11.3 The Insular Region (Islands of Southeast Asia)

Malaysia

Malaysia is a country made up of various British colonies that came together as a federation and then became an independent country. Britain started establishing colonies in the region in the late 1700s. The two main areas include the western colonies on the Malay Peninsula and the eastern colonies on the island of Borneo. The western settlements were part of the Malay Peninsula, which included the colonies of Penang and Singapore. Eventually, the British took control of the eastern colonies of Brunei, Sarawak, and Sabah on the island of Borneo. In 1957, the western colonies on the mainland peninsula broke from their British colonizers and became an independent country called the Federation of Malaya. In 1963, the British Borneo colonies of Sarawak and Sabah joined the Federation of Malaya to form the current country, which is called Malaysia. In 1965, Singapore broke off from Malaysia and became an independent country. Brunei, which was still a British protectorate, became independent in 1984.

Malaysia has two main land areas separated by the South China Sea. The regions of Sarawak and Sabah, on the island of Borneo, are called East Malaysia; the mainland on the Malay Peninsula is called West Malaysia. These regions have similar physical landscapes, which include coastal plains with nearby densely forested foothills and mountains. The highest mountains, rising 13,436 feet, are in East Malaysia on the island of Borneo. Located near the equator, Malaysia has a tropical Type A climate with monsoons regularly occurring from October to February.

Figure 11.11 Provinces in East and West Malaysia

Diversity of Culture and Ethnicity in Malaysia

Malaysia’s culture is diverse in that several major religions are practiced within its borders. Islam is considered the official religion and is supported by at least 60 percent of the population. About 20 percent of the people are Buddhists, 10 percent Christians, and 6 percent Hindu. The remaining percentages of the population include traditional Chinese religions and local tribal beliefs. In this Islamic country, there are concerns that Muslims get preferential treatment by government programs and policies. There are even special judicial legal courts for Muslims only to work out issues regarding marriage, custody, inheritance, or other conflicting Islamic issues regarding faith and obligation. This court only hears Islamic issues and no other legal matters. There have been movements by minority extremist groups that would like to see Malaysia shift toward a true Islamic state, complete with the Sharia Criminal Code as the law of the land. The movement, however, has been cracked down on by the government. Since the 9/11 incident in the United States, there has been more concern about extremist religious views.

People of Malay ethnic background make up more than 50 percent of the population. People of Chinese descent are the second-largest group at about 24 percent. An additional 11 percent of the population is made up of indigenous groups. During British colonialism, a number of people from South Asia were brought to Malaysia. For example, Tamils were brought from India to work the plantations. Their Hindu beliefs were infused into the culture, and some Tamils also converted to Christianity. Sikhs were brought from South Asia to help Britain run the country as police, soldiers, or security officers. The Sikhs who came brought their religion with them, which added to the multireligious dynamics of the country.

Malaysia’s diverse ethnic and cultural mix often results in strong centrifugal forces that push and pull on the societal dynamics of the country. China has been active in the business community and has established strong economic ties with regional counties that have Chinese populations. The single largest minority group in the province of Sarawak on Borneo is Chinese. As a minority group, Chinese citizens of Malaysia have felt discrimination. Since the official language is Malay and the official religion is Islam, there have been concerns about discrimination against all minority groups. Working through the cultural and ethnic diversity has been a major challenge for the country. Each minority religious or ethnic group desires to celebrate its own special holidays. For example, there is the usual New Year’s celebration on January 1, and then there is the traditional fifteen-day Chinese New Year celebration celebrated at a different time of the year. Sikhs celebrate the Sikh New Year. Buddhists celebrate a holiday in honor of the life and enlightenment of Buddha. Christians celebrate Christmas and Easter. Many other holidays of significance are respected or honored by various minority groups.

Economic Development in Malaysia

Malaysia has rapidly advanced its economy in recent decades and is modernizing its infrastructure—roads, bridges, highways, and urban facilities. In the capital city, Kuala Lumpur, Malaysia built a modern central business district with twin high-rise office buildings claimed to be the world’s tallest at the time of construction. Before the global economic downturn that started in 2007, Malaysia had developed a fast-growing economy and was industrializing at a rapid rate. Malaysia has taken advantage of its location on a major shipping lane and has shifted to manufacturing as an important sector of its economy. The country has been a leader in the export of natural resources such as tin, rubber, and palm oil and has developed its agricultural and extractive sectors to gain income. The 1980s and 1990s were prosperous times for the country, as it matured its manufacturing base from light textiles into electronics and heavy industries.

