1

Dr. Edo Andriesse Department of Geography

College of Social Sciences, Seoul National University

Regional Varieties of Capitalism in Southeast

Asia

Working paper No. 175 February 2014

The views presented in this paper are those of the author(s) and do not necessarily reflect those of the Asia Research

Centre or Murdoch University. Working papers are considered draft publications for critical comments by

colleagues and will generally be expected to be published elsewhere in a more polished form after a period of critical

engagement and revision. Comments on this paper should be directed to the author at edoandriesse@snu.ac.kr

Copyright is held by the author(s) of each working paper: No part of this publication may be republished, reprinted

or reproduced in any form without the permission of the paper’s author(s).

National Library of Australia.

ISSN: 1037-4612

2

Regional varieties of capitalism in Southeast Asia

Dr. Edo Andriesse

Assistant Professor, Department of Geography

College of Social Sciences, Seoul National University

Gwanak-r0 1, Gwanak-gu

Seoul, 151-746

Republic of Korea

+82 2 880 4014

edoandriesse@snu.ac.kr

Abstract

Integrating the concepts of social capital, informality and geo-institutional diversity more explicitly in

theories of capitalist diversity opens up new and promising avenues for further regional research in

less developed countries. The case of Laos demonstrates that economic integration with neighbouring

countries is leading to specific regional varieties of capitalism, new state-business relations as well as

new local-central relations. Although the institutional complementarities generate economic growth

they neither translate into thriving small and medium companies, productive employment nor

inclusive development. This calls for theories and policies that reorient capitalist formal and

particularly informal institutions from growth towards development.

Keywords: , Laos, inclusive development, regional development, ethnicity, informality

Introduction

Increasingly, the regional varieties of capitalism (regional VoC) approach, which took its point of

departure in the analysis of the Western OECD economies, augmented by Japan, is also being

employed for non-Western and developing countries. In 2009 the journal Economy and Society

(volume 38, issue 1) published a special issue focusing on Latin America, entitled “Latin American

Capitalism: Economic and Social Policy in Transition” (MARTÍNEZ et. al, 2009). In the same year, the

Asia-Pacific Journal of Management published a special issue on varieties of Asian capitalism

(volume 26, issue 3). The latter volume emphasised the need to scrutinise the coevolution of

institutional arrangements and firm behaviour, the role of the state and the relationship between

3

institutions and sustainable development (ANDRIESSE and VAN WESTEN, 2009; CARNEY et al.,

2009; TIPTON, 2009). Also, the Socio Economic Review (volume 11, issue 2) has recently discussed

Asian capitalisms (STORZ et al., 2013). The diversity of capitalism in Asia is further investigated in

Witt’s and Redding’s (forthcoming) handbook entitled The Oxford Handbook of Asian Business

Systems, with the key content of the countries’ part being summarised in WITT and REDDING (2013),

highlighting two outcomes. First, with the exception of Japan the scrutinised countries cannot be

classified as a classical liberal market economy, coordinated market economy or French style state-led

economy (SCHMIDT, 2003). Second, the findings demonstrate the relevance of institutional diversity

with respect to social capital, culture, informality and multiplexity all across Asia.

Accordingly, the characteristics of Asian capitalism may be outlined as follows. First, social capital

needs to be reconsidered as a combination of institutionalised trust in organisations and interpersonal

trust. As institutionalised trust is relatively low in many Asian countries, it is no surprise that family

business groups and conglomerates have emerged over the course of history. This has enabled

executives and owners of these organisations to navigate entrepreneurial and governmental waters

through interpersonal networks while minimising uncertainty associated with third parties. Second

and related to social capital, Asian capitalism involves a substantial degree of informality. De facto

informal ways of doing business have frequently impacted economic activity and performance more

than de jure formal laws, regulations, contracts and agreements. Actors in the private sector, but also

farmers and even governmental authorities themselves find it more efficient and effective to

circumvent formal arrangements by processes of defection and reinterpretation (HALL and THELEN,

2009). STORZ et al. (2013) point out that the related types of informal institutions have remained

under-researched and thus they propose to pay more attention to this complex topic in future research.

Third, it may be useful to follow WITT and REDDING (2013) as they observe the presence of

multiplexity in Asian capitalist diversity, namely the existence of multiple capitalist systems in one

country. They particularly point out the simultaneous existence of state-owned and private sectors

and argue that the presence of multiplexity raises important questions on the preconditions that

support the coexistence of multiple varieties of capitalism in the same institutional space. From this

follows a question pertaining to institutional convergence: if we allow for multiple equilibria within

the same national context, then firms may create their own equilibrium points.

Most important from a point of view of geo-institutional differentiation and multi-scalar analyses is

the fact that multiplexity generally also exhibits a distinctive spatial character (YANG, 2007; VAN

HELVOIRT, 2009; Andriesse et al., 2011). Spatial inequality and growth asymmetries frequently

characterise development trajectories in developing countries. As Yeung (2007) proposed, economic

geographers are well positioned to respond to the problem of methodological nationalism (PECK and

THEODORE, 2007) and to embark on spatially fine grained empirical analyses. Even in small

countries such as the Lao People’s Democratic Republic (hereafter simply referred to as Laos) the

variegated evolution of foreign direct investments might have created different regional varieties of

4

capitalism (ANDRIESSE, 2011). Economists, business and management scholars usually employ the

varieties of Asian capitalism approach for studying large countries, obviously most notably China and

Japan, as well as countries with much innovative capacity such as Singapore, Hong Kong, South Korea

and Taiwan. However, integrating social capital, informality and multiplexity more explicitly in

theories of capitalist diversity opens up new and promising avenues for further research that

reconsiders often neglected economic and social structures on the regional level of the least developed

countries, thus reorienting the common focus on large firms and government towards often neglected

actors such as small and medium enterprises (SMEs) in agrarian and labour-intensive industries. Also,

this allows for a reconsideration of policy problems such as poverty reduction and inclusive

development from a regional perspective.

This paper begins with an overview of the comparative capitalisms approach in non-Western and

developing countries. This is followed by a section discussing the recent findings on diversity of as well

as within Asian capitalist systems. The focus is on the emerging economies in Southeast Asia. The next

section then addresses the case of Laos: a state-led frontier economy. It will demonstrate the relevance

of scrutinising regional varieties of capitalism informed by social capital, informal institutions and

multiplexity and in so-doing, it delivers an account of geo-institutional differentiation in a less-

developed country. Finally, in this paper institutions, the formal/informal, enabling/disabling,

national/regional, rules of the game, are distinguished from organisations and actors.

