Rethinking Southeast Asian Economic Diplomacy


September 18,2017

Rethinking Southeast Asian Economic Diplomacy

by Henry Wai-chung Yeung, NUS

http://www.eastasiaforum.org
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In today’s global economy of cross-border production networks, the need to understand the changing ways in which the state and firms work together has become even more pressing. While the state plays an important role in supporting these production networks, it is firms and other private organisations — industry associations and standards organisations, for example — which coordinate and organise these networks.

UNCTAD’s World Investment Report 2013 estimated that some 80 per cent of today’s world trade is conducted through firms in these production networks — they are the backbone and central nervous system of the global economy.

 

In Southeast Asia, many economies are heavily involved in production networks, some of which are highly regional in nature. The ASEAN Investment Report 2016 suggests that regional production networks will be critical in realising the ASEAN Economic Community’s goals, which include building a single market of over US$2.5 trillion and a single production base of over 620 million people. As Escaith et al argue in East Asia Forum Quarterly ‘Strategic Diplomacy in Asia‘, ‘understanding the nature and dynamics of these production networks will be more important to securing stable and fair growth throughout the region’.

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Donald Trump has abandoned TPP and opened the door to China in favour of America First. Now ASEAN must get on with RCEP. Towards a more calibrated approach to strategic economic diplomacy

We need to rethink the strategic diplomacy of economic development — it can no longer be entirely state-driven in an era of global production networks. I use the concept ‘strategic coupling’ to describe the mechanism of strategic economic diplomacy through which domestic firms couple their specific initiatives and advantages with those of global lead firms. Through this process, firms coordinate diverse production networks spanning across national and regional territories.

The Apple–Foxconn case is one example of strategic coupling at work. Taiwan’s Foxconn is instrumental not only in ‘manufacturing’ Apple’s iPhone success but also in integrating Taiwan and mainland China into the iPhone’s global production networks.

But this well told story has a critical and often missed dimension — the even more crucial role played by South Korea’s Samsung. Apple’s major competitor in the global mobile handsets market, Samsung has also supplied critical components to successive generations of iPhones assembled by Foxconn.

While serving as the iPhone’s largest supplier by value of components, Samsung has kept busy building its own production networks throughout East and Southeast Asia, including a giant industrial park in the Bac Ninh province of North Vietnam. Opened in 2009, Samsung’s smartphone production there has transformed a province of rice fields into Vietnam’s second-largest export centre after Ho Chi Minh City.

While the state and its policy initiatives in Taiwan, mainland China, South Korea and Vietnam facilitated this Foxconn–Apple–Samsung strategic coupling, they are not the only domain through which this new mechanism of economic development can be effective and successful.

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My recent work Strategic Coupling shows that equally if not more important than state policies are the organisational and technological innovations developed by national firms, such as Samsung and Hon Hai (Foxconn’s parent). These firms seize opportunities embedded in the cross-border production networks spearheaded by global lead firms from advanced industrial economies in North America, Western Europe and Japan.

The state’s capacity to steer national economic development and ‘govern the market’ has become more constrained since the 1990s. The transformation of state roles has led to the weakening of the state’s embedded autonomy in countries like South Korea and Taiwan. State institutions began to facilitate the redistribution of state power towards more horizontal and functional policy in support of domestic firms and industries that take advantage of growing global opportunities.

As Southeast Asian states move from active economic intervention to facilitating strategic coupling between firms and global production networks, developmental partnerships start to broaden from top-down state–firm relations to include inter-firm networks. This new mechanism of strategic economic diplomacy recommends a dynamic conception of state-firm relations that goes beyond the debilitating market–state dichotomy.

The integration of Vietnam into Samsung’s global production network is a good example of this rethinking of strategic economic diplomacy. Samsung’s US$15 billion investment in Vietnam represents a strategic imperative to diversify away from mainland China, where Foxconn is dominant. It allows Samsung to tap into strong existing industrial clusters in Singapore, Malaysia and Thailand.

What does the strategic coupling story suggest in terms of public policy? While it is now much harder for almost any Southeast Asian economy to develop internationally competitive vertically integrated industries, there remains significant room for a new kind of strategic economic diplomacy — one that encourages domestic firms to tap into the developmental opportunities inherent in most global industries.

The call for a more calibrated approach to strategic economic diplomacy brings with it the possibility of focusing on more niche policies that nudge strategic coupling. As industrial production becomes ever more fragmented and globalised, state planners in Southeast Asian economies will find it harder to identify which products and technologies should be developed in their domestic industries.

Today’s obstacles to economic development are less about large capital outlays and scale of investment, and more about developing specialised niches within different global industries. In most global industries characterised by vertical specialisation and modularisation (transport equipment, ICT, agro-food and so on), a niche approach to industrial policy is likely to yield stronger coupling networks than a ‘big spurt’ approach to state-led industrialisation.

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The politics of industrial and sectoral choice is confounded by the growing uncertainties of today’s global economy. Value creation and capture tends to be much greater in new innovation-based industries in the manufacturing and service sectors, such as nanotechnology, biomedicine, green tech and digital media. Here, catching up is not just a matter of capital investment led by state-controlled financial institutions and elite industrial development agencies. The sheer complexity and wide range of actors and interests with specialised knowledge in these industries makes it rather unruly for bureaucratic targeting, even for a state with well-coordinated industrial policy.

