Policy,"Ambassador 3, 3 (February 1973), pp. 26-32; also reports of Marco's announcements of t h i s p o l i c y i n S t r a i t s Times (Malaysia), May 3, 1973. 39. Reports in New Nation, October 4, 1973, S t r a i t s Times, January 8, 1975. 40. P h i l i p p i n e Army C i v i l Relations and Information Service (PACRIS), Guiding P r i n c i p l e s of the New Society II (Manila: National P r i n t i n g Co., Inc., 1978), pp. 49-57. 41. Charles Morrison, A s t r i Suhrke, Strategies of S u r v i v a l : The Foreign P o l i c y Dilemmas of Smaller Asian States (St. Lucia: U n i v e r s i t y of Queensland Press, 1978), p. 257. 42. See i t s journal, Export B u l l e t i n , i n i t i a t e d i n August 1973, p a r t i c u l a r l y issues 2, 6 (August 1974) and 3, 1 (January 1975). 43. Republic of the P h i l i p p i n e s , P h i l i p p i n e Development 4, 4 (July, 1978), pp. 19-25. 44. Board of Investment, Republic of the P h i l i p p i n e s , I n s t i t u t e of Export Development, Export B u l l e t i n 4, 4 ( A p r i l 1976) and 5, 1 (Jan. 1977). For an example from the plywood industry, see FEER, Dec. 7, 1979, p. 93. Markets i n Japan and Europe have been c u l t i v a t e d to o f f s e t dependence on the U.S. f o r the product's markets. 126 45. Republic of the P h i l i p p i n e s , Five Year P h i l i p p i n e Development Plan, 1978-1982 (Manila: Government P r i n t e r s , 1977), p. 9. 46. Ibid., f i g u r e s from Table 5, p. 156. See Table IV below f o r com-parison. 47. Republic of the P h i l i p p i n e s , National Economic and Development Authority, P h i l i p p i n e Development Repbrt, 1978 (Manila: 1979), pp. 50-52 compares target and actual f i g u r e s f o r 1977 and 1978. 48. Export B u l l e t i n (Manila) 5, 1 (January 1977). 49. Interview, Commercial Secretary, P h i l i p p i n e s M i n i s t r y of Trade (Manila, October 1979). 50. Interview, Head, Finance Branch, P o l i c y Coordinating S t a f f , National Economic Development Authority (Manila, October 1979). 51. ECDC was launched i n Mexico C i t y i n 1976 a f t e r the Manila meeting of the Group of 77 e a r l i e r that year; UNCTAD i s now working on concrete proposals. A summary and the support by the P h i l i p p i n e s i s contained i n P h i l i p p i n e Development, May 31, 1979, pp. 30-34. 52. Interview, Assistant to Deputy Minister of Trade, Manila (Oct. 1979). 53. Jayaratnam Saravanamuttu, "A Study of the Content, Sources, and Develop-ment of Malaysian Foreign P o l i c y , 1957-1975" (Ph.D. Thesis, U n i v e r s i t y of B r i t i s h Columbia, 1976), p. 126. 54. IMF, Directions of Trade: Annual (various years). 55. Saravanamuttu, pp.169-170. 56. S t r a i t s Times (Malaysia), Dec. 18, 1973. 57. Third Malaysia Plan: 1976-1980 (Kuala Lumpur, 1976), p. 314. 58. Mohamed A r i f f , "Development of Malaysia's Trade P o l i c y , " S e i j i Naya, Vinyu Vichit-Vadakan, eds., ASEAN Cooperation i n Trade and Trade  P o l i c y (Bangkok: UN Asian and P a c i f i c Development I n s t i t u t e , 1977), p. 186. 59. P a r r i c u l a r l y Datuk Musa Hitam, Minister of Primary Industries. ASEAN Review (Kuala Lumpur), May 29, 1976, pp. 26f, "Frowning at the Z a i k a i . " 60. Interview with Rejean Frenette, Co u n c i l l o r , Canadian High Commission, Kuala Lumpur (October 1979). 61. Third Malaysia Plan, p. 313. 127 62. Encik Abdul Manan b i n Othman, interviewed i n New S t r a i t s Times, Feb. 15, 1978. 63. A r i f f (1977), p. 199. 64. FEER, Aug. 3, 1979, p. 36. 65. This concern was prominent i n author i n t e r v i e w s w i t h MIDA o f f i c i a l s . Kuala Lumpur (October 1979). 66. Mohamed A r i f f , M alaysia and ASEAN Economic Cooperation (Bangkok: UN A s i a n and P a c i f i c Development I n s t i t u t e , 1978), s e c t i o n s 1.25, 1.27. 67. Suhadi Manghusuwondo, "Economic Interdependence: The Indonesian View," Lee Soo Ann, ed., New D i r e c t i o n s i n the I n t e r n a t i o n a l R e l a t i o n s of  Southeast A s i a : Economic R e l a t i o n s (Singapore: Singapore U n i v e r s i t y Press, 1973), p. 124. 68. Sumitro Djojohadikusumo, "Indonesia's Trade P o l i c i e s , " Embassy of the Republic of Indonesia, Singapore, Information B u l l e t i n 16/PEN/ING/71 (1971). 69. Suhadi, p. 130. 70. Charles Morrison, "Southeast A s i a i n a Changing I n t e r n a t i o n a l Environ-ment: A Comparative Foreign P o l i c y A n a l y s i s of Four ASEAN-Member Cou n t r i e s " (Ph.D. Thesis, Johns Hopkins U n i v e r s i t y , 1976), pp. 277-87. 71. Reported i n New Nation, J u l y 15, 1974. 72. Author Interview, 1st S e c r e t a r y f o r Economic A f f a i r s , Indonesian Embassy to Canada (Ottawa, May 1980). 73. Suhadi, p. 125. 74. Sumitro Djojohadikusumo, "Foreign Economic R e l a t i o n s - Some Trade Aspects," Indonesia Q u a r t e r l y 1, 2 (Jan. 1973), pp. 18-26. 75. Both p o s i t i o n s are contained i n A l i Moertopo, Indonesia i n Regional and I n t e r n a t i o n a l Cooperation: P r i n c i p l e s of Implementation and Construc- t i o n ( J a k a r t a : Centre f o r S t r a t e g i c and I n t e r n a t i o n a l S t udies, 1973). 76. Reported i n S t r a i t s Times (Malaysia), Sept. 21, 1974. 77. Justus van der Kroef, "Indonesia's N a t i o n a l S e c u r i t y : Problems and S t r a t e g y , " Southeast A s i a n Spectrum 3, 4 ( J u l y 1975), pp. 37-49. 78. H.S. Kartadjoemena, The P o l i t i c s of E x t e r n a l Economic R e l a t i o n s : Indonesia's Options i n the Post-Detente Era (Singapore: I n s t i t u t e of Southeast A s i a n Studies, 1977), e s p e c i a l l y pp. 18, 60, 112. The author was on leave from the Indonesian M i n i s t r y of Trade while w r i t i n g t h i s , and returned afterward. 128 79. Sumardi Reksoputranto, "Development of Trade P o l i c i e s of Indonesia i n the Context of ASEAN Cooperation," S e i j i Naya, Vinyu Vichit-Vadakan, eds., ASEAN Cooperation i n Trade and Trade P o l i c y (Bangkok: UN Asian and P a c i f i c Development I n s t i t u t e , 1977), pp. 149-154. 80. Indonesian Development News 2, 10 (June 1979). 81. Indonesian Development News 2, 2 (October 1978). 82. This paragraph i s based on an interview with the 1st Secretary f o r Economic A f f a i r s , Indonesian Embassy to Canada (May 1980); the dilemma i s described as one between development (with dependence) and s e l f -r e l i a n c e by Fra n k l i n Weinstein, "Indonesia," W. Wilcox, L. Rose, G. Boyd, eds., Asia and the International System (Cambridge, Mass: Winthrop, 1972), pp. 116-145. 83. Narongchai Akrasanee, "Development of Trade and Trade P o l i c i e s i n Thailand and Prospects f o r Trade Cooperation with ASEAN," S e i j i Naya, Vinyu Vichit-Vadakan, eds., ASEAN Cooperation i n Trade and Trade  P o l i c y (Bangkok: UN Asian and P a c i f i c Development I n s t i t u t e , 1977), p. 304. 84. Ibid., p. 324 85. Ibid., p. 328 86. Bangkok Bank, Monthly Review (August 1978), p. 353. 87. Morrison (1976), p. 118. 88. S e i j i Naya, Narongchai Akrasanee, "Thailand's International Economic Relations with Japan and the U.S.: A Study of Trade and Investment Interactions," Cooperation and Development i n the A s i a / P a c i f i c Region - Relations Between Large and Small Countries Papers and Proceedings, 7th P a c i f i c Trade and Development Conference (Tokyo: Japan Economic Research Center, 1976), p. 121. 89. ASEAN Review, May 29, 1976, p. 26. 90. Sarasin Viraphol, Directions i n Thai Foreign P o l i c y (Singapore: I n s t i t u t e of Southeast Asian Studies, 1976), p. 36. 91. Author Interview, Commercial Secretary, Canadian Embassy to Thailand (Bangkok, October 1979). 92. FEER, March 10, 1978, pp. 42-43. 93. FEER, June 9, 1978, p. 32. 94. ASEAN B r i e f i n g 13 (August 1979). 129 95. FEER, November 9, 1979, pp. 77-81 96. Narongchai, p. 332. 97. Sarasin, p. 46. 98. FEER, March 21, 1980, pp. 17-20, and A p r i l 11, 1980, p. 44; Chart Thai members Pramatn Adireksan and Chatichai Choonhaven i n p a r t i c u l a r , although the l a t t e r has l e f t the government. 99. Hirschman, Appendix A. The index v a r i e s from a value of 100 ( a l l trade with one partner) to a lower l i m i t of around 20 f o r the method used here; see also James Caporaso, "Methodological Issues i n the Measure-ment of Inequality, Dependence and E x p l o i t a t i o n , " S.J. Rosen, J.R. Kurth, eds., Testing Theories of Economic Imperialism (Toronto: Lexington Books, 1974). 100. For a discussion of the d i f f i c u l t i e s inherent i n the trade data f o r the region at the beginning of the period examined here, see S e i j i Naya, Theodore Morgan, "The Accuracy of International Trade Data: The Case of Southeast Asian Countries," SEADAG Paper 41 (July 1968). 101. For a more d e t a i l e d discussion of t h i s subject, see John Wong, "South-east Asia's Growing Trade Relations with S o c i a l i s t Economies," Asian  Survey 17, 4 ( A p r i l 1977), pp. 330-344. 102. For a summary of the arguments on Third World Trade, see David Blake, Robert Walters, The P o l i t i c s of Global Economic Relations (Englewood C l i f f s : P r e n t i c e - H a l l , 1976), pp. 26-41. 103. Source: United Nations, S t a t i s t i c a l Yearbook f o r A s i a and the P a c i f i c , 1977 (Bangkok: ESCAP, 1977), pp. 199, 294, 389, 415, 455; a l l fi g u r e s f o r 1977, except Malaysia which i s f o r 1974. 104. Hirschman, p. 106, l i n k s t h i s tendency to commodity concentration. 105. John Wong (1979), p. 16 and Table 2.5, p. 141; f o r growth of manufac-tur i n g exports see below, Chapter 5, Table 1. 106. C. Fred Bergsten, "The Threat i s Real," Foreign P o l i c y 14 (Spring 1974), p. 85. 107. FEER, A p r i l 30, 1976, pp. 43-48. 108. One recent study of export concentration concluded that the major v a r i a b l e was national age, or the c o l o n i a l syndrome, E l i j a h M. James, "The P o l i t i c a l Economy of Export Concentration," Journal of Economic  Issues 15, 4 (December 1980): 967-975. 130 CHAPTER 5 INVESTMENT DEPENDENCE AND POLICY The countries of ASEAN a l l r e l y to a great degree on foreign sources of investment to provide the c a p i t a l deemed necessary to t h e i r development plans. According to one estimate, as of early 1979, the t o t a l foreign investment i n ASEAN amounted to US$9 b i l l i o n . ' * Foreign-owned companies cur r e n t l y control well over 45% of the t o t a l manufacturing 2 investment i n the ASEAN area, according to another estimate. On a country-by-country basis fo r e i g n c a p i t a l as a share of t o t a l investment i s highest i n Singapore and lowest -in Thailand, and quite s i g n i f i c a n t f o r a l l : Singapore - 69.4%; P h i l i p p i n e s - 59.7%; Indonesia - 56.9%; Malaysia - 54.8%; 3 Thailand - 29.1%. The magnitude of investment and the degree of penetra-t i o n of the region by external economic i n t e r e s t s only roughly indicate the seriousness of the issue and i t s s e n s i t i v e nature. As one major goal of a l l developing countries, with ASEAN c e r t a i n l y no exception, i s to increase the degree of t h e i r i n d u s t r i a l i z a t i o n , i t i s i n t e r e s t i n g to note that the ASEAN countries have made s i g n i f i c a n t progress i n t h i s e f f o r t . As Table 9 indicates, the share of manufacturing i n t o t a l GDP has increased, manufacturing has contributed to o v e r a l l growth of GDP to a s i g n i f i c a n t degree, and the structure of exports has s h i f t e d toward a higher proportion of manufactured goods. Indonesia has been the least successful and Singapore the most i n t h i s e f f o r t , but with the exception of Indonesia each of the ASEAN countries appears to be moving Table 9 ASEAN I n d u s t r i a l i z a t i o n Share of Manufacturing Share of Manufacturing Structure of Exports i n GDP (%) i n GDP Growth (%primary/%mfg.) 1965 1975 1970-1975 1960 1975 Indonesia 8.4 10.5 13.9 100/0 99/1 Malaysia 10.4 14.3 19.3 94/6 82/18 P h i l i p p i n e s 17.5 20.9 27.3 93/7 83/17 Singapore 15.3 21.5 23.2 74/26 57/43 Thailand 15.5 20.1 28.5 98/2 77/23 Sources: Share of manufacturing ; i n GDP and GDP growth - U.N. Economic and S o c i a l Survey of A s i a and the P a c i f i c , 1976. Bangkok: 1977, p. 15; structure of exports - ASEAN Business Quarterly 2, 4 (1978): 16. 132 toward the goal of i n d u s t r i a l i z a t i o n . Foreign investment has c e r t a i n l y been i n f l u e n t i a l i n contributing to t h i s growth. At the same time, growth based on foreign investment i s not 4 u n i v e r s a l l y applauded as contributing to autonomous national development. The multinational corporations, as the agents of d i r e c t foreign investment, stand at the center of an on-going debate over t h e i r consequence, f o r both host and home countries. The p o l i t i c a l e f f e c t s of t h e i r impact on balances of payments, patterns of exports and imports, future a v a i l a b i l i t y of exploitable resources, the development of s k i l l e d workforces, research and development of new technologies, patterns of consumer preferences, l o c a l entrepreneural a c t i v i t i e s , state revenues (and control over them), currency exchange rates, and the a v a i l a b i l i t y of l o c a l c a p i t a l are much-discussed, but l a r g e l y indeterminate. Developing countries tend to be both highly c r i t i c a l of the a c t i v i t i e s of multinational corporations which might threaten state c o n t r o l , and the desirous of more foreign investment. Domestic nationalism has made the control of foreign investment a matter of high p r i o r i t y . For the ASEAN countries, t h i s issue i s p a r t i c u l a r l y germane, as t h e i r commitment to some sort of "open economy" i s balanced by equal concern to avoid p o t e n t i a l l y negative domestic and int e r n a t i o n a l con-sequences from large pools of foreign investment. There i s l i t t l e dispute that f o r e i g n investment i s subject to a climate of closer c o n t r o l , but l i t t l e agreement on the reasons f o r t h i s among the ASEAN members. On the one hand, several p o l i t i c a l analysts point to renewed Japanese imperialism accomplished by economic rather than m i l i t a r y means,*' or confirm that many of the c r i t i c i s m s leveled against the multinationals are accurate f o r the region as a r e s u l t of " c o n f l i c t s inherent i n the r e l a t i o n s h i p between MNCs and underdeveloped countries," 133 p a r t i c u l a r l y when a single country comes to occupy a dominating r o l e i n investment.