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Southeast Asia’s Democratic Developmental Statesand Economic Growth
Michael T. RockBryn Mawr College, mrockK@brynmawr.edu

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Rock, Michael T. 2015. "Southeast Asia’s Democratic Developmental States and Economic Growth." Institutions and Economies. 7(1): 15-43.

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Institutions and Economies
Vol. 7, Issue 1, April 2015, pp. 23-51

Southeast Asia’s Democratic
Developmental States and Economic
GrowthMichael T. Rock a
Abstract: How has democracy impacted growth in Southeast Asia? This
question can be answered by demonstrating how political elites in Indonesia,
Malaysia and Thailand crafted quite unique democratic developmental statesthat enabled them to provide the public goods and public policies to maintainhigh growth. Because of this, growth under democracy has been as high as it
was during the heyday of these polities’ developmental autocracies. Moreover,as there was no single dominant pathway to the construction of democratic
development in these polities, it looks like political elites were able to take local
conditions and history into account suggesting that political elites have been
as effective in selectively intervening in the structure of democratic politics as
they have been in intervening in the economy.
Keywords: Developmental States, Economic Growth, Institutions, Southeast
Asia
JEL Classification: O4, O20, O53
Article Received: 13 February 2014; Article Accepted: 13 September 2014

1. Introduction
Development in Southeast Asia was ushered by autocrats such as Suharto
in Indonesia (Elson, 2001) Sarit (Thak, 2007) and Prem (Muscat, 1994; Anek,
1988) in Thailand, Lee (Lee, 2000) in Singapore, and Mahathir in Malaysia(Khoo, 1995)]. But over time, Indonesia and Thailand democratised rapidly
while Singapore and Malaysia remained more or less semi-democratic. As
Reilly (2006) has shown, the institutions of democracy in Indonesia, Malaysia
and Thailand ( hereafter IMT), and in East Asia had taken a centripetal thrust,adopting a combination of majoritarian electoral systems (Reilly, 2006, 109112), political party systems that favour institutionalisation of a small numberof large bridging parties (Reilly, 2006, 131-142), and forms of executive
government that increase government stability (Reilly, 2006: 146-166).
aCorresponding Author. Samuel and Etta Wexler Professor of Economic History,
Department of Economics, Bryn Mawr College. Email: mrock@brynmawr.edu.

24Michael T. RockWhite (2006) and Robinson and White (1998) have suggested that these
democracies presage the emergence of democratic developmental states ordemocratic governments that are more effective in delivering public goods andgrowth, but also decidedly less representative of the range of interests extant inmany, if not most, polities, particularly those with multi-ethnic and/or multireligious communities like in IMT. In a recent paper, Rock (2013) demonstrated
that East Asia’s centripetal democracies, including IMT, have been a growthenhancer just like the region’s developmental autocracies. While Rock’s reduced
form regression results are encouraging, they beg an important question. How
did the adoption of more centripetal democratic political institutions in East
Asia’s new developmental democracies influence economic growth?
The aim here is to answer this question by re-constructing, via threecomparative case studies, the emergence of centripetal democracies in IMT,and linking the selective adoption of more centripetal democratic institutions
to economic growth. The next three sections develop country case studies of
the causal mechanisms linking the emergence of more centripetal democratic
political institutions to development policies and growth in IMT. The final
section summarises main findings and provides conclusions.

2. Creating a Developmental Democracy in Indonesia1
Prior to the collapse of the New Order, few conditions suggested a
democratic transition was near. Economic performance remained strong.2
Despite growing opposition to Suharto and his re-election in 1997 (Aspinall,
2005: 242), the New Order regime appeared well-entrenched. Because Indonesia
lacked the traits associated with democratisation3, few expected Suharto toresign, the New Order to collapse, or Indonesia to become a robust democracy(Aspinall, 2005: 252). Virtually no one expected Indonesia to consolidate its
democracy or return development performance to the levels experienced under
the New Order.4 The country appears to have done both. How did Indonesia
manage that?
One hypothesis is political engineering — the deliberate creation of more
centripetal political institutions by political insiders (Horowitz, 2013)—lies atthe centre of the story of the consolidation of democracy and of the return torobust economic performance. As is well known, the collapse of the economy
in 1998 ignited widespread popular mobilisation from below and widespread
violence (Aspinall, 2010: 26 and 2005: 252). These events, alongside massive
capital flight (Pepinsky, 2009:155) and the killing of university students bysecurity forces, precipitated elite defection from and disintegration of the
New Order (Webber, 2006: 407). From the vantage point of 1998, Indonesia’s
democratic transition looked like a classic ‘ruptura’ (Aspinall, 2005: 271) — a

Southeast Asia’s Democratic Developmental States and Economic Growth25

mode of transition considered unlikely to lead to a consolidation of democracy(Karl, 1990: 8). Subsequently, the old New Order elites quickly captured thestate and Indonesia’s new democratic institutions, shifting the post-transition
period to pact-making between the country’s new democratic elites and themilitary on one hand and between new democratic elites and separatists on theother hand (Aspinall, 2010). While Slater (2004), Webber (2006) and Hadiz(2003) have criticised the impact of this particular transition on the quality of
democracy, Aspinall (2010) states that concessions to the military and separatists
alongside absorption of Islamists into the democratic mainstream enabledIndonesia to consolidate democracy.
By themselves, rapid collapse of the New Order and a shift to democratic
pact-making do not sufficiently explain the ability of new democratic elites
to consolidate democracy or put development back on track. Three other key
developments — creation of more centripetal democratic institutions (Reilly,2006), building a more effective government by tackling corruption (Butt, 2011)
and keeping the economists and institutions of macroeconomic policy-making
in their place of prominence in government (Aswicahyono, et al., 2009, Bird,
et al., 2008 and Boediono, 2005 and 2002) — also mattered.
As Horowitz (2013:46-53) shows, political insiders ignored outsiders’calls for more radical innovations and used existing institutions to craft a new
democratic political foundation and a revised constitution to move Indonesia’stransitional democracy in a more centripetal direction. The turn towards more
centripetal political institutions occurred in a series of fits and starts. All the
major aspects of Indonesia’s centripetal democracy were not in place until
the 2004 presidential election.5 In 1999, political elites reaffirmed the 1945
constitution (King, 2004: 8), a unitary state, a presidential form of government(King 2004: 18) and rejected parliamentary democracy as inappropriate forIndonesia (King, 2004: 143). At the same time, Indonesia adopted proportional(PR) electoral rules, but with closed party lists to generate greater party cohesion(Slater, 2004: 75). The 1999 electoral law also established party thresholds
for participation in subsequent elections (Sulistyo, 2002: 81). And Indonesia
adopted large district magnitudes (Sulistyo, 2002: 80) to ensure adequate
representation of Indonesia’s pluralist interests (King, 2004:150) while it
weakened the presidency (King, 2004:53-54 and 76). Finally, to compete in
the 1999 election, political parties had to establish branches in one-third ofIndonesia’s provinces and party offices in more than half of the districts ormunicipalities in those provinces (Reilly, 2006: 133). The net effect of these newrules on the political system was not entirely clear. Rejection of parliamentarydemocracy as inappropriate for Indonesia (Horowitz, 2013: 27), continuationof a unitary state and a presidential form of government had the potential tostrengthen the centripetal character of democratic political institutions. The