Looking forward, the post-developmental state should focus on creating broad-based capabilities in new technologies, product and process innovations, and market development, rather than choosing specific winning firms, industries or sectors.

Henry Wai-chung Yeung is Provost’s Chair and Professor of Economic Geography at the Department of Geography and Co-Director of the Global Production Networks Centre, National University of Singapore.

This article appeared in the East Asia Forum Quarterly, ‘Strategic diplomacy in Asia’.

Malaysia’s Grand Poobah’s Chequebook Diplomacy in Washington DC


September 15, 2017

Malaysia’s Grand Poobah’s Chequebook Diplomacy in Washington can be strategic, admits Ambassador Emeritus Dennis Ignatius

www,malaysiakini.com

 

COMMENT | Prime Minister Najib Razak’s recent White House soirée has brought Malaysia an unprecedented level of scrutiny and negative publicity. All major US newspapers, for example, unanimously panned the visit, highlighting the inappropriateness of inviting someone linked to an ongoing Department of Justice (DOJ) investigation (into 1MDB-related money-laundering charges).

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Najib’s Chequebook Diplomacy–Helping America Great Again impresses Donald J. Trump

It is a measure of just how far his reputation has fallen internationally after once having been feted everywhere as a reformist and moderate Muslim democrat. It is also a reminder of how little all of this really matters in a world dominated by realpolitik and the pursuit of strategic advantage.

Certainly, Najib himself didn’t appear to lose too much sleep over all the bad press. For him, the visit was clearly about positioning himself for the next elections and burnishing his credentials as a well-respected international leader able to run with some of the most powerful leaders in the world.

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Taken together with earlier high-profile meetings with President Xi Jinping, King Salman Abdulaziz Al Saud and Prime Minister Narendra Modi, the meeting with Trump, as well as Britain’s Theresa May, lends credence to Najib’s narrative that under his stewardship, Malaysia has become “a rising star” and a “global player.”

While the urban crowd and opposition supporters will no doubt shake their heads in disbelief, it will play well with Najib’s rural base, effectively neutralising the 1MDB issue, arguably Najib’s most troublesome political challenge.

Najib’s grand strategy

Beyond the optics and the controversy over 1MDB, the visit also revealed a side to Najib that will surely drive the opposition to further despair: he is proving to be a far better strategist than he’s been given credit for.

He has parlayed the powers of his office and all the levers of state control at his disposal to successfully play off both China and the US to his advantage.

It might be recalled that he deliberately pivoted to China after his falling-out with the Obama Administration.

In Beijing, last year, he complained about foreign meddling, of being treated unfairly, of being lectured to by Western powers. In not so many words, he went on to contemptuously dismiss the US and other Western powers as has-beens with no future in Asia and hinted about a new strategic partnership with China.

It appears that Washington, already alarmed at China’s growing clout in the region, quickly got the message. Washington will now play along to get along.

Furthermore, with a more amoral (some would say unscrupulous) occupant in the White House to do business with, and with Beijing beginning to get too demanding (as witnessed by the unravelling of the Bandar Malaysia deal), Najib might have also seen the need to recalibrate the balance between the US and China.

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Playing the China-US Hedging Game

Better relations with Washington will now give Najib more room to manoeuvre. It will also allow Najib to undercut opposition criticism that he is too close to China.

He has thus put both Washington and Beijing on notice: be nice to me and I’ll be nice to you. It is, in fact, the global application of his domestic political approach: as he once told Chinese Malaysians, “If you show support [for UMNO-BN] we have no problem giving more… if not, difficult lah.”

Though it is still too early to predict how all this will turn out, no other prime minister has displayed such a flair for big power gamesmanship as he.

Buying his way to respectability

In order to demonstrate to both the US and China that they have much to gain both strategically and economically by being supportive of his administration, Najib has resorted to a form of chequebook diplomacy hitherto only used by rich and powerful countries – promising contracts, investments and big-ticket purchases in exchange for support and endorsement.

With China, Najib generously granted PRC corporations billions of ringgit in infrastructure contracts, even favouring PRC contractors over our own.

He has also earned the undying gratitude of President Xi by wholeheartedly embracing the latter’s One Belt One Road (Obor) initiative, dismissing concerns about the viability and lack of transparency of many Obor projects.

And under his watch, Malaysia made its first purchase of defence equipment from China.

In Washington, Najib opened his chequebook once again promising to buy more than RM42 billion in new aircraft for Malaysian Airlines (MAS), RM300 million in fighter jets for the Royal Malaysian Air Force (RMAF), and to direct RM12 billion to RM16 billion in new investments from the Employees Provident Fund (EPF) and Kazanah Nasional to US infrastructure projects.

He also promised to “persuade” AirAsia to switch from British-made Rolls Royce engines to American-made GE engines.

No doubt, this was all music to Trump’s ears, a small contribution to making American great again.

American officials, of course, deny the visit will have any impact on the DOJ investigations but does anybody really believe that Najib would have made all those expensive promises simply to make Trump feel good?