^ Increased control i s , then, a r e s u l t of e s s e n t i a l l y p o l i t i c a l concern. On the other hand, business analysts tend to point to the r e l a t i v e d i v e r s i t y of sources of investment i n the region as a f a c t o r r e l i e v i n g j u s t these tensions, producing a r e l a t i v e l y soft and more tolerant a t t i t u d e 7 toward fo r e i g n investment. P o l i c i e s leading to more stringent control are seen not so much as a reaction to fear of foreign domination as the r e s u l t of learning and greater knowledge on the part of governments of what they want to achieve. The treatment of control of foreign investment below w i l l mediate t h i s gap; i t denies neither a basis of c o n f l i c t nor a degree of cooperation as parts of an economic r e l a t i o n s h i p . Two major areas of p o l i t i c a l concern r e l a t i n g to the issue of foreign investment w i l l be examined here. In the context of domestic p o l i t i c a l r e l a t i o n s , the r e l a t i v e r o l e s of foreign owners and domestic owners influence the d i s t r i b u t i o n of newly created wealth, providing an incentive to governments to regulate the terms of entry of foreign c a p i t a l to maximize l o c a l benefit; governments regulate the terms of transnational exchange. In the context of external r e l a t i o n s , the r e l a t i v e r o l e s of nationals investing from d i f f e r e n t countries influence the p o t e n t i a l leverage of t h e i r home governments over the host country, providing an incentive f o r governments to d i v e r s i f y sources of investment to maximize l o c a l autonomy; governments t r y to regulate the patterns of transnational exchange. These two types of control i n t e r a c t to influence the flow of investment, and presumably the power of the developing country over the MNC. Barnet and Muller see the power r e l a t i o n s h i p between developing countries and multinational corporations s h i f t i n g as a r e s u l t of the d i f f u s i o n of knowledge about t h e i r c o n t r o l . There i s "the increasing 134 awareness that the i n d u s t r i a l world i s no longer a blo c , " that competition among the U.S., Japan and Europe can be exploited, as underdeveloped countries learn to d i v e r s i t y t h e i r sources of investment to maximize t h e i r 8 leverage. As Singapore's former Foreign Minister, S. Rajaratnam, put i t : "Interdependence i s now accepted, i f somewhat cautiously, as not only a fa c t of l i f e but also as something which could be exploited f o r national 9 advantage." This chapter w i l l explore the topic of control of foreign invest-ment i n the ASEAN region. The focus throughout i s on d i v e r s i f i c a t i o n as a strategy of reducing dependence on p a r t i c u l a r states; domestic regulation i s also discussed, as i t seems to be a major f a c t o r influencing the growth rate of foreign investment, and therefore a f f e c t s the success of a p o l i c y of d i v e r s i f i c a t i o n through growth. I w i l l b r i e f l y describe the p o l i c i e s pursued by each country, separately and j o i n t l y through the ASEAN organiza-t i o n . Then a v a i l a b l e s t a t i s t i c s w i l l be analyzed'to evaluate the effectiveness of the^e p o l i c i e s . F i n a l l y , the l i m i t a t i o n s on a strategy of d i v e r s i f i c a t i o n of foreign investment w i l l be discussed. Control of Foreign Investment: P o l i c i e s and Strategies There are three aspects of control which merit p a r t i c u l a r atten-t i o n , and which w i l l structure the following discussion. F i r s t , each of the countries has developed plans which attempt to a l l o c a t e ownership between domestic and for e i g n i n t e r e s t s i n various ways. None of the ASEAN countries allows u n r e s t r i c t e d foreign ownership; t h i s i s the most basic l e v e l of con t r o l , r e f l e c t i n g national development plans and n a t i o n a l i s t i c desires f o r increasing l o c a l ownership. Second, each ASEAN member plans f o r some t o t a l amount of foreign investment flow and pursues p o t e n t i a l 135 investors accordingly. Generally, there i s some question as to whether the desired flow can be attained, creating a perception of c a p i t a l shortage; t h i s r e s u l t s i n an avid concern over the "investment climate" as an i n d i c a t o r of comparative advantage.^ Third, some concern to balance the economic presence of investor countries through d i v e r s i f i c a t i o n i s present i n each country to varying degrees; t h i s has resulted i n p o l i c i e s designed to a t t r a c t new partners to balance the o l d . The major locus of p o l i c y to achieve control over foreign invest-ment i s i n the f i v e national governments, but the ASEAN organization i s also used to some degree to pursue national objectives and i n various other ways i s relevant to investment p o l i c y i n the region. Both the national p o l i c i e s and the regional organization require examination i n order to c l a r i f y the nature of p o l i c y to regulate transnational exchanges and dependence i n investment. Control involves a mix of p o l i c i e s designed to both, a t t r a c t and r e s t r i c t f o r e i g n investment, producing several types of i n t e r n a l and int ernat ional conf1ict. Indonesia The Indonesian government i s quite adamant i n i t s desire to control foreign investment. I n i t i a l overdependence on the Dutch, with almost 74% of a l l entrepreneur investment from that single source i n the inter-war period,"*'* produced an acute s e n s i t i v i t y to foreign investment as a form of p o l i t i c a l domination. The r e s u l t was widespread n a t i o n a l i z a t i o n immediately a f t e r independence. The Suharto regime acted to reverse the active h o s t i l i t y of the Sukarno government with e a r l y l e g i s l a t i o n on foreign investment, compensation f o r much of the former Dutch property, and 12 return of the r e s t . Even though foreign investment was again welcomed, par-t i c u l a r l y i n partnerships with m i l i t a r y o f f i c i a l s and t h e i r Chinese partners, 136 economic nationalism continues to influence a t t i t u d e s , q u a l i f y i n g the i n v i t a t i o n . This reservation i s embodied i n the basic foreign investment law, which s p e c i f i c a l l y r a i s e s the concern of dependence on foreign . . 13 countries. S p e c i f i c l i m i t a t i o n s are put on the form, duration, and type of investment allowed. With few exceptions, commercial a c t i v i t i e s were to be transferred to majority Indonesian ownership by December 31, 1977 (they were), and manufacturing a c t i v i t i e s on December 31, 1997; a l l foreign investments are l i m i t e d to a t h i r t y year contract. J o i n t ventures with. 14 Indonesian nationals were i n i t i a l l y encouraged, and required a f t e r 1974. Other l i m i t a t i o n s are not c l e a r l y spelled out, but include l i m i t a t i o n s on c e r t a i n i n d u s t r i a l areas designated "overcrowded" from time to time, i n addition to the published l i s t s of open and closed sectors. Preferences are given to labor-intensive, foreign exchange-earning projects, as well as to the t r a n s f e r of technology. O i l , banking, mining, and i n 1977, f o r e s t r y are sectors which can only be pursued i n j o i n t venture with the government, and the contracts are being tightened to favor the government i n stages. 1*' These p o l i c i e s are dir e c t e d at increasing Indonesian ownership and c o n t r o l . The governing philosophy i s that foreign investment i s supplementary and temporary, and to be "domesticated", r e f l e c t i n g continued economic na t i o n a l -ism, a l b e i t a more pragmatic version. 1*' The Chairman of the Indonesian Board of Investment expressed i t thus i n 1977: "Our p o l i c y i s to make e f f o r t s so that at an appropriate time there w i l l be no foreign investment 17 whatsoever e x i s t i n g i n the country." Despite t h i s long term goal, the o v e r a l l i n d u s t r i a l i z a t i o n program r e l i e s on a continuous flow of foreign investment, to be directed to s p e c i f i c types of a c t i v i t i e s . The Repelita se r i e s s h i f t s the p r i o r i t y areas more and more toward i n d u s t r i a l projects which require large i n c r e -137 meats of f o r e i g n investment; Repelita I (1969-1974) focused on i n f r a -structure development and a g r i c u l t u r a l i n d u s t r i e s , Repelita II (1975-1978) on the processing of raw materials, Repelita III (1979-1984) adds export and a g r i c u l t u r a l projects to f u r t h e r processing, and Repelita IV w i l l focus 18 on producer goods. The current plan, Repelita I I I , c a l l s f o r foreign investment to equal 42% of a l l p r i v a t e investment (government investment 19 w i l l be about h a l f of the plan t o t a l ) . This i s remarkably low, since the h i s t o r i c a l l e v e l of foreign investment i s f a r higher: as previously noted, the l e v e l i n 1972 was 56.9%, and reported f o r e i g n investment at the end of 20 1979 was only s l i g h t l y lower, at 55.9%. The f o r e i g n component of invest-ment i s s t i l l a s u b stantial, although d e c l i n i n g , proportion of the t o t a l required by Indonesian development planning. Domestic ownership has not increased s u b s t a n t i a l l y i n the past decade, but i s apparently scheduled to i n the e a r l y 1980s. The Repelita plan f o r a reduced flow of f o r e i g n investment may simply r e f l e c t a degree of realism, rather than government desires. The investment climate i n Indonesia has not been p o s i t i v e since 1975, r e s u l t i n g 21 i n reduced flows of d i r e c t investment. Recession i n the i n d u s t r i a l i z e d countries probably accounted f o r the i n i t i a l lag, but t h i s has been r e i n -forced by investor wariness due to the Pertamia c r i s i s , signs of domestic i n s t a b i l i t y , and r i s i n g economic nationalism s i g n a l l e d by increased 22 governmental r e s t r i c t i o n s on investment contracts. Most of the approvals granted i n the l a s t few years have been f o r expansions i n e x i s t i n g projects, rather than new inflows, despite increased government e f f o r t s to a t t r a c t investment by r e s t r u c t u r i n g incentives and sending out investment promotion 138 23 teams. Control over the flow of investment has been reduced by attempts to control the structure of domestic ownership; t h i s basic c o n f l i c t has forced a r e v i s i o n of long term plans i n the d i r e c t i o n of increased promotion and reduced t o t a l investment. In addition to problems involving the l e v e l of investment, the p o l i t i c a l implications of concentrated sources of investment are subjects of concern. To a substantial degree, t h i s i s a reaction to the high v i s i b i l i t y of Japanese investors, but also to the nature of Japanese ventures and j o i n t partner pr a c t i c e s , which have contributed to the image 24 of e x p l o i t a t i o n . Anti-Japanese f e e l i n g s p e r s i s t , although expressed i n less v i o l e n t forms than the r i o t s of 1974, requ i r i n g the attention of 25 Japanese diplomatic personnel. Popular sentiment has to a degree been manipulated to the government's advantage, as, f o r example, i n the establishment of a b i l a t e r a l committee between Japan and Indonesia to 26 assuage the l a t t e r ' s f e e l i n g s . Indonesia i s , as a consequence, attempt-ing to give p r i o r i t y to other sources of investment to d i l u t e the more 27 conspicuous Japanese presence. The desire to d i v e r s i f y foreign investment sources i s not, however, simply a reaction to the Japanese r o l e . There i s also a long term concern dating from the lat e 1960s over the v i a b i l i t y of Indonesia's 28 "active and independent" foreign p o l i c y stance. In 1970 the Indonesian 29 Ambassador to the U.S. pointed to the s t r a t e g i c implications: It so happens that f o r the moment priv a t e foreign invest-ment comes from Western sources. However, we are i n the process of negotiating with the Soviet Union on a f i n a l settlement of our debts. We hope that t h i s w i l l c l e a r the way f o r p a r t i c i p a t i o n by the Soviet Union and other Communist countries i n our economic development. We do not conceive of our economic development i n the narrow terms of an exclusive-l y Western o r i e n t a t i o n . It i s i n our national i n t e r e s t to involve as many countries as possible i n the economic develop-139 ment of Indonesia. In t h i s l i g h t , n e u t r a l i t y i s removed from the impact of economic pressures because these tend to cancel each other out. Adam Malik c a r r i e d t h i s theme out i n h i s 1974 tour of Eastern Europe, expressing a "worry" that dependence on the West alone could compromise Indonesia's n e u t r a l i t y , and s o l i c i t i n g investment to balance the Western 30 presence. Development of a non-Western counter has, however, been 31 c u r t a i l e d by a cautious a t t i t u d e on the part of the Indonesian m i l i t a r y . The focus of d i v e r s i f i c a t i o n e f f o r t s has s h i f t e d to balancing l a r g e l y Western partners against each other. The o v e r a l l " r e - e q u i l i b r a t i n g e f f o r t " has taken the form of a more avid pursuit of the "middle powers" of 32 the EEC i n the l a s t few years, p a r t i c u l a r l y France, which has been " l e c t u r e d " on the low l e v e l of investment i n Indonesia r e l a t i v e to i t s 33 i n d u s t r i a l status. There has also been a degree of openness to invest-ment from other developing countries of East A s i a (including ASEAN) which would appear to b o l s t e r the neutral image of Indonesia and d i l u t e the Japanese presence, but since projects from these sources tend to be smaller and less advanced i n t h e i r technology they are not l i k e l y to increase greatly i n the future; the Indonesian government would l i k e to reserve 34 t h i s sort of investment f o r pribumi (native) entrepreneurs. The major thrust of d i v e r s i f i c a t i o n remains toward Europe. Due to the need to increase the flow of investment, a p o l i c y of d i v e r s i f i c a t i o n has become secondary. As stated by Widjojo N i t i s a s t r o , Chairman of the National Development Planning Agency, i n reference to f i n a n c i a l dependence on Japan: "There are other sources and other markets and we continue to d i v e r s i f y . But we would l i k e to see t h i s d i v e r s i f i c a t i o n develop, together with o v e r a l l growth, so that proportionately there w i l l 140 35 be growth o v e r a l l . " Indonesia has s h i f t e d toward a p o l i c y of d i v e r s i f i c a -t i o n , but the l e v e l of commitment appears to be rather low. Malaysia Nationalism i n Malaysia has led to a s i m i l a r concern over the degree of foreign economic presence and a desire to control foreign invest-ment. Ea r l y reactions were directed at the r o l e of the former c o l o n i a l power. B r i t i s h investments were something over 70% of t o t a l foreign invest-36 ment i n the interwar period, and continued to dominate as the largest 37 single investor during the 1960s, d e c l i n i n g to 21.4% by 1968. As the c o l o n i a l s i t u a t i o n was gradually relieved, economic nationalism did not disappear, but continued to d i r e c t h o s t i l i t y toward foreign investment, as i l l u s t r a t e d by these comments of more recent vintage: ....[A]n independent state must exercise f u l l sovereignity over i t s natural resources rather than ... be at the behest of multinational corporations.^8 ... [F]oreign firms are not responsive to the needs of the people. The time has come f o r Malaysians to free the nation from foreign domination of i t s economy.39 Nevertheless, Malaysian development p o l i c y has required the continued use of foreign investment. Malaysia's economic development planning has evolved i n the d i r e c t i o n of more manufacturing, p a r t i c u l a r l y f o r export, which has kept the demand f o r foreign investment high. The F i r s t Malaysia Plan (1966-1970) emphasized import-substitution i n d u s t r i e s and resource processing f o r export; however, as the domestic market l i m i t e d further growth i n t h i s 40 type of project manufacturing f o r export gradually absorbed more of foreign c a p i t a l a l l o c a t i o n s , reducing the r o l e of import-substitution projects from almost 29% of approvals i n the Second Malaysia Plan 141 41 (1971-1975) to only 12%. i n the Third. The New I n d u s t r i a l Strategy emphasizes exports and labor-intensive i n d u s t r i a l i z a t i o n , while maintaining 42 a commitment to a g r i c u l t u r a l development; however, the major requirement 43 f o r expansion i s export growth i n manufactured goods. In order to implement these p o l i c i e s , Malaysia requires a continuous flow of foreign investment. A t t r a c t i n g further foreign investment i s a fundamental part of government p o l i c y . As the Second Malaysia Plan commented: "Thus an e s s e n t i a l ingredient of p o l i c y to reach the investment targets i s the main-44 tenance of a favourable economic and p o l i t i c a l climate i n Malaysia." This has consisted of a wide range of incentive systems offered to investors, s t a r t i n g i n 1958 with the Pioneer Industries Act, now supplemented by a series of l o c a t i o n a l and labor use incentive schemes. In addition, indus-t r i a l estates and free trade zones have been extensively developed, with 45 considerable success. Infrastructure and psychological boosts are necessary to maintain a planned growth rate of foreign investment i n excess of ten percent per annum. At the same time as investment i s sought, governmental controls have imposed increasing l i m i t s on the r o l e of foreign investors. Currently, i n order to q u a l i f y f o r Pioneer Status, an investment project has to meet approval by being some combination of a p r i o r i t y product, labor intensive, export oriented, designed to use l o c a l raw materials, integrated with e x i s t i n g firms, or a g r i c u l t u r a l l y based. No formal c r i t e r i a are published, and there are unpublished l i s t s of areas considered "overcrowded" where no new investment i s normally accepted. Ownership i s also r e s t r i c t e d according to the type of project: any f i r m targeted at the domestic market or e x p l o i t i n g primary resources must be 70% Malaysian; a l l projects are 142 encouraged to s t a r t as j o i n t ventures or go public; only firms exporting a high percentage of t h e i r product are allowed f u l l f oreign ownership. The extent of incentives granted are dependent on the planned upstream or down-stream processing of a project. With the exception of export platform projects, the type of status, approval i t s e l f , and incentives granted are L the r e s u l t of bargaining between the government and the p o t e n t i a l investor. 