26

Michael T. Rocksame can be said for both geographic coverage/penetration rules and for theuse of party thresholds aimed at reducing fragmentation of the party system.
But a weakened presidency and adoption of PR electoral rules even with closed
party lists, alongside large district magnitudes, had likely pushed the politicalsystem in a centrifugal direction.
Subsequently, political elites reversed the process by directing theinstitutions of democracy in a more centripetal direction. Initially, they did
so by using constitutional amendment to strengthen the presidency (King,
2004: 54). In response to growing pressures for greater regional autonomy,
Indonesia implemented ‘big bang’ decentralisation in 2001, but it did so in a
way that protected its unitary state while keeping the separatist movementsin check (Fitrani et al., 2005: 61). One consequence of decentralisation was
an increase in the number of electoral districts. As electoral districts became
smaller, district magnitudes fell from 17.5 in 1999 to 8 in 2004 and 7.3 in 2009,
increasing centripetal tendencies as winning seat thresholds rose from 5.7%of the votes in 1999 to 12.5% in 2004 and 13.7% in 2009 (Choi, 2009: 673).
As Carey and Hix (2011) have shown in other contexts, Indonesia’s decline in
district magnitudes puts it squarely in an electoral sweet spot — one enabling it
to maximise the benefits of its PR electoral rule without encouraging too much
unruliness or losing too much in the way of accountability that enables votersto reward parties for good performance or punish them for poor performance.
Finally, the government added to its geographic coverage/penetration rules
for political parties by adopting additional rules for participation by politicalparties that pushed them to aggregate interests and compete for the politicalcentre (Choi, 2004: 679-80). A similar set of rules governed party candidates
for president (Choi, 2004:682).
Why did Indonesia’s political insiders opt to create a more centripetal
democracy by incremental means? Horowitz (2013:6) argues that this choice
was driven by the country’s social endowments and history. Social endowments,
particularly its ethnic, religious and cultural cleavages, Outer Island fears ofJavanese domination, and differences among Modernist and traditional Muslims
and between Muslims and secular nationalists, led elites to favour incremental
reform and the 1945 constitution over crafting a new constitution because theyfeared for the unitary state and secular nationalism (Horowitz, 2013: 41).
History, particularly the experience of the 1950s, pushed reform in acentripetal direction. Here, the fears focused on mass violence, territorial
separatism, deliberative deadlock, and party fragmentation (Horowitz, 2013:22). To the insider political elites charting a path to stable democracy, theviolence, regional discontent, and separatist insurgencies of the 1990s looked
all too eerily familiar to the violence, regional rebellions, and military revoltsof the 1950s (Horowitz, 2013: 25). Given this, some form of decentralisation

Southeast Asia’s Democratic Developmental States and Economic Growth27

was seen as essential (Horowitz, 2013: 73). But to protect the unitary state andlimit fissiparous tendencies, decentralisation was applied to kabupaten and kota
rather than provinces. This same set of fears led political elites to strengthen
the presidency. They did this due to fear that a fragmented country (ethnic andreligious fault lines) with a weak executive could lead to the break-up of thecountry (Horowitz, 2013: 39).
Fears of deadlock and legislative and party fragmentation were also rooted
in the experience of the 1950s. The deadlock and failure of the Konstituante(the Constitutional Assembly of Indonesia) of the 1950s to rewrite the 1945
constitution was viewed as opening the door for Sukarno’s authoritarian Guided
Democracy (Horowitz, 2013:26). Fearing a stalemate on the same issues,
especially the role of Islam (Horowitz, 2013:26), political elites rebuffedcalls for a constitutional convention (Horowitz, 2013: 53) and reaffirmed the1945 constitution. In addition, the experience of the 1950s with parliamentary
government and the 1955 elections taught reformers to fear legislative and party
fragmentation (Horowitz, 2013: 27). Because of this, they opted for electoralrules and rules governing political parties participation in elections designed
to strengthen centripetal tendencies.
How successful has the push toward more centripetal political institutions
been? Reilly (2006) contends that democratic political institutions have moved
in a centripetal direction. Mietzner (2008) shows that after democratisation,
Indonesia’s political parties have been competing for votes in the politicalcentre.6 Voters appear to have responded to these campaign promises bythrowing out parties and leaders viewed as corrupt or unable to restore growth,7and they rewarded parties and political leaders who have delivered on theirpromises to promote development.8 This outcome alone creates incentives forpolitical parties and elected presidents to continue to rely on the country’s
economists attached to core macroeconomic institutions — the central bank,the Ministry of Finance and BAPPENAS — for council and advice. It also
helped that democratically elected governments have become more stable(Reilly, 2006: 154).
Not surprisingly then, political elites have taken steps to build asomewhat more effective government while keeping the government’s coremacroeconomic institutions in their positions of prominence. To begin with,Indonesia’s anti-corruption commission has successfully prosecuted a numberof highly visible anti-corruption cases (Butt, 2011: 381; Mietzner, 2009: 146150). There is also some evidence of success in prosecuting cases of the more
local and decentralised corruption that emerged following Indonesia’s big bang
decentralisation (Rinaldi, et al., 2007). This may well account for the substantial
improvement in Indonesia’s control of corruption score recorded by the Political
Risk Services Group (2013). It may also explain why there has not been much

