Description
Ahead of the annual FEDN conference, we invited two of our FEDN members to discuss opportunities and challenges to democratic institutions in the Asia-Pacfic region. CIPE’s Tamari Dzotsenidze hosts Reiner Heufers of the Center for Indonesian Policy Studies and Robin Sitoula of the Samriddhi Foundation in Nepal for a lively conversation on present and potential future of South Asian democracies. Listen to insights on how businesses and governments are working towards greater prosperity for all on this week’s Democracy that Delivers.
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Transcript
Announcer (00:00):
Democracy that Delivers is brought to you by the Center for International Private Enterprise.
(00:06):
Now to your host.
Tamari Dzotsenidze (00:08):
Welcome to the Democracy that Delivers podcast. My name is Tamari Dzotsenidze. I’m a program officer with CIPE Policy and Program Learning and oversee the Free Enterprise and Democracy Network known as FEDN here at CIPE. As part of last year’s FEDN conference, we held regional exchanges, which were an opportunity for members and partners to get together and discuss challenges and opportunities within their respective regions.
(00:36):
I’m excited today to be joined by two of our FEDN members, Rainer Heufers from the Center for Indonesian Policy Studies and Robin Sitoula from the Samriddhi Foundation based in Nepal to delve deeper into Asia. Welcome, both. We’re thrilled to have you joining us.
Rainer Heufers (01:03):
Thank you very much, Tamari. It’s a pleasure to be here.
Robin Sitoula (01:05):
Thank you, Tamari. It’s a pleasure and an honor.
Tamari Dzotsenidze (01:06):
Rainer, why don’t you go ahead and get us started with a bit of an overview of the region.
Rainer Heufers (01:11):
Sure.
Tamari Dzotsenidze (01:11):
What do you see as some of the challenges and opportunities that we’re facing?
Rainer Heufers (01:15):
Sure. Thank you so much. Let me just put it in a nutshell, because obviously talking about Asia, you could talk for hours, but in a nutshell, what we see on the economic side is that it is really becoming one of the core centers of the global economy, if not is already. So what we have is we have the two economic powerhouses of India and China, and we have a lot of, if you want, other country satellites around it that actually benefit tremendously from these giant markets.
(01:52):
This has implications obviously also on the political side, having these large nations so close, so what we also see is on the Democratic side, we see a certain erosion across the continent. Largely in Southeast Asia, we see democratic space is shrinking which has a bit to do with looking at the neighbor China and how they do it and in a way legitimize to also implement some of these policies. And at the same time, we also see in South Asia, and obviously Robin would know much better about it, but also we see a tightening space for civil society over there. And in the interesting case of Bangladesh, in a way, they overdid it, and it boiled over. And then people were so discontent that they actually removed the government there recently in Bangladesh.
(02:43):
So what we see is really economic strength. A couple of people now start calling a new region, [inaudible 00:02:51], which is South Asia, Southeast Asia. So those two combine, South Asia and Southeast Asia, are motors of global economic strength. And this is really definitely worthwhile watching, especially when we are going to talk about investments because they’re attracting large amount of investment that is at the moment also exiting from China.
(03:16):
And at the same time we still have some very stable regimes if you want, in Japan, South Korea, and Taiwan. This is also of course part of Asia that we have those that are consistently delivering with their ups and downs, but this obviously also is an important factor within Asia because they are competitive powers, they’re competitive powers compared to what China is delivering. So people have an alternative to turn to Japan or Korea if they want to reduce the dependence on China.
Tamari Dzotsenidze (03:52):
Thank you. Robin, I’m not sure if you have anything you you’d like to add to that.
Robin Sitoula (03:58):
Well, Rainer has put it very nicely and very aptly. The only thing I would probably add is Asia is very, very big. Turkey all the way from Tokyo, Japan. And it’s very diverse, and diversity reflects in everything from realism to politics to governance, and we have samples of all kinds of states and economies. So I think Rainer, you put it very well. Thank you.
Tamari Dzotsenidze (04:27):
How would you characterize the trust that people have in liberal institutions? Are they attracted to any competing visions? In other words, do you think people believe that democracy is delivering?
Robin Sitoula (04:41):
Well, if I would have to respond, I think Asia, given religion and history and politics, we really don’t know which actually is a liberal democracy in Asia. It’s very hard to say if there is a real liberal democracy, a state with a liberal democracy, in Asia because it’s often been to [inaudible 00:05:10]. But we have democratic states, and we have states or countries that have implemented market-led economies, and so there are quite a few of them.