One aspect of the country that is looming on the horizon and may cause problems is the high population growth rate. In 2010, Malaysia’s population was estimated at more than twenty-five million, with a doubling time of about forty years. Though the country is 70 percent urban, family size (fertility rate) is still at about 3.0, which indicates an increasing population growth pattern. One-third of the population is under the age of fifteen. Malaysia is one case where the general principle that if a country urbanizes and industrializes the family size will go down has not taken place fast enough. The fertility rate has dropped from 5.0 to 3.0, but it needs to get below a rate of about 2.0 if the country is going to successfully stabilize its population growth. Unless the country addresses this population growth, the demand for resources might outstrip economic progress in the future.

Singapore

Under British colonial rule, the island of Singapore was included in the Malaysian federation. It broke away and became independent in 1965. It is a small island measuring about thirty miles long at its widest point. Singapore is about two hundred forty square miles in area. Singapore’s most valuable resource is its relative location. It is similar to Hong Kong in its development. With a good port, Singapore is a hub for ships sailing between Europe and China. It serves Southeast Asia as an entrepôt, or break-of-bulk point, where goods are offloaded from large ships and transported to smaller vessels for distribution to the Southeast Asian community.

Singapore has made good strategic utilization of its geographic location by serving as a distribution center for goods and materials processed in the region. Crude oil from Indonesia is unloaded and refined here. Raw materials are shipped in, manufactured into finished products, and then shipped out to global markets. Since Singapore is small, it has had to concentrate on manufacturing goods that provide for optimal profits. As an economic tiger, Singapore has transitioned through the same stages as Taiwan, South Korea, and Hong Kong to become an economic power in Southeast Asia.

To keep labor costs low, initial manufactured products were textiles, clothing, and cheap goods. As incomes and labor skills rose, so did the complexity of the manufactured goods. The government of Singapore has targeted certain types of products to ensure a high profit margin and a global market need. This has included automation equipment, biotechnology, and high-end information technologies. Singapore doesn’t manufacture automobiles, but it does manufacture automation robotic components that most modern auto manufactures will purchase and use. Medical technology is expensive and is in high demand the world over. Singapore is targeting this market. The information age has spawned new technologies that are evolving rapidly, and once again, Singapore has been at the center of this industry. It has been a center for the production of computer disc drives for a multitude of global corporations.

Singapore Island is a swampy place with no natural resources. All production components, food goods, construction materials, and energy must be imported. Importing everything has raised the cost of living. To compete with the other Asian economic tigers in the global marketplace, Singapore has implemented severe control measures on its operations. There are harsh penalties for criminal activities and even misdemeanor offenses. Singapore is a safe place to live because of its strict state rules. It has an authoritarian government, which strives to create an attractive place for international corporations to operate. One of the objectives is to eliminate corruption and establish a business-friendly environment.

The government of Singapore has entered into trade agreements with two of its neighbors to provide raw materials and cheap labor. A trade triangle has been established between Singapore, Malaysia, and Indonesia. Malaysia and Indonesia provide Singapore with raw materials and cheap labor; Singapore provides its neighbors with technical know-how and financial support. Everyone benefits. Singapore is an excellent example of the upper end of the economic spectrum in Southeast Asia. Countries like Laos or Vietnam would be at the opposite end, since they have a largely rural population based on agriculture that is just beginning to shift to their cities with industrialization. Singapore is already 100 percent urban with high incomes based on high-tech manufacturing and processing of raw materials. Singapore is an economic hub for Southeast Asia, complete with global airline connections, and is located on a major shipping lane. Singapore’s world-class port is one of the busiest in Asia. The rest of Southeast Asia is somewhere in between these two ends of the spectrum as far as economic development is concerned.

Indonesia

The country of Indonesia is the world’s largest archipelago state, consisting of more than 17,500 islands, about one-third of which are inhabited. Indonesia is the sixteenth-largest country in the world by area. The combined area of all the islands and regions of Indonesia would equal about the size of the country of Mexico. The country shares land borders with the Borneo side of Malaysia, the western half of the island of Timor, and the western portion of the island of New Guinea, which is shared with the country of Papua New Guinea.

