ASEAN: 50 Years and Beyond

February 8, 2016

ASEAN: 50 Years and Beyond

by Nunn Nagara

THE Association of South-East Asian Nations (ASEAN) enters its 50th year of operation this year, and many in the region sought to peek into what it would look like in another 50 years.

ISIS Malaysia held two days of brainstorming during the week in an international Track Two (non-governmental) roundtable in Kuala Lumpur titled “ASEAN in 50 Years” in the context of a rapidly changing world.

The discussions did not lack optimism: despite challenges, there was general agreement that ASEAN would still be around as a centenarian in 2066-67. This was not without cause. Evidently ASEAN today, upon growing steadily towards a formal Community, has stood the test of time.

ASEANn (1967) has endured and lasted better than its predecessors SEATO (South-East Asia Treaty Organisation, 1954), ASA (Association of South-East Asia, 1961) and Maphilindo (Malaya-Philippines-Indonesia, 1963).

ASEAN endured precisely because it was unlike its predecessors. With ASEAN, the sovereign nations of South-East Asia at last have a regional organisation fit for their purposes.

SEATO (Eisenhower-Dulles project) was a Cold War  of the West alien to South-East Asia. Its members were Australia, Britain, France, New Zealand, Pakistan and the US, with the only South-East Asian countries being US allies Thailand and the Philippines. Although without overwhelming contradictions, its small membership proved too limited for regional needs and it too died a natural death.

Maphilindo began as an emotional pan-regional appeal to ethnic identity, but in coming on the eve of the formation of Malaysia and being promoted by Indonesia and the Philippines which tried to pre-empt Malaysia, it was regarded as subversive to Malaysian territory and identity.

By 1967, Indonesia and the Philippines were under new leadership. Gen. Suharto replaced Sukarno and Marcos succeeded Macapagal, and Malaysia together with Singapore and Thailand worked with them to form ASEAN.

All member nations would have equal rights and privileges, and none would interfere in the internal affairs of the others including territorial integrity. In time, ASEAN would take in new members and acquire a higher international profile.

Among the questions raised at the Track Two ASEAN Roundtable was whether ASEAN would become an integrated regional body or remain an inter-governmental organisation in 50 years. Related to this was the question of whether it was better to have ASEAN as a supranational regional “superstate” or have it remain as an agglomeration of sovereign states.

Such discussions risk veering off at an tangent, as these artificial dichotomies have little to do with the real world. Such debates make intriguing academic discourses but are unrelated to the here and now.

Even the EU as the most developed regional grouping of states never considered replacing the national with the supranational. It is not a question of either national or regional, but both.

EU member countries, like those of ASEAN, see advantages in exercising their diplomatic clout and economic potential within a larger regional body – provided it does not preclude their core national prerogatives.It makes sense to develop common regional propensities to the fullest, or until it begins to compromise national sovereignty or interests. There is often a trade-off, and several EU states are already seeing some limits on certain fronts.

Ultimately, such dualities of national-supranational are false, misleading and distracting. It is like pitting the extreme of the free market against that of state control, when every economic system in the world is a combination of the two where both exist at all.

There was also a roundtable consensus that the nation state will continue to evolve, prevail, and remain significant as an arbiter of national and international policymaking.

Then the question becomes, to what extent would a South-East Asian nation evolve in 50 years? More to the point, what would ASEAN itself as a grouping of 10 or 11 countries including Timor Leste become by then?

Meanwhile, the identity of the nation state as formally defined continues to be eroded practically everywhere. Erosive factors include the growing influence of NGOs or CSOs, increasing multi-ethnicities and various other diversities, and territorial disputes that tug at the physical character of the state itself.

The operations of all regional institutions are limited and messy, and ASEAN is no exception. Yet, members choose to remain and non-members wish they could someday join.

ASEAN continues to experience centripetal forces tending towards coalescing inwards, as well as centrifugal forces pulling it apart. Global markets and major powers in the neighbourhood are responsible.

There are times when a member nation may feel tempted to drift away, thinking that its fortunes are better met outside ASEAN. Singapore once felt that way, followed by Indonesia more lately. But any (passing) sense of self-importance or regional frustration is soon overcome by the prevailing realities. As a Singapore policymaker once put it privately, it is not as if Singapore can just row away and join another region of its choice.

Beyond all the bubbly talk of a “borderless world,” geography is still important. It remains at the centre of geopolitics and geo-economics. Beyond the formal state, however, lies the “deep state” said to act as the ultimate determinant of policy direction above and beyond official channels and procedures. On a regional level, it can also apply to a transnational body like ASEAN.

