China’s Resource Diplomacy: It’s not Charity for sure


August 5, 2017

China’s Resource Diplomacy: It’s not Charity for sure

By Jealous Chishamba

http://allafrica.com/stories/201708040279.html

Image result for China's Resource Diplomacy

Resource diplomacy refers to the diplomatic activity designed to enhance a nation’s access to resources and its energy security.

It normally happens when great powers contend for supremacy. There are several interlinked components of resource diplomacy. Generally, resource security has three components namely insuring a stable supply of energy and resources; keeping resource supplies at acceptable prices; and being able to transfer those resources to fixed locations, not necessarily to the home country but where they can be processed or consumed.

In economic context, if recipient countries negotiate for a win-win outcome, resource diplomacy can work positively in supporting infrastructure growth for developing countries. However, in most instances, the inhibiting factor for a balanced outcome is that beggars cannot be choosers.

China’s enormous overseas spending has slowly allowed it to write the rules for 21st Century commerce as part of this resource diplomacy.

The increased overseas purchases of resources makes other countries dependent on China’s economy for their own growth, thereby expanding China’s global influence.

 

The transformation of the BRICs acronym from an investment term into a household name of international politics and, more recently, into a semi-institutionalized political outfit (called BRICS, with a capital ‘S’ after South Africa’s inclusion), is one of the defining developments in international politics of the first decade of the 21st century.

 

Beijing’s aim is to help displace the United States and Europe as the leading financial power in large parts of the developing world. To some extent, Beijing may wield some economic power over other competing global economies given that history has never set any precedent that an empire is capable of governing the world forever. Currently, international order is being restructured where traditionally-dominant economies have undergone adjustments and restrictions necessitated by the global financial crisis and its aftermath.

As if endorsing the foregoing assertion, the International Monetary Fund (IMF) unavoidably blessed the Chinese Renminbi as one of the world’s elite currencies, alongside the Dollar, Euro, Pound and Yen. Developing countries especially in Africa are increasingly finding that they must operate in China’s orbit to support their growth.

China and the African continent collectively contain a third of the global population and have recorded the fastest growth rates in the world over the past 15 years.

In some countries across Africa, a deeper relationship with China is already paying dividends. For example, the findings from Afrobarometer’s 2014/2015 surveys in 36 African countries, which included a special series of questions on China, suggest that generally 63% of the respondents have favourable views on economic and assistance activities by China.

Although there are several caveats to using this data to corroborate economic sense, the exactness of these survey results is less important than what the actual numbers signify. The recent exponential growth in China-Africa trade corridor numbers support the view that China and African countries are developing commercial ties that are more balanced, diversified, and beneficial to both regions.

China Development Bank and the Export-Import Bank of China have financed big-ticket projects in Asia and Africa as compared to Bretton Woods Institutions (the World Bank and IMF).

In addition, the birth of the Asian Infrastructure Investment Bank where China has significant power was a result of the difficulties China faced to get veto power in Bretton Woods Institutions. In 2015, the BRICS bank was also formed and China holds a clear dominance within the BRICS group (Brazil, Russia, India, China and South Africa).

BRICS bank is highly regarded as a competitor or alternative to the IMF and World Bank. China’s economic clout in Africa has strengthened and there are fears that Beijing would use these development banks as another tool to exert its influence across the global economy.

Although China-Africa relationship has evolved greatly over the past few years, critics and common pessimistic perceptions have not kept pace with changing realities. Traditionally, the Chinese are not very transparent about their flows of overseas loans.

China is not a member of the Organisation for Economic Co-operation and Development (OECD) and thus they do not participate in the OECD’s Creditor Reporting System, which is the source for much of the data on official flows from the wealthier countries.

Image result for China in Africa

China and Nigeria

While Chinese policy bank officials do release data from time to time on their African loan commitments, this is not systematic in either their parameters or specificity. As is the case with the United States Export Import Bank and other export credit agencies, Chinese banks also rarely publish information regarding specific financing agreements.

It is also uncommon for the recipients of such financing to fully disclose the details of the finance they receive. More often, the loans are tied to the use of Chinese contractors on the projects.

In this regard, China’s investment has been cast as an exploitative neo-colonial business partner with little interest in forging genuine win-win deals in African nations.