48 The Malaysian I n d u s t r i a l Development Authority (MIDA) has c o n s i s t e n t l y sought to increase the proportion of l o c a l p a r t i c i p a t i o n i n manufacturing a c t i v i t i e s through t h i s set of controls. These e f f o r t s seem to be having an e f f e c t : i n 1977, f o r example, 50.2% of a l l projects approved were wholly Malaysian owned, 47.8% were j o i n t ventures with a foreign partner 49 (74% of these majority Malaysian), and only 2% wholly foreign. MIDA makes i t c l e a r that a major goal of government control i s to reduce the r o l e of foreign investment as a proportion of each project to the benefit of Malaysian nationals. Increasing p a r t i c i p a t i o n o f Malaysians i s d i c t a t e d by another consideration aside from nationalism, unique to Malaysia. Serious r a c i a l r i o t s i n 1969 resulted i n a r a d i c a l s h i f t i n economic planning, to focus on the d i s t r i b u t i o n of business ownership among the several r a c i a l groups. The New Economic P o l i c y " ^ was promulgated i n 1971, designed to achieve an economic balance among Chinese, Indian, fo r e i g n and Malay ownership i n the context of o v e r a l l growth; t h i s applied e x p l i c i t l y to foreign investment. The structure of ownership of corporate assets i s to change d r a s t i c a l l y : Malay ownership from 1% i n 1969 to 30% i n 1990; Chinese from 22.8% to 40%; foreign from 62.1% to 30%.^'' The reduced foreign share i s a substantial realignment from the 60% of l i m i t e d companies, 75% of a g r i c u l t u r e and f i s h e r i e s , 72% of mining, 63% of commerce and 59% of manufacturing owned by 143 52 foreigners i n 1970. Since t h i s i s to occur along with substantial growth, i t does not imply an absolute curtailment of foreign investment, but a su b s t a n t i a l l y reduced r e l a t i v e r o l e nevertheless. Some progress has i n f a c t been made toward the achievement of these goals. In projects approved between 1971 and 1977, Malay ownership was 32.3%, Chinese ownership 36.1% and foreign ownership 31.6%, very close 53 to targeted f i g u r e s . Government holding companies account f o r most of the Malay ownership; 5 4 i n f a c t , large government organizations have become a cen t r a l feature of economic development, p a r t i c i p a t i n g on behalf of various groups i n myriad forms. 5 5 In the period 1970 to 1975 t o t a l foreign ownership f e l l from 63.3% to 54.9%, but in d i c a t i o n s were that the goal of 43.6% f o r 1980 was overambitious. 5^ The combination of previous domestic controls and the NEP i s increasing the share of ownership of domestic groups, p a r t i c u l a r l y Malays, at the expense of foreigners, both i n the aggregate and i n i n d i v i d u a l projects, r e s u l t i n g i n enhanced control over the e f f e c t s of foreign investment. Domestic ownership i s increasing, but nationalism i s also making i t more d i f f i c u l t to a t t r a c t more foreign investment. Domestic regulation and new clashes with fo r e i g n investors i n 1974 and 1975 unsettled the investment climate. The government s h i f t e d from t r a d i t i o n a l concession agreements to a production and management sharing system with the o i l companies i n 1974 through the Petroleum Development Act, which raised charges of'nationalization,"and at the same time established the Foreign 57 Investment Committee to ensure progressive achievement of NEP goals. The Prime Minister announced guidelines to discourage mergers, takeovers, and other such a c t i v i t i e s which could erode the Malay p o s i t i o n and n u l l i f y 58 the NEP. The next year the passage of the In d u s t r i a l Coordination Act, 144 1975, fur t h e r eroded investor confidence, domestic and foreign . Designed to ensure "orderly development" of manufacturing, the act required a l l larger manufacturing concerns (over 25 employees, or c a p i t a l of US $50,000) to seek a li c e n s e from the government within one year. The l i c e n s e could be withdrawn i f the concern changed i t s production, f a i l e d to comply with the targets of the NEP, or otherwise became not "consistent with national economic and s o c i a l o bjectives." This act extended government control s u b s t a n t i a l l y beyond that previously exercised through the granting of preferred tax status, to v i r t u a l l y a l l large manufacturing firms. Malaysian Chinese were unsettled at the prospect of implementation which could operate on the basis of r a c i a l bias, while foreign investors were concerned that the act would lead to eventual de facto n a t i o n a l i z a t i o n . ^ The apparent change i n the government p o l i c y of non-intervention s e r i o u s l y eroded investor a t t i t u d e s toward M a l a y s i a , ^ p a r t i c u l a r l y given uncertainty r e s u l t i n g from events i n Indochina. The r e s u l t was that l i t t l e new investment was made from early 1975 to the end of 1977, with most investment growth being from the expansion of e x i s t i n g projects.^"* Investors required assurances that the government desired more funding and 62 that they were not going to change equity requirements further. Some minor changes were made i n the framework of l e g i s l a t i o n to restore investor 63 confidence, and stimulate the flow of c a p i t a l . The government had apparently overstepped the boundary between acceptable control and cutting o f f the necessary flow of investment. As the control strategy at the domestic l e v e l seems to have reached the point of diminishing returns, d i v e r s i f i c a t i o n of investment sources i s apparently taking i t s place as a means of reducing the p o l i t i c a l impact of foreign investment. Deputy Prime Minister DatukSeri;Mahathir bin 145 Mohammad has since early 1978 systematically c i r c l e d the globe i n search of investment, concentrating on Europe and the smaller i n d u s t r i a l nations, with Canada and Singapore included; MIDA has sponsored investment seminars i n 64 v i r t u a l l y every developed country. The purpose of these t r i p s i s reported to be to seek greater d i v e r s i f i c a t i o n of the sources of foreign investment, with the government " i n earnest about d i v e r s i f y i n g the investment 65 pool." D i v e r s i f i c a t i o n i s thought to avoid the l i m i t a t i o n i n investment flow inherent i n a focus on domestic controls, as well as provide i n s u l a t i o n against undue p o l i t i c a l influence from any single economic center. But the emphasis i s on returning the flow of funds to a higher l e v e l . As an o f f i c i a l of MIDA put i t : "The government wants as much (investment) as possible from as many places as p o s s i b l e . T h e ethnic imperatives of the government's economic p o l i c y require continued growth of fo r e i g n investment and make a s i g n i f i c a n t dismantling of provisions f o r j o i n t partnership and domestic ownership highly undesirable. I f t h i s has the undesirable e f f e c t of c u r t a i l i n g the flow of c a p i t a l , another means of sustaining growth must be found. The re s t r u c t u r i n g goals c o n f l i c t with promoting foreign invest-67 ment only with stagnation, not with growth. It would appear that the current choice i s d i v e r s i f i c a t i o n . The P h i l i p p i n e s P o l i c i e s i n the P h i l i p p i n e s have v a c i l l a t e d between close control of f o r e i g n investment and a v i r t u a l open door as a r e s u l t of the dilemma imposed by nationalism on the one hand and the need f o r accelerated economic development to a l l e v i a t e domestic economic i n e q u a l i t y on the other. The U.S., as the major investor from the c o l o n i a l period, with 52% of a l l 68 d i r e c t investment, was the target of the " F i l i p i n o F i r s t " p o l i c y of the 1950s. Inspired by the thinking of Senator Claro Recto, the Garcia adminis-146 t r a t i o n attempted to reverse the " p a r i t y " r i g h t s of U.S. nationals embodied in the Laurel-Langley Agreements of 1956. Repudiated by President Macapagal, " F i l i p i n o f i r s t " was replaced by more relaxed controls i n the 1960s, tightened by the courts i n the early 1970s, then p a r t i a l l y implement-ed under martial law by President Marcos a f t e r 1972, with " p a r i t y " ending 69 i n 1974. The current p o l i c y of control i s , as stated by President Marcos, a response to "apprehension about foreign domination of our national economies, remembering as we do the unpleasant memories of u n r e s t r i c t e d entry of foreign c a p i t a l during the c o l o n i a l era and noting the aggressive 70 instincts of foreign investments when allowed to do or go as they please." However, the actual degree of control i s questionable, as the Marcos administration has sought to preserve an important r o l e f o r foreign 71 investment i n the P h i l i p p i n e s . The structure of controls aims to order the growth of the economy, as well as increase F i l i p i n o ownership. The decontrolled growth 72 of the 1960s produced a chaotic r e s u l t as well as a net outflow of 73 investment. Capacities are set f o r the production of a l l major products with new investment allowed only i n industries not yet meeting t h e i r set 74 c a p a c i t i e s now, mostly i n intermediate i n d u s t r i e s . Increasingly, the e f f o r t i s to channel new investment into areas producing f o r export of manufactures or commodities, ending the long import-substitution focus of 75 i n d u s t r i a l i z a t i o n . Foreign investment i s to f i n d i t s place as a supple-ment to domestic investment i n achieving the "organic development" of the 76 P h i l i p p i n e s . A complicated set of guidelines for i n i t i a l ownership p r o h i b i t s any foreign ownership i n a few i n d u s t r i e s , mandates majority F i l i p i n o control i n "basic i n d u s t r i e s " such as mining, f o r e s t r y and finance, and encourages j o i n t ventures i n a l l areas; up to 30% foreign ownership i s 147 allowed without approval, and only i n Pioneer areas i s 100% foreign owner-ship allowed. A l l majority f o r e i g n control i s to be phased out by conver-77 sion to 60% F i l i p i n i o ownership within f o r t y years. In order to prevent disguised c o n t r o l , the maximum debt to equity r a t i o i s set at 75/25, a p o l i c y opposed by a l l foreign investors, but most cumbersome f o r the Japan-ese firms that tend to use smaller i n i t i a l equity investments and fund the 78 enterprise through loans. This i s designed to prevent a recurrence of the experience of the 1960s, when many F i l i p i n o j o i n t venture partners were 79 forced to drop out, leaving foreigners i n complete co n t r o l . The complex set of controls attempts to u t i l i z e f o r e i g n investment i n a manner which w i l l develop the economy and benefit domestic economic actors. Despite the complexity of controls, and the apparent bias toward increasing F i l i p i n o ownership, the r o l e assigned to foreign investment remains large, and appears to be increasing. Planned private investment requirements f o r 1972 through 1977 a l l o c a t e d an increasing proportion to foreign resources: 25.5% i n 1972, 30.5% i n 1975, 35.3% i n 1977. In the i n d u s t r i a l program f o r the same period only 25% of the funds were expected 80 to come from foreign sources. In f a c t , these expectations have been exceeded by quite a margin. In projects granted approval, foreign dominance i s c l e a r l y increasing, from 24.4% i n 1968 to 53.3% i n 1972, reaching 56.7% i n 1976. The yea r l y increments of approved investment were above 60% from 81 foreign sources f o r 1972 through 1975, f a r above the o r i g i n a l estimates. With targets f o r the future inflow of fore i g n investment c a l l i n g f o r yearly 82 flows up to US $134 m i l l i o n by 1987, the p o s i t i o n of foreign investors r e l a t i v e to F i l i p i n o s i s not l i k e l y to erode. I t would appear that the verbiage of the Marcos regime r e s t r i c t i n g the r o l e of foreign investment has not been matched by p o l i c i e s which would a c t u a l l y increase the r e l a t i v e 148 control of F i l i p i n o s . Ownership continues to be dominated by foreign inves-t o r s . Reliance f o r control of p o l i t i c a l e f f e c t s appears to be placed on d i v e r s i f i c a t i o n , p a r t i c u l a r l y away from the U.S. For the most part t h i s has taken the form of s o l i c i t i n g Japanese c a p i t a l . While the r e l a t i o n s h i p with 83 the Japanese i s not c o n f l i c t - f r e e , i t produced a considerable flow of 84 c a p i t a l and c l o s e r economic r e l a t i o n s i n the l a t e 1970s, although now there i s some attempt to balance the Japanese presence as well. The focus of d i v e r s i f i c a t i o n has s h i f t e d toward encouraging investment from the EEC through investment centers and conferences, but the o v e r a l l e f f e c t has not 85 been productive, leading most recently to p a r t i a l deregulation. As a supplement, there i s an emerging emphasis on f i n d i n g smaller multinationals as j o i n t venture partners, which i s intended to allow p a r t i c i p a t i o n from smaller i n d u s t r i a l countries, increasing the p o t e n t i a l leverage of F i l i p i n o 86 partners. Since the announcement of a " s e l f - r e l i a n c e " p o l i c y f o r the P h i l i p p i n e s by President Marcos i n early 1973, i t has been emphasized that foreign investment i s welcome from any source i n l i n e with the general broad-ening of P h i l i p p i n e economic r e l a t i o n s , and the Board of Investments has con-s i s t e n t l y reported new investment from non-tr a d i t i o n a l partners, l a r g e l y the 87 smaller i n d u s t r i a l nations, as contributing to progress i n d i v e r s i f i c a t i o n . According to the development plan, t h i s i s expected to continue i n the future: "While a substantial portion of these [planned]investments i s expected to o r i -ginate from t r a d i t i o n a l investors, a gradual d i v e r s i f i c a t i o n i s foreseen i n 88 the l i g h t of e x i s t i n g foreign p o l i c y . " However, as was pointed out i n an interview with an o f f i c i a l from the National Economic Development Authority, the tasks i s a d i f f i c u l t one when the implementation must exclude sanctions and r e l y on p o s i t i v e incentives i n order to avoid damage to the 149 P h i l i p p i n e s ' investment climate with the U.S. and Japan, the sources of 89 most investment. D i v e r s i f i c a t i o n i s seen as a p o l i t i c a l l y expedient means of allowing investment from foreign sources to increase without s u f f e r i n g undue dependence on any single source. Singapore Singapore occupies a unique p o s i t i o n i n ASEAN, derived from both i t s small si z e and the emphasis which has been placed on i n d u s t r i a l i z a t i o n . With no large domestic market to protect, foreign investment i s seen as a basic resource, and the issue of control revolves around means to draw more, rather than how to domesticate a l i e n influence. In contrast to the other ASEAN states, Singapore has maintained a l a r g e l y p o s i t i v e a t t i t u d e toward fo r e i g n investment; although the opposition Barisan S o s i a l i s voices 90 some c r i t i c i s m , i t apparently f a i l s to s t r i k e a responsive note. Singapore's i n d u s t r i a l planning r e f l e c t s consistent change i n order to maintain an i n t e r n a t i o n a l l y competitive p o s i t i o n , which requires a consistent inflow of foreign c a p i t a l . The forced separation from Malaysia stimulated a s h i f t from import s u b s t i t u t i o n to export promotion i n labor intensive projects f o r the l a s t years of the 1960s; beginning i n 1970 higher technology and s k i l l s were emphasized, p a r t i c u l a r l y a f t e r 1975, and by the end of the decade a strategy of "high wage, high value-added" 91 was i n place f o r the 1980s. The l a s t p o l i c y , b i l l e d as Singapore's second i n d u s t r i a l revolution, r e f l e c t s f u l l employment, as well as a desire to c u r t a i l the growth of v i s i t i n g workers from neighboring ASEAN 92 countries. Singapore's i n d u s t r i a l strategy has been b u i l t on foreign c a p i t a l . 