28

Michael T. Rockdeterioration in the Political Risk Services Bureaucratic Quality score forIndonesia following democratisation (Political Risk Services Group, 2013).
Equally important, successive governments sought the advice of thecountry’s economists in core macroeconomic institutions. Given their highly
successful role during the New Order, this is not particularly surprising. But
now, political elites, particularly presidents, turn to them to help them stay inpower by delivering development. There are numerous examples of this. In
1998, President Habibie relied on the advice of the country’s macroeconomists
as he saw it as his best chance for succeeding as president (Boediono, 2002:
388). Even during the phlegmatic Wahid Administration, Indonesia’s democratic
government adhered to a traditional macroeconomic stabilisation programme(Boediono, 2002: 390). During Megawati’s presidency, the important economic
portfolios were more insulated, the economic team more cohesive and likeminded, and the government was able to establish macroeconomic stability(Boediono, 2005: 315). Subsequently, the government strengthened the roleof economists in democratic governments by creating a ‘cordon sanitaire’
around core macroeconomic institutions and principles by adopting a 1999 law
guaranteeing the independence of the central bank and by stipulating in Fiscal
Law 17/2003 that fiscal deficits be kept below 2% of GDP and the debt to GDP
ratio lower than 60% (Aswicahyono et al., 2009: 357). As Aswicahyono, et al.
(2009: 357) conclude, Indonesia’s macroeconomic policy framework has beenquite effective.
But this is not the only evidence that successive democratic governments
relied on technocrats. Trade policy reform floundered under Wahid andMegawati, the Yudhoyono government committed itself to “tariffication” of
the remaining NTBs and a lowering of tariff rates (Bird et al., 2008: 952-954).
Responsibility for trade liberalisation was under an inter-ministerial committee,
Team Tariff, housed in the Ministry of Finance (Bird et al., 2008: 952). Tariff
harmonisation was expected to lead to a decline in the MFN tariff rate from 8.7%
in 2004 to 7.7% in 2010 (Bird et al., 2008: 953). The actual MFN tariff fell to
5.4% by 2008 (Marks and Rahardja, 2012: 64). Although there has been somebacksliding (Bird et al., 2008:955-957), on the whole democratic governments
in Indonesia have been able to sustain a trade liberalisation programme thatbegan in the mid-1980s.
Arguably, the shift in Indonesia towards a more centripetal democracy
played an important role in reining in corruption, in introducing soundmacro-economic policies, in continuing support for trade liberalisation, andin achieving growth rates similar to those of the New Order. This outcome
reflects that voters (Mujani and Liddle, 2010:42-44), including Muslims,
expect governments to deliver on development goals (Pepinsky et al.,2012:10). In addition, it became possible for presidents and parties to focus on clean
government and development partly because concessions to potential spoilers

Southeast Asia’s Democratic Developmental States and Economic Growth29

of democracy in the military removed their possible intervention in politics.
It was facilitated by decentralisation and concessions to potential separatists
in Aceh and Papua that reduced the likelihood of territorial fragmentation(Aspinall, 2011). But this outcome would not have been possible without the
emergence of a centripetal party system that revolves around three major parties
that compete for the political centre (Aspinall, 2010: 29). Nor would thisoutcome have been likely without regular national campaigns for president andvice president that have driven candidates and their parties to the political centre.

3. Malaysia’s Developmental Semi-Democracy
At independence, observers of Malaysia thought that it was in for“… devastating, Malay-Chinese conflict… (Horowitz, 1989: 18)”

Despite this prediction, ethnic conflict in Malaysia has been more or lesscontained enabling government elites to focus on development. As a result,
Malaysia has sustained high growth rates, successfully diversified the economy
away from a small number of primary exports, moved up the value added
processing chain, significantly reduced the incidence of poverty, and more orless eliminated a longstanding relationship between economic function and race
(Rock and Sheridan, 2007). It has also reduced income inequality (Kuhonta,2011) How did this happen? The answers provided below focus on politicalinstitutions, particularly the deliberate creation of a centripetal (Reilly, 2011:289-299) and an at least semi-democratic, if not democratic, developmental
state in Malaysia that developed effective mechanisms for containing ethnic
violence while pushing the country’s major political parties to the politicalcentre all but forcing them to provide the public goods and public policies thatenhance growth and development.
Neither was easy to do and both required developing institutions andpolicies to overcome the legacies of British colonialism — the identificationof race with economic function (Jomo,1986:58-66, 122, 157-173, 228 andHarper,1999: 228), the disadvantaged position of the Malays, and a shift in
the population balance favouring immigrants (von Vory, 1975: 23). From theperspectives of the Malays, this was a nasty brew as it raised fears that theywould become second class citizens in the land of the Malays (Harper, 1999:
32). To make matters worse, the spread of communism, the Great Depression,internal turmoil in China and Japanese aggression contributed to a politicalawakening in both the Chinese (Heng,1988: 6, 20-21; von Vorys, 1975: 52)
and Malay communities (von Vorys, 1975: 41; Harper, 1999: 32). The ethnic
division of labour and political awakening were potentially explosive.
Unfortunately, the Japanese occupation (Cheah,1983:20-22, 26-27,33-34),
ethnic violence that flared up between the end of the occupation and the return

30

Michael T. Rockof the British (von Vory, 1975: 64 and Cheah, 1981: 109), and an anti-communist
Emergency only inflamed racial tensions.
Against this backdrop, the British reoccupied Malaya and proposed the
Malayan Union — a multi-ethnic and democratic state with a highly centralised
government (Lau, 1991). An emerging Malay national leadership mobilised
ordinary Malays against the Union which culminated in the creation of theUnited Malays National Organization (UMNO) in 1946 (von Vorys,1975:
67-68; Kuhonta, 2011: 61-64). Following rejection of the Malayan Union by
Malay elites, the British created an Anglo-Malay Working Committee to rewrite
the constitution (Lau, 1991: 188-211). The outcome, the Federation of Malaya
Agreement, created a strong central, but federal government, preserved the roleof the Sultans in each federated Malay state, severely restricted citizenshipfor non-Malays and recognised the special rights of the Malays.The colonial
government also re-established the leadership role of the traditional leadersof the Chinese community while undermining the Malayan Communist Party(Cheah, 1983: 214; Heng, 1988: 43-45). They encouraged the English-educatedChinese elite to form a political party to rally Chinese support against thecommunist insurgency and protect their capital (Heng, 1988: 55, 84-85).
The insurgency also led the British to create a Community Liaison
Committee (CLC) to promote consociational democracy. The major outcomesof the CLC were Malay acceptance of liberal citizenship rights for the Chinese(Heng, 1988: 155), Chinese acceptance of the special rights of the Malays,
and the articulation by UMNO of an aggressive corporatist economic reform
programme to create a group of Malay capitalists (Heng, 1988: 52).
Subsequently, the British extended local level elections to include majorurban areas. Because most Malayan cities were dominated by the Chinese,
UMNO needed MCA help to win these elections (Horowitz, 1989: 27-28) which
the leaders of MCA readily agreed (Heng, 1988: 156-159). Together, the twoparties pooled votes by running an ethnically mixed, but common, single slateof candidates that captured 26 of 34 seats (Horowitz, 2000: 399). Electoral
success led to a creation of a formal Alliance in 1954. In 1955, the Alliance,
which included the Malayan Indian Congress (MIC), won 51 of 52 seats inthe first election for a Federal Legislative Council (Horowitz, 2000: 401). This
election enshrined three key elements of Malaysia’s centripetal democracy —a plurality electoral rule in single-member districts (Lim, 2000: 103), crossethnic vote pooling around a single slate (Horowitz, 2000: 401), and politicalparty competition rooted in moderation on policy issues (Kuhonta, 2011: 25).
Why did the governing elites use the power of the state
to promote development? While the country’s centripetal politicalinstitutions provides at least a partial answer to this question, several
other considerations loomed large. To begin with, the Malay politicalelites, particularly Prime Minister Mahathir who came to dominate
successive governments in Malaysia’s centripetal semi-democracy haveSoutheast Asia’s Democratic Developmental States and Economic Growth31

