Malaysian Cabinet formed but legitimacy crisis continues

May 15, 2013

Malaysian Cabinet formed but legitimacy crisis continues

By Anil Netto

PENANG – Large crowds have turned out in protests in major cities on peninsular Malaysia in response to a general election marred by allegations of irregularities and vote-buying. As the protests spread across the country, the Opposition coalition Pakatan Rakyat’s challenge has the potential to destabilize Prime Minister Najib Razak’s new government.

Despite winning less than half of the national vote, BN now controls 10 out of 13 federal states due to its careful carving of constituencies.

In the central state of Selangor, some 100,000 thronged a stadium in the first major protest three days after the May 5 polls. Thousands more attended a simultaneous protest at the Rusila Mosque in Terengganu on the peninsula’s east coast. These were followed by another large turnout of close to 100,000 at another stadium, in the northern state of Penang, on May 11.

On Sunday night, some 30,000 crammed into the streets of Ipoh, the capital of the state of Perak, for yet another rally. More rallies are expected this week, including in Johor Bahru in the south and Kuantan on the east coast of the peninsula. Smaller groups of Malaysians have congregated in cities abroad, including in Melbourne, Taiwan, and Singapore.

At all the rallies participants have dressed in black to symbolize a democracy “blackout”. The de facto Pakatan Rakyat (PR) leader Anwar Ibrahim and other coalition politicians have made several rousing speeches decrying fraud and irregularities at the polls. They have also made their case with international audiences, including in interviews with big global broadcasters.

In a campaign that highlighted rampant corruption and cronyism in the ruling Barisan Nasional (BN) coalition, the PR won almost 51% of the popular vote at the polls. But with constituencies gerrymandered to favor less-populated rural areas traditionally held by BN, PR won only 40% of parliament’s 222 seats. (BN captured 133 parliamentary seats to the PR’s 89.)

PR retained the state governments of Penang and Selangor, both developed states that it has governed since 2008, and the rural east coast state of Kelantan and lost narrowly in the northern state of Kedah.

Despite winning less than half of the national vote, BN now controls 10 out of 13 federal states due to its careful carving of constituencies. In Perak state, which PR captured in 2008 only to lose power after a few of its elected representatives defected, the BN won only 43% of the popular vote but still captured the state assembly, winning 31 state seats to the PR’s 28.

Subramaniam Pillay, a steering committee member of the civil society Coalition for Clean and Fair Elections (BERSIH), notes that the last time constituencies were redrawn was in 2003, and that only a simple majority in parliament and the state assemblies is required to redraw electoral boundaries – though a two thirds majority is required to increase the number of seats.

PR’s three component parties are expected to challenge the results in some 30 parliamentary constituencies where the BN won with small majorities. They have 21 days from the date the results are officially gazetted later this month to submit court petitions.

They could also file more general suits relating to vote-buying and constitutional issues related to the conduct of a caretaker government. Bersih, which has staged massive street rallies in the past against BN’s perceived manipulation of the electoral system in its favor, has said it would set up a “People Tribunal” to investigate the allegations of fraud and irregularities.

Najib, for his part, claimed a “Chinese tsunami” (a reference to the ethnic Chinese who represent 25% of the population) voted down BN candidates in many urban areas. Utusan Malaysia, owned by Najib’s United Malays National Organization (UMNO) party, took the cue with a headline splashed on its front and back pages asking “What more do the Chinese want?”.

BN’s insistence on viewing the country’s fast-changing political landscape through a race-tinted lens is consistent with its old style of politics, which is theoretically based on power-sharing among race-based political parties in BN but in reality is dominated by the ethnic Malay-led UMNO.

The contrast with the PR’s self-proclaimed “new politics” could not be more pronounced. Multi-ethnic demonstrators have said they represent a “Malaysian tsunami” that wants good governance, clean and fair elections and an end to corruption, and an end to the BN’s practice of exploiting ethnic divisions.

“Some commentators here have missed the whole point: we are not saying the opposition will take over the government or whether the elections results can be verified and fraud detected,” said Jeremiah Liang, who left a comment on a blog. “No. The real change is that the people of Malaysia, from all races and mostly urban, starting with Selangor and then to other states, are saying to the incumbent government: You have lost the people’s mandate to lead and to govern.”

The Police have responded by threatening to investigate 28 speakers at recent rallies for sedition, an offense, punishable by imprisonment, that the BN has long used to stifle criticism of its rule. The organizers of the various rallies will also be investigated for allegedly violating the Peaceful Assembly Act, which requires they give 10 days notice to the police before staging rallies. Should the government make mass arrests, the situation could tilt towards instability, some analysts believe.

To what extent election fraud, including allegations of voting buying in the crucial North Borneo states of Sabah and Sarawak, can be proven with sufficient evidence to overturn the results remains questionable. PR parties will face significant constraints to scrutiny in interior and difficult-to-access rural areas long controlled by BN politicians.

However, in one significant expose, the social reform group Aliran found people lining up for payments ranging from 150-200 ringgit (US$50-67) over the weekend in a few nondescript locations based on vouchers received before polling day. Some of those lining up for payments but who didn’t receive cash were told they would only receive payment if the BN candidate in their area won.

Others says the real source of fraud lies in the integrity of the electoral rolls. The BN’s granting of identity cards or citizenship documents to migrants in Sabah that allow them to vote had been the subject of a royal commission of inquiry but was postponed ahead of the election.

The Election Commission, meanwhile, has received flak for using indelible ink that disappears with mild scrubbing. With 260,000 military and police personnel eligible for early voting five days before official polling, the issue has raised concerns that BN-loyal security officials may have voted more than once.

The PR’s focus on electoral irregularities and gerrymandering may mask somewhat the coalition’s failure to deliver its clean governance message in grass roots rural areas. Many of the rural voters receive their news from television, radio and newspapers tightly controlled by the BN-led federal government, while few have access to more independent Internet-based news.

If PR did get its message across, it may not have resonated with rural voters as it did with urban ones. For instance, its pledges to reduce highway tolls, provide free higher education and usher in good governance lacked popular resonance in remote areas of Sabah and Sarawak where direct BN populist hand-outs maintained voter loyalty.

Among rural voters and some urban voters there were no doubt concerns that they would lose out if the BN’s affirmative action policies were replaced by the PR’s promise of more meritocracy in the distribution of state funds. While PR had indicated it would adopt a more needs-based – rather than race-based – approach, old insecurities remain.

Other weaknesses in the PR campaign included disputes over seat allocations among component parties that led to several multi-cornered contests that split votes in pro-PR areas. The late selection of PR candidates also gave them little time to familiarize themselves with the area and electorate in Malaysia’s short campaign period.

Despite these weaknesses, Anwar has announced plans to hold more rallies. While it still seems unlikely these will morph any time soon into a larger Arab Spring-like movement that overturns the result, the rallies and the allegations add to the pressure on Najib, who is clearly struggling to come to terms with the erosion of BN popular support.

Anil Netto is a Penang-based writer.

http://www.atimes.com/atimes/Southeast_Asia/SEA-01-150513.html

BRICS challenge the World Bank and the IMF in Development Finance

April 2, 2013

by Bunn Nagara (03-31-13)@http://www.thestar.com.my

A prospective new financial architecture promises to reform and improve development finance for the world.

FIVE countries came together during the week to grab international headlines over how they might, as a group, change the world: Brazil, Russia, India, China and South Africa (BRICS).

And they would do so in the most tried-and-tested way imaginable: financially, as a single economic entity. As a bloc BRICS may effect change on a global scale, but the grouping would still do so in the traditional way of flexing economic muscle.

The annual BRICS summit held during the week in Durban, South Africa, focused on what that muscle can do – challenge the World Bank and the International Monetary Fund in the way development finance is conducted, as well as the Western dominance that has prevailed in both Bretton Woods institutions.

Those institutions were never meant to be that way, of course, as a reading of their founding texts would show. But any initial magnanimity soon gave way to self-interest: US and European dominance of the World Bank and the IMF respectively was to be a Western “consensus” imposed on the world like a global neo-colonial regime.

Interestingly, the original BRIC as both a term and a grouping originated not in any of the initial four countries or the developing world, but in the US itself.

None other than Goldman Sachs’ Asset Management Chairman Jim O’Neill coined the term in 2001 for those countries he believed would outpace the US in total GDP by 2020.

At the turn of the century Brazil, Russia, India and China were merely regarded by some as emerging economies developing under their own steam.

After O’Neill’s coinage they held their first summit in 2009 and invited South Africa to join them a year later, and BRICS was born.

Since then, BRICS as both concept and entity has had vigorous growth and a vibrant youth. It compares favourably with the IMF and the World Bank, both pushing 70 years and weighed down by limiting conditionalities and outmoded economic ideology.

Both institutions typically adopt a cold, mechanistic approach to development that prioritises market interests over human needs. Their Western bias is also a throwback in a 21st-century world of shared global interests and aspirations, and a world in which Western economies themselves are in trouble.

In contrast, BRICS as a bloc of emerging economies serves as a bridge between the developing Third World and the developed First World. It seeks to narrow that yawning chasm by focusing on reviving global growth and ensuring macroeconomic stability.

Those virtues that had once been the preserve of the West have become its elusive goals. The “developed” and the “emerging” (mostly, once “developing”) economies have traded places.

The new global bank that BFICS wants to establish is expected to emphasise infrastructure development and trade. The first represents solid investment in development for the future, and the second works as an economic multiplier for further growth.

On paper, BRICS countries account for almost half the world’s population and just over a quarter of world trade. But more important than these bare figures is how Brics economies have been driving global growth for years, as acknowledged by the World Bank itself.

The idea for a new global bank arose only last year. So how the measured progress at the Durban summit is perceived depends at least as much on the observer: is the glass half-full or half-empty?

Some of the most difficult decisions, such as financing modes, remain unresolved. Its primary purposes like the operation of funds in project financing and a contingency fund as crisis buffer will take more time to work out.

Pessimists may cite how the absence of agreement on even the quantum of fund contribution from each country bodes ill for BRICS. Basing the contribution on economic capacity makes sense, but concerns were expressed over how that would inevitably make a hulking China dominant.

A standard sum of US$10bil (RM31bil) from each country as seed capital was then considered, following a Russian proposal, but the final decision was left until later.

Optimists would say that far from weak indecision, this showed an openness about not wanting any country to dominate, with agreement on equality with a fair and manageable quantum for all.

However, realists may say that in such financial matters China would still eventually dominate. To that, it can be said that dominance by a single country was never a problem before, given the prominent US role and influence in the World Bank and the IMF.

At this point some may say it was precisely because of single-power dominance that had compromised the work of the Bretton Woods institutions. It might then be observed that a new global bank dominated by China would only balance the World Bank (and the IMF), which it would complement rather than replace.

Some observers may see crippling incompatibility in the different political systems within BRICS.But such diversity need not be an obstacle, particularly when all countries now work within a global capitalist system.

President Vladimir Putin, often cited in Western circles as a modern incarnation of the Soviet bear, even insisted that a new global bank “must work on market principles only.” And “communist” China is not only a major and enthusiastic player in global markets, but – to former British foreign minister David Miliband – has even acted as a saviour of Western capitalism.

What worries fans of the IMF and World Bank is not how a new global bank as competitor will “steal their business,” but how it may force both to be more democratic and more sympathetic to the developing world. Who else but those currently dominating them in Washington and Brussels would object?

Japan as an emerging economy itself decades ago had its chance to forge a new alternative in international finance with the Asian Development Bank, but blew it.

The former coloniser in Asia seeking to make good in its post-war period, with US partnership, soon settled into establishment mode alongside its Bretton Woods equivalents. A new global bank established by BRICS will be a welcome addition to the existing financial institutions.

Its continental and political diversity would also make a slide into betraying its noble purpose more difficult.

Late last year, Brazil suggested that the proposed bank should be modelled on ASEAN’s Chiang Mai initiative.This is a time for a sharing of experiences when each can learn from the rest, not of jealous exclusion and unfounded fears of rivalry.

In time, perhaps even the World Bank and the IMF can find it in themselves to accommodate and welcome new financial institutions operating on their “turf”.At least that would help them return to their initial noble calling.

Najib sees early achievement of Vision 2020 Goals

March 20, 2013

by Barry Porter@http://www.bloomberg.com

Prime Minister Najib Razak said the nation may reach high-income status two years ahead of target, as he seeks to convince voters of his economic achievements before elections due within weeks.

Gross national income could rise to RM1,931 per capita (US$15,000) in 2018, earlier than a target of 2020, Najib said in a televised speech late yesterday. The measure has increased 49 percent since 2009, to RM12,838 (US$9,970) last year, the government estimates. Najib also pledged to give annual cash handouts to low-wage earners.

“The time has come for Malaysians to make a decision and I hope you make the right choice,” said Najib, 59, without indicating when the election will be held. He must dissolve Parliament by April 28 and hold a vote by the end of June.

Najib, who inherited a country in recession when he replaced Abdullah Ahmad Badawi as leader in 2009, is focusing voters on his efforts to boost investment and improve incomes as he seeks a popular mandate for the first time. The ruling National Front coalition won the last election in 2008 by its narrowest margin in more than five decades, prompting Abdullah to hand over the leadership mid-term.

A nation is considered high income when GNI per capita meets or exceeds RM16,066 (US$12,476), according to the World Bank. In 1991, former premier Mahathir Mahathir laid out a 30-year plan known as Vision 2020 aimed at earning Malaysia high-income status by the end of the current decade.

Investment rises

Malaysia’s total investment grew 19.9 percent in 2012 compared with 6.5 percent in 2011, accounting for 26.7 percent of gross domestic product, according to a report on the nation’s so-called Economic Transformation Program released by the Prime Minister yesterday. Private investment climbed 22 percent to 139.5 billion ringgit (US$45 billion) in 2012, driven by spending on manufacturing, services and mining, according to the report.

“Najib’s comparative advantage is to try to portray himself as an economist and an economic success, which may hit home in middle-class areas,” Bridget Welsh, Associate Professor of political science at Singapore Management University, said by phone. “He’s mostly concerned about a public relations image. The Opposition tends to focus on ordinary people and micro issues, like wages and the cost of living.”

Infineon Technologies AG, Europe’s second-largest maker of semiconductors, said in May it will spend 4 billion ringgit over 10 years to expand its wafer-fabrication facilities in Malaysia’s north. Germany’s Evonik Industries AG plans to start a specialty chemicals manufacturing venture with Petroliam Nasional Bhd. within a US$20 billion refining and petrochemicals complex in southern Johor state.

‘Track record’

Najib can use the economic program to argue that “the current administration has got a track record in organizing big public projects and getting the private sector involved,” said Gerald Ambrose, who oversees the equivalent of RM5.31 billion (US$1.7 billion) as managing director of Aberdeen Asset Management Sdn in Kuala Lumpur.

Since taking charge, Najib has streamlined bureaucracy and opened up more industries to foreign investors. His government identified RM1,389 billion (US$444 billion) of private-sector-led projects to help champion in the current decade, ranging from oil storage to a mass railway, under the economic plan.

Malaysia’s economy grew at the fastest pace in 2 1/2 years last quarter as Najib boosted spending ahead of the election that will test his grip on power. GDP rose 6.4 percent in the three months through December from a year earlier, after a revised 5.3 percent gain in the previous quarter.
Poverty, education

“We must not rest on our laurels,” Najib said in the report. “Malaysia must continue to address issues such as poverty, labour productivity, environment sustainability and education, while factors in the external economy are likely to remain demanding in the foreseeable future.”

The architecture, engineering and quantity-surveying services sub-sectors are expected to be ready for liberalisation exercise this year, Bernama reported, citing Pemandu’s report.

Southeast Asian nations from Indonesia to the Philippines have shown resilience to the faltering global economy as local demand rises. Najib has increased government expenditure, extending cash handouts to low-income families and raising civil servants’ salaries in the lead-up to voting.

Government revenue was the highest on record last year at an estimated 207 billion ringgit, enabling the government to afford socio-economic programs and give money to the poor, according to the report by the government’s Performance Management and Delivery Unit, or Pemandu.

The budget deficit narrowed from 6.6 percent of GDP in 2009 to 4.5 percent last year and is expected to shrink to 4 percent this year as the government seeks to balance the budget by 2020, according to the report.

Resurgent Opposition

Najib’s National Front coalition is facing a resurgent Opposition led by Anwar Ibrahim, which currently holds 75 seats in Malaysia’s 222-member parliament. The prospect of an even closer election result has helped make the FTSE Bursa Malaysia KLCI Index the worst performing Asian benchmark this year, Citigroup Inc. said in a report this month.

The benchmark stock index has dropped 4.1 percent since closing at a record on Jan 7. It ended 0.3 percent higher yesterday before the report. The ringgit climbed 0.2 percent to 3.1255 per dollar. Its 2.2 percent drop this year makes it Asia’s fifth-worst performing currency among 11 tracked by Bloomberg.