After this, expect European and Japanese salesmen-politicians to come knocking at our doors with hat in hand and high praise for Najib on their lips. For so long as there’s money to be made, inconvenient issues like human rights and good governance will not be allowed to get in the way.

Cost of Najib’s generosity

The downside, however, is that Malaysia’s already beleaguered opposition, as well as its human rights defenders, can now expect no sympathy or moral support from the US and other democracies.

Najib has neatly turned the tables on his detractors; far from isolating him internationally, he has now marginalised them at home.

Worse still, the nation will have to pay a heavy price for Najib’s extravagant chequebook diplomacy.  We are already heavily indebted to China; now we will be driven into even greater debt with billions of new borrowing to pay for Najib’s Washington promises.That the government of a cash-strapped developing country, which has had to impose a new tax (GST) on its own hard-pressed and long-suffering populace just to stay afloat, would offer such an extravagant economic boost to one of the richest economies in the world is both unprecedented and mind-boggling.

DENNIS IGNATIUS, a former Malaysian ambassador, firmly believes that we should put our trust not in the leadership of politicians but in the sanctity of great institutions – our secular and democratic constitution, a democratically-elected parliament, an independent judiciary, a free press and a government fully accountable to the people. He blogs here.

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Malaysia: Cabals, Feudalism, and Apartheid


September 4, 2017

Note: Thanks to LaMoy, my buddy in the US, I am able to post my friend Dr. Murray Hunter’s 2015 article. Apparently, it was one of a number of articles Murray wrote on the Malaysian political economy while he was at Universiti Utara Malaysia, Sintok, Kedah. He must have been a pain to the university authorities. Murray now is teaching at one of the top universities in Bangkok, Thailand.

Related imageDr. Murray Hunter

 

Murray and I are in contact with each other on e-mail and Facebook. We are both academicians at institutions that respect academic freedom. It is my intention to invite him to come with Phnom Penh at a mutually convenient time to deliver a few lectures on governance at Techo Sen School of Government and International Relations, The University of Cambodia. –Din Merican

Malaysia: Cabals, Feudalism, and Apartheid

by Dr. Murray Hunter

http://moderndiplomacy.eu/index.php?option=com_k2&view=item&id=1032:cabals-feudalism-and-apartheid-will-these-institutions-damn-malaysia-s-future-prosperity&Itemid=136

Image result for tajuddin abdul rahman timbalan menteriUMNO’s racist Cabinet Minister, Tajuddin Abdul Rahman

 

“I am a businessman, not a politician” Tajuddin Abdul Rahman Deputy Minister of Agriculture and Agro-based Industry at the opening of Herbal Asia, Matrade Exhibition Centre, 1st October 2015.

Unlike most of the rest of the world that is heading along the track of multiculturalism, Malaysia seems to be locked in a limbo of racial introspection it cannot get out of.

 

This introspection is, however, more than mere racism, it is the overt part of an elaborate structure that has maintained a small elite in power for over 45 years, since the notorious May 13th riots back in 1969.

The direct discussion of this subject has basically been criminalized since the 1970s and deemed too sensitive to debate, which means there has been little public discourse on the matter of who really exercises power, how, and for whom within the country.

This has helped to enshrine a structure of political-cabalism, based upon a neo-Malay-feudalism, which has used a form of ‘Malaysian apartheid’ to support this elite in position and privilege over the rest of Malaysians they rule (as opposed to govern).

Ever since the British Colonial era, Malaysia has been divided and described through racial paradigms. The major races that represented the Malay Peninsula got together to negotiate and steer Malaya to independence in 1957, and into the Federation of Malaysia in 1963. Perhaps the most important artefact from this era is the race is still recorded on Malaysian Identity Cards today, which is hurting the sensitivities of a number of Malaysians.

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 4th Prime Minister–The Comeback 92-year Old Kid

However with a rekindled Malay nationalistic sentiment remerging in the 1960s, an opportunity after the 13th May 1969 racial riots arose for a group of Malay politicans to seize the reigns of power. Mahathir Mohamad, supported by a group of ‘ultras’ including Syed Nasir Ismail, Musa Hitam, and Tunku Razaleigh, moved to dispose of the then Prime Minister Tunku Abdul Rahman, representing the moderate Malay aristocracy.

(Tun) Abdul Razak Hussein (father of the current Prime Minister) was installed as Prime Minister in what some describe as a ‘coup’ to succeed Tunku Abdul Rahman in 1970.

As Tunku Abdul Rahman had already invoked a state of emergency in 1969 after the 13th May riots, and ruled by decree through the National operations Council, (Tun) Abdul Razak as Prime Minister through was able to use this short window was to pass through the New Economic policy (NEP) without any hindrance, as parliamentary approval wasn’t necessary. The NEP was based upon many ideas within Mahathir Mohamad’s book The Malay Dilemma, extremely controversial at the time.

At the time, the NEP was seen, even internationally as a necessary affirmative action policy. The NEP stipulated the use of quotas in granting educational places at school and universities, the use of quotas in the public service, favouritism to Malays in the granting of business licenses, the development of Malay reserve land restricting non-Bumiputera purchases, subsidies on the purchase of real estate, quotas on public equity holdings, general subsidies for Bumiputera businesses, and exclusive Bumiputera mutual funds (ASN, ASB), which gave better rates of return than commercial banks.