(05:24):
And then if we look at democracies, let’s just call it democracies, and we have all kind of samples of those democracies in Asia, we’ve seen that there are some countries that have been always regarded as guiding star for democracy, like India. I think one of the world’s largest democracy and a little bit liberal democracy for a long, long time. But if you look at India in the last 10 years or in the last two decades, it kind of feels a little alarming that the civic space itself has decreased in India whereby economically they’re doing quite well.
(06:14):
Another big democracy in Asia is Indonesia itself, which probably Rainer is better positioned to talk about, but at the same time, we also have extremes like North Korea and in China in Asia. And then we have everything else in the middle, be it Pakistan or Afghanistan or other Stans and many countries in Asia. So I think the state of governance or state of democracy in Asia itself is very diverse, Tamari.
Rainer Heufers (07:00):
And I fully agree, and I would like to add a few thoughts. Democracy, if you just say democracy, then I’m just thinking this is just a decision-making mechanism to me. But liberal democracy, that’s a very big difference. Liberal democracy is basically one that constitutionally limits the power of the government, and I think that’s very important to remember. A liberal democracy constitutionally limits the power of the government. And that’s where, not just in Asia in many continents, but also in Asia, governments struggle to accept that. And also a lot of citizens are quite unaware of that. So it’s not just a human right to have the freedom of expression, but it’s also a liberal democracy that would not give the government the power to interfere with the freedom of expression. And so this limit is something that many governments in Asia, other continents as well, would struggle to accept.
(08:02):
And when Robin was just talking about India, that’s one of those where you see the Indian government less and less willing to not exercise the power that should be constitutionally limited in a liberal democracy. But then you also mentioned trust. And so that’s another interesting dimension here, trust in the democracy in Asia. And I was really thinking, so what are the factors that would determine trust and Robin, I would also be interested what you think about that.
(08:35):
I thought about five dimensions basically. So one is the perception of the effectiveness of the government addressing economic and social issues. So people trust if they feel there is economic and social progress. Now the other one is the perception of corruption. The people trust if they don’t think the money is abused and stolen. People trust if there’s stability, political stability, and they trust if there’s freedom of expression and trust if there’s an electoral integrity so that they feel that their voice is really heard and counted. So there are so many ways of undermining trust, and you have rampant corruption, you have infringements of freedom of expression, but you do have some political stability. So Asia I would say on all these five levels has lots of problems, but also scores quite well in others.
Robin Sitoula (09:32):
Very well put, Rainer. Let’s just start with the issue of trust. Well, I do agree with you. At the end of the day, trust is something that translates to people, to citizens, and coming from a country like Nepal that has quite a young democracy, one, and two, the recent years, in the last 15 years or 20 years, we have gone through a very tumultuous time, and we’ve kind of corrected our own course of direction of democracy and established a more democratic, technically a more democratic state, as in from a unitary state, we’ve become a federal country. So that is, to me, that’s more democracy going from a unitary kingdom to becoming a federal state and constitutionally agree to devolve power to the grassroots.
(10:38):
And so in our practice of how our federalism is going on, we’re seeing that the translation of the trust that Rainer mentioned about. So currently the size of our government is very, very big. We have about 761 governments that have authority to legislate. One would be the central government, federal government. And then there are seven provincial governments. And then there are 753 municipal governments that have the authority to legislate. And they also have, the local governments or what we call the municipal governments, have units in their territories, smaller units in the territories that are called the wards.
(11:34):
We went around, last April we went around almost half of the country traveling by road and talking to people and meeting elected officials and all kinds of people, and what we found was these people were very happy with the closest government they have, that is the county level government. And they felt that this was a real democracy because this government was responsive to them. They were getting their registration, they were getting their social security benefits. And pretty much, I mean, normal people don’t have to go anywhere above that level of government, which is in thousands, a number of thousands units in Nepal.
(12:17):
But then what they were complaining about was larger things, larger things like court systems, bigger court systems because court systems are delaying to respond, or they’re complaining, and they are a bit skeptic about what federal government does. They’re skeptic about big businesses being charged of corruption or being scandalized for corruption, whatever that might be. So they’re kind of perspective of skeptical about the bigger things, the bigger governments, but they’re quite happy with the smaller government that they have close to their home. So that makes us realize that for the Nepali people that we met last time, it was the responsiveness of the government in terms of delivery of services for them. And these are very simple services that have been deprived of for a long, long time.