Najib is more popular than his government, according to the Merdeka Center for Opinion Research. His approval rating slipped to 61 percent last month from 63 percent in December, according to a survey of 1,021 voters conducted January 23 to February 6 on the country’s peninsula. By contrast, 48 percent of respondents said they were “happy” with the government, according to the poll published February 26.

-BLOOMBERG

http://www.kinibiz.com/story/corporate/9933/gtp-etp-2.0-target-can-be-achieved-by-2020.html

Bogor to Bali: Building an Asia-Pacific Community

March 20, 2013

Insight: Bogor to Bali: Building an Asia-Pacific Community

by Jusuf Wanandi & Tan Khee Giap | Insight |The Jakarta Post (02-22-13)

Almost 20 years ago, leaders of the Asia-Pacific region met in Bogor to “chart the future course of our economic cooperation, which will enhance the prospects of an accelerated, balanced and equitable economic growth not only in the Asia-Pacific region, but throughout the world”. In just a few months, Asia-Pacific Economic Cooperation (APEC) leaders will again meet in Indonesia, Southeast Asia’s largest economy. How far has the region come in achieving those goals and what more needs to be done?

The headline achievements are impressive. To note just one, incomes in the region have more than doubled since 1994 from an average of US$10,000 to more than $23,000.

The journey to where we are today has not been easy. The region has been buffeted by economic crises, first in 1997-1998 and then in 2008-2009. This crisis is not yet over, a number of APEC members recently enacted stimulus measures to kick start growth, such as QE3 in the US and Japan’s new attempt to reflate its economy. There is a possibility of a new stimulus in China in response to a deteriorating external environment.

These measures, while focused on domestic growth, have some unintended consequences. We are seeing rising capital flows into Asia that pose challenges, including the need to minimize the risks of asset bubbles and excessive credit expansion. There is already talk of “currency wars” and competitive devaluations. While the rhetoric makes for exciting reading, the world is far too complex for simplistic reasoning.

At the outset of the crisis, many had feared a descent into beggar-thy-neighbor polices, but thus far, through the actions of the G20 and APEC, we have avoided this. At this critical juncture, when nationalist sentiments are rising, we need more cooperation and understanding. APEC is the embodiment of bridging differences and must continue to play its role in bringing a diverse community together.

While APEC has done well in terms of freeing up trade and investment, the world that it occupies has changed. In 1994, bilateral trade deals were the exception, today they are the rule.

Even this is changing. The ASEAN Regional Comprehensive Economic Partnership Framework will consolidate the ASEAN+1 agreements into a single area and the Trans-Pacific Partnership agreement hopes to build on the Pacific 4 agreement. Outside our region, the US and the EU are talking about a trans-Atlantic trade agreement, which would create the single biggest market in the world.

These massive trade groups, while potentially building blocs to multilateralism, can make outsiders feel excluded. This is a dangerous path to go down and this region, through APEC, with its spirit of inclusiveness and openness, should ensure that no economy is left out.

However, strong headline growth has masked a dirty secret — income disparities have been growing both among and within regional economies. APEC leaders have long talked of the need for growth to be equitable — both in Bogor and in recent years such as in 2009 in Singapore — with a call to “foster inclusive growth” and in Yokohama where it was a key dimension of the APEC Growth Strategy.

The Millennium Development Goals (MDGs) set the objective of universal primary education by 2015. In this region, we should move ahead and aim to provide all our citizens with the skills to participate in this competitive global economy. While some economies have done particularly well in increasing tertiary education participation, for example in South Korea where the ratio has increased from 35 percent to almost universal enrollment since 1994, others lag behind.

However, enrollment rates are not a panacea. One need only look at high unemployment rates among recent graduates in parts of Europe to see this. Emphasis must be on flexibility and resilience. There is a need for educational institutions and businesses to work together to help to develop skills of our peoples to fulfill their potential. This requires a change in culture in both business and education providers.

Even if our people possess the skills to compete, they cannot do so if they are not connected to the market. We need our people and our businesses — large and small — to be able to connect to where opportunities exist. The Asian Development Bank (ADB) estimates that East Asia alone needs to invest some $8 trillion in infrastructure.

Much of this would be in transportation but a critical part of the creative economy is access to information. Access to the Internet varies tremendously in the region, from 2 to 84 in every 100 in Papua New Guinea and South Korea, respectively.

Another aspect of the integration process is how do our businesses reap the opportunities that lie ahead? It has been conventional wisdom that multinational corporations account for 70 percent of global trade, while at the same time small and medium enterprises (SMEs) account for 90 percent of all businesses.

The idea that products are made in one particular country has given way to the idea of being “made in the world”. The emergence of global value chains opens up opportunities for SMEs to participate, but SMEs face a distinct set of problems going global as trade rules and compliance costs disproportionately impact smaller businesses, and their access to finance and information about overseas markets is limited.

A focus on these three areas: education, infrastructure and barriers to SME participation, could help make a major difference to addressing APEC’s goals of equitable and inclusive growth in the years ahead. Calls for addressing inequality should not be misconstrued as calls for the redistribution of wealth — that has already been tried and failed. Making growth equitable and inclusive are essential to the region’s goal of community building — that is one in which we share a sense of common destiny and purpose.

These issues will be addressed during a conference organized by the Pacific Economic Cooperation Council (PECC), the Singapore National Committee for Pacific Economic Cooperation (SINCPEC) and the Indonesian National Committee for Pacific Economic Cooperation (INCPEC) on February. 22-23.

Jusuf Wanandi is the co-chair of the Pacific Economic Cooperation Council and vice-chair of the Board of Trustees of the Centre for Strategic and International Studies (CSIS) in Jakarta.

Tan Khee Giap is the chair of the SINCPEC and co-director of the Asian Competitiveness Institute (Singapore) at the Lee Kuan Yew School of Public Policy, NUS.

http://www.thejakartapost.com/news/2013/02/22/insight-bogor-bali-building-asia-pacific-community.html

What a Good Trans-Pacific Partnership Looks Like

March 12, 2013

What a Good Trans-Pacific Partnership (TPP) Looks Like

By Derek Scissors, Ph.D.
March 8, 2013

Abstract

The proposed Trans-Pacific Partnership (TPP) is a major step toward building a free trade area in the Asia–Pacific. For the U.S. to benefit economically, the TPP must be a high-quality agreement that moves market-oriented liberalization forward on multiple fronts. These should include state-owned enterprises, intellectual property, and services liberalization. A sound TPP will also reinforce American political leadership in the Asia–Pacific and around the world, demonstrating that the U.S. will continue to make the decisions necessary to remain fully engaged in the global economy for the cause of open markets. The Heritage Foundation’s Derek Scissors explains what a sound TPP should look like.

Every day, U.S. policymakers are faced with choices that will determine the future of American leadership in Asia. One such set of choices involves the Trans-Pacific Partnership (TPP) currently being negotiated.

The TPP is a set of trade and investment negotiations among the U.S., Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. It is an attempt by these countries to expand the scope of the 2006 Trans-Pacific Strategic Economic Partnership (P-4) beyond the four members of Brunei, Chile, New Zealand, and Singapore. Once finalized, the TPP is intended to remain open to additional parties—eventually becoming the core of a free trade area for the Asia–Pacific.

One of the challenges the TPP faces is preventing the dilution of its original economic goals for the sake of expansion (or any other reason). In order for the U.S. to benefit economically, the TPP must be a high-quality agreement that moves market-oriented liberalization forward on multiple fronts. A sound TPP will also reinforce American political leadership in the Asia–Pacific and around the world, demonstrating that the U.S. will continue to make the decisions necessary to remain fully engaged in the global economy for the cause of open markets.

What constitutes a sound TPP? The diplomatic environment is such that a TPP will shape the global trade agenda for the next decade. Beyond the new standard reached in the U.S.–South Korea free trade agreement (KORUS), the TPP must aim high for new rules on state-owned enterprises, intellectual property, and various services sectors. It should include reduction of American trade barriers and should avoid backsliding—for example, with regard to rules of origin. Because of the precedent that the TPP will set, two steps forward in one part and one step back in another, could eventually haunt the American and world economies.

The TPP is a game-changer, economically and diplomatically. If it fails, the recent “pivot” to Asia will be seen as military in nature and America’s value as a friend or ally would be high only in case of potential conflict. The U.S. should conclude and implement a high-quality agreement as soon as possible.

Elements of a Good TPP

The number of TPP members makes for complexity that will inhibit assessments of quality. The rationalization of national regulations and existing multilateral arrangements by itself is a daunting challenge, all the more so because the countries involved are at multiple stages of development. Ideal outcomes are not feasible, particularly for a group that hopes to expand. The TPP should be judged on the number of clear steps forward, or backward.

The perfect is also the enemy of the good in another sense—a TPP is overdue. Global trade diplomacy, topped by the World Trade Organization’s (WTO) Doha round, has flagged. A good TPP was needed yesterday. The partnership should include Japan among the initial signatories, and the U.S. should facilitate its entry into negotiations. But Japanese accession does not justify further delay.

There are many important elements of a good TPP. Liberalization should be as broad and as quick as possible, including lower non-tariff barriers and fewer restrictions on investment and government procurement. But a good TPP must offer progress in three comparatively new areas:

1. State-owned enterprises must be restricted to a limited number of sectors;
2. Intellectual property, including trade secrets, must be better protected; and
3. There must be major service-sector liberalization, perhaps focusing on financial services.

To achieve real and considerable progress in these areas, the U.S must be prepared to reduce barriers in agriculture, textiles, and maritime services. Further, the U.S. should avoid actions that clash with the goal of liberalization—for instance, managed trade in autos.

State-Owned Enterprises

The TPP should be an effort to restart global liberalization. The alternative is a global economic order in which the state plays a far more prominent role.[1] Very large state-owned enterprises (SOEs), topped by Chinese firms but including firms from most of the major economies, have become leading global actors. That makes explicit and enforceable limits on SOEs indispensable to the TPP’s ultimate success. The two main barriers to effectively controlling SOEs are related—(1) defining them and (2) the enormous variety of subsidies available to them.

A narrow definition of SOEs may permit firms to escape classification due to superficial changes. These can include selling a small amount of stock on a public bourse, or including discrete, “private” ownership by members of its own board or even government officials.[2] Such a definition would negate any SOE restrictions, regardless of their content.

A broad definition is needed in order for an SOE chapter to have any meaning. Such a definition will be based on competition first and ownership second: For instance, SOEs exist wherever governments have a capital stake in a firm and sharply or repeatedly suppress competition on the behalf of that firm, by any means. This will include multiple entities in the U.S. The growing role of, and threat from, SOEs makes the gain for the U.S. from a broad definition far larger than the costs.[3] American policymakers must realize this trade-off, and overrule internal political objections to a broad definition.

Given a broad definition, it will be far more effective to restrict the presence of SOEs than to restrict the assistance they receive. That is, SOEs should be barred from most industries. Requiring that they simply operate on a more commercial basis will not work. Some governments will claim that they already operate on a commercial basis for extended periods, but this is entirely insufficient. A firm that would have failed a year ago—but was rescued by the government—cannot truly be operating on a commercial basis now since, on a commercial basis, it would no longer be operating at all.

Governments have developed too many means of support for SOEs, featuring a range of financial subsidies not currently bound by the WTO and regulatory exemptions from competition, sometimes justified by vague reference to national security in connection with a “strategic” industry.[4] Identifying these channels for a particular set of countries at a particular time begs for governments to work to circumvent prohibitions, for example, by selectively offering benefits to domestic private players. A prolonged game of cat and mouse, not a substantial rollback of SOEs, will ensue.

Second and more important, the very existence of SOEs should be understood as an effort by governments to limit market competition and increase state control in a particular sector. That is: an effort precisely to retain sector participants which do not operate on a commercial basis. The goal should not be to pretend to commercialize SOEs in opposition to the reason for their existence, but to permit their operation in a minimal number of areas. SOEs should be banned from most sectors of the economy.

Where TPP member states insist on retaining SOEs, their market share should be capped at as low a level as possible, to forestall absurd claims that state firms completely dominate markets due to competitive superiority. This can be done on an annual basis. SOEs should set revenue targets based on total sector revenue from the previous year. Exceeding these revenue targets by a given amount, say 5 percent, would permit legal retaliation from countries whose firms operate in the sector.

Because SOEs represent circumscribed competition at home, their investments overseas can properly be considered by host countries as different from investment by companies that earn commercial profits at home. In turn, though, host countries should not be able to simply bar SOEs or extort concessions in return for market access, but should commit to a clear set of treatment guidelines.[5]

Intellectual Property

Voluntary trade is mutually beneficial—otherwise one side would decline to participate—and following comparative advantage maximizes this mutual benefit. At the national level, the main American comparative advantage is in innovation, both in terms of how the economic system works and in terms of the resources devoted. Violations of intellectual property (IP) cut at the heart of this comparative advantage, reducing trade benefits for the U.S. and eroding public support. It is therefore quite right for American negotiators to place IP at the center of international economic discussions. Protecting IP will also benefit other TPP members, both now and in the future.

IP is a far-ranging issue even with a group at a similar level of development; with the TPP, the countries involved offer very different challenges in protecting IP. There is no chance the IP issues with all these countries can actually be resolved; a reasonable goal is current improvement and conditions for future improvement. A “TRIPS+” approach—expanding the WTO’s “Trade-Related Aspects of Intellectual Property Rights” framework—is appropriate in principle. Such an approach was employed in the KORUS agreement,[6] but the variation among TPP countries means that priorities within TRIPS+ will have to be set, since not all members are capable of all expansions of TRIPS.

When determining priorities, the U.S. should avoid three past mistakes: (1) insisting on criminal punishments for violators that are never enforced; (2) focusing on specific sectors; and (3) believing partners will come to accept the need for IP protection within a fairly short time.[7]

It could be decades before some TPP members, and prospective members, see self-interest in protecting IP that belongs to foreigners. As long as specializing in innovation is not viable, as is true in most of the world, stealing will remain an attractive alternative. The response, though, is not to prioritize criminal punishments everywhere. The rule of law is stronger in some places, such as Singapore, than in others, such as Vietnam. In addition, an emphasis on pharmaceuticals or another sector is likely to prove shortsighted as IP issues shift across sectors and the TPP draws new members.[8]

A good point of emphasis within IP is trade secrets. Many governments, including some TPP members, may be genuinely unable in the near term to enforce IP protection across the whole of society. With trade secrets, though, governments themselves are involved.

Traditionally, theft of trade secrets has meant that IP shared with governments by foreign firms for legal and regulatory reasons is not being protected. This is often connected to SOEs. Some governments reveal trade secrets to enable their own enterprises to compete with multinational corporations; others practice coercive technology transfer.[9] Strong rules limiting government prerogatives with regard to sharing trade secrets and providing compensation when these are lost are more feasibly crafted and enforced than broad IP statutes meant to apply to all.

Further, such obligations could serve as the foundation for an accord concerning the new way governments suborn theft of trade secrets: cyber-espionage. A February 2013 initiative in trade secrets protection from the U.S., inspired by aggressive Chinese behavior, provides initial steps only,[10] inadequate for discouraging predatory behavior. To shape an effective global response, the TPP must do more. One possibility is to treat theft of trade secrets as equivalent to government-imposed illegal trade barriers and permit responses along the lines of WTO cross-retaliation.[11] This would discourage cyber-theft while legalizing and controlling the inevitable retaliation.

Services

Services share several features with intellectual property. Both are areas of American comparative advantage that need to be pressed in the TPP, and then elsewhere, on partners that sometimes want to accord them secondary consideration. Both are also broad in scope. With services, since American comparative advantage will shift over time and this is a newer area of liberalization than goods, there is more than one path to follow that will bring intense benefits. Precedent here is more important than the specific steps.

One route that recent negotiations have taken is expanding the use of negative lists. A negative list specifies the sectors protected from changes, creating a presumption of liberalization. (Its opposite, a positive list, specifies only the areas to which liberalization applies.) In many agreements, a negative list has been applied to services investment—services provided entirely within a country by a subsidiary established there through investment by a foreign entity. Services trade, by contrast, is buying and selling across national borders by independent entities based in different countries. The TPP should apply a short negative list to services trade as well.

Second in priority to use of a negative list is identifying particular areas for enhanced liberalization. An obvious first choice for the U.S. is financial services. These are not treated separately in the original P-4 agreement,[12] but are a mainstay of the American economy. To varying degrees, greater openness in financial sectors will benefit all TPP members. While the extent of liberalization in particular areas of finance will be controversial, the specific results will be less important to long-term U.S. interests than the precedent of including substantial financial services liberalization as part of TPP, as this will be the basis for any expansion of TPP and future agreements with other parties.

