WHILE most of the world celebrated the true arrival of the millennium with an explosion of carefully choreographed fireworks, the occasion was marked in two of the major nations of Southeast Asia with meticulously planned sequences of terrorist bombings. The eight deadly detonations in Indonesia and the five in the Philippines were timed and placed for maximum political impact. In Jakarta they were set off in churches in an effort to provoke a Muslim-Christian conflagration. In Manila explosions ripped apart buses and shopping malls in a campaign to foment a sense of national emergency. And in each case the terror campaigns were suspected of being organized not by some lunatic fringe but by a major power bloc in the national establishment that could think of no better way to unsettle political rivals. These bombings tolled the death of Southeast Asia as the world has known it for the past thirty years. They seem to be a suitable, if dreadful, declaration of the arrival of a new era, of the region's abrupt transition from miracle to malaise.

In 1960 Southeast Asia was as grim as sub-Saharan Africa--poor unstable, violent. But by the early 1990s the region had become a shining symbol of hope for the improvement of the Third World while most of sub-Saharan Africa remained a sad synonym for its hopelessness. Southeast Asia's main states became a showcase for economic advancement in the developing world, a case study in the ascendancy of democracy and capitalism, an object lesson in religious and ethnic tolerance. The region was also an exemplar of strategic stability. In 1967 five countries--Indonesia, Malaysia, the Philippines, Singapore and Thailand--formed a stabilizing political bloc, durably anti-communist and pro-capitalist, the Association of Southeast Asian Nations (ASEAN). After the Vietnam War and the triumph of communist Vietnam, the ASEAN states-the great bulk of the region--emerged as a bulwark against Marxist revolution. The dominoes stood firm. Not only did they refuse to tumble, they prospered.

In sum, the region became an economic, political and strategic lodestar, a significant asset for both the Third World and the West. When in 1996 the Singaporean diplomat-intellectual Kishore Mahbubani described the ASEAN experience as a kind of "magic", no one argued. The region, he waxed, "which has greater diversity of race, language, religion, culture etc. than the Balkans of Europe", had emerged as "one of the most peaceful and prosperous corners of the world." It was "a miracle of history."¹

Miracles are not only rare; they can also be fleeting. Today--only five years later--when Southeast Asia is compared to the Balkans, it is not to draw a contrast but a parallel. Most regional economies are in disarray. They have emerged from the Asian economic crisis of 1997-98 not improved but enduringly impaired. The collective Southeast Asian economy is smaller today than it was before the crisis broke. Many dormant ethnic and religious resentments have exploded in violence. Democratic systems are under tremendous stress and a stinking tide of corruption is on the rise. The dominant regional power, Indonesia, has lost the territory of East Timor that it held by force of arms for twenty-four years and is in danger of further splintering in a process commonly invoked as Balkanization. The ASEAN grouping has lost the power of action and degenerated to the brink of meaninglessness. And, depressingly, the region is increasingly inclined to blame the West for its troubles.

The holiday bombs are a clear symptom and a timely signal that the world needs to reconsider this asset that is fast becoming a serious liability. How serious a liability? In a June 2000 speech to the Asian Development Forum, Tan Kong Yam, professor of business studies at the National University of Singapore, suspected that, as the rich United States has the poor, crisis-prone Latin America at its feet, the dynamic economies of North Asia will succeed while the poorer nations of Southeast Asia lapse into a long-term, Latin-style stagnation:

Like Latin America, South-East Asia could gravitate towards being poor and prone to periodic crisis for the next ten years. The effects of weak growth could compound with political difficulties to create the same downward cycle that occurred in Latin America in the 1980s.

The crucial question must now be whether the sharp deterioration is a temporary relapse, or whether it was the quarter century of gains that was the aberration. Were those years, like most apparent "miracles", really just an effervescence? Is Southeast Asia merely returning to form as a Third World trouble spot? If so, it would become a truly worrisome one. For the last quarter century the world has been spared the need to pay much attention to the region because things have been, by and large, going right. But as things go wrong, what is at stake will emerge more starkly.

First, the region is economically important. Forty percent of all world shipping passes through Indonesia's straits, making them a vital global choke point. This includes about 80 percent of the oil that fuels Japan's economy, the world's second-biggest. Indonesia and the neighboring sultanate of Brunei are themselves significant oil exporters. The region is home to a large slice of Japan's lower value-added industrial structure. It has been a contributor to the cause of global market opening; ASEAN has its own plan for an intra-region free-trade area and it has signed up to a larger pan-Pacific free-trade plan too. All of these commitments now totter in the balance.

