EU and ASEAN: Advancing partnership for sustainability


February 16, 2016

EU and ASEAN: Advancing partnership for sustainability

By Francisco Fontan

https://www.khmertimeskh.com/50578204/eu-and-asean-advancing-partnership-for-sustainability/

 

The EU–ASEAN Foreign Ministers Meeting in Brussels on 21 January. Cooperation, solidarity and prosperity have long been the hallmark of the EU–ASEAN relationship.

As global stakeholders, the EU and ASEAN have the responsibility to advance the international rules-based order and preserve their ‘global commons’, writes Francisco Fontan.

Image result for Federica Mogherini,

In January I joined Federica Mogherini ( pic above), the EU’s High Representative for Foreign Affairs and Security Policy, in Brussels as she co-chaired the 22nd EU-ASEAN Ministerial Meeting. It was an impressive occasion, and the best attended such gathering anyone could remember, with almost all the ten ASEANan and twenty-eight EU member states represented by their Foreign Ministers. Brussels was preparing for its first big snowfall of the winter, but the reception we gave our ASEAN partners was a truly warm one.

The debate inside the room reflected the depth and breadth of our relations, from conflict in the Middle East, to the importance of the South China Sea and the Rohingya crisis, to promoting trade, investment, or higher education. Much was said but there was also a unity of purpose – a common desire to strengthen EU–ASEAN cooperation including in new areas such as combating unregulated fishing, or launching a new high level dialogue on environment and climate change, and an agreement in principle to upgrade our relations to a strategic partnership.

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As Ms Mogherini said after the meeting, this was “a recognition of the strategic nature of the partnership we already have in many fields. It was an important signal showing that the two most advanced and most successful integration processes in the world stand firmly behind multilateralism and a rules-based global order.”

Image result for Fr Vivian Balakrishnan

Or as her fellow co-chair Vivian Balakrishnan, Minister of Foreign Affairs of Singapore and ASEAN coordinator for EU relations put it “we take our partnership to a greater height, we will continue to explore new areas in which we can cooperate and learn from each other, such as cybersecurity, maritime security, connectivity and climate change.” A close and deep partnership between the EU and ASEAN is thus of strategic importance for both regional blocs.

We are certainly pivotal economic partners already. Our private sector is, by far, the first investor in ASEAN, holding a quarter of total stock in the region, and we are ASEAN’s second largest trading partner. The EU has concluded or is negotiating free trade and investment agreements with a number of Asean members, building blocks for an ambitious region-to-region trade and investment framework.

We are working hard to increase transport links and our overall connectivity. If – as I hope – we soon agree the first ever region-to-region Comprehensive Air Transport Agreement, millions of our citizens will benefit and the travel and tourism industry in particular stands to make great gains. We can build on this and establish a comprehensive EU–Asean Connectivity Partnership. While some question globalisation and are retreating into economic nationalism, it is important that ASEAN and the EU together seek to bolster global links, make them work for all and show their true value to our shared prosperity.

And as ASEAN says, we can leave no one behind.

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The EU remains the largest donor to ASEAN, helping the organisation and your governments to reduce poverty and spread opportunity, with over 200 million euros ($225 million) in support of ASEAN regional integration and connectivity, on top of over 2 billion euros of bilateral assistance to ASEAN member states, and the direct efforts of our 28 EU member states. We will also continue to stand by you after each major natural disaster, from tsunamis to cyclones, putting victims’ needs above any other consideration.

Cooperation, solidarity and prosperity have long been the hallmarks of our relations. And while they remain so, the rapidly evolving international scene is leading us to focus more on key strategic issues. Our shared ambitions can only realise their full potential in a rules-based, peaceful and stable environment. This is what makes ASEAN so important for the EU in Asia – not just as a community of ten, but being also the core of the East Asia Summit, the ASEAN Regional Forum, or the ADMM+ process. And this is where ASEAN and the EU are already rightly expanding their security cooperation – from trafficking in persons to cyber-crime, from maritime security to transnational crime and counter-terrorism.

No one can achieve these goals alone. And thankfully that is something else we agree on – the Foreign Ministers spent more time talking about the environment, climate change and sustainable development than anything else. We agreed to deliver together on our United Nations Sustainable Development Goals, including on the Paris Agreement on Climate Change.