American Offers

One argument the U.S. has often made, correctly, to its trade partners is that liberalization is not a concession. Liberalization benefits the implementing country. Independent research has demonstrated again and again that the bulk of the gains from international economic agreements do not stem from greater access to overseas markets, as is commonly argued when approval of the deals is sought. Rather, most gains stem from increased openness and competition at home.[13]

This does not only apply to America’s partners, of course. Because the American market is largely open already, the areas where it remains closed stand out. In particular, the U.S. has comparative advantages in agriculture and services, yet retains protectionist policies in both areas. Combining efficiency and scale, U.S. agriculture is by far the world’s leader. Farmers and the country as a whole would benefit greatly from open global markets.

Yet the U.S. gives its trade partners reason to remain closed by selectively protecting its own market.[14] Just as valuable precedents will be set through the inclusion of financial services in TPP liberalization, the U.S. should reduce tariffs and other barriers—to foreign sugar and dairy, especially. Liberalization in these areas does not have to be completed within the TPP, but it is long past time for it to begin.

Agriculture is the main area for self-defeating American protectionism, but maritime services may see the single most self-defeating U.S. policy. The Merchant Marine Act of 1920 (the Jones Act) requires all goods transported by water between American ports be carried in U.S.-flagged and U.S.-built ships, 75 percent owned and manned by U.S. citizens. It is a restriction of competition that benefits the American shipping industry and costs American consumers, especially as domestic natural gas production soars. It also justifies services markets restrictions by other countries, harming a huge range of U.S. services companies.[15]

Another area of longtime American recalcitrance is textiles. Here, the U.S. is not fighting the last war, it is fighting a war from the 19th century. Textile and apparel imports benefit consumers, especially poorer consumers who are more vulnerable to price increases for these goods.[16]

Moreover, the jobs supported by imports far outweigh remaining production jobs. Textile and apparel production employed about 384,000 people in the U.S. at the end of 2012. American imports of Chinese apparel alone help support close to that number of jobs in offloading, transport, and retail.[17] Apparel imports from China are less than half the total. Liberalization in textiles would help the U.S. while offering considerable benefits to current and prospective future TPP members.

Pitfalls the U.S. Should Avoid

There are also things the U.S. should not do. Rules of origin are a double-edged sword in a multilateral arrangement like the TPP. Unless rules of origin are rationalized among participating countries, companies often ignore the opportunities offered by new trade agreements because complying with the new rules of origin is too complicated.[18] Rationalizing rules of origin is a core element of any successful trade agreement.

What must not occur is the tightening of the rules of origin as the free trade net is cast wider. This would not be trade creation and liberalization, it would be trade diversion and exclusion.[19] It would change the TPP from a group that can be easily expanded and is intended in part to restart global trade progress to a group that hastens the formation of dangerous blocs.

The same caution applies to labor and environment provisions. There is nothing wrong with mutually agreed-upon labor and environment provisions unless they introduce restrictions on trade and investment. These kinds of restriction are inevitably used as precedents to attack open markets.[20] A broad scope for the TPP will be beneficial as long as the chapters on the newly introduced topics do not clash with the goal of liberalization.

Finally, the U.S. should minimize exclusions, such as those granted in KORUS for rice on the Korean side and, essentially, managed trade for autos on the American side.[21] The TPP should be an opportunity to move forward, not backward. In general, as few items as possible should be exempted through these mechanisms or inclusion on negative lists.

Timing

A sound TPP would greatly benefit the U.S. and its partners. The faster it is in place, the sooner the gains would be realized—gains that are especially needed now with chronically weak American and global economies. And there are still more reasons to speed up the TPP process.

The WTO Doha round is all but dead. The U.S. chiefly blames India and China,[22] although the recent American contribution is also suspect. If Indian and Chinese recalcitrance is indeed the major barrier to global liberalization, the TPP is the best available tool to induce cooperation from them. The same is true for Japan, an ally of the U.S. but one that has struggled with trade liberalization. Japanese participation in the TPP should be welcome, when Tokyo can move quickly. If it cannot do so at the moment, then a finished, functioning TPP may speed Japanese action.

For its part, American trade policy has bordered on stagnant for six years. If KORUS had been ratified in late 2007, upon completion, it might have been possible to make considerable progress on the then-embryonic TPP in 2008. Had the Obama Administration not been critical of imports early on,[23] it might have been possible to make more progress on the TPP in 2010. Instead, the U.S. economy has suffered from restrictions on competition here and overseas. Global trade has become effectively less liberal, as other players created regional accords of often dubious quality.[24] A TPP failure risks not only more lost benefits, but the continuing erosion of the U.S.-built post-war economic system.

High Stakes

There are two different ways the TPP process can fail: (1) no agreement or (2) a bad agreement. The first has unpleasant political implications; the second has unpleasant economic implications.

On the economic side, the inclusion of Canada and Mexico makes the TPP a heavyweight. The two countries accounted for 29 percent of American trade in 2012. Singapore and Australia add a few more percentage points. If TPP candidates Japan and Korea are added, the share passes 40 percent of U.S. trade.[25] Even these numbers do not tell the full story, however.

With the new U.S.–EU free trade initiative, the TPP is no longer the only game in town. But it is difficult to imagine a failed or empty TPP being followed by a powerhouse U.S.–EU accord. The political environment for both will be challenging. If the American side is not willing to move forward on genuine liberalization with TPP partners, there is little reason to believe it will do so with the EU. The TPP’s share of American trade may be 30 percent to 40 percent, but it likely represents the whole of American trade policy in terms of whether valuable progress will be made in the next few years. The stagnation at the WTO and in genuine trade liberalization more broadly puts a heavy burden on the TPP to be a strong agreement, not any agreement.

The TPP also affects American leadership. Respective shares of world trade show China making strides in bolstering its claim to economic parity with the U.S. Asserting American leadership in this context requires a powerful response, starting with a sound TPP.

Absent a high-quality TPP, trade development in Asia will be governed by the Regional Comprehensive Economic Partnership (RCEP). RCEP is to be composed of the Association of Southeast Asian Nations (ASEAN) and its current free trade agreement partners—Australia, China, India, Japan, New Zealand, and South Korea.

In terms of economic benefits, the RCEP should be no match for a successful TPP. Like all of ASEAN’s FTAs, the agreement is likely to be far less liberalizing—focused primarily on goods and offering multiple exclusions and differential treatment. Some RCEP countries, such as Thailand, are natural candidates for the TPP in the future. However, a failed or vacuous TPP leaves even the limited RCEP as the only active vehicle for trade and investment liberalization in Asia—and the U.S. on the outside looking in.[26] (The U.S. is not a candidate for the RCEP as it has no FTA with ASEAN and is not likely to have one in the foreseeable future.)

Finally, if the TPP fails outright, the recent American “pivot” to Asia will be seen as purely military in nature. America’s value as a friend and ally would be high only in case of potential conflict, a somewhat self-defeating position. Along these lines, a TPP collapse would allow China to portray itself as leading when it comes to progress in the Asia–Pacific and indicate that the U.S. only leads when the situation deteriorates.

A Good Trans-Pacific Partnership

In order to achieve a sound TPP, the U.S. should:

1. Restrict the operating space of SOEs to specified sectors and cap their market shares there. Trying to govern SOE behavior will not work.
2. Seek to bind governments, rather than entire societies, when it comes to IP. Coercive government acquisition of trade secrets should be subject to legal, structured retaliation.
3. Insist on a negative list approach in services trade. At least one major financial sub-sector should be included in the areas of fresh liberalization.
4. Take clear steps to address the most egregious American trade protections. Dairy and sugar are obvious choices, but textiles and maritime services should also be opened.
5. Conclude and implement a high-quality agreement as quickly as possible. At this point, speed is more important, and the extent of true liberalization far more important, than the number of initial signatories.
6. Keep rules of origin at least as loose as in the KORUS agreement.
7. Minimize the number of exceptional areas, such as autos.

• The TPP must be a high-quality agreement and it is already overdue. A TPP with little economic value-added will harm American interests indefinitely. A sound TPP will strengthen the U.S. economy and ensure American economic and political leadership in Asia into the future. —Derek Scissors, PhD, is Senior Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation.

[1] Wojciech Ostrowski, “State Capitalism: An Emerging Regime,” Polinares Working Paper No. 51, December 2012, http://www.polinares.eu/docs/d4-1/polinares_wp4_chapter1.pdf (accessed March 4, 2013).

[2] Organization for Economic Co-operation and Development (OECD), “Ownership Structures in MENA Countries: Listed Companies, State-Owned, Family Enterprises and Some Policy Implications,” September 13, 2005, pp. 3 and 16, http://www.oecd.org/mena/investment/35402110.pdf (accessed March 4, 2013); Aldo Musacchio and Sergio G. Lazzarini, “Leviathan in Business: Varieties of State Capitalism and their Implications for Economic Performance,” Harvard Business School Working Paper No. 12-108, June 4, 2012, http://www.hbs.edu/faculty/Publication%20Files/12-108.pdf (accessed March 4, 2013); and OECD, “Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005,” September 14, 2011, https://www1.oecd.org/corporate/corporateaffairs/corporategovernanceofstate-ownedenterprises/48512721.pdf (accessed February 10, 2013).

[3] Xi Li, Xuewen Liu, and Yong Wang, “A Model of China’s State Capitalism,” Federal Reserve Bank of Dallas, May 16, 2012, http://www.dallasfed.org/assets/documents/institute/events/2012/linkages_yang1.pdf (accessed March 4, 2013).

[4] Derek Scissors, “The Most Important Chinese Trade Barriers,” Heritage Foundation Testimony, July 20, 2012, http://www.heritage.org/research/testimony/2012/07/the-most-important-chinese-trade-barriers.

[5] Investment Canada Act, “Guidelines–Investment by State-Owned Enterprises–Net Benefit Assessment,” Industry Canada, http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk00064.html#p2 (accessed March 4, 2013), and Matthew Rennie and Fiona Lindsay, “Competitive Neutrality and State-Owned Enterprises in Australia: Review of Practices and Their Relevance for Other Countries,” OECD, August 2011, http://www.oecd.org/daf/corporateaffairs/corporategovernanceofstate-ownedenterprises/48510172.pdf (accessed February 8, 2013).

[6] Office of the United States Trade Representative, “Intellectual Property Rights in the U.S.–South Korea Trade Agreement,” http://www.ustr.gov/uskoreaFTA/IPR (accessed March 4, 2013).

[7] Peter K. Yu, “The U.S.–China Dispute Over TRIPS Enforcement,” Drake University Law School, October 2010, p. 3, http://www.law.drake.edu/academics/ip/docs/ipResearch-op5.pdf (accessed March 4, 2013); Vinod Aggarwal, “Reluctance to Lead: U.S. Trade Policy in Flux,” Business and Politics, Vol. 11, No. 3 (2009), p. 3, http://basc.berkeley.edu/pdf/articles/Relutance%20to%20Lead%20US%20Trade%20Policy%20in%20Flux.pdf (accessed March 4, 2013); and Minxin Pei, “Intellectual Property Rights: A Survey of the Major Issues,” Asia Business Council, September 2005, p. 6, http://www.asiabusinesscouncil.org/docs/IntellectualPropertyRights.pdf (accessed March 4, 2013).

[8] Ian F. Fergusson and Bruce Vaughn, “The Trans-Pacific Partnership Agreement,” Congressional Research Service, January 10, 2011, http://assets.opencrs.com/rpts/R40502_20110110.pdf (accessed March 4, 2013).

[9] 2011 U.S. Intellectual Property Enforcement Coordinator, “Annual Report on Intellectual Property Enforcement,” The White House, March 2012, http://www.whitehouse.gov/sites/default/files/omb/IPEC/ipec_annual_report_mar2012.pdf (accessed March 4, 2013).

[10] “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” The White House, February 2013, http://www.whitehouse.gov//sites/default/files/omb/IPEC/admin_strategy_on_mitigating_the_theft_of_u.s._trade_secrets.pdf (accessed March 4, 2013).

[11] International Chamber of Commerce, “Cross-Retaliation Under the WTO Dispute Settlement Mechanism Involving TRIPS Provisions,” June 29, 2012, http://www.wto.org/english/forums_e/ngo_e/cross_retaliation_2012_e.pdf (accessed March 4, 2013).

[12] Trans-Pacific Strategic Economic Partnership Agreement, Main Agreement, pp. 11–19, http://www.mfat.govt.nz/downloads/trade-agreement/transpacific/main-agreement.pdf (accessed March 4, 2013).

[13] Antoine Bouet, “The Expected Benefits of Trade Liberalization for World Income and Development: Opening the ‘Black Box’ of Global Trade Modeling,” International Food Policy Research Institute Food Policy Review No. 8, 2008, http://www.ifpri.org/sites/default/files/publications/pv08.pdf (accessed March 4, 2013), and Gregory Corcos, Massimo Del Gatto, Giordano Mion, and Gianmarco I. P. Ottaviano, “Productivity and Firm Selection: Quantifying the ‘New’ Gains from Trade,” Intangible Assets and Regional Economic Growth Working Paper No. 05/14, March 2009, http://www.iareg.org/fileadmin/iareg/media/papers/wp5-14_Corcos_Del_Gatto_Mion_Ottaviano.pdf (accessed March 4, 2013).

[14] Chris Edwards, “Agricultural Regulations and Trade Barriers,” CATO Institute, June 2009, http://www.downsizinggovernment.org/agriculture/regulations-and-trade-barriers (accessed March 4, 2013).

[15] Merchant Marine Act of 1920, 46 U.S. Code § 27, 2002, p. 6, http://www.upa.pdx.edu/IMS/currentprojects/TAHv3/Content/PDFs/Jones_Act_1920.pdf (accessed March 4, 2013), and Terry Miller and James Jay Carafano, “Lets Pull the Plug on the Jones Act,” Heritage Foundation Commentary, July 3, 2010, http://www.heritage.org/research/commentary/2010/07/lets-pull-the-plug-on-the-jones-act.

[16] Christian Broda and John Romalis, “Inequality and Prices: Does China Benefit the Poor in America?” Banco de Portugal, March 10, 2008, p. 2, http://www.bportugal.pt/en-US/EstudosEconomicos/Conferencias/Documents/2008MonetaryPolicy/John_Romalis.pdf (accessed March 4, 2013).

[17] Bureau of Labor Statistics, “Current Employment Statistics–CES (National), 2012, http://www.bls.gov/web/empsit/ceseeb1a.htm (accessed March 4, 2013), and Derek Scissors, Charlotte Espinoza, and Terry Miller, “Trade Freedom: How Imports Support U.S. Jobs,” Heritage Foundation Backgrounder No. 2725, September 12, 2012, http://www.heritage.org/research/reports/2012/09/trade-freedom-how-imports-support-us-jobs (accessed March 4, 2013).

[18] Paul Brenton, “Notes on Rules of Origin with Implications for Regional Integration on Southeast Asia,” PECC Trade Forum, April 22–23, 2003, http://www.pecc.org/publications/papers/trade-papers/4_ROO/2-brenton.pdf (accessed March 4, 2013); Masahiro Kawai and Ganeshan Wignaraja, “The Asian ‘Noodle Bowl’: Is It Serious for Business?” Asian Development Bank Institute Working Paper No. 136, April 2009, http://www.adbi.org/files/2009.04.14.wp136.asian.noodle.bowl.serious.business.pdf (accessed March 4, 2013); and Carolyn L. Evans, “Bilateralism, Multilateralism, and Trade Rules,” Federal Reserve Bank of San Francisco Economic Letter, January 9, 2012, http://www.frbsf.org/publications/economics/letter/2012/el2012-01.html (accessed March 4, 2013).

[19] “Rules of Origin, Communication from Hong Kong,” GATT Negotiating Group on Non-Tariff Measures, September 15, 1989, http://www.wto.org/gatt_docs/English/SULPDF/92080053.pdf (accessed March 4, 2013).

[20] Byron Dorgan and Sherrod Brown, “How Free Trade Hurts,” The Washington Post, December 23, 2006, http://www.washingtonpost.com/wp-dyn/content/article/2006/12/22/AR2006122201020.html (accessed March 4, 2013).

[21] William H. Cooper et al., “The Proposed U.S.–South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications,” Congressional Research Service, August 9, 2011, http://fpc.state.gov/documents/organization/171373.pdf (accessed March 4, 2013).

[22] Faizel Ismali, “Is the Doha Round Dead? What Is the Way Forward?” University of Manchester Brooks World Poverty Institute Working Paper No. 167, May 2012, http://www.bwpi.manchester.ac.uk/resources/Working-Papers/bwpi-wp-16712.pdf (accessed March 4, 2013), and Alan Beattie, “Negotiators Sift Debris,” Financial Times, July 29, 2008, http://www.ft.com/intl/cms/s/0/dde1e23a-5da0-11dd-8129-000077b07658.html (accessed March 4, 2013).

[23] News release, “Obama Administration Strengthens Enforcement of U.S. Trade Laws in Support of President’s National Export Initiative,” United States Department of Commerce, August 26, 2010, http://www.commerce.gov/news/press-releases/2010/08/26/obama-administration-strengthens-enforcement-us-trade-laws-support-pr (accessed March 4, 2013).