When the Malaysian Parliament was reconvened in 1971, both the Sedition and Internal Security Acts were strengthened to limit any discussion about matters concerning Malay special rights, the Malay rulers, and citizenship, under the premise of preserving ‘intercommunal harmony’. These restrictions also applied to members of parliament, thus weakening the principal of ‘parliamentary immunity’, i.e., the NEP was above parliamentary sovereignty, which attracted much international condemnation at the time.

It is during this time that a concerted covert effort was made to create a ‘secret leadership’ to maintain and support what was called the ‘Malay Agenda’. According to an interview with an anonymous high ranking official within the Razak Government at the time, most executive positions, civil service placements, and high ranking police and army personnel were filled with people sympathetic to the ‘Malay Agenda’.

The author’s source also stated that it was during the Razak era that selected bureaucrats and other people stated creating and acquiring corporate assets with the objective of channeling funds back to UMNO to fight future elections, to ensure victory.

The ‘Malay Agenda’ meant running government and agencies within government with the objective of looking after ‘Malay’ interests ahead of others. The ‘Malay Agenda’ was rarely spoken about in the open but had a wide appeal among all levels of Malay society, including some members of royal families, at the time.

This was the start of crony capitalism in Malaysia, the making of a kleptocracy. This loose ruling political-cabal was developed in the Malay-feudalistic tradition, in the sense that it required giving total loyalty to the leader of UMNO, the Prime Minister, without question.

A very small proportion of this group became very rich through the implementation of this special agenda. These original beneficiaries are now considered socially as the ‘old money’ in Malay society today.

Malaysia rejected multiculturalism for its own form of ethno-religious form of ‘Malaysian apartheid’, supported by the Malay-feudalistic social structure that was enhanced rather than dismantled over the two decades after independence from Britain. The mythology that the Chinese, who already control the economy, also aim to take political control of Malaysia was dissipated as propaganda to install a fear into the Malay population. Propaganda became one of the prime tools used by the government with the formation of the Biro Tata Negara (BTN) to indoctrinate civil servants and students on the “Malay agenda”.

Section 153 of the Malaysian constitution became the proclaimed legal basis of ‘Malaysian apartheid’ measures. The Reid Commission had only intended to be a temporary measure, to be reviewed by the parliament within 15 years. Section 153 states that “….it is the responsibility of the Yang Di-Pertuan Agong to safeguard the special position of the Malays and natives of any of the States of Sabah and Sarawak”, thus turning Malay into political construct, as there is no single Malay tribal grouping. The authorities over the years attempted to Malayanize the indigenous peoples of the Malay Peninsula, the Orang Asli, through encouraging their conversion to Islam and adoption of Malays customs.

When Dr. Mahathir came to the Prime Ministership in 1981 due to then Prime Minister Hussein Onn stepping down because of poor health, he pursued an ambitious agenda which included extending the business interests of UMNO. Much of these business interests were controlled by proxies and nominees such as Tajudin Ramli and Halim Saad. Further, Dr Mahathir with his Deputy Prime Minister Anwar Ibrahim embarked on a program to produce Malay millionaires who would bring up other Malays into the business sphere.

Ironically under Dr. Mahathir, a period of liberalization came with Wawasan(VISION) 2020, where the country grew very optimistic under the premise of ‘Malaysia Boleh’. There appeared to be a great working relationship between the different racial based parties within the Barisan Nasional, and Malaysian appeared to genuinely have pride in their nation.

These short ‘golden years’ for Malaysia were soon eclipsed by the Asian economic crisis of 1997 and the sacking by Dr. Mahathir of his then deputy Anwar Ibrahim in 1998. A bitter election was fought between the BN Government and newly formed Barisan Alternative in 1999, leading to the BN Government winning with a greatly reduced majority.

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5th Prime Minister/Mr. Clean Abdullah Badawi caught in the UN Iraq Oil For Food Scandal

Many misread the Abdullah Badawi period as further liberalization, although he publically fought corruption. However, Badawi still cracked down hard on dissent such as not allowing open discussion on Malaysia’s ‘social contract’, and allowed the police to act heavy handed at the Bersih rally in 2007. A new group of entities entered into the corporate scene which led to a number of scandals, by the notorious ‘boys on the 4th floor’, who included Khairy Jamaluddin. Dr. Mahathir became Badawi’s chief critic. Badawi’s poor election performance in 2008, and criticism of his apparent enjoyment of the trappings of power led to his replacement with Najib Tun Razak in 2009.

Najib Tun Razak came to power promising a transformation of government and a completely new paradigm in race relations with the well promoted 1Malaysia slogan. However, after being the vanguard of moderation internationally, his actions domestically showed none of the moderation he had promised. Najib was totally silent when organizations like Pekasa made outlandish statements about race.

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6th Prime Minister Najib Razak caught in 1MDB Financial Scandal

His greatest modus operandi is silence when government organs and NGOs undertake extreme actions in defending Malays and Islam. Najib’s persona as a moderate leader completely disappeared after the poor election performance in 2013, where he personally blamed the Chinese in his ‘Chinese Tsunami’ statement on election night.

