The Political Economy of Policy Reform: Insights from Southeast Asia

Economists broadly agree on many key economic policy issues, but economics as a discipline has provided much less guidance on why and how economic policy reform occurs and how to develop institutional mechanisms that enable governments to adopt “good” economic policy. Political scientists are adept at identifying coalitions, constituencies, institutions, and interest groups, but they less commonly examine the implications for economic policy. Thus, work at the intersection between economics and politics—of why and how policy reform takes place—remains relatively unexplored territory. This is especially so in developing countries where political processes are more personalistic, institutions often less well established, outcomes more fluid, and the detailed case study literature on economic policy making still in its infancy. This paper provides an analytical survey of economic policy reform in Southeast Asia. It ranges across the major policy U-turns and the incremental reforms, with special reference to macroeconomic management and trade policy. On the basis of several case studies and set against the broader international literature, we advance nine conclusions on the political economy of reform. © 2013 Asian Development Bank and Asian Development Bank Institute.