As global stakeholders, the EU and ASEAN have the responsibility to advance the international rules-based order and preserve our “global commons.” I have been immensely privileged, as the EU’s First Ambassador to ASEAN, to have seen our strategic relationship go from strength to strength. I am confident that it has even further to run and that, together, we will play a leading role in developing the global responses needed for the challenges of tomorrow.

Francisco Fontan is European Union Ambassador to ASEAN.

Nudging Mahathir into consensus mode


January 17,2019

Nudging  Mahathir into consensus mode

Opinion  |  P Gunasegaram

Published:  |  Modified:

 

QUESTION TIME | Prime Minister Dr Mahathir Mohamad’s current beef is wealth inequality, and so he wants to restart the redistribution of wealth – to Malays (and bumiputeras). This is something which I commented on here. But that’s not even a stopgap measure, because acquired wealth can be sold off. It also reflects the policies of old, which have been discredited.

The only way that wealth can be increased and retained within a community is to increase incomes, rather than to distribute existing wealth, even if it is held by the government. And the only way incomes can be increased is to put in place plans to raise incomes for all Malaysians, since 67 percent of the population is bumiputera, with Malays forming 50.5 percent of the population.

The issue of wealth and income equality comes back eventually to the effectiveness of the government and how successful it has been in narrowing opportunity gaps between rich and poor through well thought out and carefully implemented programmes.

For that to happen, it is necessary for some steps to be taken. I agree that for this to happen, it is not just the duty of Mahathir, but also the partners in the Harapan coalition government, to exert force, for at the end of the day, Mahathir only commands a small minority of MPs in the coalition.

Considering that he is advanced in age and may be lacking in vitality, it is necessary for change to start from his other partners – the leaders in PKR, DAP and Amanah – who had envisioned a different plan and programme than that of Mahathir’s Bersatu, a racial reconstruction of UMNO, where the membership is exclusively restricted to Malays and bumiputeras, with many of its members having come from UMNO.

Exerting influence

Thus, it is incumbent upon other leaders to push Mahathir into change and consensus mode. There are at least two ways this can be done – through the Harapan presidential council and the cabinet. First, Harapan’s presidential council rightly should be the place from which all broad policies for the government should emanate.

 

Image result for mahathir's cabinet

Here is where Harapan’s de facto leader Anwar Ibrahim and his wife and Deputy Prime Minister Dr Wan Azizah Wan Ismail should exert their influence after discussions with DAP leaders such as Lim Kit Siang and Lim Guan Eng, and Amanah leaders such as Mohamad Sabu, Khalid Abdul Samad and Dzulkefly Ahmad.

Since the other parties are in the vast majority in terms of their number of MPs, their combined weight should hold a lot of sway, and Mahathir can be persuaded that the policies taken should reflect that of the majority view.

If the other Harapan leaders do not take such measures and wait patiently for Mahathir to exit the scene in a year and four months from now, they must also take joint responsibility for any wrong, improper move which delay things towards an open, freer country which moves forward based on government transparency, accountability, good governance and competence.

Pushing for Anwar’s inclusion in the cabinet

 

Image result for mahathir's cabinet

The other thing that the presidential council should do is to push for Anwar’s inclusion in the cabinet and for him to become Deputy Prime minister like in 1998 soonest.

The other thing that the presidential council should do is to push for Anwar’s inclusion in the cabinet and for him to become deputy prime minister soonest. That is the natural thing to do if Anwar is to become prime minister 16 months from now, as agreed by all the coalition partners.

That may pave the way for Wan Azizah to step down from politics, as she has said many times beforehand that she wants to do after Anwar is in the picture.

It would ensure that Anwar has enough time to have a good grasp of everything that happens in the cabinet in the lead-up to him taking over as Prime Minister. It is necessary that Harapan leaders have the gumption, courage and conviction to push for this to take place.

With the presidential council becoming a greater force in making national policy with the input of all leaders, instead of being dominated by a minority leader, even if it is Mahathir, then decision-making is likely to better reflect the true aspirations of the overall Harapan coalition instead of that of Bersatu and Mahathir – as it is now. That would reflect, too, the aspirations of voters.

Get the necessary work done

Next, the cabinet. Cabinet members seem to be waiting for Mahathir’s approval before they do anything, even though it is impossible for Mahathir – or anyone else who is Prime Minister – to understand the full implications of all measures to be undertaken by the ministries.

Thus ministers should seek to take their ministries forward in terms of increased competence, work and efficiency, with full regard at all times to such key issues as integrity, honesty and doing away with patronage in decision-making and implementation. Surely no one, not even Mahathir, would fault them for coming up with good strategies and programmes for implementation that would work.