[24] Julia Gray, “Politics and Patronage: The Function of Dysfunctional Regional Trade Agreements,” Princeton University, April 23, 2010, http://www.princeton.edu/~pcglobal/conferences/ptas/Gray_pta_paper.pdf (accessed March 4, 2013); Pascal Mossay and Takatoshi Tabuchi, “Preferential Trade Agreements Harm Third Countries,” University of Reading and University of Tokyo, September 14, 2012, http://ideas.repec.org/p/cor/louvco/2012035.html (accessed March 4, 2013); and Australian Government, “Bilateral and Regional Trade Agreements,” Productivity Commission Research Report, November 2010, http://www.pc.gov.au/__data/assets/pdf_file/0010/104203/trade-agreements-report.pdf (accessed March 4, 2013).

[25] United States Census Bureau, “Top Trading Partners–Total Trade, Exports, Imports, Year-to-Date December 2012,” http://www.census.gov/foreign-trade/statistics/highlights/top/top1212yr.html (accessed March 4, 2013).

[26] Sanchita Basu Das, “RCEP and TPP: Comparisons and Concerns,” Institute of Southeast Asian Studies, January 7, 2013, http://www.iseas.edu.sg/documents/publication/ISEAS%20Perspective%202013_2.pdf (accessed March 4, 2013).

http://www.heritage.org/research/reports/2013/03/what-a-good-trans-pacific-partnership-looks-like

Super Syed Mokhtar eyes MAS

February 22, 2013

Super Syed Mokhtar eyes Malaysia Airlines (MAS)

by Jose Barrock@www.kinbiz.com

Businessman Syed Mokhtar Albukhary is proposing to the Federal Government to take over national investment arm, Khazanah Nasional Bhd’s 6.3 percent equity interest in ailing Malaysia Airlines, sources said.

While details of the businessman’s proposed takeover are not known, part of the deal may involve a long-term fuel subsidy by the government for as many as 60 years, they added.  However, one source close to Syed Mokhtar denied such a proposal to take over MAS. “We are strongly denying it….This is all just election play,” he said.

However two separate sources confirmed that such a deal is being contemplated at the moment although details are sketchy because it is still early yet. Khazanah did not respond to questions sent. At present, Syed Mokhtar’s airline related assets include the Sultan Ismail Airport in Johor, which is owned by Senai Airport Terminal Services Sdn Bhd. This was acquired from Malaysia Airport Holdings Bhd, another Khazanah controlled entity, for RM80 million in 2003.

Johor Port

He also controls two ports, Port of Tanjung Pelepas Sdn Bhd and Johor Port Bhd, both under his flagship MMC Corp Bhd. He is also understood to be close to buying Penang Port Sdn Bhd. MMC is also doing a due diligence of Keretapi Tanah Melayu, the state controlled train operator.

Syed Mokhtar controlled DRB-Hicom Bhd last year took over auto maker Proton Holdings Bhd, and postal services operator Pos Malaysia Bhd. This adds on to DRB-Hicom’s existing banking, property and automobile distribution and assembly business.  The businessman’s current thrusts seem to be hinged on entering into all the key transportation and logistic areas in  Malaysia. But his reach extends far beyond that.

Many choice assets under Syed Mokhtar

 Syed Mokhtar’s flagship company is MMC in which he has a 51.76 percent equity interest. MMC’s interests include power generation via Malakoff Bhd, the two ports and engineering and water distribution among a whole host of others assets.

Recently Puncak Semangat Sdn Bhd, a company believed to be linked to the businessman was awarded the lion’s share of the 2.6 GHz spectrum for 4G-LTE (long term evolution). Puncak Semangat bagged 40 MHz, while the other seven were only awarded 20 MHz.

Recent news reports have speculated that Syed Mokhtar is looking to take over NCB Holdings Bhd’s port operation arm Northport (M) Bhd, after he bid for Penang Port Sdn Bhd.  Other than MMC and DRB his other vehicle is Tradewinds (M), which has plantations, sugar distribution and a monopoly of rice distribution via Padiberas Nasional Bhd.

The businessman had also attempted to buy PLUS Expressways Bhd from Khazanah, but that attempt was thwarted by Khazanah owned UEM Group Bhd and the Employees Provident Fund (EPF).

Many market watchers are questioning why so many choice assets are being sold to Syed Mokhtar. Hs aides defend the moves.  “But to his credit, he takes control of the assets via bidding higher than other players.

For example about 10 years ago, Syed Mokhtar’s private company Restu Jernih (Sdn Bhd) bought 32 percent of Pernas (International Holdings Bhd which has since morphed into Tradewinds) for close to RM500 million (RM497 million) or about RM2.10 a Pernas share and 64 sen per Pernas warrant from Perbadanan Nasional Bhd. ….it was not a sweetheart deal, he paid much more than the market price for the company,” an aide of Syed Mokhtar says.

At that time he forked out more than a 200 per cent premium for the shares and warrants of Pernas.  Pernas was set up in 1969 to promote Malay capital ownership, but the lumbering giant corporation failed in its agenda, and bled losses for the longest time.

As such the deal was viewed by many as a bailout.  Some bankers view Syed Mokhtar as a systemic risk, with his ballooning debts. While debt levels are high, his businesses are sustaining and performing well. For instance, his flagship MMC, as at end September 2012, had RM17.72 billion in long term borrowings, while the company’s short term debt commitments stood at RM4.04 billion. Much of this debt level comes from 51 percent in power generation unit Malakoff Bhd.

DRB-Hicom meanwhile as at end September had non-current liabilities of RM4.07 billion and short term debt of RM2.27 billion.  Tradewinds (M) had long-term liabilities of RM2.04 billion and short term borrowings amounting to RM1.74 billion.

Mixed misfortunes

For the nine months ended September last year, Malaysia Airlines suffered a pre-tax loss of RM477.96 million from RM9.89 billion in sales, a loss per share of 14.48 sen. However Malaysia Airlines in its notes which accompany its financials said that it recorded an operating profit of RM4 million for the third quarter ended Sept 30, 2012, compared to RM191.8 million in operating losses, for the quarter ended Sept 30, 2011.  An analyst from a bank backed research outfit said that Malaysia Airlines in the past, had several problems, such as aging airplanes, and legacy issues, such as flying to many unprofitable destinations.

He says that things however are picking up, and he highlights the break even in operating profit in September last year. “The management is doing something right obviously,” he said. The analyst added that he expects the airline to post “convincing profits” in the final quarter of FY2012.

Tajuddin Ramli  MAS’ story is a sad one riddled with cases of mismanagement. Last year former controlling shareholder and executive chairman of MAS, Tajudin Ramli settled out of court three lawsuits the national carrier had against him.

Tajuddin who was closely linked to former Finance Minister Daim Zainuddin was the poster boy for Malay entrepreneurs, and was the airlines Executive Chairman from 1994 to 2001.  His entry into MAS in 1994 came about when the Government sold 32 percent of MAS to his vehicle Naluri for RM1.79 billion.

Then in 2000, the Government acquired Naluri’s 29 percent stake in MAS for RM8 per share, which was double its market price then.  After much legal wrangling, a High Court decision in December 2009 ordered MAS’ Chief to pay Danaharta, the state asset management manager, RM589.14 million plus two per cent interest per year over the base lending rate backdated to January 1, 2006.  But eventually Tajuddin settled out of court, for an undisclosed sum. Tajuddin meanwhile has claimed that his purchase was forced “national service”.

Nordic Countries: Lessons in Good Governance

February 2, 2013

http://www.economist.com/news/special-report/21570835-nordic-countries-are-probably-best-governed-world-secret-their

LESSONS

The secret of their success: Good Governance and Pragmatism

The Nordic countries are probably the best-governed in the world

CECIL RHODES ONCE remarked that “to be born an Englishman is to win first prize in the lottery of life.” Today the same thing could be said of being born Nordic. The Nordic countries have not only largely escaped the economic problems that are convulsing the Mediterranean world; they have also largely escaped the social ills that plague America. On any measure of the health of a society—from economic indicators like productivity and innovation to social ones like inequality and crime—the Nordic countries are gathered near the top (see table).

Why has this remote, thinly populated region, with its freezing winters and expanses of wilderness, proved so successful? There was a time when most of its population would have unhesitatingly praised their government, which for most of the 20th century meant the social democrats in one of their various national guises. The government had provided the people with cradle-to-grave welfare services, rescuing them from the brutal life of their 19th-century forebears, and stepped in to save the capitalist economies from their periodic crises.

But free-marketers have poked holes in the pro-government explanation and offered a powerful alternative. In the period from 1870 to 1970 the Nordic countries were among the world’s fastest-growing countries, thanks to a series of pro-business reforms such as the establishment of banks and the privatisation of forests. But in the 1970s and 1980s the undisciplined growth of government caused the reforms to run into the sands. Free-marketers put the region’s impressive recent performance down to its determination to reduce government spending and set entrepreneurs free.

Government’s role in improving equality is also being questioned. Andreas Bergh, of Sweden’s Research Institute of Industrial Economics, argues that the compression of Swedish incomes took place before the arrival of the welfare state, which was a consequence rather than a cause of the region’s prosperity—and almost killed the goose that laid the golden eggs.

This special report has supported some of the free-marketers’ arguments. The Nordic countries had got into the habit of spending more on welfare than they could afford and of relying more on a handful of giant companies than was wise. They are right to try to trim their states and make life easier for business. But it would be wrong to ignore the role of government entirely.

The Nordic countries pride themselves on the honesty and transparency of their governments. Nordic governments are subject to rigorous scrutiny: for example, in Sweden everyone has access to all official records. Politicians are vilified if they get off their bicycles and into official limousines.

The Nordics have added two other important qualities to transparency: pragmatism and tough-mindedness. On discovering that the old social democratic consensus was no longer working, they let it go with remarkably little fuss and introduced new ideas from across the political spectrum. They also proved utterly determined in pushing through reforms. It is a grave error to mistake Nordic niceness for softheadedness.

Pragmatism explains why the new consensus has quickly replaced the old one. Few Swedish Social Democratic politicians, for instance, want to dismantle the conservative reforms put in place in recent years. It also explains why Nordic countries can often seem to be amalgams of left- and right-wing policies.

Pragmatism also explains why the Nordics are continuing to upgrade their model. They still have plenty of problems. Their governments remain too big and their private sectors too small. Their taxes are still too high and some of their benefits too generous.The Danish system of flexicurity puts too much emphasis on security and not enough on flexibility. Norway’s oil boom is threatening to destroy the work ethic.

It is a bad sign that over 6% of the workforce are on sick leave at any one time and around 9% of the working-age population live on disability pensions. But the Nordics are continuing to introduce structural reforms, perhaps a bit too slowly but stolidly and relentlessly. And they are doing all this without sacrificing what makes the Nordic model so valuable: the ability to invest in human capital and protect people from the disruptions that are part of the capitalist system.

Getting to Denmark

Most of the rich world now faces the same problems that the Nordics faced in the early 1990s—out-of-control public spending and overgenerous entitlement programmes. Southern Europe needs a dose of Nordic tough-mindedness if it is to get its finances under control. And America needs a dose of Nordic pragmatism if it is to have any chance of reining in entitlements and reforming the public sector.

The Nordics are hardly blushing violets when it comes to advertising the virtues of their model. Nordic think-tanks produce detailed studies in English about how they reformed their states. Nordic politicians fight their corner in international meetings and Nordic consultants sell their public-sector expertise around the world. Dag Detter played a leading role in restructuring the Swedish state’s commercial portfolio in the 1990s, representing more than a quarter of the business sector. He has since advised governments in Asia and across Europe.

Yet it is hard to see the Nordic model of government spreading quickly, mainly because the Nordic talent for government is sui generis. Nordic government arose from a combination of difficult geography and benign history. All the Nordic countries have small populations, which means that members of the ruling elites have to get on with each other. Their monarchs lived in relatively modest places and their barons had to strike bargains with independent-minded peasants and seafarers.

They embraced liberalism early. Sweden guaranteed freedom of the press in 1766, and from the 1840s onwards it abolished preference for aristocrats in handing out top government jobs and created a meritocratic and corruption-free civil service. They also embraced Protestantism—a religion that reduces the church to a helpmate and emphasises the direct relationship between the individual and his God. One of the Lutheran church’s main priorities was teaching peasants to read.

The combination of geography and history has provided Nordic governments with two powerful resources: trust in strangers and belief in individual rights. A Eurobarometer survey of broad social trust (as opposed to trust in immediate family) showed the Nordics in leading positions (see chart below). Economists say that high levels of trust result in lower transaction costs—there is no need to resort to American-style lawsuits or Italian-style quid-pro-quo deals in order to get things done. But its virtues go beyond that. Trust means that high-quality people join the civil service. Citizens pay their taxes and play by the rules. Government decisions are widely accepted.

 

The World Values Survey, which has been monitoring values in over 100 countries since 1981, says that the Nordics are the world’s biggest believers in individual autonomy. The Nordic combination of big government and individualism may seem odd to some, but according to Lars Tragardh, of Ersta Skondal University College, Stockholm, the Nordics have no trouble reconciling the two: they regard the state’s main job as promoting individual autonomy and social mobility. Any piece of Nordic social legislation—particularly the family laws of recent years—can be justified in terms of individual autonomy.

Universal free education allows students of all backgrounds to achieve their potential. Separate taxation of spouses puts wives on an equal footing with their husbands. Universal day care for children makes it possible for both parents to work full-time. Mr Tragardh has a useful phrase to describe this mentality: “statist individualism”.

Nordic people take this attitude to government with them when they go abroad. In the 19th and early 20th centuries some 1.3m people, a quarter of the Swedish population at the time, emigrated, mostly to the United States. America created an entire genre of jokes about “dumb Swedes” and their willingness to obey rules. These dumb Swedes created the best-governed enclaves in America, such as Minnesota. Even today Americans with Nordic roots are 10% more likely than the average American to believe that “most people can be trusted”.

Size isn’t everything

Economists frequently express puzzlement about the Nordic countries’ recent economic success, given that their governments are so big. According to a professional rule of thumb, an increase in tax revenues as a share of GDP of ten percentage points is usually associated with a drop in annual growth of half to one percentage point. But such numbers need to be adjusted to allow for the benefits of honesty and efficiency.

The Italian government, for instance, imposes a heavy burden on society because the politicians who run it are mainly concerned with extracting rent rather than providing public services. Goran Persson, a former Swedish Prime Minister, once compared Sweden’s economy with a bumblebee—“with its overly heavy body and little wings, supposedly it should not be able to fly—but it does.” Today it is fighting fit and flying better than it has done for decades.

Singapore: Niche Diplomacy through water expertise

January 31, 2013

by Mely Caballero-Anthony and P. K. Hangzo, RSIS

Through strategic planning and investment in research and technology, strong political will, and effective governance, Singapore has emerged from water insecurity to become a global hydrohub.

It has built a robust and diversified range of water sources and has successfully addressed its water challenges in the process. As a result it has earned international recognition as a model city for water management. This has also led to a new direction in its water diplomacy, which is no longer centred on securing Singapore’s water supply from Malaysia.

Singapore has in recent years capitalised on its domain expertise in water management. In the process, its water diplomacy has taken on the character of ‘niche diplomacy’. The term was coined to describe how middle powers, through their ideas and positive international impression, can influence international issues regardless of their size and lack of military power. Singapore, in this context, has been able to turn its niche expertise in the management of an increasingly important resource — water — into an approach to diplomacy that has allowed it to enhance its regional and international standing and influence.

It has done this through sharing water expertise as well as humanitarian activities. Singapore’s growing expertise in water management has also enabled the country to set the agenda on a number of global water issues, including water standards, which remain a challenge worldwide.

In March 2012, the Technology and Water Quality Office of Singapore’s national water agency, the Public Utility Board (PUB), was designated World Health Organization (WHO) Collaborating Centre for safe drinking water management and integrated urban water management. Under this arrangement, Singapore serves as the WHO’s regional policy research hub on relevant concerns, such as regulatory issues, water industry structure and water pricing. It will also conduct capacity-building activities and training courses for WHO member states, particularly those in Southeast Asia and the Western Pacific region.

Urban water security has become an important policy agenda in most countries. Cities in developing countries are under pressure to meet the burgeoning demand for water brought about by rapid economic and population growth. With the number of people living in urban areas projected to increase from 3.6 billion in 2011 to 6.3 billion by 2050, the situation is set to become more critical. However, it presents significant opportunities for Singapore to contribute to tackling global water security challenges.

There are already several Singaporean projects along these lines. For example, the Singapore Cooperation Enterprise (SCE) signed an agreement in 2011 with the government of Mauritius to assist it to develop a system capable of providing an uninterrupted supply of potable water, to reduce non-revenue water to a minimum, to improve the country’s Total Water Management system and to develop a plan to meet increasing and changing needs.