Post GE13, has seen a definitive return to repression by the BN Government in power. Its closely aligned newspaper organ Utusan Malaysia has been continually allowed to publish headlines and statements, such as ‘Apa lagi Cina mahu’, which were inflammatory in the post-election environment.

GE13 also weakened the MCA, Gerakan, and MIC to the point where they no longer have any effective say in government, a far cry from their days of great influence within the cabinet during the 1970s and 80s. All political parties became totally subservient groups within an UMNO dominated BN. This is ironically a result of opposition electoral success in 2013.

Extreme groups have been allowed to make anti-Chinese rhetoric and racial insults with impunity under the Najib Government, thus keeping Chinese groups quiet through producing an atmosphere of fear and tension. This is a purposeful tactic to suppress any opposition.

In terms of popular vote, the UMNO-BN Government is now in reality a minority one, capturing less than 50% of total votes cast. However through the first past the post voting system, the BN is almost ensured to continue winning elections in the future. This is especially the case with the poor electoral strategy that the Pakatan Rakyat employed last election, focusing on the urban areas, rather than the rural areas. To compete with the BN, the opposition must make major changes to its electoral strategy, but will come up against a ‘hardened Umno’ organization at grassroots level. In addition, the opposition today is in so much disarray, the effective leader of the opposition to the government appears to be Dr. Mahathir.

Rather than reaching out to win the ‘hearts and minds’ of all Malaysians, UMNO has seen the decline of electoral support for BN component parties as an opportunity to consolidate power within its own right. GE13 has allowed UMNO and the political-cabal that controls it to manoeuvre even more on the ‘Malay Agenda’.

Since 2013, economic and social policy has been allowed to degenerate into blatant racial discrimination, and now has become something even more sinister.

The Malaysian civil service is being cleaned out. For example in Sabah, civil servants from ethnic groups like Dusun/Kadazan are slowly being weeded out and replaced. A bureaucratic ethnic cleansing is going on within the civil service. Other indigenous ethnic groups are no longer acceptable. Likewise, the universities are being cleansed of dissidents. There is a purge going on in Malaysia that has even taken the Deputy Prime Minister and attorney general out. This is supplemented with a clampdown on ‘whistleblowers, and anybody within existing agencies that have potential to turn against the political-cabal. Any potential resistance, including reporters and the media, to the political-cabal that currently controls the country is being eliminated. Malaysia is now facing a repressive phase in government that one has not seen since Dr. Mahathir’s “Operation Lalang” in the late 1980s.Only this time it is much wider.

The effects of this imposed policy of ‘Malaysian apartheid’ upon the country today are profound, and can be summarized as follows:

1.A feudal social structure has been developed with four sections of populace;

i) The Malay elite who rules the country and their associates,

ii) A Malay middle class which is predominantly urban,

iii) A Malay rural class, and

iv)  The rest of the Malaysian population.

Politically, this rural Malay class has kept the Malay elite in power, while the educated middle class is turning away from UMNO.

2. A brain drain is happening from Malaysia at present, which does not only include Chinese and Indian, but Malays as well. The political-cabal of elite leaders aren’t really concerned with this brain drain, as this seen as a good opportunity to weaken potential future opposition. This loss of creative and innovative people is leaving a rent seeking mentality within the country, at a time, creativity and innovation is really needed to develop the Malaysian economy. The leadership have intentionally nurtured the development of an unquestioning population, which is reflected in the Malaysian education system, as the best means to maintain a docile electorate that will not look at political issues like corruption very seriously.

3.There has been a general failure to eradicate poverty throughout rural Malaysia, as limited resources have been used to prop up the feudal warlords of UMNO through ‘white elephant’ rural development projects throughout the country. Many UMNO warlords have made it big through receiving contracts while their areas remain inadequate with basic infrastructure, and rural assistance such as farm extension services and even proper roads and irrigation. There are still large numbers of Malays who cannot afford to attend university, through the lack of any general assistance schemes available in most other countries. Poverty is still a major problem within Malaysia, where the government has been claiming undue successes.

4. The Malaysian economy is skewed with inefficiencies and market restrictions that hinder its transformation into a mature developed sustainable economic system. Companies are allowed to have monopolies, the restricted issuance of import permits has created inefficient markets, and general lack of transparency is making the Malaysian market unattractive to investors. A 2012 Asian Development Bank (ADB) report cites the two main reasons for Malaysia’s net capital outflow as the distortions introduced into the economy by the NEP, and the widespread presence and overbearing influence of Government Linked Companies (GLCs). The restriction of tenders to Bumi companies has created an inefficient Ali Baba business model, which raises the cost of both government and business. GLCs and other government owned companies openly compete with entrepreneurs in the market with an unfair advantage, thus stifling innovation, and the willingness of private individuals to take business risks. Malaysia still needs economic growth to absorb new entrants to the workforce in the coming decade.

5. Meritocracy doesn’t exist within the Malaysian civil service, universities, or other agencies. People are forced to adopt a feudal stance of seeking favour from superiors to get promotions and survive within these organizations. Under such an environment there is no chance for creativity, critical thinking, or even honesty. ‘Ketuanan Melayu’ is now turning hegemonic is a dangerous way that can spill off Malaysian shores. This stands Malaysian in a poor position to be internationally competitive in the future.