Comparative capitalisms in developing countries

In the last decade non-Western, developing countries have increasingly been included in the varieties

of capitalism literature. Most research focuses on Latin America, notably on the relationship between

capitalism and social policies, and East Asia, focusing on the successes of pre- 1990 Japan, China and

the Asian Tigers. Nevertheless, increasingly academics have focused on Southeast Asia and Africa as

well. For instance, PEDERSEN and MCCORMICK (1999) discussed Africa’s business systems,

DORWARD et al. (2005) and POULTON et al. (2006) connected Africa’s agricultural opportunities to

institutional complementarities and OCHIENG (2008) in general favoured coordinated market

economies over liberal types as it has a strong focus on stakeholders rather than firm shareholders. An

important development is the search for more varieties and a continuum rather than a dichotomy of

liberal market economies and coordinated market economies. The emerging literature points out that

the role of the state is an essential element in many varieties (TIPTON, 2009; MARTÍNEZ et al., 2009;

BECKER, 2012; WITT and REDDING, 2013) and as will be elaborated below also regional (sub-

national) states for the analysis of regional varieties, as opposed to earlier approaches putting the firm

as the heart of empirical scrutiny and stressing its centrality in any capitalist variety. It now frequently

appears that the state occupies a crucial role in economic activity, either in a positive enabling or

negative disabling way. Indeed, the successes of large countries (Brazil and China), smaller countries

(such as Malaysia, Chile and Uruguay), failures in state capacity across the global South and the

5

resurgence of left-wing governments in Latin America since 2000 necessitates a detailed examination

of state-business, state-society and local-central relations. Although several authors have concluded

that the Washington Consensus era ended with the collapse of Lehman Brothers in 2008, one can

begin to wonder whether civil servants, politicians and policymakers have ever considered this

consensus in the first place in China, the Republic of Korea, Russia, Brazil and others (THE

ECONOMIST 2012a). In the case of East Asia analysts have written on the successes of the Beijing-

Seoul-Tokyo (BeST) Consensus and the Beijing Consensus: a political economic model in which a

visible hand not only facilitates but steers and where necessary intervenes in markets in order to

create global competitiveness, export success and a vibrant urban middle class (LEE and MATHEWS,

2010; RAMO, 2004). Although several Asian countries have tried to follow this consensus to a certain

extent state actors in poorer countries are frequently involved in neo-patrimonial, predatory, personal

and familial deals lowering institutionalized trust and increasing the scope for disabling informal

institutional arrangements (EVANS, 2005; CARNEY and GEDAJLOVIC, 2001; ANDRIESSE and VAN

WESTEN, 2009; WITT and REDDING, 2013; NATTRASS, 2013; ZHANG and WHITLEY, 2013).

The explicit inclusion of the role of state in comparing capitalist diversity has generated

various varieties. In a study on welfare regimes MARTÍNEZ FRANZONI (2008) identified three types

using a cluster analysis: 1. a state-targeted (Argentina and Chile), 2. state-stratified (Costa-Rica, Brazil,

Mexico, Panama and Uruguay) and 3. informal familialist (twelve other Latin American countries).

She argues that “with a few exceptions, such as Ecuador and Venezuela, countries of the informal-

familialist regime type were late industrializers and adjusted their economies radically. They were

highly stratified at that time, and they continue to be so today. As one of the consequences, the

proportion of spouses with paid work reflects family strategies that are deployed to compensate for

low wages and weak or non-existent public policy.” This is a more fruitful exercise than capturing the

Latin American experience in its entirety into the singular variety of “hierarchical market economy”,

based on the notion that many diversified business groups internalise business transactions

(SCHNEIDER and SOSKICE, 2009). WITT and REDDING (2013) also carried out a cluster analysis

based on the following indicators: education and skills formation, employment relations, financial

system, inter-firm networks, internal dynamics of the firm, ownership and corporate governance,

social capital and the role of the state. Five clusters of business systems are detected: (post-) socialist

economies, advanced city economies, emerging Southeast Asian economies, advanced Northeast

Asian economies and Japan (fitting into the coordinated market economy group). It is problematic to

allocate these five clusters in any continuum. Rather, they represent distinct varieties with unique

institutional formal and informal arrangements (Table 1).

In sum, the study of capitalist institutional arrangements and its evolution in developing

countries requires a reconsideration of the modi operandi of the “orthodox” varieties of capitalism

school. Three issues stand out that have so far received little attention in the human geographical

literature. First, economic growth has been accompanied with rising socio-economic inequality.

Inequality is the highest in Latin American countries, and the Asian Development Bank (ADB), is also

starting to worry more about the threats of excessive social, economic and spatial inequality

6

(MARTÍNEZ et al., 2009; ADB 2012). While shared growth prevailed in the high performing Asian

economies during the 1970s and 1980s, as pointed out in WORLD BANK (1993), inequality has

markedly risen in the last two decades and the Kuznets curve is starting to lose its validity.1 In

countries such as the Philippines growth of the gross domestic product does not sufficiently translate

into reductions in unemployment, underemployment and the percentage of people below the poverty

line. Therefore, choosing economic growth as a dependent variable is too narrow (TUROK, 2011).

Opting for inclusive development appears to be more instructive and valuable. That would make the

regional VoC approach analytically more relevant for developing countries and expand the

comparative tools for institutional inquiry. According to KANBUR and RAUNIYAR (2010), pro-poor

growth is insufficient as many countries have witnessed rising inequality amidst falling poverty levels.

They claim that the millennium development goals are a reasonably suitable tool to measure inclusive

development. An advantage of inclusive development is the possibility to take into account non-

income inequalities such as inequality along ethnic lines. In both Latin America and Southeast Asia

indigenous populations are underrepresented as entrepreneurs, employers and managers, whereas

descendants of southern European migrants in the former and ethnic Chinese in the latter own a

disproportionate share of economic assets. Inequality, ethnicity and increasingly class are obviously

major issues in African countries as well. NATTRASS (2013) paints a rather bleak picture of South

Africa that is now part of the BRICS group. In the first post-apartheid years the country was heading

towards a coordinated market economy, but evolutionary dynamics, mainly race-state-business

relations, “created a variety of capitalism which provides CME [coordinated market economy]-like

support for the employed, patrimonial and increasingly corrupt support for sections of black business,

whilst effectively excluding the predominantly unskilled, unemployed from the fruits of growth”.

Second, in the “global South” the informal sector has played an essential and influential role

in economic life. For instance in India, generally seen as an emerging economic powerhouse and a

potential competitor of China given its more favourable demographics in the long run, only 7% of the

total labour worked in the formal registered sector around 2000 including access to the formal social

security system and provisions under the labour law (HARRISS-WHITE, 2010). Furthermore, she

contends that the informal sector has created relatively more jobs since the early 1990s when India

started to liberalise and deregulate. The presence of the informal economy has led to the introduction

of a new variety of capitalism: “informally dominated market economies”. Using Mozambique as a

case study DIBBEN and WILLIAMS (2012) analysed institutional arrangements in in the sphere of

employment relations. Trade unionization, collective bargaining, skills training and social security are

much weaker and looser in the informal sector, but one should not ignore the organizational

capabilities within this sector. However, a major obstacle is that informal sector organisations have

limited influence at the national level. DIBBEN and WILLIAMS conclude that Mozambique’s variety

resembles to some extent some southern European countries, yet the introduction of a new variety

based on informality is preferred. This has major implications for the study of employment relations

and labour issues in developing countries. For example, what is the impact of social identities (class,

caste in the case of India, religion, ethnicity, gender, family) on informal arrangements, how do the

7

formal and informal interact with one another (HARRISS-WHITE, 2010) and are policies to formalise

existing informal arrangements always advisable?

Third, WITT’S and REDDING’S (2013) observation that informality and social capital need

to be further explored should be deepened by paying more attention to influential families and a

national and regional level. Extended families obviously form a source of social security in informally

dominated market economies with relatively undeveloped formal welfare regimes (MARTÍNEZ

FRANZONI, 2008) and long lasting political dynasties and competition between dynasties influence

institutional arrangements (e.g. IQBAL, 2012 on Pakistan; MENDOZA et al., 2012 and BBC, 2012 on

the Philippines). 2 Furthermore, many business groups are well connected to the state/certain

national politicians (GOMEZ, 2009; ZHANG and WHITLEY, 2013), and perhaps most importantly,

the boundaries between business and politics are often very difficult to locate in case millionaires turn

politicians. Good examples are Thailand’s former Prime-Minister Thaksin Shinawatra (PASUK and

BAKER, 2004), President Horacio Cortes of Paraguay and in the developed world former Italian

Prime-Minister Silvio Berlusconi. And at the regional level the Osmeña family of Metropolitan Cebu in

the Philippines is one of the best examples (VAN HELVOIRT, 2009: 155-192; LANGE 2010).