been keen in increasing national power and projecting the country in a world
dominated by the West (Khoo, 1995:17). For them, development is an importantcomponent of national power (Khoo, 1995:67), a goal in its own right (Khoo,
1995: 57), and a vehicle for consolidating and sustaining their own politicalregimes (Khoo, 1995: 73). Political leaders in UMNO have been particularlycommitted to nationalist and industrial development agendas for indigenous
Malays. Because of this, the nationalist agenda in Malaysia has been to protectthe ‘special rights’ of the indigenous Malays (Means, 1972). Because the ruling
UMNO is strongly anti-socialist, anti-communist and pro-capitalist (Jomo,
1986: 243, 247), its alignment with an equally anti-communist and pro-capitalist
Chinese political party meant that development would take place within theconfines of a capitalist development model, although not a free market one.
How did the Malay elites who controlled the state use their power topromote a prosperous and capitalist Malaysia? As the British left Malaysia
with a relatively strong central government (Slater, 2010: 74-93) and a small,but highly effective civil administration that was and is committed to basic
macroeconomic stability (Ismail and Meyanathan, 1993: 3), governments havetended to get macroeconomic policy fundamentals right. But how centripetal
governments pursued their broader development objectives varied. Before therace riots of 1969 that threatened both the Alliance government and ethnic peace,development strategy focused on selective interventions in agriculture andrural development that benefited Malays as well as a more or less laissez faire
approach to industrial development. After the race riots of 1969, the government
retooled the Alliance government (Kuhonta, 2011: 88), UMNO (Kuhonta,
2011: 83-86 and 97), the state (Kuhonta, 2011: 84, 96-97) strengthened theruling party’s and the state’s centripetal capabilities so it could maintain ethnic
peace, stifle dissent, and pursue a more directly interventionist and pro-Malay
development policy.
Prior to the race riots of 1969, the government focused its development
efforts on rural economic activities (Ismail and Meyanathan, 1993: 4), primarily
in rice and palm oil (Bruton,et al.,1992: 233-242; Pletcher, 1991), beneficial
to Malays. The government’s rice programme required substantial public
expenditures on irrigation (Goldman,1975: 265), land expansion (Goldman,
1975: 265), infrastructure, marketing of rice (Mokhtar and Meyanathan, 1988:103), and promotion of fast-breeding, high-yielding rice varieties that worked
well in Malaysia (Goldman,1975: 267). It was hoped that modernisation ofrice planting would reduce Malaysia’s dependence on the vagaries of world
rice market (Fitzpatrick, 1992: 125) and increase the incomes of poor Malayrice farmers.
The government also intervened in oil palm plantation. Initially, expansionof the area devoted to oil palm was facilitated by the government allowing
private planters to use rubber replanting grants to grow oil palm trees (Pletcher,32

Michael T. Rock

1991: 625). Subsequently, the Federal Land Development Authority (FELDA),
a government agency, launched an aggressive resettlement scheme based on
several crops, particularly oil palm (Pletcher, 1991: 625). As a consequence,
the area under oil palm expanded rapidly from 54,700ha in 1960 (Pletcher,1991: 625) to 258,428ha in 1970 (Pletcher, 1990: 330).
Despite these selective interventions designed to benefit the Malays, theincidence of poverty among rural Malays remained stubbornly high. When
the Chinese began contesting for control of the state, the outcome was therace riots of 1969. The government responded by restructuring the Allianceparty and by strengthening both UMNO and the state so that the latter could
pursue a more pro-Malay development agenda under its New Economic Policy(NEP). The NEP committed the government to reducing poverty irrespectiveof race (Bruton et al.,1992: 271) and ‘restructuring’ the Malaysian society toeliminate the identification of race with economic function (Jomo, 1986: 256).
Rapid economic growth was seen as critical to meeting both goals (Ismail and
Meyanathan, 1993: 6).
Under the NEP, the government accelerated its selective interventions inrice and oil palm plantations. In rice, intervention first turned to squeezing themargins of traders and millers in the hope that this would increase farmers’
incomes (Pletcher, 1988: 191). To that end, the government created the National
Padi and Rice Authority (Lembaga Padi dan Beras Negara, or LPN) in 1971
(Mokhtar and Meyanathan, 1998: 109). The LPN used its authority to stabilise
rice prices at a high level (Mokhtar and Meyanathan, 1988: 107, 130; Rock,
2002: 492) at some cost to economic efficiency (Mokhtar and Meyanthan, 1988:
120-121, 139). Despite this intervention, poverty among Malay rice farmers
persisted (Jomo, 1990; Mehmet, 1986). This led the government to increaseother subsidies to rice farmers (Mokhtar and Meyanathan, 1988: 107-108).
Taken together, government intervention provided farmers with a stable rice
prices (Rock, 2002: 492) and increased rice self-sufficiency (Goldman, 1975:
263; Mokhtar and Meyanathan, 1988:100).
Government intervention in oil palm focused on capturing control of theforeign-owned oil palm plantations, resolving collective action problems, andcorrecting market failures in the processing of crude palm oil. The government
gained control of foreign owned estates in a process of ‘velvet’ nationalisation
without reducing growth (Pletcher, 1991: 630-631). Take-over of foreign estates
and rapid expansion of crop area to oil palm was complemented by aggressive
use of an export duty on unprocessed oil palm to overcome a market failure indomestic value-added processing of crude palm oil (CPO) (Gopal, 1999: 361
and 366).
The effect of the duty was to reduce the domestic price of CPO andincrease domestic processing margins (Gopal, 1999: 366). This policy was
wildly successful — in 1975, Malaysia was refining less than 10% of its CPO,

Southeast Asia’s Democratic Developmental States and Economic Growth33

but by 1994, it was refining 99.2% of CPO while refining capacity reacheda little more than 10 million tonnes (Gopal, 1999: 363 and Moll, 1987). The
government also selectively and successfully intervened in applied research onprocessed palm oil products (Fold, 2000: 478 and Pletcher, 1991: 627). And
it has been actively involved in maintaining quality control in processed palm
oil products (Pletcher, 1991: 631-632) and in the international marketing ofthem (Fold, 2000: 476 and Pletcher, 1991:634).
In addition, the government used its enhanced capabilities to implementa stunningly successful and growth-oriented affirmative action programme(Rasiah and Ishak, 2001: 6; Bruton et al., 1992). Following a downturn in theworld economy, the government responded with a classic austerity programme(Khoo, 1995: 115), by privatising numerous state-owned enterprises (Bowie,
1994: 178-181), liberalising the foreign investment and trade regimes, and by‘holding the NEP in abeyance’ (Khoo, 1995: 140-141). These policy changes
coincided with the Northeast Asian newly industrialising economies relocating
their industries to the second tier NICs in Southeast Asia, including Malaysia.
This sparked a growth and export boom, a general rise in consumption andliving standards (Khoo, 2003: 17) as well as a rising stock market (Khoo, 2003:
23).
Rapid economic growth, the success of the NEP, particularly the creationof a Malay capitalist class, made it possible for Mahathir to declare that the
NEP had been a great success (Khoo, 2003: 20) and that it was time to end it(Khoo, 2003: 22). As a result, Mahathir began reconstructing industrial policies
and the institutions of industrial policies to achieve technological-capabilities
building objectives (Jomo, 2007; Felker, 2001: 138; Felker, 1999: 103-104).
Subsequently, the government completely re-organised and upgraded its public
sector science and technology programmes (Felker and Jomo,1999: 20-21 andRasiah, 1999: 191). By the early 1990s, these “reforms…created an increasingly
coherent and dynamic policy system in S&T as well as in broader industrial
policy arenas” (Felker, 1999: 112,114-115).
This new industrial policy system demonstrated a commitment to a new
approach to technological upgrading in local firms via a Vendor Development
Programme (Lim, 2004:7 and (Felker, 1999:118), an Industrial Linkage
Programme (Lim, 2004:8), and a Global Supplier Programme (Lim, 2004:9). Each of these programme aimed to promote technological upgrading bylinking local firms with the global value chains of multinational corporations.
Despite numerous criticisms of these new policies (Jomo, 2007; Lim and Ong,
2007; Rasiah, 1998; Best, 1999; Tan, 1999) 9, there is substantial evidence via
case studies (Rasiah, 2001; McKendrick et al., 2000; Doner and Hershberg,
1999; Narayanan et al., 1997; Churchill,1995 and Lai et al., 1994) and somestatistical evidence (Flaaen et al., 2013: 13, 14-16,33-35, and 45-46; Yusof andBhattasali, 2008: 11) that this new strategy is working.