Thus, a Deep ASEAN would act much like an ASEAN state, but on a regional scale and in the common collective interest of its member states. There are signs that a Deep Asean has taken root after the inclusion of the CLMV countries (Cambodia, Laos, Myanmar and Vietnam).

Progress towards the regalia of a Deep ASEAN.however. has been slow. It took many years for the Secretary-General to acquire the status of an ASEAN government minister, then full regional coverage in its membership, then a formal legal identity with a Charter, with more developments set to come.

The extended powers that a Deep ASEAN offers member nations in representing their shared interests are also an attraction for them to compromise on some aspects of their national sovereignty to join.

Asean must then develop its legitimacy by broadening its internal constituency. This has come with moves towards a people-oriented ASEAN, then a people-centred ASEAN, and now with talk of a people-led ASEAN.

But “people” as an indeterminate mass is quite meaningless without being harnessed and honed into policy making form. Unless this is done through the appropriate political processes, improved people-to-people exchanges could mean little more than expanded tourism flows and enhanced student exchange programmes.

Another question raised was whether ASEAN had to include all countries in South-East Asia. The name “ASEAN” says so, its founding fathers said so, and it serves ASEAN’s legitimacy to do so.

There was also discussion and confusion over neutrality or non-alignment as an ASEAN imperative. ASEAN is, has been, and needs to be neutral or non-aligned in respect of the major powers – but not with the sanctity of international law which it must embrace.

ASEAN remains a minnow relative to the US, China, Russia and India – all of which have renewed or heightened their interests in this region. Asean members have no choice but to close ranks.

The major powers will keep ASEAN relevant and important, but only if ASEAN deals with all equally and impartially.

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia. The views expressed are entirely the writer’s own.

Dr.Paul Krugman Reviews ‘The Rise and Fall of American Growth’ by Robert J. Gordon

February 2, 2016

NY Times Sunday Book Review

Dr.Paul Krugman Reviews ‘The Rise and Fall of American Growth’ by Robert J. Gordon

by Paul Krugman

Back in the 1960s there was a briefly popular wave of “futurism,” of books and articles attempting to predict the changes ahead. One of the best-known, and certainly the most detailed, of these works was Herman Kahn and Anthony J. Wiener’s “The Year 2000” (1967), which offered, among other things, a systematic list of technological innovations Kahn and Wiener considered “very likely in the last third of the 20th century.”

Unfortunately, the two authors were mostly wrong. They didn’t miss much, foreseeing developments that recognizably correspond to all the main elements of the information technology revolution, including smartphones and the Internet. But a majority of their predicted innovations (“individual flying platforms”) hadn’t arrived by 2000 — and still haven’t arrived, a decade and a half later.

The truth is that if you step back from the headlines about the latest gadget, it becomes obvious that we’ve made much less progress since 1970 — and experienced much less alteration in the fundamentals of life — than almost anyone expected. Why?

 Robert J. Gordon-2015

Robert J. Gordon, a distinguished macro­economist and economic historian at Northwestern, has been arguing for a long time against the techno-optimism that saturates our culture, with its constant assertion that we’re in the midst of revolutionary change. Starting at the height of the dot-com frenzy, he has repeatedly called for perspective: Developments in information and communication technology, he has insisted, just don’t measure up to past achievements. Specifically, he has argued that the I.T. revolution is less important than any one of the five Great Inventions that powered economic growth from 1870 to 1970: electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine and modern communication.

In “The Rise and Fall of American Growth,” Gordon doubles down on that theme, declaring that the kind of rapid economic growth we still consider our due, and expect to continue forever, was in fact a one-time-only event. First came the Great Inventions, almost all dating from the late 19th century. Then came refinement and exploitation of those inventions — a process that took time, and exerted its peak effect on economic growth between 1920 and 1970. Everything since has at best been a faint echo of that great wave, and Gordon doesn’t expect us ever to see anything similar.

Is he right? My answer is a definite maybe. But whether or not you end up agreeing with Gordon’s thesis, this is a book well worth reading — a magisterial combination of deep technological history, vivid portraits of daily life over the past six generations and careful economic analysis. Non-economists may find some of the charts and tables heavy going, but Gordon never loses sight of the real people and real lives behind those charts. This book will challenge your views about the future; it will definitely transform how you see the past.

