Introduction

Summary

This introduction to Southeast Asian Affairs 2007 seeks to draw out the major themes and issues that are woven into the narratives of the four regional, eleven country, and five thematic articles, as well as provides a preview of the articles in this volume.

Southeast Asian economies demonstrated vibrant growth in 2006 and a much better capacity to deal with internal and external shocks. All countries were keenly aware of the need to attract investments and to reform regulatory and policy impediments. The region's economic prospects were buoyed by the fast-growing Chinese and Indian economies and the revival of the Japanese economy. Vietnam stood out as having the highest growth rate among the major countries in Southeast Asia. Its admission into the World Trade Organization (WTO) held out promise of even better economic prospects ahead, though much work still needs to be done to make the country more business friendly. The city state of Singapore, with its mature domestic economy, was reinventing itself as a services hub. Indonesia, the largest country in the region, needed to carry out more reform to be able to attract the investments needed for a higher growth rate, but overall it was moving in the right direction. There were signs that Malaysia too was seeking to ease some of the controls and regulations that have discouraged foreign investment. Myanmar was likely see greater revenues from oil and gas in the future, making Western sanctions even more irrelevant.

There was little danger of inter-state conflict within the region. Relations between the major powers were reasonably amicable, with some improvement towards the end of the year in the difficult China-Japan relationship, while potential flashpoints like Korea and Taiwan remained fairly well managed, at least for the time being. International terrorism remained a threat but within Southeast Asia progress was being made in neutralizing terrorist elements in Indonesia and southern Philippines, though terrorism remains a long-term problem needing much more than military and security means to overcome it.