Globalization in Asia:

Getting the Breeze Without the Bugs

Executive Summary: Nearly two years since Asias economic crisis began, the region has begun to express doubts about the impact of globalization on regional societies. Although the term defies simple definition, participants agreed that globalization has several core characteristics:
y

Unprecedented economic interdependence, driven by cross-border capital movements, rapid technology transfer, and "real time" communication and information flows. Rise of new actors that challenge state authority, particularly nongovernmental organizations and civic groups, global firms and production networks, and even financial markets. Growing pressure on states to conform to new international standards of governance, particularly in the areas of transparency and accountability. The emergence of an increasingly Western-dominated international culture, a trend which in many countries has sparked concern about the erosion of national identity and traditional values. The rise of severe transnational problems that require multilateral cooperation to resolve.

Globalization and Regional Security The impact of globalization on Asias security is complex. In some ways the impact has been positive: economic integration has reduced the potential for conflict, particularly in Southeast Asia. Nevertheless, globalization may give rise to new security concerns, and aggravate existing tensions.
y

New transnational threats Globalization has contributed to the rise of energy and environmental issues, food and water access, migration, and organized crime and terrorism as major security concerns. To be effective, responses to these problems must be multilateral in nature. Weakening regional institutions The financial crisis has weakened Asias two major regional organizations, APEC and ASEAN. APEC was helpless during the crisis, and ASEAN appears increasingly divided. Shifts in the balance of power Because globalization can fuel rapid economic growth, shifts in the balance of power can occur more quickly than in the past. Rapid Chinese growth and Japanese economic stagnation may change the strategic equation in Asia in a relatively brief period of time. Expanding roles for the military The combination of new threats and

lingering concerns will place unprecedented demands on regional military organizations. Militaries will have to take on new roles, even as resources decline and recruitment falls. Globalization and Sovereignty Although globalization is often viewed as a challenge to national sovereignty, states in Asia have chosen to embrace the global economy. During Asias boom years, globalization was viewed as a tool for strengthening national power, rather than as a potential threat. This view was reinforced by the belief in Asia that governments could participate in the global economy without altering domestic political structures and practices. Across the region growing wealth often coexisted with authoritarianism. Events in Indonesia, however, suggest that globalization can force political, as well as economic, change. Globalization can exacerbate divisions within society, with some groups profiting more from globalization than others Indonesias ethnic Chinese, for example. In the face of globalization, ethnic divisions and separatist movements could worsen, and social cohesion could suffer as well. Authoritarian regimes may have more to fear from globalization than democratic states. Governments that embrace norms such as transparency, accountability, and the rule of law concepts that form the backbone of democratic societies appear to have suffered less from the financial crisis than their authoritarian counterparts. For now, few Asian governments appear likely to reject globalization entirely. Nevertheless, the possibility of an Asian backlash primarily against the United States remains real. A new "grand bargain" between the West and Asia is essential. The West must recognize that Asian concern over eroding values and social cohesion is legitimate; Asia must cease demonizing the West for its role in spurring globalization, because no nation is immune to the challenges and opportunities it presents.

Introduction

As the effects of an unprecedented economic crisis continue to ripple across

Asia, a fundamental issue has moved to the forefront of policy discussions in the region: the long-term impact of globalization on Asian societies. Even during the years of Asias economic boom, scholars and government officials across the region engaged in a lively dialogue about the influence of global forces on the region. The debate over alleged differences between Asian and

Western "values" that emerged in the early 1990s was at least partly an expression of Asian concerns about globalizing forces. The Asian financial crisis has provided new fuel for this debate. Prominent, mainstream Asian thinkers from India, to Malaysia, to Japan are now pointing to globalization as a possible threat to internal cohesion and economic health. Commentators in the West have generally assumed that the crisis would precipitate disillusionment with so-called Asian approaches to governance and economic management, spurring further "convergence" with Western practices. Although there is evidence that some Asian countries have moved in this direction, others are drawing alternative conclusions: namely, that adherence to Western methods leaves Asian societies more vulnerable to the ravages of global capitalism, and more exposed to forces that corrode long-standing cultural and social norms. The outcome of this debate will have profound implications for the regions security environment, and for the United States which is seen in much of Asia as the ultimate driving force behind globalization. To explore Asian perspectives on globalization, and to examine how the phenomenon is reshaping the regions security environment, the Asia-Pacific Center invited a group of distinguished government officials and scholars for three days of intensive discussions. Although thinking about the influence of globalization is still very much in its infancy, the meeting served to sharpen thinking about how relations in the region may or may not be transformed in the years ahead. Globalization: What Is It? To examine the impact of globalization on Asia, the term must first be defined. The task is not simple. Several conference participants noted that groups within societies define the term differently, often to suit narrow, parochial interests. In South Korea, for example, labor unions make use of the term in demanding the "universal" right to assemble; business interests, in contrast, employ it to spur deregulation. One American observer noted that "globalization" is often used to describe so many different things that the term is essentially meaningless; globalization has become, he noted wryly, the "el Nino of the social sciences" a force that can be blamed for almost anything. Other participants questioned whether globalization was truly a new phenomenon. An American historian noted that the entire course of human history can be seen as the gradual expansion of transportation and communication networks; in that context, globalization may be little more than an extension of past patterns of human interaction. At the very least, as a South Korean participant noted, "globalization" must be distinguished from terms like "interdependence" and "integration" vocabulary which