34

Michael T. RockIn sum, there is therefore substantial evidence to suggest that the governing
elites in Malaysia successfully pursued an aggressive development agenda.
Commitment to a development agenda flowed directly from Malaysia’scentripetal institutions which pushed the political parties in the Alliance to themoderate centre forcing them to provide the public goods and public policies
necessary to develop the economy. But commitment to development, at least
within UMNO, also flowed from the disadvantaged position of the Malays
at independence. Governing elites in Malaysia were also fortunate that the
British left them with a strong centralised state. Given their commitment
to development and their control of a strong centralised state, ruling elites
maintained macroeconomic stability and selectively intervened in thoserural activities beneficial to Malays. When this strategy failed to reducepoverty and inequality, UMNO elites re-negotiated the political bargain andstrengthened its capabilities and the state so it could launch a highly successful
and growth-oriented affirmative action programme that reduced poverty andinequality while virtually eliminating the identification of race with economic
function. The success of this strategy subsequently enabled governing elites
to shift development strategy, this time focusing on building the technologicalcapabilities of Malaysia’s firms. It is difficult to believe that any of thiswould have been possible without the creation of the centripetal democratic
institutions— a plurality electoral rule in single member districts, cross ethnic
vote pooling around a single slate, and centrist moderation on policy issues— that enabled ruling elites to mitigate ethnic conflict so they could focus ondevelopment.

4.

Thailand’s Democratic Developmental StateThe origin of Thailand’s democratic development state lies in the forced
opening of the economy in 1855. The Thai monarchy responded by turning
to administrative reforms and political change to preserve Thai independence.
Administrative reforms extended central control over the outlying provinces,significantly enhanced the state’s ability to tax, and weakened traditional
regional power bases (Wyatt, 1984;Chai-anan, 1971:30). These changes
were accompanied by the gradual abolition of slavery and the replacementof corvee labour with a rural society of small producers with little politicalinfluence. By 1927, the outlines of the modern Thai political economy wereset. The centre (Bangkok) had moulded a loosely integrated collection ofsemiautonomous provinces into a nation-state by a triad of forces consistingof a highly centralised bureaucracy that invested in defence and the transportsystem, a freed peasantry that expanded the area under cultivation and Chinese
traders and European exporters who facilitated the rice trade (Chai-anan, 1971:
78; Feeny, 1982: 80-81).

Southeast Asia’s Democratic Developmental States and Economic Growth35

Subsequent political developments reinforced the tendency toward acentralised state, a weak political party system, and unstable political institutions(Chai-anan, 1982: 1-2). The 1932 “revolution” completed the transfer ofpolitical power from royal elites to Western-trained bureaucratic elites (Morelland Chai-anan, 1981: 13-16). But it wasn’t until Sarit came to power in 1958 thatpolitical elites in the centralised state began to promote development (Muscat,
1994: 88). Within a few short years Sarit developed close ties with the WorldBank and economic technocrats in the Thai bureaucracy (Muscat, 1994: 88).
He eliminated discrimination against the Chinese, blocked the growth of stateowned enterprises, and relied on the private sector for development (Muscat,
1994: 88). He also created the technocratic institutions — a Bureau of the
Budget, the National Economic Development Board, the Board of Investment,
and the Fiscal Policy Office in the Ministry of Finance—that along with the
Bank of Thailand came to dominate economic policymaking in successive Thaigovernments (Muscat, 1994: 92).
Between 1960 and 1987 the technocrats in these macroeconomic agencies
engaged in sound macro-economic management (Christensen et al., 1993: 2628). Urban wage rates, including the social wage, were kept near their scarcity
values (Bertrand and Squire, 1980). The government also took advantage ofa large land frontier to manipulate an industrious (Keyes, 1983) but politicallydocile peasantry by giving peasants access to land (Piker, 1976) while taxing
them heavily (Wong, 1987: 72; Ammar, 1975).
At the same time, the government extracted agricultural resources fromthe countryside without impoverishing the peasantry and built an importsubstitution industrial (ISI) base around the deliberate creation of a small
number of commercial banks (Hewison, 1989: 283; Suehiro, 1992: 48-49)
that amassed savings, allocated credit, and acted as investment coordinators(Ammar, 2011:68). As in banking, the building of an ISI base behind protective
barriers (Narongchai, 1973) was selective as government policies systematicallyfavoured large firms and a few Sino-Thai entrepreneurs. One effect of this bias
was the domination of Thai industry by large firms which merged into familycentred conglomerates (Suehiro, 1992: 37).
By the mid-1980s, the Thai economy reached a turning point. Stagnatingyields under fixed technologies, the closing of the land frontier, and low factor
productivity growth rates in ISI industries suggested diminishing returns fromthe old growth strategy (World Bank, 1980; Wiboonchutikula, 1987). As a result,government elites opted for an export-led industrial (ELI) growth strategy. If
there had not been a change in the relationship between groups in civil society
and the Thai state, autonomous state actors in the core macroeconomic agencies
might have found ways to lead a Northeast Asian-style transition to ELI growth.
But the rapid socioeconomic change of the previous 25 years undermined the36

Michael T. Rocklegitimacy and autonomy of Thailand’s autocratic developmental state. It
facilitated the emergence of a substantial urban middle class which turned toparties and electoral politics to protect its interests (Girling, 1984; Dalpino,
1991; Anek, 1988). Increasing financial independence of the Sino-Thai business
community, especially the large conglomerates, insulated business fromthe reaches of government (Prasartset, 1982). Government control of tradeassociations declined and representatives of those associations penetrated the
public sector (Prasartset, 1982: 53-67). The business community also began
to play a more prominent role in Thai cabinets as it learned how to collaborate
with the public sector and use its resources to influence and control politicalparties (Bangkok Post, 1982: 31-32). As a result, a stable semi-democratic
political system emerged and the old authoritarian developmental state gave
way to a semi-democratic “broker polity” in which,“the key figure (became) the prime minister who (had) the main
responsibility for brokering a free for all between a growing number oforganized constituencies...” (Dalpino,1991:61).