Indeed, almost half the book is devoted to changes that took place before World War II. Others have covered this ground — most notably Daniel Boorstin in “The Americans: The Democratic Experience.” Even knowing this literature, however, I was fascinated by Gordon’s account of the changes wrought by his Great Inventions. As he says, “Except in the rural South, daily life for every American changed beyond recognition between 1870 and 1940.” Electric lights replaced candles and whale oil, flush toilets replaced outhouses, cars and electric trains replaced horses. (In the 1880s, parts of New York’s financial district were seven feet deep in manure.)

Meanwhile, backbreaking toil both in the workplace and in the home was for the most part replaced by far less onerous employment. This is a point all too often missed by economists, who tend to think only about how much purchasing power people have, not about what they have to do to get it, and Gordon does an important service by reminding us that the conditions under which men and women labor are as important as the amount they get paid.

Aside from its being an interesting story, however, why is it important to study this transformation? Mainly, Gordon suggests — although these are my words, not his — to provide a baseline. What happened between 1870 and 1940, he argues, and I would agree, is what real transformation looks like. Any claims about current progress need to be compared with that baseline to see how they measure up.

And it’s hard not to agree with him that nothing that has happened since is remotely comparable. Urban life in America on the eve of World War II was already recognizably modern; you or I could walk into a 1940s apartment, with its indoor plumbing, gas range, electric lights, refrigerator and telephone, and we’d find it basically functional. We’d be annoyed at the lack of television and Internet — but not horrified or disgusted.

By contrast, urban Americans from 1940 walking into 1870-style accommodations — which they could still do in the rural South — were indeed horrified and disgusted. Life fundamentally improved between 1870 and 1940 in a way it hasn’t since.

Now, in 1940 many Americans were already living in what was recognizably the modern world, but many others weren’t. What happened over the next 30 years was that the further maturing of the Great Inventions led to rapidly rising incomes and a spread of that modern lifestyle to the nation as a whole. But then everything slowed down. And Gordon argues that the slowdown is likely to be permanent: The great age of progress is behind us. But is Gordon just from the wrong generation, unable to fully appreciate the wonders of the latest technology? I suspect that things like social media make a bigger positive difference to people’s lives than he acknowledges. But he makes two really good points that throw quite a lot of cold water on the claims of techno-optimists.

First, he points out that genuinely major innovations normally bring about big changes in business practices, in what workplaces look like and how they function. And there were some changes along those lines between the mid-1990s and the mid-2000s — but not much since, which is evidence for Gordon’s claim that the main impact of the I.T. revolution has already happened.

Second, one of the major arguments of techno-optimists is that official measures of economic growth understate the real extent of progress, because they don’t fully account for the benefits of truly new goods. Gordon concedes this point, but notes that it was always thus — and that the understatement of progress was probably bigger during the great prewar transformation than it is today.

So what does this say about the future? Gordon suggests that the future is all too likely to be marked by stagnant living standards for most Americans, because the effects of slowing technological progress will be reinforced by a set of “headwinds”: rising inequality, a plateau in education levels, an aging population and more.

It’s a shocking prediction for a society whose self-image, arguably its very identity, is bound up with the expectation of constant progress. And you have to wonder about the social and political consequences of another generation of stagnation or decline in working-class incomes.

Of course, Gordon could be wrong: Maybe we’re on the cusp of truly transformative change, say from artificial intelligence or radical progress in biology (which would bring their own risks). But he makes a powerful case. Perhaps the future isn’t what it used to be.

Nobel Laureate in Economics Paul Krugman (above) is a Distinguished Professor at the CUNY Graduate Center and an Op-Ed columnist for The New York Times.

Fixing a Battered Economy, but Can Najib do it

January 27, 2016

Malaysia: Fixing a Battered Economy, but Can Najib do it

by Bloomberg


Prime Minister Dato’ Seri Najib Razak looks to have weathered a scandal over a murky US$681 million (RM2.08 billion) “personal donation” from the Saudi royal family as he turns his focus to a potentially bigger threat to his hold on power – the economy.

After seven months and a series of probes involving the attorney-general’s office and anti-graft agency, investigators say they found no evidence of wrongdoing by the Prime Minister, who received the money in the months before a closely fought 2013 general election.

Najib has maintained the funds were not used for private benefit, with US$620 million later returned to the Saudi donors, though there has not been a clear explanation as to what the rest was spent on or where that money is now. He’s retained the support throughout of the bulk of the ruling party’s powerful division chiefs.

