The Southeast Asian region has experienced remarkable economic dynamism. While this strong growth path, often characterised as an “economic miracle”, was interrupted by the Asian crisis of 1997, ten years later several indicators show signs of a sound recovery. Although the fallout from the crisis has not been fully eliminated, economic growth has been robust and trade and investment flows have been escalating due to increasing international division of labour. Southeast Asia has made significant progress in integrating into the global economy; at the same time integration within the region has also strengthened. An examination of recent developments in the region shows that despite regional diversity, several initiatives have been launched towards integration.

The Asian financial crisis of 1997–98 caused significant damage to economies in East Asia. The crisis prompted the region’s policy makers to realise the importance of economic and financial co-operation among themselves given the region’s deepening economic interdependence. Following the crisis, therefore, East Asia embarked on various initiatives to manage such interdependence and achieve stable economic growth.

Peer review in the OECD has a long history; one that we in APEC have drawn on as we have developed our peer review processes. APEC, Asia-Pacific Economic Cooperation, was established in 1989 to bring together economies around the Pacific to discuss economic co-operation – its inaugural meeting was in Canberra that year.

Peer review, peer support and peer pressure are key elements of European Union (EU) governance. As Niels Thygesen states in Chapter 6, “peer review is omnipresent in the EU, but still very difficult to define.” This difficulty derives from the fact that in the European Union, peer review (as well as peer support and peer pressure) is part of a much wider governance framework and rarely appears as an activity per se. But there is no doubt that peer activities have played and play a very important role in the spreading of best practices among the member States of the Union and in crafting effective policies at national and community level.

In thinking about the topic of this publication it occurred to me that a useful question to address would be: “What, if anything, is different about peer review in the context of regional integration?” In answering this question I will do three things. First, I will outline three aspects of peer review. These are peer reviews as peer learning, peer preview as support for domestic stakeholders, and peer review as peer pressure. In outlining these elements I will argue that peer learning is the core of peer review and that attempts to more aggressively pursue peer pressure will almost certainly undermine the process. Second, I will outline the preconditions necessary for peer review to work well. Third, I will comment on whether undertaking peer review in the context of regional integration helps or hinders constructive peer review. Naturally this last aspect will be heavily influenced by the specific regional integration project, but I think that some general observations can be made.

We are seven years into the 21st century and Asia is trying, like the other continents, to resolve a contradiction: on the one hand, co-operation is more necessary than ever now that economies are increasingly interdependent; on the other hand, there is a refusal to resort to standard models and a determination to preserve national sovereignty.

There are different models for conducting peer reviews of economic performance and policies of individual countries and my main purpose in preparing this chapter is to compare the current practices in three international frameworks: the OECD, the International Monetary Fund (IMF) and the European Union (EU). Interesting differences between the three frameworks emerge both in the methods of work and in the roles played by national governments in the peer review processes. Some of these differences can be explained by the main subject matter under reviews, others by the size and cohesiveness of the membership of the international institution in question. Still others may be more difficult to understand.

Ten years have passed since the 1997 East Asian crisis which dealt a heavy blow to the member countries of the Association of Southeast Asian Nations (ASEAN).1 Having recovered strongly from the crisis, ASEAN has proven to be one of the most dynamic regions in the world economy. Improved business environments have allowed the countries of this region to benefit from their increasing integration in the global economy. Growth has been largely driven by strong export and investment activities. The region’s enterprises have expanded their participation into global value chains and in some cases managed to move up their technological ladders.

This chapter is composed of two parts. The first part considers the current policy reforms and challenges facing Indonesia, while the second part focuses on peer reviews and how they might relevantly apply to ASEAN and Indonesia.

This chapter can be broken down into two parts. The first part considers policy challenges in the Philippines, taking a look at recent economic development and describing major policy initiatives and their effects. The second part discusses the rationale for peer reviews in the Association of Southeast Asian Nations (ASEAN), briefly assesses their benefits, then looks at their future.

The Thai economy recovered from the Asian economic crisis in 1997 with strong economic growth that averaged 5% in 2000-06. Poverty, which increased during the turmoil, is now lower than the pre-crisis level. Unemployment is around 1.5%, which is considered a little lower than the natural rate of unemployment. Economic stability is also strong, as demonstrated by the current account surplus, high foreign reserves, decreasing public debt, and non-performing loans (NPLs) in the banking sector. However, since 2005, the country has experienced political uncertainty, which led to a military intervention on the 19 September 2006. The interim government subsequently announced that a new election would be held towards the end of 2007.

During the 1990s, a large number of countries embarked on fundamental economic policy reforms. Centrally planned economies in Eastern Europe and East Asia, as well as highly protected and inward-looking economies like India and Brazil, were eager to reduce government involvement in economic decision-making in order to ensure macroeconomic stability and open up to international trade and capital flows. Different countries adopted different approaches and sequences of reform, which led to different policy outcomes. These experiences provide fertile ground for the political economy studies of economic reform. They provide considerable material on critical factors, like the timing, economic necessity, and political challenges of reforms.

Peer review systems spring from the grim European experience of the interwar years between 1914-18 and 1939-45. Throughout the Great Depression, which first bit in 1929, each and every government in Europe sought to export its adjustment costs by implementing such policies as competitive devaluation and tariff increases. The outcome was a depression that was far worse than it needed to be, because the nations of Europe failed to respond in a co-ordinated manner. By the end of the 1930s it had become clear that no government could ever again hope to vanquish economic crises without considering what its neighbours could do.

Among the many OECD peer reviews that have taken place since Japan joined the OECD on 28 April 1964, Economic Surveys (conducted every 18 months and of which there have been 33) and reviews of official development assistance (ODA), which take place every 3-4 years and of which there have been 4, are considered the most important and are the most widely publicised in Japan. The growing pressures of economic globalisation have heightened OECD members’ awareness of the importance of domestic macroeconomic and structural policies and external policy co-ordination, while highlighting the need to learn from other countries’ experiences and to coax public opinion into support for painful domestic reforms that are essential to long-term economic growth and the wellbeing of people in countries the world over.

It is the firm belief of this writer that Asian countries need to participate more actively in OECD programmes, particularly in the light of Asia’s economic share of the world economy and its extraordinary dynamism. In 1970 its share of world gross domestic product (GDP) was a mere 15%, but by 2004 it had risen to 25%. Similarly, its share of world trade, only 6% in 1970, had more than tripled to 21% by 2005.

This annex examines the practice of peer review and the related effect of peer pressure in the context of international organisations, particularly the Organisation for Economic Co-operation and Development. It outlines the main features of these two concepts and attempts to establish a model based on the different peer review mechanisms used at OECD. While there are other documents available that list the peer reviews of the OECD, this chapter will provide an analysis of the practice.