23 December 2014
Asia's weak and fragile states

Asia's weak and fragile states

All too many Asian countries have weak and fragile states, which are holding back their prospects for development.

A flight from Manila to Singapore would take you from one of the world's worst airports to one of the best. It would also take you from one of Asia's weak and fragile states to one of its strong states.

Manila's Ninoy Aquino Airport has only recently relinquished its title of the world's worst airport to Pakistan's Islamabad Benazir Bhutto International Airport, according to "The Guide to Sleeping in Airports". In 2014, Manila's airport rose to the rank of the world's fourth worst airport thanks to the opening of its new Terminal 3.

In sharp contrast, Singapore's Changi International Airport was voted the world's best airport for the eighteenth year in a row. In fact, five of the world's best airports are in Asia, the other four being Seoul, Kuala Lumpur, Hong Kong and Tokyo (Haneda).

The ratings by readers of "The Guide to Sleeping in Airports" may not provide scientific evidence on the quality of Asia's airport infrastructure or the strength of its states. But they certainly square with other more objective indicators.

The most important single determinant of success in Asia has been the presence of "strong states" in economies like Japan, Hong Kong, Korea, Singapore and Taiwan. In the Fund for Peace's Fragile States Index, Singapore, Japan and Korea all score very well (neither Hong Kong nor Taiwan feature in this Index). These three countries are placed in the "very stable" category along with advanced countries like the US, Germany, France and the UK.

You must travel much further down the list to find other Asian countries. Malaysia can be found in the "warning category", some 39 places below Korea in this exercise covering 178 countries. Further down in the "high warning" category are Vietnam, Indonesia, India, Thailand and China. And even further down again in the "very high warning" category are Laos, the Philippines and Cambodia. Way down near the bottom of the list in the "alert" category are countries like Nepal, Sri Lanka, Bangladesh, North Korea and Myanmar.

What do we mean by a weak and fragile state?

There are many ways in which a state can be weak and fragile. Most notably is the inability to provide public services to its citizens. The quality of basic public services like clean water, sanitation (toilets), health, education and transport facilities is appalling in Asia's weak and fragile states. This can be due to an inability to collect sufficient taxes to finance public services because elites systematically cheat the tax system, notably in the Philippines.

Physical insecurity is another characteristic of weak and fragile societies, often the product of poverty, inequality and a sense of social injustice. Also contributing to such insecurity are corruption and incompetence of police authorities.

The loss of physical control of its territory or of the monopoly on the legitimate use of force is another characteristic of fragile or weak states. Many Asian countries like Burma/Myanmar and India are unable to assert sovereignty over vast swathes of their territory due to the power of ethnic minorities or due to strong local elites often equipped with private armies. Powerful elites can also bully weak and fragile governments into implementing policies that favor their interests, like protecting monopolies. And elections can be deeply flawed by the dominance of political dynasties, vote-buying and other irregularities.

The evidence is clear that these characteristics of weak and fragile states greatly undermine the prospects for economic and social development.

The case of the Philippines provides interesting insights into the state of the state in Asia. This archipelago of 7107 islands has been described as having a weak state, but a strong society. One author has called it an "anarchy of families".

Indeed, until the Spanish colonization of the Philippines in the 16th century, there was no meaningful state in much of the country. Apart from a few Muslim sultanates in the south, pre-colonial society was fragmented into largely autonomous barangays or villages ruled by local elites. In other words, the Philippines did not exist as a nation until Spanish sailors visited the islands in the time of King Philip II. And even today, large numbers of Filipinos seem much more attached to their provincial identity than to their national identity.

During the colonial period, the Spaniards did not establish a strong state. Beyond Manila, the colony was mainly run by the Catholic Church and private business. By the end of the Spanish period in the late 19th century, there was a well developed local elite formed through inter-marriage between locals and colonials ("mestizos"), and the integration of Chinese immigrants. This elite was able to consolidate its position of economic and political power during the American colonial period in the first half of the 20th century.

The Philippine elite (estimated by some at 178 families) has since maintained a stranglehold on the country's economy and politics through periods of both martial rule and democracy, with the result that the Philippine state remains weak and fragile.