Initially, this semi-democratic developmental state faced substantial
difficulties in reforming policies to promote exports. It proved difficult tomaintain a competitive exchange rate (Far Eastern Economic Review, Nov. 22,
1984:14-17). Business opposition to tax increases contributed to a savingsinvestment gap that led the IMF to suspend lending to Thailand because thegovernment could not reduce the public sector deficit (Far Eastern Economic
Review, March 20, 1986: 122-124; June 26, 1986: 62; September 25, 1986:
92). The inability to raise taxes on the private sector contributed to a significant
deterioration of public sector balances between 1973 and 1987.10 Governing
elites also found it difficult to lower trade barriers. They agreed to laissez fairestyle trade liberalisation in 10 industries in 1980 but only two industries showedpromising development; government reformers suffered a notable setback intheir attempt to liberalise trade in the electronics industry. Subsequently, tariffs
became even more, rather than less, protective (Narongchai et al.,1991: 15-17).
Fortunately, widespread support in the business community for openeconomy policies, at least in agriculture, enabled governing elites to devalue thebaht despite the military’s opposition (Pongpaichit, 1980: 450). The government
responded to the inability to raise taxes by increasing the centralisation of
economic policy-making and pursuing zero growth budgets (Christensen,
1991: 99). The inability to liberalise the trade regime along laissez faire lines
led reformers to adopt a statist alternative (Wiboonchutikula, 1989: 51). The
Japanese financed a long term Export Industry Modernization Program (EIMP)
through the International Finance Corporation of Thailand at highly subsidisedinterest rates (Wiboonchutikula, 1989: 51). Promotional privileges - including

Southeast Asia’s Democratic Developmental States and Economic Growth37

exemptions and/or reductions in import duties and business taxes onimported inputs, machinery, and equipment and exemptions from corporate
income taxes – by the Board of Investment were extended to export projects(Wiboonchutikula,1989:56). The Bank of Thailand began subsidising theworking capital needs of exporters. By 1988, subsidised loans covered 40%
of exports by value (Wiboonchutikula,1989:52).
These policies were sufficient to allow the economic transition as real
GDP growth expanded rapidly.11 Growth was fed by a foreign investment andexport boom. Between 1986 and 1989, annual foreign direct investment flows
and exports more than doubled (World Bank, 2013). By 1985, manufactured
exports exceeded agricultural exports for the first time (Unger, 1991: 8). Textile
exports increased fourfold between 1983 and 1989; integrated circuits exports
doubled between 1985 and 1987; and exports of plastics and shoes more thandoubled in 1988 alone.
The stability and prosperity throughout the 1980s contributed to even moresignificant changes in Thai politics. Over time, Thailand’s growing middle classcame to view authoritarian government as no longer appropriate for Thailand(Far Eastern Economic Review, May 16-22, 1992: 38). Democratic values
became more embedded, at least temporarily, in the value system of key elites(Far Eastern Economic Review, February 23-March 1, 1991: 36, May 9-15,
1992: 38, May 16-22, 1992: 38 and June 20-26, 1992: 32). By 1988, it waspossible to elect a civilian prime minister. But this maturing of Thai democracy
did not occur without substantial challenges. The carrying over of patronclient politics into the newly elected civilian government diminished the roleof politically neutral technocrats in economic policymaking. This presaged afrontal assault on the state by civilian politicians (Christensen, 1991: 99). The
opening up of the state to the “privatisation” of government projects provided
justification for a military coup. Throughout this period (1988-1997), politicalinstability increased as Thailand experienced two coups and had 11 prime
ministers.
Following the military’s brutal attack on pro-democracy activists in
Bangkok in May 1992, talk among political elites shifted to the need to revise
the constitution to curb money politics, vote buying, abuses of power andgovernment inefficiencies (Prawase, 2002: 21). Because the new constitution
designed to correct these problems was majoritarian, it is difficult to believe that
it wasn’t created so that democratic governments could enjoy macroeconomic
stability, competitive exchange rates as well as develop and implement moreprogrammatic policies and programmes that fostered growth and development.
The 1997 financial crisis provided the impetus to bring revision of theconstitution to fruition (Ammar, 2011: 70). In the eyes of the reformers, existing
electoral rules, a candidate-centred electoral system, and weak prime ministers
were responsible for generating large, unwieldy, and politically unstable and38

Michael T. Rock

short-lived multi-coalition governments that were responsible for thepoliticisation of core macroeconomic agencies and for the inability of
democratic governments to develop and implement broadly targeted policies orprogrammes necessary to sustain growth or deal with rising inequality (Hicken,
2006: 388 and Kuhonta, 2006: 375).
To overcome these problems, reformers adopted a range of mutually
reinforcing amendments to the Constitution that pushed the party system in acentripetal or majoritarian direction. They replaced Thailand’s small multimember electoral districts with single member districts. They jettisoned theblock vote electoral rule in favour of a plurality electoral rule (Hicken, 2006:385). The reformers also strengthened political parties and voters’ attachment
to them by adding 100 seats to the lower house (Kuhonta, 2006: 374) and byadopting a 5% vote threshold for political parties competing for party seats(Hicken, 2006: 385). Taken together, these changes in electoral rules were seen
as favouring a democratic politics dominated by two large catch all or bridging
parties (Ammar, 2011: 74) that would compete for votes by providing the public
goods and policies necessary to sustain development (Hicken, 2005: 107).
Reformers also took several steps to strengthen prime ministers relative
to political parties and cabinet members. They adopted more stringent
requirements for a vote of no confidence in the lower house (Kuhonta, 2006:381) and required cabinet members to resign from their parliamentary seats
upon joining the cabinet (Kuhonta, 2006: 381). They pushed through a 90-day
party switching rule (Kuhonta,2006:381). Finally, they created an incentive
for prime ministers to choose cabinet members from those MPs elected fromthe party list (Kuhonta, 2006:381). These revisions made MPs and cabinet
members more beholden to the prime minister while also making it moredifficult for opposition parties to launch a no-confidence vote. At the same time,
constitutional reformers proposed setting up watch dog agencies, including
an independent Electoral Commission, an independent National Counter
Corruption Commission, and a Constitutional Court (Kuhonta,2006: 379),
to increase public accountability and reduce both the abuse of power and the
rampant corruption in the political system (Hicken, 2006: 386).
The new constitution was passed on September 16,1997. Evidence
suggests that reformers got at least some of what they wished for. Election
results show that the new constitution pushed the party system in a centripetal
direction as the effective number of parties in parliament declined from 7.2
between 1986 and 1996 to 3.8 following the 2001 election and 2.6 following
the 2005 election (Hicken, 2006: 389). The fall in the number of parties was
so dramatic that for the first time in Thai history, a single party, Thai Rak Thai
(TRT), nearly captured a majority of seats in 2001 (Hicken, 2006: 393). It
finally did so in 2005 when it won 376 out of 500 seats (Hicken, 2006: 394).
The shift to a centripetal party system alongside a strengthened prime minister