Second, Southeast Asia is strategically important. Just as it was a bar to the encroachment of communism during the Cold War, today it could be a strategic counter to China's ambitions in the South China Sea. China has territorial disputes with Malaysia, the Philippines, Taiwan, Vietnam and Brunei over rival claims to tiny islands and vast tracts of seabed in the putatively resource-rich region. All but Brunei have built some sort of military outposts on the islands to emphasize the point. In the last few years, Beijing has been prepared to discuss these claims, but it has not yielded on any of them. Although the ASEAN states want to negotiate en bloc with China to increase their bargaining power, Beijing has insisted on bilateral discussions or no discussions at all. In the words of an authority on international boundaries, "In terms of the number and complexity of overlapping jurisdictional and sovereignty claims made to it, the South China Sea is probably the most disputed place on earth."² Indonesia, in particular, is wary of China's intentions to extend its territorial ambit southward. China has unilaterally drawn a line on the map to encompass an expanse of sea that loops so far south as to include part of the vast Indonesian--claimed West Natuna gas discovery. Beijing has assured Indonesia that it has no territorial dispute with Jakarta. Still, the Indonesians pointedly staged the biggest naval exercises in the country's history in the vicinity. Last November, China offered ASEAN a free-trade agreement, a further part of its medium-term efforts to enlarge its regional influence.

Third, in world politics, ideology and religion, the region can be a disproportionately powerful force--for good or for ill--through its bearing on two of the world's most influential doctrines: Islam and democracy. Indonesia is the world's most populous Islamic country, and the world's fourth-most populous democracy. At the moment, democracy and Islam coexist in the vast archipelago, but it is still an early and uneasy moment in a grand experiment. During the thirty-two year reign of General Suharto, both doctrines were carefully controlled and limited by the secular, authoritarian president and his army. In the last two years, liberated from Suharto's restraining hand, both have been testing their new freedom. But by their very existence both also challenge the power of the army in a struggle yet to be resolved. Paul Wolfowitz, former U.S. ambassador to Jakarta and now deputy secretary of defense in the Bush administration, argued last year that a successful Indonesian transition to democracy would not onl y be a valuable example to Muslim countries around the world, but "as the biggest democracy in East Asia it would also be a none-too-subtle influence on China." The West, he believed, had an "extraordinary opportunity" to help cement the world's biggest Muslim country as a democracy. The peace and stability of the entire region was at stake:

There is a real danger Indonesia will start to fragment. It occupies such a huge and strategic position I think that, unfortunately, you will see big and small powers scrapping over the pieces. I am not predicting it's going to be another Yugoslavia--but then again I don't know anyone who predicted Yugoslavia three years before it went bad.³

The Region Divides

IN THE 1997 ranking of the 100 richest people in Asia, fully 60 were Southeast Asians. All but one--the sultan of Brunei--were based in Indonesia, Malaysia, the Philippines, Thailand or Singapore. They needed at least $1 billion to make the list. This was a pretty remarkable achievement--these economies made up less than one-sixth of the continent's collective economic weight, yet yielded 60 percent of its wealthiest tycoons. Then the Asian economic crisis struck. It was brief but brutal. When the region had been declared to be well on the way to recovery, a revised list of Asia's biggest billionaires was compiled. It was striking to see in 2000 that of the top 100 billionaires only 37 were from the southeast. The region had produced a disproportionate number of ultra-rich, and now it bore a disproportionate share of their dissipation. Altogether, 28 Asian tycoons had been so savaged by the crisis that they failed to reappear in the rankings; of these, 23 were from the countries of the continent's southeast.⁴

The fate of the billionaires illustrates three points. First, much of Southeast Asia's prosperity was transient. It was lost to the crisis and has not been regained. The crisis was not just a cyclical event; it has changed the structure of the regional economy. Second, it is another sign of the trend that Professor Tan fears--the growing divergence between the Southeast Asian economies and the larger economies of Northeast Asia, and the consequent "Latinization" of the region as it falls behind. Third, it draws attention to three fundamental problems of Southeast Asian capitalism: its benefits were too highly concentrated in the hands of too few; those few were too dependent on state concessions and favors for their wealth; and most of the billionaires were ethnic Chinese in a sea of Malays.