150 The importance of foreign investment i s r e f l e c t e d i n both output 93 and ownership of the Singapore economy. In 1977, foreign projects accounted f o r over 73% of t o t a l manufacturing output and over 84% of export sales. Ownership of the most important group of i n d u s t r i a l firms, those enjoying Pioneer status, has become overwhelmingly foreign: l o c a l c a p i t a l constituted 47% of t o t a l investment i n 1963, but only 16% by the end of 94 1972. Singapore investors, with the government prominent among them, play an important minority ownership r o l e i n perhaps as many as h a l f of the 95 foreign c o n t r o l l e d firms, but the s i t u a t i o n remains that most of the larger manufacturing enterprises are beyond the scope of national c a p i t a l i s t s . It i s quite apparent that the r o l e a l l o c a t e d to foreign investment i s the c r u c i a l one f o r s i g n i f i c a n t i n d u s t r i a l i z a t i o n , with 96 l o c a l c a p i t a l playing a supporting r o l e i n services and commerce. This d i v i s i o n of labor (or c a p i t a l ) makes Singapore extremely dependent on the flow of foreign investment. In order to a t t r a c t t h i s investment, the Singapore government has developed an extensive i n f r a s t r u c t u r e of f a c i l i t i e s , agencies and incentives. The Economic Development Board (EDB) implements government p o l i c y i n i n d u s t r i a l development, and i s c l o s e l y t i e d i n with the execution of foreign p o l i c y ; one of i t s senior o f f i c e r s has r e c e n t l y been seconded to take the p o s i t i o n of Ambassador to the EEC, i n d i c a t i n g the degree of overlap 97 between foreign and commercial p o l i c y . The EDB i s responsible f o r most 98 aspects of investment i n Singapore, including s o l i c i t i n g investment through t h i r t e e n world-wide o f f i c e s , granting incentives, and monitoring performance of e x i s t i n g firms. D i f f e r e n t i a l incentives are granted through negotiation between the EDB and the proposing investor, with EDB emphasis on promoting large export projects with high l e v e l s of technology and 151 planned d i v e r s i f i c a t i o n of product l i n e s ; labor intensive projects are not absolutely discouraged, but r a r e l y given incentives since 1975, and frequently admonished that t h e i r v i a b i l i t y w i l l become l e s s tenable with 99 Singapore's high wage p o l i c y . Since the r e s u l t of government p o l i c y i s to favor large foreign investment over the smaller l o c a l e n t r e p r e n e u r , 1 ^ several programs have been developed to encourage smaller projects of a desirable technological nature. These include a program o f f e r i n g permanent residence to investors bringing i n a substantial sum of c a p i t a l , which has attracted investment from Hong Kong, 1^ and the Ca p i t a l Assistance scheme, which has since 1976 provided government loans and equity on a small 102 scale. The l a t t e r program i n p a r t i c u l a r was developed to counter flagging l e v e l s of foreign investment flow during 1975-1976, i n order to 103 a t t r a c t new types of c a p i t a l and keep the t o t a l flow of investment up. Since there are few r e s t r i c t i o n s on foreign c a p i t a l - almost no areas closed to i t , and no r e a l requirement f o r l o c a l p a r t i c i p a t i o n , the emphasis of p o l i c y has been c o n s i s t e n t l y on a t t r a c t i n g the desired flow to f u e l Singapore's i n d u s t r i a l i z a t i o n . One measure of the success of Singapore's p o l i c i e s on foreign investment i s Singapore's emergence as a center f o r the d i s t r i b u t i o n of investment to other countries of the region. T r a d i t i o n a l l y a large investor i n Malaysia, Singapore i s now supplying funds to Indonesia, 104 Thailand, the P h i l i p p i n e s , S r i Lanka and Bangladesh. Some of t h i s i s overflow from Singapore based multinationals, but with the new high-wage p o l i c y there may be more Singaporean investment based on smaller scale, labor intensive manufacturing driven out to neighboring lower wage areas; the EDB i s suggesting to some investors interested i n labor intensive projects that they consider other ASEAN countries rather than Singapore as 152 an o r i g i n a l location."*"^ 5 The Singapore Manufacturer's Association i s also s t a r t i n g to send out t h e i r own investment missions to various parts of Asia and the P a c i f i c , looking f o r future investment s i t e s . " ^ Along 107 with the Ph i l i p p i n e s , Singapore i s becoming a s i g n i f i c a n t source of investment i n the ASEAN region, p a r t i c u l a r l y as the type of investment required i n Singapore i n c r e a s i n g l y d i f f e r s from that required i n the other ASEAN countries. Although extensive p o l i c i e s to increase l o c a l p a r t i c i p a t i o n are lacking, Singapore r e l i e s on d i v e r s i f i c a t i o n of sources f o r p o l i t i c a l control over the e f f e c t s of foreign economic presence. With the major focus of investment promotion on Japan, the U.S. and the EEC, a rough balance among these g l o b a l l y predominant economic actors i s attempted by the simple expedient of se t t i n g quotas f o r the overseas missions of the 108 EDB. Although there are now numerous projects from the smaller indus-109 t r i a l nations, less e f f o r t i s devoted to them; only A u s t r a l i a has been singled out f o r i t s future potential.'*"''^ This i s perhaps a r e s u l t of the p o l i c y of p r e f e r r i n g high technology p r o j e c t s . Recent p o l i c y has s h i f t e d "to i n t e n s i f y the EDB's a c t i v i t i e s " i n Japan,''""''''" as Japanese investments are r e l a t i v e l y less than those from the U.S. and EEC sources i n t o t a l c a p i t a l , although there are more projects from Japan. As was pointed out i n 1973, the ea r l y strategy of d i v e r s i f y i n g sources of foreign investment "protected Singapore from undue influence by foreign investors, as the government insured that foreign investments came from a m u l t i p l i c i t y of countries so that no sing l e one could exert undue economic influence over 112 the Republic," a p o l i c y which began to show r e s u l t s i n the lat e 1960s. P o l i t i c a l considerations are as important as economic or geographic; the goal i s to produce competition among investors i n order to cancel out 153 113 i n d i v i d u a l influences. Singapore follows an economic balance of power doctrine to control foreign investment, which complements the same policy-followed on the diplomatic f r o n t . Thailand Thai i n t e r e s t i n c o n t r o l l i n g foreign investment has only r e c e n t l y become important. Perhaps because of the lack of formal c o l o n i a l status, a 114 high degree of investment dependence on B r i t a i n before the war (70-80%) appears to have not caused a reaction s i m i l a r to that i n other ASEAN countries. Rather, the i n i t i a l focus of control was to prevent exclusive Chinese resident control of industry through the creation of government monopolies, which remain quite e x t e n s i v e . O n l y i n the 1970s has concern over foreign investment surfaced. I n d u s t r i a l development p o l i c y has lagged behind that of other regional states, r e s u l t i n g i n some uncertainty over the desired r o l e f o r foreign investment. Import s u b s t i t u t i o n has been the main goal of indus-t r i a l i z a t i o n from the mid-1950s, and the continuing focus of the f i r s t two national plans (1961-1966, 1967-1971); t h i s attracted s i g n i f i c a n t foreign investment during the l a t e 1 9 6 0 s . B y 1970 i n t e r e s t was beginning to s h i f t toward promoting exports, and c r i t i c i s m was leveled at the Board of Investments that past p o l i c y had not taken into account the need f o r export 117 growth; Japanese pro j e c t s , f o r example, were exporting less than 2% of 118 t h e i r production. The t h i r d plan (1972-1976) accordingly s h i f t e d emphasis to labor intensive export projects, but with l i t t l e apparent e f f e c t ; t h i s i s s t i l l being touted as the d i r e c t i o n of change i n p o l i c y 119 f o r the 1980s. As planning s h i f t s toward larger export projects the need f o r foreign investment w i l l increase over that required previously 154 f o r smaller investments f o r the domestic market. P o l i c y i n s t a b i l i t y and domestic controls have reduced the r e l a t i v e r o l e of foreign investment i n Thailand. Throughout the 1960s, foreign investment constituted exactly a t h i r d of registered c a p i t a l ; i n 120 the 1970s t h i s had gradually declined to around 27%. Major r e s t r i c t i o n s on foreign investment were introduced with the 1972 A l i e n Business Law, which closed many areas to future majority foreign ownership, and required 121 some to divest to the extent required to achieve majority Thai ownership. Joi n t ventures are preferred, and nearly a l l approved investments take t h i s 122 form. Despite a very uneven reputation on the actual enforcement of these controls and t h e i r ultimate e f f e c t on l i m i t i n g foreign control of 123 p a r t i c u l a r enterprises, the r e s u l t does appear to be an increase i n the r e l a t i v e p o s i t i o n of Thai to foreign owners. Languishing l e v e l s of for e i g n investment have been a consistent problem. This i s due i n part to the extensive control and bureaucratic delay involved i n seeking approval, but also to p o l i t i c a l i n s t a b i l i t y which has disrupted the degree of p o l i c y consistency desired by foreign business i n making investment decisons. Despite higher l e v e l s of protection offered to promoted projects than i n other countries of the region, and extensive tampering with the investment laws to increase t h e i r attractiveness, foreign i n t e r e s t i s less than desired. The most recent revisons even include a guarantee against s t r i k e s , and place the Prime Minister at the 124 head of the Board of Investments. In 1979 the A l i e n Business Act was relaxed to allow increased expansion of investment i n e x i s t i n g projects without approval, and i n d u s t r i a l promotion zones were- revamped i n a 125 continuing attempt to reverse the decline i n foreign business i n t e r e s t . 126 Nevertheless, foreign investment continues to be s t a t i c . 155 Another major concern i s emerging i n the form of p o l i t i c a l consequences of the pattern of investment. The dominant r o l e of Japan has become an issue, complicating attempts to balance domestic control over forms and areas of investment against a c a p i t a l shortage. A r i s i n g fear of Japanese domination during the 1970s has resu l t e d i n the promotion of economic nationalism as a defense, even by business i n t e r e s t s and the Foreign 127 Investment Committee. As e a r l y as 1972 government p o l i c y was reported to discourage complete control of any industry by a single foreign nation, 128 but t h i s p o l i c y was l a r g e l y i n e f f e c t i v e . It i s impossible to t e l l to what degree anti-Japanese p o l i c y statements are a r e s u l t of economic nationalism, and therefore permanent, or merely a r e f l e c t i o n of f a c t i o n a l s t r i f e ; i n t e r e s t s t i e d to Japanese j o i n t ventures have replaced those 129 closer to U.S. investments i n the Prem government, so the future w i l l test the degree of nationa l concern. Since the u n i f i c a t i o n of Vietnam the d i v e r s i f i c a t i o n of economic r e l a t i o n s has been given more p r i o r i t y i n an e f f o r t to become more s e l f r e l i a n t and keep "equidistance" among the major 130 powers, so i t may be that the concern over the Japanese presence i s at the s t r a t e g i c l e v e l . E f f o r t s to increase the flow of c a p i t a l from the EEC are j u s t i f i e d i n these terms, as contributing to a more healthy d i v e r s i f i -131 cation. D i v e r s i f i c a t i o n as a means of reducing dependence on Japan, and to a l e s s e r extent on the U.S., appears to have become at le a s t an under-tone of Thai foreign economic p o l i c y . P o l i c i e s Pursued Through ASEAN The ASEAN organization i t s e l f has i n recent years emerged as an important t o o l of economic p o l i c y f o r the members, and where common int e r e s t s e x i s t i t i s used to a t t a i n mutually agreed objectives. In t h i s , 156 as i n other areas of p o l i c y , the ASEAN organization supplements national p o l i c y , as stated by the Foreign Minister of Singapore, S. Rajaratnam, i n 1971: "ASEAN i s used more f o r national than f o r regional i n t e r e s t s by i t s 132 member countries and i t i s an instrument f o r national consolidation." In the area of fo r e i g n investment the common i n t e r e s t s appear to be i n expanding the flow and range of sources of funding. The most important type of ASEAN i n i t i a t i v e has been i n j o i n t "dialogues" (the ASEAN term f o r a diplomatic conference) between the f i v e members and the major external partners. Each of the dialogues has included a substantive focus on investment issues, with the exception of 133 that with New Zealand. In each case, some type of program focused on the investment area has resu l t e d . These meetings have allowed ASEAN to move ahead i n coordinating common programs with the i n d u s t r i a l countries 134 involving investment, l i k e l y more a t t r a c t i v e to the members than could have been expected had ASEAN not prenegotiated the issues and presented a common front to the i n d u s t r i a l countries. The r e l a t i o n s h i p with A u s t r a l i a i s the most obvious example of c o l l e c t i v e influence. From the e a r l i e s t meetings i n 1974 A u s t r a l i a was put on the defensive, with r e s t r i c t i o n s on investment flow to ASEAN a prominent issue. In an attempt to overcome the acrimonious tenor of r e l a t i o n s , A u s t r a l i a sponsored an ASEAN-Australia I n d u s t r i a l Cooperation Conference i n 1978, designed to bring together l i k e l y A u s t r a l i a n investors with p o t e n t i a l ASEAN partners. Despite the gesture, the conference was marred by threats from the ASEAN delegates that A u s t r a l i a would be excluded from the developing ASEAN economic bloc i f further moves to loosen trade and increase the flow of investment were not forthcoming. This f l e x i n g of 135 c o l l e c t i v e muscle produced f i v e planned j o i n t ventures. Despite the 157 lack of grace i n the courting, A u s t r a l i a i s becoming a more important investor i n ASEAN. Another less-important":. i n d u s t r i a l country, Canada, has drawn the attention of ASEAN. The series of meetings i n 1977 were low-key and focused mainly on b i l a t e r a l assistance, but two programs i n i t i a t e d sub-sequently by the Canadian government pertain to increasing the flow of investment from Canada to the ASEAN area. As i n d u s t r i a l development i s to be the major thrust of Canadian programs i n Southeast Asia, the programs sponsored by CIDA provide funds f o r p r e f e a s i b i l i t y studies of ASEAN i n d u s t r i a l complementation projects to be done by Canadian firms, with, the hope that the ea r l y contact w i l l r e s u l t i n larger contracts and Canadian ventures at a l a t e r date. In addition, an i n d u s t r i a l cooperation program sponsors meetings between Canadian and ASEAN manufacturers i n f i e l d s where there i s some p o s s i b i l i t y of j o i n t ventures; to date these have been li m i t e d to f u r n i t u r e and auto parts manufacturers. As the p i l o t of a larger CIDA program, the purpose i s to r a i s e the l e v e l of information about the c a p a b i l i t i e s of Canadian investors, which has been a major f a c t o r hindering i n t e r e s t i n ASEAN f o r investments from Canada. The presently low l e v e l of in t e r e s t i n Canada as a p o t e n t i a l partner f o r d i v e r s i f y i n g investment r e l a t i o n s r e s u l t s from the ASEAN perception that Canada i s merely an extension of the U.S. i n d u s t r i a l system. This appears to he changing, and Canada i s l i k e l y to become more important to ASEAN i n the future as a source of investment."