“Najib has survived all the attacks on him,” said Ooi Kee Beng, Deputy Director of the ISEAS-Yusof Ishak Institute, a research centre in Singapore for Southeast Asian issues. “He’s actually in a spot where he can’t really be challenged.”

Calling the imbroglio an “unnecessary distraction” for Malaysia, Najib yesterday pledged to prioritize efforts to halt a slowdown in growth. A sputtering economy is the most serious risk to voter enthusiasm among ethnic Malays in rural areas, a group that has for decades been the backbone of his party.

The prize for Najib is winning an election that must be held by 2018. To do that he must prevent a further erosion of support that saw the ruling coalition – in power since independence in 1957 – lose the popular vote for the first time at the last election, mostly as non-Malays deserted it.

Survived attacks

Maybe they can help Najib fix the Economy

Fending off efforts by some within his own party, including former prime minister Tun Dr Mahathir Mohamad, to get him out, Najib has fired detractors, curbed dissent and as a result potentially even strengthened his hold on power. He’ll need that influence to carry out further reforms in order to reach a goal of making Malaysia a developed economy by the end of this decade.

The backing of divisional chiefs in his ruling UMNO may wane if they believe there is a risk of losing further ground in the next election with Najib at the helm. Voters could shift toward the opposition if they feel the economic slowdown, accompanied by rising costs and lower subsidies, is impacting their daily lives.

Austerity path

Investor confidence in Malaysia has already been battered by plunging crude prices and the political upheaval. Najib, who has often relied on handouts to the poor to preserve support, needs to keep voters appeased while staying on an austerity path that will satisfy credit rating companies.

Gross domestic product is forecast by the government to increase 4%t to 5% in 2016, after an estimated expansion of as much as 5.5% last year. The economy grew at the slowest pace in more than two years in the three months through September from a year earlier.

“He wants to slow down the pace of fiscal consolidation because he knows that growth is slowing down as well, so he doesn’t want to exacerbate that,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. “He will try and manage the pace of fiscal consolidation without kind of losing sight of the overall medium-term agenda, which is to reach a certain point to have a balanced budget later on.”

Taming deficit

The Prime Minister is expected to announce a revision to growth forecasts and cuts to operating expenditure tomorrow to keep the fiscal deficit for 2016 for Asia’s only major net oil exporter in check. Moody’s Investors Service lowered its credit-rating outlook for Malaysia this month, citing an external environment that has crimped government revenue.

Still, economists say spending cuts would weigh on expansion, with Malaysia’s exporters facing headwinds from a China slowdown and a weakening yuan. Businesses are asking the government to defer a plan for a higher minimum wage from July, while Malaysians are still feeling the inflationary impact of a nationwide consumption levy implemented last year.

“The economy is very much affected by the world economy and there’s not much to be done beyond the government trying to apply certain measures to help with people’s livelihoods,” said Oh Ei Sun, an analyst at the S. Rajaratnam School of International Studies in Singapore and Najib’s political secretary from 2009 to 2011. “There is very little they can do to stimulate the economy.”

Not all agree that Najib remains the right person to lead the coalition to the next elections.”It’s an issue of a crisis of confidence in the economy,” said Terence Gomez, a professor at the University of Malaya. “What this means for the party is they will now have to think about what to do with a prime minister that is discredited, who doesn’t inspire confidence and the implications on the party as they look forward to the impending general election.”

Thayaparan on TPPA

January 24, 2016

Thayaparan on TPPA

The more rules and regulations,
The more thieves and robbers.― Lao Tzu

Parti Sosialis Malaysia (PSM) long opposition against the Trans-Pacific Partnership Agreement culminates tomorrow ( January 23) at Dataran Merdeka. Kuala Lumpur.


They and a host of other disparate NGOs hope for a huge turnout of Malaysians opposed to what they claim is an ideological struggle against the corporate hegemons that attempt to subvert the will of the people and an UMNO government complicit in playing geopolitical games at the expense of the rakyat.


For the first time, the TPPA has divided academics, politicians and NGOs who usually find themselves comfortably ensconced along partisan lines. Indeed, Lim Teck Ghee’s well-argued and timely piece ‘Should we sign on or stay out of TPPA?’ ends with this rejoinder:

“The TPPA is neither a poison pill nor a panacea. While there is a price to pay, the government has made the right choice by opting to join it. The discipline that the TPPA will demand will further the cause of the rule of law and force the government to think twice before embarking on rule changes. Membership will force the government to reconsider and amend existing rules that have the effect of furthering protective and rentier practices.”

