Southeast Asia in late 2008 and early 2009 was, like much of the rest of the
world, hit by a large man-made tsunami in the form of a worldwide financial
meltdown and severe recession. The impact of this tsunami was not focused
on the financial sector in Southeast Asia because the region had already
experienced its own financial meltdown a decade earlier in the financial
crisis of 1997–98. Many of the financial institutions in the region had been
liquidated or restructured in that earlier crisis, and those remaining were
cautious about taking on new high-risk financial instruments. Southeast
Asia thus has not, for the most part, needed to deal with large numbers
of insolvent banks, but the impact of the worldwide recession has been no
less painful. The impact has instead been felt through a sharp decline in
world demand for the region’s exports. The magnitude of that decline in
exports has led in turn to a marked drop in the growth rates of GDP in these
countries—a drop that in some cases is likely to result in negative growth
rates in 2009 and possibly beyond.
This economic crisis is affecting the political situation in several of the
countries of Southeast Asia, notably Indonesia, Thailand, the Philippines,
Cambodia, and Malaysia, where governments and people are struggling
with difficult and incomplete transitions from authoritarian to democratic
governance. Other countries, notably Vietnam, have stayed with one-party
authoritarian government but have needed to find alternatives to ideology and
revolutionary élan to maintain political stability