Deciphering China’s Economic Resilience


July 26, 2017

Deciphering China’s Economic Resilience

by Stephen S. Roach*

*Stephen S. Roach, former Chairman of Morgan Stanley Asia and the firm’s chief economist, is a senior fellow at Yale University’s Jackson Institute of Global Affairs and a senior lecturer at Yale’s School of Management. He is the author of Unbalanced: The Codependency of America and China.

https://www.project-syndicate.org/commentary/china-economic-resilience-by-stephen-s–roach-2017-07

Once again, the Chinese economy has defied the hand wringing of the nattering nabobs of negativism. After decelerating for six consecutive years, real GDP growth appears to be inching up in 2017. The 6.9% annualized increase just reported for the second quarter exceeds the 6.7% rise in 2016 and is well above the consensus of international forecasters who, just a few months ago, expected growth to be closer to 6.5% this year, and to slow further, to 6%, in 2018.

Image result for China's Economic Resilience

I have long argued that the fixation on headline GDP overlooks deeper issues shaping the China growth debate. That is because the Chinese economy is in the midst of an extraordinary structural transformation – with a manufacturing-led producer model giving way to an increasingly powerful services-led consumer model.

To the extent that this implies a shift in the mix of GDP away from exceptionally rapid gains in investment and exports, toward relatively slower-growing internal private consumption, a slowdown in overall GDP growth is both inevitable and desirable. Perceptions of China’s vulnerability need to be considered in this context.

This debate has a long history. I first caught a whiff of it back in the late 1990s, during the Asian financial crisis. From Thailand and Indonesia to South Korea and Taiwan, China was widely thought to be next. An October 1998 cover story in The Economist, vividly illustrated by a Chinese junk getting sucked into a powerful whirlpool, said it all.

Image result for china's economic growth 2016

Yet nothing could have been further from the truth. When the dust settled on the virulent pan-regional contagion, the Chinese economy had barely skipped a beat. Real GDP growth slowed temporarily, to 7.7% in 1998-1999, before reaccelerating to 10.3% in the subsequent decade.

China’s resilience during the Great Financial Crisis was equally telling. In the midst of the worst global contraction since the 1930s, the Chinese economy still expanded at a 9.4% average annual rate in 2008-2009. While down from the blistering, unsustainable 12.7% pace recorded during the three years prior to the crisis, this represented only a modest shortfall from the 30-year post-1980 trend of 10%. Indeed, were it not for China’s resilience in the depths of the recent crisis, world GDP would not have contracted by 0.1% in 2009, but would have plunged by 1.3% – the sharpest decline in global activity of the post-World War II era.

The latest bout of pessimism over the Chinese economy has focused on the twin headwinds of deleveraging and a related tightening of the property market – in essence, a Japanese-like stagnation. Once more, the Western lens is out of focus. Like Japan, China is a high-saving economy that owes its mounting debt largely to itself. Yet, if anything, China has more of a cushion than Japan to avoid sustainability problems.

According to the International Monetary Fund, China’s national savings is likely to hit 45% of GDP in 2017, well above Japan’s 28% saving rate. Just as Japan, with its gross government debt at 239% of GDP, has been able to sidestep a sovereign debt crisis, China, with its far larger saving cushion and much smaller sovereign debt burden (49% of GDP), is in much better shape to avoid such an implosion.

To be sure, there can be no mistaking China’s mounting corporate debt problem – with non- financial debt-to-GDP ratios hitting an estimated 157% of GDP in late 2016 (versus 102% in late 2008). This makes the imperatives of state-owned enterprise reform, where the bulk of rising indebtedness has been concentrated, all the more essential in the years ahead.

Moreover, there is always good reason to worry about the Chinese property market. After all, a rising middle class needs affordable housing. With the urban share of China’s population rising from less than 20% in 1980 to more than 56% in 2016 – and most likely headed to 70% by 2030 – this is no trivial consideration.

But this means that Chinese property markets – unlike those of other fully urbanized major economies – enjoy ample support from the demand side, with the urban population likely to remain on a 1-2% annualized growth trajectory over the next 10-15 years. With Chinese home prices up nearly 50% since 2005 – nearly five times the global norm (according to the Bank for International Settlements and IMF global housing watch) – affordability is obviously a legitimate concern. The challenge for China is to manage prudently the growth in housing supply needed to satisfy the demand requirements of urbanization, without fostering excessive speculation and dangerous asset bubbles.

Meanwhile the Chinese economy is also drawing support from strong sources of cyclical resilience in early 2017. The 11.3% year-on-year gain in exports recorded in June stands in sharp contrast with earlier years, which were adversely affected by a weaker post-crisis global recovery. Similarly, 10% annualized gains in inflation-adjusted retail sales through mid-2017 – about 45% faster than the 6.9% pace of overall GDP growth – reflect impressive growth in household incomes and the increasingly powerful (and possibly under-reported) impetus of e-commerce.

Pessimists have long viewed the Chinese economy as they view their own economies – repeating a classic mistake that Yale historian Jonathan Spence’s seminal assessment warned of many years ago. The asset bubbles that broke Japan and the United States are widely presumed to pose the same threat in China. Likewise, China’s recent binge of debt-intensive economic growth is expected to have the same consequences as such episodes elsewhere.

Forecasters find it difficult to resist superimposing the outcomes in major crisis-battered developed economies on China. That has been the wrong approach in the past; it is wrong again today.

Malaysia’s Economic Report Card: Positive


July 26, 2017

Malaysia’s Economic Report Card:  “Malaysia is on the right course”, says Prime Minister Najib Razak

In delivering his keynote address at InvestMalaysia 2017 in Kuala Lumpur today (July 25), Prime Minister Najib Abdul Razak highlighted the economic transformation under his leadership.

He also launched a scathing broadside at the opposition coalition Pakatan Harapan, whose chairperson is his former mentor turned nemesis Dr Mahathir Mohamad.

Among others, Najib claimed that there has been a concerted campaign to send misinformation overseas to damage Malaysia’s economy for selfish political objectives.