Meanwhile DAP’s Charles Santiago and Wan Saiful Wan Jan, Chief Executive of IDEAS, have been involved in a spate over the former’s contention that the TPPA would affect access to affordable medicine.

In Wan Saiful’s words, “I fully support YB Charles Santiago’s demand for the Ministry of Health to be more engaged and work together with the Ministry of International Trade and Industry in communicating the impact of the TPP on healthcare in Malaysia, but is regrettable that the DAP MP was selective with facts to support his arguments and he turns a deaf ear when answers are given to address his concerns.”

The problem here is that answers have not been provided. What the UMNO government has done is allowed the discourse to be dominated by proxies (from both sides of the political divide) who cherry pick points of contention or create strawmen arguments in an attempt to avoid the responsibility of explaining the effects of their (BN) secretly negotiated trade deal on the lives and livelihood of ordinary Malaysians.


Suaram Adviser Dr. Kua Kia Soong, meanwhile reminds TPPA proponents that “The TPPA is clearly more than just a trade deal; it also imposes parameters on non-trade areas. This is the point stressed by (economist Joseph) Stiglitz. It sets new rules for everything from food safety and financial markets to medicine prices and internet freedom, requiring countries to maintain compatible regulatory regimes; facilitate corporate financial transactions; establish copyright and patent protections to govern intellectual property rights and to safeguard foreign investors.”

The average Malaysian is either unaware of the importance of this agreement or mistrusts a government mired in corruption and financial scandals. The secrecy in which this deal was made has angered opponents of this agreement in many countries and in Malaysia’s case, the Malaysian International Trade and Industry Ministry (Miti) offered this when it comes to the secrecy involving the negotiating text:

“A level of confidentiality is required for two main reasons: (a) regulations and the evolving process of negotiations and rules surrounding the TPPA oblige negotiators to maintain confidentiality of the negotiating texts and (b) negotiators advancing the interests of Malaysia strategically do not want to publicly disclose their bargaining positions to ensure the best outcome during the negotiations.”

No comprehensive human rights impact assessment


Meanwhile PSM last year noted that Malaysian negotiators were in no position to conclude the talks held in the United States because there was no comprehensive “Human Rights Impact Assessment (HRIA) study to examine the impact of the trade treaty on Malaysians when it is signed and implemented”.

Apparently “in mid-2014, MITI initiated a cost-benefit analysis study (CBA) for only two specific areas, namely – impact on bumiputera policy, SME and national interest. We were informed that the bumiputera policy and SME CBA study is undertaken by Teraju, while the national interest analysis is done by ISIS (Institute of Strategic and International Studies [ISIS] Malaysia). But till today, the findings of both studies have yet to be released.”

PSM list several points of concern that this agreement would have an impact on human rights. Readers are encouraged to read more at their official site but briefly, they are:

1) Right to food

2) Right to healthcare and well-being

3) Right to basic amenities

4) Right to education

5) Right to housing

6) Rights of citizens and environmental protection

7) Rights of workers

8) Rights of indigenous communities

I am extremely skeptical of how exactly this trade agreement negotiated in secret would have any significant impact on the institutional dysfunctions that plague this country. Perkasa and the rest of their right-wing kind may find themselves unlikely allies with secular, socialist and oppositional forces of this country but the rhetoric coming out of Putrajaya and even emissaries of the United States is that nothing will actually change when it comes to the racially-motivated agenda of the ruling regime.

International Trade and Industry Minister Mustapa Mohamed boldly states “The bumiputera agenda has been recognised by our friends in the TPPA negotiations. Contracts reserved for bumiputeras will continue”, which to my mind at least should raise danger signals to anyone who advocates a meritocratic playing field or if you like, a free or fair-playing field.

This sentiment is echoed by Putrajaya’s friend US Trade Representative Michael Froman, who said in a forum organised by IDEAS, that “Minister Mustapa and Prime Minister Najib has been very clear from the start on TPPA, how important the bumiputera policy is to Malaysia” and “And our view is, it is really the sovereign decision of Malaysia what direction they take the bumiputera policy in the future.”

The “bumiputera policy” as articulated by the US Trade Representative is in the context of alleviating poverty but the reality is that the so-called policy is code for racial supremacy and political hegemony.