6. The divide and conquer political strategy of the Government, use of bullying through third party NGOs, and straight threats and arrogance has had a major effect upon the people of Malaysia. Many have lost hope and respect for the leadership of their country. Many are now resentful. There is potential for outbreaks of violence due to the uncontrollability of some extreme ‘ultra’ groups allowed to roam free in society today. The country thinks in terms of race, even to the point where a near diplomatic incident nearly occurred with China a few weeks ago, the second most powerful country in the world. This is not healthy and will not stand Malaysia well within the international community. The dissent generated by this ‘divide and conquer’ political strategy is fodder that allows the political-cabal to use state apparatus to strengthen their hold on power, as the current spate of arrests indicates.

7. What the policies of the Government and resulting social structure of society has created is a small elite class of rulers who act upon the axiom that ‘we are the law’. Comments by the Defence Minister Hishammuddin Hussein (a cousin of the current prime minister), indicate the ruling elite’s distain even for the constitutional monarchy of Malaysia. The elite is now in an unquestionable position of power unable to be dislodged by the rule of law. They are unashamed by scandal and control all the elements of power through their network of loyalists through the civil service, police, armed forces, and judiciary.

8. Finally, it could be argued that Malay self-confidence has been destroyed and replaced with a national inferiority complex, that the elite can use and play to at their whim. There is a condescending attitude by the elite that ’Malays are backward’ and need special protection by the UMNO -BN Government. Thus a whole section of the population is continually told they need help. The concept of ‘Ketuanan Melayu’, according to UKM Professor Noraini Othman has connotations of enslavement, with a Malay master and servant relationship implied. Tun Dr. Ismail Abdul Rahman went further and said that the ‘special position of the Malays’ in the constitution is a slur on the ability of the Malays.

The political-cabal that was set up in the 1970s by Prime Minister Tun Razak, has been transferred across from leader to leader since that time. Each Prime Minister inherited a complete network of loyalists to the ‘Agenda Melayu’ (Malay Agenda).

This has been their strength. However cracks appeared in this political-cabal when Mahathir tried to make an agreement with both his successors, which according to him have not been kept. In addition, the scandals of the present prime minister are beginning to test those loyal to the “Agenda Melayu’, to the point where some may begin to feel guilty about their loyalty to the current leadership of the political-cabal and ‘spill the beans’. Hence the sackings, demotions, transfers and arrests of late.

This, however, will not mean self-destruction to Malaysia’s political-cabal. It’s a fight over control and not reform. Winner will take all. Perhaps Dr. Mahathir was naïve in thinking that he could still exercise control and influence over this political-cabal, once he stepped down from the leadership of UMNO and the nation. This is one of the biggest mistakes of his political career.

The very nature of UMNO itself, once a party of school teachers, junior civil servants, farmers, and fishermen, which transformed into a party of contractors, small entrepreneurs, and professional rent seekers, will serve Najib well as he tries to consolidate his position. The party is run along feudal lines where booty is distributed around the country through lucrative contracts to those who head the party at state and district levels to maintain their loyalty and support. The influence of this on public policy and development planning is rarely discussed, even though it leads to massive misallocations of funds into projects that have little, if any community or economic benefit. This prevents any policy approach to planning and implementation, drastically lowering the quality of government.

Najib can reward his warlords, maintain their loyalty, and even put more of his loyalists in place for the coming election, win it, and even end up having more power than he has now. This scenario is Dr. Mahathir’s worst nightmare, and why he is working so hard to remove Najib before the next election.

To date very few international bodies have heavily criticized this “Malaysian Apartheid”. The Malaysian Government will continue to get away with repressing its populace with divide and conquer tactics. There is no front against Malaysia, like there was against South Africa. No one interested in putting sanctions upon Malaysia.

However, Swiss Islamic intellectual Dr. Tariq Ramadan foresees a credibility gap for Malaysia in international affairs where he says “As Malaysian Muslims complaining about discrimination by the West, should first acknowledge the injustices against minorities in their own country”. Until Malaysia sorts out its own racism, any stand upon Israel and Palestine seeps into hypocrisy.

This Malaysian Apartheid will continue into the foreseeable future and anybody who tries to oppose it will meet the Roth of bullying tactics to subdue them, as is being played out now with the latest round of arrests. The Malay position will remain a taboo subject for years to come, hence Malaysian sensitivities when any non-Malaysian comments on Malaysian internal affairs.

This also means that the question as to whether the NEP-NDP has been protecting or marginalizing the Malays will not be discussed. This is an important question for the future of Malaysia and the challenges that lie ahead. As former Prime Minister Ahmad Badawi once said “Malays who can’t learn how to walk without crutches will end up in a wheelchair”. Dr. Mahathir took this further and said “Unfortunately, the protection and privileges accorded by the New Economic Policy (NEP) may weaken the Malays further by lulling the next generation into complacency, thinking that the

NEP’s affirmative action will always be there for them to fall back upon….. The NEP can make the users so dependent that their inherent capability regresses.”

This dooms the country into the ‘middle income trap’, where the capabilities, creativity and innovation needed to lift the Malaysian economy into high valued activities, does not exist. Economic and social prosperity is risked so that Kleptocratic rule can continue unabated in Malaysia. Malay self-respect has also been sacrificed in this quest to hold power.