(13:17):
It could be immunization, it could be citizenship, it could be passports, all this thing. And so for these people, they really think federalism is worth at the very local level. And they think that the provincial government, which is our second-tier government or state level government, is not of much importance because they don’t have to interact with them. They’re far away. So that was our finding in a way or impression in a way traveling across Nepal and how it was the sense of delivery by democracy was in terms of response by the government in terms of the services required by the citizens.
Rainer Heufers (14:04):
That’s very interesting, Robin, because I can relate that to the experience in Indonesia that it is about responsiveness of the government. In a way, Indonesia is a very interesting case study because in 1998 when the authoritarian rule ended, we had both a democratization and a decentralization process happening at the same time.
(14:28):
And the interesting result is, and so the studies that were done were econometric analysis later with data over the next 10 years that showed that the decentralization process actually led to increased budget expenditures on infrastructure and the things that people really needed locally, whereas the electoral cycle did not have a significant effect on such expenditures or such improvements of the livelihood if you want, of the people in Indonesia. So it was really decentralization that delivered if you want, and that’s basically because there was the accountability now. And the interesting question then is, and I believe decentralization meaningful one can really only work in democracy, don’t you think? I mean, if there must be an accountability involved in all of this, and that’s the democratic element.
Robin Sitoula (15:32):
Well, I agree with you, Rainer. I couldn’t agree more. And I think that feeling that we are getting from the local level is that this closest government that they have is within probably a 15 or 20 minutes walk. And these are elected representatives, and they can hold them accountable. So the government is really close for them, but they cannot hold accountable of the higher governments because like I told you, we have three tiers of government. So they cannot hold accountable of these higher governments. Also, they don’t have any businesses at the higher government. So if you talk to them about the perceptions of theirs on the higher level of governments, then they start complaining about it. There’s a lot of issues of corruption, there’s a lot of issues of favoritism, there’s a lot of issues of rule of law and governance, and there are issues of institutions not being in place and even institutions that exist not being able to deliver on the bigger picture.
(16:36):
So I think one of the things that I kind of coming back to what Tamari started with liberal democracy, I think one of the fundamentals I personally feel is for liberal democracy to be functioning and to gain support. It also has to be able to build institutions that are functional because liberal democracy is a combination of a lot of other smaller parts like maybe justice or maybe implementation of competitive acts or all this sort of thing or enabling the markets.
(17:18):
And so if we are not able to build these institutions and make these institutions work, then people tend to look for a superpower or someone with a great idea. And a country like us, we’re always fragile to that because we’ve been a kingdom with a king ruling for a long time, and then people were like, “Maybe that one man called the king is better.” For Asia, I see it as a [inaudible 00:17:52], because the history of the larger Asian continent has been that once upon a time there has been kings, and there has been monarchs in many parts of Asia. And people tend to get back to that trust of a benevolent leader, and many Asian countries are selling benevolent leaders, and you know it, I know it, right. And that is one of the big risks that I see, at least in our part of the continent.
Tamari Dzotsenidze (18:23):
Robin, you just mentioned enabling the markets, which brings me to one of my questions. What role can the private sector play in all of this, right? We’ve talked a lot about governance and democratic institutions, so what do you see as the role of the private sector in relinking markets and democracy and restoring some of this trust?
Robin Sitoula (18:45):
Well, at least for me, I think it is very idealistic to think that private sector would play a significant role in this and coming from a country like Nepal because private sector does not have a very good reputation. And the reason private sector does not have a very good reputation is private sector is represented by Chamber of Commerces that are merely a confederation of big businesses and interest groups. And so they have been very much into making profit or increasing profit or subsidies or protectionism or favoritism or policy corruption. And these are not the largest section of private sector. This is just probably 1% of private sector, but that is politically representing private sector as Chamber of Commerces.