Southeast Asia’s Democratic Developmental States and Economic Growth39

also brought greater stability in government as the average tenure of sitting
governments rose from 10 months between 1992 and 2000 to 41 months between
1997 and 2004 (Reilly, 2006: 154).
The shift to a more centripetal democracy had one other salutary effect. It
led parties and governments to offer voters clear programmatic policy choices,
particularly in health care (Selway 2011). This was especially true of Thaksin’s
TRT party (Selway, 2011:177-179), but it was also true of the Democrat Party(2011: 177-180). As Ammar (2011,75) says, Thaksin ran a brilliant campaign
in 2001 by offering voters several clear, new, popular policies — a 30 baht
health scheme, a debt moratorium (Chambers, 2013: 90), and a village grant
programme. He also ran against the Democrat Party’s neo-liberal reform
programme (Ammar, 2011: 75) promising to rebuild Thai capital by nurturing
competitiveness and deepening Thai capitalism (Pasuk and Baker, 2004: 112118). Thaksin’s welfare proposals were so wildly popular with rural Thais
that his party won almost a majority of seats in the 2001 election (Hicken,
2006: 394). He built a durable majority government (Hicken, 2006: 405) anddelivered on his promises (Ammar, 2011:75). In 2005, his party captured an
outright majority (Hicken, 2006: 394). Not surprisingly, all the other major
political parties quickly followed suit by offering clear national programmatic
policies to voters (Selway, 2012: 66).
After dabbling with a protectionist development strategy (Ammar, 2011:75), Thaksin adopted a dual track economic development strategy. The first
track emphasised macroeconomic stability and openness to trade and investment(Chambers, 2013: 89, Ammar, 2011: 76 and Thitinan, 2010). The second track
consisted of state welfare policies for rural Thais (Chambers 2013: 90). Since
the latter potentially impinged on the former, Thaksin kept public debt and thefiscal balances from deteriorating by rationalising and substantially reallocating
health care expenditures to make those expenditures more consistent with hisgoals (Hicken and Selway, 2012: 65-68). As a result, macroeconomic stability
and a competitive exchange rate were maintained (Ammar, 2011:73) and growthof real GDP per capita was quite robust averaging 4.1% per year (World Bank2013). While the centripetal aspects of Thailand’s 1997 constitution worked
well, other elements were less successful (Kuhont, 2006a: 386-388; Case,2007:
631-632). For many, one-party government began to look like a return toauthoritarianism. As public opposition to Thaksin grew, elite support cracked
and on September 19, 2006, the military took over the government in a coup.
For all but 11 months since the coup, Thai governments have been
dominated by stand-in parties for Thaksin and TRT. Moreover, despite thepassage of a new constitution in August of 2007 specifically designed to refragment democratic politics (Hicken and Selway, 2012: 69 and 73) a wideningof the regional, rural—urban, and class divide exploited by TRT and its main
opponent, the Democrat Party, hardened so even though there was a return40

Michael T. Rockto multi-party government, there was only a modest uptick in the number ofparties in government (Hicken and Selway, 2012:77). Subsequently, the standin for TRT, the Pheu Thai Party, won an absolute majority of seats (266 out of500) in the 2011 election. This election pitted Southerners, civil servants andmore well off urbanites against poor rural Thais in the North and in Northeast
Thailand (Hicken and Selway, 2012:74). Given the salience of these cleavages,
throughout the post-2006 coup period political parties and governments
continued to act in a centripetal way by offering and delivering programmatic
policies and programmes to voters.
In sum, the shift toward a more centripetal and developmental democracy
played an important role in restoring the technocrats to their position as arbitersof sound macro-economic policy-making, in maintaining support for tradeliberalization and investment, and in the creation of a wider social safety net thatwere successful in preventing inflationary pressures or significant deteriorationof the fiscal balance. This combination of policies enabled Thailand to achieve
the growth rates achieved by the predecessor autocratic governments. 12
The return of politically-neutral technocrats as the final arbiters ofmacroeconomic policies should not be surprising. The economists in the coremacroeconomic agencies have demonstrated their worth to elites in the military,
bureaucracy, and business by delivering rapid growth and keeping inflation incheck. Given that Thai voters of all stripes now expect candidates for office tohave a clear policy position on a range of issues (Selway, 2011: 174), it would
be somewhat shocking if they did not hold them accountable for poor economic
performance. As a result, politicising these core agencies has to look like a risky
political strategy for elected officials.
The same can be said about Thailand’s open economy development
strategy. It too has delivered high and relatively stable growth. Turning awayfrom this strategy must look risky to democratically elected politicians. Thereis evidence of this in Thaksin’s early years as prime minister. He had initiallydecried Thailand’s dependence on East Asian export-led development strategy
and toyed with an internally-led development strategy (Ammar, 2011: 75). But
as criticism mounted, Thaksin quickly changed course by adopting a dual-track
development strategy.
The one “real” innovation in economic policy since the emergence ofThailand’s democratic developmental state has been Thaksin’s 30-baht healthscheme, aimed at rural Thais. But is this really new? Previous governments andthe Democrat Party had introduced several similar programmes that worked(Selway, 2011: 180). Following the enactment of the 1997 constitution leadersin the Democrat Party realised that it would be important for them to respondto voters clamouring for a stronger social safety net (Selway, 2011:180) and
it is important to say they did and did so effectively (Selway, 2011:180).
That said, it must be noted that he and his successors have delivered on theirSoutheast Asia’s Democratic Developmental States and Economic Growth

41

campaign promises and they did so, like the Democrat Party before them,without triggering inflation and without a significant increase in public debt
or a marked deterioration in the public sector fiscal balance.
What made all of this possible was the emergence of a more majoritarian
democracy following adoption of the 1997 constitution which linked voters,
local candidates for office and party leaders in an incentive system which
delivered more broad-based national policies (Selway, 2011). This development
is due to voters demands and because candidates for political office now see itin their interest to affiliate with political parties that deliver what voters want.
It is also a consequence of a recognition by party leaders that it is in theirinterest to develop and implement broad-based national programmes that meetthe needs of the electorate.

5.

