NS4054“Oil and Politics in Southeast

Asia”Benjamin Smith

Author

• Benjamin Smith

• PhD University of Washington 2002

• Associate Professor at the University of Florida, teaching comparative and Asian politics, ethnicity and nationalism, post-conflict peace-building

• Research focus: Separatist conflicts, regime change, democratization, and the politics of resource wealth

• Books and several publications

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Agenda

• Overview• “Old” Oil Exporters• Research Design and Findings• What to Expect to the New Exporters?• Conclusion

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Overview

• Research question

• How is the impact of oil income on politics in Southeast Asia?• Key arguments

• The effects of resource wealth are frequently conditional and therefore dependent on antecedent conditions

• Looks at three oil-shaped dynamics

• The trajectories of older exporters (Brunei, Malaysia, Indonesia)

• Broad regional trends since 1990

• The emergence of three new exporters (Cambodia, Timor-Leste, and Vietnam) since 2000

• Mono-causal approach vs Conditional approach

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“Old” Oil Exporters

• Brunei• Indonesia• Malaysia

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“Old” Oil Exporters

• Brunei

• Independent in 1960s

• Resembles the small Gulf monarchies

• Crude oil and natural gas share 60% of GDP and more than 90% exports

• Oil has small impact to the politics:• “Shellfare” by the regime• Civil-service majority

• Small impact politically and economically during Asian financial crisis

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“Old” Oil Exporters

• Indonesia

• 1960s-1970s : boom years in Indonesia’s oil industry

• Mid-1980s oil price crash: difficult period for the Indonesian government -> more autonomous economy

• Production decline -> left OPEC in 2008

• Results:• Oil-led to export-led manufacturing• Authoritarianism to democracy

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“Old” Oil Exporters

• Malaysia

• Oil dependent

• 1969 race riots -> assertive government response to the violent expression

• 1970s oil boom: a chance to restructure the economy

• Oil revenue was used to boost export competitiveness

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Research Design

• Purpose: to explore the general effects of oil export dependence in Southeast Asia

• Research approach: Quantitative analysis (regression analysis)

• Data used:

• 12 countries in Southeast Asia

• Period: 1990 – 2008 (except Timor-Leste, from 1999)• Using oil income per capita instead of GDP to measure oil

export dependence• Independent variables: Oil income per capita, GDP per

capita, annual GDP per capita growth• Outcome variables: Democracy, Conflict, Governance

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Hypotheses/ Common Trends

• Democracy

• More oil income = less democracy• Conflict

• Oil-rich countries are more prone to internal conflicts• Governance

• Oil exporting countries will score lower on the two governance indicators (Government effectiveness and Control of Corruption)

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Result

Main oil exporters

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Result

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Hyphoteses vs Result

Hypotheses Result

DEMOCRACY

More oil income = less democracy More oil income = less democracy

CONFLICT

Oil-rich countries are more prone to internal conflicts

Oil or per capita wealth does not have significant relations to the onset of violent internal conflicts

GOVERNANCE

Oil exporting countries = bad governance

Oil exporters have more capable government

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What to Expect to the New Exporters?

• Cambodia, Timor-Leste, and Vietnam• Influence of oil revenue to the political economies?

• Likely for Cambodia and Timor-Leste

• Unlikely for Vietnam

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What to Expect to the New Exporters?

• Cambodia

• Oil exploration began in 1969 but stopped when the Khmer Rouge came to power

• Offshore discoveries in 2005• 3-5 trillion cubic meters of natural gas• 400 million barrels of oil

• Problems• Democracy: Cambodian People’s Party has undermined political

freedom• Conflict: Oil income are likely to make renewed conflict more likely• Governance: The government is one of the least capable in

Southeast Asia

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What to Expect to the New Exporters?

• Timor-Leste

• High expectation following 1999 independence

• No progress in 10 years -> disputes with Australia

• 90% of population works in agricultural sector -> unlikely change, due to insufficient technological resources to refine oil

• Problems:• Oil revenue distorts country’s currency• The misuse of oil revenue by politicians• Oil might amplify the problems of poor governance and unresolved

sociopolitical cleavages

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What to Expect to the New Exporters?

• Vietnam

• Oil exploration began in the 1960s, production took place since 1986

• 2004 production reached 400,000 barrels per day from just 275,000 in 1999

• Modest oil effect to a stable authoritarian regime

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Conclusion

• No uniform effects of oil politics in Southeast Asia• Need to have coherent looks at the various trajectories to

understand the political economy of oil• Lesson learned

• Old oil exporters: oil wealth in Southeast Asia has been put to nearly as many political uses as we have yet theorized

• New oil exporters: oil sector influence can be potentially transformative or modest