Malaysia Airlines will be fully owned by Malaysian Government

August 9, 2014

MAS Restructuring : Leave no stones unturned

by Din Merican

Azman MokhtarWell done, TS Azman Mokhtar for making this strategic move at this time, when Malaysians of goodwill are with our government following MH370 and MH17 tragedies where lives were lost. We look forward to know the details of your plan to restructure our national flag carrier.

We hope you will be tough with the MAS Staff Union, and not allow it to dictate what Khazanah should do in the national interest. So reduce staffing. Deal with crony contracts. Review the routes and financing of aircraft; and appoint competent professionals to manage the airline, and have a truly independent Board of Directors,  and finally please seek the advice of MAS elders like Tan Sri Rama Iyer, Tan Sri Saw Huat Lye, Tan Sri Aziz Abdul Rahman and Dato’ Kamaruddin Ahmad.

All of us want MAS to succeed but the restructuring must be comprehensive so that the rot that has plagued our national flag carrier in recent years can be eliminated. Let us face the moments of truth with a healthy corporate culture. Therefore, make use of this opportunity to start on a clean slate. Let us hope Prime Minister Najib has the political will to make a new beginning for MAS.

Malaysia Airlines will be fully owned by Malaysian Government’s Khazanah

by Thomas

BANGKOK — Mired in debt and reeling from two aircraft disasters this year, Malaysia Airlines will be fully taken over by the government as a prelude to a restructuring, the Malaysian government said Friday.

MASKhazanah Nasional, the investment arm of the Malaysian government, formally requested the delisting of the airline in a letter to the Malaysian stock exchange on Friday and offered to buy back shares at a price 12.5 percent higher than Thursday’s closing price.

Malaysia Airlines had been losing money for several years when five months ago, a flight bound for China disappeared, and no trace of the aircraft or its 239 passengers has been found. Just over three weeks ago, another Malaysia Airlines plane exploded over Ukraine, killing almost 300 people.

Khazanah was vague about its plans for the airline, saying only that it intended “to undertake a comprehensive review and restructuring” and that the airline had “substantial funding requirements.” Malaysia’s Prime Minister, Najib Razak, said a “holistic restructuring plan” would be announced by the end of the month.

“This process of renewal will involve painful steps and sacrifices from all parties,” he said in a statement that specifically mentioned the need for support from, among others, the airline’s creditors, raising the possibility of a debt write-down.

The share buyback, which would cost Khazanah about 1.4 billion ringgit, or $437 million, still needs approval by private shareholders, who own about 30 percent of the company. Khazanah’s offer price of 27 sen, 0.27 ringgit, a share appears favorable to stockholders: That price was last reached in February, before the company’s two tragedies.

The disappearance in March of Flight 370 from Kuala Lumpur to Beijing remains a mystery, and a search in the southern Indian Ocean is still underway. On July 17, 298 passengers on a Malaysia Airlines flight from Amsterdam to Kuala Lumpur were killed when a company Boeing 777 was shot down over Ukraine.

The disasters aggravated what was already poor financial performance by the airline, which has lost money for the past three years and has been squeezed by nimbler rivals, like Air Asia, the privately owned, low-cost airline also based out of Malaysia that has grown exponentially since beginning operations more than a decade ago.

Malaysia Airlines, which began as Malayan Airlines, in 1947 during the British colonial period, has suffered a number of sharp losses in recent decades. It has often been managed by business executives close to the governing party, the United Malays National Organization, and was bailed out by the government at least once. Like many other government-linked companies in Malaysia, the airline is saddled with ties to influential contractors connected to the party, which has governed the country since independence in 1957.

The Malaysian government sees the carrier as a national strategic asset. In a statement Friday, Khazanah said the goal of the restructuring was to make the airline profitable but also for it to “serve its function as a critical national development entity.”

Malaysia can’t afford a botched handling of MH17

July 20, 2014

MY COMMENTWe have been hit by two tragedies, MH 370 and MH 17 a few days ago,Din Merican both within a space of four months. MH370 is still shrouded in secrecy and  it is a public relations disaster; our leaders and public and security officials handled the foreign media poorly. MH17 was brought down by Russian made missiles in the hands of Ukrainian rebels backed by  Prime Minister Putin’s government. Our political leaders and officials are again in the eyes of media. Let them handle the situation better this time.

Those who are behind this dastardly violence must be brought to account. Our diplomats and those of countries which lost their citizens and the United Nations Secretary General Ban Ki-Moon must act in concert to ascertain the facts about the downing of this ill-fated 777 aircraft. At home, the new Transport Minister has to ensure that there are no cover-ups, blame games, excuses, and conflicting or contradictory statements. Please provide facts as they come to light, and do it well and ensure that there are no fumbles.

I am glad that our Prime Minister has allowed debate in our Parliament on MH37. I hope Parliamentarians on both sides of Dewan Rakyat can be rational and constructive in their deliberations so that we can achieve consensus on what we should do to restore national self confidence and pride in our national flag carrier, Malaysian Airlines.

No shouting matches please. Bung Mokhtar types must not be allowed to disrupt the debate or make fools of themselves. In this time of national crisis, UMNO-BN and Pakatan Rakyat must stand together. The debate should result in a plan of action for the government. To nudge the debate along orderly lines, there should be a White Paper to Parliament on MH17 in which the government can present its views on what it has its mind to deal with the aftermath of MH 17.Din Merican

Malaysia can’t afford a botched handling of MH17

by William Pesek (07-18-14)

There’s nothing funny about Malaysia Airlines losing two Boeing 777s and more than 500 lives in the space of four months. That hasn’t kept the humor mills from churning out dark humor and lighting up cyberspace.


Actor Jason Biggs, for example, got in trouble for tweeting: “Anyone wanna buy my Malaysia Airlines frequent flier miles?” A passenger supposedly among the 298 people aboard Flight 17 that was shot down over eastern Ukraine yesterday uploaded a photo of the doomed plane on Facebook just before takeoff in Amsterdam, captioning it: “Should it disappear, this is what it looks like.”

That reference, by a man reportedly named Cor Pan, was to Malaysia Airlines Flight 370, whose disappearance in March continues to provide fodder for satirists, conspiracy theorists and average airplane passengers with a taste for the absurd. On my own Malaysia Air flight last month, I was struck by all the fatalistic quips around me — conversations I overheard and in those with my fellow passengers. One guy deadpanned: “First time I ever bought flight insurance.”

MH17 CrashThere is, of course, no room for humor after this disaster or the prospect that the money-losing airline might not survive — at least not without a government rescue. This company had already become a macabre punch line, something no business can afford in the Internet and social-media age. It’s one thing to have a perception problem; it’s quite another to have folks around the world swearing never to fly Malaysia Air.

Nor is no margin for mistakes by Malaysia or the airline this time, even though all signs indicate that there is no fault on the part of the carrier. The same can’t be said for the bumbling and opacity that surrounded the unexplained loss of Flight 370. Even if there was no negligence on the part of Malaysia Air this week, the credibility of the probe and the willingness of Prime Minister Najib Razak’s government to cooperate with outside investigators — tests it failed with Flight 370 — will be enormously important.

As I have written before, the botched response to Flight 370 was a case study in government incompetence and insularity. After six decades in power, Najib’s party isn’t used to being held accountable by voters, never mind foreign reporters demanding answers. Rather than understand that transparency would enhance its credibility, Malaysia’s government chose to blame the international press for impugning the country’s good name.

The world needs to be patient, of course. If Flight 370’s loss was puzzling, even surreal, Flight 17 is just MH 17plain tragic. It’s doubtful Najib ever expected to be thrown into the middle of Russian-Ukraine-European politics. Although there are still so many unanswered questions — who exactly did the shooting and why? — it’s depressing to feel like we’re revisiting the Cold War of the early 1980s, when Korean Air Flight 007 was shot down by a Soviet fighter jet.

More frightening is how vulnerable civilian aviation has become. Even if this is the work of pro-Russian rebels, yesterday’s attack comes a month after a deadly assault on a commercial jetliner in Pakistan. One passenger was killed and two flight attendants were injured as at least 12 gunshots hit Pakistan International Airlines Flight PK-756 as it landed in the northwestern city of Peshawar. It was the first known attack of its kind and raises the risk of copycats. The low-tech nature of such assaults — available to anyone with a gripe, a high-powered rifle and decent marksmanship — is reason for the entire world to worry.

The days ahead will be filled with post-mortems and assigning blame. That includes aviation experts questioning why Malaysia Air took a route over a war zone being avoided by Qantas, Cathay Pacific and several other carriers. The key is for Malaysian authorities to be open, competent and expeditious as the investigation gains momentum. Anything less probably won’t pass muster.

MH 370 and MH 17 taught us never to take things for granted

July 20, 2014

MH 370 and MH 17 taught us never to take things for granted

by Neil Khor (07-19-14)@

MASPride of Malaysia dented by Tragedy

COMMENT: The loss of 298 lives as MH 17 was shot down over Ukraine has come too soon on the heels of the loss of MH 370. An airline that had a near perfect record for the past 30 years since its inception is now suddenly the most blighted in the aviation industry.