The system of discrimination has only benefited in preserving a feudal hierarchy within Malaysian society where the new lords are political dynasties which are now fighting each other openly using 1MDB as the platform. This is not about corruption, but which family dynasty and surrounding group rules, rather than any promise of social reform.

Malaysia Sdn Berhad: Book Review


August 11, 2017

Malaysia Sdn Berhad: Fox guarding the henhouse?

BOOK REVIEW | Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia. Edmund T Gomez et al. Institute for Democracy and Economic Affairs (IDEAS), Kuala Lumpur.

by Prof. Dr. Jomo Kwame Sundaram

http://www.malaysiakini.com

In the late 1980s, the young Terence Gomez proved himself to be the worthy successor to a Malaysian research tradition begun by James Puthucheary in Singapore’s Changi Prison almost three decades earlier. Gomez single-handedly transformed our understanding of the role of politics in the ownership and control of the Malaysian corporate sector.

Employing novel methods as needed and appropriate, the auto-didact researcher showed how official policies and institutions had enabled an earlier generation of selected Malay business professionals to take over some commanding heights of the Malaysian economy.

Change and continuity

In their new book, Gomez and his team of researchers chart developments over the last three decades since he began his pioneering work, paying particular attention to developments following the 1997-1998 crisis. That crisis exposed the vulnerability of the earlier expansion closely associated with the Umno leadership then.

The corporate restructuring and refinancing institutions and processes that followed were not simply bailouts at the public expense, as alleged by some critics then. Instead, as the book shows, most major assets are now under new management, ultimately controlled by the current prime minister cum finance minister.

The authors focus on seven government-linked investment companies (GLICs), namely Khazanah Nasional, Permodalan Nasional (PNB), both under MoF Inc, Kumpulan Wang Simpanan Pekerja (KWSP or EPF), Kumpulan Wang Persaraan (KWAP), Lembaga Tabung Angkatan Tentera (LTAT) and Tabung Haji.

Malaysians may be comforted to learn that of the seven, only Tabung Haji is run by politicians, and the others by professionals. But after all, 1MDB too has been run by professionals (Jho Low is a Wharton graduate) while Felda Global Venture’s previous boss claimed to have a doctorate. The not-so-magnificent seven covered do not include others, such as those in the Felda group, controlled directly by the PM since 2004.

Most bumiputera entrepreneurs who emerged in the dozen years or so before the 1997 crisis also had impressive professional credentials. The apparently better performance of the more recent crop of professional managers may have less to do with their qualifications, than the ethos, checks and balances of the new institutional arrangements introduced and enforced by some GLICs.

Government control

The range of activities undertaken by government-linked companies (GLCs) overseen by the GLICs includes familiar ones from the 1980s such as utilities, finance, plantations, property and construction. Media, previously controlled by the ruling party and its trustees, are now held by GLCs, while investments in hospitals and other services have also grown. With development finance institutions now under GLCs, their original objectives and rationales have been undermined by commercial considerations.

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The Gomez team has done Malaysians a great service by describing how things have changed, tracing the bewildering variety of new arrangements. However, how to interpret this variety remains moot, and some informed readers will have their own bones to pick with what is considered most significant in their analysis.

Protracted crisis

Two economic developments help us better understand the recent growing unrest, especially among informed Malays. First, the Saudi-initiated oil price collapse in late 2014 precipitated a more general commodity price collapse. Meanwhile, lacklustre growth in Malaysia since 1998 has been exacerbated by premature deindustrialisation unconvincingly presented as inevitable in achieving developed country status.

Second, despite heavy censorship, news has been leaking out of corporate abuses involving not only 1MDB, but also FGV and other corporations associated with the legendary ‘Malaysian Official 1’. Easy money from China may have helped the regime with its immediate financing problems, but a generation familiar with mounting personal debt senses that this is at the public’s, taxpayers’ and future generations’ expense.

This ‘double whammy’ has been reflected in the much-weakened ringgit and by other indicators. Meanwhile, there have been heightened concerns about the recent foreign investor resurgence, especially with official non-disclosure of ownership data since 2008. Recent erosion of public faith in the state and ruling coalition has been accelerated by unprecedented recent abuses for personal gain and nepotism.

Don’t shoot the messenger

Even if successfully challenged on some details, this important book should open an important new debate on how Malaysia is to progress. Gomez offers some proposals, apparently at odds with the book’s sponsor. Others, especially participants in and observers of Malaysia’s corporate sector and political economy, will promote their own alternative purported solutions. The ensuing debate can only benefit the nation, as Gomez’s first decade of publications shaped the earlier debate and reforms, even if most outcomes may have disappointed him.

While this regime is undoubtedly associated with unprecedented abuses, there is little in the study to support the publisher’s faith in leaving things to the market and simplistic insistence on government withdrawal from the economy as a universal panacea to the myriad problems the nation faces. In the face of the wide-ranging and complex issues involved, this would be tantamount to throwing the baby out with the bathwater.

Unsurprisingly, this publication on the regime’s role in ownership and control of contemporary corporate Malaysia is silent on the current political crisis as the nation approaches the next general election. Nevertheless, IDEAs must be congratulated for sponsoring and publishing this important work.