In other words, ministers should move their butts to get the necessary work done and not wait for orders and instructions from the top, who in this case is Mahathir. If they don’t take the initiative to get things done much better than before, they can’t turn around and blame Mahathir.

It’s their job to get action plans done and present them to the cabinet for approval. If their plans are found to be good and workable, it is unlikely that Mahathir or the other members of the cabinet are going to turn them down.

These are tough times and Mahathir may well need some help to initiate changes. If he is straying from the path the coalition agreed on, who better to tell him than his coalition partners and to steer him back to the right one?

That needs courage, conviction and the willingness to face confrontation, which could eventually lead to a conciliatory path that is more beneficial to the country. After all, is that not the way of consensus, which is how the election was won by Harapan?

Next: 10 ways to increase incomes and raise living standards.


P GUNASEGARAM believes consensus comes out of genuine desire to find the right path. E-mail: t.p.guna@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

FOCUS On POVERTY alleviation, not income creation for billionaires–Mahathir’s outdated policy prescriptions


January 16, 2019

FOCUS On POVERTY alleviation, not billionaires —Mahathir’s outdated policy prescriptions

by P. Gunasegaram

Image result for the malaysian maverick by barry wain

QUESTION TIME | When Prime Minister Dr Mahathir Mohamad sank low to say that wealth should be distributed equally among races, he indicated plainly that he has no solid plan to increase incomes and alleviate poverty for all Malays and Malaysians. His priorities are elsewhere.

Note that he talks about the distribution of wealth, not increasing incomes, which is more important because this is what will eventually result in a proper redistribution of wealth by valuing fairly everyone’s contribution  to wealth creation.

During his time as Prime Minister previously for a very long 22 years from 1981 to 2003 out of 46 years of independence at that time – nearly half the period of independence – he had plenty of opportunities, but squandered them.

He did not care for the common Malay, but was instead more focused on creating Malay billionaires overnight through the awarding of lucrative operations handled by the government or government companies previously, such as roads, power producers, telecommunications and others.

He depressed labour wages by bringing in millions of workers from Indonesia, and subsequently Bangladesh and the Philippines, to alter the religious balance in Sabah. A significant number of them became Malaysian citizens over the years, altering the overall racial and religious balance in the country.

By doing that he let his own race down, many of whom were workers and small entrepreneurs whose incomes were constrained by imported labour. Even now, Mahathir has not shown a great willingness to increase minimum wages, which will help many poor Malays and bumiputeras increase their incomes.

As Mahathir himself well knows, distribution is not an easy thing. Stakes held by others cannot be simply distributed, but they have to be sold, even if it is at depressed prices as it was under the New Economic Policy or NEP, when companies wanted to get listed.

Instant millionaires

There are not enough Malays rich enough to buy these stakes, but many of them in the Mahathir era and earlier, especially the connected elite, became rich by purchasing the 30 percent stakes for bumiputeras that had to be divested upon listing by taking bank loans.

By simply flipping the stakes on the market at a higher price after they were listed, they pocketed the difference and became instant millionaires.

Image result for the permodalan nasional

It was Mahathir’s brother-in-law – the straight, honest and capable Ismail Ali – who was the architect behind the setting up of Permodalan Nasional Bhd or PNB to hold in trust for bumiputera stakes in major companies. PNB now has funds of some RM280 billion and has been enormously successful in this respect.

But Mahathir, with advice from Daim Zainuddin who became his Finance Minister, still cultivated selected bumiputera leaders, many of them Daim’s cronies, and gave them plum deals. A slew of them who were terribly over-leveraged got into trouble during the 1997-1998 financial crisis.

The government, often through Khazanah Nasional Bhd, had to rescue some of the biggest ones, resulting in Khazanah holding key stakes in many companies such as Axiata, CIMB, PLUS and so on. Recently, the government has been talking about, not surprisingly, selling these stakes to investors, accusing Khazanah of not developing bumiputera entrepreneurship, which was not anywhere in its original aims.

It becomes more obvious what Mahathir is talking about. Redistribution of wealth now will come out of the selling of government (Khazanah) and PNB stakes to individual Malay entrepreneurs to equalise wealth distribution among the races. To make it more palatable, some willing Indian entrepreneurs, too, may be found.

