Political Unrest Has Southeast Asia on Edge

After declaring the region’s economic crisis over at a meeting in Thailand this month, leaders of Southeast Asia’s 10 nations are grappling with a new concern: growing political instability from the Philippines to Indonesia.

The instability--accompanied in many cases by violence--could retard or derail the financial recovery, economists say, and has ramifications that could stretch from Singapore, the vulnerable but commercially savvy city-state, to the United States, the largest importer of Southeast Asia’s products.

Though often born under the banner of Islamic fundamentalism, the pockets of far-flung violence are not regionally related or coordinated, political observers say, and have their roots in a variety of nationalistic, religious, racial, cultural and social causes. But given the inability of governments to find solutions, the convulsions are starting to spook foreign investors as surely as did cronyism, shaky banks and astronomical corporate debt in the economic crisis of 1997-99.

The southern Philippines is racked by an Islamic separatist movement whose guerrillas have kidnapped foreigners, killed civilians and planted bombs from Manila to Zamboanga. Laos, aided by upward of 1,000 Vietnamese soldiers, is fighting a resurgent rebellion by the Hmong ethnic minority. Thailand has problems with insurgents on the Laotian and Myanmar borders. Malaysian soldiers engaged in a shootout last month with Muslim cultists trying to steal weapons. Indonesia is bogged down trying to cope with bloody sectarian violence in the Molucca Islands and with separatist guerrillas in Aceh and Irian Jaya provinces.

Risk analysts fear that the political and economic instability will feed on each other, creating more unrest that could spill across borders. Nowhere is this fear greater than in Indonesia, where President Abdurrahman Wahid has spent the week at the national assembly trying to salvage the credibility of his administration in the wake of criticism from lawmakers who chide him for not fixing the economy or ending political and religious violence.

“Some of the countries in Southeast Asia, like Laos or Myanmar, could disappear in the morning and no one would notice,” said a European diplomat. “But Indonesia remains the one country, economically and politically, whose well-being is essential to the region, and Indonesia is obviously not in good health.”

Indonesia’s 17,000 islands, which straddle some of the world’s most strategic shipping lanes, are from tip to tip as far apart as London and Tehran. Two of every five Southeast Asians live here, and the size of Indonesia alone makes it a vital counterweight to China’s growing influence. Indonesia was a founding member of the Assn. of Southeast Asian Nations, or ASEAN, headquartered in Jakarta, and until President Suharto’s political demise in 1998, ASEAN made few decisions without first getting Indonesia’s approval.

ASEAN leaders, meeting at a security forum in Bangkok, Thailand, this month, responded to concerns of instability by setting up a troika, of rotating membership, intended to deal with crises. But ASEAN still operates by consensus and refuses to interfere in affairs of member states, thus leaving the troika with no real clout and the 10-nation grouping with no regional mechanism for responding to political or economic instability.

Indonesia’s neighbors are closely watching how Jakarta deals with its sectarian and separatist strife and are concerned about attempts at the national assembly to unseat Wahid, fearing that such a move would derail the country’s fledgling democracy and create more instability.

“Developments in Indonesia,” said Deputy Prime Minister Lee Hsien Loong of Singapore, “are a cause for worry.”

Pint-sized Singapore, which is within eyesight of some Indonesian islands, fears that continued strife could result in waves of ethnic Chinese fleeing Indonesia and ending up on its shores. Other countries fear that the impact of separatist and Islamic fundamentalist groups could extend beyond Indonesia’s borders. And every leader is concerned about the ripple effect of a sputtering Indonesian economy, particularly at a time when other ASEAN economies are recovering but remain far short of pre-crisis levels.

President Joseph Estrada of the Philippines said recently that Southeast Asia’s recovery had temporarily stalled and that the region was in the grip of a mild relapse. He warned against complacency and curtailing reforms. The relapse has sent Thai stocks to a 21-month low, cut the value of Indonesia’s currency by more than 10% against the U.S. dollar and played a role in the Philippines’ higher-than-expected $1-billion budget deficit for the year’s first half.

All the problems, political analysts believe, are compounded by the surge of violence. As if to underscore the volatility, police investigated four bomb threats Tuesday while Indonesia’s national assembly was meeting in Jakarta, a city already unnerved by a blast last week that killed two people and injured at least 20, including the Philippine ambassador.