Integrating families would also do justice to calls for considering more rigorously the role of ethnicity

and personal capitalism (CARNEY and ANDRIESSE forthcoming).

Multi-scalar varieties of Southeast Asian capitalism

This section examines regional VoC in the countries which are member of the Association of Southeast

Asian Nations (ASEAN). Probably the first overview of Southeast Asia informed by the body of

knowledge on varieties of capitalism is TIPTON (2009). Regarding the role of the state he made the

interesting distinction between state direction and state capacity. State capacity (the ability to

translate policy into desired action) has been generally low in the Southeast Asian states, whereas

state direction (the extent of control over markets) decreased during the transition from the import-

substitution to the export-oriented industrialisation era. Holdings, state-owned and family business

groups have been mainly responsible for the export successes and governments’ policies have greatly

contributed. This resulted in a neglect of SMEs, even in Singapore where “there are relatively few

successful entrepreneurs…, and compared to other Chinese of Southeast Asia, Singaporean Chinese

are unlikely to engage in entrepreneurial behaviour” (TIPTON, 2009). Tipton further complained that

neither ASEAN nor its member states have implemented effective policies to encourage the

establishment of SMEs and innovation in SMEs. This omission explains to some extent the lack of

inclusive development and growing inequality in Southeast Asia. The section of the labour force that is

unable to work for the successful business groups or to connect to those groups indirectly through

supply and demand linkages falls behind and often works in the informal sector. In addition to the

formal-informal sector duality another challenge in Southeast Asia is an emerging middle income trap.

It remains unclear how Thailand and Malaysia can take the next step and how the developed country

status can be achieved. It appears to be difficult to transform from export-oriented industrialisation to

8

strategies whereby innovative capacity and knowledge intensive industries are gaining prominence.

Political instability, vested interests (personal capitalism), processes of institutional lock-in and a lack

of reforms in education and skills formation stymie transformative capabilities. This political

economic model could be described as embedded mercantilism (JAYASURIYA, 2003; ANDRIESSE

and VAN WESTEN, 2009). The Philippines, Indonesia, Vietnam are likely to face a similar situation

(OHNO, 2009; IMF, 2013).3 .

Table 1: Varieties in Asian capitalism

Cluster Country Capitalist variety

(Post-) socialist

countries

China Authoritarian capitalism

India From failed developmental state to hybrid

market capitalism

Vietnam Post-state capitalism

Laos Frontier capitalism

Advanced city

economies

Hong Kong Hybrid capitalism as catalyst

Singapore Open-led state capitalism

Remaining

Southeast Asian

countries

Indonesia Oligarchic capitalism

Malaysia Personal capitalism

Philippines Inequality-trapped capitalism

Thailand Post-developmentalist capitalism

Advanced Northeast

Asian countries

Republic of Korea Plutocratic state-led capitalism

Taiwan SME-oriented capitalism in transition

Japan Coordinated capitalism between

institutional change and structural inertia

Source: WITT and REDDING, 2013 (clustering based on their statistical analysis)

Nevertheless, there is substantial variety and dynamics within Southeast Asia. Table 1 gives an

overview of contemporary varieties of capitalism in Southeast and East Asia. The classifications are

based on rigorous comparative institutional analyses. For several countries it gives a clue as to how

institutional arrangements are evolving. For instance, in Thailand personal capitalism is gaining

strength (see also ZHANG and WHITLEY, 2013) and the role of the state in Vietnam has decreased

somewhat although one should acknowledge substantial elite resilience (GAINSBOROUGH, 2010:

156-176). In terms of poverty reduction and inclusive development the country stands out as a

relative success story (BEESON and PHAM, 2012). Economic growth has trickled down faster to the

poor compared to other countries in transition such as Cambodia, Laos and India as well as the

emerging economies of Thailand and Indonesia (see for instance KERBO, 2011: 136-157 where

Vietnam is compared to Cambodia). Although ethnic minorities still face many problems in improving

their livelihoods, the Overseas Development Institute (ODI) included Vietnam in both the top 20

absolute achievers in poverty reduction and top 20 relative achievers in terms of progress relative to

the millennium development goals targets (ODI 2010: 4). . Another welcome development is the

9

absence of outright land grabbing in Vietnam (SIKOR 2012). This contrast with the Philippines where

capitalism results in exclusive growth patterns (BALISACAN, 2003).

Regarding variegated multi-scalar analyses it is necessary not only to include the regional,

but also the international scale (PECK and THEODORE, 2007). In the economic spaces of Southeast

Asia it is evident that the ethnic Chinese way of doing business based on guanxi, a specific set of

informal institutions (PARK and LUO, 2001), remains a vivid element. This pertains both to large

business groups operating in urban areas as well as small-scale entrepreneurs. YEUNG (2006) points

out three aspects of continuity of Chinese capitalism in Southeast Asia: 1. “the family firm as a central

element in organizing ethnic Chinese capitalism 2. strategic deployment of ‘Chineseness’ and Chinese

identities; and (3) Chinese culture as strategic resources for business expansion”. One of the best

examples in Thailand is the Charoen Phokphand, a multinational with massive agro-processing and

other investments in mainland China. Its owners, the Sino-Thai Chearavanont family, is the richest

family in Thailand with an estimated worth of US$ 14.3 billion (YEUNG, 1999; FORBES 2013). Indeed,

ethnic-Chinese from many Southeast Asian countries are now investing in mainland China.

Henceforth, bearing in mind that certain varieties of capitalism have international dimensions would

also avoid methodological nationalism. In other words: “…it is certainly possible that Chinese culture

and identity will remain an important set of strategic resources for Chinese Southeast Asians to

engage in a form of economic organization that is neither entirely Chinese in its nature and ethnic

composition nor bounded within national political-economic institutional contexts like its

counterparts elsewhere” (YEUNG, 2006). This does not only pertain to the ethnic Chinese in

Southeast Asia, but also to expanding Indian business interests in the Middle East, international value

chains managed by ethnic Koreans in China and others. .

The remainder of this section explicitly focuses on regional -institutional differentiation and

inclusive development in the Philippines, Thailand and Malaysia. National institutions interact in a

complex manner with regional institutions. First, there could be institutional geographical overlap

between national and regional institutions. Second, regional institutions could steer or block

developments in a coexistent and co-evolutionary manner with national ones. Third, national

institutions could marginalize regional institutions due to powerful national organisations and actors.

Fourth, the dimensions of formal versus informal institutions and enabling versus disabling

institutions additionally complicate multi-scalar varieties. And fifth, related to the second point,

CROUCH et al. (2009) advise to engage in more industry specific studies in order to understand how

actors in industries behave. According to them they might follow the national institutional framework,

but could also try to circumvent it and foster other institutional arrangements that are more conducive

to the sector requirements for international competition. .”

In light of this potential analytical complexity Andriesse et al. (2011) linked regional VoC to

the global value chain approach. GEREFFI (2013) argues that this approach remains vivid “in a post-

Washington Consensus world”, yet new governance structures and geographical concentration can be

expected as a result of the larger influence of emerging economies in the Global South. Linking global

or national value chains t0 regional institutional inquiry offers the possibility to explicitly take into

10

account multi-scalar variety and to scrutinise the interdependence of international economic linkages

and regional diversity. For instance, the ways of benefiting from foreign direct investment or trade

opportunities depends on regional actors and governance structures.

