High rates of economic growth in Southeast Asia in recent decades have led to rising income levels within the region. Yet few Southeast Asian countries have been able to move beyond middle-income status to achieve high-income status in the World Bank’s country income classifications, reflecting the fact that economic growth rates in the region have slowed since the late 1990s.
Today, only Singapore and Brunei are classified as high-income countries. Other countries in the region are either lower-middle income countries (Cambodia, Lao PDR, Myanmar, Timor-Leste, the Philippines, Vietnam) or upper-middle income countries (Malaysia, Thailand, Indonesia).
Moreover, some middle-income Southeast Asian countries have remained stuck at their current levels for many years. The Philippines, for instance, has been a lower-middle income country since the late 1970s while Malaysia has been an upper-middle income country since 1992. Timor-Leste, Thailand, Lao PDR and Vietnam have all been at their current levels since the late 2000s.
This situation has led some economic analysts to question whether the region is succumbing to the so-called “middle-income trap.” According to the World Bank — which coined the term — the middle-income trap is a systematic growth slowdown due to an inability “to take on the new economic structures needed to sustain high-income levels.” These structures include sound infrastructure, strong institutions, low levels of corruption, and policy settings that encourage technology transfer. But, perhaps most importantly, they include strong education and Research and Development (R&D) ecosystems capable of driving innovation. Such ecosystems are currently weak in most Southeast Asian countries.
Unfortunately, the region will find it difficult to address this education and R&D deficit because the political preconditions for change are absent. Specifically, the region lacks what political scientists Richard Doner and Ben Ross Scheidner have referred to as powerful “upgrading coalitions” — that is, coalitions of political and social groups that have an interest in improved educational and R&D systems and can drive change in these systems.
Education and R&D Ecosystems
In recent decades, Southeast Asian countries have greatly improved access to education, including for the poor. However, this has not been accompanied by significant improvement in educational quality in much of the region.
One sign of this is the region’s poor performance in international standardized assessments of school-level student achievement such as PISA, PIRLS and TIMSS. Wealthy Singapore and Brunei have fared well in these assessments, as has Vietnam. But other participating middle-income countries — the Philippines, Indonesia, Cambodia, Thailand, and Malaysia — have generally clustered towards the bottom of these league tables.
The lack of education quality is also reflected in global university rankings. Singaporean universities — particularly the National University of Singapore and Nanyang Technological University — rate among the top universities in the world. But only eight Southeast Asian universities appear in the top 500 in the most recent Times Higher Education World University rankings. One of these is Universiti Brunei Darussalam while two are from Singapore and five are from Malaysia.
Finally, the region’s R&D systems lack dynamism. According to the Global Innovation Index (GII), the region as-a-whole performs poorly in all seven areas covered: institutions, human capital and research, infrastructure, market sophistication, business sophistication, creative outputs, and knowledge and technology outputs.
Unfortunately, there is no easy fix to these weaknesses, in no small part due to the politics involved.
The Politics of the Trap
The ascendance of predatory political, bureaucratic and corporate elites stymies reform. Their primary interests lie in the status quo — the extraction of rents from natural resources sectors, the exploitation of low-wage and low-skilled labor, and control over or privileged access to state facilities, budgets, appointments, contracts, and concessions.
Some of these elites have been involved in education sectors in their respective countries as owners of private education institutions, senior education administrators, and/or contractors to education departments and institutions. Yet, they have largely sought to use education systems to accumulate resources, distribute patronage, mobilize political support, and exercise political control rather than produce skilled workers, encourage critical and inquiring minds, and stimulate innovation.
They accordingly have little interest in providing the financial, human resource, incentive structure and administrative prerequisites for a high-quality education system and stronger learning outcomes. Nor have they had much interest in strong R&D ecosystems due to their focus on rent-seeking rather than innovation.
Technocratic elements in government and the international financial institutions have contested this orientation seeking a stronger focus on basic skills acquisition in the name of market efficiency. Progressive elements have done likewise, in the name of human rights and social justice. But both elements have lacked the leverage required to drive through their preferred changes.
At the same time, progressive elements have often opposed the market-oriented education policy reforms promoted by technocratic elements, claiming these reforms promote the commercialization and privatisation of education and worsen education inequality. These two sets of elements have yet to evolve into a powerful “upgrading coalition.”
Indonesia provides an illustration. The Asian economic crisis and fall of the New Order in 1997-1998 precipitated the introduction of a series of technocratic education policy reforms, many promoted by the World Bank. These included corporatization of public educational institutions, a new teacher certification scheme, a competency-based curriculum, and a high stakes national exam. But continued predatory dominance combined with democratisation meant that predatory and progressive elements were able to contest these reforms, leading in many cases to their partial or full defeat.
Vietnam has been an exception, notwithstanding the dominance of a predatory/authoritarian elite based in the Communist Party of Vietnam. This is because technocratic elements have had greater sway over education policy and its implementation than in Southeast Asia’s other middle-income countries; and the absence of democracy has limited the scope for progressive elements to push back against technocratic reform.
The Communist Party has made spending on education a priority, outlaying almost 5.7 percent of Gross Domestic Product on education in 2017, much higher than Indonesia (3.6 percent in 2015) and the Philippines (2.6 percent in 2012). Vietnam has prioritised investment in pre-school, primary and basic literacy education, promoted equity in access, and attracted and supported qualified teachers.
Overcoming Predation
Efforts to improve education and R&D ecosystems in the region will need to go beyond increased public education and R&D funding, additional administrative capacity, improved teaching training, and the removal of disincentives to change — the measures emphasized in technocratic analyses — and promote a fundamental reconfiguration of power relations between these elements.
They will need to consider ways of ensuring technocratic and/or progressive elements in these countries become stronger than predatory political bureaucratic and corporate elites in their influence over education and R&D policy and its implementation while forging a common platform for change.
Such change, while difficult, is fundamental to addressing the middle-income trap.
This article is part of a special series developed by Asialink’s Insights and the Asia Institute’s Melbourne Asia Review, University of Melbourne.