All of this helps explain why the region is asking hard questions about capitalism and free markets. Perhaps the most difficult part of the entire economic crisis for Southeast Asia was the sheer unexpectedness of it. The region had become accustomed to endless growth. And its achievements were genuinely impressive. In 1960 an Indonesian could expect a life span three years shorter than that of a citizen of India, and he could expect to be 20 percent hungrier. By the 1990s he could expect to live two years longer and eat 20 percent more than his contemporaries from the subcontinent.⁵

There was a sense that continuous improvements were automatic, that these countries' status was unshakeable. The World Bank's 1993 report, The East Asian Miracle, lauded eight "high-performing Asian economies", including three in Southeast Asia--Indonesia, Thailand and Malaysia. "If growth were randomly distributed, there is roughly one chance in ten thousand that success would have been so regionally concentrated", the bank marveled. The global investment community bought into an East Asian miracle: the only question was whether to invest in a Northeast Asian tiger or a Southeast Asian dragon.

All of this helps explain why the region is asking hard questions about capitalism and free markets. Perhaps the most difficult part of the entire economic crisis for Southeast Asia was the sheer unexpectedness of it. The region had become accustomed to endless growth. And its achievements were genuinely impressive. In 1960 an Indonesian could expect a life span three years shorter than that of a citizen of India, and he could expect to be 20 percent hungrier. By the 1990s he could expect to live two years longer and eat 20 percent more than his contemporaries from the subcontinent. [5]

There was a sense that continuous improvements were automatic, that these countries' status was unshakeable. The World Bank's 1993 report, The East Asian Miracle, lauded eight "high-performing Asian economies", including three in Southeast Asia--Indonesia, Thailand and Malaysia. "If growth were randomly distributed, there is roughly one chance in ten thousand that success would have been so regionally concentrated", the bank marveled. The global investment community bought into an East Asian miracle: the only question was whether to invest in a Northeast Asian tiger or a Southeast Asian dragon.

The shock across all Asia was profound. But it was in Southeast Asia, where the protective cushion of wealth was thinnest and the quality of institutions poorest, that the effects were harshest, the resentment sharpest, and the enduring problems most serious. Before the crisis broke in July 1997, private research for the ASEAN secretariat warned of a problem with the region's competitiveness. But it was widely believed that the crisis, though savage, would impose the cure. It would snap fixed exchange rates and force big devaluations, and it would purge inefficient firms and banks. The spectacular collapse of the regional economy in 1997-98 did leave a detritus of vast bad debt in banks and companies; the problem is that despite some progress most of the bad debt is still there. The purge did not occur. Post-crisis restructuring has been so inadequate that some analysts argue it will take a second crisis to restore health to the Southeast Asian banking and corporate sectors. In short, a prime opportunity has been lost.

Three years after the crisis first struck, the World Bank, at one time the chief cheerleader of the East Asian economic miracle, issued a new and sober assessment in its 2000 publication, East Asia, Recovery and Beyond: "The crisis has left two legacies: heavy debt and greater household insecurity. It has also left the region more vulnerable to external shocks." Indeed, the burden of bank debt in these countries is truly crippling. According to UBS Warburg, as a proportion of their economies the debt is bigger than it was in Japan at the peak of its banking crisis, or in the United States at the worst of the Savings & Loan disaster. In the most severely afflicted country, Indonesia, the central bank itself last year was pronounced bankrupt. Its governor awaits trial on charges of corruptly paying vast amounts of the central bank's money to assist banks owned by cronies of former President Suharto.

Another major concern about the state of post-crisis Southeast Asia is that the public sector has been left owning much more of the economy than it did before the crisis. The World Bank calculates that the Malaysian government now owns a fifth of all bank assets in the country; the Thai government owns a third; and the Indonesian authorities hold 78 percent. A former professor of public policy at Stanford University, Hilton Root, now at the Milken Institute, points out:

These economies are now crisis-prone. The worst often comes three to four years after the initial crisis. Companies have enough cash flow to function but not enough for new investment. The banking system is broke and can't lend enough for investment either. So in three or four years, firms find they have fallen behind. In Latin America, there was a big crisis in 1982. But the worst effects didn't appear at the company level until four years later.⁶

The economists at Credit Lyonnais Securities (Asia) made their own assessment of whether the region could lapse into crisis all over again. They drew up a scorecard to measure the structural propensity of Asian economies to make dud investments. As a benchmark, they used Japan on the eve of its disastrous period of massive mal-investment known as the Bubble Economy. The results? They found that seven Asian economies were today similarly--or even more ruinously--inclined to channel good money into bad investments. The vulnerable included Thailand, Malaysia, Indonesia and the Philippines--four of the five main economies of Southeast Asia. The firm's specialist on Southeast Asia, Anthony Nafte, summarized key investor concerns:

In Malaysia, companies still look to the Government to decide where to invest. And the exchange rate is pegged at a level which is artificially low. In effect, it's a subsidy being used to prop companies up. In Thailand, the ratio of non-performing loans in the banking system is getting worse, not better. And it's about to get much worse. In the Philippines, people ... just lost faith in President Estrada. And Indonesia has deep political and economic problems.⁷

Professor Tan explains his dismal thesis for the Latinization of Southeast Asia. He has three main concerns: First, "The South-East Asian boom of the past was driven by Japanese investment. The region was getting 30 to 50 percent of [its] foreign direct investment from Japan. The Japanese relocation of productive capacity to the region was the spearhead of South-East Asia's industrialisation. But this Japanese investment will not be there for the next 10 years." Second, "Chinese competition has asserted itself. There will be a 'passdown' of industry relocating from Korea and Hong Kong to lower-cost countries, but it will go to China--not to South-East Asia. At the same time you have Mexico, with the benefit of NAFTA, as a very strong competitor. You have a new competitive landscape." Third, "South-East Asia is relatively weak in all the key indicators--expenditure on research and development, internet penetration, and so on."⁸

Indeed, a report prepared for ASEAN last November showed China attracting 61 percent of all new foreign direct investment in emerging Asia, with Southeast Asia getting only 17 percent. This is the opposite of the situation a decade earlier. Southeast Asia succeeded in the decades from 1960 to 1997 chiefly by exporting low value-added manufactures, but, as China conquers market after market in this area, it may be that the region's success was only a sort of reprieve. Since China launched its pro-market reforms under Deng Xiaoping in 1978, it has increasingly asserted competitive advantage as a low-cost manufacturer. With lower wages, better trained workers and superior infrastructure, Chinese products continue gradually to displace those of Southeast Asia from shop shelves around the world. A decade ago China's economy was smaller than the collective economy of Southeast Asia. Today it is almost twice as big.⁹

Liberated from the yoke of colonial occupation, the newly independent states of Southeast Asia struggled through the challenge of communism in the 1960s. The region then entered a period of apprehensiveness and instability as it launched into nation-building; then growing confidence as it succeeded; then complacency and self-congratulation as it began to believe its own promotional rhetoric. Hubris came next. With the arrival of the economic crisis of 1997-98, it was plunged into shock, anger and bitterness. Southeast Asia after the crisis is seething with frustration and resentment. The real question, perhaps, is whether the region's economic disappointments will scar its political achievements.

Democracy's Chances

THERE IS a case for believing that democracy is making itself at home in Southeast Asia. Britain left Singapore and Malaysia with parliamentary systems, and they kept them. They elect their governments to this day. The people of Thailand and the Philippines struggled free of authoritarian regimes. They seemed to be textbook cases of countries where rising living standards created rising political expectations. It happened in fits and starts, but it happened--and almost bloodlessly. Then the Indonesians overthrew Suharto. Here it was not a case of rising living standards but the abrupt interruption of rising living standards that provoked the change. Although it had not held a genuine election since the 1950s, Indonesia managed to conduct a peaceful and fair ballot across its vast archipelago of 3,000 inhabited islands with some 100 million voters. And, despite the profusion of 36 political parties, the result was declared with considerably greater dispatch than the U.S. presidential election of 2000.

It seems, then, that the trend for the region over the last thirty years has been positive, and with the transformation of Indonesia, all five of the original member states of ASEAN are now democratic. Maybe Francis Fukuyama was right about "the end of history." Maybe the critics, arguing that Southeast Asians lack the maturity to choose their own leaders, were horribly wrong. Of course, other regional countries remain in authoritarian hands, but the trend has been positive and overwhelmingly so. Myanmar (Burma) is the only country that seems to have retreated indefinitely from an experiment in democracy.

But deeper analysis shows that there is no room for complacency. The original democracies, Singapore and Malaysia, have the mechanics of elections to choose governments, but not the liberal values and systems that give elections meaning. Singapore's ruling party has successfully repressed political opposition by using a compliant court system to sue opponents into financial bankruptcy and political oblivion. Malaysia has gutted its court system to ensure that the government gets its way. Both countries control and censor their media. They are both systems of illiberal democracy or soft authoritarianism. Thailand and the Philippines are countries where democracy was achieved, lost and then recovered. Both struggle against deeply entrenched corruption and both, in recent times, have elected worryingly corrupt leaders. This has consequences for the durability of democracy in these states.