Sometimes, the pessimists’ views have some merit given the opaque, government-to-government nature of China’s relationship with the continent. Other schools of thoughts opine that the behind-closed-doors, government-to-government approach of the Chinese state entities lacks transparency and it has therefore been criticised for compromising the expected economic and social benefits of such deals for African countries.

According to China Africa Research Initiative, loans or grants from Chinese government agencies to African counterparts have traditionally outweighed foreign direct investment.

For example, from 2000 to 2015, the Chinese government, banks and contractors extended US$94,4 billion worth of loans to African governments and state-owned enterprises (SOEs).

The figures speak for themselves that indeed the burgeoning of Sino-African links is unprecedented and is becoming the main topic of interest in Africa’s international relations. African governments typically agree to long-term concessionary loans from the Export Import Bank of China to fund major infrastructure projects. They do so because other sources of financing are lacking or are too slow to meet immediate infrastructure needs.

China has realised that Africa is unique and that the approach by Bretton Woods is tied to archaic and largely ineffective Africa investment models hence the danger of missing out on the double digit returns that successful African investments provide.

Wenjie Chen, an economist in IMF’s African Department found that whereas Western investment favours the better governance environments, Chinese investment in strong and weak governance environments is about the same, but its share of foreign investment is higher in the weak governance states.

Thus, the capital flows behind this system of infrastructure financing, often results in illogical comparison between United States, European, and Chinese forms of investment in Africa. Zimbabwe has also been the loci for Chinese investments.

In July 2017, Zimbabwe made an application an application for US$153 million from China Export Import Bank for the upgrade of Harare International Airport. Loans pledged by Exim Bank are in excess of US$1 billion.

In 2016, China’s Premier surprised several global powerhouses when he visited Zimbabwe and pledged around US$4 billion of China-led Foreign Direct Investment (FDI). If executed, this level of commitment contrasts starkly with the action or lack thereof from Bretton Woods banks in Zimbabwe.

Post the visit of China’s President Xi Jinping in Zimbabwe, Fay Chung, did a balanced analysis in his correspondent article entitled Unpacking China’s USD4bln Zim investment.

It is unfortunate that some of the innumerable challenges mentioned as investment deterrents in Chung’s article have not been addressed hence the delays in real China-led FDI flow in the country. It is worth emphasising that given the shifting global dynamics, what ultimately comes from China’s promises depends largely on what we do ourselves.

Sustainability relies not only on goodwill from the East and the West, but also on us being able to add value, negotiate and focus on long-term goals as already achieved by other neighbouring countries whose China-led FDI flows are comparatively high despite vast opportunities in-country.

China has backed its proposal for real win-win cooperation between China and Africa by committing US$60 billion of new investment in major projects which can help develop local economic capacity if the country religiously pursues these opportunities.

Pursuing the opportunities embedded in China-Africa trade corridor is a low hanging fruit for Zimbabwe given that China’s investment in Africa often eschews conditionality as compared to Bretton Woods Institutions.

As for Zimbabwe, the compelling returns will be gained by setting up an investment-led task force to take advantage of China’s resource diplomacy and unlock massive investment potential for the benefit of the country.

The enormity of infrastructure gaps that Zimbabwe needs to resolve requires exploring these strategic opportunities offered by these “all-weather” friends.

Chishamba is a Zimbabwean banker with experience in treasury and corporate banking. He writes in his personal capacity.

Malaysians are forgetful


July 25, 2017

Malaysians are forgetful about scandals, that is why they keep coming back from Mahathir to Najib Razak

by R.Nadeswaran

http://www.malaysiakini.com

 

Forex, Maminco, Cowgate, Mara, FGV, 1mdb…what next?

 

COMMENT | Dr Mahathir Mohamed recited a sajak (poem) entitled ‘Melayu Mudah Lupa’ (Malays forget easily) at the 2001 UMNO General Assembly. After 16 years, is it still appropriate or does one word need to be changed?

Replacing “Malays” with the “Malaysians” would better describe how events and scandals of yesteryears have been consigned to the burial grounds and entombed.

But even the dead can be awakened for political expediency. After 30 years, the ghost of the foreign exchange market (forex) losses, said to run into billions of ringgit, has arisen from the grave – with hopes of it demonising the leading opposition figure, Mahathir.