“So if you receive these smears, or you read it in publications that do not check the facts properly, please beware,” he told his audience, comprising local and foreign investors.–www.malaysiakini.com

Full Text of Prime Minister Najib Razak’s Keynote Address (Salutations Removed)

Image result for Najib Razak at InvestMalaysia Forum 2017

Prime Minister Datuk Seri Najib Razak, addressing some 2,000 local and international investors attending the Invest Malaysia 2017 Forum–July 25, 2017

As the Prime Minister of Malaysia, I want to lay out the foundations needed for our nation to be counted among the very top countries in the world. We want that competitive edge, and to be a knowledge-based society – but we must always work towards those goals in ways that are sustainable, inclusive and equitable. No Malaysian must ever be left behind. All must participate and benefit from this amazing journey that we are on.–Prime Minister Najib Razak

Seven years ago, in 2010, I introduced our New Economic Model – right here, at Invest Malaysia. This model was designed to transform Malaysia into a high- income nation, and our country into a more inclusive, equitable and sustainable society, with no one left behind, opportunity made available for all, and the right fundamentals put in place to secure a stable and successful future.

We had a plan of reform – economic transformation and taking the tough but responsible choices. And it is clear today, that, aided by the hard work of millions of Malaysians, the plan has worked and is continuing to work.

Let the facts speak for themselves:

Between 2009 and 2016, Gross National Income has increased by nearly 50 percent, and GNI per capita using the Atlas method increased to US$9,850. Based on the World Bank’s latest high-income threshold of US$12,235, we have narrowed the gap towards the high-income target from 33 percent to 19 percent.

2.26 million jobs have been created, which represents 69 percent of the 3.3 million target we want to reach by 2020. Clearly, we are making the right progress towards those goals.

Inflation and unemployment have been kept low. We have attracted unprecedented levels of Foreign Direct Investment, which shows the confidence the world has in Malaysia.

But no wonder. For our growth has been the envy of the advanced economies, even during years of turmoil in the global economy. This year, the World Bank has upped their estimate. We are expected to record a rise in GDP of 4.9 percent, considerably higher than their earlier prediction of 4.3 percent.

Others have also increased their predictions – Morgan Stanley now says 5 percent, while Nomura’s forecast is for the Malaysian economy to grow by 5.3 percent this year. Only yesterday, the IMF has reviewed their forecast from 4.5 percent to 4.8 percent. And growth is expected to be higher next year. So we are on the right trajectory.

Other sets of figures support confidence in Malaysia. In the first quarter of 2017 our trade, for instance, recorded an increase of 24.3 percent – up to RM430.5 billion – compared with the same period last year.

In March, exports breached the RM80 billion mark for the first time. At RM82.63 billion, it was the highest monthly figure for Malaysian exports ever recorded.

The capital market increased by nine percent to a level of RM3.1 trillion in the first six months of this year, and now ranks fifth in Asia relative to GDP. It continues to attract wide interest from both domestic and foreign investors. In fact, in the equity market, there were net inflows of RM11 billion in the first half of 2017, compared with RM3 billion of net outflows during the whole of 2016.

The Malaysian bond market grew to RM1.2 trillion in 2016, while our Islamic capital market has recorded a hugely impressive average annual growth of 10 percent over the last six years, reaching RM1.8 trillion in June 2017.

Malaysia is also home to the largest number of listed companies in ASEAN. At US$29 billion, Bursa Malaysia also recorded the highest amount of funds raised in the last five years in any country in our 10-nation association.

And our currency, the ringgit, has been described by Bloomberg recently as, and I quote, “easily the strongest major Asian currency this quarter, climbing twice as much as the next best, the Chinese yuan”.

All of this can point to only one conclusion – our economy continues to prosper, and we are stronger than ever as a result of the reforms and the programmes the government has put in place.

The markets, the business community and companies like strength and stability. They want the certainty provided by a government that understands that the prosperity of its people is best served by being business-friendly, and that sovereignty is not compromised one inch by the record Foreign Direct Investment this government has secured.

No. It will help build the new Malaysia of the 21st century, and bring many benefits, from knowledge and skills transfers to a rise in the standard of living for the people.

The business community wants the certainty of knowing that the government is committed to the necessary reforms, and is committed to fostering a culture of entrepreneurship and to transparency, accountability, and good regulation.

On that note, I can announce that the government has, in principle, agreed to the establishment of an Integrity and Governance Unit at all GLCs, and state and ministry-owned business entities, under the supervision of the Malaysian Anti-Corruption Commission, precisely to strengthen the confidence all can, should, and do have in Malaysia.

The international business community knows that it has that certainty – with this government. Indeed, they are voting with their feet. HSBC is investing over RM1 billion to build its future regional headquarters in the Tun Razak Exchange, recognising Malaysia’s increasing status as an international financial and business centre.

Broadcom Limited, one of the world’s largest semiconductor companies with a market capitalisation of nearly half-a-trillion dollars, is going to transfer its Global Distribution Hub from Singapore to Malaysia in 2017, from where it will manage the group’s global inventory of RM64 billion a year.

Huawei, a leading global ICT solutions provider which serves more than one- third of the world’s population, has made Malaysia its global operation headquarters, data hosting centre and global training centre, with a total project cost of RM2.2 billion and employing more than 2,370 people.

Saudi Aramco is investing US$7 billion – that’s its biggest downstream investment outside the kingdom – for a 50 percent stake in Petronas’ Refinery and Petrochemical Integrated Development in Johor. That is the single largest investment in Malaysia, and shows the confidence Saudi Arabia has in our people, our technology, and our ability to be a strong partner with their most important business.

Others who are already here are expanding their operations. Finisar Corporation, a global technology leader in optical communications, will invest a further RM610 million in its operation in Perak – bringing its total investment in Malaysia to RM1 billion.

Coca-Cola has already invested RM1 billion in Malaysia since 2010. It announced in March an additional RM500 million investment to expand the size and production capacity of its plant at Bandar Enstek.

I could go on and on. The point is that the confidence and certainty global businesses have in Malaysia brings jobs, lifts wages and helps our workforce upskill.

It is this government that offers that certainty to businesses both in Malaysia and overseas. The opposition offers none at all. They are in chaos. Two leading members of one party can’t agree if the old opposition alliance still exists in the state of Selangor. “Yes, it does”, says one. “Oh no it doesn’t!” says the other. It’s like a Punch and Judy show!

And the latest leadership structure the opposition announced is farcical, sounding a bit like a return-to-work programme for old-age political pensioners!

It is also cynical and deceptive, with three leaders but no clarity on who has executive power among them, and DAP kept deliberately invisible despite controlling the opposition behind the scenes with the vast majority of their parliamentary seats.

As for their Prime Minister candidate, the opposition is so desperate that they are now trying to make the people believe it will be a nonagenarian – who isn’t even a member of parliament, and whose party has just one seat!