Crying for Loss of Loved OnesThe manner in which we recover, and there is no doubt that we will, shall determine our collective destiny as a nation. Like many Malaysians, I was in shock and disbelief at midnight on Thursday as news of the loss of MH17 filtered through social media. Since the loss of MH 370, I have made it a point to fly MAS whenever possible come what may.

I have grown up with MAS, as a toddler traveling from Penang to Singapore in the 1970s right through my student days at UM, when the airline was kind enough to extend to students with AYTB (Asian Youth Travel Bureau) cards tremendous discounts allowing us to go home on the cheap.

In those days, it was a grueling nine-hour bus ride down Malaysia’s trunk roads from Kuala Lumpur to Penang. A MAS flight not only provided comfort and speed, it assured that students got home safely.

Like the airline, those of us born in the 1970s, have come of age to find a world changed beyond all recognition. It is not that we cannot adapt to change but the changes have come so rapidly and so brutally that nobody has had the time to make sense of it all. We may have been brought up to believe in God and Country (Rukunegara) but globalisation have altered our allegiances.

Similarly, the aviation industry, too. has not fared too well in this globalised world. The pacific period, from the 1960s to 2000, is over.

In those days, emerging nations like Malaysia personified themselves through national airlines. We broke away from Singapore to form MAS, which not only flew the flag but also assumed the burden of unprofitable but necessary domestic routes. The growing up years was characterised by good service, which by the 1980s, was amongst the best in the world.

Flying on MAS was a privileged and entire families would go to the airport to receive or send relatives off. It was definitely not the era of “everybody can fly” but rather “now you have arrived”. Cheap fossil fuels and better-designed plans made flying cheaper and more accessible. By the time the budget airlines appeared in the sky, the entire attitude towards aviation had changed as well.

MH17 Crash Site2 National carriers had to compete like any other in the industry resulting in spectacular bankruptcies, including that of Japan Airlines! With this fundamental change, attitudes towards flying also transformed. Malaysian society changed the most in the last 15 years. The Internet continues to be a great leveler. No single Prime Minister, no matter how powerful, can decide with impunity or set the tone of discussion on national issues like Dr Mahathir Mohamad.In short, MAS like many other “national” organisations has continued to come up short, never meeting the rising tide of expectations. Since September 11, 2002 when two planes slammed into New York’s Twin Towers, air travel has never been the same. I remember traveling from Minneapolis to Louisville in Kentucky with a guide dog as a fellow passenger.

There was hardly any security with checkpoints that were no more stringent than at a bus stop.  That was in 1999 but today the US is imposing full body scans, check-ups on laptops and security scanning of mobile phones. Soon security procedures will take as long as inter-continental flights in all major airports.

From the sad and painful experience of losing MH370, we have learned that the aviation industry itself has not kept up with technological change, with planes entering blind spots and much dependent on 1940s radar technology. There is also very little improvement on how to track planes to ensure better monitoring. Till this day, black box technology still relies on batteries that only last a maximum of 30 days.Now four months onwards, we have lost MH17, which was shot down by a surface-to-air missile over a route that was deemed officially safe by the IATA. Yes, some airlines have avoided this route over the Ukraine but many airlines flying from Europe to Asia were using this prescribed route.

Political maturity in short supply

How high an airplane fly is also dictated by the air traffic controller of the country whose territory one is flying across presumably they know what other flying objects will be flying over their airspace at the same time. As someone who flies on MAS, Emirates and SIA regularly from Malaysia to Europe, this route above the Ukraine is very familiar.

I have also flown frequently to neighbouring Georgia, crossing the Caspian and Black seas. There was really no way to have anticipated that a civilian plane would be shot down. If the European authorities had red-flagged the area as two other Ukrainian military aircraft had been shot down, they should have banned all commercial flights over Ukraine airspace.

Having lost two aircraft involving the loss of more than 500 souls is a very bitter pill for Malaysians to accept. For the longest time we have developed and made giant progressive strides forward. Yes, political maturity is still an on-going battle.

Religious and racial extremism is on the rise but most of us have enough to eat, some even able to share with the less fortunate by supporting soup kitchens.

Never take things for grantedMalaysia is still a great country, blessed with natural resources and a cultural diversity that is the envy ofMH17 Crash site 2 the world. But the loss of our two MAS flights has taught us never to take things for granted. Whilst we can plan and make the best preparations, we cannot foresee how these plans will unfold.

In the case of MAS, some hard decisions may have to be taken to make it viable again. There is no loss of face if we have to start again from scratch. To all those who have lost friends, families and loved ones in MH370 and MH17, my most heartfelt and sincere condolences.

Malaysians the world over are united in grief and sorrow. But I am sure we will emerge stronger and better, at least strive to be better people to ensure a stronger nation going forward.

NEIL KHOR completed his PhD at Cambridge University and now writes occasionally on matters that he thinks require better historical treatment. He is quietly optimistic about Malaysia’s future.



Another MH Tragedy: MH17 shot down over eastern Ukraine, 295 killed

July 18, 2014

Another MH Tragedy: MH17 shot down over eastern Ukraine, 295 killed

by Reuters (July 17, 2014)


Malaysia’s Prime Minister, Najib Razak, called Thursday evening for an investigation at the crash site and the unfettered cooperation of local authorities. Noting that Ukrainian officials had reported that the plane was hit by a missile, he said, “Malaysia is unable to verify the cause of this tragedy.”“No stone will be left unturned,” he added. “If it transpires that the plane was, indeed, shot down, we insist that the perpetrators must be brought to justice.”–New York Times

A Malaysian airliner was shot down over eastern Ukraine by pro-Russian militants on Thursday, killing all 295 people aboard, a Ukrainian interior ministry official said.

Raising the stakes in the East-West showdown between Kiev and Moscow, the official blamed “terrorists” using a ground-to-air missile and Ukraine’s prime minister called the downing of the flight from Amsterdam to Kuala Lumpur a “catastrophe”.

A Reuters correspondent saw burning wreckage and bodies on the ground at the village of Grabovo, about 40 km from the Russian border in an area where pro-Russian rebels have been active and have claimed to have shot down other aircraft.

“I was working in the field on my tractor when I heard the sound of a plane and then a bang,” one local man at Grabovo told Reuters. “Then I saw the plane hit the ground and break in two. There was thick black smoke.”

MH17 Crash site 2The Boeing 777 came down near the city of Donetsk, stronghold of pro-Russian rebels, Interior Ministry official Anton Gerashchenko said on Facebook, adding it was “shot down with a Buk anti-aircraft system by terrorists,” the term the Kiev government uses for militants seeking to unite eastern Ukraine with Russia. The dead were 280 passengers and 15 crew.

Malaysia Airlines said on its Twitter feed it had lost contact with its flight MH-17 from Amsterdam. “The last known position was over Ukrainian air space,” it said.

A rebel leader said Ukrainian forces shot the airliner down. Ukrainian official said their military was not involved. A general view shows part of the wreckage of Malaysia Airlines flight MH17 in the Donetsk region, near the Ukrainian border with Russia. Interfax-Ukraine quoted another Ukrainian official as saying the plane disappeared from radar when it was flying at 10,000 metres, a typical cruising altitude for airliners.

Ukraine has accused Russia of taking an active role in the four-month-old conflict in recent days and accused it earlier on Thursday of shooting down a Ukrainian Sukhoi Su-25 fighter jet – an accusation that Moscow denied.

The military commander of the rebels, a Russian named Igor Strelkov, had written on his social media page shortly before the report of the airliner being downed that his forces had brought down an Antonov An-26 in the same area. It is a turboprop transport plane of a type used by Ukraine’s forces. – Reuters/

NOTE: MAS Europe’s office disclosed the nationalities of those on board:

- 154 Dutch
– 27 Australians
– 23 Malaysians
– 11 Indonesians
- 6 Britons
– 4 Germans
– 4 Belgians
– 3 from the Philippines
– 1 Canadian

MH370: “The same mistake must not be made again” – Najib

May 14, 2014

MH370: “The same mistake must not be made again” – Najib

The Silent OnePrime Minister Datuk Seri Najib Tun Razak admitted to the flaws the Malaysian government had done in managing the case of the missing Malaysia Airlines (MAS) flight MH370.

Najib in his article entitled Malaysia’s Lessons from the Vanished Airplane, published on The Wall Street Journal, today, stated that “My government didn’t get everything right. Yet other parties too, must learn from MH370 – and make changes.”

In his this article Najib started off with his chronicle of the “bizarre” and “unprecedented” event that took place under his watch as the Prime Minister and that he understands the plight and the terrible anguish for the families of those on the plane especially with the lack of definitive proof or physical evidence like the wreckage from the aircraft that made it harder to bear.

Najib also credited the efforts by all for doing their level best under near-impossible circumstances and this is a huge attainment for a developing country like Malaysia to overcome diplomatic and military sensitivities and bring together 26 different countries to conduct one of the world’s largest peacetime search operations.

However,  Najib wrote, ”But we didn’t get everything right. In the first few days after the plane disappeared, we were so focused on trying to find the aircraft that we did not prioritize our communications.”