(19:52):
What I think it would be important in a country like Nepal is to be able to bring the voice of the small and medium entrepreneurs in the mainstream because the small and medium entrepreneurs have a very big base of stakeholder. And I think that could be something that private sector could do. Otherwise, I mean, I don’t know. I’m totally, totally clueless on what can we do so that the private sector could open up the market or private sector could defend market reforms? Well, there has been few cases, so I’m a bit skeptic, but I have a strong belief in small and medium enterprises, and if we figure out ways to uplift them, and if we figure out ways to get their voices as a mainstream private sector voices, maybe that can be more helpful, Tamari.
Tamari Dzotsenidze (20:57):
Rainer, do you have any thoughts on everything Robin just said and what you see as the role of the private sector in all this?
Rainer Heufers (21:05):
Yeah, I can only agree. I have exactly the same opinion. That might not be very interesting for the audience, but it is the case. You must just understand in a country, the government sets a certain amount of rules how to play in the market in this space, and those who know how to play along those rules will succeed, so that means those companies that are able to follow up, to follow everything the government has actually established as the rules, will be the dominant players. That means the dominant players are the ones that are close to the government, knows how to play this, potentially has good relationships there. There’s definitely a level of corruption involved in this. You cannot even differentiate exactly what’s a private company and what’s the government because quite often in many countries you have a leader of a private company becomes a supporter of a, let’s say, a presidential or a political candidate with his wealth and gets awarded with a ministerial position in the next cabinet.
(22:25):
So this is an in and out between the private sector and the government sector and the boundaries are quite blurred. So they will have their niche, the rules that they know how to play with along these roles. So basically they’re settled. And therefore I agree with Robin. If we really want equal access, equal opportunities, if we want to put away with the gatekeepers, then we need to give the smaller companies, the midsize companies, the chance to grow. And the real successful market economies that we know are those with a very strong SME sector who actually also have the little champions in global markets, which are themselves just small or medium-sized companies, so that must be the aim.
Tamari Dzotsenidze (23:19):
Yes. So do you think then that with all of this, markets are in need of liberalization leveling or more regulation, right? If they’re very, as you were saying, it’s hard to tell the difference between where the private sector is and where governance is. So what do you see markets being in need of to address some of these problems?
Rainer Heufers (23:42):
Sure, it is. This is a difficult question. How can we ensure that the small, medium-sized enterprises have a stronger position? And I believe what we need to do is we need, to a certain extent, change our vocabulary. If we just make it a private sector against the government, it is not really helping in countries that have this suspicion that Robin mentioned towards the private sector. They just think, “A-ha. So a couple of cronies are going to take the cake and eat it all by themselves.”
(24:12):
So I think it’s all about access and equal opportunities, and we need to tell the stories of those who do not have the access, who fail to have the opportunities, even though they’re qualified and they have a really interesting service or product that they want to offer, but they were blocked, and they were not able to actually bring this forward. So we need to tell the stories of those and try to see whether we can ensure that they actually have a chance. Whether this requires more regulations or less regulations, that’s hard to say. That really depends on a local context. It definitely requires a different set of regulations, those that facilitate access and not restrict access. And that I believe is an opening of markets that I would definitely think many countries need.
Robin Sitoula (25:04):
To add onto Rainer, our experience in Nepal has been that for some weird reasons, the amount of compliance and laws that we have in Nepal is exorbitant, and people are just scared of to start a business and a better choice is to go abroad to work. So we have a huge exodus of young people going abroad for better opportunities, and when we think about this, the closest example I can see is in the last two decades of Indian reform, whatever has happened in India, one of the things they did brilliantly was they scrapped away thousands of laws that were redundant. And probably for a country like Nepal, that is a big lesson that we also have thousands of laws that are redundant, and we need to scrap off. Only that we lack the same political will and the resource probably on what needs to be scrapped up.
(26:14):
So I think there is space for think tanks like us and chips and many other around across Asia to be able to bring those unnecessary laws on the table and say, “If we scrap this up, maybe things will be better for people, easier to access.” And people want. Nepal, I have an interesting,, might be for you, I don’t know if you say the same in Indonesia or east of Asia, but Nepal, the informal economy is almost 45% and people are doing business, but they’re doing it informally, and they’re doing it informally because it is very expensive to be formal.
(26:56):
And we’ve been arguing with the policymakers that can we make it zero cost to be formal? It doesn’t hurt us or at least the size of our formal economic grows, right? So I think these are the kind of things that we might help us, but then again, the daunting talk is we have to educate more people, we have to educate more influencers, we have to produce more evidence and probably being true to democracy, raise a rally or raise a voice for these kind of reforms in Asian countries.