But the truth is that in a democracy numbers don’t lie, and DAP remains by far the most dominant party in the opposition. The DAP leader of the last half century is now hiding behind the man who jailed him, trying to deceive Malays into thinking that former leader is their interim candidate for Prime Minister.

Neither can the word of the opposition be relied on. Just recently, a leading member in one party said that, if Malaysia had such good relations with Saudi Arabia, why had the hajj quota not been increased? But it has! Twice this year, from 22,230 to 27,900 and then up to 30,200.

That’s another example of the benefits this government’s policies bring to the people of Malaysia – in this case, our foreign policy of forging friendship abroad, rather than holding grudges for decades, as that certain former leader still does.

But you won’t hear about the very real benefits from our engagement with Saudi Arabia, China, India or anywhere else from the opposition. In fact, they’ll tell barefaced lies about it, just as they have been feeding lies about the economy and stoking fears of economic disaster in Malaysia.

There has in fact been a concerted campaign to send such misinformation overseas to damage Malaysia’s economy for their own selfish political objectives. So if you receive these smears, or you read it in publications that do not check the facts properly, please beware.

It is not fair to the Malaysian people, and it’s not fair to the business community, both at home and abroad.

They, and you, deserve the truth. So let me tell you what a cross-section of respected international bodies has to say about this government’s record.

The OECD’s most recent economic assessment of Malaysia stated, and I quote: “Malaysia is one of the most successful Southeast Asian economies… thanks to sound macroeconomic fundamentals and its success in transforming its economy into a well-diversified and inclusive one.”

We are ranked second in ASEAN in the World Bank’s Doing Business Report 2017 – and 23rd overall, among 190 economies globally.

We were ranked second among the Southeast Asian nations in the World Economic Forum’s Human Capital Index 2016, up one place from last year’s third spot.

We are ranked third among 190 economies, worldwide, for Protecting Minority Investors, by the World Bank Doing Business Report 2017.

The World Economic Forum’s Global Competitiveness Report 2016-2017 ranks Malaysia fourth among 138 economies for Strength of Investor Protection.

We rank eleventh out of 125 countries in the Venture Capital and Private Equity Attractiveness Index, by the IESE Business School in Spain.

The ratings agency Fitch recently reaffirmed our A- rating and stable outlook.

And a recent survey by BAV Consulting and the Wharton School at the University of Pennsylvania declared Malaysia to be the “best country to invest In”. It said, and I quote, “Malaysia is the clear frontrunner in this ranking, scoring at least 30 points more than any other country on a 100 point scale.”

There is clear international unanimity that Malaysia is on the right course, and the figures and accolades I have reported to you today are the direct results of this government’s steering of the economy through uncertain and choppy global waters.

IMF reported that the resilience of our economy was due, and I quote, to “sound macroeconomic policy responses in the face of significant headwinds and risks”. And these sound policies are the reason why they said that: “Malaysia is among the fastest growing economies among peers.”

And lastly, the World Bank has shown that it agrees as well. In its latest report, issued just last month, it said that the government’s “macroeconomic management has been constantly proactive and effective in navigating near-term challenges in the economic environment”.

It concluded, and I quote: “The Malaysian economy is progressing from a position of strength.”

Does that really sound like the Malaysian economy is failing, and that we are in danger of going bankrupt, as the opposition would have you believe?

I think the World Bank, the OECD and the IMF know what they are talking about – and I’m sure, ladies and gentlemen, that you do too.

We have only arrived at that position of strength because we put in place a far-reaching economic plan; and because we have been unafraid to take the tough decisions to build up the resilience of the Malaysian economy.

We have diversified government sources of income, including reducing reliance on oil and gas revenues from 41 percent in 2009 to 14 percent today. Given the huge drop in the price of oil, just imagine how we would be suffering if we had not done that.

We also needed to widen the tax base, and so, in common with around 160 other countries, we introduced a goods and services tax, or GST. It was not popular, but it was the right thing to do – as every reputable economist has confirmed.

GST has helped us in our determination to steadily reduce the deficit – we are on course to reduce it to three percent this year, from 6.7 percent in 2009 – and GST has been crucial to retaining our good assessments by the international ratings agencies.

Yet the opposition says they would abolish it. Tell me, from where exactly would they produce the RM41 billion collected in GST revenue last year? Out of a hat?

If GST was abolished, it would not just be a matter of a revenue shortfall. The deficit would rise from 3.1 percent to 5 percent. Our ability to fund the construction of schools, hospitals and other essentials would be affected.

Government debt would rise above our self-imposed level of 55 percent of GDP. Our sovereign credit ratings would then be downgraded. Lending costs for all, such as loans for personal use, for business and for housing, would increase. The people would suffer, and they would suffer directly.

One of Malaysia’s prominent independent analysts, the Director of Economics at the Institute of Strategic and International Studies Malaysia, had it right when he said the idea of getting rid of GST was, and I quote, “preposterous” and “economically nonsensical”. “I don’t think anyone in their right mind would want to do that,” he said.

It is another example of what the opposition do when faced with tough decisions: they seek the easy or the populist way out, regardless of whether it makes sense or is even possible. They are not being straight with the Malaysian people.

This government, however, will always be straight with the people and we will always do right by the people. We will always put their interests first, from economic welfare to security. Even if it is not the most popular thing to do, we will not hesitate – because it is the responsible thing to do for the country.

This is also one of the reasons I am not very popular with that certain nonagenarian. Under his leadership many corners were cut, and the Malaysian people had to pay a very high price so that a few of his friends benefited, even when symbols of national pride had horrendous and catastrophic decisions inflicted on them.

But I say to you now that under this government, we are cracking down on crony capitalism. No more sweetheart deals. No more national follies kept going to stroke the ego of one man. No more treating national companies as though they were personal property.

Because it is the people who suffer, and we will not tolerate a few succeeding – and not on their own merits – while the many are denied opportunities, all for the interests of a selfish few.

Now some of you may be thinking that I have not mentioned national companies where there have been issues. At 1MDB it is now clear that there were lapses in governance.

However, rather than bury our heads in the sand, we ordered investigations into the company at a scale unprecedented in our nation’s history. Rather than funnel good money after bad to cover up any issues 1MDB may have faced – the model embraced by a former leader – I instructed the rationalisation of the company.

And it is progressing well. Indeed, many of the assets formerly owned by 1MDB are thriving. One only needs to drive past Tun Razak Exchange to see the new construction for confirmation.

