Democracy and East Asian Financial Cooperation

ImageBy: Eko NM Saputro, Melbourne

The issue of democratisation is almost always brought into many aspects of life, including regional cooperation. A democratic arrangement is considered as the best structure to govern regional cooperation. In this regard, the European Union (EU) is mostly referred by many scholars as the most democratic regional arrangement since it has respected the principles of liberty, human rights and fundamental freedom, as well as the rule of law.

In contrary, many believe that Asia, particularly East Asia (EA), has worked in different way. The regional governance in EA was run by the deference of nationalism, power and culture. Therefore, the EA countries still hold sovereignty over regionalism, in the opposite of EU that has power to endorse its decision over national legal framework. In addition, the issues of human rights abuses, lack of free and fair elections, and deep involvement of military in ruling the Asian nations are several points that decelerate the spread and penetration of democratic principles into regional arrangement. As a result, EU needs less effort compared to EA to build and operate its regional institution based on democratic principles. Simply, many argue that EA should follow EU in democratising regional governance.

Several attempts to take the principles of procedural democracy into East Asian regional arrangement have been taken by ASEAN Plus Three countries. Interestingly, the attempts were conducted through financial cooperation, an area that most of Asian nations will stay focused despite the on-going political dispute among them. The introduction of voting mechanism along with consensus in the Chiang Mai Initiative Multilateralization (CMIM) widely surprised public since the mechanism potentially could surpass the sovereignty of the member countries. The provision of equal values of voting power may also push EA authoritarian-member countries to espouse democratic principles in some degrees. Furthermore, the CMIM surveillance process encourages the openness of such economic information that contributes to generate higher level of transparency and accountability. In addition, the involvement of the Asian Development Bank (ADB) as a contributor in Credit Guarantee and Investment Facility (CGIF) potentially helps to immerse the democratic values into decision-making in EA financial initiative.

In the midst of encouragement to adopt democratic principles, the current situation in Europe somewhat shows in different way with the pattern of democratic governance. The pressure of EU leaders to resolve the financial condition of Greece through referendum has been perceived as an attempt to limit its sovereignty and potentially scarify democracy. This challenge has threatened the freedom of Greek people and its elected authority that may impact more than economic wealth. In this case, there is a tendency that democratic principles were undermined to run economic package that has not shown better result yet. In broader arrangement, the G-20 has also been criticised as a forum that lacks of participation since the voices of developing countries were relatively marginalised. Most of G-20 outcomes are predominantly representing the interests of developed countries. Too much directions from G-20 developed countries have been challenged the pillars of democracy in this forum. 

East Asian regional financial governance has successfully tackled down the global financial crisis 2009. It has been also relatively strong enough to deal with the impact of recent Euro crisis. Considering the success of current EA financial arrangement and the pattern of democratic issues in EU, the proponent of Western democracy may need to consider carefully in further embedding democratic principles into EA financial cooperation. Current EA regional arrangement shows that the combination of Asian values with procedural democracy gain positive outcome toward regional policy coordination in financial cooperation.

Eko NM Saputro has been working at Fiscal Policy Office. Currently he is a PhD Candidate at the School of Humanities and Social Sciences, Deakin University, Melbourne



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