Table 2: regional variety in Southeast Asia Cebu Negros Oriental Bohol Satun Perlis Economic geographical nature Market-driven

exports of manufacturing and services

A post-colonial plantation economy

A small-scale farming economy

Market-driven agro-industrial economy

A state-driven service economy

Multi-scalar political-economic networking Public –private coordination

Strong: ‘boosterist’ alliance

Exclusive: political and business elite is the same, social polarization

Limited: restricted to personal elite alliances

Limited: elites divided by ethnicity and religion

Strong within Bumiputera sector

Local-central ties

Strong: mutual dependence

Strong: alliances of planters, elite well-represented in Manila

Top-down: dependence on Manila

Top-down: dependence on Bangkok

Hierarchical and strong, active Federal government

Role of ethnicity

Moderate: many Filipino-Chinese entrepreneurs

Strong: economic and political dominance by mestizo elites

Strong: duopsony of Filipino-Chinese tycoons

Strong: economic dominance by Sino-Thai families

Strong; ethnic divide in business communities

Inclusive/exclusive aspects of value chains and regional VoC Value chains Strong

exclusion mechanisms

National protective policies; no upgrading

Tycoons prevent inclusion of outsiders

Relatively inclusive access upstream

State-driven local chains

Regional VoC Competition for access to foreign buyers reduces social capital

Relatively inclusive access mechanisms for locals, based on personal contacts

Relatively inclusive access mechanisms for locals, based on personal contacts

Exclusion of Muslim majority, except as labour

Inclusive within Bumiputera sector

Source: ANDRIESSE et al., 2011: 168, 173

Table 2 examines the regional perspective on varieties of capitalism in Southeast Asia, based

on a research project on regional economies in the Philippines, Thailand and Malaysia.4 . Bohol, Cebu

and Negros Oriental are located in the Visayas in central Philippines, while Satun in Thailand and

Perlis in Malaysia straddle the Thailand-Malaysia border. Interestingly, Satun and Perlis shared a

similar history until then Siam and British Malaya agreed on a permanent border in the Anglo-

Siamese treaty of 1909 and still share similar social identities, most notably an Islamic majority. Table

2 consists of three parts: the upper part gives the most important industries in each region; the middle

part unpacks institutional and political-economic outcomes governing the regional economies and the

third part connects these outcomes to the nature of insertion in the national or global economy as well

as the extent of inclusive development, the latter of which is a prime concept in this paper. The table

shows that the interplay between national institutions, local-central ties and ethnicity determine the

relative influence of regional institutions. Regional institutions, for instance the ethnic Chinese way of

doing business in Perlis, are blocked by the powerful impact of Federal Malaysian policies to support

and expand the Bumiputera sector.5 This is a good example of marginalisation of regional institutions.

In the three Philippine cases distinctive regional institutions can be detected, due to the absence of a

11

coherent national VoC and traditionally strong regional elites, if not dynasties. Regional elitism in

Cebu, Negros Oriential and Bohol also contributes to exclusion mechanisms, most notably with

respect to the development of value chains and the regional VoC in Cebu.

Map 1: Laos

This is consistent with Philippines’ classification as inequality-trapped capitalism (Table 1). In terms

of the impact of regional VoCs on the extent of inclusive development it is important to recognize that

“social and cultural capital can foster cooperation at the local level while excluding certain segments of

the population (ANDRIESSE et al., 2011: 172).” This implies that regional institutions can be enabling

for economic growth while disabling for inclusive regional development. For instance, policy makers

generally favour strong business associations such as chambers of commerce and industry-specific

associations in order to stimulate regional collaboration, regional institutional thickness (AMIN and

THRIFT, 1994:15), and cultivating a sense of regional belonging. Yet, when those associations tend to

exclude specific groups along ethnic, religious or other social dimensions, fostering inclusive

development is becoming difficult.

12

6. The next section zooms in on Laos, a country in transition where capitalist institutions just

started to emerge after 1986. Due to major institutional changes and rapid responses of Lao and

neighbouring actors in the last two decades, Laos provides a key example for regional diversity in

Southeast Asia.It could also serve an illustration of what might happen in Burma/Myanmar in the

coming decades. The opening up of this country, with China, India and Thailand keen to invest could

trigger similar process of geo-institutional differentiation.

Regional variety in Laos

This section partly draws on ANDRIESSE (forthcoming) and ANDRIESSE (2011). Laos as a territorial

entity is a product of the colonial era, in which the French sought to disconnect the area east of the

Mekong River from the economy and culture of Siam (contemporary Thailand) (IVARSSON, 2008).

In addition, the Vietnam War caused enormous havoc in Laos, with communists and pro-North

Vietnamese forces fighting non-communists, largely made up of ethnic minorities such as the Hmong

people. In 1975, the Lao People’s Revolutionary Party (hereafter referred to as the Party) claimed

victory and has ruled the country ever since. Laos, however, remained a purely communist country for

only eleven years. The Party, facing external debts and an economy in shambles and in the light of

economic reforms in the USSR and China announced the New Economic Mechanism (NEM) in 1986,

similar to Vietnam's Doi Moi reforms and associated economic opening-up (STUART-FOX, 1997:195-

201). The NEM has been responsible for the entry of capitalist institutions, privatisation, a remarkable

opening up of markets and the influx of foreign direct investment (FDI). Nevertheless, the political

system has remained authoritarian. The Politburo of the Communist Party is in firm control of most

political activities and the Secretary-General of the Party is also President of the Republic.

Laos’s population of 6.4 million is small in the Southeast Asian context, as is the economy;

moreover, around 70 percent of the labour force works in agriculture. In the latest UNDP Human

Development Report, Laos is ranked 138 in the human development index (HDI), with a value of

0.543. Cambodia has exactly the same ranking while Timor-Leste is ranked above Laos (134) and

Burma/Myanmar below (149) (UNDP, 2013: 146-147). Net official development assistance received

accounts for 6.2 percent of the gross national income. This is 6.9 percent in Cambodia, but only 2.9

percent in Vietnam (UNDP, 2013: 184). Clothing, wood products, and processed foods have a high

potential for export and thus are useful from an inclusive development perspective (generating

employment and limiting environmental pollution, if managed well), but in the contemporary Lao

political economy, the booming industries are copper- and gold-mining and hydropower; industries

that generate little employment and degrade the natural environment (UNDP, 2006; DIE, 2009).

Laos aims to be a kind of battery, as it were, for neighbouring countries. At the end of 2010 the

completed Nam Theun 2 dam (NT2) and hydropower facility began selling electricity to Thailand.

The current trends in Lao mining and hydropower are part of a wider economic geographical

phenomenon which can be described as a transnational resource frontier. and international economic

spaces. . Thai companies, for example, have invested in sugarcane plantations in Southern Laos, the

13

Chinese state-owned copper importer Minmetals owns a copper and gold mine in Savannakhet

province, Chinese and Vietnamese are involved in rubber plantations in the northern and southern

provinces respectively, and the NT2 dam is a complex project involving direct investment by Thailand

and France (SHRESTHA, 2010). The resource frontier 'captures empirical reality concerning the

political economy of rapid and uneven development in the country' (BARNEY, 2009:150). It should be

noted, however, that foreign investors have not only made inroads in resource frontiers, but also in

manufacturing industries such as clothing and motorcycle assembly.