First, the Philippines. After a decade of impressive reform under the honest competency of President Fidel Ramos, aptly nicknamed "Steady Eddie", Filipinos voted to replace him with a semi-literate drunkard and crook, the former movie tough guy Joseph Estrada. In the meantime, the armed Muslim separatist movement in the country's south, brought in check by the Ramos government, revived. Anyone can make a mistake. But when the country realized its error two years later, the constitutional procedure for impeaching and removing Estrada broke down. The Catholic Church, and finally the army, intervened decisively to force him from office without due process. It turned out that the army and not the constitution was the ultimate source of authority. This episode had echoes of the 1986 removal of the corrupt authoritarian Ferdinand Marcos. It raises deep questions about the quality and durability of Filipino democracy.

Next, Thailand. Again, the people have freely elected a man under suspicion of serious corruption, a billionaire tycoon. Thaksin Shinawatra, elected on January 6, is a clever nationalist who has tapped his people's lingering resentment of the country's harsh treatment by the IMF. Thaksin found an easy way to win the rural vote, which dominates Thai politics--he bought it. He is a naked populist who offered a grant of $23,000 to each of Thailand's 70,000 villages if elected. He also promised to impose a three-year moratorium on farmers' interest payments. He was once foreign minister, but was forced from office by allegations of conflict of interest. Now Thaksin is under investigation for concealing $232 million in assets and for failing to pay taxes, which, he says, he "forgot" to do. The country's National Counter Corruption Commission charged him in December--before the election--and has said it will rule on the case within a year. If convicted, the law says he must quit public office for five years. This could pose a serious constitutional and political challenge for Thailand. "It has the potential", observes political scientist Sunai Phasuk of Chulalongkorn University, "to become a very chaotic situation."

Meanwhile, in the biggest country and newest democracy of Southeast Asia, the political system is in an extremely parlous condition. Indonesian President Abdurrahman Wahid, a blind and eccentric Muslim cleric and mystic, is under parliamentary scrutiny for corruption. He is also manifestly failing to restore the economy or administration of the country. Indonesia started to fragment the moment Suharto stepped down. Jakarta allowed East Timor, annexed by Indonesian troops in 1975, to vote its future. Its people chose independence. But a vengeful Indonesian army sponsored an orgy of militia killing. Australian troops led a UN-mandated international force to expel the militia killers.

Other provinces of Indonesia are now clamoring for independence. Irian Jaya, also known as Papua, and Aceh in northern Sumatra are agitating with particular vigor; but here Jakarta has responded not with ballots but with bullets. The nationalists in the government, and the army in particular, are determined that there should be no more sundering of the country's territory. In the meantime, ethnic and religious fighting, held in check under the thirty-two years of Suharto's rule, rampages sporadically and uncontrollably on the periphery of the Javanese empire. The army, pushed to the periphery by the new democratic structures, is keenly awaiting the failure of Indonesia's second experiment with democracy. Indeed, the army's impatience is evident. According to President Wahid, the police investigation into the church bombings that killed fifteen people and injured over one hundred has named a faction of the army as the chief suspect.

In all these countries, and in varying degrees, democracy, superficially in such robust health, is in fact in fundamental jeopardy. It will be the work of at least another generation to improve the quality and hence the durability of democratic systems and principles where they now exist in Southeast Asia, and probably many generations to extend them to the countries where they do not exist.

Frozen in the Headlights

WITH THE economies and governments of the region under such stress, it is natural that their key collective identity, ASEAN, should also be under stress. And it is. It did serve its original purpose in resisting communism. But it is now failing every significant challenge it faces. In a moment of excitement a few years ago, the foreign minister of one of its members, Singapore's Professor S. Jayakumar, declared that, "We want a Southeast Asia whose future will be determined by Southeast Asians-not by others in faraway capitals."

ASEAN's first big failure was its utter impotence in the face of the Asian economic crisis. This was a humiliation of monumental proportions. When economic collapse approached, ASEAN froze in the oncoming headlights. Individual governments and the organization as a whole became helpless victims, as Thailand and then Indonesia faced international insolvency and dragged the region into recession. Who stepped in to deal with the crisis? Others in faraway capitals, chiefly the twin sisters from Washington, the International Monetary Fund and the World Bank. The other big player was Tokyo.