So, a Royal Commission of Inquiry (RCI) has been set up and will soon start the proceedings, in the hope of establishing a host of facts. There’s certainly nothing wrong with this – perfectly legal. Using provisions provided in the Federal Constitution, the system allows Joe Public to have privy and access to the reasons for decisions to the commitments made by our leaders and their reasons for doing so.

But what can RCIs do? What does our government do with the findings? What happens after the findings? Will they bring about changes or will they be consigned to gather dust in some steel cabinet in Putrajaya?

There have been many, but let’s look back at just two. The first was on the VK Lingam video and the other was the RCI on illegal immigrants in Sabah.

V.K. Lingam–Vincent Tan’s Correct, Correct, Correct Lawyer–Fixing the Judiciary with Tun Ahmad Fairuz

In 2007, a five-man panel chaired by the former Chief Judge of Malaya, Haidar Mohamed Noor, examined a video clip allegedly of lawyer VK Lingam (photo) being involved in the manipulation of judicial appointments.

Subsequently, Lingam was barred from practising in 2015, but he has since challenged the decision of the Bar Disciplinary Committee, which found him guilty of interfering with judicial appointments. The case is scheduled to be heard next month.

In 2013, the former Chief Judge of Sabah and Sarawak, Steve Shim, chaired a five-man panel to investigate “Project IC”, in which citizenship was allegedly given unlawfully to illegal immigrants in Sabah during the Mahathir administration for electoral support.

‘Project IC probably existed’

After hearing 211 witnesses and recording more than 5,000 pages of evidence, the panel concluded that “Project IC” probably existed. It recommended the formation of a permanent secretariat, along with either a management committee or a consultative council, to address the issue of illegal immigration in Sabah.

But the immigrant problems still continue to prosper across the porous borders between Malaysia and The Philippines.

Against such backdrops, what would yet another RCI bring about? For a while, the proceedings will be the talk of the town, after which, it will enter into a sleep mode to be awakened when yet another scandal surfaces on our shores.

The Cowgate Scandal–The Gatekeeper got awa ,thanks to UMNO

Can someone update Malaysians on the National Feedlot Corporation (NFCorp)? On July 25, 2013, NFCorp chairperson Mohamad Salleh Ismail (photo) told a press conference that Japanese company, Kirimitonas Agro Sdn Bhd, had agreed to purchase its entire shares and related companies, and accordingly take over all the assets and liabilities, including the RM250 million loan with the Malaysian government.

Two weeks earlier, the then Finance Minister II Ahmad Husni Hanadzlah, told Parliament that the government had recovered RM79.9 million from the RM250 million it loaned NFCorp.

Ahmad Husni said the government also sealed NFCorp’s assets worth RM23.3 million – two pieces of land in Putrajaya, two units of real estate in Menerung Township Villa and three plots of land in Gemas.

“Out of the RM250 million, close to RM80 million has been received and RM170 million is yet to be received,” he said when winding up the debate for his ministry on the motion of thanks for the Royal Address in the Dewan Rakyat then.

Ahmad Husni said the Finance Ministry took three steps to resolve the NFC project controversy, namely bringing the case to court, taking over or getting back the amount owed and the assets, and finding a new company to continue the project.

And they drive around in their Porsches…

What happened to the real estate that was seized? Can someone give Malaysian taxpayers a status report on the case? After all, RM250 million belonging to the people was given in loans and surely, the least we can expect is some decent, truthful answers. No need for an RCI to tell us how the money for cattle breeding was used to buy luxury condos and property.

Almost two years ago, Mara, its associated companies and senior officials were caught with their hands in the cookie jar. They were involved in a multi-million ringgit scandal where buildings (student accommodation) in Melbourne were bought at inflated prices and the difference filtered down to some people’s pockets.

Police reports were made; the Malaysian Anti-Corruption Commission briefly detained a couple of people, and the Mara Chairperson was replaced. So, what happened to the investigations? Have the crooks been brought to book? Some of them are driving around their Porsche cars, acting as if nothing ever happened.

The construction of the Port Klang Free Zone (PKFZ) was the biggest financial scandal in the country prior to the emergence of an entity called 1Malaysia Development Bhd (1MDB). Six people were charged and all were acquitted. But, if no one is guilty, then the question is: Where did our money go?