Attempting to correct the perceived “imbalance” among the various communities in Malaysia as discussed by some of the other participants at the IDEAS forum, ignores the fact that the reasons for such imbalances were the policies that were carried out post-1969 and the machinations of successive administrations that redefined the so-called bumiputera policies as a means to maintain political and racial hegemony.

So the big question is should Malaysians turn out in support of for these disparate groups on Jan 23 when they are clearly divided on the issue of the TPPA. The answer in my opinion is yes. If you do not support the TPPA, you should attend the protest march to stand in solidarity with groups which you may have nothing else in common with.

If you do support the TPPA, you should attend the rally tomorrow to remind the government that the implementation of this trade pact should be done in good faith and the so-called progressive ideas contained in the implementation of this agreement will be closely monitored by a skeptical rakyat.

My opinion should not be construed as a ploy to increase numbers but rather as an acknowledgement that diverse views on this issue should be carefully considered or rejected based on rational consideration of information that should have been available to the public.

That when a deal is negotiated in secret and the views of various stakeholders are ignored or not even assessed, this spells trouble especially for a regime that is on the brink of a dictatorship.

And less people think that I’m against a free market, I’m a firm believer (much to the dismay of certain of my ideological – left and right – leaning friends) in these words of the late Harry Browne: “The free market punishes irresponsibility. Government rewards it.”

S THAYAPARAN is Commander (Rtd) of the Royal Malaysian Navy.


TPPA–Time to Listen, not just be selective with Facts

January 20, 2016

TPPA–Time to Listen, not just be selective with Facts

by Wan Saiful Wan Jan

IWan Saiful Wan Jann a recent statement DAP Member of Parliament Charles Santiago, repeated his assertion that the Trans-Pacific Partnership (TPP) would affect access to affordable medicine.  He cited the case of Jordan and claimed that the prices of medicine there increased by 20 per cent and the generic drug industry was wiped out six months after they signed a free trade agreement with the United States in 2001.

“I fully support YB Charles Santiago’s demand for the Ministry of Health to be more engaged and work together with the Ministry of International Trade and Industry in communicating the impact of the TPP on healthcare in Malaysia,” said Wan Saiful Wan Jan, Chief Executive of IDEAS.


“But is regrettable that the DAP MP was selective with facts to support his arguments and he turns a deaf ear when answers are given to address his concerns.” What has been deliberately omitted from the story about Jordan by opponents of the TPP are the two major benefits the country enjoyed as a result of its free trade agreement (FTA) with the US.

Wan Saiful added: “Firstly, Jordan saw increased investment in research and development and the introduction of new, innovative and effective drugs into the market. Liberalisation of the regulatory environment led to 78 new launches of innovative medicines within ten years, more than double Jordan’s pre-reform rate. The reforms catalysed by the FTA spurred local healthcare entrepreneurial activities leading to more products being developed by Jordanian companies such as the Jordan Pharmaceutical Manufacturing Company. The FTA helped Jordanian consumers access to new and innovative medicines, and this is good.”

Charles Santiago

“Secondly, Jordan enjoyed the introduction of best practices and international standards in the country’s industry. Prior to the reforms, only one Jordanian company was certified for Good Manufacturing Practises (GMP) and this raised questions about the quality of locally produced generics before reforms. After reforms, at least four more Jordanian companies achieved international GMP certification, enabling for more Jordanian produced generics to be used locally and exported for the regional and international pharmaceutical markets. Today, post-reform, Jordan has become the leading Arab exporter of drugs, exporting   cent of their production to some 66 countries.”

“It is telling that in November last year, Thailand, a country that depends on generic medicines extensively in its universal healthcare coverage scheme, has expressed its intent to join the TPP. Is YB Charles saying that the Thais don’t understand what they are getting themselves into?  The fact is, the reduction of trade barriers will allow the price of generic medicines to go down and this is good for health. Since Malaysia wants to use mostly generics in our healthcare system, we should focus on the wider positive benefits of TPP on the pricing of generics.” said Wan Saiful.

Wan Saiful concluded that “YB Charles has been a consistent anti-liberalisation campaigner and I respect him for his persistence. I am sure he and other anti-liberalisation campaigners will continue nit-picking to oppose the TPP.  But being selective with facts and refusing to listen when answers are given is not the way to handle this issue.”

* IDEAS is an independent not-for-profit think tank dedicated to promoting market-based solutions to public policy challenges.