But let’s not forget that while there were issues at 1MDB, certain politicians blew them out of proportion, and tried to sabotage the company, in an attempt to topple the government in-between election cycles.

At the time we knew the real issue was not 1MDB, and that if 1MDB hadn’t been around they would have chosen another line of attack to try to illegitimately change the government. So we stood steadfast, and resolute, in the face of this orchestrated campaign. Because we will not be deterred from our duty, as the democratically elected government, to serve the nation.

Our priorities were made crystal clear when we introduced the concepts of the “capital economy” – which refers to the macro perspective – and the “people economy”, which is focused entirely on the people, the most precious asset of our great country.

We face challenges ahead, of course. We need to improve productivity. We need to raise the levels of education and skills. We need to put innovation and creativity at the heart of the economy of the future.

This why we have partnered with the Chinese technology leader Alibaba to create the Digital Free Trade Zone, the world’s first special trade zone that will promote the growth of e-commerce, and provide a state-of-the-art platform for both SMEs and larger enterprises to conduct their digital businesses and services.

This initiative is part of the digital roadmap which aims to double e-commerce growth from 10.8 per cent to 20.8 per cent by 2020.

But we can only achieve such targets with the people, and by empowering the people. To ensure the dignity of all, we have virtually eliminated poverty, to less than one percent. We are delighted that the income of the bottom 40 percent households has been increasing at a compound annual growth rate of 12 percent since 2009, when I took office.

But we know that cost of living issues hit those with low incomes the hardest; which is why we distributed RM5.36 billion in 1Malaysia People’s Aid, or BR1M, to 7.28 million households in 2016. This is why we ensured that essential foods and necessities are zero-rated for GST.

At the same time, we have many agencies promoting affordable housing programmes, and why we built and restored nearly 95,000 houses for the rural poor last year. Other affordable housing projects include PPA1M, for civil servants; PR1MA, for the urban middle income group; and the People’s Housing Programme for the lower income group, or Bottom 40, with monthly rents as low as RM124.

Infrastructure, too, is absolutely vital. It is crucial for our cities, and life-changing for rural communities. From 2010 to 2016 we delivered 6,042 kilometres of new rural roads, provided 350,000 houses with access to clean water, and connected 154,000 houses to electrical services.

At the end of last year, the first phase of the Mass Rapid Transit project was completed, and recently, the second phase of the Sungai Buloh-Kajang MRT Line has been launched. We now have 51 kilometres of operational line with 31 stations.

This will take 160,000 cars off road, making Kuala Lumpur more liveable. It created 130,000 new jobs, of which 70,000 are direct employment. And best of all, it was completed ahead of schedule and RM2 billion below budget. We are now planning for MRT 2 and 3.

The Pan Borneo Highway in Sarawak and Sabah will be a game changer for our people there, encouraging greater mobility, boosting industry and tourism and creating thousands of new jobs.

In a few years time, we will have the first high-speed rail link connecting Kuala Lumpur to Singapore, which will cut travel time between the two cities to 90 minutes, as compared to more than four hours by car.

And the East Coast Rail Link will bring huge benefits, jobs and a new connectedness to the people of Pahang, Terengganu and Kelantan in particular.

In other areas, we are seeing the benefits of our programmes for all the people. The national pre-school enrolment rate rose to 85.6 percent in 2016, for instance, as opposed to 67 percent in 2009; and we have achieved almost universal enrollment for the five years and upwards age group.

Women have seen great strides as well. The female labour force participation rate has increased from 46 percent in 2009 to 54.3 percent last year. That’s over 700,000 more women in the workforce.

And I am delighted to be able to announce that Malaysia has reached its target of women making up 30 percent of top management – that’s 1,446 women, out of a total of 4,960 in top management excluding CEOs, as of December 2016.

We want to go further, though, and have set 2020 as the date by which we want all public listed companies (PLCs) to have at least 30 percent women at board level. Because we know that when women succeed, we all succeed.

Unfortunately, we still have 17 “top 100” PLCs that have no women at all on their board. This just is not good enough, and I call on these companies to immediately address this lack of diversity. I would like to announce that, from 2018, the Government will name and shame PLCs with no women on their boards.

As many of you will know, SMEs make up 97 percent of businesses in Malaysia, and one of the hallmarks of my administration has been its support and encouragement for this backbone of our economy.

So I am pleased to be able to officially launch today the Leading Entrepreneur Accelerator Platform Market, or LEAP Market, by Bursa Malaysia. This is a new qualified market which will offer an alternative way for small and medium companies to raise funds and grow their business to the next level.

It is in line with our SME Masterplan which aims to raise the share of GDP contributed by SMEs, their numbers of employees, and their volume of exports.

And it is another of the many initiatives that my government has put in place in pursuit of our transformation, and that prove our trustworthiness as a business-friendly government of a vibrant economy.

We want you to see Malaysia as a gateway to ASEAN and the region, and with the eventual conclusion of the Regional Comprehensive Economic Partnership or RCEP, we want you to see Malaysia as a base from which to access almost 50 percent of the world’s population, and over 30 percent of global GDP.

This year, we are celebrating the 60th anniversary of independence. From relatively humble beginnings, we have grown and evolved into a modern economy and society with a record to be proud of. But we are looking to the future as well – which is why we have produced the 2050 National Transformation, or TN50, initiative.

Through TN50, we want to listen to our rakyat. We want them to be heard. And through our dialogue sessions, we are listening to the aspirations of our youth for what they want the Malaysia of 2050 to be.

As the Prime Minister of Malaysia, I want to lay out the foundations needed for our nation to be counted among the very top countries in the world. We want that competitive edge, and to be a knowledge-based society – but we must always work towards those goals in ways that are sustainable, inclusive and equitable. No Malaysian must ever be left behind. All must participate and benefit from this amazing journey that we are on.

We invite you be to part of that journey, and I hope today we are able to shed light on the tremendous opportunities that Malaysia has to offer. We urge to you to look at our potential; to look at the great achievements the government’s transformation programme has delivered, and continues to deliver; and invest in Malaysia.

 

Britain’s Deepening Confusion


June 27, 2017

Britain’s Deepening Confusion

by Robert Skidelsky* @www.project-syndicate.org

Image result for Theresa May under siege

Conservative Prime Minister Theresa May leading a confused Britain

*Lord Skidelsky, Professor Emeritus of Political Economy at Warwick University and a fellow of the British Academy in history and economics, is a member of the British House of Lords. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999.