The country’s location on both sides of the equator provides a tropical Type A climate, complete with a monsoon season. Average rainfall can vary from seventy to two hundred forty inches per year. The highest mountain is in West Papua and rises to about 16,024 feet. Indonesia is located on the Pacific Rim, where tectonic plate activity produces earthquakes and volcanic activity. The country is home to over one hundred fifty active volcanoes, including two of the most famous ones, Krakatoa and Tambora. Both had devastating eruptions in the past two centuries. One of the most violent volcanic explosions ever recorded in human history came from Krakatoa, which is located between the islands of Java and Sumatra. A series of eruptions in 1883 were heard as far away as the coast of Africa. Shockwaves reverberated around the globe seven times. Ash erupted into the atmosphere to a height of about fifty miles. The official death toll was 36,417, but estimates from local sources place it as high as 120,000. Global temperatures fell by about 2°F, and weather patterns were disrupted for the next five years. Krakatoa remains active. Over the past few decades, the volcanic peak has been growing at an average rate of about five inches per week.

The tropical climate and the archipelago nature of the country provide for enormous biodiversity within the environment. Second only to Brazil in its biodiversity, Indonesia is host to an enormous number of unique plants and animals. The habitats of many of these creatures are being encroached upon by human activity. The remote islands have more of a chance of escaping habitat devastation and remaining intact, but agricultural and extractive economic activities have converted much of the natural environment into a cultural landscape that is not conducive to environmental sustainability.

Animals such as orangutans are losing their natural forests and may become extinct if current trends continue. The timber industry has brought about deforestation. Slash-and-burn agriculture has destroyed forest habitat, and human development patterns such as roads and urbanization have altered the ecosystems of the region. According to recent reports, Indonesia is one of the largest emitters of carbon dioxide in the world because of the high number of forest fires set each year. In 2009, the United States brokered a deal with Indonesia to forgive thirty million dollars of its debt if the country would work to protect forests on the island of Sumatra, which is home to endangered indigenous animals such as tigers, elephants, rhinos, and orangutans.

In 2010, the estimated population of Indonesia was about 245 million. Indonesia has the fourth-largest population of any country in the world after the United States, India, and China. Indonesia also has more Muslims than any other country in the world. More than half the population of Indonesia lives on Java, the island where Jakarta, the capital city, is located. Java is the most populous island in the world and has a population density of more than 2,400 people per square mile. Java is the size in area of the US state of Louisiana. Java has 135 million people, whereas Louisiana has 4.5 million people. Jakarta is a world-class city that is larger than New York City and encompasses a large metropolitan area, complete with many manufacturing centers, business complexes, and housing districts.

The many islands of Indonesia are home to a large number of diverse ethnic and religious groups that vary as widely as any Southeast Asian nation. There may be as many as three hundred different and distinct ethnic groups in Indonesia. Many of the ethnic groups are further divided by islands or distance. More than two hundred fifty separate languages and hundreds of additional dialects are spoken. There are an estimated seven hundred fifty languages spoken on the island of New Guinea itself, with hundreds of them spoken on the Indonesian side of the island in a population of less than three million. The most prevalent language group in the country as a whole is Javanese, which is spoken by about 42 percent of the population. Javanese includes the official language of Indonesian, which is taught in schools and used in business and politics as the lingua franca of the country. Many people speak more than one language or even a number of languages to communicate throughout the country.

Islam was diffused to Indonesia in the thirteenth century and by the sixteenth century had become the dominant religion. The Indonesian constitution allows for religious freedom, although more than 85 percent of the population follows Islam. There are at least four other religions that are officially recognized: Christianity (both Protestantism and Roman Catholicism), Hinduism, Buddhism, and Confucianism. Since Islam is followed by such a large percentage of the population, the other religions do not carry the same influence. Regional and ethnic differences play a role in the varied religious dynamics. The island of Bali, for example, is home to a majority Hindu population. Most Buddhists are ethnically Chinese, and they only make up a small percentage of the population. Christians and Muslims have had conflicts on the island of Sulawesi. It is common to find the practice of these religions less than orthodox in the more rural communities of the country.