*5*' The search f o r ASEAN investment partners perhaps reached the l i m i t s of imagination with the ASEAN-West Asia Investment Conference. Designed rather obviously to include ASEAN i n the r e c y c l i n g of "petro-d o l l a r s " , the 1977 conference drew l i t t l e i n t e r e s t from the po t e n t i a l 158 partners and l a r g e l y demonstrated the present lack of r e l a t i o n s between the two regions as well as the lim i t e d p o t e n t i a l . The goal, however, was made quite e x p l i c i t : that the only p r a c t i c a l way f o r developing countries to further the necessary interdependence of nations without l o s i n g t h e i r 137 independence i s to d i v e r s i f y . The theme of d i v e r s i f i c a t i o n i s c a r r i e d out i n the three regional approaches above, but by f a r the most s i g n i f i c a n t action to achieving t h i s goal i s with the EEC. The EEC i s the single region with the capacity to balance the investment influence of Japan and the U.S., and t h i s p o t e n t i a l informs a large part of ASEAN motivation to f o s t e r c l o s e r r e l a t i o n s . Again, i t was Rajaratnam who expressed the preferences f o r ASEAN, at the ASEAN-EEC In d u s t r i a l Cooperation Conference i n Brussels, A p r i l 1977: "We'd f e e l more comfortable with d i v e r s i f i c a t i o n of investment sources" as ASEAN i s 138 currently too dependent on the U.S. and Japan. This conference and i t s larger, more productive follow-up i n Jakarta the next year both attempted to match s p e c i f i c projects i n ASEAN countries to European investors i n an 139 ambitious way, i n l i n e with the EEC commitment to step up e f f o r t s to 140 expand European investment i n the ASEAN region. The promising part of t h i s r e l a t i o n s h i p i s the in t e r e s t on both sides i n expanding economic r e l a t i o n s . The EEC, p a r t i c u l a r l y the Commission and Germany, i s concerned to assure access to ASEAN raw materials and reverse the r e l a t i v e decline of 141 European business i n t e r e s t s i n the region. ASEAN's in t e r e s t i s captured aptly i n the t i t l e of an a r t i c l e announcing d i v e r s i f i c a t i o n to the economic 142 "middle powers" - "Once we pinned our f a i t h on Japan - now i t ' s the EEC." ASEAN has been the v e h i c l e of choice i n the development of broader region-to-region r e l a t i o n s . 159 Despite a desire to reduce the predominance of Japan as an investment partner, i t i s not the case that further f i n a n c i a l r e l a t i o n s with Japan have been de-emphasized. Japan has c o n s i s t e n t l y been most concerned to f o s t e r close economic r e l a t i o n s with ASEAN, and even sought 143 a permanent r o l e as a development partner i n 1968, which ASEAN vetoed. Japan i s extending a large part of the financing of the large i n d u s t r i a l 144 pro j e c t s , and has agreed to encourage more, and higher technology, 145 investment i n the region. E a r l y Japanese i r r i t a t i o n at ASEAN i n i t i a t i v e s to c u l t i v a t e the EEC as a counterweight stimulated the consideration of 146 means to tighten t i e s with ASEAN, and now the governmental t i e s have been reinforced by the ASEAN-Japan Economic Council which j o i n s the private sector organizations of the s i x countries i n an e f f o r t to promote coopera-147 t i o n i n investment and technology t r a n s f e r . At the same time as the r e l a t i o n s h i p with Japan seems to have f a i l e d ASEAN expectations, most of the members have increased t h e i r e f f o r t s to promote investment from Japan, leading to the conclusion that the s h i f t toward Europe i s as much aimed at increasing bargaining leverage with Japan as a c t u a l l y changing the pattern of investment. The meetings with the U.S. have had almost no r e s u l t s outside the f i e l d of investment. The f i r s t , i n 1977, produced only a minor tax 148 concession of i n t e r e s t to ASEAN, while the second meeting, i n 1978, resulted i n a mission to the region to reassess the investment climate, and 149 u l t i m a t e l y i n the convening of an ASEAN-U.S. Business Council. The l a t t e r private sector conference, s i m i l a r to those with the EEC and A u s t r a l i a , produced a number of j o i n t venture proposals and an organization to promote investment from the U.S. 1^ The r e l a t i o n s h i p with the U.S. has been muted, according to one informant, because the U.S. i s apprehensive 160 151 about the p o s s i b i l i t y of t r a n s f e r r i n g the stigma of SEATQ to ASEAN. Future economic r e l a t i o n s w i l l apparently remain the preserve of private business. A regional p o l i c y of p o t e n t i a l s i g n i f i c a n c e f o r investment i s curre n t l y being debated. Proposals f o r the establishment of common incentives and p o l i c i e s on foreign investment are working t h e i r way through the regional mechanism. F i r s t appearing on the agenda of the Second Heads of Government Meeting i n Kuala Lumpur i n 1977, but dropped 152 from the f i n a l communique, the proposal was passed to the Economic 153 Ministers and considered i n both 1977 and 1978 without r e s o l u t i o n . The idea i s supported by Malaysia as an element strengthening national bargain-ing power and r e f l e c t i n g a stronger ASEAN p o s i t i o n i n a t t r a c t i n g investment from the i n d u s t r i a l countries;"* 5 4 several p r i v a t e sector organizations have also added t h e i r a p p r o v a l . * 5 5 The issue i s presently being considered by the ASEAN Economic Planners i n the form of p i l o t guidelines f o r investment i n i n d u s t r i a l complementation projects, as a preliminary step to a general set of common p o l i c i e s . ' * 5 ^ According to one observer,* 5^ the Economic Ministers favor the proposal while the Foreign Ministers are unconvinced, but the governments are unw i l l i n g to expand the cost of the ASEAN Secretariat to cover t h i s new area. I f private sector plans f o r an ASEAN 158 Investment Corporation to fund regional projects are ca r r i e d through, i t w i l l add impetus to the harmonization of p o l i c y on investments. The focus of p o l i c y regarding the control of foreign investment, then, has s h i f t e d from domestic regulation toward a d i v e r s i f i c a t i o n strategy. Increasing the benefits f o r domestic i n t e r e s t s through c l o s e r control of for e i g n investment i n various sectors of the economy and mandated j o i n t partnership arrangements has characterized each ASEAN country with 161 the exception of Singapore. However, t h i s manifestation of economic nationalism has had serious e f f e c t s on the flow of investment as the foot-loose industries looked elsewhere f o r le s s r e s t r i c t e d platforms. E s p e c i a l -l y with the s h i f t to export i n d u s t r i a l i z a t i o n , the ASEAN countries have sought higher flows of investment to s a t i s f y national aspirations f o r economic growth. D i v e r s i f i c a t i o n of investment sources has emerged as a p o l i c y strategy which allows the pool of foreign investment to grow while minimizing the p o t e n t i a l p o l i t i c a l e f f e c t s . It i s t h i s p o l i c y which has emerged as the focus of control i n the ASEAN area, with the ASEAN organiza-t i o n being used to contribute to i t s furtherance. However, a primary c r i t i c i s m of developing countries i s that they are unable to implement t h e i r p o l i c i e s , p a r t i c u l a r l y i n r e l a t i o n to the i n d u s t r i a l i z e d states, as a r e s u l t of being " s o f t states" or dependen-c i e s . Thus, an examination of p o l i c y i s only preliminaryt to' determining; a' s h i f t i n r e a l i t y . I f d i v e r s i f i c a t i o n i s being pursued e f f e c t i v e l y i t should be r e f l e c t e d i n actual patterns of fo r e i g n investment over time, and i t i s to t h i s that I now turn. Investment Patterns: Toward D i v e r s i f i c a t i o n ? The analysis of the pattern of investment sources w i l l inform conclusions as to whether or not p o l i c i e s have been e f f e c t i v e i n sponsor-ing d i v e r s i f i c a t i o n as a defensive p o l i t i c a l strategy. As i n the case of trade, three p a r t i c u l a r questions w i l l be addressed. F i r s t , has there been progress i n balancing the r e l a t i v e p o s i t i o n s of the major investment partners, so that none accrues an advantage due to excessive concentration? For t h i s condition to be met e f f e c t i v e l y , no more than one-third of t o t a l foreign investment should come from a single source, and at least one other 162 investor should be i n a p o s i t i o n to balance the major one. Second, has the o v e r a l l p o s i t i o n of the three major investing areas receded, reducing the degree of s e n s i t i v i t y to the major i n d u s t r i a l nations? Third, has the pattern of investment become more d i v e r s i f i e d i n general, as indicated by Hirschman's index of concentration? There are d i f f i c u l t i e s i n attempting to analyze foreign invest-ment data f o r the ASEAN countries. Aside from the problem of obtaining data that are consistent over time, the several governments c o l l e c t s l i g h t l y d i f f e r e n t forms of data. Indonesia, Thailand and the P h i l i p p i n e s indicate investment intended at the date of approval of the investment proposal, which may not be a c t u a l l y transferred l a t e r i n the same amount. Malaysia indicates r e g i s t e r e d equity, but has kept these records since the i n i t i a t i o n of company r e g i s t r a t i o n i n 1975; e a r l i e r data are not s t r i c t l y comparable. Singapore presents gross f i x e d assets, but does not publish a complete breakdown by source country; some fig u r e s have to be interpolated through comparison of d i f f e r e n t published data sets. Thus, while the data f o r each state are i n t e r n a l l y consistent, some r e f l e c t intentions rather than r e a l i z e d c a p i t a l , imposing a l i m i t a t i o n on cross-national comparison. Since the primary purpose i s to examine changes i n the r e l a t i v e r o l e s of foreign investors i n each country's investment pool, the data are s u f f i c i e n t ; cross-national comparisons, however, can be only approximate. The data used here have been c o l l e c t e d from published and unpub-l i s h e d sources, but i n each case derive from the government agencies responsible f o r investment. These are: the Board of Investments f o r 159 Thailand, Indonesia and the P h i l i p p i n e s ; the Malaysian I n d u s t r i a l Development Authority; the Economic Development Board of Singapore. Tables 10 through 14 below present the data f o r each ASEAN country by 163 percentage d i s t r i b u t i o n of investment sources f o r as long a time span as a v a i l a b i l i t y of data permits. The regions and the c a l c u l a t i o n of the index of dispersion are i d e n t i c a l to those used i n discussing trade. Investment i n Indonesia has remained r e l a t i v e l y concentrated on a few sources. The reve r s a l of Sukarno's p o l i c y of expropriation by the Suharto regime led to the return of foreign investors a f t e r 1967. St a r t i n g from a base of almost zero ( B r i t i s h investments were returned, and American ones had not been na t i o n a l i z e d ) , the i n i t i a l investment was even more concentrated on U.S. sources than had been true f o r the pre-war Dutch dependence. Thus, r e l a t i v e l y small investments from new partners r e s u l t i n large changes i n proportional standing among the lesser partners, e s p e c i a l l y up through 1970. The predominant p o s i t i o n of the U.S. was s t e a d i l y eroded with the inflow of Japanese investment i n the mid-1970s. Aside from the dominant r o l e of Japan, the only other investors of s i g n i f i -cance are those from the U.S. and new t e x t i l e investments from Hong Kong and Taiwan (NICs i n the t a b l e ) . Indonesia i s heavily concentrated on Japan s p e c i f i c a l l y , the large i n d u s t r i a l countries generally, and shows l i t t l e general d i v e r s i f i c a t i o n . This i s equally evident when the comparison i s made s t a r t i n g from 1970, when a s u f f i c i e n t pool of investment had accumulated to moderate large proportional changes due to r e l a t i v e l y small increments of new investment. Indonesia has not d i v e r s i f i e d , except to exchange a preponderant U.S. r o l e f o r a dominant Japanese one. Malaysia's pattern of foreign investment underwent large changes p r i o r to 1975, when regular s t a t i s t i c s became a v a i l a b l e . For purposes of rough comparison, the d i s t r i b u t i o n as indicated by the 1968 Census of Manufacturing Industries i s i n c l u d e d . 1 6 0 Although the s t a t i s t i c s are not p r e c i s e l y comparable, two points are apparent. F i r s t , the p o s i t i o n of Table 10 INDONESIA - Cumulative Foreign Investment Percentage D i s t r i b u t i o n 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 Large I n d u s t r i a l 91.7 60.6 57.8 58.8 55.1 58.1 58.8 62.2 69.1 67.3 USA 82.5 43.1 39.9 37.1 30.7 35.5 30.0 22.3 18.1 17.4 EEC 7.2 12.5 6.0 8.5 7.9 6.8 6.9 12.4 10.1 10.1 Japan 2.0 5.0 12.0 13.2 16.4 15.8 21.8 27.6 40.9 39.8 Small I n d u s t r i a l 0.8 33.2 14.0 14.7 21.4 20.7 22.8 23.2 19.0 21.1 Canada - 18.3 6.7 5.4 4.4 3.4 2.8 2.0 1.6 1.5 Other W. Europe - 1.3 0.7 1.8 1.4 1.2 1.2 1.8 1.5 1.4 A u s t r a l a s i a 0.6 0.3 0.4 0.8 6.3 5.1 5.4 4.5 3.7 3.5 NICs 0.2 13.3 6.2 6.7 9.3 10.9 13.3 14.9 12.2 14.6 Third World 5.0 2.1 1.0 0.9 1.3 1.9 2.1 1.8 1.6 1.6 Lati n America 5.0 2.1 1.0 0.9 1.3 1.3 1.2 0.9 0.7 0.7 A f r i c a - - - - - - .02 .01 .01 .0] South A s i a - - - .04 .03 0.6 0.8 0.9 0.9 0.9 S o c i a l i s t - - - - - - - - 0.1 .Of ASEAN 2.5 4.0 27.3 25.5 22.3 19.4 16.4 12.8 10.2 9.9 P h i l i p p i n e s 2.5 2.2 22.6 18.6 14.9 12.0 10.2 7.6 6.0 5.8 Singapore - 1.6 3.0 4.5 4.0 4.3 3.6 3.3 2.6 2.6 Malaysia - 0.2 1.4 2.1 2.4 2.3 1.9 1.4 1.2 1.1 Thailand - - 0.3 0.3 1.0 0.7 0.6 0.5 0.4 0.3 Tota l 100 100 100 100 100 100 100 100 100 100 Geographical Dispersion 83.0 50.6 48.8 45.5 40.8 43.4 42.0 41.7 48.1 47.6 (Index) Annual Growth Rate (%) - 136.8 175.1 22.8 26.2 27.5 22.1 37.3 26.5 4.8 Source: Indonesia Board of Investments. Excludes petroleum, banking and insurance. Table 11 MALAYSIA - Cumulative Foreign Investment Percentage D i s t r i b u t i o n 1975 1976 1977 1968* Large I n d u s t r i a l 48.7 53.2 53.2 58.5 USA 11.4 12.3 10.4 15.0 EEC 17.7 19.1 22.7 42.2 Japan 19.6 21.8 20.1 1.3 Small I n d u s t r i a l 19.6 17.4 16.9 Canada 1.0 1.2 0.5 Other W. Europe 2.3 2.3 1.6 A u s t r a l a s i a 2.4 2.4 2.6 NICs 13.9 11.6 12.1 10.0** Third World 3.7 3.7 3.8 La t i n America 1.7 1.6 1.7 South A s i a 2.0 2.2 2.2 ASEAN 28.0 25.7 26.2 Indonesia 0.1 0.1 .05 P h i l i p p i n e s .07 0.2 0.1 Singapore 27.6 25.2 25.9 22.1 Thailand 0.2 0.2 0.1 Tota l 100 100 100 90.6 Geographical 50.9 Dispersion 42.4 42.2 43.2 (Index) Annual Growth Rate (%) - 23.6 32.0 * f o r comparison only ** estimate Source: Malaysian I n d u s t r i a l Development Authority (1975, 1976, 1977); Census of Manufacturing  Industries (1968). 