 

“Enough is enough,” proclaimed British Prime Minister Theresa May after the terrorist attack on London Bridge. Now, it is clear, almost half of those who voted in the United Kingdom’s general election on June 8 have had enough of May, whose Conservative majority was wiped out at the polls, producing a hung parliament (with no majority for any party). Whether it is “enough immigrants” or “enough austerity,” Britain’s voters certainly have had enough of a lot.

But the election has left Britain confusingly split. Last year’s Brexit referendum on European Union membership suggested a Leave-Remain divide, with the Brexiteers narrowly ahead. This year’s general election superimposed on this a more traditional left-right split, with a resurgent Labour Party capitalizing on voter discontent with Conservative budget cuts.

To see the resulting political terrain, imagine a two-by-two table, with the four quadrants occupied by Remainers and Budget Cutters; Remainers and Economic Expansionists; Brexiteers and Budget Cutters; and Brexiteers and Economic Expansionists. The four quadrants don’t add up to coherent halves, so it’s not possible to make out what voters thought they were voting for.

But it is possible to make out what voters were rejecting. There are two certain casualties. The first is austerity, which even the Conservatives have signaled they will abandon. Cutting public spending to balance the budget was based on the wrong theory and has failed in practice. The most telling indicator was the inability of George Osborne, Chancellor of the Exchequer from 2010 to 2016, to achieve any of his budget targets. The deficit was to have vanished by 2015, then by 2017, then by 2020-2021. Now, no government will commit to any date at all.

The targets were based on the idea that a “credible” deficit-reduction program would create sufficient business confidence to overcome the depressing effects on activity of the cuts themselves. Some say the targets were never credible enough. The truth is that they never could be: the deficit cannot come down unless the economy grows, and budget cuts, real and anticipated, hinder growth. The consensus now is that austerity delayed recovery for almost three years, depressing real earnings and leaving key public services like local government, health care, and education palpably damaged.

So expect the ridiculous obsession with balancing the budget to be scrapped. From now on, the deficit will be left to adjust to the state of the economy.

The second casualty is unrestricted immigration from the EU. The Brexiteers’ demand to “control our borders” was directed against the uncontrolled influx of economic migrants from Eastern Europe. This demand will have to be met in some way.

Migration within Europe was negligible when the EU was mainly West European. This changed when the EU began incorporating the low-wage ex-communist countries. The ensuing migration eased labor shortages in host countries like the UK and Germany, and increased the earnings of the migrants themselves. But such benefits do not apply to unrestricted migration.

Studies by Harvard University’s George J. Borjas and others suggest that net immigration lowers the wages of competing domestic labor. Borjas’s most famous study shows the depressive impact of “Marielitos” – Cubans who immigrated en masse to Miami in 1980 – on domestic working-class wages.

These fears have long underpinned sovereign states’ insistence on the right to control immigration. The case for control is strengthened when host countries have a labor surplus, as has been true of much of Western Europe since the crisis of 2008. Support for Brexit is essentially a demand for the restoration of sovereignty over the UK’s borders.

The crux of the issue is political legitimacy. Until modern times, markets were largely local, and heavily protected against outsiders, even from neighboring towns. National markets were achieved only with the advent of modern states. But the completely unrestricted movement of goods, capital, and labor within sovereign states became possible only when two conditions were met: the growth of national identity and the emergence of national authorities able to provide security in the face of adversity.

The European Union fulfills neither condition. Its peoples are citizens of their nation-states first. And the contract between citizens and states on which national economies depend cannot be reproduced at the European level, because there is no European state with which to conclude the deal. The EU’s insistence on free movement of labor as a condition of membership of a non-state is premature, at best. It will need to be qualified, not just as part of the UK’s Brexit deal, but for the whole of the EU.

So how will the shambolic results of the British general election play out? May will not last long as Prime Minister. Osborne has called her a “dead woman walking” (of course without acknowledging that his austerity policies helped to seal her demise).

The most sensible outcome is currently a political non-starter: a Conservative-Labour coalition government, with (say) Boris Johnson as Prime Minister and Jeremy Corbyn as his deputy. The government would adopt a two-year program consisting of only two items: the conclusion of a “soft” Brexit deal with the EU and a big public investment program in housing, infrastructure, and green energy.

The rationale for the investment program is that a rising tide will lift all boats. And an added benefit of a thriving economy will be lower hostility to immigration, making it easier for Britain to negotiate sensible regulation of migrant flows.

And who knows: if the negotiations force the EU to re-cast its own commitment to free labor movement, Brexit may turn out to be a matter less of British exit than of an overhaul of the terms of European membership.

Reactions to DOJ Lawsuits reflect Ignorance of Malaysian Officialdom


June 27, 2017

Reactions to DOJ Lawsuits reflect Ignorance of Malaysian Officialdom

by Dr. M. Bakri Musa, Morgan-Hill, California

Image result for Najib Razak, Riza Aziz and Rosmah Mansor

Najib Razak, Rosmah Mansor and Riza Aziz (inset): Their Day will come,only a matter of time

America is a Rorschach Test to most foreigners. What they view as America reveals more of themselves than of America; likewise, how they react to events in America.

One visitor to Washington, DC, would see only the homeless under the bridges, potholes on the streets, and “adult” stores at very corner; others, The Smithsonian, Georgetown University, and the National Institutes of Health. The contrasting observations reflect volumes on the observers.

Consider the Malaysian responses to the US Department of Justice (DOJ) lawsuits relating to alleged illicit siphoning of funds from 1MDB. I am not referring to the kopi-o babbling in the echo chamber of UMNO-paid “cyber-troopers” that pollutes the social media. They are pet parrots; babbling whatever is coached to them. With a different master offering more leftovers they could be made to change their tune.

Image result for 1mdb

Where is Mr. Lodin Wok Kamaruddin now?

What interests me instead are the responses of ministers and commentators. Their utterances expose their appalling ignorance of the American justice system. They also reveal much of themselves, as per Rorschach’s insight.

One Minister, eager to be seen as his master’s favorite lapdog, asserted that DOJ is being influenced by the Malaysian opposition. On cue, the other hounds and bitches piled on. A hitherto severe critic of the establishment pontificated that a former champion college debater together with Mahathir and Daim Zainuddin were involved.

Heady stuff for a young man! Though flattered, Syed Saddiq went ahead and filed a police report against that blogger! Mahathir described best those who believed such canards: “Bodoh luar biasa!” (Extraordinarily stupid!)