Some of the elite families, such as Ayala and Aboitiz, have dominated since the Spanish colonial era. Their business interests range from utilities to property development to banking, telecommunications and the booming business process outsourcing industry. The dominance of these elite families often has less to do with great business acumen than to do with government regulations that continue to allow near monopolies and protections for key players. Despite wide-ranging reforms since 1981, big chunks of the market remain effective oligopolies or cartels.

The country's weak state is most evident in the country's very poor physical infrastructure for transportation and energy, as well as its poor systems for health, education, sanitation and water. It can also be seen in the weak implementation of laws and regulations (such as regarding taxation, forestry, the environment land reform) that might conflict with the interests of the country's elites. State weakness is also evident in the persistence of Muslim and communist insurgencies, kidnapping and other violence, and deeply entrenched corruption.

The weakness of the Philippine state was also evident in its response to the super-typhoon Yolanda in 2013. The government was not able to efficiently manage the disaster relief operations.

After decades of being the "sick-man" of Asia, the Philippine economy is currently experiencing a boom, driven by construction and consumption. But the cracks of a weak state are still very visible.

Since urban infrastructure is not keeping pace with real estate investment, traffic congestion is now worse than ever. Despite the opening of a new terminal, Manila's airport is still chaotically crowded. Congestion has now extended to the port of Manila, due to a deeply corrupt and incompetent customs authority. At the time of writing, some ships were giving up waiting, and were returning to the home bases with their cargoes.

Moreover, strong economic growth is not trickling down, with poverty rates stuck at close to 30% of the population. Cielito Habito, a former economic planning minister, has estimated that the growth in the wealth in 2011 of the 40 richest Philippine families on the Forbes wealth list represented 76 percent of the growth in the country’s GDP, very much higher than in Thailand, Malaysia or Japan.

In other words, the Philippines' tiny elite is amassing most of the country's new wealth while the poor miss out. “I think it’s obvious to everyone that something is structurally wrong. The oligarchy has too much control of the country’s resources,” said Habito. The path to riches for the few is also helped by a political culture that allows personal connections to easily open doors, added Habito.

The ultimate consequence is that Filipinos remain as motivated as ever to leave their country and join their fellow citizens who can be found in virtually every country of the world. More than 10% of Filipino citizens, and more than 20% of the working age population, have now left the Philippines.

There have been many calls for a stronger and more disciplined state, including by Singapore's Lee Kuan Yew. But Lee was quickly reminded by former Philippine President Ramos of the country's "ill-fated flirtation with authoritarianism" under President Marcos. Indeed, the Marcos experience of a stronger and yet deeply corrupt government has weakened the prospects for ever having a strong state which could provide the services and security that the Philippine economy and people badly need and desperately deserve.

India is another case with a weak state with a strong society. Economic reforms launched in 1991 led to a healthly spurt in growth. But in more recent years, growth has slowed as the economy hit the limits of having a weak state, namely India's poor infrastructure, bureaucratic red tape, and deep corruption. It can only be hoped that the administration of Prime Minister Narendra Modi will succeed in strengthening the Indian state.

Many are impressed by the strength of the Chinese state, which has managed to build some excellent infrastructure like airports and high speed trains. But China's strong state also abuses many of its powers by favoring the interests of Communist Party members, committing human rights abuses, repressing any sign of social and political dissent, and restricting personal freedoms.

Despite the importance of having a strong state, there is also a risk of having a state which is too strong, as Professor Daron Acemoglu has argued. Very high taxes and social welfare systems like in Western Europe can sap an economy's dynamism. And while a strong state can drive development, it can also then be captured by new elites that emerge from rapid development, as in the case of Hong Kong, Japan, Korea and Singapore.

As is most evident in the case of Japan, a once dynamic economy can very quickly become schlerotic. Open economies and societies, that embrace creative destruction and constant renewal, are the key to continued prosperity.

In sum, it is most important to get the strength and role of the state "right". In the early stages of development, a strong state will usually be more important than when a country reaches an advanced stage of development and relies more on business innovation as a driver of growth. And most importantly, a strong state should always be counterbalanced by a strong society to ensure state accountability and transparency.
Tags: asia, governance, weak states, fragile states, failed states, the philippines