have been part of the social science lexicon for decades if the concept is to have meaning. Despite the doubts expressed about the utility of the term, however, conference participants generally agreed that globalization is a new phenomenon with a number of core characteristics:
y

Unprecedented economic interdependence, driven by cross-border capital movements, rapid technology transfer, and "real time" communication and information flows; Rise of new actors that challenge state authority, particularly nongovernmental organizations (NGOs) and civic groups, truly global firms and production networks, and even financial markets; Growing pressure on states to conform to new international standards of governance, particularly in the areas of transparency, accountability, and the rule of law; The emergence of an increasingly Western-dominated international culture, a trend which has sparked concern about the erosion of national identity and traditional values in many Asian countries; and The rise of increasingly severe transnational problems such as energy and environmental concerns, large-scale migration flows, and organized crime networks that require multilateral cooperation to resolve.

The forces of globalization will not totally transform Asias regional security order, but they will produce a new set of challenges and opportunities for policymakers in the next century.

Globalization and Regional Security

The impact of globalization on Asias security environment is complex. In

addition to affecting political and economic conditions within states, globalization may be transforming relations among states. This impact is not necessarily negative. A number of participants argued that in some ways the forces of globalization have brought about greater stability in the region. Deeper economic integration, and the emergence of regional "growth triangles" such as the Johor-Riau-Singapore triangle in Southeast Asia have reduced the potential for conflict; the unprecedented interdependence spurred by globalization gives states an incentive to cooperate. Indeed, in the words of an Indonesian participant, the "absence of war" in Southeast

Asia in recent years must be attributed at least in part to the forces of globalization. Nevertheless, the impact of globalization on the regional security environment is not entirely positive. Though globalization may mitigate the potential for conflict in some parts of the region, other traditional security concerns appear immune to its effects; indeed, globalization may actually serve to aggravate long-standing tensions. The forces of globalization are also giving rise to new challenges that will test the ability of regional governments to cooperate. Participants linked the following set of concerns with globalization: New Threats A number of participants linked the rise of new "transnational" concerns to the impact of globalization. Many of these challenges represent long-term threats that have traditionally fallen outside the realm of foreign policy. The cross-boundary nature of these threats also poses a dilemma for Asian governments. Developing the institutional capacity at both the domestic and international level to address these concerns will be a major challenge for the region in the next century. These new threats include:
y

Energy and environmental concerns. Rapid economic growth in Asia has led to growing reliance on energy imports, increasing the importance of sea lanes and transportation routes. The regions increased use of energy has also exacerbated environmental degradation, which several participants linked to social unrest. Food and water security. The growing problem of environmental degradation, coupled with growing populations in the region have increased pressure on food and water supplies. Although improvements in agricultural technology appear likely to mitigate food security issues, water availability was cited by several participants as a likely source of conflict in the future. Migration. The combination of rapidly growing populations in much of the developing world, increasingly porous national borders, and disparities in economic growth rates, have sparked a dramatic increase in international migration. Migration has already emerged as a source of tension in Southeast Asia; Malaysia deployed troops and naval vessels to limit the arrival of Indonesian migrants during the financial crisis. Organized crime and threats from other "non-state" actors. Through the increasing ease of communication and transportation flows, and

the growing permeability of national borders, organized crime networks, terrorists, drugs and weapons traffickers, and even human smugglers face fewer constraints on their activity. Some participants suggested that these threats may prove to be some of the most pernicious of the 21st century. Weakening Regional Institutions? Asias financial crisis, and the forces of globalization more broadly, may have a corrosive effect on the regions multilateral institutions. The Asia Pacific Economic Cooperation (APEC) forums inability to forge a response to the financial crisis has led many to question the institutions future relevance. Participants also noted that the future of the Association of Southeast Asian Nations (ASEAN) appears increasingly uncertain, given the current turmoil in Indonesia, although the organization will continue to be Southeast Asias core institution for the foreseeable future. Rifts also appear to be emerging between ASEANs democratic and more authoritarian members. Thailand and the Philippines, for example, have advocated a policy of "flexible engagement", which would allow ASEAN members to comment on each others internal policy matters; these countries have similarly supported proposals for a new ASEAN surveillance system, in which members would cooperate in monitoring economic indicators for signs of impending crisis. These initiatives would represent a departure from ASEANs traditional stance of non-interference in domestic affairs and could spark opposition from within the organization. Globalization may ultimately bring about new concepts of sovereignty and regional security interaction. Shifts in the Balance of Power The capacity of globalization to fuel rapid economic growth and to ravage economies almost overnight implies that regional and global balances of power can change more quickly than in the past. The combination of rapid Chinese economic growth and extended stagnation in Japan, for example, could significantly alter the balance of political, economic, and military power in Asia in a relatively short period of time. Participants noted that globalization could also give rise to new sources of rivalry. Deepening economic integration, for example, could contribute to the emergence of regional economic blocks that compete for power and influence. Some participants suggested that the European Unions rise as a possible challenge to American economic dominance can be seen as a political consequence of globalization.

