For the first time in decades, there is growing economic and political uncertainty in Asia. Political risk is rising for many countries, while the rate of economic growth is falling. Currencies are under attack, and leaders find opposition rising. Some nations are hollowing out, and others are pricing themselves out of markets. No one yet thinks that the "Asian miracle" is over or that the many tigers of the Pacific Rim have lost their vitality. But the optimism expressed by many Asians may have to be tempered. It may be time to reassess old policies and move in new directions.
Political pressures dominate the problems facing Indonesia and Burma. Riots in Jakarta highlight dissatisfaction with the dominance of the Suharto family and the difficulties President Suharto is having in moving toward a more pluralistic political system. The rapid growth that created labor unions and a large middle class in South Korea, Taiwan, and Thailand has also transformed those countries into civilian democracies. It is now Indonesia's turn--but Suharto appears to be fighting the trend, by battling the forces of Megawati Sukarnoputri. In Burma, another woman, Aun Suu Kyi, championed a democratic victory in elections a short time ago, only to have the military overturn the results.
Economically heavy regulation, closed markets, and capital flows restricted to those who are connected to powerful politicians are hurting job and wealth creation in Asia. While Korean chaebol invest in Europe and the U.S., tight domestic restrictions cramp both local entrepreneurs and foreign companies. Thailand's economy is slowing down because corruption has stymied attempts to build rapid transit to unclog Bangkok's crowded streets.
Despite the voices of authoritarianism, the trend in Asia is toward democracy. Elections are as natural a part of the Asian landscape as rice, and leaders should think twice about opposing their own people. This is true for the economy as well. Deregulation and free markets are the way to reinvigorate Pacific Rim economies. Leaders should not wait.