The Impact of Cultural and Regional Diversity on East Asia's Economic Development

9 MINS READOct 4, 2002 | 02:12 GMT

The diversity of Asia's cultures and the strong sense of nationalism in the post-colonial period after World War II have created a region where racial identity, national pride and labor migration collide. The dynamics of labor movements and the existence of minority ethnic populations within East Asian countries date back centuries, but without the pressures of colonial rulers — whether European or Asian — the need to balance ethnic diversity with economic and social stability continues to create rifts among and inside Asian states.


When looking at the intersection of diversity and economics in Asia, one of the most frequently encountered themes is the recurring presence of a Chinese minority controlling a disproportionate amount of the wealth. In Indonesia, Malaysia and the Philippines, the Chinese diaspora frequently has become the target of disgruntled social forces. These Chinese minorities' contributions to their adopted economies are a mixed blessing, creating a dilemma for their host and native governments.

While the ethnic Chinese are perhaps the most noticeable such group due to their accumulation of wealth, they are not alone in seeking their fortunes away from home. Ethnic Indians represent a substantial portion of the mix in Malaysia and Singapore, and they are in the middle of the political turmoil that periodically rocks the Pacific island nation of Fiji. Filipinos too are frequent migrant laborers, and Philippine workers overseas contribute a fair amount to their native economy through remittances. South Koreans have been moving into the Philippines and Vietnam, and Indonesians are ubiquitous workers — as well as a constant source of tension — in Malaysia.

Approximately 23 million to 24 million Chinese are working in East Asia and the Russian Far East, not counting Taiwan, Hong Kong or Macao. In Southeast Asia alone, where nearly 80 percent of overseas Chinese reside, ethnic Chinese make up 5 percent of the total population. They are concentrated most heavily in Indonesia, Thailand and Malaysia, with other large populations in Singapore and Myanmar. In Singapore, ethnic Chinese are the dominant race, but in the other examples they make up only a small fraction of the total population.

Despite their small numbers, ethnic Chinese usually control a disproportionate share of their host country's wealth. This has led to racism and, in several cases, violence against the Chinese, particularly during periods of economic and political turmoil. After the Vietnam War, hundreds of thousands of ethnic Chinese fled Vietnam, and during the transition from Indonesia's founding President Sukarno to President Suharto, the Chinese community found itself at the heart of a national campaign of violence directed against a "communist threat" — the excuse for ousting Sukarno in favor of the military-backed Suharto.

Yet the very economic clout of the ethnic Chinese communities presents a challenge to their host governments. On one hand, as in the case of Indonesia, the "foreigners" are an easy target, allowing the nation to rally behind a cause or join in a mutually reinforced fear that the foreign population will suck up all the national wealth. This fear is a powerful political tool. But it also triggers capital flight, something particularly troubling in times of economic and social crisis — the very times the domestic governments are most tempted to raise the so-called "China threat."

While the fear of Chinese businessmen draining the national economy may be motivated primarily by politics, there is some underlying truth to the perception, and it may only worsen in the future. Chinese living overseas, especially those in the Asia-Pacific region, contributed immensely to the remarkable growth of China's economy over the past decade. And while many ethnic Chinese communities in Southeast Asia have been there for centuries, a new wave of Chinese entrepreneurs are using their connections at home and abroad to make more money — much of which ends up reinvested in mainland China.

This is particularly troubling for East Asian nations still struggling with the fallout from the 1997 Asian economic crisis. China's economic reform and opening program, particularly over the past five years, has made it the premier destination for foreign direct investment in Asia, leaving Southeast Asian nations struggling for a piece of the pie. And because China has a seemingly inexhaustible source of cheap labor, the advantages of keeping an operation in Indonesia or the Philippines have nearly disappeared. China has become the Holy Grail for foreign investors star-struck by the 1.3 billion-person potential market and the government's continuing attempts to woo foreign companies.

With Chinese living overseas also joining in the gold rush, Southeast Asian nations risk losing out not only from the ever more intense competition with China but also from their own top entrepreneurs looking back to the mainland. And, as Beijing realizes the importance of tapping these overseas segments, it is growing increasingly interested in taking up the issues of their welfare — and discrimination against them — with other regional governments. While this is largely innocuous, Beijing also realizes the potential strategic importance of maintaining closer ties with its expatriates.