In spite of the diversity within the population, the country of Indonesia has established a substantial degree of nationalism as a centripetal force that holds the country together. There is a relatively high degree of stability despite the surface tensions or ethnic and religious conflicts that may erupt. An example of the social tensions is demonstrated in the case of the Chinese citizens of Indonesia, who only make up about 1 percent of the population but impart a substantial influence over the privately owned business sector of the economy. This seemingly inequitable relationship has resulted in considerable resentment by other portions of the population, often with violent results. The many islands have become natural divisions between cultural groups.

Some of the islands—or portions of them—have attempted to break away in a devolutionary manner and become independent countries. Just as East Timor became independent, the most western province of Aceh on the island of Sumatra had a similar movement toward independence. West Papua on the island of New Guinea has also had an independence movement. The Aceh situation was negotiated out, while the West Papua movement has been suppressed by military and political force. Many of the islands possess large amounts of natural resources, so the country of Indonesia does not want to lose these national assets that could prove valuable in gaining wealth for the future. It is not easy to create national unity with such a diverse population scattered throughout such a large archipelago.

Agriculture has been the historic base of the Indonesian economy. In 2010, it accounted for about 13 percent of the nation’s gross domestic product (GDP). Agriculture is the largest employment sector—approximately 42 percent of the workforce. This equates to more than half of the population being rural. Many of the agricultural methods in rural areas are traditional; for example, farmers use water buffalo or oxen for tilling the land. The tropical climate and adequate rainfall provide for multiple crops of rice per year in many areas. Spices, coffee, tea, palm oil, and rubber are also produced in substantial quantities.

Industries are an important building block for how a country gains wealth. In the case of Indonesia, industry accounts for about 40 percent of its GDP and employs about 20 percent of its workforce. Major industries include oil, natural gas, mining, and textiles or clothing manufacturing. Indonesia’s economy has been affected by global markets, but in 2005 it still managed to run a trade surplus. Japan has been its main trading partner, and China has also been a major supplier of imported goods. Indonesia has been taking advantage of the trade triangle it has with its neighbors, Singapore and Malaysia, to increase its import and export trade activities.

The political background of Indonesia is similar in dynamics to many of its neighbors. Colonized by Europeans, Indonesia was previously called the Dutch East Indies, which explains why the islands of the Caribbean were called the West Indies. The Dutch colonized Indonesia in the early seventeenth century but had to relinquish possession of the archipelago to the Japanese in World War II. In 1945, after the Japanese surrendered, Indonesia declared its independence, which was finally granted in 1949 after much negotiation. The country’s government quickly moved toward authoritarian rule.

During a fifty-year time period, there were only two authoritarian leaders: Sukarno (1949–68) and Suharto (1968–99). Near the end of Sukarno’s rule, there were violent conflicts between Sukarno’s military and the Communist Party of Indonesia, which resulted in more than five hundred thousand deaths. Suharto’s regime was credited for substantial economic growth but was also accused of serious corruption and the repression of opposition political voices. Since 1999, Indonesia has conducted free parliamentary elections and is now considered the third-largest democracy, after India and the United States.

Brunei

There are noticeable similarities between the oil-rich sheikdoms of the Persian Gulf region in the Middle East and the small sultanate of Brunei on the northern coast of Borneo. Bordered by Sarawak, the sultanate is actually two small separate regions along the coast of the South China Sea. The former British protectorate of Brunei is today a major oil and natural gas exporter. It provides a high standard of living for its small population. The compact country is about the size of the US state of Delaware. The country’s population for 2009 was listed at about 388,000. Brunei is attracting immigrants seeking opportunities and advantages. It is called a sultanate because the kingdom has been ruled by sultans (rulers) from the same family for the past six centuries.

The main ethnic groups in Brunei are Malay, at 66 percent, and Chinese, at 11 percent. Brunei is an Islamic State with Islam as its state religion. About two-thirds of the population is Muslim. Buddhism is the second-most popular religion. The ruling sultan is not only head of state but also prime minister of the government and leader of the Islamic faith. Similar to states in the Middle East where Islam is the official religion, alcohol is banned, and the public consumption or sale of it is illegal. Prohibition against alcohol has eliminated the establishments of pubs and nightclubs. Non-Muslims and visitors to the country can legally hold small quantities of alcohol for personal consumption.

The people of Brunei have a high standard of living, with the availability of modern amenities. The government has been concerned about integrating the country into the global economy. Natural gas and crude oil bring in about 90 percent of exports and just over half of the GDP. Education and medical care is free. Food, housing, and rice farming are subsidized by the state. The state has been working to expand the economy beyond natural gas and oil. Agricultural production has been increased, and unemployment has been a major focus. The wealthy emirate has also been developing its tourism sector and the financial and banking industry.

