The end of the Cold War has given rise to a wide-ranging debate about the future of international relations in the Asia-Pacific. This debate has been difficult to assess in part because of the elusive quality of the outcomes being explored, such as whether the region is characterized by “stability” or “rivalry.” What exactly do we want to explain?

What will the future of East Asia be like in the years ahead? More than a decade after the end of the Cold War, we are still confronted with the fundamental question of whether a new world order will be shaped primarily by state, regional, or global forces and actors. This great puzzle of both theoretical and real-world significance has been widely debated among scholars and policy pundits of diverse normative and theoretical orientations, only to generate many competing explanations and prognostications.

Concepts of regionalization and regionalism have dominated discussions of emerging global orders. With the rise of the European Union (EU), scholars have begun to look for similar multilaterally negotiated regional organizations in the Asia-Pacific region.

Why do some economies grow for several years and then stall? One obvious answer is that these economies have “overheated.” Another is that foreign demand for their products has dried up. This article explores a longer-term explanation—namely, that the institutions favorable for one stage of economic growth are less suitable for a subsequent stage. This idea of “growing into trouble” is consistent with Dani Rodrik's argument that the institutions required to stimulate growth may not be sufficient to sustain growth. We push this idea further by exploring the different requirements of structural change versus upgrading. Structural change connotes an economy's diversification through new investments, often producing real income growth. But economies can diversify without being more efficient, or their initial competitiveness can be based largely on transient factor endowment advantages. Upgrading refers to the competitiveness of these diverse activities achieved through locally based productivity improvements.

Malaysia has long been viewed as a model of a “moderate” Islamic polity. Muslims and non-Muslims have enjoyed the same civil and political rights, and Islamic parties have competed alongside secular ones in periodic elections, in spite of the distinctly Islamic timbre of Malaysia's state and society. Growing domestic political volatility, however, has led many to question the viability of political moderation. Mounting Islamism among the public, reflected both in the rise of Islamic nongovernmental organizations (NGOs) and in the greater priority placed on public displays and enforcement of piety, has spurred and been reinforced by increasingly Islamist political parties. Discussions of political change have come to revolve largely around the place of Islam in party platforms and state institutions. The relative position of Muslim and non-Muslim citizens in the polity has altered with the incremental Islamization of state and society, and observing religious rituals has become a matter as much of state law as of personal choice for Muslims. Internationally, too, Malaysia has come to emphasize more its ties with non-Western and especially Muslim-majority states. Islam has thus become increasingly central to Malaysian politics—even though only slightly more than half the population (all ethnic Malays, and a small proportion of Indians, Chinese, and others) is Muslim.