Institutional complementarities

On the basis of the institutional spheres of education and skills formation, employment relations,

financial system, inter-firm networks, internal dynamics of the firm, ownership and corporate

governance, social capital and the role of the state it is possible to identify three institutional

complementarities:

1. A strong interventionist role of the state in the general political economy, a state-mediated

financial system, state-mediated inter-company relations, and the suppression of trade unions

have jointly led to a capitalist variety in which large companies that are somehow connected to

the Party, either through patronage or partial government ownership, can flourish. On the other

hand, it has resulted in disabling arrangements for SMEs. Ordinary entrepreneurs find it very

difficult to obtain access to finance; business organisations do not support SMEs, and consortia

of state-owned enterprises and foreign companies are the main beneficiaries of this model.

2. The absence of inclusive employment relations, improved but still low levels of educational

attainment, low wages, insufficient levels of social capital, and the government’s approval of

exploiting natural resources have resulted in a frontier mentality. A 'first come, first served'

arrangement steers a considerable part of the frontier economy, whereby business interests

force farmers, fishermen, smallholders, and villagers to relocate to make way for large-scale

frontier operations in hydropower, mining, and plantations. The lack of education and a narrow

base of civil society make protesting difficult, if not impossible. This complementarity explains

the current trajectory of rapid but uneven growth. The danger in the long term is increasing

socioeconomic inequality. This is why Laos’s variety can be labelled frontier capitalism (see

Table 1)

3. A virtual absence of corporate governance and on-the-job skills formation, a hierarchical

internal firm structure, and the lack of trust-based inter-company relations within industries

have created an institutional vacuum. Instead of industries endowed with institutional

thickness, institutional thinness prevails, and firms in Laos’s major industries are not

embedded in well-organised global value chains (except for mining), industrial districts

(WHITLEY, 1999: 43-44; ANDRIESSE et al., 2011). Consider the clothing industry. Many actors,

including the government, knew that the industry would see the end of the Multi-Fibre

Arrangement and was likely to experience difficulties once preferential trading regimes for the

14

least developed countries were toned down, but relevant stakeholders have conducted few

concerted efforts to enhance the capabilities of the industry (RASIAH, 2009).

Geo-institutional differentiation, social capital and informality

The complementarities described above provide a general overview of the prevailing national

institutions and the resulting political economy as well as lack of inclusive development. But as

mentioned in the introduction of this paper a regional perspective requires a closer look at geo-

institutional differentiation, social capital and informality. Table 3 connects capitalism in Laos to

three geographical scales: the international scale of the Greater Mekong Subregion (GMS), the

national scale and the regional (sub-national) scale. Laos is geographically a rather fragmented

country and as it has influential neighbouring countries, it is possible to identify several blends of

frontier capitalism. In southern Laos Thai and Vietnamese corporate actors, supported by chambers

of commerce, governmental authorities are actively investing in large scale plantations, contract

farming, mining and trading activities. With respect to the rubber industry PINKAEW (2012) showed

that the central government in Vientiane plays a relatively minor role in some of the new provincial

arrangements:

This provincial administration has direct bilateral relations and Memoranda of Understanding with

16 individual provinces in Vietnam, mostly in the field of agricultural production, but also education

and tourism. Several senior members of the provincial staff can communicate in Vietnamese and

Champasak is keen to foster relations with Vietnamese investors. Thus, many of the early

negotiations between companies and Champasak province were underpinned by a series of

diplomatic arrangements between provinces. It should be noted that land concessions at the

provincial level sometimes did not follow Laos’s land law.

Table 3: Multi-scalar analysis of variety of capitalism of Laos

Greater Mekong Subregion

Financial system, ownership and

corporate governance

Important role of foreign direct investors from Vietnam, China and

Thailand

Inter-firm relations Foreign firms establish links with Lao private firms and state-owned

enterprises

Labour mobility More than 200000 persons (irregularly) work in Thailand

Multilateral organisations Belief in efficacy of market integration

Belief in efficacy of connectivity

Laos as a nation state

Role of the national state Intervenes in many industries, encourages frontier mentality

Insufficient attention paid to inclusive development, notably SMEs,

employees, farmers and displaced citizens

Lao Holding State Enterprise steers hydropower industry

Nation-building in progress: for instance use of Lao Kip encouraged

Balancing political-economic interests of Vietnam, China and Thailand

15

Social capital Low institutionalised trust

Education and skills formation Secondary education needs to be improved

Gender inequality

Little on the job training

Employment relations Labour as input factor rather than human capital

The “regional world” of Laos

Role of the provincial state Accountable to Vientiane, but increasingly active as interventionist in the

economy, especially in frontier industries

Social capital High village based interpersonal trust

Ethnicity Complex relations between Lao people and the many ethnic minorities

Inter-firm relations Increasing number of deals with Vietnamese, Chinese and Thai firms,

depending on geographic location

Sources: RIGG, 2009; COHEN, 2009; PINKAEW, 2012; ANDRIESSE, forthcoming

The institutional outcomes in Champasak serve to illustrate two points: First, it is a clear example of

defection by a provincial government rather than the private sector .7 In this case national formal

institutions are deemed ineffective and instead new cross-border arrangements are forged. Second,

the Party in Vientiane is not all-powerful. Other actors such as provincial governments increasingly

mingle in economic affairs. Furthermore, ROMYEN (2010) demonstrated how complex land dealings

are in contemporary Savannakhet. In a paper on the sugarcane business in Savannakhet, she showed

that large Thai firms have heavily invested in plantations since the mid-1990s. Nevertheless,

increasing economic openness does not mean that deals are made in a ‘free’ land market. Instead,

negotiations on long-term land concessions are politicized and involve Thai sugarcane business

executives, the Thai government, the Lao government, chambers of commerce, brokers and lobbyists.

Moreover, she contends that the Thai side is in a more favourable position to benefit from the

emerging corridors in Laos, as Thai firms have much more capital available and experience with the

rules of the game entrenched in current geo-institutional settings in the GMS. Meanwhile, in northern

Laos the Chinese have secured interests in an array of economic activities including casinos and

rubber plantations. The government of Laos, even the Lao military and Chinese companies backed by

Chinese governmental authorities perceive large scale rubber plantations as the civilising way forward

for the upland populations (COHEN, 2009). Yet, certain ethnic minorities themselves, not backed by

organisations, have also been able to benefit from new rubber opportunities on the Laos China

borderlands using informal arrangements structured by kinship and other forms of interpersonal trust

(STURGEON, 2013). Thus the increasing integration between the regional scale and the GMS scale

results in complex frontier economy dynamics in which not only Lao, Vietnamese, Thai and Chinese

firms and provincial governmental authorities are involved, but rather unexpectedly also weaker parts

in society such as ethnic minorities and rubber smallholders. As such there is a need to recognise the

potential emergence of pockets of spontaneous inclusive development.

Besides geographical variation in the power and influence of the Party, things in Vientiane

are also changing. In the medium run, informality, notably the role of important families, will increase

amidst continuing low institutionalised trust (Table 3), difficulty to do formal business and capability

16

to enforce contracts. Laos ranks 163 in the WORLD BANK’s (2013: 3) ease of doing business list. This

compares unfavourably to the other (post-) socialist countries as classified by WITT and REDDING

(2013) (Table 1): China 91, Vietnam 99 and India 132. And Cambodia, together with Laos the other

small country located between Vietnam and Thailand, is doing better as well with a rank of 133. It is

therefore no surprise that informality and families are essential for doing business. After 1975 senior

Party members increasingly engaged in traditional Lao forms of social capital, giving jobs to extended

relatives and loyal retainers. As Laos state capacity has been relatively low (compared to the

neighbouring countries except Cambodia), competition between networks of influence and patronage

cohering around senior Party officials became a part of political life (STUART-FOX, 2006).