The modus operandi will be to sell the stakes when prices are depressed and perhaps even to offer a bulk discount to these so-called entrepreneurs who, of course, will not only be among the elite, but who are cronies. That will ensure a steady flow of funds into Bersatu in future from donations to help make it the premier party in the Pakatan Harapan coalition.

Image result for the malaysian jomo and gomez

Mahathir knows full well that equal wealth distribution is impossible – it’s never been done anywhere before and makes wealth acquisition disproportionate to intelligent effort and hard work, a sure recipe for inefficiency, corruption and patronage. As eloquently argued by prominent political economy professor Terence Gomez, patronage is king in new Malaysia – if it was cash during Najib’s time.

Mahathir does not have the wherewithal to lead anymore, if he ever had it in the first place. Eight months after GE14, he is still bereft of a plan to increase incomes and improve livelihoods. He needs to recognise he does not have one and that he stays in power because of the strength of the other parties in the coalition.

Wrong direction

The only way to close the wealth gap is to increase future incomes across all races. Anything else is the expropriation of other people’s wealth. In the meantime, the holding of wealth in trust by state agencies is perfectly acceptable because the income comes back to the government.

This can be wisely used to improve the quality of education, get better quality investments, raise productivity and hence labour wages, and provide equal opportunities for growth and innovation among all communities. As so many people have said before me, you can equalise opportunities, but not outcomes.

So far, 61 years of UMNO-BN have not managed to equalise opportunities for all as the government education system is in shambles, among others. And eight months of Harapan is heading in the wrong direction under Mahathir.

Despite Bersatu being a party expressly formed to fight for Malay rights, Mahathir’s party had the lowest support from Malays of parties looking after Malay rights, including Umno, PAS, PKR and Amanah.

He is still stuck in a mode to widen his rather narrow and vulnerable power base (his Bersatu won only 13 seats of 52 contested, the worst win rate of any party in the coalition) unethically by attracting tarnished MPs from Umno into the Bersatu fold, in the process willing to break agreements with other coalition partners and doing/advocating things which are against the principles of a properly functioning democracy.

He has also said he will not honour some manifesto promises, saying that these were made when Harapan did not expect to win the elections – a rather lame excuse. He has not even made solid moves to undo repressive laws introduced by his predecessor Najib Abdul Razak.

Mahathir, obviously, has no intention plan to improve the livelihood of the common Malay and all Malaysians;  he is stuck in old-school forced distribution which is injurious to the economy, maybe even fatal in the long term.

 Malaysians don’t want the creation of Malay (or any other ) billionaires from government wealth.


Old wine in a new bottle is still sour. E-mail: t.p.guna@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

 

 

Trump vs. the Economy


 

Trump vs. the Economy

December 30, 2018  by

https://www.project-syndicate.org/commentary/trump-behavior-causes-stock-market-drop-by-nouriel-roubini-2018-12

Between publicly chastising US Federal Reserve Chair Jerome Powell and escalating his trade war with China, US President Donald Trump has finally rattled the markets. While investors were happy to look the other way during the first half of Trump’s term, the dangerous spectacle unfolding in the White House can no longer be ignored.

NEW YORK – Financial markets have finally awoken to the fact that Donald Trump is US president. Given that the world has endured two years of reckless tweets and public statements by the world’s most powerful man, the obvious question is, What took so long?

For one thing, until now, investors had bought into the argument that Trump is all bark and no bite. They were willing to give him the benefit of the doubt as long as he pursued tax cuts, deregulation, and other policies beneficial to the corporate sector and shareholders. And many trusted that, at the end of the day, the “adults in the room” would restrain Trump and ensure that the administration’s policies didn’t jump the guardrails of orthodoxy.

These assumptions were more or less vindicated during Trump’s first year in office, when economic growth and an expected increase in corporate profits – owing to forthcoming tax cuts and deregulation – resulted in strong stock-market performance. In 2017, US stock indices rose more than 20%.

But things changed radically in 2018, and especially in the last few months. Despite corporate earnings growing by over 20% (thanks to the tax cuts), US equity markets moved sideways for most of the year, and have now taken a sharp turn south. At this point, broad indices are in correction territory (meaning a 10% drop from the recent peak), and indices of tech stocks, such as the Nasdaq, are in bear-market territory (a drop of 20% or more).