In June 2012 the SCE also signed an agreement with the Delhi Jal Board (DJB) in India to set up waste-water treatment plants to generate water for consumption. The program is co-funded by DJB and the Temasek Foundation, and will establish a water reclamation plant with 40 million gallons per day capacity. It is projected that this plant will benefit 3–4 million consumers.

The SCE and Temasek Foundation established a similar arrangement with the Bangalore Water Supply and Sewage Board (BWSSB) of the city of Bangalore in southern India. BWSSB officials would be trained to manage, operate and maintain recycle-and-reuse plants and would also help them develop strategies to raise public awareness and acceptance of recycled waste-water.

Singapore is increasingly integrating its water expertise into its response strategy for humanitarian emergencies in Southeast Asia. In the wake of the devastating floods in Thailand in 2011, which caused more than 800 deaths, PUB delivered water quality monitoring equipment to Thailand’s Metropolitan Waterworks Authority (MWA). PUB, together with industry partners, also provided training to MWA staff on risk assessment and water safety plan formulation, as well as laboratory services for the testing of water samples.

Other initiatives have involved tackling more chronic needs. Through the Water for Life project launched by the Singapore International Foundation in 2010, Singapore helped rural communities in Siem Reap, Cambodia, to gain access to clean water, providing some 2000 bio-sand filters to help reduce the incidence of water-borne diseases. This was followed by a similar project in Kampong Speu.

Singapore has made determined efforts to extend its water expertise beyond its shores. Its niche expertise in water has strengthened its ties with other states and increased its influence at the regional and international level.

Mely Caballero-Anthony is Associate Professor and Head of the Centre for Non-Traditional Security (NTS) Studies, S. Rajaratnam School of International Studies, Nanyang Technological University.

P. K. Hangzo is Associate Research Fellow at the Centre for Non-Traditional Security (NTS) Studies, S. Rajaratnam School of International Studies, Nanyang Technological University.

A version of this article was first published here in NTS Insight, and appeared here as RSIS Commentary No. 221/2012.

http://www.eastasiaforum.org/2013/01/31/singapore-niche-diplomacy-through-water-expertise/

Sudut Fikiran Bakri Musa

28hb. Januari, 2013

http://suaris.wordpress.com

I  Masa Depan Melayu

Kalau lebih ramai lagi memberi dan menyumbang daripada mereka yang bergantung dan menerima, cepatlah maju masyarakat itu…

Dr Bakri Musa agak asing kepada sesetengah pembaca Malaysia. Tambahan pula kepada sesetengah pembaca yang kurang terdedah dengan medium internet berbahasa Inggeris, maka mereka dijangka sedikit kerugian apabila idea-idea bernas dari penulis dan pemikir hebat seperti Dr Bakri tidak dapat diakses kepada mereka.

Suaris telah mengambil inisiatif untuk mendekatkan pembaca berbahasa Melayu khususnya dengan buah fikiran Dr Bakri. Selaku anak kelahiran negeri Sembilan, dan mewakili generasi awal Bumiputera yang mendapat peluang pendidikan luar Negara, Dr Bakri tidak pernah melupakan asal-usulnya dan membalas budi tanah airnya melalui senarai idea dan tulisan, yang sebahagiannya dibukukan.

Terbaru, beliau muncul dengan koleksi tulisannya yang diberi judul ‘Liberating The Malay Mind’ yang diterbit oleh ZI Publication. Sekalipun bermastautin di Amerika Syarikat, membaca naskah tulisan beliau menyebabkan kita berasa amat dekat dengannya.

Dalam kesempatan ini, Dr Bakri berbincang mengenai topik yang penting dan amat relevan dengan situasi orang Melayu di Negara kita, iaitu “Bangsa Melayu dan Masa Depan’. Warga Melayu dilihat berada di persimpangan dalam banyak perkara; persimpangan politik, ekonomi, pembangunan, pendidikan dan sosial amnya. Pendek kata, bagaimanakah rupa perkembangan masa depan orang Melayu dalam dekad akan datang dan bagaimanakah mereka akan menghadapinya?

Ikuti wawancara tersebut selengkapnya.

Suaris:  Apa khabar Dr? Diharapkan Dr dan isteri sentiasa sihat dan diberkati Allah hendaknya.

Dr Bakri:  Beres!  Sehat sahaja, Alhamdullillah!

Suaris : Dr banyak menulis berkenaan ketidaksediaan orang Melayu dalam menghadapi masa depan mereka? Sejauh mana tidak bersedianya mereka ini?

Dr Bakri : Di dalam buku saya Towards A Competitive Malaysia (Ke arah Malaysia Membangun) saya mengemukakan kesimpulan ini: Kemajuan atau kemunduran sesuatu masyarakat dan negeri tergantung kepada empat tiang – pemimpin (leaders), rakyat (people), budaya (culture), dan alam sekitar (geography).

Daripada empat unsur itu, hanya satu sahaja – alam sekitar – yang tidak boleh di ubah. Sama ada negara itu kaya dengan minyak dan tanahnya subur adalah berkat daripada Tuhan. Bersyukur dan untunglah rakyatnya.

Tetapi kalau negara yang bertuah itu mempunyai pemimpin yang korup dan tidak bijak, rakyatnya tidak mempunyai kebolehan atau kepakaran, dan budayanya merosot dan suka membazir, lama kelamaan masyarakat itu akan mundur. Banyak contoh di dunia sekarang, antaranya Brunei dan negera Arab.

Di sebaliknya, jika alam atau geografi negeri itu tidak bertuah, tanahnya penuh dengan gunung-gunung yang tinggi dan dibalut salji yang tebal, dan cuacanya sejuk menyebabkan tanaman boleh tumbuh hanya empat atau lima bulan sahaja setahun, tetapi jika mutu pemimpin, rakyat dan budaya masyarakat itu tinggi, ia akan maju dan terus maju. Contohnya Switzerland.

Kita mudah faham betapa mustahaknya pemimpin yang bijak, cekap dan beramanah. Pemimpin yang saya maknakan bukan sahaja dalam medan politik dan pentabiran negeri (menteri dan penghulu), tetapi juga dalam agama (mufti dan ustaz), masyarakat (sultan dan raja raja), pendidikan (professor dan guru guru), ibu bapa dll.

Mutu rakyat atau modal insan (human capital) tergantung kepada dua ukuran: kesihatan dan pendidikan. Kalau rakyat kita tidak sihat (ketagih dadah, dijangkiti malaria dan denggi), mereka tidak akan cekap dan berupaya. Kalau dasar pelajaran kita mundur, pemuda pemudi kita tidak akan mahir.

Seseorang makhluk itu adalah menyumbang dan memberi, atau bergantung dan menerima daripada masyarakat. Kalau lebih ramai lagi memberi dan menyumbang daripada mereka yang bergantung dan menerima, cepatlah maju masyarakat itu. Sebaliknya jika lebih ramai menerima dan bergantung cepatlah mundur masyarakat atau negeri itu.

Apa yang saya maksudkan dengan istilah budaya ialah acara acara, badan-badan serta adat resam dan nilai-nilai masyarakat itu.

Cuba ambil badan-badan. Bila saya beli daging di kedai saya tahu ada badan-badan dan undang-undang yang mengesahkan bahawa daging itu bersih dan halal. Kalau tidak, ramai pembeli yang akan sakit dan mati akibat makan daging busuk. Bagitu juga jika kita tidak ada badan dan undang-undang yang kita tidak percayai, siapa yang akan mengesahkan bahawa rumah yang saya nak beli itu betul-betul dipunyai oleh si penjual? Banyak masa and jasa akan membazir hanya untuk mengesahkan yang penjual betul-betul tuan punya harta yang nak dijual.

Bagitu juga bila saya simpan wang di bank, saya yakin duit saya itu tidak akan hilang dilarikan oleh manager bank itu.

Tentang nilai budaya, jika kita hormatkan penipu, pencuri dan penyangak, itu memberi tauladan kepada orang ramai terutama yang muda. Mereka pun akan menjadi penyamun dan pencuri seperti kaum Mafia di Italy Selatan.

Keempat empat unsur-unsur itu bertindak balas antara satu dan lain. Maknanya, rakyat yang bijak akan memilih atau mengundi pemimpin yang sama bijak dan tidak akan melayan atau tunduk kepada pemimpin yang angkuh dan penipu. Bagitu juga pemimpin yang bijak akan membina dasar pendidikan yang membolehkan murid murid menerima ilmu dan kemahiran yang membolehkan mereka menjadi rakyat yang soleh.

Rakyat dan pemimpin yang bijak akan mengunakan dan memelihara alam sekitar nya dengan bijak. Misalnya Cancun, Mexico, dalam tahun lima puluhan dulu adalah satu kampung nelayan yang miskin. Tetapi oleh kebijakan pemimpin serta mutu rakyat yang bertambah tinggi, Cancun sekarang bukan lagi pusat nelayan tetapi pusat pelancongan yang masyhur dan maju. Nelayan yang dahulunya miskin sekarang mewah berkerja sebagai “tour guide” untuk pelancong dari America dan Europah yang tiba beribu untuk memancing sebagai sport.

Bila kita periksa keadaan masyarakat Melayu sekarang dari sudut keempat empat elemen yang saya terangkan diatas, iaitu pemimpin, mutu rakyat, budaya, dan alam sekitar kita, apakah markah yang patut kita bagi?

Cuba tengok alam sekitar kita. Pantai-pantai kita indah, ombaknya biru, airnya tidak sejuk, dan matahari selalu sahaja bercahaya. Patutnya berjuta orang Eropah dan Jepun melancong ke negeri kita. Kalah Cancun! Apa sebab tidak begitu? Tengoklah, sampah merata rata, kemudahan awam saperti tandas dan bilik mandi tak ada, kalau ada pun kotor.

Di mana salahnya?  Pemimpin? Betul! Rakyat? Betul juga! Budaya? Susahlah nak cakap! Di dalam buku saya Towards A Competitive Malaysia saya huraikan pelbagai cara memimpin, cara-cara untuk meninggikan mutu rakyat, meninggikan unsur-usur budaya kita, serta membela alam sekitar kita supaya mengutungi masyarakat.

II   Melayu Perlu Merdeka

Masyarakat Melayu sekarang berkehendakkan pertolongan racun Roundup bukan baja Urea untuk menghapuskan ahli lalang dalam masyarakat kita. Kebun kita sudah dibanjiri lalang…

DALAM siri temuramah Suaris bersama Dr Bakri Musa bahagian kedua, Dr menyatakan pentingnya orang Melayu bersama pemimpin-pemimpinnya melakukan anjakan dengan mengubah pemikiran mereka ke arah kemajuan dan rasionaliti. Mereka tidak sepatutnya taksub kepada ajaran mahu pun arahan yang meminta mereka supaya berfikiran jumud, mundur ke belakang sekalipun arahan itu datangnya dari seorang ulama atau pemimpin utama. Mereka juga diseru supaya membuang kebergantungan berlebihan mereka kepada tongkat (bantuan kerajaan) supaya mereka lebih berdikari dan percaya diri.

Ikuti temuramah tersebut selengkapnya.

Suaris:  Dr Mahathir dalam satu rancangan di Astro Awani beberapa hari lepas berkata orang Melayu akan terus ketinggalan sekiranya tidak dibantu, yang diistilahkan beliau sebagai tongkat. Adakah Dr bersetuju orang Melayu terus diberikan tongkat berkenaan. Sampai bila bantuan ini perlu diteruskan?

Dr Bakri:  Kalau orang Melayu sekarang masih lagi kebelakangan selepas lebih daripada 55 tahun di “bantu” oleh kerajaan UMNO, kita patut periksa dengan teliti apakah yang disifatkan “bantuan” itu.

Sebagai ibu bapa kita sedia maklum betapa mustahaknya cara kita membantu anak anak kita. Kalau kita selalu sahaja memanjakan, jangan harapkan mereka menjadi cemerlang. Kalau kita terlalu kuat atau “strict,” mungkin mereka akan hilang ketegasan sendiri (self-confidence). Begitu juga kalau kita selalu memburukkan dan memberatkan kelemahan mereka.

Dalam rawatan moden, seseorang yang sudah dibedah tulang punggungnya jarang diberi tongkat; kalau diberi hanya untuk seminggu dua sahaja. Sebaliknya, pesakit diberi physiotherapy untuk tujuan berjalan sendiri tanpa tongkat. Pesakit yang saya bedah, pada keesokan harinya saya menyuruh dia bangun berjalan tanpa pertolongan.

Banyak bahayanya jika si pesakit terbaring sahaja di atas katil, antaranya darah beku (blood clot) yang boleh mengakibatkan maut. Pesakit yang saya bedah kerana appendicitis biasanya keluar dari hospital pada esok hari dan kembali berkerja dalam tempoh seminggu. Dua puloh tahun dahulu pesakit seumpama (akan mengambil masa yang lama) baru nak keluar dari hospital!

Satu wawasan perubatan ialah jika badan kita (sama ada urat, tulang, dan juga otak) tidak di kerjakan atau dilatih ia akan menjadi lemah dan reput. Jika saya ikatkan bujang (pemuda) yang kuat dan sehat di atas katil dan “bantu” dia makan, mandi dan sebagainya supaya dia tak payah pun bergerak satu urat, tak sampai seminggu hamba Allah itu tidak akan boleh bangun sendiri; dia akan memohon tongkat sebab badannya sudah menjadi lemah. Itu bahayanya “menolong” berlebih- lebihan.

Kita perlu kaji dengan teliti mengapa “pertolongan” yang diberi kepada kaum kita oleh kerajaan UMNO tidak berkesan.

Dr. Mahathir pernah merawat pesakit. Kalau si pesakit tidak sembuh dengan ubat dan rawatan yang diberi, patutkah si doktor terus dengan ubat dan rawatan yang sama bertahun- tahun? Mungkin si pesakit patut dibantu dengan Penicillin, bukan Panadol.

Kadang kadang, walau pun ubat yang diberi itu sesuai, mungkin sukatan yang diberi tidak mencukupi atau berlebihan. Betul, Panadol akan menurunkan demam, tetapi hanya jika diberi dalam sukatan yang berpatutan. Kalau diberi suku pil sahaja, demam takkan turun, dan kita akan salahkan ubat!

Kalau kita bagi ubat berlebihan, itu pun boleh menjadi bisa dan bahaya. Di Amerika setiap tahun berapa orang kanak-kanak maut kerana ibu memberi Tylenol (ubat seperti Panadol) berlebihan mengikut sukatan yang sesuai untuk orang dewasa.

Kalaupun kita bagi ubat yang sesuai serta sukatan yang berpatutan tetapi pesakit masih tidak sembuh, ini bermakna kita patut dan mesti tukar “diagnosis” dan rawatan kita. Penyakit seperti appendicitis memerlukan pembedahan, bukan penicillin.

Mungkin pembaca kurang selesa dengan metafora perubatan, jadi saya gunakan gambaran peladang. Di ladang, kalau kita tidak cabutkan dengan habis-habisan termasuk uratnya, lalang akan gembur dan menimbun serta merosakkan tanaman yang berharga. Apa lagi kalau kita “tolong” lalang itu dengan membajakannya!

Kebun UMNO sekarang ditimbuni lalang. Kalau kita hendak menolong UMNO dan orang Melayu pada umumnya, kita patut semburkan racun Round Up untuk membunuh lalang-lalang itu supaya kita boleh tanam benda yang berguna dan mereka berpeluang bangun. Tetapi apa yang kita buat sekarang? Kita bajakan lalang! Alasannya, betul lalang, tetapi lalang Melayu! Kita mesti tolong sebab Melayu!

“Pertolongan” yang dihebohkan oleh Dr. Mahathir dan pemimpin-pemimpin UMNO saya sifatkan seumpama membajakan lalang. Akibatnya banyak dan lumayan lalang Melayu sekarang; Isa Samad sekarang sembur sebagai peneraju FELDA. Dia dibuktikan bersalah “wang politik” oleh kerabatnya dalam UMNO beberapa tahun lepas. Khir Toyo satu lagi lalang Melayu yang sekarang sembur dalam istana kayangannya yang dibiayai oleh (wang) rakyat.

Di bahagian swasta, lalang Tajuddin Ramli hampir mengorbankan kebun MAS. Banyak lagi lalang di Utusan dan New Straits Times. Dalilnya, pembaca NST sekarang tak sampai separuh daripada sepuluh tahun dahulu. Lalang Melayulah yang menimbun dan akhirnya memusnahkan Bank Bumiputra. Kita tidak hairan dengan kehijauan dan kesuburan lalang, walau pun lalang Melayu!