Brunei may have to take a lesson from the United Arab Emirates (UAE)—that is, to work to develop a free trade zone to attract international trade—if the country wants to continue to gain wealth once the oil and natural gas run out. It has an excellent location on the South China Sea but would have to compete with the established economic tigers of Singapore and Hong Kong as well as the other rising urban centers in the region, such as Kuala Lumpur or Bangkok.

The Philippines

Located on the eastern side of the Southeast Asian community is the archipelago state of the Philippines. With more than 7,100 islands, many volcanic peaks, and an expanse of coastal waterways, the Philippines is home to more than ninety million people in a combined land area about the size of Arizona. The Philippines was a Spanish colony. The name is taken from Spain’s sixteenth-century King Philip II. Spain relinquished its claim on the Philippines to the United States in 1898 after its defeat in the Spanish-American War. The people of the Philippines wanted independence at that time and fought a bitter war with the United States in which more than a million people died. The United States allowed the Philippines to become a commonwealth in 1935. The independence movement was placed on hold while the Japanese invaded and controlled the Philippines during World War II. After the war was over, the United States granted the Philippines its independence in 1946.

The Global Economy and Outsourcing

The modest level of political stability has caused the Philippines to become an attractive destination for global corporations who seek to outsource their information and technology service jobs. Any work that can be conducted over the Internet or telephone can be outsourced to anywhere in the world with high-speed communication links. Countries that are attractive to Business Process Outsourcing (BPO) are countries where the English language is prominent, where employment costs are low, and where there is an adequate labor base of skilled or educated workers who can be trained in the services required. All three of these requirements are met by the labor force of the Philippines. The historical influence of the United States has provided a base of English language speakers. The country also has an adequate population base with the education or professional skills necessary to meet these demands. Corporate colonialism has the Philippines in its business focus and is finding a good source of available labor.

In 2005, information technology and BPO amounted to about thirty-four billion dollars globally. Since 2005, that amount has increased dramatically, doubling and tripling in some countries by 2009. India has been a major destination for BPO, but the Philippines is gaining ground and increasing its infrastructure in an attempt to gain a larger share of the market. Other countries around the world are a part of this outsourcing market. This type of business activity shifts jobs from one country to another. A country might lose these types of jobs, but its corporations can remain competitive in the global marketplace if they can cut costs of operation by outsourcing their service work to a low-cost country.

Figure 11.21 Street Scene in Manila

The National Capital Region (NCR), which includes the city of Manila, has more than 13 million people, which makes it one of the most densely populated metropolitan regions in the world.

East Timor (Timor-Leste)

Timor is an island of southern Indonesia not far from Australia. The island is divided by its colonial history. The eastern half was a Portuguese colony beginning in the sixteenth century. Portuguese colonizers introduced Christianity in the form of Roman Catholicism. The western half was associated with Indonesia, which was a Dutch colony during the colonial era. The Japanese occupied the Dutch colony during World War II but had to give it up after they surrendered in 1945. Indonesia received its independence in 1949 and laid claim to the whole island of Timor. East Timor made a declaration of independence in 1975 but was occupied by Indonesia. A bitter civil war erupted. A year later, Indonesia declared East Timor its twenty-seventh province. The civil war resulted in the deaths of as many as two hundred fifty thousand people. It wasn’t until 1999 that Indonesia finally ceded its political control over East Timor. The Australian military has been instrumental in securing East Timor for independence and has been serving as a peacekeeping force for internal security for the past decade. The United Nations (UN) recognized East Timor as a sovereign independent country in 2002. The official name of the country is listed as Timor-Leste.

Timor-Leste has a population of about 1.2 million. About 98 percent of the population is Roman Catholic. The only other predominantly Catholic country in Asia is the Philippines. About 90 percent of the population still works in agriculture. The country has had a difficult time establishing a stable government and reducing conflict. Almost all its infrastructure was damaged in the civil war, and rebuilding has been slow. Poor and impoverished due to the civil war over independence, the country does have some opportunities derived from the large natural gas field in the vicinity. East Timor has been working to gain control of its maritime boundaries to benefit from the offshore natural resources.