Those characters must also believe that the American judicial system is like Malaysia’s, where prosecutors could be influenced or paid off a la one Shafee Abdullah. Sarawak Report alleged that he was paid RM9.5 million from Najib’s slush fund before being appointed special prosecutor in Anwar Ibrahim’s case. Shafee has not denied that.

Image result for The RM9.5 million Shafee Abdullah

The RM9.5 million Shafee Abdullah–who else are the beneficiaries of the bounty?

Another Minister declared DOJ’s charges ‘mere’ allegations. Sorry, no marks for stating the obvious. A former journalist-turn-blogger echoed that, and proceeded, for emphasis, to reprint in bold the DOJ’s caution.

Of course DOJ’s accusations, like all court complaints, are “alleged” until adjudicated by the court. DOJ must have credible evidence to not waste taxpayers’ money on frivolous lawsuits. The jury would not buy it. DOJ does not allege any Joe on the street of corruption.

Those who believe otherwise must think that DOJ and American courts are like Malaysia’s where prosecutors could be bought to bring on cases with the flimsiest of evidences and still find judges to convict, as with Anwar’s case.

That is not a far stretch. A few years ago, a defense lawyer V.K. Lingam known for his amazing ‘skills’ in getting his clients acquitted was caught on videotape assuring his listener that he had the judge in his pocket. The lawyer’s utterance, “Correct! Correct! Correct!” would forever be embedded in the annals of shame in the Malaysian Judiciary.

Then there was the character who insinuated that the ‘inactivity’ of DOJ since its first filing a year earlier reveals its sinister political motive. Had he followed the court’s calendar he would have noted the flurry of activities. Among them, the successful challenge by the new trustee of some of the seized properties to be represented.

This character went on to opine that since her initial filing in July 2016, US Attorney-General Loretta Lynch had been “fired,” implying that the lawsuit was without merit. Such willful ignorance reveals a deliberate attempt to mislead. Lynch was a political appointee, and with President Trump’s election all such appointees were replaced. Further, the second filing was by her successor.

Deputy Prime Minister Ahmad Zahid, a local PhD, implied that all the furor over 1MDB were fake news, the concoctions of hostile foreign media! It is instructive that this character did his dissertation on the local media. To him, the likes of The Wall Street Journal are like Utusan Melayu. His response reveals as much about him as the institution that awarded him his doctorate.

A junior minister accused the Americans of trying to topple Najib, in cahoots with the opposition. Not too long ago he and others were lapping at pictures of Najib golfing with President Obama. That minister however, did not see fit to lead a demonstration at the embassy in defense of Malaysia.

It is unfortunate that this non-too bright character’s remarks resonated with simple villagers. A senior Minister, a little brighter being that he was a London-trained lawyer, dismissed the whole DOJ affair. Malaysia had other far more important issues to attend to, he sniffed. If the staggering sums of the loot did not impress him, what about the charges of corruption levelled at the highest government official, cryptically referred to as “Malaysian Official 1.” That should be his and all Malaysians’ top priority.

Yet another minister advised everyone not to panic. The lady doth protest too much, methinks. Nobody was panicking except her crowd.

Attorney-General Apandi was miffed that DOJ did not consult him. DOJ’s lawsuits were prompted to protect American financial institutions from the corrupting influences of dirty foreign funds. It does not need Malaysia’s ‘help,’ more so considering that Apandi had declared no wrongdoing.

Apandi was also upset at the criminal insinuations against the Prime Minister. His comment unwittingly revealed what he thinks of his job, less as chief prosecutor, more as Najib’s private attorney. No wonder his “investigations” exonerated Najib! Apandi also unwittingly confirmed that MO1 is, in fact, Najib and that the activities he was alleged to have been engaged in were criminal in nature.

If the responses were revealing, the non-response or silence was even more so. The lawsuits allege that billions were illicitly siphoned from the company, and it is mentioned umpteen times in the complaints. Yet 1MDB did not seek to be represented as a party of interest. This reflects its management’s inability to separate the company’s interests from those of its officers’. Najib is 1MDB’s chairman. The management confuses Najib with the company. Management is not looking after the company’s interest in not seeking representation, which was how the mess started in the first place.

Malaysian officials’ responses to DOJ’s lawsuits did not reflect well on them or Malaysia. I can hardly wait for their reactions or “spin” when this DOJ investigation goes on to its next inevitable phase, the filing of criminal charges and or when one of the defendants becomes a prosecution witness.

Meanwhile, fake news or not and collusion or not, MO1, his spouse, or stepson will not be stepping foot in America any time soon, if ever. That is revealing.

Book Review: Dr Shankaran Nambiar –Malaysia in Troubled Times


May 11, 2017

Book Review: Dr Shankaran Nambiar –Malaysia in Troubled Times

by Tricia Teoh

“THE absence of good institutions and transparency in public undertakings, government procurement, and … the design of public policy has the potential to shake investor confidence” is how economist Shankaran Nambiar sums up the macroeconomic conditions of Malaysia.

In his latest book, Malaysia in Troubled Times, which compiles Nambiar’s articles in newspapers between 2014 and 2016, he deftly articulates his positions on issues. He grapples mainly with the question of “where is the economy headed towards”, which he asks numerous times across his pieces, an evident sign of his deep concern over the trends taking place in the country.

Nambiar articulates what many observers of Malaysian issues have struggled with: despite our economy not hitting negative growth, not being in danger of defaulting on sovereign debt and the fact that the central bank having adequate reserves to cover shortfalls, he states clearly that yes, indeed, we should still exercise great caution with respect to the Malaysian economy.

And why so? Various pieces indicate why observers should be worried – an outflow of foreign funds, the sharp decline of oil prices, which has in turn led to a growing federal fiscal deficit, and … “doubts on the efficacy of government linked companies”.

Image result for  Idris Jala

When Malaysia is in trouble, follow Idris Jala and play the Guitar

The challenges facing Malaysia stretch beyond our borders, and here Nambiar wades through regional waters to help readers understand the dynamics behind the now-dead Trans Pacific Partnership Agreement, the Regional Cooperation Economic Partnership, and the Free Trade Area of the Asia-Pacific, which he highlights is indicative of China flexing its muscles in the region.

Malaysia, he says, “has a special, valuable relationship with China, which places it in an excellent position to help establish a stable security landscape in the region”. Of course, the “special relationship” we have with China would now be interpreted in a very different light today, given the many bilateral deals Malaysia has now signed with China. Apart from arguing for how ASEAN can build itself up as a stronger regional pact, it is also refreshing that he brings in Asean-India economic ties and goes on to push for greater Malaysia-India improvements in trade and investment, which apparently our neighbours Singapore and South Korea have put a lot more effort in than we have.