The government continues to service the loans taken by the developer. Even as this is written, the Port Klang Authority (PKA) owes the Treasury billions of ringgit. By the year 2051, PKA’s commitment will accumulate to RM12.4 billion. How is it going to get the money? As a regulatory body, its revenues are meagre. Did anyone think about an RCI to get to the bottom of the issue? Bottom line: The loan will be written off and we, the people, will have to bear that burden.

Image result for The Mother of All Malaysian ScandalsThank You MCA and MIC–Gua Tolong Lu, Lu Tolong Gua

There are dozens of other instances or issues that may not be of the magnitude of the forex losses but have made headlines that require some form of inquiry. The obvious one is the 1MDB, which has made headlines all over the world for the wrong reasons.

But does the government have the political will and determination to get the bottom of all these, especially the Mother of all Scandals?

 

Vietnam: A Promising Partner for the Trump Administration


July 12, 2017

Asia Pacific Bulletin

Number 387 | July 11, 2017
ANALYSIS

Vietnam is a Promising Partner for the Trump Administration

By Huong Le Thu

Image result for Vietnamese Prime Minister Nguyen Xuan Phuc and President Donald TrumpVietnamese Prime Minister Nguyen Xuan Phuc and US President Donald Trump held talks in Washingotn DC on May 31 (local time), discussing ways to develop bilateral ties in a more substantive manner.

 

Vietnamese Prime Minister Nguyen Xuan Phuc was the first Southeast Asian Head of State – and the third from Asia (after Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping) – to meet with President Donald Trump since he took office. During his late May three-day visit, he also visited New York to commemorate the 40th anniversary of Vietnamese membership in the United Nations before traveling to the White House. Phuc’s mission was to forge a personal relationship with President Trump, who has yet to form any consolidated view on policy towards Southeast Asia, including the South China Sea.

President Trump, during the May 31 meeting with Prime Minister Phuc, said that he is glad to see a more “balanced” trade relationship with Vietnam. This new trend of seeking what Trump considers to be more fair trade relationships might be challenging for any Southeast Asian state with smaller size and capacity. However, Vietnam aims to demonstrate goodwill by meeting the White House halfway on such expectations.

Switching Contexts

Almost exactly a year ago, the bilateral relationship reached a new high, with then-President Obama’s visit to Vietnam where he announced the total annulment of the arms embargo that had been in place since the war. In fact, Vietnam’s relations with the United States had been warming significantly over the past few years, coinciding with China’s increasing assertiveness in the South China Sea and with the Obama administration’s rebalance policy.

Trump’s victory in the presidential election last November generated some unease in Hanoi that the promising momentum could be lost. Just like other Southeast Asian states, Vietnam rarely figured in Trump’s campaign speeches if at all. He put Vietnam in the same category as China – unfair traders that were dumping their cheap products into the American market. Trump’s decision to withdraw from the Trans-Pacific Partnership (TPP) posed an existential challenge to the whole project and was a hard hit for Vietnam. Vietnam – the least developed economy of the 12 TPP members – was widely predicted to benefit the most from the trade agreement. More importantly, TPP served as a tool for Vietnamese policy makers hoping to “escape China’s orbit” by reducing economic dependency on Chinese trade. The Trump administration’s declaration that the rebalance is dead only further exacerbated Vietnam’s strategic anxiety.

But Vietnam is no stranger to such difficult circumstances. The visit can be seen as Vietnam’s proactivity in seeking engagement with the United States. With a mission to seek US continuity in its commitment to regional affairs – especially regional maritime disputes – Phuc aimed to lay out benefits for Washington to induce it to keep ties with Hanoi strong. The prime minister tailored his economic agenda for Trump’s business mindset. Phuc – who is viewed domestically as a hands-on economic reformer – was a better fit for the role than conservative party Secretary General Trong or President Quang, who is a former Minister of Public Security.

A “Carrot” for Trump?

Despite Hanoi’s strategic concerns, bilateral economic relations have been doing well. America remains Vietnam’s largest export market; however, it ranks sixth among trade partners with which the United States has the largest trade deficits. Bilateral trade from January through May 2017 amounted to $16 billion, which constitutes an increase of 9.9% over the previous year. US exports grew by 22% compared to last year. The visit aimed at alleviating some of the Trump administration’s concerns about the growing deficit with Vietnam, which totaled $32 billion last year, a fraction of the deficit with China – $347 billion.