Najib also acknowledged the fact that there was a huge confusion especially when the plane vanished instantaneously between two countries’ air traffic controls and that it took air-traffic controllers four hours to launch the search-and-rescue operation and this requires an investigation.

The Prime Minister wrote “None of this could have altered MH370’s fate. And I pledge that Malaysia will keep searching for the plane for as long as it takes. We will also continue facilitating the independent investigation so we can learn from any mistakes. We have already tightened airport security, and investigators are looking for other measures to improve safety.”

Najib highlighted that this ordeal faced by Malaysia in this era of modernity must not be taken lightly and that the nation is not the only party that must learn from MH370.

He ended the article by saying “The global aviation industry must not only learn the lessons of MH370 but implement them. The world learned from Air France but didn’t act. The same mistake must not be made again.”

ASEAN-US Security Relations Moving to a New Level

Number 256 | April 15, 2014

ASEAN-US Security Relations: Moving to a New Level

by Mary Fides Quintos and Joycee Teodoro

Chuck Hagel -The United States has just completed hosting a three-day forum with the ten ASEAN Defense Ministers in Hawai’i, fulfilling US Secretary of Defense Chuck Hagel’s invitation to his ASEAN counterparts during last year’s Shangri-La Dialogue in Singapore. The agenda of the US-ASEAN Defense Ministers’ Forum included a roundtable discussion on humanitarian assistance and disaster response (HA/DR), site visits to the National Oceanic and Atmospheric Administration’s (NOAA) Pacific Tsunami Warning Center and the USS Anchorage–an amphibious transport dock ship designed to respond to crises worldwide–and discussions on various pertinent security issues in the region.

The US-ASEAN Defense Ministers’ Forum marked the beginning of Secretary Hagel’s ten-day trip to Asia which included visits to Japan, China, and Mongolia and is his fourth official visit to the region in less than a year, all part of the ongoing US rebalance policy to Asia. This event was the first meeting that the US hosted, as previous gatherings were conducted on the sidelines of the ASEAN Defense Ministers’ Meeting (ADMM) Retreat and ASEAN Defense Ministers Meeting-Plus (ADMM-Plus) Summit.

The US-ASEAN Defense Ministers’ Forum was conducted under the ambit of the ADMM-Plus which was established in 2007 to serve as a venue for ASEAN to engage with eight dialogue partners–Australia, China, India, Japan, New Zealand, South Korea, Russia, and the United States–in promoting peace and security in the region. To date, ADMM-Plus has established five working groups for practical cooperation covering maritime security, counter-terrorism, humanitarian assistance and disaster management, peacekeeping operations, and military medicine.

This most recent meeting was held amid another wave of tensions on the Korean Peninsula and in the South China Sea. For ASEAN, a recent water cannon incident near Scarborough Shoal involving Filipino fishing vessels and Chinese Coastguard ships, the standoff at Ayungin (Second Thomas) Shoal again between the Philippines and China, and China’s naval exercises at James Shoal which is claimed by Malaysia are all issues of concern.

Indonesia’s strengthening of its military presence in the Natuna Islands which China included in its nine-dash line is another indication of the increasing insecurity and instability in the region. The meeting provided a good opportunity for informal dialogue on the overall security environment in Asia and the possible implications of developments in Ukraine for the principles of sovereignty and territorial integrity within the international order. It also served as an opportunity for the United States to reemphasize that it can be relied upon by ASEAN members in supporting the peaceful settlement of disputes in accordance with international law and in upholding the freedom of navigation and overflight in the region.

With regard to humanitarian assistance and disaster response, Typhoon Haiyan in the Philippines Hishamuddin Husseinlast year and the ongoing search for Malaysia Airlines Flight 370 has demonstrated the lack of capacity of individual ASEAN countries or ASEAN as a bloc to immediately respond to a crisis. Not disregarding the efforts made by the governments of the Philippines and Malaysia, these incidents highlighted the need for the participation of other states particularly in terms of sharing of expertise, technology, and information. The US-ASEAN Defense Ministers’ Forum explored areas where cooperation in these areas can be further strengthened. It was a reiteration of the need for multilateral cooperation in non-traditional security challenges that do not respect territorial boundaries.

The increased frequency of high-level visits by US officials to Asia, the provision of resources to its allies in the region, the reallocation of military hardware, along with ongoing military activities demonstrate that the US intent is to have a closer engagement with the region over the long term. These actions are also manifestations of the US commitment to Asia despite fiscal restraints and the looming crises in other regions where the US is also expected to be involved.

Moreover, they send a strong signal that the United States remains the region’s security guarantor regardless of doubts on its capacity to perform that role. However, the US-led hub-and-spokes alliance security model can be perceived as an act of containment against a particular country, hence the importance that bilateral alliances are supplemented by a multilateral institution that is open and inclusive such as ASEAN in shaping the regional security architecture.

The conclusion of the first US-initiated US-ASEAN Defense Ministers’ Forum highlights the growing importance of ASEAN to the United States, especially if the event becomes more institutionalized. The message is that the United States views ASEAN as a central and strategic player, not only in the US rebalance to Asia but more importantly in the building of a strong and credible regional security architecture for the Asia-Pacific.

The move by the United States to actively engage ASEAN in its rebalance also shows the maturation of ties between them. By acknowledging ASEAN as an important regional actor, the relationship between the two has clearly been elevated. This also raises a key point with regard to respecting ASEAN’s centrality in the region. Economic power and military size notwithstanding, major powers need to recognize that any credible regional security architecture must include ASEAN.

These deliberate and sustained efforts involving ASEAN in devising the region’s security architecture are clear manifestations that the United States is actively engaging more actors in the region for maintaining peace and stability. More importantly, by involving ASEAN, there is the added assurance that the region’s security environment will work under a framework that is not dominated by a single power.

ASEAN, for its part, should see changes in the regional security environment as both opportunities and challenges. While ASEAN has been successful in engaging the major powers in the region, its centrality must continuously be earned. First, it needs to maintain unity amid differences; it should not be influenced by any external actor that seeks to advance its national interests at the expense of regional interests. ASEAN members must learn how to pursue their respective interests not only through national strategies but also through regional unity.

As a community, ASEAN is expected to act as a bloc championing the group’s interests and not only those of the individual member-states. Second, there should be greater commitment to cooperation not only in HA/DR but also in other non-traditional areas of security. Non-traditional security challenges are often transnational in scope and include multiple stakeholders. ASEAN must continuously enhance regional cooperation and coordination in times of crisis, although individual countries must also develop domestic capacity to respond to security challenges.

ASEAN should start addressing this deficit now otherwise institutional mechanisms will remain only on paper. These challenges will force ASEAN to build and improve on its usual practices and move beyond its comfort zone, in the long run benefitting the bloc as it matures institutionally.

About the Authors: Ms. Mary Fides Quintos and Ms. Joycee Teodoro are both Foreign Affairs Research Specialists with the Center for International Relations and Strategic Studies at the Philippines Foreign Service Institute.

The views expressed here belong to the authors alone and do not reflect the institutional stand of the Philippines Foreign Service Institute. Ms. Quintos can be contacted at and Ms. Teodoro at

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.
Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options
The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.
APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington.
APB Series Coordinator: Damien Tomkins, Project Assistant, East-West Center in Washington.
The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.
For comments/responses on APB issues or article submissions, please contact

East-West Center | 1601 East-West Road | Honolulu, HI | 808.944.7111

East-West Center in Washington | 1819 L Street, NW, Suite 600 | Washington, DC | 202.29

Amid Search for Plane, Malaysian Leaders Face Rare Scrutiny

Asia Pacific

Amid Search for Plane, Malaysian Leaders Face Rare Scrutiny


SEPANG, Malaysia — Malaysia’s governing elite has clung to power without interruption since independence from Britain almost six decades ago through a combination of tight control of information, intimidation of the opposition and, until recently, robust economic growth.

But worldwide bafflement at the disappearance of Malaysia Airlines Flight 370 has challenged the country’s paternalistic political culture and exposed its coddled leaders to the withering judgments of critics from around the world.

Civilian and military leaders on Wednesday revealed that they had known for the past four days, but did not publicly disclose, that military radar had picked up signals of what may have been the missing aircraft. It appeared to be flying on a westerly course sharply off its intended flight path to Beijing.

If the radar readings were from the missing plane, it could mean a radical reinterpretation of where it ended up. And it was only under a barrage of intense questioning on Wednesday from a room packed with reporters who had arrived from many countries that officials acknowledged that the last recorded radar plot point showed the jet flying in the direction of the Indian Ocean — and at a cruising altitude, suggesting it could have flown much farther.

Continue reading the main story

Detecting a Plane

Two kinds of radar are used to keep track of air traffic from the ground.

Primary radar

Sends out radio signals and listens for echoes that bounce back from objects in the sky.


Secondary radar

Sends signals that request information from the plane’s transponder. The plane sends back information including its identification and altitude. The radar repeatedly sweeps the sky and interrogates the transponder. Other planes in flight can also receive the transponder signals.

That raised the question of why the information had not been released earlier.

“The world is finally feeling the frustration that we’ve been experiencing for years,” said Lee Ee May, a management consultant and a former aide to a Malaysian opposition politician.