Though financial markets’ higher volatility reflects concerns about China, Italy and other eurozone economies, and key emerging economies, most of the recent turmoil is due to Trump. The year started with the enactment of a reckless tax cut that pushed up long-term interest rates and created a sugar high in an economy already close to full employment. As early as February, growing concerns about inflation rising above the US Federal Reserve’s 2% target led to the year’s first risk-off.

Then came Trump’s trade wars with China and other key US trade partners. Market worries about the administration’s protectionist policies have waxed and waned throughout the year, but they are now reaching a new peak. The latest US actions against China seem to augur a broader trade, economic, and geopolitical cold war.

An additional worry is that Trump’s other policies will have stagflationary effects (reduced growth alongside higher inflation). After all, Trump is planning to limit inward foreign direct investment, and has already implemented broad restrictions on immigration, which will reduce labor-supply growth at a time when workforce aging and skills mismatches are already a growing problem.

Moreover, the administration has yet to propose an infrastructure plan to spur private-sector productivity or hasten the transition to a green economy. And on Twitter and elsewhere, Trump has continued to bash corporations for their hiring, production, investment, and pricing practices, singling out tech firms just when they are already facing a wider backlash and increased competition from their Chinese counterparts.

Emerging markets have also been shaken by US policies. Fiscal stimulus and monetary-policy tightening have pushed up short- and long-term interest rates and strengthened the US dollar. As a result, emerging economies have experienced capital flight and rising dollar-denominated debt. Those that rely heavily on exports have suffered the effects of lower commodity prices, and all that trade even indirectly with China have felt the effects of the trade war.

Even Trump’s oil policies have created volatility. After the resumption of US sanctions against Iran pushed up oil prices, the administration’s efforts to carve out exemptions and bully Saudi Arabia into increasing its own production led to a sharp price drop. Though US consumers benefit from lower oil prices, US energy firms’ stock prices do not. Besides, excessive oil-price volatility is bad for producers and consumers alike, because it hinders sensible investment and consumption decisions.

Making matters worse, it is now clear that the benefits of last year’s tax cuts have accrued almost entirely to the corporate sector, rather than to households in the form of higher real (inflation-adjusted) wages. That means household consumption could soon slow down, further undercutting the economy.

More than anything else, though, the sharp fall in US and global equities during the last quarter is a response to Trump’s own utterances and actions. Even worse than the heightened risk of a full-scale trade war with China (despite the recent “” agreed with Chinese President Xi Jinping) are Trump’s public attacks on the Fed, which began as early as the spring of 2018, when the US economy was growing at more than 4%.

Given these earlier attacks, markets were spooked this month when the Fed correctly decided to hike interest rates while also signaling a more gradual pace of rate increases in 2019. Most likely, the Fed’s relative hawkishness is a reaction to Trump’s threats against it. In the face of hostile presidential tweets, Fed Chair Jerome Powell needed to signal that the central bank remains politically independent.

But then came Trump’s decision to shut down large segments of the federal government over Congress’s refusal to fund his useless Mexican border wall. That sent markets into a near-panic, and the government shutdown was soon followed by reports that Trump wants to fire Powell – a move that could turn a correction into a crash. Just before the Christmas holiday, US Treasury secretary Steven Mnuchin was forced to issue a public statement to placate the markets. He announced that Trump was not planning to fire Powell after all, and that US banks’ finances are sound, effectively highlighting the question of whether they really are.

Recent changes within the administration that do not necessarily affect economic policy making are also rattling the markets. The impending departure of White House Chief of Staff John Kelly and Secretary of Defense James Mattis will leave the room devoid of adults. The coterie of economic nationalists and foreign-policy hawks who remain will cater to Trump’s every whim.

As matters stand, the risk of a full-scale geopolitical conflagration with China cannot be ruled out. A new cold war would effectively lead to de-globalization, disrupting supply chains everywhere, but particularly in the tech sector, as the recent ZTE and Huawei cases signal. At the same time, Trump seems to be hell-bent on undermining the cohesion of the European Union and NATO at a time when Europe is economically and politically fragile. And Special Counsel Robert Mueller’s investigation into Trump’s 2016 election campaign’s ties to Russia hangs like a Sword of Damocles over his presidency.

Trump is now the Dr. Strangelove of financial markets. Like the paranoid madman in Stanley Kubrick’s classic film, he is flirting with mutually assured economic destruction. Now that markets see the danger, the risk of a financial crisis and global recession has grown.