166 B r i t i s h investment (almost a l l of that under EEC) was s t i l l large i n 1968, but the former c o l o n i a l t i e was almost gone by 1975. Second, Japanese investments have l a r g e l y occurred i n the 1970s, without becoming more than a counterweight to remaining B r i t i s h investment. Other sources of investment appear r e l a t i v e l y stable, with Singapore becoming the largest source of investment once the B r i t i s h share declined. Since 1975, invest-ment i n Malaysia has become s l i g h t l y more concentrated on the large i n d u s t r i a l nations, but with three roughly equal major investors, no pattern of dependence i s apparent - a large change from 1968. Foreign investment i n the P h i l i p p i n e s has become more evenly spread among several sources. Steady erosion of the U.S. r o l e through newly important investments from Hong Kong (NIC) and Japan have provided three roughly equal investment partners, erasing the vestiges of U.S. c o l o n i a l i s m . T h e r e s u l t i s a s i g n i f i c a n t degree of d i v e r s i f i c a t i o n of p a r t i c u l a r partners, but s t i l l a high degree of concentration on the major i n d u s t r i a l countries f o r investment. The P h i l i p p i n e s has changed from being quite dependent on a sin g l e foreign investment source, to not being excessively vulnerable to any one, while s t i l l quite s e n s i t i v e to large i n d u s t r i a l partners. Singapore has reduced the r e l a t i v e r o l e of i t s single largest investment source, the EEC, but draws almost a l l of i t s investment from the large i n d u s t r i a l countries. The EEC s t i l l plays the largest r o l e , but has been balanced by the U.S., while Asian countries together provide an equivalent proportion of investment. The inflow of U.S. investment during the 1970s resu l t e d i n an extremely high l e v e l of s e n s i t i v i t y to the large i n d u s t r i a l nations f o r f o r e i g n investment. General d i v e r s i f i c a -t i o n of sources has been steady, but moderate i n e f f e c t . Despite the Table 12 PHILIPPINES - Cumulative Foreign Investment Percentage D i s t r i b u t i o n 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 Large I n d u s t r i a l 60.7 64.8 61.1 36.8 47.7 57.5 66.8 64.6 64.3 59.7 USA 59.0 60.4 55.4 32.4 40.2 41.3 30.1 29.7 30.9 29.8 EEC .01 2.6 3.8 1.9 3.5 9.5 10.8 10.0 9.8 8.7 Japan 1.7 1.8 1.9 2.5 4.0 6.7 25.9 24.9 23.6 21.3 Small I n d u s t r i a l 1.2 5.9 6.5 46.8 37.7 29.3 23.8 26.9 28.1 32.4 Canada - - .01 .05 1.6 1.1 2.7 2.4 2.1 1.8 Other W. Europe - 0.5 0.4 0.2 1.0 0.8 2.2 2.3 5.1 4.5 A u s t r a l a s i a - - - - .02 0.1 2.2 3.5 4.3 3.8 NICs 1.2 5.4 6.1 46.6 35.1 27.2 16.7 18.7 16.7 22.4 Third World _ - 0.3 0.2 0.2 0.6 0.8 0.9 0.8 0.7 L a t i n America - - - - - 0.4 0.5 0.6 0.5 0.4 South A s i a - - 0.3 0.2 0.2 0.2 0.3 0.3 0.3 0.3 West Asi a - - - - - - .01 .01 .01 .0] ASEAN - - - - - .01 0.3 0.3 0.3 0.3 Indonesia - - - - - - - - <.01 <.0] Singapore - - - - - .01 0.2 0.2 0.2 0.2 Thailand - - - - - - .05 0.1 0.1 0.1 Not S p e c i f i e d 38.1 29.3 32.1 16.3 14.4 12.5 8.3 7.3 6.5 6.9 Total 100 100 100 100 100 100 100 100 100 100 Geographical Dispersion 61.4 62.1 57.7 57.3 54.1 51.1 44.8 44.6 44.1 44.4 (Index) Annual Growth Rate (%) - 119.0 44.9 169.2 37.0 47.1 85.1 14.9 17.4 16.3 Source: Board of Investments, Republic of the P h i l i p p i n e s . Table 13 SINGAPORE - Cumulative Foreign Investment Percentage D i s t r i b u t i o n 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 Large I n d u s t r i a l 68.0 59.9 65.7 82.1 77.8 80.6 80.5 79.6 79.4 80.1 80.2 82.2 USA EEC Japan 8.9 48.8 10.2 11.7 40.7 7.5 21.8 37.8 6.0 34.5 40.8 6.8 31.8 39.1 6.9 36.8 37.8 6.0 37.3 34.3 8.9 35.4 32.6 11.6 33.1 32.8 13.4 33.0 33.1 14.0 33.0 31.9 15.3 30.5 36.4 15.3 Small I n d u s t r i a l n.a. n.a. n.a. n.a. 22.2 19.4 19.5 20.4 20.7 19.9 19.8 17.8 Canada Other W. Europe Other A s i a * 0.3 1.6 20.3 0.3 1.6 17.5 0.3 1.6 17.6 0.3 1.2 18.8 0.3 1.8 18.6 0.3 1.8 17.8 0.3 2.0 17.5 0.2 1.9 15.7 Not S p e c i f i e d 32.0 40.1 34.3 17.9 0 0 0 0 0 0 0 0 Total 100 100 100 100 100 100 100 100 100 100 100 100 Geographical Dispersion (Index) 59.9 58.8 55.8 56.8 54.8 55.9 54.4 53.0 52.0 52.0 51.5 52.3 Annual Growth Rate (%) 49.8 32.2 65.8 58.3 44.9 16.5 14.9 10.7 10.6 10.9 26.5 * Includes A u s t r a l a s i a , South Asia, NICs, and ASEAN Source: Economic Development Board, Singapore Table 14 THAILAND - Cumulative Foreign Investment Percentage D i s t r i b u t i o n 1970 1971 1974* 1975 1976* 1977 1978* Large I n d u s t r i a l 62.4 62.9 64.3 62.6 63.2 62.6 63.0 USA 18.1 17.0 16.2 13.8 15.4 15.6 15.4 EEC 11.1 10.6 10.8 10.4 10.3 12.3 12.8 Japan 33.2 35.3 37.3 38.4 37.5 34.7 34.8 Small I n d u s t r i a l 17.5 19.1 19.2 20.4 20.4 22.5 22.3 Other W. Europe 1.7 1.6 1.4 2.6 2.5 2.7 2.6 A u s t r a l a s i a 0.6 0.6 0.6 0.5 0.5 0.7 0.7 NICs 15.3 16.9 16.0 17.3 17.3 19.2 19.0 Third World 1.8 2.4 2.1 4.1 4.0 5.2 5.2 Lati n America 0.3 0.9 0.7 0.8 0.8 1.4 1.4 South A s i a 1.2 1.2 1.0 1.3 1.2 1.5 1.5 West A s i a 0.3 0.3 0.5 2.0 2.0 2.3 2.3 ASEAN 5.7 5.8 5.4 4.3 4.0 4.6 4.5 Indonesia 0.2 0.2 - - - - -Malaysia 3.7 3.9 3.6 2.6 2.6 2.8 2.8 Singapore 1.1 1.1 1.3 1.2 1.0 1.3 1.3 P h i l i p p i n e s 0.7 0.6 0.5 0.5 0.5 0.5 0.5 Not S p e c i f i e d 12.5 9.8 9.0 8.6 8.5 5.0 5.0 To t a l 100 100 100 100 100 100 100 Geographical Dispersion 42.5 44.2 45.2 45.8 45.5 44.7 44.7 (Index) Annual Growth Rate (%) - 2.6 10.1 18.7 4.2 -9.1 4.5 * 1974 as of Jan. 31; 1976 as of June 30; 1978 as of March 31; a l l others as of Dec. 31. Source: Board of Investments, Thailand. 170 trend toward greater d i v e r s i f i c a t i o n , the l e v e l of concentration i s r e l a t i v e l y high, contradicting the image put forward by Singapore of a high degree of geographical d i v e r s i f i c a t i o n ; f igures published by the EDB f o s t e r the idea of close balance by d i v i d i n g the whole into nearly equal portions f o r North America, the EEC and Asia. Nevertheless, an e a r l i e r dependence on the EEC has been changed through d i v e r s i f i c a t i o n to other large i n d u s t r i a l countries. Thailand i s c o n s i s t e n t l y dependent on Japan f o r i t s investment. The r e l a t i v e p o s i t i o n of that s i n g l e source changed l i t t l e during the 1970s, although 1975 saw a peak i n concentration which declined somewhat thereafter. This small reduction i n s p e c i f i c partner concentration appears to have been the r e s u l t of an increased flow of investment from the NICs, now Thailand's second most important source of f o r e i g n investment. The l e v e l of concentration on the large i n d u s t r i a l nations has been consistent-l y high. Overall concentration has increased by a small amount. Thailand has not d i v e r s i f i e d i t s investment sources, and remains p o t e n t i a l l y vulnerable to Japan as the largest single source. Effectiveness O f P o l i c i e s On Investment In general, there has been some progress toward d i v e r s i f i c a t i o n of foreign investment sources. S p e c i f i c partner v u l n e r a b i l i t i e s have been reduced f o r several countries, and only Thailand has f a i l e d to reduce the concentration of foreign investment sources from the e a r l i e s t date to the l a t e s t f o r which there were data a v a i l a b l e . At the same time, most of the countries drew more of t h e i r investment from the large i n d u s t r i a l countries over time. Comparing the foreign investment data with the p o l i c i e s should c l a r i f y these changes. 171 Indonesian p o l i c i e s have had only a marginal e f f e c t . The ambiva-lent a t t i t u d e toward Japan has not c u r t a i l e d increasing dependence on t h i s source of investment. There has been a small growth i n sources intended to balance Japan, the EEC and the NICs, but not enough to f u l f i l l the objective. To be f a i r , Indonesian concern has continued beyond the l a s t date f o r which data were a v a i l a b l e , and further changes may have occurred. Nevertheless, a l l forms of concentration of sources of investment were less i n 1976 than 1967. But despite a fear of compromising i t s foreign p o l i c y autonomy through such concentration, Indonesia remains heavily dependent on the large Western i n d u s t r i a l nations f o r investment, and p o t e n t i a l l y quite vulnerable to Japan. Malaysian p o l i c i e s have been quite e f f e c t i v e i n reducing the r o l e of the former c o l o n i a l power and achieving the most d i v e r s i f i e d pattern of foreign investment i n ASEAN. Recent concern over the r i s i n g r o l e of Japan has stimulated a renewed drive to d i v e r s i f y , which i s too recent to evaluate, but t h i s i s hardly a problem compared to the other ASEAN states. Malaysia i s neither heavily concentrated on the largest i n d u s t r i a l countries, nor p a r t i c u l a r l y dependent on any one of them f o r i t s sources of foreign investment. F i l i p i n o p o l i c i e s of d i v e r s i f i c a t i o n have met with considerable success. The predominant positon of the U.S. was s u b s t a n t i a l l y eroded, both before and a f t e r M a r t i a l law, and the secondary target, Japan, has also l o s t r e l a t i v e ground as a source of foreign investment. P o l i c i e s to a t t r a c t investment from the EEC have showed some r e s u l t s , although small i n e f f e c t on the o v e r a l l balance. Japan and the NICs have become cr e d i b l e counterweights to the U.S. as sources of investment. The Phi l i p p i n e s should no longer be seen as overly dependent on the U.S. i n investment 172 r e l a t i o n s , a large change from the s i t u a t i o n i n the l a t e 1960s. Singapore has also been r e l a t i v e l y e f f e c t i v e i n f o s t e r i n g d i v e r -s i f i c a t i o n . The predominant r o l e of the EEC has been progressively eroded and balanced by the U.S., while p o l i c i e s intended to draw i n Japan as an investment partner have shown less success so f a r , but are the major current focus. A substantial r o l e f o r the smaller Asian countries has been maintained, one of the goals of p o l i c i e s i n the 1970s. The EEC remains Singapore's largest source of investment, yet not a dominant one. At the same time, the e f f e c t s of p o l i c y should not be overestimated; Singapore remains the least d i v e r s i f i e d ASEAN country, and the most concen-trated on the large i n d u s t r i a l countries. Thai concern over the r o l e of Japan has had only marginal e f f e c t s . Increasing concentration up through 1975 was reversed by a small amount thereafter, which corresponds, to the peak of domestic a g i t a t i o n against Japan. A small growth i n investments sourced i n the EEC i s also apparent, but not enough to balance the r o l e of Japan. Some general d i v e r s i f i c a t i o n has taken place since 1975 as well, but not enough to compensate f o r increasing concentration p r i o r to that date. Since there i s no apparent government p o l i c y , these changes cannot be re l a t e d to effectiveness. Thailand i s almost as dependent on Japan as Indonesia i s , and, l i k e Indonesia, has not e f f e c t i v e l y dealt with what i s recognized as a problem. Limitations on D i v e r s i f i c a t i o n Some of the ASEAN countries have made progress toward d i v e r s i f y -ing t h e i r sources of foreign investment. Those with s p e c i f i c government p o l i c i e s to achieve t h i s goal - Singapore, Malaysia and the Ph i l i p p i n e s , have produced r e s u l t s ; Indonesia's v a c i l l a t i o n between p o l i t i c a l concern 173 and pragmatic acceptance, and Thailand's p o l i t i c a l concern (hut lack of p o l i c y ) , have been associated with: l i t t l e or no progress toward d i v e r s i f i c a t i o n . Government p o l i c i e s , then, would appear to be a major var i a b l e i n achieving a wider range of sources of foreign investment. However, the major form of d i v e r s i f i c a t i o n has been rel a t e d to the r e l a t i v e r o l e s of the few largest sources. In 1967, each of the ASEAN countries was dependent on a single foreign source, often the former c o l o n i a l power. This has changed through, balancing the former dominant partner with one other i n Singapore, Malaysia and the Ph i l i p p i n e s , while Indonesia exchanged a large U.S. r o l e f o r a s l i g h t l y smaller Japanese one. Although each of the ASEAN countries but Thailand shows some d i v e r s i f i c a t i o n to a wider global community, each has also maintained, or increased, the r e l a t i v e concentration on the large i n d u s t r i a l countries: close to two-t h i r d s or over f o r a l l but Malaysia and the P h i l i p p i n e s . An important l i m i t a t i o n on d i v e r s i f i c a t i o n i s that there are only a few large c a p i t a l -exporting countries, e s p e c i a l l y f o r r e l a t i v e l y advanced-technology pr o j e c t s . Another l i m i t a t i o n stems fqrom domestic regulation of foreign investment. Each ASEAN country, except Singapore, has attempted to increase the ownership of i t s nationals, although with varied success; Malaysia and Thailand have done so, while Indonesia and the P h i l i p p i n e s appear to have not. A l l f i v e have regulated the terms of foreign p a r t i c i -pation with increasing vigor to meet t h e i r domestic economic goals. 162 Planned divestment of foreign control and closer government regulation unsettle p o t e n t i a l foreign investors, who are c l o s e l y concerned over the s t a b i l i t y of the "investment climate" i n host countries. Published ratings 163 of the ASEAN countries by investment analysts rank, them roughly i n the reverse order of the extent of regulation: Singapore i s highest, 174 Malaysia lower, followed by the Phi l i p p i n e s , Thailand and Indonesia. These ratings are issued to guide prospective investors, and do not ne c e s s a r i l y determine the actual flow of c a p i t a l . S t i l l , domestic regulation has a negative e f f e c t on the a b i l i t y of these countries to a t t r a c t the kind and volume of c a p i t a l considered desirable, and les s choice r e s u l t s i n less bargaining advantage over terms. This tension between the desire to regulate more c l o s e l y and the desire to maintain an a t t r a c t i v e image i n the investment market was quite evident i n the mid-1970s, when global recession dampened the flow of c a p i t a l , causing several of the ASEAN states to moderate t h e i r regulations and increase overseas promotional a c i t i v i t i e s . It i s i n order to circumvent these l i m i t a t i o n s that d i v e r s i f i c a -t i o n has become more a t t r a c t i v e as a strategy. Not only does d i v e r s i f i c a -t i o n serve the p o l i t i c a l goal of reducing the p o t e n t i a l influence of economic partners, but i n the case of investment, i t also allows an increased flow of foreign investment by tapping a larger market. In a global system characterized i n investment r e l a t i o n s by oligopoly and h o s t i l i t y to regulation, d i v e r s i f i c a t i o n can be achieved through government p o l i c y . 175 NOTES 1. ASEAN B r i e f i n g 10 (May 1979). 2. V. Kanapathy, "Investments i n ASEAN: Perspectives and Prospects," United Malayan Banking Corporation, Economic Review 15,1 (1979), p.19. 3. Indonesia, 1972; Malaysia, 1976; Phi l i p p i n e s , 1975; Singapore, 1975, Thailand, 1975. Sources: Indonesia, Singapore (manufacturing invest-ment only) - John Wong, ASEAN Economies i n Perspective (Philadelphia: I n s t i t u t e f o r the:Study of Human Relations, 1979), p. 178; Thailand, Ph i l i p p i n e s , Boards of Investment; Malaysia, FIDA, Annual Report, 1977 (Kuala Lumpur, 1978), p. 224 (Pioneer Companies). It should be pointed out that comparisons of t h i s nature are i n d i c a t i v e only, as the basis of national s t a t i s t i c s vary too widely to allow close comparison. 4. The l i t e r a t u r e on MNCs i s quite large, but concise summaries are con-tained i n David Blade and Robert Walters, The P o l i t i c s of Global  Economic Relations (Englewood C l i f f s : P rentice-Hall, 1976), pp.76-126, and Eli z a b e t h Smythe, "Foreign Investment, Foreign P o l i c y and Interstate Relations: Towards a Propositional Inventory," Paper delivered at the International Studies Associsation, March 1980. Standard works include: Raymond Vernon, Sovereignty at Bay (New York: Basic Books, 1971); Jack Behrman, National Interests and the Multinational Enterprise (Englewood C l i f f s : Prentice-Hall, 1970); Richard Barnet and Ronald Muller, Global Reach (New York: Simon and Schuster, 1974); Robert G i l p i n , U.S. Power and the Multinational Corporation (New York: Basic Books, 1975). 5. Jon Halliday, Gavin McCormack, Japanese Imperialism Today (New York: Monthly Review Press, 1973), pp. 31-49; Raul S. Manglapus, Japan i n Southeast A s i a : C o l l i s i o n Course (New York: Carnegie Endowment f o r f o r International Peace, 1976), pp. 5-23. 6. Franklin Weinstein, "Multinational Corporations and the Third World: The Case of Japan and Southeast A s i a , " International Organization 30, 3 (Summer 1976), pp. 373-404 (quote at 378). 7. Buu Hoan, "Asia Needs a New Approach to the Mul t i n a t i o n a l s , " Lloyd Vasey, ed., ASEAN and a P o s i t i v e Strategy f o r Foreign Investment (Honolulu: U n i v e r s i t y Press of Hawaii, 1978); Donald Sherk, "Foreign Investment i n Southeast Asia: A Reconsideration," M.W. Zacher, R.S. Milne, eds., C o n f l i c t and S t a b i l i t y i n Southeast Asia (Garden C i t y , N.Y.: Anchor Books, 1974); John Wong; Thomas A l l e n , " P o l i c i e s of ASEAN Countries Toward Direct Foreign Investment," A. Kapoor, ed., Asian Business and  Environment i n T r a n s i t i o n (Darwin: Princeton U n i v e r s i t y Press, 1976). 