For the majority of the population, nevertheless, the Party is something rather abstract and

the people need to cultivate interpersonalised trust in their communities. Informal arrangements

based on kinship, friendship, ethnicity, and village origin play very important roles. Such social

identities often 'regulate' job-seeking in the clothing industry in Vientiane, initiating (irregular)

migration to Thailand and many other forms of economic survival. In the communist era of 1975–

1986, hierarchy, reciprocity, and village patronage structured social life, but nowadays many find it

difficult to cope with the capitalist features of urban individualism and competition. Migrants arriving

in Vientiane without connections in the city have considerably higher chances of becoming beggars,

prostitutes, criminals, or drug-addicts (REHBEIN, 2007), while urban Lao people look down upon

ethnic minorities. In sum, it cannot be expected that nationwide more neutral forms of social capital

will emerge anytime soon. The findings on regional varieties of capitalism in Laos complicate the idea

that policymakers can transform the GMS into a level playing field, wherein formal institutions and

more roads bring about smooth integration and connectivity (Table 3). Instead, regional actors, be

they firms, provincial governments or rubber smallholders, reinterpret and even defect from national

institutions. This process is informed by social identities such as ethnicity and linguistic familiarity

and generates a mosaic of formal and informal institutions at the regional level. .

Conclusion

This paper has demonstrated that a multi-scalar approach towards varieties of capitalism in Southeast

Asia generates a better understanding of processes of capitalist modernisation, given the persistence

of regional diversity . Institutional complementarities might be enabling for certain business

communities and general economic growth, yet prevent inclusive development and result in

socioeconomic and spatial inequalities due to social identities, various interactions between national

and regional institutions, vested interests and distributive conflicts. In other words, the way various

institutions interact might not be beneficial for all involved actors in the economic sphere. For

instance, the case of Laos revealed that the weak position of employees, insufficient levels of social

capital, and the government’s approval of exploiting natural resources promote an economic

environment in which business thrives at the expense of weaker sections of society. Given rising

inequality in Asia there is a need to connect regional varieties of capitalism stronger to the concept of

17

inclusive development as well as the millennium development goals. The ODI concluded that one of

the ways to achieve the millennium development goals is to have “sound macro-economic policies,

open trade, and recognition and active management of the complementary roles of market and state”

(ODI, 2010: 10). Several questions arise from the latter part of this statement. What exactly does this

complementary role entail? Is the role actually always complementary? What is the impact of

informality, social capital and geo-institutional differentiation on this complementary role? How can

national and regional policymakers get rid of disabling institutions and institutional lock-in while

facilitating new enabling complementary roles? And how does it differ between industries (Crouch et.

al., 2009)? For instance, the health industry is important. Health is a major theme in the millennium

development goals, the industry is set to grow tremendously as a result of ageing and there is a

complex web of state-owned hospitals, private hospitals, a variety of clinics, insurance firms, public

health agencies, informal traditional health systems, etc. etc. in many developing countries. And while

education and skills formation occupy a strategic place within the varieties of capitalism approach,

health is rarely researched.

For the above questions to be answered comprehensively this paper concludes with

suggesting two policy recommendations and two topics for advancing theories on regional VoC. First,

many developing countries need to invest more in education and skills formation in non-core areas.

The evidence on Laos demonstrates that a lack of education and skills formation seriously hampers

the emergence of inclusive development. A stronger focus on human capital formation makes it easier

and more effective to benefit from formal institutional reforms (decentralisation schemes, growth

poles, spatially targeted industrial policies, etc.) and increasing connectivity. It would also allow

citizens to cope better with potential negative side effects such as environmental degradation and to

increase chances of success in case of migration. Second, RODRÍGUEZ-POSE (2013) points out that a

carefully crafted balance between strategy and the right institutions is essential for regional inclusive

development. Indeed, national and international organisations often design good strategies for

specific regions in developing countries, yet ignore the disabling regional informal institutions on the

ground. In this regard smarter sequencing seems to be of paramount importance. Building a road,

establishing product or service clusters or setting up an investment agency in Laos and many other

developing countries before getting the regional institutions right will not work, especially if

entrepreneurial activity is influenced by ethnicity or other social identities. For any strategy to be

effective enabling institutional complementarities should be sufficiently thick and the disabling ones

as thin as possible. To refine theories on regional VoC it is instructive to consider more explicitly the

notion of regional personal capitalisms (ZHANG and WHITLEY 2013, CARNEY and ANDRIESSE,

forthcoming). Despite all the decentralisation schemes in which transparency, accountability and the

virtues of good governance are promoted, familalism, personalism and overlapping economic and

political interests continues to thrive in regional capitalist varieties. These features have so far not

been adequately dealt with in regional theoretical inquiry. Another phenomenon that deserves more

attention is the complex interplay between national and regional states. Not only firms, but also

18

regional civil servants and politicians are increasingly well-positioned to reinterpret or defect from

national institutions creating more complex multi-scalar dynamics.

References

ADB (2012) Asian development outlook 2012: Confronting rising inequality in Asia. Asian

Development Bank, Manila

AMIN, A. and TRIFT, N. (1994) Living in the global, in AMIN, A. and THRIFT, N. (Eds)

Globalization, Institutions and Regional Development in Europe, pp. 1-22. Oxford University Press,

Oxford.

ANDRIESSE, E. (forthcoming) ‘Laos: frontier capitalism’, in WITT, M. and REDDING, G. (Eds), The

Oxford Handbook of Asian Business Systems. Oxford University Press, Oxford.

ANDRIESSE, E. (2011) Introducing the regional varieties of Asian capitalism to Lao PDR. Research

note, ASEAN Economic Bulletin 28 (1), 61-67.

ANDRIESSE, E., BEEREPOOT, N., VAN HELVOIRT, B. and VAN WESTEN, G. (2011) Business

systems, value chains and inclusive regional development in South-East Asia, in HELMSING, A. and

VELLEMA, S. (Eds) Value Chains, Social Inclusion and Economic Development: Contrasting Theories

and Realities, pp. 151-177. Routledge, Abingdon.

ANDRIESSE, E. and VAN WESTEN, G. (2009) Unsustainable varieties of capitalism along the

Thailand-Malaysia border? The role of institutional complementarities in regional development, Asia

Pacific Journal of Management, 26 (3, special issue on Varieties of Asian Capitalism), 459-479.

BALISACAN, A. (2003) Poverty and inequality, in BALISACAN, E. and HILL, H. (Eds), The Philippine

Economy: Development, Policies and Challenges, pp. 311-341. Oxford University Press, New York.

BARNEY, K. (2009) Laos: the making of a “relational resource frontier", Geographical Journal, 175 (2),

146–159.

BBC (2012) Philippine politics – it’s a family affair. http://www.bbc.co.uk/news/magazine-19994432

BECKER, U. (2012) Measuring change of capitalist varieties: reflections on method, illustrations from

the BRICs, New Political Economy. http://dx.doi.org/10.1080/13563467.2012.717611

19

BEESON, M. and PHAM, H. (2012) Developmentalism with Vietnamese charactistics: the persistence

of state-led development in East Asia, Journal of Contemporary Asia 42 (4), 539-559.