Tamari Dzotsenidze (27:39):
We’ve spoken about some of the challenges at length throughout this podcast. Are there any opportunities that you see that members of the network or others who are advocating for democracy and open markets should be seizing within Asia?
Robin Sitoula (27:56):
For Asia, one of the short window of opportunities for a lot of us to think is the population or the demographic dividend. This is going to remain for a short time, probably 10 years, 20 years, but for the time being, we are one of the largest young population in the world. Asia itself is one big large population, so I think this is an opportunity in policy terms to be able to say, “Okay, how can we quickly use this to make life better for our people?” Because this is not going to stay forever. We are already seeing tendencies of decline, including my country, India, or China, everywhere. This is going to go into decline, and this is going to be a short window of opportunity. I see that there are opportunities to advocate for reform and help our population prosper. I mean, because we are a big population, we are also a big market. And so that’s I think a great population and that opportunity that we could make a case for. So that’s where I see.
Rainer Heufers (29:01):
Well then let me add another one that I can see. And that is over the last decades we have seen the center of the global economy slowly moving from the west towards the east. And it’s somewhere in the middle now, but it definitely was just in the west, and that’s not anymore the case. It’s not at all any anymore the case. As I said earlier, we have India and China as the global economic giants, but then we have also Japan, Korea, et cetera. So it’s quite a lot of economically strong countries. And that gives us an enormous amount of case studies on how opening up investment and trade regimes are actually beneficial to people. China itself is a great example of how when they opened up, they actually reduced poverty enormously, and that’s not just opening up to the outside world, but also internally when they allowed all the migration inside China. Korea and Japan are both examples of how when they started to look at an export-oriented economic growth model, they were enormously benefiting, and I mean shot to a level of income that they’ve never seen before.
(30:17):
And then we have Southeast Asia, which is famous for being winners of globalization like Singapore and several other countries in the region, so we have lots of cases where we can see how it works. And now we have the new development. We have a net outflow of FDI from China now for a couple of years in a significant amount. We have adopted the China plus one strategy or the ABC, anywhere but China strategy. So they’re looking for other destinations and now is a competition to attract those investments. And Vietnam is very far ahead by deregulating their economy, by making it easier to invest in Vietnam. So they’re doing very well in this. Thailand is trying to do this, to attract electric vehicles and others, et cetera. So that’s a great example to see how if you open up, if you integrate in global supply chains, global value chains, you really can benefit from what’s happening in the world.
Tamari Dzotsenidze (31:21):
Thank you both. As we approach our time, I would love to give you the opportunity to share any final thoughts if there’s anything that I missed asking about that you would like to share.
Robin Sitoula (31:32):
On a closing thought, I think what I’d like to stress upon is all this, throughout histories and centuries, we’ve seen that the only way to create wealth has been businesses and entrepreneurs. Irrespective of whether we like them or not, opening the environment or making it easier for entrepreneurs to do more is the best way to prosperity. If we like prosperity, and if we desire prosperity, I think we have to work towards making that happen for entrepreneurs. That’s what I think as a summary.
Rainer Heufers (32:18):
For me, I would like to end with the word of concern. What we have seen is China has grown more and more protectionist and installed an industrial policy in order to grow its own domestic industries, and other countries are concerned about that, but what they do is they respond with the same set of policies, with trade restrictions, investment restrictions, et cetera. So we have that in the United States. We have that in European Union. And now we see in Southeast Asia, they’re worried that when US and Europe close their markets, all these goods from China will be dumped in Southeast Asia. And I think also in South Asia, there’s the same concern.
(33:02):
So are we then going to be the grounds where all of this is going to be dumped? So they are starting to become more protectionist. And at the moment, I’m worried about this resurgence of industrial policy when we have seen so clearly how open global economic cooperation has benefited people so much that poverty in Asia has gone down tremendously because of these activities. So I’m a little worried with what’s going on at the moment with the industrial policy that’s coming back.
Tamari Dzotsenidze (33:31):
Thank you both so much for joining us today and for sharing your insights into the region. This has been a really great conversation. To our listeners, the next Free Enterprise and Democracy Network conference is coming up soon on October 8th. Learn more and register at FEDN.CIPE.org. Thank you so much.
Announcer (33:52):
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Published Date: September 11, 2024