Above all, Nambiar is a faithful believer of Keynes, whom he quotes several times in the book, saying that “positive expectations and ‘animal spirits’ spur aggregate demand and economic growth”, and that “at the moment it seems that the animal within the economy is wounded”. He cleverly works his critique of the economy through metaphors such as these, but stops short of blatantly dismissing any efforts being made by policymakers to improve the economic conditions of the country. He could also have done more in providing solutions to what he considers to be ailing our economy.

Despite the nuanced tone of his writings, it is clear that he harbours silent frustration with public policies and their implementation in Malaysia. Although the book focuses mainly on technical economic matters, Nambiar also ventures into “getting the big picture right”. He questions Malaysia’s dismal performance in the Programme for International Student Assessment (PISA) and Trends in International Mathematics and Science Study (TIMSS). He emphasises the importance of good public transport, education, human resource development and healthcare. And perhaps most importantly, he questions whether our politicians and policymakers are truly connected with the economy “as experienced by traders, technicians, taxi driver and executives”.

It is now almost two years after one of Nambiar’s pieces titled “Do we need to create scenarios for a future Malaysia?” and yet it seems even more imperative to do so today. With the elections near, this is what policymakers ought to do. And if they are not, then citizens ought to instead, and demand that their representatives pave the way for the right future to actuate.

An imagined future has to be one that, Nambiar argues, goes beyond motherhood statements like “being united in diversity and sharing a common set of values and aspirations” that he considers merely “dreamy visions of the future”. One has to concretely build scenarios based on concrete issues such as income distribution, incorporating input from a “constraint approach” (what are the stumbling blocks?) as well as a “global basis approach” (how does Malaysia fit into this matrix based on global trends?).
It is on this note that the book hits the nail hard on its head. Nambiar’s voice that constantly urges and pushes for the creation of the “spirit of this big picture” reminds us that simply, there is none of this presently that so inspires. His is a thoughtful, objective and incisive perspective of a nation that could be much more – and his desires for a better, more productive, wealthy Malaysia are evident.

Policymakers and politicians serious about addressing challenges to the Malaysian economy would benefit from a thorough reading of Nambiar’s book. They should also take heed of his advice that in thinking of the long-term, they must be “realistic about the present state of affairs”. This would be a good first starting point.

Comments: letters@thesundaily.com

The ASEAN Community: A Lofty Historical Challenge


May 11, 2017

The ASEAN Community: A Lofty Historical Challenge

by Michael Heng

“As an economic power, ASEAN is small by international standards. Given the level of development and technological base, ASEAN is unlikely to make a big impact on the global economy.” Do you agree with Professor Heng’s observation)?

http://ippreview.com/index.php/Home/Blog/single/id/433.html

Image result for Asean Economic Community

The Association of Southeast Asian Nations (ASEAN) was founded in 1967. Its 50th anniversary this year is a good time to take stock and to look ahead. ASEAN was established with the goal of preserving long-term peace in region at a time when the First Indochina War was raging, even though its explicitly stated goals were economic growth, social progress, and cultural development. One of its guiding principles is to abide strictly by the modern international system of sovereign states where countries do not interfere in each other’s internal affairs. ASEAN’s leaders have chosen to make decisions by consensus, and to avoid airing their differences in the public.

ASEAN has scored significant success as an economic community, due largely to the activities of global production networks in the region. In the assessment of a senior Chinese official speaking at a workshop in 2009, ASEAN is the healthiest and most integrated regional organization in Asia and it should be the center and platform to promote Asia’s economic integration.

Image result for Asean Leaders in Manila

However, one cannot ignore the failure of ASEAN to resolve significant intra-ASEAN problems such as the Thai-Cambodian border dispute, the annual haze originating from Indonesia, and the blatant violation of human rights in Myanmar. Such problems cannot be resolved within ASEAN because of the strict non-interference policy in each other’s internal affairs. But conditions in the international arena today are different from when ASEAN was formed half a century ago. Environmental pollution, climate change, epidemics, terrorism, and transnational crime cannot be solved without close international cooperation. In the event of large scale violations of human rights, sovereignty cannot be used as a cover for the state to fan off interference by the international community. With the doctrine of Responsibility to Protect, the concept of state sovereignty in the past few decades has acquired subtle but important new interpretations. ASEAN’s strict insistence on non-interference is out of sync with prevailing international norms.

Before the 1997 Asian financial crisis, global capital had focused on gaining market access and investment in Southeast Asia. In the wake of the crisis, it began to be disenchanted with the region’s failure to respond effectively to the crisis. Meanwhile, critical examination of the financial meltdown revealed some serious flaws among the political leadership in most ASEAN member states. This period also saw the rise of China and India as new economic powers next door. Between them, these events prompted soul-searching within ASEAN.

Related image

Driven by internal and more so by external developments, ASEAN has strived to deepen and widen its integration and has set its sights on becoming a community of nations. To do so, it has to look beyond the geopolitical and economic dimensions, and widen its scope to include the social and cultural dimensions. Though some progress has been made in this direction, especially in their agreement to the terms of the ASEAN Charter, it remains to be seen whether the member states will be able to live up to the ideals as enshrined in this document. Even if they do so, they need to go further than this document in order to be in tune with prevailing international norms as adopted by the United Nations.

Unity in Diversity

One of ASEAN’s achievements has been its ability to group together ten member states with different political systems, population sizes, geographical sizes, languages, religions, historical backgrounds, and stages of economic development. It should come as no surprise that the ASEAN Charter has adopted as its principle the concept of “unity in diversity.”

Image result for Asean --Unity in Diversity

Unity in diversity is the concept of “unity without uniformity and diversity without fragmentation” — thereby moving and raising the focus from unity based on mere tolerance of physical, cultural, linguistic, social, religious, political, ideological and/or psychological differences towards a more complex unity based on an understanding that differences enrich human interactions. One should add that this understanding should go beyond the utilitarian aspect to one founded on the basis of appreciating and cherishing differences. No wonder that unity in diversity is said to be the highest possible attainment of a civilization, a testimony to the noblest potential of the human race.

