Edited by Suiwah Leung, Ben Bingham and Matt Davies
Chapter 12: The Political Economy of Policy Reform: The Future of Reforms for the Mekong 4?
12. The political economy of policy reform: the future of reforms for the Mekong 4? Hal Hill, Suiwah Leung and Trevor Wilson 1 INTRODUCTION Reform means durable and significant policy change that improves aggregate socio-economic welfare. The literature focuses on major changes in policy, sometimes referred to as ‘turning points’. Asian examples include China in 1978, India in 1991, Indonesia in 1966 and Vietnam in 1986. But some countries boast no such turning points. In Southeast Asia, policy reforms in Malaysia, Singapore and Thailand consist of incremental progress.1 In Myanmar, political changes in 1988 generated new policy directions without far-reaching reforms. The nature of reforms and their bureaucratic complexity also differs. Some measures are straightforward, stroke-of-the pen deregulations, such as introducing a floating exchange rate, replacing non-tariff barriers with tariffs, removing regulatory requirements, opening an industry to competition and abolishing corrupt agencies. These decisions require careful prior evaluation and a judgement that parties disadvantaged by reforms will not be able to sabotage them. But once this ‘due diligence’ has been undertaken, implementation is relatively straightforward. By contrast, other reforms require a bureaucracy capable of implementing them. For example, successful tax reform depends on a competent and honest tax administration. This may be an interactive process, in the sense that the reforms are designed to lessen the scope for discretionary interventions (such as a value added tax that builds in an incentive for compliance, simpler tax rates and regulations). Another illustration is that while decentralization of resources and administrative authority empowers...
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