ASEAN's second big failure was its response to the crisis in East Timor. When the killing started in Dili, the regional body stood mute and inert. "East Timor became ASEAN'S millstone", argue Leonard Sebastian and Anthony Smith from the Institute of Southeast Asian Studies in Singapore,

when the association failed to speak up and stop the rampage ASEAN's inaction at the start of the crisis surrendered the moral and political high ground to Australia. [Its voice] may no longer be credible when it calls for Asian solutions to Asian problems.

Again, the solution came from others in faraway capitals--from Canberra and from the UN headquarters in New York, under pressure from Washington.

The third serious failure emerged starkly last November--in trade policy. The leaders of ASEAN started to backslide on the organization's only really ambitious project, the creation of a free-trade area. Malaysia's Mahathir demanded and won a special new exemption from the plan, under which about 85 percent of trade between ASEAN's members was to be freed from tariffs by 2002. This was to include cars and car parts. But Mahathir wants to protect his indigenous car project, the Proton, which today lazes under the shelter of tariffs as high as 300 percent. This angers Thailand, the self-proclaimed "Detroit of the East", host to world-class Toyota, Ford and BMW assembly plants.

So ASEAN has failed to deal with an economic crisis, failed to do anything in the face of a security crisis, and now is failing to manage its own programs of trade liberalization. His ideal in tatters, Professor Jayakumar has conceded that ASEAN looks feeble: "We may not like these perceptions of ASEAN as ineffective and a sunset organisation, but they are political facts."

Why is it in such grave difficulty? Without a strong president in Indonesia, ASEAN is leaderless. With political uncertainty in two of its other major members, Thailand and the Philippines, its most important members are distracted. Enfeebled by the financial crisis, it is economically weak. Under competitive challenge from a rising China, its confidence is shaky. And with the recent entry of four new members--Myanmar, Vietnam, Cambodia and Laos--any semblance of unity is impossible.

Like the world's investors, the Singaporean government has drawn the conclusion that it will not put its full faith in the future of ASEAN. Singapore is striking out with bilateral free-trade agreements with anyone who might be interested--the United States, Japan, Mexico, Australia, New Zealand. It is for this reason that Singapore's supreme strategist--the former prime minister, Lee Kuan Yew--last November proposed a new regional trade grouping: ASEAN, plus the three big Northeast Asian economies of Japan, China and South Korea, plus Australia and New Zealand. Lee knows that if Singapore wants any sort of dynamism, it will not find it in ASEAN.

A Japanese academic once compared ASEAN to a salad in the affairs of the wider Asia-Pacific: a valuable side dish, but not essential to sustaining life. Today it is starting to smell like a salad that has been left out in the sun for too long. The first rays of the new millennium's dawn over Southeast Asia illuminate a grim scene. But there is nothing predetermined about the region's present state of disarray, no inevitability about its decline into "Latinization." Its successes were man-made, and so are its failures. Its salvation, if it is to have one, will lie in energetically building, not madly bombing, its own future.

1 The original article, "The ASEAN Magic", was first published in the Japanese Foreign Ministry journal, Gaiko Forum, in April 1996, and Mahbubani's elaborations are contained in his book, Can Asians Think? (Singapore: Times Books International, 1998), pp. 14,157-65.

2 Clive Schofield, "A Code of Conduct for the South China Sea?", Jane's Intelligence Review, January 1, 2000.

3 Author's interview with Wolfowitz, quoted in the Australian Financial Review, August 9, 2000.

4 See Geoff Hiscock, Asia's New Wealth Club (London: Nicholas Brealey Publishing, 2000), especially pp. 13-16 and 314-15.

5 "Emerging Asia: Changes and Challenges" (Manila: Asian Development Bank, 1997), p. 275.

6 Quoted in the Australian Financial Review, June 19, 2000.

7 Credit Lyonnais Securities (Asia), "Asia's Dismal Decade", Emerging Markets (May 2000); and Nafte as quoted in the Australian Financial Review, June 20, 2000.

8 Quoted in the Australian Financial Review, June 20, 2000.

9 China's nominal GDP in 1999 was $996 billion. That of the big five ASEAN economies was $509 billion (Indonesia's was $143 billion, Thailand's $125 billion, Singapore's $85 billion, Malaysia's $79 billion, the Philippines' $77 billion). This makes China 195 percent the size of ASEAN.

Peter Hartcher, formerly Asia-Pacific editor of the Australian Financial Review, is now the paper's Washington correspondent.