The extremist groups have skilfully used religious and nationalist sentiments to garner political support and protect themselves against arrest. However, the Bali bombing has changed the situation. President Megawati has promulgated tough anti-terrorist decrees, including powers to detain suspected terrorists. The Indonesian government has arrested Abu Bakar Ba’asyir, who is the emir, or leader, of the Jemaah Islamiyah group, who had till now defied the Indonesian authorities to act against him. Government action in the aftermath of the Bali bombings has won the strong backing of key local institutions and the Indonesian population. Parliamentary leaders concurred with the passing of the anti-terrorism decrees, and the leaders of the two largest Muslim groups in Indonesia, the Nahdlatul Ulama and Muhammadiyah, have also voiced their support. The people of Indonesia know that if the militants succeed, not only will international confidence plummet and economic progress grind to a halt, but their country will be torn asunder. Southeast Asian governments will act because they know that the objectives of the terrorists are totally beyond the pale. These are not innocent political dissidents exercising their democratic rights. They are ruthless fanatics, quite willing to destroy innocent lives in order to create civil strife and animosity between communities and countries, shake confidence in Southeast Asian economies and their legitimate governments, and weaken the basis of the states. They cannot succeed, but they can cause great harm in trying. Provided the governments respond vigorously to the extremist threat, they can contain the problem and gradually restore confidence to the region.

Access to Markets Third, Southeast Asian economies need to boost external demand by strengthening their access to the major developed markets. In the short term, there is little we can do about the cyclical downturn. But for the longer term, favourable and assured access to key trading partners will allow Southeast Asian countries to maximise benefits from free trade and globalisation, and make themselves more attractive to investors. One basic approach is to promote multilateral trade, and contribute to a successful outcome of the Doha Development Agenda of the World Trade Organisation (WTO). But we need to complement the multilateral approach with bilateral Free Trade Agreements (FTAs) with our key trading partners. This is why Singapore is actively pursuing an FTA strategy. We have concluded FTAs with New Zealand, Japan, and the European Free Trade Area (EFTA), and hope to conclude agreements with the US and Australia very soon. Singapore’s aim is not just to boost our own trade links with our FTA partners, but also to catalyse broader economic engagement between ASEAN and its trading partners. This is indeed happening. After New Zealand concluded its FTA with Singapore, Australia and New Zealand proposed starting a Closer Economic Partnership Agreement with ASEAN. Last year, ASEAN and China agreed to set up an ASEAN-China FTA within 10 years. Weeks later, Prime Minister Koizumi of Japan proposed a Japan-ASEAN Comprehensive Economic Partnership, to be modelled on the Japan-Singapore bilateral agreement.