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Indonesia, Thailand and
Malaysia Only 30 years ago, Indonesia was a country seized by terror. Hundreds of thousands of ethnic Chinese and communist sympathizers were slaughtered in race riots, and had their businesses nationalized or burned to the ground. Before Sukarno was ousted in 1965 by Suharto, who became acting President in 1967, the government had begun to expropriate Western assets as well.
Following a spate of anti-Chinese rioting in 1969, Malaysia too changed course dramatically. Introducing racial-quota policies, the government sought to increase the native Malay population's share of wealth from the prevailing 5% to 30%. In 1985 the government scaled back the most extreme rules and kicked off a massive privatization program. The country has grown at an annual rate of more than 8% since 1988. As the government got out of business, it sold state assets to a new generation of Malay businessmen. One of these, Halim Saad, won the contract to build Malaysia's $3 billion North-South Highway, which runs the length of the country and became the springboard for the successful Renong group, now one of the largest construction and property businesses in the country. Another Malay, Tajudin Ramli, got his first break when he won a mobile-telephone license in the '80s. A couple of years ago, he bought the state-owned Malaysia Airlines. Critics charge that well-connected businessmen corner the best deals, but there is no denying that the economy has received a thorough makeover in the past few decades. Once dominated by British-owned rubber, timber and palm-oil plantations, it now boasts major computer-peripheral companies, electronics-manufacturing hubs like Penang and even a nationally built auto, the Proton. The share of wealth in ethnic Chinese hands has actually increased since 1970, but the goal of creating a large Malay middle class has been achieved. In 1970 the majority of Malays lived in the countryside and below the poverty line; by the early '90s fewer than 10% were that poor, and most had migrated to new jobs in the cities. Says Daim Zainuddin, Finance Minister during that period: "We have learned that when the stomach is full people won't be mischievous." Thailand too has achieved a healthier economic status since the '70s, when the government was fighting a running battle with communist insurgents. By 1987 the once derided odd man out of Southeast Asia was outdoing its neighbors. Exports were up even as commodity prices came down; clothing exports rose 38% in 1986, and shipments of integrated circuits jumped 41%. The turnaround was fueled by foreign investment, which grew tenfold between 1985 and 1990. Still, only one-eighth of the increase of total Thailand investment between 1985 and 1990 came from abroad. In 1980 agriculture accounted for 60% of exports; a mere 15 years later, manufacturing made up 80%. The foreign investment and new outward orientation of the manufacturing sector also spawned local giants. One of these, Alphatec Electronics, was founded in 1988 by Charn Uswachoke, whose last job had been with a local subsidiary of AT&T. In December Charn broke ground on a $1.2 billion joint venture with Texas Instruments to produce advanced memory chips. |
Then the counterrevolution began. Under Suharto,
Indonesia moved quickly to pass liberal investment laws.
Mighty business empires grew out of the ashes of the razed
Chinese shops. Thee Kian Wie, now a senior associate at the
Indonesian Institute of Sciences, returned in 1969 to a
changed country after six years in the U.S. "When I left
Indonesia, socialism appeared to be the wave of the future,"
he says. "When I returned, the atmosphere was staunchly
anticommunist." The effects of Suharto's policies keep
multiplying. Last year foreign direct-investment approvals
in Indonesia reached a record $40 billion, mainly in joint
ventures with manufacturers.