Conclusion

What should one make of these case studies? First, they confirm what a growing
body of theoretical and empirical work demonstrates — when it comes to theimpact of political institutions on growth, the devil really is in the details (Person
and Tabellini, 2006). Broad political regime type (autocracy vs democracy)
appears to be less important to growth than whether the micro institutions
embedded in particular regime types enable and/or encourage governing elites
to provide the public goods and policies deemed necessary to stimulate growth.
As the literature on Indonesia and Thailand show, political elites initiallyrelied on developmentally-oriented authoritarian regimes for economic
growth. But as is well known, autocracies outside East Asia have not been
particularly good at stimulating economic growth. The literature on authoritarianregimes suggests that differences in growth outcomes are due to significant
institutional differences among the former. At least in Indonesia and Thailand,
the authoritarian regimes built several enduring and growth enhancing
institutions - including a competent public sector bureaucracy in macroeconomic
management and fiscal policy -that was insulated from popular pressures. At
the same time, paramount political leaders had their own reasons for adopting
pro-growth and development policies. Nothing like this particular politicalformation has appeared in sub-Saharan Africa, a region which, until not solong ago, has been characterised by a large number of authoritarian regimes.
There the micro institutions of autocracy were used to buttress neo-patrimonial
ties to clients that were good at providing patronage, but poor at providing the
public goods or policies necessary for growth (van de Walle, 2001).
Something similar appears to be at work within the democratic politicalinstitutions in IMT. The political elites there deliberately constructed a set ofcentripetal democratic institutions that facilitated the emergence of democratic
developmental states. But the reasons they did so differed. In Indonesia, political

42

Michael T. Rockelites constructed a centripetal democracy after the collapse of the New Orderbecause they feared a return to the fissiparous politics of the 1950s (Horowitz,2013). In Malaysia an ethnic division of labour, political awakening within
dominant ethnic communities, world war and a communist insurgency inflamed
ethnic divisions. Following independence, inter-ethnic strife exploded in 1969.
Given this history it is not surprising that political elites created centripetal
democratic institutions to ameliorate inter-ethnic strife (Slater, 2010: 93). In
Thailand, political elites created a centripetal democracy to overcome several
pathologies in Thai politics, in particular political instability and rampant votebuying and corruption. In each instance, centripetal democratic institutions
proved to be particularly fertile grounds for the pursuit of development as they
enabled and enticed political elites to provide the public goods and policies
necessary for growth.
Third, the success of IMT’s developmental democracies in sustaining highgrowth occurred under quite different institutions of centripetal democracy
suggesting that the political requisites for engineering the emergence of
democratic developmental states may be wider than most think. Three core
institutional differences— forms of executive government, electoral rules, anddifferences in political party formations mattered. Malaysia’s semi-democratic
developmental state relies on a parliamentary form of government, a plurality
electoral rule in single-member districts, and a multi-ethnic alliance of
ethnically-based political parties that pools votes across a single slate. Neither
Indonesia nor Thailand uses this particular political formation. While Thailand,
like Malaysia, relies on a parliamentary form of government, Indonesia doesnot. With respect to electoral rules, Thailand, like Malaysia, used a plurality
electoral rule in single member districts under the 1997 constitution, butfollowing the 2006 coup it shifted back to a block vote in multi-member districts.
Despite this return, Thai democracy continues to exhibit centripetal tendencies.
Indonesia on the other hand uses a proportional electoral rule in multi-member
districts, but offsets the centrifugal consequences of this electoral system byrequiring political parties to meet stringent geographic coverage restrictions
and equally stringent vote thresholds. Both have worked to significantly reduce
the number of parties in government and push parties to the political centre.
Third, neither Indonesia nor Thailand relies on ethnic-based political parties orpolitical alliances to compete in elections or to govern after winning elections.
These institutional differences among the democratic developmental states in
IMT suggest that there are multiple pathways political elites can use to craft
democratic developmental states. While some of these may well be pathdependent, not all are.

Southeast Asia’s Democratic Developmental States and Economic Growth

43

Notes
1

2

3

4

5

6

7

8

9

10

What follows with respect to Indonesia is a revised version of a similar argumentthat appears in Rock (2013).
Between 1990 and 1997, real GDP grew at an annual average rate of 7.58%,
inflation averaged 8.7%, the fiscal balance as a share of GDP was 1.2%, thecurrent account balance as a share of GDP was -2.45%, the Gini Index was 29.9
and the head count incidence of poverty was 17.6% (World Bank, 2012).
In 1998, Indonesia was relatively poor, ethnolinguistic fractionalisation was
high, it possessed a small middle class and an equally small working class, andits dominant religion was thought to be an impediment to democracy (Webber,2006:403).
A test of the hypothesis that mean growth rates in real income per capita are thesame under democracy (t=.53, p=.59.) or under centripetal democracy (t=.10,
p=.91) as under the New Order (1966-1998) do not reject this hypothesis. This
result does not change if New Order growth rates are from 1970 to 1998 or if
the focus is on growth rates for real GDP instead of real GDP per capita wherea difference of means test does not reject (t=.46, p=.64) the hypothesis thatmean growth rates are the same.
Tinkering with electoral rules, political party laws, and constituency size
continued well past 2004 benefitting larger parties and incumbents (Horowitz,
2013: 199-206).
For example, in 2004 Yudhoyono campaigned on a promise to achieve a 6%
GDP growth rate (Liddle and Mujani, 2006: 137) and he delivered on it as real
GDP grew by 5.9% during his first term (World Bank, 2012). He also promised
to clean up corruption, which he did as Indonesia’s score on the Control ofCorruption Index of the Political Risk Service rose from a low of 1 throughout
Megawati’s presidency to 3.58 by the end of Yudhoyono’s first term (Political
Risk Services Group, 2013).
For example, poor economic performance (real GDP grew at 4.5% - World Bank,
2012) and poor performance of Megawati’s presidency in terms of weeding out
corruption cost her votes (Liddle and Mijani, 2006: 133).
During Yudhoyono’s first term, his most popular initiative was the launchingof an aggressive anti-corruption campaign that netted a number of high profile
perpetrators such as legislators, bureaucrats and investigators (Meitzner, 2009:150-151) and correspondingly Indonesia jumped 17 ranks in Transparency
International’s Corruption Perceptions Index (Meitzner, 2009: 147).
Criticisms can be found in (MITI, 1999; Best 1999; Tan 1999; Rasiah 1998;
Malaysia, 1991); Jomo, chapter one; Felker and Jomo, 2002; and McKendrick
et al., 2000).
A regression of the fiscal surplus as a percentage of GDP on time yielded anegative and statistically significant coefficient for time. The estimated equation
is FS/GDP = -.52 -.16 T. R2 = .49, t = 4.88 with N = 27.

44
12Michael T. RockThe average annual growth rate of real GDP per capita was 4.95% per year
between 1960 and 1973, 4.32% per year between 1974 and 1987, and 4.43%
between 1988 and 2012 (World Bank, 2012). A simple difference of means test
fails to reject the hypothesis that mean growth rates fell as Thailand democratised(t=.38, prob=.71). In addition, there is no difference in growth rates (t=.1.34,
prob.=.19) in the heyday of Thailand’s developmental autocracy (1960-1973)
compared with its majoritarian democracy (2001-2012).

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