8. Richard Barnet, Ronald Muller, pp. 195, 203. 9. Quoted i n the Mirror, May 27, 1974, i n an address to the Singapore Inter-national Chamber of Commerce. 176 10. This "Ratings Game" i s formalized i n in t e r n a t i o n a l business reports comparing national investment .climates. See ASEAN Report, Vol. I (Hong Kong: Dow-Jones, 1979), pp. 142-143; Business International A s i a / P a c i f i c , reported i n C h r i s t i a n Science Monitor, Sept. 20, 1979. 11. Helmut C a l l i s , Foreign C a p i t a l i n Southeast A s i a (New York: I n s t i t u t e of P a c i f i c Relations, 1942), p. 34. B r i t i s h holdings were about 14% and American 7% (1937). 12. Mohammad S a d l i , "Foreign Investment i n Developing Countries: Indonesia," Peter Drysdale, ed., Direct Foreign Investment i n Asia and the P a c i f i c (Toronto: U n i v e r s i t y of Toronto Press, 1972), pp. 202-203. 13. ". .. [ N e v e r t h e l e s s t h i s p r i n c i p l e of r e l y i n g on our own capacity should not lead to reluctance to make use of fore i g n c a p i t a l , technology and s k i l l , so long as these are t r u e l y devoted to serving the economic in t e r e s t s of the people without causing dependence on foreign countries." Law 1 of 1967, Preamble-Richard Robinson,'Toward a Glass Analysis of the Indonesian M i l i t a r y Bureaucratic State," Indonesia 25 (A p r i l 1978), pp. 17-39. 14. The Indonesian i n t e r e s t s are to become majority partners within 10 years, from an actual ownership of 20% - Indonesian Investment FdCus (August 1979). 15. Indonesia Development News 2, 2 (October 1978); the " t h i r d generation' mining contracts have unsettled prospective investors - Far Eastern Economic Review (FEER), Feb. 1, 1980, pp. 51-52. 16. S a d l i , p. 215. 17. B a r l i Halim, quoted i n S t r a i t s Times, Feb. 16, 1977. 18. Wong, pp. 59-60. 19. Asia Research B u l l e t i n (ARB), March 31, 1979, p. 544; Indonesia Develop-ment News 2, 10 (June 1979); Kuhn Loeb Lehman Brothers International, et a l . , The Republic Of Indonesia (1979), p. 21. 20. Calculated from Indonesia Development News 3, 7 (March 1980). 21. From a flow of approximately US $500 m i l l i o n i n 1975 to less than US $300 m i l l i o n i n 1978 - "Indonesian Survey" (supplement to Euromoney), January 1979, p. 4. 22. FEER, A s i a Yearbook, 1978 (Hong Kong, 1979), p. 206. P r e s i d e n t i a l Decrees i n 1977 (Numbers 53, 54) streamlined the bureaucratic procedures f o r processing investment and modified the incentives offered, both i n an attempt to strengthen the investment climate. 23. ASEAN B r i e f i n g 10 (May 1979). 177 24. J . Panglaykim, "Economic Cooperation: Indonesian-Japanese Joint Ventures," Asian Survey 18, 3 (March 1978), pp. 247-260; Steven Kohlhagen, "Host Country P o l i c i e s and the Flow of Direct Foreign Investment i n the ASEAN Countries," Hal Mason, ed., International Business i n the P a c i f i c Basin (Toronto: D.C. Heath Co., ^  1978), pp. 100-101. 25. FEER, March 10, 1978, pp. 45-47. 26. ARB, J u l y 31, 1979, p. 587. 27. Charles Morrison, "Southeast Asia i n a Changing International Enrivon-ment: A Comparative Foreign P o l i c y Analysis of Four ASEAN-Member Countries" (Ph.D. Thesis, John Hopkins University, 1976), pp. 277-87; Weinstein. 28. The date 1969 was suggested as the o r i g i n of t h i s concern. Author interview, Indonesian Embassy, Ottawa (May 1980). 29. Soedjatmoko, "Problems and Prospects f o r Development in Indonesia," Asia 19 (1970), pp. 20-21. 30. New Nation, J u l y 15, 1974. 31. Author interview, Indonesian Embassy, Ottawa (May 1980). 32. H.S. Kartadjoemena, The P o l i t i c s of External Economic Relations: Indonesia's Options i n the Post-Detente Era (Singapore: I n s t i t u t e of Southeast Asian Studies, 1977), p. 112; FEER, Feb. 23, 1979, pp. 37-39. 33. Indonesia Development News 2, 1 (Sept. 1978). 34. Louis Wells, V ' E l l a Warren, "Developing Country Investors i n Indonesia," B u l l e t i n of Indonesian Economic Studies 15, 1 (March 1979), pp. 69-84. 35. "Indonesian Survey" (supplement to Euromoney), January 1979, p. 10. 36. C a l l i s , p. 52. 37. Nikar Sarker, Foreign Investment and Economic Development i n Asia (Bombay: Orient Longman, Ltd., 1976), Table 5, 2, p. 90; Jayaratnam Saravanamuttu, "A Study of the Content, Sources, and Development of Malaysian Foreign Policy, 1957-1975" (Ph.D. Thesis, U n i v e r s i t y of B r i t i s h Columbia, 1976), pp. 48-57. 38. Tun Ismail, quoted i n FEER, August 29, 1975 ( r e f e r r i n g to petroleum). 39. Tengku Razaleigh, S t r a i t s Times (Malaysia), J u l y 7, 1975. 178 40. Wong, pp. 62-67; P.Arudsothy, ''Malaysia,'^Sinichilchimura, ed., The Economic Development of East and Southeast Asia (Honolulu: U n i v e r s i t y Press of Hawaii, 1975), pp. 116-117. 41. Third Malaysia Plan (Kuala Lumpur: Government P r i n t e r s , 1976), p. 275. 42. Foreign A f f a i r s Malaysia 8, 4 (December 1975), pp. 60-68. 43. Third Malaysia Plan (TMP), p. 56. 44. Second Malaysia Plan, 1971-1975 (Kuala Lumpur: Government Pr i n t e r s , 1971), p. 92. 45. The effectiveness of Malaysian (And Singaporean) free trade zones have stimulated a "second generation" of- imitations i n the region - FEER, May 18, 1979, pp. 76-78; the UN I n d u s t r i a l Development Organization (UNIDO) singled out Malaysia of a l l the countries i t surveyed as the only one where i n d u s t r i a l estates made a "major contribution" to i n d u s t r i a l i z a t i o n and employment - UNIDO, The Effectiveness of Indus- t r i a l Estates i n Developing Countries (New York: UNIDO, 1978), pp.10-11. 46. TMP, p. 86. 47. On investment p o l i c i e s , see A l l e n , Kohlhagen, pp.101-102; the author also conducted interviews with MIDA o f f i c i a l s to c l a r i f y several points. 48. From 1968 u n t i l A p r i l 1979 the agency was known as the Federal I n d u s t r i a l Development Authority - FIDA. 49. FIDA, Annual Report, 1977 (Kuala Lumpur, 1978), p. 172. 50. On the NEP, see: R.S. Milne, "The P o l i t i c s of Malaysia's New Economic P o l i c y , " P a c i f i c A f f a i r s 49, 2 (Summer 1976), pp. 235-262; R.S. Milne, Diane Mauzy, P o l i t i c s and Government i n Malaysia (Vancouver: Un i v e r s i t y of B r i t i s h Columbia Press, 1978), pp. 321-351. 51. Second Malaysia Plan, p. 40. 52. S t r a i t s Times (Malaysia), Feb. 21, 1974. 53. ARB, J u l y 31, 1978, p. 468; 30% of equity must be reserved f o r Malay ownership (in 1976 and 1977 over 40% was a c t u a l l y reserved - FIDA  Annual Report, 1977, p. 183). 54. The share of Malay i n d i v i d u a l s i s expected to remain quite small, only 7.4% i n 1990, leaving 22.6% f o r government investment funds - TMP, p.87; however i n 1976 pri v a t e i n t e r e s t s took up ju s t over 50% of j o i n t venture bumiputra shares - FIDA Annual Report, 1977, p. 183. 55. R.S. Milne (1976), pp. 243-250. 179 56. TMP, p. 184; lagging Chinese investment has led to an increase in the planned f o r e i g n share f o r 1976-1980 - Linda Lim, ''The P o l i t i c a l Economy of Foreign Investment i n Malaysia," Paper, Association f o r Asian Studies (March, 1980), p. 14. 57. TMP, p. 273. 58. Tun Razak, reported i n S t r a i t s Times (Malaysia), Feb. 21, 1974. 59. By l a t e 1979 70-80% of firms were registered - author interview, MIDA (October 1979). See ARB , May 31, 1975, pp. 87-88, June 30, 1975, p. 98, J u l y 31, 1977, pp. 345-348; Milne and Mauzy, pp. 344-51. 60. Louis Kraar, Stephen Blank, "Malaysia: The High Cost of Affirmative Action," A s i a (March/April 1980), p. 6-9. 61. FIDA Annual Report, 1977, pp. 153, 157; FEER, Aug. 3, 1979, pp. 36-37. 62. See the report on M i n i s t e r of Trade and Industry, Datuk Hamzah, giving such assurances to Swiss investors - Malaysian Digest, October 15, 1977, p. 4. 63. ASEAN B r i e f i n g 16 (November 1979); FEER, Aug. 3, 1979, pp. 36-37; Milne and Mauzy, pp. 348-350. 64. Asian Wall Street Journal, Sept. 6, 1979. 65. FEER, June 16, 1978, pp. 46-47, and Feb. 23, 1979, pp. 41-44; Tadoyoshi Yamada, "Foreign Investment i n the ASEAN Region," Lloyd Vased, ed., ASEAN and a P o s i t i v e Strategy f o r Foreign Investment (Honolulu: University Press of Hawaii, 1978), p. 106. 66. Author interview, MIDA (October 1979). 67. TMP, p. 89. 68. C a l l i s , p. 22 (1936). Another 20% was from Spain. 69. See Renato Constantino, L e t i z i a Constantino, The P h i l i p p i n e s : The Con-tinuin g Past (Quezon C i t y : Foundation f o r N a t i o n a l i s t Studies, 1978), pp. 269-311; Teodora Agoncillo, Milagros Guerrero, History of the  F i l i p i n o People F i f t h E d i t i o n (Quezon C i t y : R.P. Garcia, 1977), pp. 563-568; Amado Castro, et a l . , "The P h i l i p p i n e s , " Shimichi Ichimura, ed., The Economic Development of East and Southeast Asia (Honolulu: U n i v e r s i t y Press of Hawaii, 1975), pp. 181-182, 221-222; David Rosenberg, ed., Marcos and M a r t i a l Law i n the P h i l i p p i n e s (Ithaca: Cor n e l l U n i v e r s i t y Press, 1979), p. 290. 180 70. Ferdinand Marcos, "Redefining the Role of Foreign Investment i n a Developing Economy," Lloyd Vasey, ed., ASEAN and A P o s i t i v e Strategy  f o r Foreign Investment (Honolulu: U n i v e r s i t y Press of Hawaii, 1978), p. 48. 71. See f o r example, Robert Stauffer, "The P o l i t i c a l Economy of a Coup: Transnational Linkages and P h i l i p p i n e P o l i t i c a l Response," Journal of  Peace Research 11, 3 (1974), pp. 161-177. 72. Cesar Vir a t a , "Foreign Investment i n Developing Countries: The P h i l i p p i n e s , " John Drysdale, ed., Direct Foreign Investment i n Asia  and the Pac i f i c (Toronto: Uni v e r s i t y of Toronto Press, 1972), p. 259. 73. World Bank, The P h i l i p p i n e s : P r i o r i t i e s and Prospects f o r Development (Washington, D.C: 1976), there was a net outflow of US $380 m i l l i o n , 1955-70, p. 338. 74. S p e c i f i c investment areas are l i s t e d i n the annual "Investment P r i o r i t i e s Plan." 75. 70% of firms registered f o r incentives were export-oriented i n 1977 -Board of Investment, Export B u l l e t i n 5, 3 § 4 ( A p r i l 1977); i n 1974 o f f i c i a l emphasis s h i f t e d to promotion of export industries - Four- Year Development Plan, FY 1974-1977 (Manila, 1973), p. 66. 76. Marcos, p. 48. 77. Investment Incentives Act, 1967; Foreign Business Regulation Act, 1968; Export Incentives Act, 1970. A l l were ammended by P r e s i d e n t i a l Decree i n 1973. The p o l i c y on j o i n t ventures i s set out i n Five Year  P h i l i p p i n e Development Plan, 1978-1982 (Manila, 1977), p. 404. 78. FEER, Feb. 23, 1979, pp. 52-53. 79. V i r a t a , p. 259. 80. Four-Year Development Plan, FY 1974-77 (Manila, 1973), pp. 42, 69. 81. Calculated from Board of Investment f i g u r e s . 82. Five Year P h i l i p p i n e Development Plan, 1978-1982, p. 398. 83. FEER, March 10, 1978, pp. 47-48. 84. Mamoru Tsuda, A Preliminary Study of Japanese-Filipino J o i n t Ventures (Quezon C i t y : Foundation f o r N a t i o n a l i s t Studies, 1978), pp. 3-7. 85. Board of Investments, Export B u l l e t i n 3, 1 (January 1975); S t r a i t s Times, A p r i l 4, 1977; FEER, Feb. 23, 1979, pp. 52-55; Asia Week, March 7, 1980, pp. 38-9. 181 86. Author interview, ASEAN Director ( P h i l i p p i n e s ) , Manila (October 1979). 87. Marcos announcement, S t r a i t s Times (Malaysia), May 3, 1973 and New Nation, May 3, 1973; Board of Investment reports i i i Export Bu 11 et i n (August 1973 to December 1977); ARB, May 31, 1978, pp. 443-444. 88. Five Year P h i l i p p i n e Development Plan, p. 406. 89. Head, Finance Branch, P o l i c y Coordinating S t a f f , NEDA (Manila, October 1979). 90. Lim Joo-Jock, "Foreign Investment and I n d u s t r i a l i z a t i o n i n Singapore: Adaptive P o l i c i e s and Responses i n an I n t e r n a t i o n a l l y Competitive S i t u a t i o n , " Lim Joo-Jock, et a l . , Foreign Investment i n Singapore: Some Broader Economic aiid S o c i o - p o l i t i c a l Ramifications (Singapore: I n s t i t u t e of Southeast Asian Studies, 1977), p. 16; the opposition p o s i t i o n i s from personal discussions with an ac t i v e member of Barisan. 91. Lee Soo-Ann, I n d u s t r i a l i z a t i o n i n Singapore (Melborne: Longmans, 1973); Wong, pp. 71-76. 92. Chia Siow Yue, "Singapore's Trade Strategy and I n d u s t r i a l Development, with Special Reference to the ASEAN Common Approach to Foreign Economic P o l i c y , " Paper, 10th P a c i f i c Trade and Development Conference (ANU, 1979), p. 20. 93. O f f i c i a l l y , these workers number 40,000, but there are many more working i l l e g a l l y , perhaps as many as 100,000. 94. 1963 fi g u r e s are from Economic Development Board (EDB), Annual Report 1963 (Singapore: 1964), p. 85; 1972 calculated from Kunio Yoshihara, Foreign Investment and Domestic Response (Singapore: Eastern Univer-s i t i e s Press, 1976), Table S.10, pp. 244-247. 95. Yoshihara, p. 148. 96. The d i v i s i o n between l o c a l and fo r e i g n c a p i t a l i s r e f l e c t e d i n t h e i r organizations. International companies are represented i n the Inter-national Chamber of Commerce, while the Chinese Chamber of Commerce i s composed of l o c a l , smaller, mostly commercial i n t e r e s t s - Interview, Secretary General, Federation of Chambers of Commerce and Industry (Singapore, September 1979). 97. Mr. Hwang Peng Yuan, reported i n EDB Annual Report 1977-78. An interview with an EDB o f f i c i a l confirmed that h i s r o l e as the head of the EDB's London o f f i c e had prepared h i s secondment, and that he retained a c t i v e l i n k s to the EDB (Singapore, September 1979). 98. Except f o r the Singapore government's holdings, which have now been transferred to the administration of M i n i s t r y of Finance, Inc. 182 99. Information on the current p o l i c y i s drawn from a review of the EDB's annual reports and interviews with an o f f i c i a l of the EDB in September 1979. 100. Chia (1979), p. 9. 101. A minimum of S$250,000 was required, Much of the investment l i s t e d as o r i g i n a t i n g i n Hong Kong i s derived from t h i s program, as many of the owners took residence status i n Singapore as insurance against future p o l i t i c a l developments i n Hong Kong - interview, EDB (September 1979). 102. S$49 m i l l i o n of government funds by mid-1978 -'EDB'Annual Report 1977-78, pp. 22-24. 103. Chua Wee Meng, "The Singapore Economy: Past Performance, Current Structure and Future Growth Prospects," Southeast Asian A f f a i r s 1977 (Singapore: I n s t i t u t e of Southeast Asian Studies, 1978), pp. 222-223. 104. FEER, May 12, 1978, pp. 40-41, and October 19, 1979, pp. 81-83; Asian Wall Street Journal, Sept. 6, 1979. 105. Interview, Secretary-General, Singapore Federation of Chambers of Commerce and Industry (Singapore, Sept. 1979). 106. Business Times (Singapore), Sept. 1 and 21, 1979. 107. The P h i l i p p i n e s has several j o i n t ventures i n Indonesia i n raw materials projects; F i l i p i n o planners envision considerable economic complemen-t a r i t y with the eastern portion of Indonesia - Board of Investments ( P h i l i p p i n e s ) , Export B u l l e t i n 5, 1 (Jan. 1977). Some of these funds may i n f a c t come u l t i m a t e l y from U.S. sources. 108. Interview, EDB (Singapore, Sept. 1979). 109. 23 from non-EEC Europe, 1 from Canada, 12 from the NICs, 19 from A u s t r a l i a ; EDB, Major International Companies Manufacturing i n Singapore (Singapore: EDB, 1979). 110. EDB Annual Report, 1977-1978, p. 33. 111. Ibid., two a d d i t i o n a l EDB o f f i c e r s were transferred to Japan to support t h i s e f f o r t . 112. Labor Mini s t e r Ong Pong Boon, S t r a i t s Times, Oct. 3, 1973. 113. Lim, 1977, pp. 10, 218-219. 114. C a l l i s , p. 70. 183 115. James Ingram, Economic Change i n Thailand, 1850-1970 (Stanford: Stanford U n i v e r s i t y Press, 1971), pp. 229-232; Ker Sin Tze, Public  Enterprise i n ASEAN 116. Prochom Chomchai, "Thailand," S i n i c h i Ichimura, ed., The Economic Development of East arid Southeast Asia (Honolulu: University Press of Hawaii, 1975), pp. 140-172; Wong, pp. 76-79. 117. Ingram, p. 299. 118. Sarkar, p. 62. 119. ARB, September 30, 1978, p. 488, quoting P h i s i t Pakkassem, Director, National Economic and S o c i a l Development Board (Thailand). 120. Figures from the 1960s calculated from Ingram, p. 291; f o r the 1970s from the Board of Investments data gathered by author; 1970 - 33.4%, 1974 - 30.8%, 1977 - 27.0%, 1978 - 27.4%. 121. D e t a i l s i n A l l e n , pp. 77-78. 