Ms. Lee said she was embarrassed when the country’s Defense Minister, Hishammuddin Hussein, the scion of a powerful political family, rejected a reporter’s assertion on Wednesday that the search for the airplane had been disordered.

“It’s only confusion if you want it to be seen to be confusion,” Mr. Hishammuddin said at a news conference that unfolded before an international audience.

Relatively free from natural disasters and other calamities, Malaysia has had little experience with handling a crisis on this scale. It is also an ethnically polarized society where talent often does not rise to the top of government because of patronage politics within the ruling party and a system of ethnic preferences that discourages or blocks the country’s minorities, mainly ethnic Chinese and Indians, from government service.

Ethnic Malays, who make up about half of the population, hold nearly all top government positions and receive a host of government preferences because of their status as “sons of the soil.”

Authoritarian laws have helped keep the governing party, the United Malays National Organization, in power — and an ascendant opposition in check.

The day before Flight 370 disappeared, the leader of the opposition, Anwar Ibrahim, was sentenced to five years under a sodomy law that is almost never enforced. Critics called the case an effort to block the opposition’s rise at a time when the governing party’s popularity is waning.

Then on Tuesday, a court convicted Karpal Singh, another opposition politician, of sedition, a law enacted in colonial times.

“We call it persecution, not prosecution,” said Ambiga Sreenevasan, a lawyer and the former head of the Malaysian Bar Council.

The government is accustomed to getting its way, and the crisis surrounding the missing plane is holding officials accountable in ways unfamiliar to them, Ms. Ambiga said.

“Malaysians have come to accept that their leaders don’t answer questions,” she said. “When you are not seriously challenged in any meaningful way, of course you get complacent and comfortable.”

For a relatively prosperous country of 30 million people that is less well known internationally than neighboring countries like Thailand and Singapore, the government’s confused efforts at finding the missing jetliner are an awkward and undesired appearance on the world stage.

The crisis has led to introspection about why the government has appeared uncoordinated and unable to pin down seemingly basic facts about the missing flight.

Officials insisted for three days that baggage was removed from the flight before takeoff when five passengers did not board. But the country’s chief of police on Tuesday said that was false: Everyone who checked in boarded the plane, he said. No explanation was given for the conflicting accounts.

Ibrahim Suffian, the Director of the Merdeka Center, an independent polling company, said the response to the crisis had underlined a lack of precision both in government and in the society over all.

“There’s a tolerance for a lack of attentiveness to detail,” he said. “You have a tendency of not asking so much and not expecting so much.”

The crisis also highlighted a lack of competence in government that Mr. Ibrahim said was related to a deference to authority and reluctance to take initiative. “There’s always been a kind of wait-for-instructions-from-the-top attitude,” he said.

Yet amid the criticism of the rescue efforts there was also an acknowledgment that the plane’s disappearance was so unusual that perhaps no government would be fully prepared for it.

“This is almost a unique situation,” said Ramon Navaratnam, a Harvard-trained economist and a former Malaysian senior civil servant. “Anyone would be caught off guard.”

For now, the Malaysian authorities are stuck in the unenviable position of hearing many questions but having few answers.

“They have never faced pressure to perform like this,” said Ms. Lee, the management consultant. “But now international eyes are on them, and they have nowhere to hide.”

A version of this article appears in print on March 13, 2014, on page A11 of the New York edition with the headline: Leaders in Malaysia Face Unusual Scrutiny.

Why Malaysia Will Say Almost Nothing About the Missing Plane

Why Malaysia Will Say Almost Nothing About the Missing Plane

March 12, 2014

Hishamuddin HusseinWith an international team of investigators still seemingly baffled about what happened to Malaysia Airlines Flight MH370, which disappeared over the weekend, relatives of the passengers and diplomats from countries touched by the mishap have vented their frustration with the Malaysian government.

For days, it seems, Malaysian officials and the state-owned carrier have released almost no information about the flight or working theories of why it vanished. Malaysia Airlines did not even inform relatives for 15 hours that the plane had disappeared, sending the distraught families to a hotel in Beijing to wait, and Kuala Lumpur’s envoys still have mostly kept the relatives in the dark days later.

More than 100 friends and relatives of the vanished passengers signed a petition on Monday calling on the Malaysian government to be more transparent and answer questions. Several of the relatives threw bottles at Malaysia Airlines employees who came to speak with them in Beijing, where the missing plane had been headed, but mostly the officials maintained their tight-lipped approach.

The frustration felt by families of the missing is understandable and reasonable, but no one should have expected much better from the Malaysian government. Although theoretically a democracy with regular, contested elections, Malaysia has been ruled since independence by the same governing coalition that has become known for its lack of transparency and disinterest—even outright hostility—toward the press and inquiring citizens. For a relatively wealthy country, Malaysia is also unusually prone to corruption. Since the Sept. 11 attacks and the revelations that al-Qaeda members had convened planning meetings in Malaysia, the government has become intensely controlling of any information about potential terror threats while maintaining a liberal visa policy for arrivals.

Malaysia’s actual air safety record is, according to aviation experts, relatively strong. That achievement is unsurprising for a country with a per capita gross domestic product of about $10,400, which has become a global hub for electronics production and other high-tech manufacturing. Before the disappearance of Flight MH370, Malaysia Airlines had not suffered a fatal crash since 1995. Kuala Lumpur, where the plane originated, has an even higher GDP per capita than the rest of the country—about $18,000—and boasts a vast, modern skyline, efficient transport, and gleaming new suburbs.

But Malaysia’s politics have not kept pace with its economic expansion. The long-ruling Barisan Nasional coalition has continued to win elections through massive gerrymandering, outright thuggery, and opposition parties’ inability to stop squabbling and make connections with rural voters.

In the most recent national elections, held in May 2013, the Barisan Nasional coalition won the largest number of seats in parliament, although the opposition actually won the popular vote; only gerrymandering, massive handouts to voters, and many election irregularities ensured the Barisan Nasional’s victory. In addition, the ruling party squeaked home by appealing primarily to the most hardline elements within its coalition, politicians and voters disdainful of the country’s multiethnic identity and the incremental freedoms of expression and social life that have developed in the past 20 years.

So even though Malaysia is far richer than neighboring Indonesia or the Philippines, those countries’ histories of democratic politics have made their politicians more accountable and more attuned to public expectations. Since independence in 1957, Malaysia has had only six prime ministers and the senior ranks of the ruling coalition have gained little fresh blood. In the current crisis, Prime Minister Najib Razak has made few substantive comments on the plane, while Malaysia’s major state-controlled media outlets, which in theory could have been ahead of the plane investigation story, have been very timid in their reporting.

This lack of accountability filters down, especially at state-owned enterprises such as Malaysia Airlines, which are notorious in Malaysia for insider dealing, corruption, and lack of transparency. Even before the crash, Malaysia Airlines’ parent company had lost money the last three years, including a huge loss of more than $350 million in 2013, in part because of its terrible management. One comprehensive study of government-linked companies, conducted by a group of economists in Australia and Malaysia, found that Malaysia state-run firms had worse corporate governance than publicly traded Malaysian companies not controlled by the state. Partly because investors understood that state-run companies were so poorly managed, the study found lower overall valuations on the Malaysian stock market. In other words, these state companies traded at a discount because of their mismanagement.

Malaysia’s lack of transparency and weak institutions have made graft and corruption endemic, making it easy for people to be smuggled in or out of the country, often on stolen passports.

The watchdog organization Global Financial Integrity has ranked Malaysia as one of the countries with the biggest illicit outflows of money in the world, while corruption monitoring organization Transparency International ranks Malaysia 53rd in the world in terms of clean government, below many poorer nations with fewer potential resources to combat graft.

At least two of the people on the vanished flight, and possibly more, apparently traveled on stolen passports and may have been migrants using people smugglers to get through Malaysia and on, eventually, to Europe. The Head of Interpol, Ronald Noble, has expressed surprise at how easy these people with stolen passports boarded the plane.

Malaysia’s fraught relationship with other Muslim-majority countries and the U.S. has made Kuala Lumpur’s leaders, never very transparent, even more opaque when it comes to intelligence-sharing and counterterrorism. Although no one seems to have determined whether the flight’s disappearance is related to terrorism, do not expect the Malaysian government to be the one providing any answers to the public if it turns out terrorism was involved. Malaysia has long had a relatively liberal visa policy toward Muslims from other countries, in part because it needed foreign workers and in part because this policy had traditionally been popular. (That policy, in part, is why Osama bin Laden recommended Malaysia as a place for terror operatives to meet and for wounded fighters to recover.)

But at the same time Malaysia has maintained a relatively liberal visa policy, it has cooperated closely with Britain and the U.S. on intelligence and security matters. This cooperation has always been extremely unpopular with the majority of Malaysians, and so successive Prime Ministers have worked hard to conceal it from public discourse. Unfortunately for the relatives of the vanished plane, the prime minister’s natural secrecy seems to have become so normal, for him and other government officials, that he cannot break the habit even in times of horrible tragedy.

Kurlantzick is Senior Fellow for Southeast Asia at the Council on Foreign Relations and author of Democracy in Retreat: The Revolt of the Middle Class and the Worldwide Decline of Representative Government.