CARNEY, M. and ANDRIESSE, E. (forthcoming) ‘Malaysia: Personal Capitalism’, in WITT, M.

and REDDING, G. (eds) The Oxford Handbook of Asian Business Systems. Oxford University Press,

Oxford.

CARNEY, M. and GEDAJLOVIC, E. (2001) Corporate governance and firm capabilities: A comparison

of managerial, alliance and personal capitalisms, Asia Pacific Journal of Management, 18: 335–354.

CARNEY M., GEDAJLOVIC, E. and YANG, X. (2009) Toward an institutional theory of Asian

enterprise. Asia Pacific Journal of Management 26 (3, Special issue on Varieties of Asian Capitalism),

361-380.

COHEN, P. (2009) The post-opium scenario in northern Laos: Alternative and Chinese models of

development, International Journal of Drug Policy 20 (5), 424–430.

CROUCH, C., SCHRÖDER, M. and VOULZKOW, H. (2009) Regional and sectoral varieties of

capitalism, Economy and Society 38 (4), 654-678.

DIBBEN, P. and WILLIAMS, C. (2012) Varieties of capitalism and employment relations: Informally

dominated market economies, Industrial Relations 51 (S1), 563-582.

DIE (2009) Laos on its way to WTO membership: Challenges and opportunities for developing high-

value agricultural exports, studies No.51. Deutsches Institut für Entwicklungspolitik, Bonn.

DORWARD, A., KYDD, J., MORRISON, J. and C. POULTON (2005) Institutions, markets and

economic co-ordination: Linking development policy to theory and praxis, Development and Change

36 (1), 1-25.

EVANS, P. (1995) Embedded Autonomy: States and Industrial Transformation, Princeton University

Press, Princeton.

FORBES (2013) Thailand’s 40 richest. http://www.forbes.com/thailand-billionaires/list/

GAINSBOROUGH, M. (2010) Vietnam, Rethinking the State. Zed Books, London and New York;

Silkworm Books, Chiang Mai

20

GEREFFI, G. (2013) Global value chains in a post-Washington Consensus world, Review of

International Political Economy http://dx.doi.org/10.1080/09692290.2012.756414

GOMEZ, E. (2009) The rise and fall of capital: Corporate Malaysia in historical perspective, Journal of

Contemporary Asia 39 (3), 345-381.

HALL, P. and THELEN, K. (2009) Institutional change in varieties of capitalism, Socio-Economic

Review 7, 7–34.

HARRIS-WHITE, B. (2010) Work and wellbeing in informal economies; The regulative roles of

institutions of identity and the state, World Development 38 (2), 170-183.

IMF (2013) Regional economic outlook Asia and the Pacific.

http://www.imf.org/external/pubs/ft/reo/2013/apd/eng/areo0413.pdf

IQBAL, J. (2012) Dynastic politics and economic distortions, The Lahore Times October 31.

http://www.lhrtimes.com/2012/10/31/dynastic-politics-and-economic-distortions/

IVARSSON (2008) Creating Laos: The Making of a Lao Space between Indo China and Siam, 1860–

1945. Nias Press, Copenhagen.

JAYASURIYA, K. (2003) Embedded mercantilism and open regionalism: The crisis of a regional

political project, Third World Quarterly 24 (2), 339-355.

KANBUR, R. and RAUNIYAR, G. (2010) Conceptualizing inclusive development: with applications to

rural infrastructure and development assistance, Journal of the Asia Pacific Economy 15 (4), 437-454.

KERBO, H. (2011) The Persistence of Cambodian Poverty: From Killing Fields to Today. McFarland,

Jefferson.

LEE, K. and MATHEWS, J. (2010) From Washington Consensus to BeST Consensus for world

development, Asian Pacific Economic Literature 24 (1), 86-103.

LANGE, E. (2010) Elites in local development in the Philippines, Development and Change 41 (1), 53-

76.

MARTÍNEZ, J., MOLYNEUX, M. and SÁNCHEZ-ANCOCHEA, D. (2009) Latin American capitalism:

economic and social policy in transition, Economy and Society 38 (1), 1-16.

21

MARTÍNEZ FRANZONI, J. (2008) Welfare regimes in Latin America: Capturing constellations of

markets, families, and policies, Latin American Politics and Society 50 (2), 67-100.

MENDOZA, R., BEJA JR., E., VENIDA, V. and YAP, D. (2012) Inequality in democracy: Insights from

an empirical analysis of political dynasties in the 15th Philippine Congress, Philippine Political Science

Journal 33 (2), 132-145.

NATTRASS, N. (2013) A South African variety of capitalism?, New Political Economy

http://dx.doi.org/10.1080/13563467.2013.768610

OCHIENG, C. (2008) Comparative capitalism and sustainable development: stakeholder capitalism

and co-management in the Kenyan fisheries sub sector, Natural Resources Forum 32, 64-76.

ODI (2010) Millennium development goals report card: Learning from progress. Overseas

Development Institute, London. http://www.odi.org.uk/sites/odi.org.uk/files/odi-

assets/publications-opinion-files/6014.pdf

OHNO, K. (2009) Avoiding the middle-income trap: reformulating industrial policy formulation in

Vietnam, ASEAN Economic Bulletin 26 (1), 25-43.

PARK, S. and LUO, Y. (2001) Guanxi and organisational dynamics: organisational networking in

Chinese firms, Strategic Management Journal 22, 445-477.

PASUK PHONGPAICHIT and BAKER, C. (2004) Thaksin: The Business of Politics in Thailand.

Silkworm Books, Chiang Mai.

PECK, J. and THEODORE, N. (2007) Variegated capitalism, Progress in Human Geography 31 (6),

731-772.

PERRONS, D. (2011) Regional Disparities and Inequalities: Towards a Capabilities Perspective? In

PIKE, A., RODRÍGUEZ-POSE, A. and TOMANEY, J. (Eds) Handbook of Local and Regional

Development, pp. 59-73. Routledge, Abingdon.

PINKAEW LAUNGARAMSRI (2012) Frontier capitalism and the expansion of rubber plantations in

southern Laos, Journal of Southeast Asian Studies 43 (3), 463-477.

POULTON, C., KYDD, J. and DORWARD, A. (2006) Overcoming market constraints on pro-poor

agricultural growth in Sub-Saharan Africa, Development Policy Review 24 (3), 243-277.

22

RAMO, J. (2004) The Beijing Consensus. The Foreign Policy Centre, London.

RASIAH, R. (2009) Can garment exports from Cambodia, Laos and Burma be sustained?, Journal of

Contemporary Asia, 39(4), 619–637.

REHBEIN, B. (2007) Globalization, Culture and Society in Laos. Routledge, Routledge.

RIGG, J. (2009) A particular place? Laos and its incorporation into the development mainstream,

Environment and Planning A (41 (3), 703-721.

RODRÍGUEZ-POSE, A. (2013) Do institutions matter for regional development?, Regional Studies,

DOI:10.1080/00343404.2012.748978

ROMYEN KOSAIKANONT (2010) Bitter sweet: The international political economy of the

transbordering investment under the Greater Mekong Sub-region Project, paper presented at RSCD-

CHATSEA Conference on revisiting agrarian transformations in Southeast Asia, Chiang Mai, 13–15

May.

SCHMIDT, V. (2003) French capitalism transformed, yet still a third variety of capitalism, Economy

and Society 32 (4), 526-554.

SCHNEIDER, B. and SOSKICE, D. (2009) Inequality in developed countries and Latin America:

coordinated, liberal and hierarchical systems, Economy and Society 38 (1), 17-52.