Pemimpin Melayu seperti Mahathir patut tekun mencari jalan lain yang lebih bererti dan berkesan untuk menolong kaum kita. Jangan hanya suka memuaskan hati dengan mencaci dan membangkitkan kononnya kelemahan bangsa kita. Masyarakat Melayu sekarang berkehendakkan pertolongan racun Roundup bukan baja Urea untuk menghapuskan ahli lalang dalam masyarakat kita. Kebun kita sudah dibanjiri lalang.

Ada pepatah Kristian yang saya terjemahkan lebih kurang seperti berikut. Kalau kita menolong si miskin dengan memberinya seekor ikan, dia akan dapat makan hanya sehari. Tetapi kalau kita tolong dengan mengajar dia mengail, dia akan dapat makan selama hidup. Kalau tolong lebih sedikit, seumpama memberi pinjaman untuk membeli sampan, dia akan mengail laut yang luas dan dapat menanggung sekampung.

Kita tidak menolong kaum kita dengan memberi kuota masuk universiti dengan senang, lesen mengimport dan kontrak-kontrak lumayan, atau menyuruh perusahaan bangsa lain mengambil pengarah-pengarah (biasanya ahli politik) Melayu. Jauh sekali! Itu hanya membajakan lalang. Mereka hanya “ersatz capitalists” atau perusahaan menenggek, bukan tulen.

Pertolongan yang lebih bermakna dan berkatnya berpanjangan ialah jika kita menolong orang Melayu berfikir sendiri. Bebaskan otak orang Melayu. Kalau ungkapan kita masa tahun lima puluhan dahulu ialah “Merdeka Tanah Melayu,” sekarang slogan kita mestilah, “Merdeka Minda Melayu!

Itulah tema buku saya terakhir, “Liberating The Malay Mind.” Apakah yang saya maksudkan dengan minda merdeka? Konsep ini lebih terang dijelaskan melalui cerita seorang alim, Mullah Nasaruddin. Ia terkenal kerana mengajar melalui contoh yang ringkas dan jenaka diri sendiri.

Dia ada jiran yang suka meminjam keldai Mullah tetapi lalai untuk mengembalikannya. Pada satu hari jiran itu datang untuk meminjam binatang itu. Pak Mullah, (yang telah) menjangkakan permintaan itu, telah dulunya menyorokkan binatang itu di dalam reban dan tidak ternampak dari luar. Bila jiran itu memohon, Mullah Nasaruddin dengan lenang membalas, “Keldai ku sudah dipinjam oleh abangku semalam.”

Bila jiran itu kecewa pusing balik, dia kedengaran binatang itu melaung dalam reban. “Kau katakan keldai telah dipinjam oleh abang kau.”

Mullah serta-merta menjawab, “Kau lebih percayai ringkikan keldai lebih daripada suara Mullah?” Seorang yang mempunyai minda merdeka lebih mempercayai laungan keldai itu; mereka yang mempunyai minda yang masih dipenjarakan oleh adat dan budaya akan turut mempercayai Mullah walaupun keldai itu ada di hadapan mata.

Kita mesti melatih orang Melayu supaya bila kita dengar laungan keldai kita mesti mempercayai telinga kita walau pun Pak Lebai mengatakan itu hanya suara rekaan sahaja.

Dalam buku terakhir, saya mengemukakan empat cara untuk membebaskan minda Melayu. Pertama, membebaskan sebaran am dan punca-punca maklumat dan berita serta pandangan. Kedua, mengadakan sistem pendidikan yang bebas (liberal education) dan berlandasan kukuh atas asas sains dan matematik.

Ketiga, mendorongkan perusahan dan perdagangan dalam masyarakat kita; iaitu mengalakkan orang Melayu menjadi kaum perusahaan. Bila kita berdagang, kita sifatkan orang bangsa lain bukan sebagai pendatang tetapi bakal pelanggan kita. Maknanya, asas keuntungan kita!

Keempat, kita mesti kaji semula bagaimana kita mengajar agama kepada anak- anak kita serta bagaimana kita mengamalkan agama yang suci ini. Islam telah membebaskan kaum Bedouin Arab yang kanun, membebaskan mereka dari Zaman Jahiliyah kepada Zaman Cahaya. Begitu juga Islam patut membebaskan orang Melayu memulai dengan membebaskan minda kita.

Tanpa membebaskan minda Melayu, tidak kira berapa billion pertolongan kita beri, seberapa lumayan kontrak, AP serta kuota-kuota lain kita hadiahkan, atau berapa senangnya anak-anak kita masuk universiti, itu semuanya tidak bermakna atau berkesan. Semuanya itu bukan “pertolongan” yang tulin, bahkan hanya candu untuk syok sendiri dan hisapan khayalan sahaja. Semuanya saya umpamakan membajakan lalang.

Sebagai negara merdeka Malaysia telah mencapai banyak kejayaan. Kalau kita merdekakan minda Melayu, tidak terhad kejayaan kita sebagai perseorangan dan juga sebagai masyarakat. Yang indahnya, bila minda kita merdeka, ia tidak boleh lagi dipenjarakan.

Tidak payahlah kita ragukan unsur-unsur seperti globalisasi dan neokolonial. Kita tidak lagi bimbang bila anak kita fasih dalam bahasa Inggeris atau bahasa asing. Dengan minda merdeka kita tidak akan berasa terancam bila makhluk Allah lain menggunakan istilah ‘Allah’.

Merdekakan minda Melayu! Itulah satu pertolongan yang berkesan dan tak terharga!Berbalik semula ke ‘tongkat’ yang paling dihargai oleh Mahathir dan kerabatnya dalam UMNO, bagaimana kita boleh mengharap orang-orang kampung membuang tongkat kecil kayu mereka sedangkan tongkat emas yang beberapa lagi indah dan besar diberi kepada sultan-sultan, raja- raja dan menteri- menteri?

Kita marah bila Pak Mat di Kampong Kerinchi menyelewengkan wang pinjaman MARA dua tiga ratus ringgit untuk memajukan warung kopinya untuk membeli baju sekolah anaknya, tetapi bila suami menteri menyelewengkan berjuta- juta duit rakyat untuk membeli kondo mewah, pemimpin seperti Mahathir senyap sahaja.

Melayu tak payah diberi tongkat apa-apa pun. Pertolongan yang patut diberi ialah untuk membebaskan minda kita. Kalau hendak beri pertolongan, hanya tolonglah sedikit mencabut lalang di kebun kita supaya pisang, timun dan kacang kita boleh berpeluang tumbuh. Kalau enggan berbuat demikian, tolong janganlah bajakan lalang tu!

Better Times for Malaysia in 2013

January 28, 2013

Better Times for Malaysia in 2013: Real GDP Growth at 5.3-5.5 per cent, say Economists

by Sathish Govind@http://www.themalaysianreserve.com

Economists expect Malaysia’s gross domestic product (GDP) to grow between 5.3% and 5.5% in 2013, an improvement on the 5% estimated for 2012, based on improved global sentiments and continuing strong domestic demand and consumption.

Several Malaysian economists agreed that private investment has made a strong return, underpinned by improved investment climate and the various bold initiatives undertaken through the Economic Transformation Programme (ETP).

RAM Holdings Bhd Group Chief Economist Dr Yeah Kim Leng (left) said GDP growth for 2013 will be about 5.3% while CIMB Group Holdings Bhd Group Chief Economist Lee Heng Guie is predicting a growth of 5.5%, fuelled by robust private investment and domestic consumption.

Dr Yeah said Malaysia has been able to withstand the global slowdown in demand for exports due to private consumption and investment that expanded by more than 20% in the first three quarters of last year.

He said among factors that assisted Malaysia’s economic growth last year, and would continue to do so this year, were low interest rates and firm asset prices. Dr Yeah said interest rates are expected to remain stable as inflationary pressure is expected to remain manageable.

On inflation, CIMB’s Lee (right) said economic growth will likely put pressure on prices and see the inflation rate rise from 2.5% to 3% from the previous 1.7% to 2% last year. Lee attributes the slightly higher inflation rate this year to the subsidy rationalisation programme and the spillover effects from the implementation of the minimum wage and global commodity prices.

Malaysian Rating Corp Bhd Chief Economist Nor Zahidi Alias said monetary policy is likely to remain unchanged unless growth momentum declines significantly.

He said Bank Negara Malaysia (BNM) is unwilling to endanger the financial system by inducing more over-leveraging practices through lower interest rates, especially among households. Nor Zahidi said as household debt to GDP ratio has topped 60% in the past one decade, premature reductions in the policy rate will not be in line with the central bank’s intention to curb household appetite for debt.

On Malaysia’s current account, RAM’s Dr Yeah said while the current account surplus was 17% of the GDP between 2004 and 2008, it has declined to less than 10% in the last two years. He said with 70% of imports being intermediate goods, it is unlikely that the current account would weaken when exports decline.

On the ringgit, Nor Zahidi (left) said while he sees the general strengthening of the ringgit against the dollar, the short-term trend will be bumpy for several reasons. These include the weak prospects of the equity market among foreign investors with regards to the outcome of the general elections and the financial market’s perception that the ringgit may be adversely affected by the shrinking current account surplus.

“This would mean holding the ringgit would be more risky,” he said. Nor Zahidi said offsetting these factors are the prospects of a steady recovery of the US economy, which tends to weaken the greenback and thus be ringgit positive.

Sustained inflows of capital into Malaysia will benefit the region’s currencies and he expects the ringgit to move within the range of RM2.95 to RM3.15 against the dollar in 2013.

On some of the possible concerns of the Malaysian economy, Nor Zahidi said there are elevated levels of property prices and the overstretched household sector. However, he said BNM should be given the credit for delicately balancing the need to contain household debt while avoiding a hard landing of the household sector.

MIER: The Malaysian Economy is expected to grow at 5.6% in 2013

January 17, 2013

by Zurairi AR@http://www.themalaysianinsider.com

The local economy is set to expand by 5.6 per cent this year owing to improving economic sentiment worldwide, a Malaysian economic think-tank predicted today.

The Malaysian Institute of Economic Research (MIER) also forecast that gross domestic product (GDP) growth for whole last year hit 5.1 per cent, beating the 4.8 per cent forecast by the Ministry of Finance.

Coming ahead of the World Economic Forum (WEF) in Davos next week, the news may serve to boost Prime Minister Datuk Seri Najib Razak’s Barisan Nasional (BN) ahead of Election 2013.

“The world economy will be improving this year, so will (Malaysian economy),” explained Dr Zakariah Abdul Rashid, MIER’s Executive Director. “Malaysia is located in the world’s most dynamic region … Malaysia should be growing at a rate faster than the world’s economy, because ASEAN will be driving the world.We’re riding on the advantage of ASEAN.”

The global economy is expected to achieve 3.3 per cent growth last year, and 3.6 per cent this year, driven by the optimistic outlook as a result of economic reform measures undertaken in the US and European Union (EU).

Malaysian’s growth will be primarily driven by domestic investment — primarily from the government’s Economic Transformation Programme (ETP) — and the export market.However, MIER forecasted that public consumption in the form of government operating expenditure will increase only at a small rate in the coming two years.

In 2011, public consumption saw an increase of 16.1 per cent, and 10.2 per cent expected increase in 2012. MIER expected that it will increase only by 0.7 per cent in 2013, and 2.5 per cent in 2014. “There is a lot of talk about rationalising the subsidies, downsizing the public sector, all those will be taken into account.”

Dr. Zakariah expressed concern that the operational expenditure will go into deficit, and stressed that MIER will strongly suggest to the government that further subsidies cut be made.

“The operating expenditure in emolument is quite big … subsidies also have taken quite a big chunk out of it.These are very sensitive issues … They should reduce (the subsidies), but (we don’t know) whether there is political will to do that or not,” he added.

In Budget 2013, RM201.9 billion was set aside for operational expenditure, with subsidies making up RM42 billion (21 per cent) of the total.

In Budget 2012, RM181.6 billion was allocated for operational expenditure, and RM33.2 billion (18 per cent) was for subsidies. The Executive Director also stressed that MIER’s numbers were robust and would withstand a change in government after Election 2013.

“If economy was to stay in a resilient manner, politics shouldn’t meddle a lot in the economy. It doesn’t matter whoever rules the country, the professional economists will be advising them.”

Idris Jala on ETP and the Malaysian Economy

January 9, 2013

http://www.thestar.com.my (01-05-13)

IN the journey of transforming Malaysia’s economy where the impossible must be made possible, there is no room for doubt. We must push ahead to do what needs to be done to make sure that the high income economy is achieved by 2020.

Make no mistake about it, Malaysia’s economic resilience today, having recorded a 5.3% growth in GDP as at the third quarter of this year amidst a global economic slowdown is no fluke. Our GDP growth for this period surpassed regional peers Singapore’s 1.3%, Thailand‘s 3%, South Korea’s 1.6%, Taiwan’s 1% and Hong Kong’s 1.3%.

Furthermore, when the International Monetary Fund’s (IMF) managing director Christine Lagarde met Prime Minister Datuk Seri Najib Tun Razak in November, she said that Malaysia was the only country for which the IMF had to revise upward their GDP growth forecast.

I believe that this resilience is a result of the concerted, cohesive Economic Transformation Programme (ETP) Malaysians from different segments of society put into motion two years ago.Indeed, the year 2012 has been a win on many counts for the ETP which is led by our Prime Minister.

Setting the true north of the ETP was certainly one of the most defining moments. We repeat it like a mantra – we want to ensure that the gross national income (GNI) per capita in Malaysia reaches at least US$15,000 by 2020. This is our true north.

In 2009, our GNI per capita was US$6,700 and we managed to increase this to reach US$9,700 by 2011. This is a remarkable 45% increase.To get to our true north target by 2020, the challenge is to secure a total of RM1.4 trillion in investment, 3.3 million incremental jobs and RM1.4 trillion in GNI, all to be achieved by 2020.

Are we on the right track, many have asked.The ETP is dual in its objectives. It aims to create specific economic focus areas through the 12 National Key Economic Areas (NKEAs) so that potential investors know beforehand what prospects the Malaysian economy has for them. It also addresses policies and procedures to create conditions for competitiveness to flourish under the six Strategic Reform Initiatives (SRIs).

The sense of buy-in we have secured from the private sector cannot be stronger than what it is today. To date, it has attracted RM212bil in investments which will create almost 411,000 new jobs and RM137.6bil in GNI by 2020.

A total of RM20.6bil out of RM29bil investment committed in 2011 to 2012 was realised. For the years between 2013 and 2015, we intend to surpass that. Private investment growth in Malaysia averaged 6.7% between 2000 and 2010, but doubled in 2011 to 12.2% after the first year of the ETP. We’re on track to do even better in 2012, with investment having tripled to 22.5% after three quarters.

It is encouraging to see the private sector is retaking its rightful role as the engine of economic growth in this country. A government cannot carry the bulk of the burden in generating economic growth.

There are limitations in the ways a government can earn income. Also, that income needs to be used for developmental purposes and where possible, for fiscally prudent practices to ensure we do not end up in the same situation of bankrupt nations like Greece.

Thus, with the private sector taking the lead role in economic development, the Government can now focus on truly catalytic projects with great economic returns such as the Mass Rapid Transit, River of Life project, Pengerang Integrated Petroleum Complex as well as tipping point for infrastruture investment in economic corridors.

When these projects are up and running, the beneficiaries would be the private sector and the rakyat, the product or service provider and the consumer. It results in both sustainable wealth creation and improvement in the quality of life for Malaysians.

Despite positive signs so far, we are yet to reach the pinnacle and we must continue to up our game.One very real objective that the ETP hopes to achieve is to bring structural changes to gross domestic product (GDP) make-up in order to achieve a higher degree of sustainability.

We cannot be too dependent on either private investments or domestic consumption but need to achieve a healthy mix of components so that we are able to weather global headwinds through a robust and resilient economy.

As a percentage of GDP, in the past, private investments have been 20%-22%. For the nine months of 2012, this has risen to 27%, and it needs to stay at this level.

Our net trade is impacted and reflective of the recessionary state of the United States and euro economy. To deal with this, our exports need to significantly increase and the only way we can penetrate the global marketplace is when our products and services are competitive, meeting with global standards.

Local companies and brands must be challenged to grow their base outside the comfort of the local market and compete with the best in the regional and global arena.

Renowned global institutions have been taking note of the country’s positive change. The World Bank’s Doing Business Report 2013 saw us move from the 18th position in 2012 to 12th in 2013 whilst the AT Kearney’s FDI confidence index for Malaysia has risen from 21 in 2010 to 10 in 2012 ahead of France, South Korea, and Canada.

While we have a long way to go to fight graft, the Corruption Perception Index (CPI) by Transparency International shows that Malaysia’s global ranking has improved from 60th to 54th this year. This demonstrates that the Government’s effort in combating corruption is delivering some encouraging results, albeit we have a long way to go.

Yes, we must keep moving. We must keep pushing to change policies, attitudes and behaviours necessary to make Malaysia a competitive and business-friendly destination.

It is important to keep in mind that this transformation is not something being pushed down by the Government to the private sector but a culmination of both government-industry collaboration to identify the best way forward for the country’s economy.