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

 

 

In Defense of the Fed


December 26, 2018

jerome powell fed

In Defense of the Fed

Despite howls of protest from market participants and rumored threats from an unhinged US president, the Federal Reserve should be congratulated for its commitment to normalizing interest rates. There is simply no other way to break the US economy’s 20-year dependence on asset bubbles.

 

NEW HAVEN – I have not been a fan of the policies of the US Federal Reserve for many years. Despite great personal fondness for my first employer, and appreciation of all that working there gave me in terms of professional training and intellectual stimulation, the Fed had lost its way. From bubble to bubble, from crisis to crisis, there were increasingly to question the Fed’s stewardship of the US economy.

Image result for trump and the fed

That now appears to be changing. Notwithstanding howls of protest from market participants and rumored That now appears to be changing. Notwithstanding howls of protest from market participants and rumored unconstitutional threats from an unhinged US President, the Fed should be congratulated for its steadfast commitment to policy “normalization.” It is finally confronting the beast that former Fed Chairman Alan Greenspan unleashed over 30 years ago: the “Greenspan put” that provided asymmetric support to financial markets by easing policy aggressively during periods of market distress while condoning froth during upswings.

Since the October 19, 1987 stock-market crash, investors have learned to count on the Fed’s unfailing support, which was justified as being consistent with what is widely viewed as the anchor of its dual mandate: price stability. With inflation as measured by the Consumer Price Index averaging a mandate-compliant 2.1% in the 20-year period ending in 2017, the Fed was, in effect, liberated to go for growth.

And so it did. But the problem with the growth gambit is that it was built on the quicksand of an increasingly asset-dependent and ultimately bubble- and crisis-prone US economy.

Greenspan, as a market-focused disciple of Ayn Rand, set this trap. Drawing comfort from his tactical successes in addressing the 1987 crash, he upped the ante in the late 1990s, arguing that the dot-com bubble reflected a new paradigm of productivity-led growth in the US. Then, in the early 2000s, he committed a far more serious blunder, insisting that a credit-fueled housing bubble, inflated by “innovative” financial products, posed no threat to the US economy’s fundamentals. As one error compounded the other, the asset-dependent economy took on a life of its own.

As the Fed’s leadership passed to Ben Bernanke in 2006, market-friendly monetary policy entered an even braver new era. The bursting of the Greenspan housing bubble triggered a financial crisis and recession the likes of which had not been seen since the 1930s. As an academic expert on the Great Depression, Bernanke had argued that the Fed was to blame back then. As Fed Chair, he quickly put his theories to the test as America stared into another abyss. Alas, there was a serious complication: with interest rates already low, the Fed had little leeway to ease monetary policy with traditional tools. So it had to invent a new tool: liquidity injections from its balance sheet through unprecedented asset purchases.

The experiment, now known as quantitative easing, was a success – or so we thought. But the Fed mistakenly believed that what worked for markets in distress would also spur meaningful recovery in the real economy. It raised the stakes with additional rounds of quantitative easing, QE2 and QE3, but real GDP growth remained stuck at around 2% from 2010 through 2017 — half the norm of past recoveries. Moreover, just as it did when the dot-com bubble burst in 2000, the Fed kept monetary policy highly accommodative well into the post-crisis expansion. In both cases, when the Fed finally began to normalize, it did so slowly, thereby continuing to fuel market froth.

Here, too, the Fed’s tactics owe their origins to Bernanke’s academic work. With his colleague Mark Gertler of NYU, he argued that while monetary policy was far too blunt an instrument to prevent asset-bubbles, the Fed’s tools were far more effective in cleaning up the mess after they burst. And what a mess there was! As Fed governor in the early 2000s, Bernanke maintained that this approach was needed to avoid the pitfalls of Japanese-like deflation. Greenspan concurred with his famous “mission accomplished” speech in 2004. And as Fed Chair in the late 2000s, Bernanke doubled down on this strategy.

For financial markets, this was nirvana. The Fed had investors’ backs on the downside and, with inflation under control, would do little to constrain the upside. The resulting “wealth effects” of asset appreciation became an important source of growth in the real economy. Not only was there the psychological boost that comes from feeling richer, but also the realization of capital gains from an equity bubble and the direct extraction of wealth from the housing bubble through a profusion of secondary mortgages and home equity loans. And, of course, in the early 2000s, the Fed’s easy-money bias spawned a monstrous credit bubble, which subsidized the leveraged monetization of housing-market froth.