Politics aside–TPPA is Good for Malaysia

January 16, 2016

Politics aside–TPPA is Good for Malaysia

by Tan Sri Dr. Munir Majid


The Trans-Pacific Partnership Agreement (TPPA) is a huge commitment and it is unsurprising it has engaged enormous public interest. The debate over it, however, will only serve the nation well if is not excitable and emotional, not just alarmist without suggesting means of enhancing Malaysia’s capability, and not purely academic or self-serving.


The excitable and emotional arguments are largely political in nature, another stick with which to beat the government. Too many important national interests are involved for the TPPA to be political football. Statements like exiting the TPPA would bankrupt Malaysia are an alchemy just to stop Malaysia signing it, not a considered argument on the cost and benefit of being a member of the TPP.

Tun Dr Mahathir, who made this remark, has associated Malaysia and bankruptcy all too often that one worries if this is what he wishes on a Najib Malaysia. But Malaysia is not Najib. We are a nation that must make itself compete and survive well into the future beyond the politicians that had led, or now lead us.

It has been asserted also that the TPPA would cause Malaysia to lose its sovereignty. Malaysia alone among the 12 set to sign it? Lose sovereignty to whom? The US? All 11 surrendering their sovereignty just like that? Vietnam, after over two generations spilling blood for its freedom and still now struggling against Chinese over the South China Sea claims? Singapore, so jealously guarding its sovereignty in the last 50 years after separation from Malaysia?

What utter nonsense this assertion is. It is in the exercise of its sovereignty that Malaysia is entering into this agreement, with obligations and privileges, challenges and opportunities, and associations in a bloc which represents 40% of the world economy.

The study by the Institute of Strategic and International Studies (I must declare my interest as a director, but I had absolutely no involvement in the study) concludes the Malaysian national interest is served by signing the TPPA which underpins the great openness of the Malaysian economy and underlines Malaysia’s continued commitment to that openness. It would be worthwhile for sovereignty-phobic critics of the TPPA to read the report on the International Trade and Industry Ministry (Miti) web-site.

I would expand to say the TPPA makes geopolitical sense for Malaysia as it introduces an American presence of balance in the region, not against, but with China. It is never any good for small countries when one major power dominates. They should be adept at engaging both powers in a positive sum relationship, as Singapore does so well.

PKR President Dr Wan Azizah Wan Ismail said last Tuesday the opposition party would not support the TPPA because it is geopolitical. Yes, it is also geopolitical. What about it? How does the PKR want Malaysia to sit between China and the US? What exactly does the opposition want?

I am reminded of an old dictum about opposition in parliament: to propose nothing, oppose everything and to turn out the government. However, as I said, the TPPA is a great event. It is too important for the country to be a play-thing of party politics.

There had been grave concerns expressed about how the TPPA would wipe out national policies on bumiputras and SMEs, state-owned enterprises and government procurement – part of what the PWC cost-benefit study commissioned by Miti calls the “”thematic issues” – but after these concerns were well (some say too well) managed through higher threshold levels and extensions of time, the aim moved to the fact the TPPA has overwhelmingly more chapters on issues not related to trade.

This is very true. It covers qualities, standards and principles of good governance, transparency, accountability and incorruptibility in extenso. What is the problem? Do we want bad governance, opaque and unaccountable systems, and corruption? It cannot but be a good thing that associated countries are being moved in the direction of higher standards and better quality rule.

Then, comes the question why do we have to rely on an “external” regime to improve ourselves and, sometimes in the same breath, the assertion the TPPA cannot solve all Malaysia’s governance issues in any case.

So, which and what is it? It has never been the contention that the TPPA is a one-shot panacea for Malaysia’s political, social and economic problems. But it is a jolly good start and boost. And it is, furthermore, freely sought by Malaysia, in the exercise of its sovereign right. The TPPA will assist in the injection of higher disciplines and standards of governance as well as of justice – such as for workers through acceptance of International Labour Organisation requirements (not unknown in this country as the electrical and electronic industry already conform but not extensively enough practised in other sectors).

There are a number of obligations Malaysia has undertaken, especially through the United Nations system, which it has not always fulfilled, like with the Universal Declaration of Human Rights. With the TPPA, Malaysia will not easily escape obligations it has made – another good discipline.

However, depending on the extent and complexity of the obligations, it can also expose Malaysia to means of legal redress that could be overwhelming. There is therefore merit in the fear expressed that the TPPA, through Chapter 9 on Investment, could place Malaysia at risk under the Investor State Dispute Settlement (ISDS) provisions in the second section of that chapter.