On the ETP’s methodology, I was heartened to learn that Harvard University and Princeton University, two Ivy league universities in the United States, have written case studies on the transformation of Malaysia. These are used in their teaching courses.

I believe this is not something for the Government alone to be happy about; all Malaysians should be proud of this achievement. In many ways, we are beginning to see the results of this collective, industry-wide effort targeted at economic transformation for Malaysia.

As the momentum builds up, we cannot become complacent. There are even bigger wins in store in the future for the ETP. We just have to stay focused in our efforts and be positive on our high-income target. With that, season’s greetings and wishing you a wonderful and prosperous 2013. Happy New Year!

Datuk Seri Idris Jala is CEO of the Performance Management and Delivery Unit  and Minister in the Prime Minister’s Department.

The Malaysian Fiscal Story unflattering

January 1, 2013

The Malaysian Fiscal Story unflattering despite strong economic growth in 2012

by Mohamed Ariff, INCEIF

Surprisingly, the Malaysian economy could grow at a creditable pace in 2012, despite dismal export performance associated with the slow expansion of the US economy and recession and stagnation in Europe.

Malaysia’s quarterly growth rates have been fairly impressive: 4.9 per cent, 5.4 per cent and 5.2 per cent respectively in the first three quarters. The economy needs just 4.1 per cent growth in the fourth quarter of 2012 to garner 5.0 per cent growth for the year as a whole.

So all indications are that Malaysia’s GDP growth will slightly exceed the government’s target of 5.0 per cent growth in 2012. The main growth drivers are domestic consumption and investment, both private and public. Construction and services have been the fastest growing sectors in 2012.

It is noteworthy that inflation has become increasingly tame, decelerating from 2.7 per cent in January to 1.3 per cent in October 2012. The inflation rate for the full year in 2012 is projected to settle at 1.7 per cent. The unemployment situation has been somewhat steady, in the region of 3.0–3.3 per cent. The banking sector stayed healthy and well capitalised with a net impaired loans ratio of just 1.4 per cent. The central bank has kept its overnight policy rate at 3.0 per cent in the face of ample liquidity.

Malaysia continues to register a current account surplus in its balance of payments, although the size of its surplus has been diminishing. International reserves at the end of September stood at US$135.6 billion, providing a retained import cover for 9.4 months, which is more than comfortable.

The Malaysian fiscal story, however, is unflattering, as the country has been continuously running budget deficits since 1998. With elections around the corner, government subsidies and cash handouts have been flying in the face of fiscal discipline, with no attempts made to address much-needed tax reforms that would reduce the current over dependence on oil and gas, which accounts for roughly 40 per cent of government revenue. Government revenue has failed to grow in tandem with GDP growth in recent times, with the ratio of revenue to GDP falling from 33 per cent in 2007 to 24 per cent of GDP in 2011 and to an estimated 22 per cent of GDP in 2012.

All this may have an adverse effect on the country’s international credit ratings, and hence the need to rein in sovereign debt. Government debt has ballooned to MYR 502.4 billion (US$164.6 billion) in the third quarter of 2012, breaching the self-imposed debt ceiling of 55 per cent of GDP. The debt ceiling was raised from 40 per cent to 45 per cent of GDP in April 2008 and lifted further to 55 per cent in July 2009. Malaysia’s debt-to-revenue ratio of about 250 per cent is close to Italy’s 260 per cent.

The near-term outlook for the Malaysian economy is very much dependent on the economic performance of its major trading partners. Export market diversification efforts currently underway may help reduce Malaysia’s vulnerability to external impacts but cannot lessen its exposure to the external world. Likewise, a dynamic domestic economy can contribute to greater resilience but cannot be a substitute for the more lucrative external sector, given the relatively small size of the domestic market. GDP growth in 2013 is forecast to be in the region of 5.5 per cent.

Malaysia, an advanced developing country with an impressive development track record, now caught in the throes of the current global economic slide, needs to escape the middle-income trap before it can join the league of developed nations as envisaged in its Vision 2020. Malaysia needs to reinvent itself to accomplish this goal. To this end, the government has taken a number of strategic reform initiatives to enhance the country’s competitiveness and improve its growth potential. While economic imperatives can explain the government’s reform agenda, the rapidly changing political landscape in the country appears to be the main driver of change.

After 55 years of one-party administration by the ruling coalition, Malaysia has arrived at a new crossroads with a strong opposition effectively offering an alternative government to the Malaysians. For the first time in history, the ruling coalition is facing a formidable opposition. All signs suggest that a two-party system is already in place, regardless of the outcome of the forthcoming elections, which remain too close to call.

Malaysia has finally come of age politically after 55 years of independence. The race-based politics of yester year are giving way to an issues-oriented political process that cuts across racial boundaries. Simply put, it is not going to be business as usual any more in Malaysia — which bodes well for the nation’s future. To be sure, pluralism is Malaysia’s strength, not its weakness.

Mohamed Ariff is Emeritus Professor at the Department of Economics and Governance, Global University of Islamic Finance (INCEIF).

http://www.eastasiaforum.org/2013/01/01/the-malaysian-economy-developments-and-challenges/

On Dirty Money Outflow, Malaysia is No 2

December 18, 2012

by Steven Gan@http://www.malaysiakini.com

Close to RM200 billion of dirty money was siphoned out of Malaysia in 2010, putting the country second only to Asian economic powerhouse China in global capital flight.Washington-based financial watchdog Global Financial Integrity (GFI), in its latest report which tracks capital flight, says the level of illicit flows from Malaysia in 2010 was the highest in 10 years.

GFI has introduced a new and more conservative methodology in its estimates of illicit financial outflows, which help to zero in exclusively on dirty money. As such, estimates from its previous reports have been revised.

Last year, GFI put the figure of illicit outflows for Malaysia in 2009 at US$46.86 billion (RM143.3 billion). This has been altered to US$30.41 billion (RM93 billion).

The latest report finds a dramatic jump of capital flight in Malaysia – from US$30.41 billion (RM93 billion) in 2009 to US$64.38 billion (RM196.8 billion) in 2010.

GFI has yet to obtain data for 2011 and 2012, but these will be included in future reports.

The global financial watchdog has warned that capital flight in Malaysia is “at a scale seen in few Asian countries”.

The GFI report, ‘Illicit Financial Flows From Developing Countries: 2001-2010′, is co-authored by GFI economists Sarah Freitas and Dev Kar, who is a former senior economist at the International Monetary Fund.

According to GFI, for the cumulative illicit financial outflows over 10 years – from 2001 to 2010 – Malaysia is ranked No 3 in the world, after China and Mexico.

The total 10-year estimate for Malaysia is US$285 billion (RM871.4 billion), while China is US$2,740 billion, and Mexico, US$476 billion.

Prime Minister Najib Abdul Razak has disputed GFI’s figures. Last year, he gave Parliament a much lower figure of RM135.3 billion for illicit capital outflows from 2000 to 2009.

Nevertheless, GFI data was backed by a different study earlier this year by another organisation – the London-based Tax Justice Network, which found Malaysia among the top countries when it comes to capital flight.

Graft accounts for 20% of dirty money

GFI said that trade mispricing – the practice of shifting profits overseas by over- or under-invoicing intra-company transactions – accounts for an average of 80.1 percent of illicit financial flows from developing countries. The rest of the dirty money involves corruption.

“Illicit transfers of the proceeds of corruption, bribery, theft, and kickbacks, accounting on average for 19.9 percent of illicit outflows over the decade, are on the rise as a percentage of total illicit financial outflows,” said GFI.

“Crime, corruption, and tax evasion cost the developing world US$858.8 billion in 2010, just below the all-time high of US$871.3 billion set in 2008.”

GFI described its estimates of global dirty money as “extremely conservative” as they do not include trade mispricing in services, same-invoice trade mispricing, hawala transactions, and dealings conducted in bulk cash.

“This means that much of the proceeds of drug trafficking, human smuggling, and other criminal activities, which are often settled in cash, are not included in these estimates,” said Kar (right).

Asia is the biggest losers of capital, says the GFI report. “We found that Asia, accounting for 61.2 percent of cumulative outflows, was still the main driver of such flows from developing countries.

“Indeed, five of the 10 countries with the largest illicit outflows – China, Malaysia, the Philippines, India, and Indonesia – are in Asia.”

GFI said increasing transparency in the global financial system is critical to stemming the outflow of illicit money from developing countries.

Following the release of the previous GFI report in January last year, Najib, who is also the Finance Minister, kicked the ball to Bank Negara’s court, saying that it would provide an explanation on the findings.

Soon after, Deputy Finance Minister Donald Lim announced that Bank Negara has launched a probe.

But to date, Bank Negara has yet to announce the result of its investigations or explain the massive illicit capital flight, despite offers of help from top GFI economists.

Keeping Economies Ticking

October 4, 2012

http://www.nst.com.my

by Dr. Zeti A.Aziz, Governor, Bank Negara Malaysia

The global economy has now entered into a period of slower economic growth despite the significant and wide-ranging pro-growth policies that have been implemented across the world. Why then has the world not been able to achieve a sustained long-lasting recovery? What has been holding back this prospect?

In addition, rapid and significant changes in the global environment have also brought with them new demands and new challenges. Our understanding of the factors that are containing the global growth prospects and the consequence of the new environment will better position us to face a fundamentally new landscape and to manage its challenges.

The topic on the big shift that is being experienced in the world today is indeed relevant. While the international and national attention is currently focused on the immediate challenges of the global environment, equally important, however, is to recognise the long-term changes that will reshape our future.

My remarks today will focus on the immediate challenges of the global economy, taking into account fundamental factors that are likely to affect the growth outlook. The second part of my remarks will touch on the key imperatives to best prepare us for the new global landscape, so as to be better positioned to succeed and survive in this new environment.

Policymakers in the world economy have continued to be confronted with policy challenges since the onset of the global financial crisis. While the policy responses have focused on addressing the origins of the crisis — on the extensive build-up of excesses, over-leverage and over-indebtedness of the private and public sectors, breakdown in the functioning of financial markets, loss of competitiveness, and loss of confidence in the financial system and the economy, the concern now is on achieving a sustained economic recovery that is accompanied by job creation.

Half a decade into the crisis, and this has yet to be achieved. In recent months, the global economy has again experienced a broad-based moderation in growth from an already modest pace. This has stemmed largely from renewed weakness of recovery in several of the major advanced economies.

In the United States, the significant monetary accommodation, reinforced by the large-scale financial market interventions and the significant fiscal stimulus during the early stage of the crisis, has averted an economic depression, but it has not, however, brought about a sustained recovery.

In Europe, an economic contraction is being experienced, resulting from the combination of fiscal austerity, tight credit conditions, and continued uncertainty and volatility in the financial markets. While important progress has been made recently in Europe on the arrangements that will contribute to containing significant high-risk events, and in paving the way towards a more sustainable and integrated European region, its immediate-term effects on economic recovery is likely to be limited.

 There are several factors that are containing the potential for sustained growth in these economies. This can be classified into seven categories.

First is the gradual process of unwinding the excesses that had been built up over several years. These include the high degree of indebtedness by households, the financial sector and public sector.

Second is the significant long-term structural adjustments that are needed to regain relative competitiveness. This will involve greater efficiency and innovation within existing industries, and the shifting of resources out of industries in which these economies no longer have comparative advantage into new industries which have comparative advantage.

While the former may result in economic gains, these may not necessarily be accompanied by increased employment, and the latter may result in temporary economic dislocation and increased unemployment. Thus, even if such policies were to yield results, they may not produce a robust recovery of economic activity and a reduction in unemployment in the short and medium term.

The third is the need for the introduction of new institutions and the transformation of existing institutions to render them relevant to the changed environment. While existing institutions may need to be transformed, merged or even dissolved, new institutions may need to be established to facilitate management of the new environment. The same will hold true for businesses if they are to remain competitive and, in particular, if they should venture into new areas and across borders.

The fourth category of factors concerns economic and financial management. Macroeconomic policies in most of these economies have been pursued to the limit, rendering limited policy flexibility. Monetary policy accommodation has resulted in substantially low interest rates which have been brought down to near zero levels, while the cumulative fiscal expansion during the period 2007-2009 has amounted to an average of four per cent of gross domestic product.

In addition are the potential intended or unintended consequences of the international regulatory reforms. The reforms have focused on building a stronger global regulatory framework and raising the resilience of the banking system. While still in their early stage of implementation, concerns have been raised on their implications for the cost to both the financial intermediation process and to the real economy.

An important change in our environment both at the national and international levels is the increased interconnectedness within the financial system and the global economy. This greater interconnectedness, and hence the greater interdependence, requires having in place the governance arrangements for greater coordination.

Fifth is that these arrangements have not been put in place  at the national and international levels.  In addition, corporations or organisations in this new environment can no longer function by departments or sections, but as an integrated organisation.  This also requires new governance arrangements.

For an economy or a financial system, we have seen how a crisis in one segment was thought to be confined, but it had pervasive consequences on the entire financial system and the economy.

Sixth, is that despite the increased connectivity of the world, as exemplified by the swift spread of the financial crisis and economic shocks throughout the global economy and international financial system in 2008, the institutional arrangements for the cross-border dimension of policy-making have yet to reach the levels commensurate with the degree of economic and financial integration in the world.

Finally, seventh, the response to the crisis needs to be comprehensive. While addressing weaknesses and lapses is important, equally important is the enabling environment for the measures to yield results. Pro-growth policies are vital for this.During the Asian financial crisis, Malaysia gave equal attention to financial sector resolution to restore the financial intermediation process and thus credit supply. Equally, emphasis was placed on addressing the problems of borrowers.

Debt restructuring and mechanisms for support were put in place for the corporate sector, small and medium-scale enterprises and the household sector. This supported growth of the economy and at a fraction of the cost of the financial sector resolution.

In this current environment, the emerging economies are challenged by both the weakening global growth and the spillovers arising from the policy actions in the major advanced economies. While continuing to register reasonable economic growth, the momentum of the growth has moderated in most emerging economies, affected by slowing external demand and uncertainty in the financial markets.

Nevertheless, ongoing shifts in the emerging economies have contributed to sustaining our econo-mies. It is the growing importance of domestic demand in most of Asia’s emerging economies that is creating a huge cumulative domestic market, and this is resulting in greater regional integration with an increase in inter-regional trade.

Greater regional and inter-regional integration of the emerging economies through the proliferation of interlocking networks of trade, investment and finance, has contributed to provide mutually reinforcing support to economic activity in the emerging economies.

In Malaysia, the decline in external demand while affecting overall growth, has been partially offset by stronger domestic demand, following the robust resumption of private consumption and investment activities, and the diversification of exports to the regional economies. In addition, the wide-ranging reforms since the Asian financial crisis have resulted in strengthened financial intermediaries and a more developed financial system. This has allowed for the economy to better intermediate the volatile cross-border flows without disruption to the financial system.

Also, Malaysia’s economic flexibility has allowed us to shift resources from industries in which we no longer have comparative advantage to new areas of growth. It is these factors that will continue to underpin the positive growth outlook of the Malaysian economy into the near to medium term.

The changing global landscape presents significant new challenges for both the developed and emerging economies. Important is to be well-positioned to manage the new risks and to build the necessary capability and capacity to have the agility and flexibility to adjust to the rapidly changing conditions. As the emerging economies aspire towards achieving higher levels of income and living standards, a different path from that which led the way for the advanced economies will now need to be considered.

The current global financial crisis and the Asian financial crisis have provided us with many important lessons that should form the underpinnings for our business models and our policies for growth and development. A key priority of policy should be to balance the need of ensuring sustained stability while having in place the necessary foundations to secure long-term development.

Avoiding and preventing the build-up of excesses is a critical imperative. The recent crisis has forcefully shown that markets cannot be exclusively relied on to rein in excesses. Market discipline needs to be complemented by policy interventions to effectively manage the build-up of imbalances in the financial sector and in the economy.

In the financial system, this involves putting in place more comprehensive regulatory frameworks, complemented by enhanced surveillance arrangements and relatively more intrusive supervisory oversight. It also involves having wide-ranging policy tools, including macro-prudential policies, to mitigate and manage risks emanating from excesses in the system.

As the experience in advanced economies has shown, the source of imbalances can arise in a number in segments of the economy, including from the household, the financial and the public sectors. This underscores the importance of prudence; to ensure that growth is underpinned by sustainability and not excesses. A further lesson is to build buffers during the good times to better position us to withstand future shocks.

Equally important for policy in the emerging economies is to put in place the necessary foundations for long-term growth. The first is to create a competitive environment that allows for greater economic flexibility. This includes reforms for a sequenced and gradual removal of distortions prevailing in the economy, lowering the costs of doing business, and to streamline the involvement of the public sector in businesses.

The second is to accord importance to investments in modern infrastructure, and to enhance technological readiness that will enable the economy to prepare for the changing economic and financial landscape.

