How developed is Thailand compared to Indonesia

For Southeast Asia, the struggle for survival has started again

Countries like Thailand, Indonesia and the Philippines are being thrown years behind in the fight against poverty. In contrast to previous crises, China is now hardly available as an additional engine. The international community Asean is facing neglected tasks.

Thais are lining up again to sell gold coins and jewelry. It has become eerily quiet on Malaysia's major construction sites. In Singapore, the lights have gone out in the shopping centers and at the airport. In Indonesia, meanwhile, the flight of capital has driven the national currency rupiah into the basement.

The scenery is reminiscent of the Asian financial crisis of 1998/99. Starting in Thailand, upheavals tore an economically up-and-coming region into recession with a domino effect and drove millions into poverty. Political crises followed, leading to more democracy in Indonesia and Thailand, for example - and even spawning a new state, East Timor. Elsewhere, they additionally consolidated authoritarian structures, for example in Malaysia.

The Asean room falls into the abyss

The economic impact of the current crisis on Southeast Asia is by no means foreseeable. But the collapse of the markets, which until recently were considered “emerging” in the jargon, is becoming more apparent every day. For example in the latest forecast by the International Monetary Fund: According to this, the economic output of the five larger regional economies - Indonesia, Malaysia, Thailand, Singapore and the Philippines - will shrink by 1.3% in the current year.

The severity of the depression could soon be little inferior to the Asian crisis of the late 1990s: Tourism has collapsed in Thailand, which has contributed significantly to the gloomy GDP forecast of minus 6.7% for 2020. As a traffic hub and export-dependent country, Singapore is also currently suffering in extremis, which should lead to a minus of up to 4% by the end of the year. In contrast to the small city-state, Indonesia has a large domestic market; but even that guarantees zero growth at best for the current year.

Thailand and Indonesia are exposed

Like no other country in the region, Indonesia needs economic dynamism for its young workforce. According to official figures, 2.8 million people have already lost their jobs since the outbreak of the crisis, which has only really manifested itself there since mid-March. According to Finance Minister Sri Mulyani Indrawati, this number will soon rise to 5.2 million. Indonesia has always remained below its real growth potential. But now that the country is about to catch up, a dramatic setback threatens.

Similar to China, the Southeast Asian countries have achieved impressive successes in combating poverty in recent years. This is especially true in Vietnam and Indonesia. But with the Covid 19 crisis, the economic struggle for survival has started again for millions.

On the one hand, welfare state cushioning is practically non-existent in the region even in the 21st century; On the other hand, with the exception of Singapore, very few states have sufficient funds to give needy groups a significant helping hand. In the case of Thailand and Malaysia, household debt is very high at around 70% of GDP. For example, the Thai government will pay compatriots in need 5,000 baht (around CHF 160) a month for the next three months.

Relatively few infections - but serious consequences

With currently around 22,000 proven corona cases - three quarters of which are in Indonesia, Malaysia and the Philippines -, i.e. around 1% of all global infections, Southeast Asia is still doing relatively well in an international comparison. But the small percentage says little about the long-term economic consequences. The unreported numbers are probably high, mainly in Indonesia, the Philippines and Thailand. This means that there is still a risk that the epidemic in these countries will drag on for months.

In a highly acclaimed essay, the entrepreneur Parag Khanna, who gained international fame with his book “The Future is Asian”, published a year ago, pointed out that the world will probably soon have reached the peak of corona infections. This could also apply to individual Asean countries, such as Malaysia. There the number of newly reported cases has fallen below 100; the number of sick people is now even declining for the first time. Malaysia therefore wants to loosen the lockdown as early as the end of April.

China has saved in previous crises

But Khanna's outlook remains pessimistic overall: In his view, the weakened economies will not recover in a V-shape or a U-scenario, but rather develop in the pattern of a broad W with recurring upward and downward trends. That would be new for Southeast Asia in particular. After recessions such as 1997/98 and economic slowdowns such as 2008, recoveries occurred there reflexively - thanks to China. In the wake of the Asian crisis, China, as a rising economic power in the region, provided decisive impulses twice. Now that China itself is experiencing an unprecedented slump, no one in Southeast Asia is betting on this replacement engine anymore.

The corona crisis has also uncovered a weak point in Southeast Asia, which has recently been forgotten somewhat due to growth spurts and waves of globalization: the Southeast Asian community of states Asean, founded more than five decades ago, offers little support in such situations.

Asean today stands neither for far-reaching economic integration nor for close coordination in other policy areas. In spite of their historical, cultural and geographical proximity, the proportion of “domestic trade” among the ten Member States only accounts for around 26%. In the case of one of the states, this expresses their cosmopolitanism; in other cases, however, the low proportion rather testifies to the demarcation from neighboring countries.

"Regionalization" is the new globalization

In any case, it shows that the Asean Economic Community (AEC), which officially came into force in 2016, has ultimately had little effect. The AEC project promotes, among other things, unlimited trade relations, investment facilitation, closer coordination in policy areas such as the environment, health, disaster relief and vocational training.

But while these countries have experienced repeated epidemics in the past, such as Sars and avian flu, the coronavirus caught most Asean members off guard. Until recently, the risk from Covid-19 was assessed very differently depending on the government. Asean was completely taken by surprise by the corona virus: It was not until April 14 that the ten heads of government held an online Asean summit meeting (together with China, Japan and South Korea) for the first time to discuss a coordinated approach to securing food supplies and exchanging medical devices.

Parag Khanna's approach, according to which globalization suffers severe and lasting setbacks and which is now replaced by stronger regionalization, will soon be able to be examined using the example of the Asean community. It is still unclear whether the crisis will usher in a third constructive phase of life for the group of states or whether it will illustrate their growing inability.

From a historical point of view, the turning point is definitely revealing: In the sixties and seventies, the five founding members initially saw themselves as a political bulwark against communism. With the Asean expansion in the nineties, hopes of lasting economic prosperity were connected. Now one is in a crisis and realizes that there is little basis for joint action in elementary areas such as environmental protection and disease prevention.

Quarantine instead of visa-free

Perhaps the crisis is now giving impetus to closer and faster coordination in Southeast Asia. It doesn't look like it yet: For the time being, the borders in the Asean area will remain closed, the once booming air traffic has been paralyzed, many business people have been repatriated, most students have returned to their homeland, and instead of more visa exemption there is now in all countries Quarantine Regulations. The recession is inevitable in Southeast Asia as well. A reconsideration of the goals of the Asean is appropriate.