It would be wrong nevertheless to say Malaysia would be taken to the cleaners each time, based on a historical analysis of how big business have been hauling governments to court or arbitration – and winning big.

The score for governments winning is 37% of the time, which may not be too comforting. While there is a point to be made about governments keeping to their legal commitments and not moving goalposts, as happens all too frequently with Latin American governments which have lost substantially in frequently cited cases, there is the feeling that big business, particularly Americans, are testing and bending the rules, if not the arbitrators.

Miti has argued there are sufficient provisions in the TPPA to limit and inhibit big business alacrity for legal redress, as in time accorded for other means of settlement to be used and as in provision for the TPP Commission under Chapter 27 to interpret the agreement. However, given the risk factor, it would be a good idea for Miti to organise a small caucus of legal experts, business leaders and government officials to go through the whole gamut of dispute settlement provisions and interpretation under the TPPA with an emphasis on the ISDS.

The PWC cost-benefit study notes in consultant fashion the ISDS “may increase cost to the Government” which includes I would suggest direct loss, professional and proceedings cost and also administrative preparedness. It is the last, I would venture, that the government should give a lot of attention to as Malaysia has to improve legal administrative capability.

We have been caught short many a time on details and record-keeping which has lost us a number of international cases. If we add to this English language capability which has deteriorated, the ISDS exposure could become larger than it already is. So government and administration have to improve. And thus so many fears because we feel we are so inferior and not prepared.

We are not that inferior but we must be better prepared. This applies of course particularly in the competition for markets which the TPPA opens up.

Here economists are having a merry old time arguing about what exactly are the real economic benefits of the TPPA. This is not unknown among economists, only one of whom in my knowledge, predicted the 2008 financial market crash and subsequent economic crisis. Indeed the Queen of England, when opening the New Academic Building of the London School of Economics in November 2008, had asked all those many economists there why none of them saw the crash coming. (They were lost for words and the Queen was not amused: worth at that time about £320mil, the Queen had lost £25mil in a personal investment portfolio).

So on to economists and their little battles over what they never get right. There is the contention now that the PWC cost-benefit study was wrong to base its TPPA economic benefits conclusions on the CGE (Computable General Equilibrium) model which is wanting and inaccurate. There is a Tufts university study based on a UN model which contends the economic benefits of the TPPA are very small, with a very interesting finding of negative effects on growth, employment and income distribution in the U.S. – the usual suspect and prime mover of the TPPA.

The PWC study on the other hand finds the net gains to the overall Malaysian economy of the TPPA are a higher GDP by US$107bil-US$211bil in the period 2018-2027 and additional investment of US$136bil-US$239bil. It reports a narrower trade surplus impact in 2027 of 4.3%-5.2%.

The study however underlines there will be adjustment costs to firms from increased competition and cross-sectoral TPPA obligations. In other words, a lot depends on what firms do in open markets: there are opportunities and challenges. There are details of course on which sectors are likely to benefit the most and which will be under threat. The study has also been made available on the MITI web-site.

Another independent recent study by the World Bank also found positive economic benefits for Malaysia from being involved in the TPPA. Importantly, the FMM reports that 62% of export growth is because of reduced trade barriers (The PWC study sees over 90% of economic gains are driven by reduction on non-tariff measures by 25%-50%).

Whatever the models and assumptions, how much Malaysia benefits economically from the TPPA depends on what our firms do. They have a good export growth track record. And there are four new export markets in countries with whom Malaysia has no FTA that will be opened up, three of them really sizeable markets: the US, Mexico and Canada. However Malaysian firms also have to adjust domestically against imports.

The economists and writers, some ideologised against big business, can pontificate and go on about this and that model, but it is the doers that matter. Malaysian firms and the Malaysian people have to step up the challenge.

In such a detailed and comprehensive as well as a demanding and complex agreement such as the TPPA, there will be fear and trepidation. But remember, everyone is bound by it, including the U.S. (where there also exist so many fears and doubts which would not arise if it were all for America)

It is not just the TPPA that demands we are agile and competitive. There is already the AEC. The RCEP is slotted to be in place by the end of this year. ASEAN countries are negotiating a free trade agreement with the EU. The FTAAP (Free Trade Area of the Asia Pacific) will come.

It is the fear of competition which is mainly driving criticism of the TPPA. But there is really no where to hide. As one of the world’s most open economies, Malaysia is already in the mix. We can and must compete.

Tan Sri Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.