In the South Pacific, Chinese immigrants and Beijing's financial assistance combine to give China a potential future stronghold of support. While this currently is a political tool to keep Taiwan diplomatically isolated, China does perceive a strategic benefit to closer relations with the Pacific Islands. Since China has only limited naval capabilities, the Pacific islands provide important outposts for listening and, in the event of a war with the United States, China also could use these to disrupt U.S. transportation corridors across the Pacific.

But even though this is a far-off strategic consideration and not at the forefront of Chinese thinking, the ethnic Chinese populations in other places, like the Philippines and Indonesia, provide a strategic lever for Beijing to use while discussing other issues with Manila or Jakarta. And, as previously mentioned, these governments already are extremely sensitive to their ethnic Chinese populations, since they are a source of both economic capital and social tension.

As China continues to push ahead of Southeast Asia economically, the issue of overseas Chinese will take on heightened importance. Though much of the Chinese diaspora was born overseas, mainland China is emerging as an attractive place for investments, and the foreign-born Chinese are well situated to take advantage of cultural and family ties to shift into the Chinese markets. Beijing, too, will continue to strengthen ties with this previously untapped political and economic resource, giving the Chinese government greater leverage in its regional diplomacy. But with the economic troubles in Southeast Asia continuing, the social pressures against ethnic Chinese will only increase, since this group is viewed as being part of the mainland Chinese juggernaut that is stripping jobs and investments away from the rest of the region.

China is not alone in this. India also has a sizable diaspora in East Asia numbering nearly 5.5 million, with the vast majority located in Southeast Asia. In Southeast Asia, the ethnic Indians are strongest in Malaysia, Singapore and Myanmar, where they made up 7.3 percent, 9.7 percent and 5 percent of the respective populations in 2001. Like the Chinese diaspora, the Indian diaspora has existed in the region for centuries.

The composition of the Indian diaspora is varied, from temporary migrant laborers to professionals and even politicians. In Singapore and Malaysia, Indians take a strong role in the political scene but often are overshadowed by ethnic Chinese.

In Malaysia, national racial policies leave ethnic Indians near the bottom of the economic spectrum, though there are many prominent Indians in business and politics. In Myanmar, however, recent studies have shown that most of the prosperous Indians departed, leaving an impoverished diaspora behind.

In the Pacific island nation of Fiji, where ethnic Indians proved most successful, tensions with the native population have boiled over in the past few decades, leading to coups and ethnic violence.

Overall, overseas ethnic Indians have, like their Chinese counterparts, been slowly reestablishing links to their home country, recruiting labor and sending money back to India - as remittances, investments or philanthropy. Such ties are expected to strengthen in the future as New Delhi begins to pay more attention to its overseas population.

Two other major groups scattered throughout East Asia are Filipinos and Indonesians. For the most part, the diaspora from these countries go abroad due to economic hardships and a dearth of opportunities at home. In the Philippines, remittances from overseas foreign workers are expected to total a record $8 billion in 2002 — bolstering the country's currency reserves, aiding the banking system and spurring domestic consumption.

But the less stable and more migratory nature of the Indonesian and Philippine diaspora creates tensions within the region, particularly during times of regional economic downturns. Countries like Malaysia, which absorbs a fair number of Indonesian and Filipino workers, take aim at the immigrant populations whenever there are economic problems or even social concerns. The returning migrant workers then become a strain on their own home countries.

Managing diversity posed by immigrations is a serious issue outside of Asia. In Europe, it has led to the rise of right-wing parties like those in Austria and France that have enjoyed substantial success in spite of relative prosperity. The issue of illegal immigration is a perpetual issue in American politics as well. In some ways, Asia is managing its long-term and short-term migratory policies more successfully than other relatively advanced regions. In spite of serious ethnic violence in the past, such as Indonesian actions toward the Chinese in the 1970s, and in spite of economic stress, the level of tension has been contained. But the past is not necessarily an indicator of the future. The confluence of economic weakness and ethnic pressures is a volatile issue throughout the world. It is far from clear that it will be an explosive issue in Asia. Nevertheless, it is an issue to be watched. Celebrating Asia's diversity goes hand in hand with caution about diversity's potential effects.

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