And so it went, from bubble to bubble. The more the real economy became dependent on the asset economy, the tougher it became for the Fed to break the daisy chain. Until now. Predictably, the current equity market rout has left many aghast that the Fed would dare continue its current normalization campaign. That criticism is ill-founded. It’s not that the Fed is simply replenishing its arsenal for the next downturn. The subtext of normalization is that economic fundamentals, not market-friendly monetary policy, will finally determine asset values.

The Fed, it is to be hoped, is finally coming clean on the perils of asset-dependent growth and the long string of financial bubbles that has done great damage to the US economy over the past 20 years. Just as Paul Volcker had the courage to tackle the Great Inflation, Jerome Powell may well be remembered for taking an equally courageous stand against the insidious perils of the Asset Economy. It is great to be a fan of the Fed again.

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.

 

The Malay Dilemma revisited


December 17, 2018

The Malay Dilemma revisited

 by Dennis Ignatius

Image result for mahathir mohamad
 

In what may well be a prelude to a significant policy shift, Prime Minister Dr. Mahathir Mohamad has taken to warning Malays that they are being left behind, that they are not on par with other races, that they are increasingly confined to the urban fringes where infrastructure is poor.

With rhetorical flourish, he even confessed to an audience at UiTM recently of being ashamed that “in our own country we are left behind….” It is an idea straight out of his ‘Malay Dilemma’ thesis.

Left behind?

But left behind? Is Mahathir really serious?

Image result for The Malays
www. freemalaysiatoday.com
The narrative that Malays are being left behind is, for the most part, simply a political construct that is being promoted to justify the continuation of race-based policies that essentially favour the elites at the expense of the poor and serve the interest of Malay power structures.”–Dennis Ignatius

Go into any government department or university, go to a cabinet meeting or to parliament, go to Mindef or Bukit Aman, go into the nation’s corporate boardrooms or banks, go to Damansara Heights, and you’ll find the Malays firmly entrenched there, and rightfully so, as homeowners, entrepreneurs, bankers, scientists, doctors, vice-chancellors, professors, engineers, architects, civil servants, etc. They are holding their own very well and are second to none.

If anything, it is the non-Malays who are falling further and further behind in many of these sectors as a result of skewered government policies.

Even the notion of urban racial disparity that Mahathir has used to justify not having local council elections, was disproved a long time ago. According to 2010 census data, Malays are in the majority in all but a few urban centres. In Kuala Lumpur, for example, the Malay population in 2010 stood at 49.5%, outnumbering the Chinese population, which stood at 43.2%. It is much higher than that now.

Simply put, a lot of these race-based assumptions may have been true twenty or thirty years ago but not anymore; yet they continue to be bandied around as fact and used as a basis to formulate policies.

Who is to blame?

And if Malay urban areas lack infrastructure, shouldn’t city administrators be taken to task for their failure to serve all the residents of the city? It makes no sense at all to somehow blame others for the unequal distribution of facilities and opportunities when the administration is itself overwhelmingly in Malay hands. Perhaps, if our politicians and city administrators were not so busy exploiting their own positions for personal gain, the poorer areas of our cities might get the attention they rightly deserve.

It is, in fact, mind-boggling that so many Malay politicians continually harp on how poorly the Malays are doing when all the power to correct the situation has been in their hands for more than 60 years. Instead of fear mongering and race-baiting, they should look at their own performance and their own policies and figure out how to do a better job of governing the nation to the benefit of all its citizens.

A political construct

The narrative that Malays are being left behind is, for the most part, simply a political construct that is being promoted to justify the continuation of race-based policies that essentially favour the elites at the expense of the poor and serve the interest of Malay power structures.

Of course, there are many Malaysians who need help – farmers, fishermen, rural and urban poor; no one will grudge them greater support and assistance. But let’s have a targeted needs-based approach that really works, that will make a real difference. A needs-based approach will do more to uplift the disadvantaged Malays (as well as others) than many of the current policies that only benefit the crony-elites.

Building a culture of confidence

Instead of perpetuating a siege mentality – that the Malays are about to be overwhelmed by other communities – the government should celebrate the tremendous advances that the Malay community has made in the years since independence and how Malays have taken their place as leaders and change-agents in every area of national life.

Creating a culture of suspicion, fear and envy of other communities might be expedient in the short-term but it is ultimately fatal to our nation’s progress. Surely that’s one of the most important lessons we must learn from the past 60 yeas of UMNO’s racist policies.

The views expressed are those of the author and do not necessarily reflect those of FMT.