New Luxury Aircraft for Prime Minister and Malaysia’s First Lady

January 3, 2014

New Luxury Aircraft for Prime Minister and Malaysia’s First Lady

Amid austerity measures, pro-UMNO bloggers are questioning whether Prime Minister Najib Abdul Razak is now jetting across the country in a new luxury aircraft.In blog postings by, among others, Big Dog and RockyBru, they pointed to an Airbus ACJ320 with tail number 9H-AWK using the call number, “Perdana 2″ or “NR2″ – which incidentally are similar to Najib’s initials.The aircraft is registered in Malta and leased from aviation group Comlux.

According to aviation news website Aviation Week, Jet Premier One (M) Sdn Bhd, the company which manages flights for VVIPs in Malaysia, including Najib, had indeed leased the Airbus ACJ320 from Comlux.

The lease was supposed to be a temporary replacement for the regular aircraft Najib uses, an Airbus ACJ319, being refurbished by Comlux Aviation Services.

The Airbus ACJ319 with tail number 9M-NAA operated under the call name “NR1” or “Perdana 1” and is the official aircraft for the Prime Minister, similar to that of the US President’s Air Force One.

It first came under the spotlight in 2011 when Najib flew on the Airbus ACJ319 to Perth, Australia, apparently on holiday.

In a press release by Comlux May last year, the company had announced it had won a contract to rework the VIP area of the Airbus ACJ319 as well as handle scheduled maintenance works for six years.

The company did not specify the value of the project. In the interim, Comlux leased an Airbus ACJ320 with tail number 9H-AWK to Jet Premier One. It took over the call name of  “NR1” and “Perdana 1″ and was spotted taking off from the Kuala Lumpur International Airport on October 6 to Denpasar Internatonal Airport, Bali, according to flight enthusiast site Jet Photos.

Najib left for Bali on December 6 for the Asia Pacific Economic Conference (APEC) Summit.

‘RM27k an hour operate’

The aircraft comes with a lounge, a private room equipped with personal bathroom and has wifi and phone access while in the air. Comlux did not reveal how much the plane was leased for but according to the company’s brochure, the approximate operating cost for its Airbus ACJ320 flight is US$8,350.31 (RM27,501.75) per hour.

In another press statement in October last year, Comlux announced that it has completed refurbishing the “Head of State of Malaysia aircraft” Airbus ACJ319 after working on it since its arrival at its US base in June that year.

Despite the return of the plane, the lease for the Airbus ACJ320 appears to be still active and has been spotted jetting around in Malaysia.

The Airbus ACJ320 changed its call name to “NR2″ or “Perdana 2″ while the ACJ319 took back its call name “NR1″ or “Perdana 1″.

According to air traffic tracker website Flight Radar 24, the Airbus ACJ320 with tail number 9H-AWK last took off from KLIA under the call name “NR2″ on December 31. The site also recorded the Airbus ACJ319 with tail number 9M-NAA taking off from KLIA on Dec 26 under the call name “NR1″.

In a parliamentary reply on November 7 last year, Minister in the Prime Minister’s Department Shahidan Kassim revealed that the government spent RM14.95 million for fuel and RM160.08 million in maintenance for VVIP flights in 2012.

The government aircraft pool includes a Falcon, Global Express, Boeing Business Jet, Blackhawk, two Augustas and a Fokker F28. However, that reply did not mention either the Airbus AC319 or Airbus ACJ320.

‘PMO says aircraft lease over’

In an immediate response, the Prime Minister’s Office (PMO) said the lease of the Airbus ACJ320, which started on February 1, 2013, ended on December 31 that year. The PMO added that the lease of the Airbus ACJ320 was necessary due to a shortage of government aircraft.

Prior to this, it said the government had five aircraft, namely the ACJ319, BBJ, Fokker F28, Global Express and Falcon 900.

“In August 2012, the Fokker F28 aircraft was decommissioned as it was over 30 years old and was not replaced. Last year, the BBJ and ACJ319 were scheduled for compulsory maintenance. The BBJ went through maintenance between January to July 2013 while the ACJ319 went through maintenance between June 15 to Oct 8, 2013. As such, the PMO which is responsible for special government aircraft took the decision to lease the ACJ320 to overcome the shortage of aircraft,” it said.

The PMO added that the aircraft were not exclusively for Najib but is also used by the Agong, Sultans, Yang di-Pertuas, ministers, deputy ministers, foreign guests of the Federal Government, senior government officials and VIPs. It added that the aircraft allowed these individuals to move in and out of the country safely and helps with their busy schedule.

His and Hers now ? PMO, please clarify.

His and Hers now ? PMO, please clarify.

Tsunami of Price Hikes

January 2, 2014

Tsunami of Price Hikes In Malaysia Truly Asia

by Balan Moses@

Balan MosesTHE pain that many fear will envelop them from a prospective tsunami of price hikes has yet to kick in but rest assured that the inevitable will take place.

I am sorry to start the year on a pessimistic note but false optimism will get us nowhere. We, the people at large, have to discuss the matter and collectively work with the government and private sector to get us out of this veritable pickle that we find ourselves in. Malaysians are bracing for increments ranging from power rates to tolls that have crept up on us all of a sudden leaving many afraid that their slender financial resources may not be able to weather the storm.

How is it that everyone (I exaggerate, of course) is rushing, in concert it appears, to charge us more? Has fair play (and fair prices) been thrown out the window? In reality, higher charges for a myriad goods and services have been our constant companions since last year with many not really feeling the pinch due to the manner in which prices went up intermittently by a fraction.

Much like the proverbial frog in water that grew warmer gently but surely until the heat became unbearable. In truth, our ringgit buys less today than it did last year. And it appears that this will very much be the trend in the foreseeable future.

What then is the fate of the ordinary wage earner whose purchasing power is diminishing at a faster rate than the annual increase in income? Not exactly encouraging news given the warning a couple of days ago that some employers may be giving smaller bonuses and salary increments this year.

At Dataran Merdeka--Price Hikes Protest -31-12-13Price Hike Protest-December 31, 2013

And certainly not palatable information to the many retirees from the public and private sectors. Government pensioners are not exactly ecstatic every time there is an across the board hike in public sector salaries as pensions do not appear to keep pace with price hikes.

As for those who retired from the private sector, the outlook appears rather bleak as jobs become increasingly hard to come by at their age.

Some of those depending on Employees Provident Fund savings to get by fear that their money may not last them for too long with medical exigencies making their unhealthy presence felt and old age imposing its costs in so many other ways.

So where does that leave the average consumer? I think it is time that consumers organise themselves better to avoid getting a raw deal from traders at all levels.

I am not besmirching the honest traders who make reasonable profits by giving the consumer a fair price for a product or service. Not for a moment do I begrudge traders their fair profit as they too have families with all attendant costs. My beef is with profiteers who use any excuse for a better profit.

Malaysians have to identify the areas where they spend the most and seek to keep costs at reasonable levels. I use the word “reasonable” as I am cognizant of the fact that we do not live in a vacuum with international price trends directly affecting our economy.

Be that as it may, the time has come for middle Malaysia (the rich may not arguably feel the pinch like the middle class and poor do) to sit up and take an active interest in the mechanics of price hikes. I am sure there are retired economists, entrepreneurs, consumerists, academics, statisticians and managers with a reservoir of experience who can join hands to identify the way in which prices are increased.

They can also point out to government areas of unjustified increases in prices for the executive to act on. They can also work with the private sector to rationalise price hikes. I am curious about how much profit traders make in any sale or transaction.

Is there any authority that keeps tabs on these things or is it a laissez-faire system where everyone makes as much profit as they want? The argument may be made that no one is forcing anyone to buy at a particular shop or outlet. Willing buyer, willing seller as the saying goes.

And therein lies the rub as unwilling buyers are now forced to buy at willing outlets that don’t mind inflating prices as they have a captive audience.

Is there a choice available to consumers? Not really. Those in housing estates are at the mercy of sundry shops that charge 20-30% more than some supermarkets which in turn charge 20% or more than hypermarkets.

Can we have a directory of enterprises for the consumer to refer to for fair prices? Can someone get this going on the internet for the public good? There are a whole raft of things that the consumers can do if we put our collective mind to it. Remember. We are a potent force who can make or break businesses.

Even as I delve into the litany of woes facing the average consumer, I want to highlight the plight of the poor who earn meagre salaries and are struggling to make ends meet. The poor will always be with us and it is incumbent on everyone else to come to their aid, irrespective of their race or religion.

Poverty strips everyone of their dignity and right to a decent life. As Alexander Pope’s immortalised saying “hope springs eternal in the human breast” resonates in my mind, I want to end on a similar note.

I pray that Malaysians journey through this year as best as they can given the strength of human spirit which can rise to the occasion as and when necessary. Happy New Year.

I RETURNED from abroad last Saturday, landing at the Low Cost Carrier Terminal (LCCT) in the wee hours of the morning. As three flights landed at almost the same time, the pedestrian lanes were busy with passenger traffic.