Expanding Roles for the Military The combination of lingering traditional threats, the prospect of increased internal tensions in Asian countries, and the emergence of new security challenges will place unprecedented demands on regional militaries. Military organizations will have to take on new roles, a trend that may spark resistance within the ranks of uniformed personnel. At the same time, other demands in Asian societies will compete for financial resources, and growing economic opportunities elsewhere will likely reduce recruitment levels. Increasing demands on the military, in other words, will likely coincide with a period of declining resources stretching the armed forces in many countries very thin. How Important is Globalization? Conference participants agreed that globalization undoubtedly is introducing new complexity into the Asia-Pacific security environment. Whether the forces of globalization will fundamentally transform the regional order is another question, however. The picture is mixed. There is some evidence that globalizations integrating force has contributed to an environment of greater peace and stability in Southeast Asia. In other parts of the region, however, the case is much less clear. In Northeast Asia, for example, traditional, state-centered patterns of interaction still appear to prevail, despite increasing trade and investment ties. Relations between the sub-regions major powers China, Japan, Russia, and by extension, the United States are still best understood through the framework of realism: the balance of power, relative gains, deterrence and the centrality of military force. South Asia, too, remains relatively untouched by the global economy, and therefore traditional patterns of interaction remain dominant. Globalization, in other words, appears to have had a relatively minor impact on political relationships in Northeast and South Asia at least until now. Whether the forces of globalization will serve to remold the international system and create fundamentally new forms of interaction, remains to be seen.

Globalization and the State in Asia

Globalization is often viewed as a threat to the authority and sovereignty of the state. The Asian financial crisis demonstrates that governments are increasingly hard-pressed to insulate their populations from the pressures of the world economy. Nevertheless, the state remains the central actor in Asia, and its centrality is unlikely to change in a fundamental way even with the rise of globalization.
Embracing Globalization - Several participants argued that Asian states have played a key role in promoting globalization in the region. One

participant from Singapore argued that until the financial crisis, regional governments perceived globalization as a tool for enhancing national power. Singapores decision to embrace the world economy helped it to become the financial center of Southeast Asia, and bolstered its strategic position in the region as well. China and Vietnam have undertaken substantial economic reforms to break out of isolation and strengthen the positions of those in power. For these and other countries, participation in the global economy has certainly entailed costs. Greater openness to trade, foreign investors and visitors, and information from the outside world all have contributed to the erosion of sovereignty in Asia. But with few exceptions Burma and North Korea, for example Asian states chose to accept these costs in order to reap the benefits of globalization. Behind the Asian embrace of globalization was the assumption that economics could be separated from politics. In other words, Asian governments sought to liberalize their economies even as they worked to protect existing political systems, institutions, and practices an effort that proved remarkably successful during the boom years. Globalization helped to give legitimacy to ruling regimes across Asia. In particular, rising living standards resulted in populations willing to tolerate governments that were often authoritarian a phenomenon sometimes described as "performancebased" legitimacy. In countries like Indonesia, Malaysia, and even South Korea, growing prosperity and authoritarianism walked hand-in-hand. New Doubts - In essence, as a Singaporean participant noted, Asia saw itself as a "winner" in the new global contest, although even during the years of the Asian miracle regional governments worried that global forces would corrode national identity. In the wake of the financial crisis, however, in the words of a participant from Singapore, doubts about the benefits of globalization have been "redoubled." The region is now deeply aware of the costs of being a globalization "loser." More importantly, the crisis may indicate that Asias traditional economicswithout-politics approach toward globalization may no longer be possible as events in Indonesia so starkly suggest. Governments that previously embraced globalization as a tool for strengthening domestic legitimacy have come to see the phenomenon as a possible threat to their power. Malaysian Prime Minister Mohamad Mahathirs denunciations of foreign speculators, and of Western capitalism more generally, represent one somewhat extreme example.