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JOMO KS received the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. The views expressed here are entirely his own.

 

 

Capitalism’s excesses belong in the dustbin of history


August 2, 2017

Capitalism’s excesses belong in the dustbin of history.

by Martin Kirk

https://www.theguardian.com/commentisfree/2017/aug/01/capitalism-excesses-dustbin-history

Image result for Capitalism's excesses belong in the dustbin of history.

Back in February, a college sophomore called Trevor Hill stood up during a televised town hall meeting in New York and put a simple question to the House minority leader, Nancy Pelosi.

Citing a study by Harvard University that showed that 51% of Americans between the ages of 18 and 29 no longer support capitalism, Hill asked if the Democratic party would contemplate moving farther left and offering something distinctly different to dominant rightwing economics? Pelosi, visibly taken aback, said: “I thank you for your question,” she said, “but I’m sorry to say we’re capitalists, and that’s just the way it is.”

The footage went viral on both sides of the Atlantic. It was powerful because of the clear contrast: Trevor Hill is no hardened leftwinger. He’s just your average millennial – bright, well-informed, curious about the world and eager to imagine a better one. By contrast, Pelosi, a figurehead of establishment politics, seemed unable to even engage with the notion that capitalism itself might be the problem.

It’s not only young voters who feel this way. A YouGov poll in 2015 found that 64% of Britons believe that capitalism is unfair, that it makes inequality worse. Even in the US it’s as high as 55%, while in Germany a solid 77% are sceptical of capitalism. Meanwhile, a full three-quarters of people in major capitalist economies believe that big businesses are basically corrupt.

May, Brexit and Future of the UK


August 1, 2017

Why you should and shouldn’t worry about Britain leaving the EU

by  Peter Beard @ 29/07/17

https://thestudenteconomist2017.wordpress.com/2017/07/28/the-good-the-bad-and-the-eu/#more-36

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As Clint Eastwood would say: “Nowadays, politically, everybody is promising everything. That’s the only way you can get elected”. As referenced in the title, British politics has stayed true to Eastwood’s quote. “A strong and stable economy” as Theresa May would put it during her electoral campaign… But as Brexit nears the horizon, can we really be sure of what she’s saying?

Over a year ago on June 23rd, Britain made the decision to leave the EU during the Referendum under David Cameron. Who would have thought it was going to happen? I certainly didn’t, probably nor the ‘Brexiteers’ themselves thought it would actually happen.

£9.8 billion – or in other terms, £188 million a week. That is what Britain net financial contribution was to the European Union. Significant as it may seem, the publics’ final vote decision was a mixture of this, but more important apparently is the standing on Jobs and Immigration. Roughly speaking,

Migration from the EU added £160 million in additional costs for the NHS across the UK – this is somewhat considerable. No wonder the older demographic voted to leave. I imagine it’s the waiting they were fed up with at their local clinic or hospital.

But in all seriousness, the likes of immigration were blamed for the causation of job losses in the UK. However, this is simply not true, especially when the economy is at a 25 year low for unemployment (4.5%). The notion of rising immigration and increased job losses being a direct cause and effect is a misconception. Just because X and Y are correlated does NOT mean that X causes Y or vice versa.

Nevertheless, the EU has reaped some benefits for the UK, such as the £3.19bn subsidies received in 2014 for British farmers – of which now accounts for 50% of farmers’ incomes.

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As it stands, Theresa May’s progress has frankly stagnated. To some, slow progress further advocates the pressing issue of uncertainty. Throughout this and last year’s electoral campaigns, the word ‘uncertainty’ has put fear into both the consumer and the firms of our economy… But why? Surely uncertainty is neither good or bad?

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Well, from a Macro-Economists point of view, uncertainty links to the idea of confidence and consumer sentiment; after all, if an economy is not confident in spending its own money, then no one benefits as money is the fuel used to drive economic growth.

So, if the UK spends less, we would expect greater job insecurity from your larger corporations because they are likely to withdraw inward investment from the UK – of which it is currently 3rd in the world for attracting FDI . Moreover, MNC’s  will no longer be part of the single market – a major benefit for firms when trading goods.

Put simply, not only are jobs at risk, but for the firms that stay in the UK, be prepared for every day retail prices to rise as the cost of extra tariffs will be passed down to the consumer.

However, to some the risk of uncertainty does not pose a serious nor long-term threat. Firstly, There’s no evidence of significant capital flight. London will arguably remain a leading financial centre outside the EU and banks will still want to be headquartered in Britain due to its comparatively low direct tax rates.

Secondly, though we expect the value sterling to fall, this does create inventive for manufacturers to export – perhaps this could be critical for reigniting the economy if and when we enter a recession.

Lastly, the removal of unwieldly EU regulations lowers some of the barriers to entry and thus improves competition – a principle that is good for consumer welfare surplus owing to wider choice and theoretically lower prices.

Overall, there is an underlying theme that was hardly mentioned during the debates: Free trade vs. Protectionism – ironic though that implementing protectionist policies is actually endangering more jobs than it is saving from the UK’s sunset industries such as the Steelworks and Car Manufacturing.

*Overall, I feel bad this post was not very helpful coming to a sound judgement, but neither is Parliament, so I don’t as feel bad after all.