The joy of returning home was, however, marred by a number of things that could have been avoided if those in charge of the airport had done their job that day. The first hurdle was the fact that the escalator was out of service. I saw old men and women struggle with their hand luggage as they climbed the flight of steps with no one to help them.

Malaysia 2014

As we stood in line at the immigration checkpoint, the manual line seemed to move faster than the autogate when logic dictates that it should have been the other way around. We later found that only one gate had been opened for three plane loads of exhausted people.

The baggage carousel area was another disaster as hundreds of weary travelers tried to keep their cool as they tried to negotiate around a sea of trolleys. Clearly the place was not made for a large crowd. If anyone thought that this was the end of their woes, they were sorely mistaken.

The taxi line was overflowing with passengers, some with children, with nary a taxi in sight. The attendant on duty told me that this had been the case the whole day. I know that the LCCT is a no-frills area but please have a heart for those who use it. We are not second class travelers and deserve the same conveniences available at the Kuala Lumpur International Airport (KLIA).

Not that some of those landing there are not complaining either. A friend flew in the other day with an aged relative and was unable to find a single trolley. The other problem was that not one premier taxi was available.

I believe we have the infrastructure in place at our airports. It’s just that monitoring is below par. Let’s hope that Visit Malaysia Year 2014 will not be marred by these hiccups in an otherwise good system.

Balan Moses, theSun‘s executive editor (news), like many other Malaysians, feels for the poor, the underprivileged, the disabled and those barely keeping their nose above water. He wants to galvanize Malaysians to put their best foot forward to help the underclasses live decently with pride and dignity even as those blessed more in every respect do their bit for their lesser Malaysian cousins. Feedback:

Malaysia Truly Asia

January 2, 2014

Malaysia Truly Asia

Malaysia, where dreams come true and nightmares too. Promoting Malaysia as a land of paradise is fine, but we are short changed when we consider the politics. Religion and race are being used to divide and rule us. I like this video but how I wish that it is  the real thing. –Din Merican

What a Good Trans-Pacific Partnership Looks Like

March 12, 2013

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

March 8, 2013


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.

Major State-Owned Enterprises

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.

research and development spending

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 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.

US cross border services trade

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.

US agricultural trade


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.

US china total trade

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, (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, (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, (accessed March 4, 2013); and OECD, “Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005,” September 14, 2011, (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, (accessed March 4, 2013).

[4] Derek Scissors, “The Most Important Chinese Trade Barriers,” Heritage Foundation Testimony, July 20, 2012,

[5] Investment Canada Act, “Guidelines–Investment by State-Owned Enterprises–Net Benefit Assessment,” Industry Canada, (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, (accessed February 8, 2013).

[6] Office of the United States Trade Representative, “Intellectual Property Rights in the U.S.–South Korea Trade Agreement,” (accessed March 4, 2013).

[7] Peter K. Yu, “The U.S.–China Dispute Over TRIPS Enforcement,” Drake University Law School, October 2010, p. 3, (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, (accessed March 4, 2013); and Minxin Pei, “Intellectual Property Rights: A Survey of the Major Issues,” Asia Business Council, September 2005, p. 6, (accessed March 4, 2013).

[8] Ian F. Fergusson and Bruce Vaughn, “The Trans-Pacific Partnership Agreement,” Congressional Research Service, January 10, 2011, (accessed March 4, 2013).

[9] 2011 U.S. Intellectual Property Enforcement Coordinator, “Annual Report on Intellectual Property Enforcement,” The White House, March 2012, (accessed March 4, 2013).

[10] “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” The White House, February 2013, (accessed March 4, 2013).

[11] International Chamber of Commerce, “Cross-Retaliation Under the WTO Dispute Settlement Mechanism Involving TRIPS Provisions,” June 29, 2012, (accessed March 4, 2013).

[12] Trans-Pacific Strategic Economic Partnership Agreement, Main Agreement, pp. 11–19, (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, (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, (accessed March 4, 2013).

[14] Chris Edwards, “Agricultural Regulations and Trade Barriers,” CATO Institute, June 2009, (accessed March 4, 2013).

[15] Merchant Marine Act of 1920, 46 U.S. Code § 27, 2002, p. 6, (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,

[16] Christian Broda and John Romalis, “Inequality and Prices: Does China Benefit the Poor in America?” Banco de Portugal, March 10, 2008, p. 2, (accessed March 4, 2013).

[17] Bureau of Labor Statistics, “Current Employment Statistics–CES (National), 2012, (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, (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, (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, (accessed March 4, 2013); and Carolyn L. Evans, “Bilateralism, Multilateralism, and Trade Rules,” Federal Reserve Bank of San Francisco Economic Letter, January 9, 2012, (accessed March 4, 2013).

[19] “Rules of Origin, Communication from Hong Kong,” GATT Negotiating Group on Non-Tariff Measures, September 15, 1989, (accessed March 4, 2013).

[20] Byron Dorgan and Sherrod Brown, “How Free Trade Hurts,” The Washington Post, December 23, 2006, (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, (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, (accessed March 4, 2013), and Alan Beattie, “Negotiators Sift Debris,” Financial Times, July 29, 2008, (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, (accessed March 4, 2013).

[24] Julia Gray, “Politics and Patronage: The Function of Dysfunctional Regional Trade Agreements,” Princeton University, April 23, 2010, (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, (accessed March 4, 2013); and Australian Government, “Bilateral and Regional Trade Agreements,” Productivity Commission Research Report, November 2010, (accessed March 4, 2013).

[25] United States Census Bureau, “Top Trading Partners–Total Trade, Exports, Imports, Year-to-Date December 2012,” (accessed March 4, 2013).

[26] Sanchita Basu Das, “RCEP and TPP: Comparisons and Concerns,” Institute of Southeast Asian Studies, January 7, 2013, (accessed March 4, 2013).

Brand Malaysia: “Orang Utans and Pandas don’t cut it anymore.”.

September 4, 2012

Brand Malaysia: “Orang Utans and Pandas don’t cut it anymore”.

by Dato Dennis Ignatius (08-30-12)

According to Datuk Seri Idris Jala, Cabinet Minister and CEO of the Performance Management and Delivery Unit  (PEMANDU), the Government is in the midst of a major exercise to rebrand the country and promote a more vibrant image abroad.

A national branding unit with a RM30mil budget and a dedicated team of officers has been established in the Prime Minister’s Department to spearhead the project.

International management consultants have also been hired to give strategic advice and assist in the rebranding exercise.

Malaysia has undoubtedly had its successes. Dynamic development strategies, successful investment promotion, innovative tourism marketing, a reputation for racial and religious tolerance, an innovative foreign policy and world-renowned corporations like Petronas helped make Malaysia a respected name globally.

However, during the past decade in particular, a series of unfortunate developments has left brand Malaysia in tatters, as I noted in this column more than two years ago (“Brand Malaysia reeling from a thousand cuts”, February 4, 2010).

Racial and religious extremism, corruption scandals, significant outflows of local capital and talent, a lack of transparency and accountability, intense and highly divisive politicking and a perceived democracy deficit have taken a ruinous toll.

And all this at a time when it has become far more challenging to sustain national brands. In a world of real-time communications and social media, global opinions are shaped before local policy makers can even react.

Singapore Prime Minister Lee Hsien Loong, for example, recently expressed concern that xenophobic comments and postings on the Internet by Singaporeans were damaging Singapore’s international reputation.

Furthermore, where previously national branding was centred mostly around tourism, today a cutting-edge global reputation hinges upon quality of life, business environment, justice and good governance as much as anything else. Orang utans and pandas don’t cut it anymore.

Malaysia has not fared too well in this new branding environment. We were ranked 43rd out of 113 countries that were measured for brand strength by FutureBrand, one of the branding industry’s pioneers and a collaborator in the Malaysian rebranding exercise.

With the exception of culture and tourism, Malaysia did not score highly in any of the other categories (value system, quality of life, good for business, etc.) that FutureBrand considers in assessing a country’s overall brand.

The Government’s move to take stock of how we are presently perceived by the world at large is, therefore, timely. We might also need to consider repositioning our nation beyond the “Malaysia, Truly Asia” tourism specific brand that served us well these past years.

To be effective and productive, however, the rebranding exercise must be grounded in a realistic appreciation of what branding is all about.

Branding can help focus and project the essence of a nation, its values, its culture and the unique qualities it brings to the world. It cannot serve as a substitute for sound policy or camouflage obvious weaknesses. Merely developing a nice jingle or a catchy phrase by itself will not substantially improve a nation’s image.

It should come as no surprise that the countries with the best and most recognisable brand names are countries with free and open societies which have found a way to empower their people, ignite their creativity and marshal their talents.

As FutureBrand explains on its website, “from progressive politics to a sense of openness and freedom of speech, a country that is geared around its people … will always score highly”.

Countries like Australia, Switzerland, New Zealand, Japan, Canada, the United States and Sweden, therefore, did well while Pakistan, Zimbabwe and Cambodia did poorly.

We don’t, of course, need expensive foreign consultants to tell us all this; it’s common sense and already obvious to most Malaysians. What we do need, more than anything else, is the political will to address the underlying causes of our declining national brand.