Growing Internal Divisions Asias reconsideration of globalization is in part driven by the realization that the uneven impact of globalization on Asian societies may exacerbate internal divisions no small concern in the regions many multiethnic states. With some groups within society benefiting more from globalization than others ethnic Chinese in Indonesia and Malaysia, for example the risk of worsening ethnic divisions and separatist movements is high. Further, to the extent that globalization weakens governments and erodes notions of national identity, a concern several participants cited, social cohesion in Asia could suffer. Globalization and Democracy - Several participants argued that authoritarian regimes may have more to fear from globalization than more democratic states. No government is immune to the effects of globalization, and democracies are no exception; the financial crisis swept aside democratic leaderships in South Korea and Thailand, for example. But several participants noted that the forces of globalization appear to reward, or at least punish less severely, governments that embrace transparency, accountability, and the rule of law norms that form the backbone of democratic and free-market societies. Indeed, one Malaysian participant argued that the forces of globalization may actually strengthen the institutions that support democracy, by demanding reforms that result in more open political and economic systems. In authoritarian regimes, the norms and institutions that appear necessary to manage the pressures of globalization are often in short supply. In the face of globalization, the authoritarian state thus suffers from two central weaknesses: the absence of democratic norms and institutions, and reliance on economic performance to sustain political legitimacy. Such states may be most likely to face and least likely to endure "punishment" from the global economy. Managing Costs and Benefits Despite the financial crisis, no Asian countries appear likely to reverse course and reject globalization. Few Asians perceive the North Korean and Burmese models to be viable alternatives to the global economy, and even Malaysia has moved recently to loosen the capital controls it imposed during the depths of the financial crisis. Some governments have even welcomed the opportunity for reform; as a South Korean participant pointed out, President Kim Dae-jung has used the crisis to implement economic restructuring that his predecessor in South Korea also considered desirable but politically impossible. Nevertheless, the danger of backlash in Asia against globalization especially its social and cultural effects is real. A participant from Singapore noted that throughout the region there is growing anxiety over

the impact of global forces on "national ways of life." Many Asians have chosen to view events as a new form of imperialism originating in the United States a sentiment that has been exacerbated by elements of arrogance in the Wests response to the financial crisis. In the years ahead, Asian governments will be tested by two related challenges: the task of compensating the victims of the world economy, and the need to balance increasingly global political and cultural norms with traditional values and identities. Emerging Civil Society - In this context, the emergence of an international civil society in Asia non-governmental groups and organizations that pressure states on issues of concern, such as human rights, the environment, and social welfare may be a critical antidote to the negative forces of globalization. As a participant from Singapore noted, the rise of an international civil society in some senses represents a challenge to the state; NGOs which by definition have no national loyalties that pressure governments to provide a cleaner environment or to protect human rights often can pose a threat to those in power. Nevertheless, these forms of "globalization from below" may help to ensure that regional governments remain adequately sensitive to the costs associated with greater integration into the world economy or "globalization from above." It is in the long-term interest of Asian governments to accommodate the emergence of an international civil society in the region; these new actors can ultimately assist the state in managing the harmful elements of globalization. A New "Grand Bargain" The challenge for Asia of managing the complex forces of globalization could lead to tensions with the United States, as the rhetorical backlash against American influence in the region suggests. One participant from Singapore argued that to prevent globalization from emerging as a source of tension in U.S.-Asia relations, a new trans-Pacific "grand bargain" is essential. For its part, the West must abandon triumphalist rhetoric, and recognize that Asian concern over eroding values and social cohesion is legitimate. Indonesias experience suggests that concern about the possibility of internal fragmentation is justified particularly in the multi-ethnic states that characterize much of the region and should be recognized as such in the West. Asia, in turn, must cease demonizing the West for its role in spurring globalization. Participants were quick to note that Western countries have also been buffeted by globalization, and managing its challenges will be a central item on the policy agendas of Washington, London, Paris, and Bonn long into the 21st century. Indeed, the resilience of U.S. presidential

candidate Pat Buchanans distinctive brand of populist isolationism not to mention the millennial fears spurred by the Y2K bug demonstrate that anxiety over globalization plagues even Americans. About the Conference Asias economic crisis has had a profound impact on the regions security environment. Through two conferences and a roundtable discussion hosted during 1998, the Asia-Pacific Center has explored in depth the near-term implications of the crisis: the suspension of arms modernization programs and military exercises, diminished solidarity within ASEAN, and the enhanced regional role of the United Statesto name only a few. As the crisis wore on, it became clear that the debate in Asia had shifted to the larger issue of globalization in the region. With financial support from the U.S. Pacific Command, APC organized a three-day meeting to examine the longer-term impact of the financial crisis, and globalization more broadly, on the AsiaPacific region. This report was written by Christopher B. Johnstone, a Research Fellow at the Asia-Pacific Center. For more information on this and other programs, contact the Research Division at (808) 971-8900, or visit the APC web site at www.apcss.org.

Participants