Voulme 3 - Issue 7 - September 1997

Two months after the Thai baht was allowed to float free of its fixed exchange rate, South-east Asia’s economic crisis appears to be deepening as currency devaluations and stock-market falls spread to Indonesia, Malaysia, the Philippines and even Hong Kong. Talk of the end of an economic era in South-east Asia is almost certainly overblown, but political and strategic consequences are bound to result from the current economic disarray. A slow-down in economic growth, now virtually inevitable, is likely to lead to rising social tensions and political instability. Leadership transitions in Indonesia, Malaysia and the Philippines will almost certainly be complicated and the possibility of more nationalist rulers emerging is real.

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Despite King Norodom Sihanouk’s return to Cambodia on 29 August 1997, the political crisis sparked by Second Prime Minister Hun Sen’s violent coup of 5–6 July 1997 shows no early sign of resolution. The ousting of his former coalition partner, Prince Norodom Ranariddh, has proved a major embarrassment for the Association of South-East Asian Nations (ASEAN) and delayed Cambodia’s entry into the regional grouping. ASEAN’s efforts at diplomatic intervention have broken its long-held principle of non-interference in domestic affairs, but failed to meet with a satisfactory response from the Hun Sen regime. The imperative of enlargement, and the need for political stability in Cambodia, may yet prompt ASEAN to endorse a spurious legitimacy for the Hun Sen regime.

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Russia’s arms industry is slowly recovering from the collapse of the Soviet Union. It has gained new markets in Asia and Latin America, but lost many of its traditional customers in Eastern Europe and Africa. But in its haste to secure new orders from countries like China, India, Indonesia, Iran, Malaysia and South Korea, Russian arms manufacturers are increasingly selling top-of-the-range items, in some cases equipment that is not even available to the Russian armed forces. With the collapse of Russia’s domestic arms market, the need for exports may push the government and weapons companies into dubious deals. In the long term, restructuring the industry is the only cure for its economic woes.

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As Kenya prepares to stage its third multiparty elections since independence in 1963, the polls seem certain to be bloody and are likely to leave the country more divided than ever. Given the immense divisions within the opposition, and the decision by Kenneth Matiba – President Daniel arap Moi’s closest rival in the 1992 election – to boycott the polls, there is a growing danger that Kenya’s political debate will be conducted on the streets. Furthermore, allegations that Moi’s Kenya Africa National Union (KANU) was behind violence that left more than 40 people dead in August 1997 suggest that ethnic tensions may be being deliberately inflamed to disperse opposition supporters and guarantee KANU victories in key areas. Despite the significance of these elections, it is the struggle between KANU hardliners and moderates to find Moi’s successor that is likely to determine the future of east Africa’s dominant economy.

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A fragile stability has descended on the Caucasus. Major conflicts – such as those in Chechnya and Nagorno-Karabakh – are, if not resolved, at least confined to the political rather than the military sphere. Economic prospects have also improved, but the region’s extraordinary ethnic mosaic, the vulnerability of its newly independent states and the competition for influence between Russia, Turkey, Iran and the US make for an uneasy future.

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