There can be no doubt that if we seriously tackle the very issues that regularly make headlines in our own media, our international image will improve dramatically. The unique and amazing strengths of Malaysia, after all, remain undiminished; they just need to be given proper expression.

We also need to keep in mind that building and sustaining a successful national brand requires long-term consistency, commitment and attention to detail, something that we don’t seem to be particularly good at.

Take, for example, the KL International Airport (KLIA). We spend time and money to promote it as a world-class airport only to see these efforts undermined by repeated heists at the airport. According to local media reports, there were three major heists at KLIA in the last few months alone.

It doesn’t take an expert to tell us that if KLIA is perceived as lacking in security, it will never realise its full potential as a competitive regional hub.

The bottom line, therefore, is that if we want a better international image we must start by cleaning up our own act. Foreign consultants can help with spin, packaging and presentation, but it is up to us to make the policy changes that alone can build and sustain a successful national brand.


Borneo’s Ecotourism Problem

August 28, 2012

Le Monde Diplomatique: Borneo’s Ecotourism

Borneo’s Ecotourism Problem

The idea was to use tourism to protect Borneo’s remaining virgin jungle and its wildlife, and reward locals for abstaining from illegal logging. It isn’t working out quite that way
by Clotilde Luquiau

“Borneo stays true to nature, far from the modern world.” “A soft adventure tour to meet the people and see the jungle wildlife of untamed Borneo.”

Copy like this and photos of animals with gentle eyes against a jungle backdrop are how French travel agent Asia entices tourists to the Malaysian part of the island of Borneo.

Once they get there, they understand the inherent contradictions of “authentic tourism”. Traditional shacks of rattan and palm leaves have been replaced by houses with zinc roofs and walls made of wood or (worse still) breezeblocks. Ecotourism is supposed to generate revenue for local populations, limit environmental impact and make everyone more environmentally aware. But the money spent by tourists who come to admire Borneo’s virgin forests and unspoiled landscapes helps to modernise the place; and what the locals gain in comfort and security, the tourists lose in picturesqueness. Because Malaysia is targeting higher-spending tourists, the modernisation is set to increase. But who will really benefit?

“Politicians are always talking about ecotourism. They say it will bring development, so it’s not surprising the villagers have high expectations,” said Annie (1), a consultant in charge of developing a new tourism plan in Sabah, a state in northern Borneo. The authorities consider economic, socio-cultural and environmental “sustainability” a must.

So the money tourists spend is supposed to help preserve the environment in the areas they visit; yet the very presence of tourists and hotels increases the pressure on the environment. “We must stop this promotion of natural areas, which brings in greater numbers of visitors,” said Annie. But restricting numbers to reduce the environmental impact of tourism would also mean less revenue.

The dilemma is clearest in the Lower Kinabatangan area, in Sabah. The presence of orang-utans, proboscis monkeys, pygmy elephants and hornbills along the lower reaches of the River Kinabatangan led to the development of wildlife tourism during the 1980s.

Since 1997 the area has been protected by law with the support, first of the World Wildlife Fund (WWF) and, later, of other local and international NGOs such as Hutan (France) and Land Empowerment Animals People (LEAP, US-Malaysia). In 2005 the Kinabatangan Wildlife Sanctuary was established. It covers 27,000 hectares, divided into 10 non-contiguous lots spread out over 200km.

There are two problems. The geographical fragmentation makes it difficult for wildlife to move between lots, and their genetic diversity and health are under threat from increasing consanguinity. And because the 1997 Wildlife Conservation Enactment prohibits hunting and harvesting in the sanctuary without special authorisation, the locals find that environmental protection benefits urban travel agents more than them. Many prefer to convert their land into small-scale plantations, deriving only a minimal income from tourists, through a homestay programme.

The sanctuary includes four villages that receive visitors: Abai, Sukau, Bilit and Batu Puteh. The sanctuary and the presence of major corporations make their inhabitants feel doubly dispossessed. Because of their indigenous status, the villagers are entitled by law to a small amount of land (while the big companies are able to buy up large tracts and create plantations covering several hundred hectares) but it’s too little for their children to be able to live off; those who have no land and depend on fishing, or temporary jobs in the city or on plantations, are even worse off.

Ecotourism was supposed to be their salvation. Villagers could offer accommodation, get jobs in hotels, put on traditional culture shows, or sell local crafts. Easier said than done.

Untrained, with little English

It’s hard to grow fruit and vegetables when monkeys, wild pigs and elephants raid crops; ordinary fences will not keep them out and only the big plantations can afford electric fences. Few villagers still have weaving and carving skills; rattan baskets were replaced by plastic housewares a long time ago. Traditional events are hard to organise when young people are losing interest in local culture. And in any case tourists are more interested in the wildlife.

The villagers run just two (basic) bed & breakfasts. The hotels, which the guidebooks and brochures call “ecolodges”, generally rent the land they occupy, which gives a dozen families a significant income. But just two or three employ only local staff: most find it cheaper to hire Filipino or Indonesian immigrants.

Mary, a former ecotourism coordinator for the WWF, was in charge of a bottom-up project that was supposed to take the villagers’ needs into account. She described the situation in the late 1990s, when there were still only five ecolodges: “The operators felt they had offered the locals an opportunity, but the locals hadn’t taken it up. They hired a few villagers, but complained that they didn’t turn up for work when there was a wedding to go to. …  The villagers say they are entitled to jobs because they are natives. But they should only get a job if they deserve it. Otherwise, someone better qualified should get it.” Untrained and with little English, the villagers rarely meet the job requirements, even if they are knowledgeable about nature. They complain about the working conditions and the lack of freedom that comes with being an employee. Many said they would rather be their own boss, even if it meant living off fishing alone.

It seems the benefits of ecotourism are not as great as the authorities suggested when they invited the villagers to help protect and commercialise Borneo’s natural heritage. “If tourism doesn’t bring us any benefits,” said a villager in 1996 (2), “we’ll kill the last few proboscis monkeys so the travel agent won’t have anything to show.” There was already a sense that the authorities were more concerned with protecting the animals from any inconvenience the villagers might cause them, than the other way around.

Protecting the environment has had many benefits for the tourist industry. Over 70,000 people visit the sanctuary each year and the number is rising steadily: new hotels are being built. But to get to the sanctuary, they must make a 150km journey through oil palm plantations, most of which belong to major corporations. “When my customers see the plantations, they burst into tears,” said Albert, who owns a travel agency in Kota Kinabalu and an ecolodge in Sukau.

The official line is that, over the last 15 years, illegal plantations have been destroyed, poachers have been arrested or dissuaded, and wildlife has been studied and protected. The elephant population density is rising and the areas of forest felled since the 1950s are growing back. Around the sanctuary and along the riverbanks, the landscape is starting to look the way the tourists expect, to the delight of the travel agencies. A sign of success is that tourist accommodation has evolved from a few basic tents in 1990 to around 340 hotel rooms, an annual capacity of over 200,000 person/nights. The 15 accommodation centres are concentrated around the villages of Sukau (population over 1,000) and Bilit (less than 200).

Martin is the initiator of the homestay project in Kinabatangan. An engineer by training, he fell in love with Borneo and has been working in tourism in Sabah since 1991, when he was shocked to find that some operators took tourists around villages without giving the villagers any share of the profit. If villagers demanded a share, the operators would move on: “There are plenty of villages, so it was easy to find another one.” This had no impact on the popularity of the tour. “The tourists were not naïve, but they didn’t know the history of the tour, and it all seemed so perfect.” So they continued to believe they had chosen a package that benefited the locals.

From the late 1980s, over-exploitation of the forest meant the natives of Kinabatangan were no longer able to get work as loggers in forest reserves, and they were criticised for resorting to illegal logging near their villages. Tourism was seen as an alternative to a way of life that was dying out. “In 1996,” said Martin, “I heard that the government was planning to fund some of the conservation work in Kinabatangan and was talking about village tourism projects. So I contacted the WWF. They had donors, and I had a village that wanted to try a different way of life, based on community development: Batu Puteh. Our plan did involve protecting biodiversity, but, from the villagers’ point of view, the aim was to find an alternative to illegal logging.”

The homestay idea seemed straightforward: a dozen villagers could simply club together, show that their area would be of interest to tourists, and convert their houses to comply with health and safety regulations. After discussions and training, the programme got under way. Batu Puteh served as a model and between 1997 and 2004 four such groups were set up in Kinabatangan, 16 in Sabah. Now all they needed was tourists, and the villagers would benefit from tourism directly.

Neat little houses with a TV

But things have not gone to plan. The poorest villagers can’t afford to improve their houses to the necessary standard. The training is free, but it is held near Kota Kinabalu, the Sabah state capital, 400km from Kinabatangan; it can cost a month’s income for a couple to travel there. And only one Australian agent specialising in adventure tourism and one Bornean agency, set up by the inhabitants of Sukau, will actually work with the homestays.

There is also a problem with the gap between the Malaysian city-dwellers who run the project and believe in comfort, and the western tourists, who want authenticity and adventure. Visitors who would like to play at being Indiana Jones find themselves put up in neat little houses where a television set takes pride of place in the living room. They can sit on the ground and eat with their hands; sometimes their mattress will be laid on the floor and, at night, wild pigs may forage among the stilts on which the houses are built. If they are lucky, the monkeys will put on a little show by stealing food from the kitchen, or elephants may show the tips of their trunks in the garden. But mostly it’s nothing like the image they have of life in the jungle — it’s a brave new world of washing machines, electric fans, mixers, karaoke machines, zinc roofs and cars.