122. Amnuay Viravan, "Foreign Investment i n Developing Countries: Thailand," Peter Drysdale, ed., Direct Foreign Investment in Asia arid the P a c i f i c (Toronto: U n i v e r s i t y of Toronto Press, 1972), p. 234. Amnuay was Chairman of the Thai Board of Investments. 123. Weinstein, pp. 387-396; Canadian Embassy informants say that the laws are often ignored, that delays produce widespread bribery, and that approvals often hinge on f a c t i o n a l gain c a l c u l a t i o n s (interview, Bangkok, October 1979). 124. G.A. Marzouk, Economic Development and P o l i c i e s : Case Study of Thailand (Rotterdam: Rotterdam Uni v e r s i t y Press, 1972), pp. 230-234; S t r a i t s Times, Jan. 26, 1977; FEER, Asi a Yearbook 1978 (Hong Kong: FEER, 1978) p. 326. 125. S t r a i t s Times, Sept. 22, 1979; ARB, Jan. 31, 1979. 126. FEER, Feb. 23, 1979, pp. 52-53. 127. Sarasin Viraphol, Directions i n Thai Foreign Pol i c y (Singapore: I n s t i -tute of Southeast Asian Studies, 1976), pp. 35-36; S e i j i Naya, Narongchai" Akrasanee, "Thailand's International Economic Relations with Japan and the U.S.: A Study of Trade and Investment Interactions," L e s l i e Castle, Frank Holmes, eds., Cooperation arid Development iri the  A s i a / P a c i f i c Region: Relations Between Large arid Small Couritries (Tokyo: Japan Economic Research Center, 1976), pp. 94, 121. 128. Amnuay, pp. 236-237. 184 129. FEER, A p r i l 11, 1980, p. 44. 130. Sarasin, p. 36; S t r a i t s Times, Aug. 26, 1976. 131. FEER, Feb. 23, 1979, pp. 51-53. 132. FEER, March 10, 1978, p. 39. 133. The most convenient summary of the various dialogues i s 10 Years ASEAN (Jakarta: ASEAN Secretariat, 1978), pp. 220-229. 134. FEER, June 9, 1978, p. 30 (interview with Rajaratnam). 135. Reports on the conference are contained i n : New S t r a i t s Times, Aug. 8, 1977 and Aug. 24, 1978; S t r a i t s Times, Nov. 6, 1978; FEER, Nov. 24, 1978, pp. 44-47; A l l e n , pp. 101-102. 136. This section i s based on interviews with Canadian diplomatic personnel i n the ASEAN countries and Ottawa, and CIDA o f f i c i a l s i n Ottawa; see also CIDA, I n d u s t r i a l Cooperation with Developing Countries (Ottawa, 1977) . 137. S. Rajaratnam, "Opening Address," Lee Soo Ann, ed., Economic Relations Between West Asi a and Southeast A s i a (Singapore: I n s t i t u t e of South-east Asian Studies, 1978) (papers of a conference held November 14-16, 1977); FEER, March 31, 1978, pp. 36-40. 138. S t r a i t s Times, A p r i l 8, 1977; Economist, November 25, 1978, p. 60. 139. Reports on the l a t t e r conference: ASEAN Business Quarterly 3, 1 (1979), pp. 24-25; V. Kanapathy, "Investments i n ASEAN: Perspectives and Prospects," UMBC Economic Review 15, 1 (1979), p. 29; FEER, Feb. 23, 1979, pp. 37-38, and March 16, 1979, p. 117; Asian Finance (Hong Kong) 5, 4 ( A p r i l 1979), p. 18. 140. FEER, December 1, 1978, p. 57. 141. "ASEAN and EEC: Working Toward a Growth Pact," Asian Finance 5, 1 § 2 (Feb. 1979), pp. 113-115. 142. FEER, February 23, 1979, p. 37. 143. FEER, May 30, 1968, p. 46. 144. So f a r only a 70% share of the Indonesian urea projects has been agreed to, about US$300 m i l l i o n of the US$1 b i l l i o n eventually expected -Indonesia Development News 3, 3 (November 1979). 145. S t r a i t s Times, August 8, 1977. 185 146. ARB, March 31, 1972, p. 823. 147. ASEAN B r i e f i n g 18 (January 1980). 148. New S t r a i t s Times, J u l y 6, 1977; Malaysian Digest, September 15, 1977; FEER, September 23, 1977, pp.124-129. 149. U.S. Department of State, B u l l e t i n , Sept. 18, 1978, pp. 19-25; Indonesia Development News 1, 8 (August 1978), OPIC and EXIMBANK were sent through the region to p u b l i c i s e U.S. i n t e r e s t i n investment. 150. S t r a i t s Times, J u l y 25, 1979; ASEAN B r i e f i n g 10 (May 1979) and 13 (August 1979). 151. M i n i s t r y of Trade, P h i l i p p i n e s (October 1979). 152. FEER, August 19, 1977, p. 28 and Sept. 30, 1977, p. 51. 153. New Nation, August 8, 1977; S t r a i t s Times, May 30, 1978. 154. New S t r a i t s Times, May 11, 1978. 155. Asiaweek, August 3, 1979. 156. Interview, MIDA (Kuala Lumpur, October 1979). 157. Thomas A l l e n , p. 25. 158. ASEAN B r i e f i n g 17 (December 1979); FEER, February 1, 1980, pp. 34-6. 159. A p a r t i c u l a r l i m i t a t i o n with the data from the P h i l i p p i n e s i s that s t a t i s t i c s were c o l l e c t e d f o r the f i r s t time i n 1968, and only f o r new investment from that time, leaving the bulk of U.S. investment i n place before that date unrecorded. 160. Department of S t a t i s t i c s , Census of Manufacturing Industries, 1968 (Kuala Lumpur, 1968), Table 30. Reproduced i n Nikar Sarkar, ed., Foreign Investment and Economic Development i n A s i a (Bombay: Orient Longman, 1976), p. 90. 161. As noted above these f i g u r e s may understate the U.S. r o l e . Stauffer, p. 166 c i t e s estimates that 80% of foreign investment i n 1970 was from the U.S., compared to government fi g u r e s of 55.4%. 162. See Stephen Korbin, "Foreign Enterprise and Forced Divestment i n the LDCs," International Organization 34, 1 (Winter, 1980), pp. 65-88. 163. The C h r i s t i a n Science Monitor, September 20, 1979 published Business International's comparative ratings f o r 1976-1979; the Dow-Jones assessment f o r 1979 was published i n A l l e n , Vol. I, p. 142. 186 CHAPTER 6 DEPENDENCE AND GLOBAL ORGANIZATIONS An Approach to Power i n Global Organizations  The Importance of Organization It i s a commonplace observation that developing countries lack an adequate measure of organization through which to mobilize t h e i r resources, compared to more developed nations. As Marshall Singer points out i n discussing the d i s p a r i t y i n power between i n d u s t r i a l i z e d and developing areas: "impotence - lack of wealth, organization, and status -tends to generate s t i l l f u r t h e r impotence. Hence, the tendency i s f o r the more powerful countries to get s t i l l more powerful, while the weaker countries get r e l a t i v e l y weaker."'* However, Singer goes on to point out that a l t e r i n g any one of these v a r i a b l e s provides the opportunity to change the d i s p a r i t y . Better organization can be a t o o l to increase r e l a t i v e power. Samuel Huntington shares t h i s emphasis on domestic organi-zation as an element of power, but h i s observation i s applicable to the i n t e r n a t i o n a l arena as well: "In the modernizing world he controls the 2 future who organizes i t s p o l i t i c s . " As was pointed out i n Chapter 2, writers on i n t e r n a t i o n a l p o l i t -i c a l economy are concerned with the issue of p a r t i c i p a t i o n i n i n t e r n a t i o n a l organizations. Interdependence writers advocate the use of i n t e r n a t i o n a l "regimes" (formal or informal organizations) to manage the e f f e c t s of exchanges among countries, while dependency writers support the creation of 187 i n s t i t u t i o n a l arrangements among developing countries to h o l s t e r t h e i r a b i l i t y to bargain with the i n d u s t r i a l countries. Increasing memberships i n i n t e r n a t i o n a l i n s t i t u t i o n s on a s e l e c t i v e basis presumably augments the a b i l i t y of nations to exercise control over t h e i r i n t e r n a t i o n a l r e l a t i o n -ships. Perhaps most immediately relevant to control i s the r o l e played by global organizations i n making information a v a i l a b l e . As O'Brien and 3 H e l l e i n e r have pointed out, developing countries are r e l a t i v e l y disadvan-taged i n t h e i r bargaining with more developed countries because of d i f f e r e n -4 t i a l access to up-to-date information of a l l sorts. Information sharing through i n t e r n a t i o n a l i n s t i t u t i o n s may equalize bargaining resources. Where one gets information may also be of s i g n i f i c a n c e . As Huntington has pointed out, the degree of control exercised by governments over access to t h e i r nationals structures influence, with external actors predominating where governments remain passive.*' An example of t h i s i s provided by the observation of a diplomat i n Singapore that formerly i t was the case that a bureaucrat encountering a problem would d i r e c t h i s inquiry to London, whereas now i t i s much more common that another ASEAN o f f i c i a l i n a s i m i l a r capacity would be contacted. As a r e s u l t of t h i s shared information, l o c a l solutions may be developed with the help of contacts made through the regional organization. This changes the structure of influence between developed and developing countries by a l t e r i n g i t s i n s t i t u t i o n a l basis. There are several d i f f e r e n t types of global organizations. The most v i s i b l e , but fewest i n number, are formal intergovernmental organiza-tions (IGOs), such as the United Nations. There are a much larger number of non-governmental i n t e r n a t i o n a l organizations (NGOs), composed of members acting i n a pri v a t e capacity (even i f they are agents of a government); 188 these tend to be less v i s i b l e , but do not ne c e s s a r i l y lack influence, as the T r i l a t e r a l Commission demonstrates. Possibly the largest i n number, but the least v i s i b l e , are informal personal r e l a t i o n s h i p s between in d i v i d u a l s of one nation and in d i v i d u a l s of another. Informal networks are thought to be quite important, and some, such as Chinese s o c i e t i e s and family groups, are reputed to be i n f l u e n t i a l i n channeling trade, invest-ment and other economic resources throughout A s i a . Unfortunately, few e f f e c t i v e means to research these organizations e x i s t , due to the secrecy surrounding them; thus, these w i l l have to be l a r g e l y excluded from an a l y s i s . I w i l l therefore focus on IGOs and NGOs - only a part of the organizational system. Third World p a r t i c i p a t i o n i n the in t e r n a t i o n a l networks of IGOs and NGOs i s r e l a t i v e l y small, although apparently growing. Membership i n intergovernmental organizations i s concentrated i n the more economically developed regions, p a r t i c u l a r l y Europe and North America, and sparser i n A f r i c a and Asia; the propensity to j o i n IGOs i s thought to be c l o s e l y r e l a t e d to the . l e v e l of economic development.^ NGO membership i s s i m i l a r l y skewed. As of 1966, over one-half of a l l NGO memberships were from the developed Western countries, while non-communist Asia was quite 7 under-represented. Table 15 shows that the ASEAN states are members of f a r fewer global organizations than the developed countries; although they are c l o s i n g the gap, i t i s so large that the ASEAN countries are not l i k e l y to catch up i n the near future. An increase i n p a r t i c i p a t i o n through membership would appear to be the f i r s t step i n augmenting the influence of developing countries. However, p a r t i c i p a t i o n i s not ne c e s s a r i l y the equivalent of e f f e c t i v e influence. As Cox and Jacobson have documented f o r the cases of 189 Table 15 ASEAN Representation i n Global Organizations (in percent) 1960 1966 1977 Indonesia 16.7 13.9 18.2 Malaysia 10.6 14.0 17.8 Phi l i p p i n e s 18.9 21.2 22.1 Singapore 5.2 6.3 14.1 Thailand 13.1 13.7 18.1 (for comparison) France 83.8 79.4 75.3 USA 57.6 57.3 57.4 Japan 38.9 43.2 45.6 Total IOs 1165 1596 2112 Source: Union of International Associations. Yearbook of International Organizations, 1978 (Brussels: UIA, 1978), S t a t i s t i c a l summary Table 4. 190 some of the more important i n t e r n a t i o n a l organizations, the s t r a t i f i c a t i o n of influence has c o n s i s t e n t l y favored the r i c h Western countries, g i v i n g g them predominance even i n organizations with a u n i v e r s a l membership. 9 Simple p a r t i c i p a t i o n , even with the active involvement of the government, i s an inadequate measure of the structure of influence. How, then, can we approach strategies of change i n global organ-i z a t i o n s i n a manner consistent with the emphasis on reducing dependence? Short of studying each organization and recommending s p e c i f i c p o l i c i e s to improve the performance of each country, there are two ways, both r e l a t e d to d i v e r s i f i c a t i o n through regionalism. F i r s t , members of a regional organ-i z a t i o n can create i n s t i t u t i o n a l t i e s among groups with a s i m i l a r focus throughout the region, to allow them to act as bargaining u n i t s with external actors. These regional non-governmental i n t e r n a t i o n a l organizations (RNGOs) can r e l y on information sharing and group negotiating a c t i v i t i e s to increase t h e i r influence. Second, governments of a regional organization can insure that t h e i r p o t e n t i a l influence i s maximized by a l l being members of the same IGOs, and acting as a bloc on matters of mutual i n t e r e s t . ^ This t r e a t s the d e f i c i e n c i e s of simple p a r t i c i p a t i o n by extending the exam-inati o n to the structure of memberships. Both st r a t e g i e s would increase the p o t e n t i a l influence of develop-ing countries i n global organizations. That i s not to say that t h e i r actual influence i n p a r t i c u l a r organizations w i l l increase. In some kinds of IGOs governmental memberships introduce c r i t e r i a of influence external to the organization i t s e l f , derived from the power of the members, while informal networks seem to be quite i n f l u e n t i a l i n other organizations.'*'* This approach side-steps the issue of actual influence, which would have to be based on research into cases of decision making, to address the issue of 191 p o t e n t i a l influence, or s t r u c t u r a l power, which i s based on the pattern of r e l a t i o n s h i p s . This chapter examines how ASEAN governments and groups have changed the pattern of t h e i r involvement i n global organizations from several perspectives. F i r s t , the pattern of memberships i n IGOs w i l l be examined to determine whether p o t e n t i a l influence has increased. Second, the patterns of membership of ASEAN i n d i v i d u a l s and groups i n NGOs w i l l be described. Third, the growth of RNGOs, and t h e i r a c t i v i t i e s w i l l be described; since these organizations are c l o s e l y connected with economic a c t i v i t i e s i n the ASEAN area, greater d e t a i l w i l l be provided to supplement e a r l i e r discussions of trade and investment issues, and complete the i n v e s t i g a t i o n of i n t e r -national p o l i t i c a l economy i n the ASEAN area. Since r e l i a b l e information on memberships i n the RNGOs are not a v a i l a b l e , they w i l l not be included i n the s t a t i s t i c a l descriptions of IGOs and NGOs. F i n a l l y , I w i l l return to the issues of d i v e r s i f i c a t i o n and dependence. A Note on Methods In examining the structure of memberships i n IGOs I have adopted a modified version of s o c i a l network theory. Since t h i s approach derives from s o c i a l anthropology rather than any common p o l i t i c a l science l i t e r a -ture, some preliminary explanation seems desirable. S o c i a l network theory conceives of a s o c i a l system as a structured set of r e l a t i o n s h i p s , much l i k e a spiderweb or a family tree, which deter-mines which actors can i n t e r a c t d i r e c t l y , which only i n d i r e c t l y , and which 12 not at a l l . The pattern of interconnection channels the flow of communi-cation, and i n a p o l i t i c a l s i t u a t i o n , the flow of influence. Different i n t e r n a l structures channel influence i n d i f f e r e n t ways. An h i e r a r c h i c a l l y 192 structured network, such as a m i l i t a r y command structure, determines influence r e l a t i o n s p r e c i s e l y , and channels information only upward, not l a t e r a l l y . A loose hierarchy with d i f f u s e " c l u s t e r s " of authority, such. as a c l i e n t e l e system, provides greater influence to the c e n t r a l actors i n the c l u s t e r s while leaving o v e r a l l coordination to negotiation among the 13 leaders of the f a c t i o n s . A r e l a t i v e l y e g a l i t a r i a n structure, such as an association, spreads influence and access widely while requiring c o a l i t i o n 14 p o l i t i c s f o r the exercise of c o n t r o l . In global organizations a c o l o n i a l system might approximate the h i e r a r c h i a l network, regional organizations the clustered network, and NGOs the e g a l i t a r i a n network.* 5 The a b i l i t y of governments to act i n unison i n IGOs i s a function of t h e i