SHRESTA, O. (2010) Laos: Lao People’s Democratic Republic in 2009: Economic performance,

prospects, and challenges, in SINGH, D. (ed.), Southeast Asian Affairs 2010, pp. 145-152. ISEAS,

Singapore.

SIKOR, T. (2012) Tree plantations, politics of possession and the absence of land grabs in Vietnam,

The Journal of Peasant Studies 39 (3-4), 1077-1101.

STIGLITZ, J. (2013), The Price of Inequality. Penguin Books, London.

STORZ, C., AMABLE, B., CASPER, S. and LECHAVALIER, S. (2013), Bringing Asia into the

comparative capitalism perspective. Socio-Economic Review 11 (2), 217-232.

STUART-FOX, M. (1997) A History of Laos. Cambridge University Press, Cambridge.

STUART-FOX, M. (2006) The political culture of corruption in the Lao PDR, Asian Studies

23

Review 30, 59–75.

THE ECONOMIST (2012a) State capitalism: the visible hand (special report). The Economist,

January 21st.

THE ECONOMIST (2012b) The world economy: for richer, for poorer (special report). The Economist,

October 13th

TIPTON, F. (2009) Southeast Asian capitalism: history, institutions, states and firms, Asia Pacific

Journal of Management 26 (3, special issue on Varieties of Asian Capitalism), 401-434.

TOMANEY, J., PIKE, A. and RODRÍGUEZ-POSE, A. (2011) Local and Regional Development:

Reflections and Futures. In PIKE, A., RODRÍGUEZ-POSE, A. and TOMANEY, J. (Eds) Handbook of

Local and Regional Development, pp. 618-630. Routledge, Abingdon.

TUROK, I (2011) Inclusive Growth: Meaningful goal or mirage? In PIKE, A., RODRÍGUEZ-POSE, A.

and TOMANEY, J. (Eds) Handbook of Local and Regional Development, pp. 74-86. Routledge,

Abingdon.

UNDP (2013) Human Development Report 2013. The Rise of the South: Human Progress in a Diverse

World. United Nations Development Programme, New York

UNDP (2006) International Trade and Human Development: Lao PDR 2006. United Nations

Development Programme, Vientiane

VAN HELVOIRT, B. (2009) Regions, institutions and development in a global economy: Divergent

regional business systems in the Philippines. Utrecht University (Ph.d thesis), Utrecht, The

Netherlands, http://igitur-archive.library.uu.nl/dissertations/2009-1013-200109/UUindex.html

WHITLEY, R. (1999) Divergent Capitalisms: The Social Structuring and Change of Business Systems.

Oxford University Press, New York.

WILLIAMS, C., KEDIR, A., FETHI, M. and NADIN, S. (2012) Evaluating ‘varieties of capitalism’ by

the extent and nature of the informal economy: the case of South-Eastern Europe, South-Eastern

Europe Journal of Economics 2, 113-130.

WITT, M. and REDDING, G. (2013) Asian business systems: institutional comparison, clusters and

implications for varieties of capitalism and business systems theory, Socio-Economic Review 11 (2),

265-300.

24

WITT, M. and REDDING, G. (Eds) (forthcoming) The Oxford Handbook of Asian Business Systems.

Oxford University Press, Oxford

WORLD BANK (1993) The East Asian Miracle: Economic Growth and Public Policy. Oxford

University Press, Oxford.

WORLD BANK (2013) Doing business 2013: Smarter regulations for small and medium-size

enterprises. World Bank, Washington DC.

YANG, C. (2007) Divergent practices of capitalisms in China: Hong Kong and Taiwan-invested

electronics clusters in Dongguan, Economic Geography 83, 395–420.

YEUNG, H. (1999) The internationalization of ethnic Chinese business firms from Southeast Asia:

Strategies, processes and competitive advantage, International Journal of Urban and Regional

Research 23(1), 88–102.

YEUNG, H. (2006) Change and continuity in Southeast Asian ethnic Chinese business, Asia Pacific

Journal of Management 23, 229-254.

YEUNG, H. (2007) Editorial: Remaking economic geography: Insights from East Asia, Economic

Geography 83, 339–48.

ZHANG, X. and WHITLEY, R. (2013) Changing macro-structural varieties of East Asian capitalism,

Socio-Economic Review 11 (2), 301-336.

Endnotes

1 The relationship between income and inequality is now sometimes considered to follow a N or U trajectory rather than an

inverted-U trajectory (PERRONS, 2011: 60; THE ECONOMIST 2012b). In general, there is now an increasing recognition that

social and spatial inequalities should be dealt with, even during periods of economic growth (TOMANEY et al., 2011: 624-628).

Moreover, since the collapse of the Lehman Brothers in 2008, inequality has received more political attention in the developed

world. Politicians have the felt need to respond to the grievances of middle classes in the USA and Europe who are now dealing

with the consequences of recession (STIGLITZ, 2013: ix-34).

2 In an insightful study on the dynastic politics and the composition of the 15th Congress in the Philippines, MENDOZA et al.

(2012) wrote that “about 70% of the 15th Philippine Congress is dynastic. On average, political dynasties are spread across the

different age and gender groups of legislators. So there appears to be little, if any, bias against the young or against women. But

political dynasties tend to dominate the major political parties and, on average, are located in areas with relatively higher

poverty levels and inequalities, and relatively lower average incomes.” They propose more research to reveal the causal

direction and links between dynastic politics and poverty, but their analysis is consistent with BALISACAN (2003) who

demonstrated that one of the significant variables explaining provincial poverty is local dynasties. They are not conducive to

regional economic growth and restrict the access of the poor to basic services.

3 The notable exception in Southeast Asia is Singapore. Together with the other Asian Tigers Singapore has clearly been able to

‘break out’ from the middle income status

25

4 The research project name was Differential regional development South East Asia, led by Dr. Van Westen and funded by the

Urban and Regional research centre Utrecht (URU), Utrecht University, The Netherlands. This project was part of a wider URU

research programme entitled Regional development in a global context. Empirical fieldwork from 2004 to 2007 generated a

wealth of regional knowledge on regional VoCs and value chains. A total of 194 firms, mostly SMEs, were surveyed and personal

interviews were conducted in order to unravel the role of the local state, in particular political economic interaction and

potential dependency on the national state. Thus besides taking into account geo-institutional differentiation a major strength

of this project was its focus on SMEs as opposed to large business groups in most of the literature. Another feature was the role

of ethnicity, notably the effect of ethnic Chinese entrepreneurship on value chains and regional VoCs. See ANDRIESSE and

VAN WESTEN (2009) and VAN HELVOIRT (2009) for more detailed information

5 The Bumiputera sector refers to economic activities of the Malay majority as opposed to the ethnic Indians and ethnic Chinese

who are generally better off and control a disproportionate share of economic assets

6 A limitation of ANDRIESSE et al. (2011) comparative analysis is that the informal sector was not covered in the empirical

analyses. Most of the 194 SMEs are formally registered. More research is needed to capture institutional diversity and geo-

institutional differentiation within this dynamic sector. DIBBEN’S and WILLIAMS’S (2012) study on Mozambique and

WILLIAMS and et al. (2012) on Bulgaria, Cyprus, Greece, Romania and Slovenia form good starting points in this context

7 HALL and THELEN (2009) pointed out that defection forms a major element in institutional change. This outcome also

resembles Crouch et al. (2009) insights of sector and regional specific actors who circumvent national institutional frameworks.