Another area of significance is to ensure balanced and inclusive development. Indeed, in the emerging economies, this is becoming increasingly urgent as the benefits of rapid development have not been evenly distributed, and income inequality has risen further even in the developed economies. Going forward, economic empowerment will increasingly depend on access to technology, high quality education, healthcare and social security systems.

Equally important is greater financial inclusion. Without policy intervention, the trend towards greater inequality could potentially intensify. In Malaysia, many of the necessary policy strategies for long-term growth in these areas of significance are already at various stages of implementation, with considerable progress in certain areas.

As the technological gap between the emerging and advanced econo-mies converges, it will become increasingly critical for an emerging economy like Malaysia to transition from growth based on capital accumulation, to growth based on productivity improvements. In addition, the rising global inter-connectedness characterised by the emergence of highly intricate networks such as the increase of global manufacturing supply chains, increases the susceptibility of industries to both cascading failures, as well as to the rapid re-orientation of business competitiveness through disruptive innovations such as in the mobile computing industry or the possible rise of additive manufacturing.

To advance forward in this direction, human capital development is pivotal. It leads to greater value creation, enhanced technological readiness and the capacity to innovate and adapt — all of which are key for firms to operate in the new landscape. Productivity is thus not only a function of physical technology, but of talent development, given the increasing dynamic and complex environment.

In the area of regional collaboration and cooperation, the Asian region is well ahead in the areas of surveillance arrangements, financial safety nets and crisis management. These frameworks and arrangements were established in the period of relative stability since the Asian financial crisis. The establishment of regional arrangements and platforms, including the building of regional financial infrastructures and markets, is not only aimed at facilitating the efficient intermediation of financial resources in the region, but also at safeguarding financial stability in the region.

This trend paves the way for coordinated policy actions to manage and mitigate the risks and vulnerabilities to the region. Given our diversities, there is also tremendous opportunity for the private sector, in particular in Asean, to integrate further in the areas of trade, investment and finance, and to leverage on the respective comparative advantage that exists in the region.

While we could best prepare for the future using all the knowledge that we have, the transition towards the new landscape will continue to be paved with uncertainty and new challenges. Further, there will be increasing complexity in the functioning of the global economy and international financial system.

In this environment, perhaps the best compass for policy-makers and businesses is one that is centred on principles; in particular, on ethics and integrity. Recent experiences in the advanced economies have put this into question. This needs to be restored.

The next generation of policy-makers and leaders in business will be defined not by the power they hold and the amount of wealth they amass, but by the stewardship they exercise in serving the people and the responsibility they demonstrate to their communities

*Governor Zeti’s Address at the Khazanah Megatrends Forum 2012 on  October 2, 2012

ASEAN’s missed opportunities

October 3, 2012

by Murray Hunter

Although the pundits state that the ASEAN Free Trade Area (AFTA) and ASEAN Economic community (AEC) will be in place by 2015, there are signs on the ground in many of the member nations that this is far from the case.

With the rapid growth and development of China and to a lesser extent India, the ASEAN region has been largely out of global focus in recent times. Although in terms of GDP, the ASEAN region cannot come even close to matching the other blocks like the China, the US, EU, India, and Japan; trade and consumption figures are very interesting.

Exports from the ASEAN region to the rest of the world were USD1.25 trillion (RM3.75 trillion) in 2011, not too far behind China at USD1.89 trillion, the EU USD1.79 trillion, and the US at USD1.5 trillion. ASEAN exports were higher than Japan at USD800.8 billion, and India USD298.2 billion.

What is even more interesting is that the ASEAN region is also a very high consumption block indicated by its imports from the rest of the world at USD1.06 trillion, which was much higher than India at USD451 billion, and Japan at USD794.7 billion. ASEAN still trails China at USD1.74 trillion, with the EU at USD2 trillion and US at USD2.314 trillion.

If one looks at mobile telephone usage as rough indicator of consumption, ASEAN usage (569 million) is much higher than the EU (466 million) and ASEAN has a higher per-capita usage than China and Japan. Finally the population growth rate within the ASEAN block is much higher than any of the other blocks.

This makes the ASEAN region one of the most interesting growth markets in the world. ASEAN as a single trade entity also has the potential to strongly influence world affairs through its trade strength.

The agreement to form the ASEAN Free Trade Area (AFTA) in Singapore back in 1992, and later the ASEAN Economic Community (AEC), with the objective of streamlining banking, finance, transport infrastructure, customers regulations, human capital mobility, and economic policy embodying AFTA by 2015 may potentially enable the region to exercise this influence.

However this promise of great opportunity that could propel much of the ASEAN region into great prosperity and influence, may falter due to the current unpreparedness of ASEAN members in most areas of integration. The writer believes that this is not just a lagging schedule, as has been suggested by many, but most of the region’s members are currently inwardly focused upon their own domestic interests which may lead to the failure of achieving the implementation of the AEC by 2015.

Moreover, a parochial rather than any regionally orientated mindset currently persists in Bangkok, Jakarta, Putra Jaya, Manila, Hanoi, and Naypyidaw, suggesting that this position may not change in the immediate future.

Inward Focus

Without going into detail, many ASEAN governments are facing watershed issues that may well set out how their respective societies will look for many future generations. Consequently their focus is currently inward upon domestic issues.

The Yinluck Shinawatra (left) led government in Thailand has many deep issues to solve which not only concern the government’s immediate survival, but the way Thailand may be governed in the future. Shinawatra must find a way to work with the palace and the military without being seen to betray her peasant constituency in the North-east of the country who very deeply feel many injustices over the last six years since the coup d’état ousting her brother, Taksin Shinawatra.

In addition there will be a transition to a new monarch in the near future which according to commentators may bring some uncertainty. This is not to mention the insurgency in the South of Thailand which has seen an escalation over the last few months, potential floods again over the next few months, which last year devastated industry around Bangkok and surrounding areas, where long term solutions are scant.

In Malaysia the Najib Razak Barisan Nasional led government has been in power for 55 years and is tired. The Opposition Pakatan Rakyat under the leadership of Anwar Ibrahim looks to be in a very strong position for the coming 13th general election that must be held before May 2013. The Barisan Nasional has the fight of its life ahead just to survive and cannot rely on its traditional strongholds like Johor, Sarawak, and Sabah to carry it through this time. The country has been in a quasi-election mode for some time, and with the focus on survival, there has been little interest in regional issues.

In Myanmar, President Thein Sein (right) recently reshuffled the cabinet to reportedly strengthen his own personal position and maintain forward reform momentum. Myanmar is heading down a road of reform where it hasn’t gone before and the potential outcomes are still uncertain.

Although Aung San Suu Kyi has been released from house arrest, many foreign governments have dropped sanctions, and the government has made peace settlements with a number of ethnic insurgency groups (yet many more like the Rohingyas need to be solved), there is little focus or interest in the regional issues at this point.

Indonesia went through its political turmoil more than a decade ago with the riots in 1998 that eventually brought the resignation of Suharto. With three presidents between 1998-2004, Indonesia is emerging as a vibrant multi-party democracy with Susilo Bambang Yudhoyono as President since 2004. The country is still plagued with corruption, natural disasters, pressure for autonomy, and poverty.

Political diversity may be hindering the creation of a national vision of development that all in a bipartisan fashion can engage. Coupled with the logistics of managing an archipelago more than 4,000km long, the Indonesian focus is still primarily concerned with economic management, although there is a general belief that an ASEAN market would in the long term benefit the country.

Corazon Aquino was swept to the presidency during the peoples’ power revolution of 1986, ousting Ferdinand Marcos. Since her term as president, there have been a further four elected presidents of the Republic of the Philippines, with her son Benigno Aquino III as the current president. Political power in the Philippines is still very much based upon favour and alliance of ‘political warlords’ in each regional subdivision and this partly explains why the former first lady Imelda Marcos and children, although forced to flee the country in 1986, were welcomed back and today hold positions of power as a provincial governor and members of the legislatures.

The Philippine government’s focus currently remains upon the issues of poverty, which at 32.9 per cent of the population is the highest in the region. Democracy in the Philippines has not seemed to solve the country’s fundamental issue of poverty. Like Indonesia, the Philippines is also an archipelago which presents many problems for development. The government still has to deal with the Abu Sayyaf in the south of the country, regular natural disasters, and rampant corruption.

Finally, although Vietnam has tried to reform the economy with the ‘doi moi’ programs of the mid 1980s, the country is still basically a centrally planned economy. More than 20 per cent of GDP is agriculture based and state owned enterprises account for more than 40 per cent of GDP. Vietnam has a large trade deficit even though exports are rising rapidly. Controls have been put in place to stem further blow outs in the trade deficit, bringing more state control over the economy rather than liberalisation.

State debt is also high with some state firms in deep financial trouble which is eroding the country’s financial ratings and even causing some political instability at leadership level. The Vietnamese economy, along with that of Cambodia and Laos are far from ready for integration within the framework of the AEC.

Currently there is an absence of any leader with regional vision within ASEAN. The leaders of the region don’t appear to have the relationships like their predecessors once had, as emerging democracies and development have their own demands. The club of dictators has gone.

Even the pro AEC ASEAN Secretary General Dr. Surin Pitsuwan (right) who kept the integration momentum going is preparing to hand over the position to a less experienced diplomat from one of the less developed members, potentially leading to a further vacuum in leadership on the issue.

The beneficiaries?

The constituency that one would expect to support an integrated ASEAN economy, regional conglomerates appears to still be lukewarm to the concept. Although companies like Air Asia, CIMB Bank, Bangkok Bank, SingTel, and Siam Cement are taking advantage of the region as a market, they are the exception. The majority of ASEAN conglomerates are ethnic Chinese who settled across the region building up their empires along common models of trading, real estate, finance and insurance, retail, and banking activities.

These firms are well connected in their own countries and haven’t historically done well business wise in countries within the region where their connections are weak. Consequently these firms prefer to diversify business interests within their home country rather than expand across the region.

One can easily get the impression when visiting Bangkok, Jakarta, Kuala Lumpur, and Manila that business there is a widely diversified ownership of business, where in fact region businesses in ASEAN countries today are still in the hands of a small number of families. Many of these companies are yet to develop the regional mindset necessary to take up the opportunities that the AEC offers. They may actually enjoy the current protection that is afforded them from outside competition.

At the same time the ASEAN region is dominated by SMEs which account for approximately 98 per cent of all enterprises and some75-85 per cent of total employment. Many of these are subsistence based enterprises employing no innovation in their business models. AFTA and the AEC will provide very few opportunities to these enterprises, except in the area of tourism.

ASEAN member states still see each other as competitors, competing with each other to attract direct foreign investment. Competing education and medical hubs have been set up which aim to attract international customers at the lowest cost. How the paradigm of collaboration rather than competition can be developed still remains to be seen.

Lagging preparation and the barriers to overcome

Infrastructure and logistic networks the AEC required for increased trade within the region are still very much work in progress. With the exception of Singapore, major highways, railways, deep-water ports are still under construction. Many border crossings are extremely congested, and the high speed railway between Thailand, Laos and Southern China is still only just an idea.

The banking system is not yet integrated, little has been done in the way of streamlining customs procedures which is hindering the implementation of high quality logistic systems across the region. Little exists in the way of a regionally based media to culturally integrate the region.

Existing ASEAN initiated projects like the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and the East ASEAN Growth Area (BIMP-EAGA) have existed more as ideals rather than anything that has substance on the ground. Above all there has been no attempt to integrate monetary or fiscal policy within the ASEAN region which would be necessary within any common market.

ASEAN states are still very much in different stages of growth, spread across a wide development continuum. The contrast between developed Singapore and Laos, Myanmar, Vietnam, and Cambodia is extremely wide, much more than any other region around the world. This diversity presents even greater challenges where assistance given by the more developed members of ASEAN could be construed as interference by the lesser developed nations. This is still a very sensitive issue within ASEAN today.

In addition, each country within ASEAN is in a different stage of legal system development, which is very important as the legal system creates the framework upon which business is conducted. Even if the common market is pronounced to be in existence by 2015, this factor alone will be a major impediment for companies within the region. There is too much folklore within the business communities about specific ASEAN country legal systems that make them shy away from direct investment.

At government level there are still many bilateral issues that can potentially hinder and set back collaboration. Only just recently the Thai and Cambodian army had a number of skirmishes over the Preah Vihear Temple ruins along their common border.

Cambodia is concerned about Lao dam construction, Malaysia and Indonesia are yet to settle some maritime and land borders in Borneo, the Philippines still has a claim on Sabah, Singapore and Malaysia had a number of spats concerning water, land reclamation, and rock formations in the South-China Sea that went as far as the International Court of Justice (ICJ). Vietnam and Cambodia are still in dispute over outlying islands along their common border.

The region is way behind schedule in the implementation of the AEC. Many unresolved issues concerning agriculture and non-tariff barriers are yet to be resolved. The less developed countries of Cambodia, Laos, Myanmar, and Vietnam are also holding back progress.

If the ASEAN region fails to create an effective and integrated common market in 2015 which is truly competitive, with free flow of skills, and capital, ASEAN will be severely disadvantaged vis-a-vis China, the US, Japan, and the EU, at a delicate time when the current détente is in flux and transformation.

It may be ASEAN’s own inward focus and inbred parochialism that prevents it sitting at trade, political, and economic forums as equal partners with influence and stature. This may also prevent ASEAN entering into an era of diverse economic prosperity in the near future from the synergies and market size an AEC would bring.

It is highly unlikely the AEC will be in place with any effective form by 2015 unless it becomes a high policy priority within each member government. The outcome most likely is the formation of an AEC in a compromised form, consistent with the track record of past ASEAN compromises since its formation back in 1967. — New Mandala-The Malaysian Insider

Malaysia slides from 21st to 25th Slot in Global Competitiveness Ranking

September 6, 2012

Global Competitiveness Ranking: Malaysia  slides faom 21st to 25th Slot

by Koh Jun Lin (09-05-12)@http://www.malaysiakini.com

Malaysia has dropped from 21st to 25th slot out of 144 countries in global competitiveness, according to the Global Competitiveness Report 2012 – 2013.

The annual report, released by the World Economic Forum (WEF) today, also shows that Malaysia’s ‘technological readiness’ is ranked 51st, maintaining a five-year downtrend.

This was despite the overall score remaining relatively steady at 5.06 points out of a maximum of seven points, compared to 5.08 previously.

“Malaysia and other countries are putting in a lot of initiatives. There are four countries which are faster growing in terms of their competitiveness here, and they are South Korea (ranked 19th), Luxemburg (22nd), New Zealand (23rd) and the United Arab Emirates (24th),” said Malaysia Productivity Corporation (MPC) Senior Director Lee Saw Hoon in explaining the drop in ranking.

Lee was speaking at a press conference at MPC’s headquarters in Petaling Jaya today in conjunction with the release of the report.She also said that the report also “upgrades” Malaysia’s status from an efficiency-driven economy to a country that is “in transition” to an innovation-driven economy.

In the report, the criteria for the latter classification is to have a gross domestic product (GDP) per capita between USD9,000 to USD17,000 and the change entails a shift in the weightage of various performance indicators towards those that promote innovation.

The report also places Malaysia’s competitiveness second to Singapore in the Asean region, and eighth in the Asia-Pacific region.

Low level of technological readiness

With regard to Malaysia’s technological readiness, the report notes three areas that require improvement, namely: international internet bandwidth in kilobits per second per user (ranked 83rd), broadband internet subscriptions per 100 population (68th) and mobile broadband subscriptions per 100 population (64th).

“Its (Malaysia’s) low level of technological readiness (51st) is surprising, especially given its achievements in other areas of innovation and business sophistication and the country’s focus on promoting the use of ICT.

“Lack of progress in this area will significantly undermine Malaysia’s efforts to become a knowledge-based economy by the end of the decade,” the report wrote.

In a press statement today, International Trade and Industry Minister Mustapa Mohamed said there is a discrepancy between perception and what the data shows, and does not reflect Malaysia’s actual condition.

“Towards this end, the government will ensure that consolidated and comprehensive data and information is provided to international data sources such as the International Communications Union and the World Intellectual Property Organisation,” he said.

Mustapa (right) added that the upcoming launch of the 1Malaysia Affordable Broadband Package could be expected to improve the situation.

Meanwhile the report also praised Malaysia’s markets for being “efficient and competitive” and supported by both a well-developed financial sector (ranked 6th) and business-friendly institutional frameworks (28th).

The report further praised the government’s efforts to combat excessive bureaucracy and lack of transparency, saying, “in a region where many economies suffer from lack of transparency and the presence of red tape, Malaysia stands out as particularly successful at tackling those tow issues.”

Regardless, in an opinion poll of 79 business executives in Malaysia conducted as part of the report, respondents still reported inefficient government bureaucracy as the biggest problem for doing business in Malaysia, followed by corruption and an inadequately educated workforce.