ASEAN Socio-Cultural Community Blueprint

Just like unity in diversity, the concept of social justice is found in many ASEAN documents. For example, the ASEAN Socio-Cultural Community Blueprint of 2009 claims that “ASEAN is committed to promoting social justice and mainstreaming people’s rights into its policies and all spheres of life, including the rights and welfare of disadvantaged, vulnerable and marginalized groups such as women, children, the elderly, persons with disabilities and migrant workers.” The reality in the ASEAN countries however shows clearly that there is a wide mismatch between such lofty statements and what the people experience.

A close reading of the ASEAN Charter will reveal that it has some lofty and high sounding concepts. For example, ASEAN and its Member States shall act in accordance with, among others, the principle of “adherence to the rule of law, good governance, the principles of democracy and constitutional government.” This sounds hollow when its member states undermine the independence of their judiciaries, allow corruption to run wild, pay scant attention to protect their environment, indulge in gerrymandering, and harass their political opposition.

Same Journey but at Different Speeds

ASEAN may be seen as a fine example of unity in diversity. But to strive towards the goal of a community of nations, they must live up to the goals and aspirations as written in their own official declarations. One way to do so is to emulate the best among them in a given area. For example, Indonesia has made significant progress in democratic transformations, and can fairly be said to be the most democratic of the ten. While Indonesia should continue to make progress, the other nine should be inspired by the success of Indonesia and follow its example. Similarly, Singapore’s achievement in economic development and clean government should spur the other nine to do the same.

The common struggles of the ASEAN peoples across the region will be a firm foundation for the growth of ASEAN solidarity, shared consciousness, sense of common interests, and an ASEAN identity.

It is of special importance that Indonesia can carry out democratic reforms, and Singapore can practice clean government. It means that these institutions and practices are not alien to Southeast Asia or in a wider context to the non-Western world.

Unity in diversity here may take on additional meanings: united in pursuing the goals of social justice, economic prosperity, clean government, human rights, democracy, etc. but with different member nations proceeding at different speeds. Those moving ahead should nudge and help those trailing behind.

Promoting Knowledge at the People-to-People Level

According to the Charter, community building is to be intensified through enhanced regional cooperation and integration via the means of the security community, economic community, and socio-cultural community. The first two have enjoyed the lion’s share of official attention. The third deserves to be given its due attention.

A recent study reveals that the general public in cities in Indonesia, Malaysia, and Singapore perceive the formation of the ASEAN Community as beneficial, but they see the formation as elitist and state-centric as it did not involve the people. This is a disturbing finding. City residents are generally more well-informed and involved in the political life of their countries. If they do not feel so involved in the formation of the ASEAN Community, one can imagine how low the sense of involvement can be in the rural areas. Much more must be done therefore to create and nurture a sense of participation by the citizens.

There is a useful role to be played by ASEAN’s professional bodies, like the ASEAN Associations of Lawyers, Engineers, Doctors, Accountants, Architects, Journalists, Writers, Teachers, etc. Through their regular contacts and sharing, we have new channels for evolving ASEAN styles of landscaping, architecture, paintings, music, and so on. The Association of Doctors could also be a good forum for them to develop a teaching program on traditional medicine based on research and as practiced by their ancestors.

In additional to the above are regular exchanges of cultural troupes. Their works should be featured on national television channels, and tickets should be subsidized by sponsors. For those more inclined to intellectual discussions, their interests can be served by local think tanks hosting talks and seminars by public intellectuals and thinkers on topics concerning the broader and long-term future of the region.

Looking Ahead

From its humble beginning, ASEAN has grown into a regional body that is courted by major world powers. Given the different historical backgrounds, cultures, political systems, and their lack of complementary economic activities, its endurance and success might come as a surprise. Credit must be given to its political leaders for being able to respond well to the emerging challenges and opportunities.

The success of ASEAN can also be seen as a clever response to the challenges posed by globalization. This is clearly seen in how the Asian financial crisis prompted ASEAN to speed up and deepen its integration. The same was again seen in the aftermath of the 2008 financial crisis. The latest is how global production networks have integrated the ASEAN economies with that of China, forming the basis for the ASEAN-China Free Trade Agreement.

But the imperatives for regional integration need to be combined with an awareness of the limitations arising from inter-state competition and divergent domestic capabilities within its member states. Here there is a need to work for the greater common good and with a long-term perspective. There are at least four areas where this approach is needed. The first concerns industrial policy. The member states need to sit down and formulate industrial policies which are complementary to each other. Doing so will increase intra-ASEAN trade, which currently constitutes only 25 percent of ASEAN’s trade. The second concerns protection of the environment, a point that was touched on earlier. The third concerns supporting local cultures and intellectual activities, so that Southeast Asia can boast its own world-class writers, painters, thinkers, musicians, and architects. The fourth and arguably the most difficult, is to translate into real practice the paper commitment of ASEAN member states to democracy and social justice. It includes protecting and respecting the rights of minorities, appreciating the political opposition as assets of the countries, and guaranteeing freedom of the press and association.

As an economic power, ASEAN is small by international standards. Given the level of development and technological base, ASEAN is unlikely to make a big impact on the global economy.

Perhaps the most important area which ASEAN can contribute to the world is to bring about the ASEAN Community with cultures and historical backgrounds different from those of the European Union. The new global conditions present Southeast Asia with opportunities and challenges. The greatest opportunities are the big avenues for economic growth in the region, and long-lasting peace. Territorial contestation leading to war is for most countries a thing of the past. Some challenges are persistent — nationalism, ethno-religious parochialism, discrimination against women, massive natural disasters, diseases, and poverty. Some challenges are new — climate change, environmental degradation, depleting natural resources, transnational crime, and terrorism. The challenges call for political, religious, opinion, and business leaders to re-orientate their courses of action toward the greater common good of the people in the region.

What is more crucial and effective is for the citizens of ASEAN countries to render support to each other in their struggle to realize the ideals of the ASEAN Charter such as environmental protection, rights of migrant workers, human rights, and social justice. It would be difficult for the governments to suppress these struggles because these are struggles inspired by a document crafted and endorsed by the government leaders themselves. The common struggles of the ASEAN peoples across the region will be a firm foundation for the growth of ASEAN solidarity, shared consciousness, sense of common interests, and an ASEAN identity.

Like other historical processes, the journey to the formation of the ASEAN Community will take time and will not be easy. There is still a wide gap between the deeds and words of the government leaders of ASEAN. If and when the realities on the ground are in line with the lofty proclamations of the ASEAN documents, then and only then will the ASEAN Community be no longer a dream but a reality. It will be an ASEAN with a new identity, for it will represent a new moral and political order, able to articulate global issues in international forums with moral authority and coherence.