Goodbye Miracle Eight is the 10th Pok Rafeah Chair Public Lecture, Institute of Malaysian and International Studies, Universiti Kebangsaan Malaysia delivered on 24 November 2015. In the second half of the 20th century South Korea and Taiwan achieved developed country status with relatively egalitarian economies and also consolidated their democracies. Their achievements were threefold: advanced industrialization, with low Gini indices, and democratization. Southeast Asian countries, in particular Malaysia, Thailand, Indonesia and the Philippines, were slated for similar achievements.
The World Bank coined the term the ‘Miracle Eight’. Financial media classified them among high-growth emerging markets (EM). Sources such as Freedom House observed ongoing ‘reformasi‘ and viewed countries in the region as poised for achieving democratic reforms.
Given growth rates over 5%, business and general media still often portray them this way. Vietnam and Myanmar now also emerge as runners-up in growth. Myanmar is slated to grow by 10% in 2015. The GDP of ASEAN is $5.6 trillion with a population of 600 million. ASEAN plus Three (with Korea, Japan and China) ranks as the world’s major economic power house. Thus the question where Southeast Asia is headed is part of rising Asia and is also part of the emerging economies that play an increasingly important role in the world economy.
However, in SEA realities over time have not borne out expectations. Yes, there has been steady growth, but in quantity rather than quality and arguably leading to a cul de sac. Inequality has not come down or has increased over time. Democratization and consolidation of democracy have not occurred. Jan Nederveen Pieterse’s Pok Rafeah Chair lecture in November 2014 opened with the following questions:
In Northeast Asia per capita GDP is high and inequality is low while in Southeast Asia per capita GDP is low and inequality is high. Is this a temporary deviation, just a time lag, or is there a pattern of differences between Northeast and Southeast Asia? Can would-be tigers become tigers? If Southeast Asian countries are to escape the ‘middle-income trap’ this question probably has policy relevance. The comparison is important and meaningful not just within Asia but also with a view to the general debate on emerging economies—the leading economies in the 21st century. While they are chen lumped together as emerging markets, or under the cheerful heading of ‘rising Asia’ they may actually refer to quite different political economies.
Manufacturing has become increasingly competitive worldwide and for developing countries the options for manufacturing exported growth and industrial upgrading have significantly narrowed. Hence the era of the ‘Miracle Eight’—which grouped middle-tier Southeast Asian countries with Northeast Asian tiger economies has passed. Why were the opportunities for industrial development that existed in Southeast Asia not utilized effectively?
The central question is the nature of political institutions in the region. Turning to wider dynamics, developments in Southeast Asia are also influenced by changing geoeconomic constellations. Shifting economic complementarities now increasingly involve China-centric value networks in East Asia. China’s lead in Asia is of a different character than Japan’s lead in the past. The next section asks whether ASEAN is becoming a manufacturing workshop of the world and what the implications are of this development. In closing, the lecture looks at forward options for middle-tier Southeast Asian economies.