The ecolodges are built of wood, close to the edge of the forest, and blend into the trees. They are some distance from villages, which limits the scope for commercial transactions between the tourists and the local population. The ecolodges’ skilful marketing and networks make them serious competitors for the homestays.

In 2008 the WWF encouraged five ecolodges to set up an association for environmental protection, by including an eco-tax in their charges. “The aim is to protect our investment,” said the association’s president. The jungle, the wildlife and the river are the ecolodges’ raw materials: without them, there would be no tourism. With the money raised through the tax, they intend to pay for security patrols, set up a common code of social and environmental best practices, and take part in local reforestation.

So even if the attempt at community development through ecotourism is founded on misunderstandings, it has involved a wider circle in the defence of the natural environment, by creating an economy that depends on it: everyone I met agreed that the banks of the Kinabatangan are better protected today than before the tourists arrived.

*Clotilde Luquiau is a geographer

(1) The names of people interviewed have been changed at their request.

(2) Heiko K L Schulze and Suriani Suratman, Villagers in Transition: Case Studies from Sabah, Sabah University of Malaysia, 1999.

No Good Cheer from Santa Claus for Bumpy 2012

December 18, 2011

Bumpy 2012: No Good Cheer from Santa Claus

by Nouriel Roubini

The outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies.

Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both China and the advanced economies slow down). Central and Eastern Europe are exposed to the eurozone. And turmoil in the Middle East is causing serious economic risks – both there and elsewhere – as geopolitical risk remains high and thus high oil prices will constrain global growth.

At this point, a eurozone recession is certain. While its depth and length cannot be predicted, a continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity imply a serious downturn.

The US – growing at a snail’s pace since 2010 – faces considerable downside risks from the eurozone crisis. It must also contend with significant fiscal drag, ongoing deleveraging in the household sector (amid weak job creation, stagnant incomes, and persistent downward pressure on real estate and financial wealth), rising inequality, and political gridlock.

Elsewhere among the major advanced economies, the United Kingdom is double dipping, as front-loaded fiscal consolidation and eurozone exposure undermine growth. In Japan, the post-earthquake recovery will fizzle out as weak governments fail to implement structural reforms.

Meanwhile, flaws in China’s growth model are becoming obvious. Falling property prices are starting a chain reaction that will have a negative effect on developers, investment, and government revenue. The construction boom is starting to stall, just as net exports have become a drag on growth, owing to weakening US and especially eurozone demand. Having sought to cool the property market by reining in runaway prices, Chinese leaders will be hard put to restart growth.

They are not alone. On the policy side, the US, Europe, and Japan, too, have been postponing the serious economic, fiscal, and financial reforms that are needed to restore sustainable and balanced growth.

Private- and public-sector deleveraging in the advanced economies has barely begun, with balance sheets of households, banks and financial institutions, and local and central governments still strained. Only the high-grade corporate sector has improved. But, with so many persistent tail risks and global uncertainties weighing on final demand, and with excess capacity remaining high, owing to past over-investment in real estate in many countries and China’s surge in manufacturing investment in recent years, these companies’ capital spending and hiring have remained muted.

Rising inequality – owing partly to job-slashing corporate restructuring – is reducing aggregate demand further, because households, poorer individuals, and labor-income earners have a higher marginal propensity to spend than corporations, richer households, and capital-income earners. Moreover, as inequality fuels popular protest around the world, social and political instability could pose an additional risk to economic performance.

At the same time, key current-account imbalances – between the US and China (and other emerging-market economies), and within the eurozone between the core and the periphery – remain large. Orderly adjustment requires lower domestic demand in over-spending countries with large current-account deficits and lower trade surpluses in over-saving countries via nominal and real currency appreciation. To maintain growth, over-spending countries need nominal and real depreciation to improve trade balances, while surplus countries need to boost domestic demand, especially consumption.

But this adjustment of relative prices via currency movements is stalled, because surplus countries are resisting exchange-rate appreciation in favor of imposing recessionary deflation on deficit countries. The ensuing currency battles are being fought on several fronts: foreign-exchange intervention, quantitative easing, and capital controls on inflows. And, with global growth weakening further in 2012, those battles could escalate into trade wars.

Finally, policymakers are running out of options. Currency devaluation is a zero-sum game, because not all countries can depreciate and improve net exports at the same time. Monetary policy will be eased as inflation becomes a non-issue in advanced economies (and a lesser issue in emerging markets). But monetary policy is increasingly ineffective in advanced economies, where the problems stem from insolvency – and thus creditworthiness – rather than liquidity.

Meanwhile, fiscal policy is constrained by the rise of deficits and debts, bond vigilantes, and new fiscal rules in Europe. Backstopping and bailing out financial institutions is politically unpopular, while near-insolvent governments don’t have the money to do so. And, politically, the promise of the G-20 has given way to the reality of the G-0: weak governments find it increasingly difficult to implement international policy coordination, as the worldviews, goals, and interests of advanced economies and emerging markets come into conflict.

As a result, dealing with stock imbalances – the large debts of households, financial institutions, and governments – by papering over solvency problems with financing and liquidity may eventually give way to painful and possibly disorderly restructurings. Likewise, addressing weak competitiveness and current-account imbalances requires currency adjustments that may eventually lead some members to exit the eurozone.

Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition. But that is the challenge that a fragile and unbalanced global economy faces in 2012. To paraphrase Bette Davis in All About Eve, “Fasten your seatbelts, it’s going to be a bumpy year!”

Nouriel Roubini is Chairman of Roubini Global Economics and professor at the Stern School of Business, New York University. His detailed 2012 global growth outlook is available at

Copyright: Project Syndicate, 2011.

Airports will have to reshape the way they do business: Are we ready?

December 16, 2011

Source: AFP – RELAXNEWS (English International Version)-12-15-11

Airports will have to reshape the way they do business: Are we ready?

Airports will have to reshape the way they do business in future if they are to see passenger numbers — and indeed passenger satisfaction — increase, according to a new report.

“Airports of the Future” has been launched in Hong Kong and comes from the minds of the people behind the CAP Strategic Research Ltd company, which “bases its forecast on 25 years experience & expertise in aviation research.”

“Passengers no longer enjoy air travel, especially those based in Europe and the US. They regard flying as expensive, stressful, time-consuming and uncomfortable,” the report notes.

As airlines struggle to make profits, costs at airports too will have to be cut.”The aviation industry therefore faces a difficult future. Airports and airlines will need to adapt,” claims CAP Strategic Research Ltd.

But it’s not all doom and gloom — by 2025 the company predicts air travel will be fun once more thanks to such developments as “Trusted Travellers” being able to bypass security; rapid, high-tech emigration and immigration; no shops at airports, just showrooms; airports operating 24 hours a day; totally new boarding procedures and no check-in desks or check-in luggage.

In analyzing its “key trends for the future,” the report points out that the concept of “No Check-In Desks” is already in operation with online check-in and self check-in machines/kiosks at airports. Among those first to take on this practice were Qantas and easyJet.

Traditional emigration and immigration procedures are already being phased out with the INSPASS in the US, the Iris Recognition Immigration System (IRIS) at Heathrow, IACS at Changi in Singapore, ‘U-Airport’ at Incheon in Seoul and SmartGate between Australia and New Zealand, the report notes. Here in Hong Kong, residents flash their identity card, and confirm their identity with a thumb print.

Traditional shops, too, are on the way out at airports, according to the report, to be replaced by online purchasing at showrooms. The report points out that some airports already have “You Shop, We Drop” programs with passengers able to buy items and have them delivered to their homes. “If companies like Amazon and Taobao were to get involved in airport retailing then the showroom concept would develop very quickly,” says CAP Strategic Research.

CAP Strategic Research Ltd has offices in China, Hong Kong and Singapore and “specializes in surveying airline customer groups — from business & leisure travelers and corporate travel departments to travel agents, airports, F&B operators and retailers.”


Copyright 2011 RelaxnewsAll Rights Reserved

Greetings from Phnom Penh

November 21, 2011

Greeting from Phnom Penh

Semper Fi and I arrived in Phnom Penh this morning on separate flights. We are here on business. He came on a Silk Air flight from Singapore during which he enjoyed the good breakfast they served. I took the MAS flight from KLIA on a Boeing 737-800. Mine too was a pleasant journey, marred only by a cheap skate breakfast of miniaturized roti bomb with sambal tumis sardine supplied by Ibrahim’s Sky Chef and orange juice. I told the flight attendant that MAS should stop supplying breakfast to economy class passengers on this route, if this is the kind of meal they serve up. It is a sheer waste of money.

I do not expect to be treated like a passenger on first or business class, but I expect decent meal. There is no point winning the best Cabin crew award and boosting about it when the comfort of your ordinary passengers is brushed aside.I hope MAS management look into this matter before its reputation is further damaged. –Din Merican