Among the deals Phuc signed was a $15-17 billion agreement on the exchange of technological goods and services. President Trump described this win-win outcome as “more jobs for America, more equipment for Vietnam.” In contrast to the US-Vietnam leaders’ exchange one year ago, this meeting avoided values-based talk and was highly transactional in nature. Leaders in Hanoi have taken note of this shift. With such transactional gestures to generate good will, Vietnam hopes not only to boost bilateral relations, but also to draw Trump’s attention to geo-economic and geo-strategic regional developments.

During the Obama administration, Vietnam – along with other Southeast Asian neighbors – was considered a major beneficiary of American engagement in the region, both strategically and economically. The TPP was seen as a “carrot.” Under this administration, countries like Vietnam may need to come up with their own “carrots” to attract Washington’s attention, or at least ameliorate the perception of relative loss.

A New Model for Great Power-Small Power Relations?

Vietnam remains Southeast Asia’s most vigilant actor thus far during the first months of the Trump administration. Despite the apparent challenges – particularly the White House’s low level of engagement in the region – Hanoi can look to a number of advantageous factors. First of all, Southeast Asia’s US treaty allies – Thailand and the Philippines – are growing increasingly distant from Washington and closer to Beijing. Manila’s shift under Duterte is consequential, particularly for Vietnam, because of its role in the South China Sea disputes. The recent 30th ASEAN Summit showed Manila’s reluctance to even raise the maritime issues publicly. Under these changing regional circumstances, Washington should reconsider modes of strategic cooperation beyond the traditional treaty ally framework. While Singapore also remains a US-reliant regional partner, Hanoi will be more hard-pressed to get the relationship right. This means that Vietnam might be the keenest regional actor to invest in this relationship and become Trump’s “America First” connection in Southeast Asia.

Moreover, while the issue of human rights represented an enduring obstacle for the Obama administration, Trump’s less values-based approach means that the government in Hanoi is likely to be more comfortable with Washington’s new foreign policy direction.

Best Timing Ever

For America this could be a golden opportunity to engage with Hanoi. Despite previous efforts, domestic responses to American defense engagement in Vietnam still encounter a level of resistance. At this juncture, however, there seems to be consensus among Hanoi’s domestic leadership that the region cannot afford America’s absence. Thus, Phuc’s trip – as well as his reciprocal invitation for Trump to visit Vietnam – signals more openness than ever before, and certainly a better negotiating position.

The Trump administration needs to realize that the previous lasting investments in this relationship should not be sacrificed for short-term business gains. In fact, it is the Trump administration that is likely to harvest the fruits that previous administrations carefully seeded. Vietnam is now a key actor in the region, and if the United States wants to retain its position in Asia, it should understand that long-term gains from this relationship are worth more than revenues. If Trump’s “Make America Great Again” slogan has a global meaning, then securing the support of partners should come first. And a promising partner is Vietnam.

About the Author
Dr Huong Le Thu is a visiting fellow at Strategic and Defence Studies Center, Coral Bell School of Asia Pacific Affairs, Australian National University. She can be contacted at LeThu.Huong@ANU.edu.au.

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.

For comments/responses on APB issues or article submissions, please contact washington@eastwestcenter.org.

East-West Center | 1601 East-West Road | Honolulu, HI | 808.944.7111
East-West Center in Washington | 1819 L Street, NW, Suite 600 | Washington, DC | 202.293.3995

East-West Center in Washington, 1819 L Street, NW, Suite 600, Washington, DC 20036

The Emerging Geopolitics of the Indian Ocean Region


June 29, 2017

Image result for asia-pacific bulletin
Number 386 | June 28, 2017
ANALYSIS

The Emerging Geopolitics of the Indian Ocean Region

By Jonathan D. T. Ward

In a world in which Asia plays an increasingly important economic and geopolitical role, the Indian Ocean provides the foundation for the trading systems that underpin Asia’s economic rise. The Indian Ocean is the basin in which trade from Europe, Asia, the Middle East, and Africa connects. It is also the energy lifeline on which several of the world’s major economies depend. Littered with maritime chokepoints, the geopolitical outcomes that will determine the region’s future have yet to be decided.

Image result for Geo-Politics of the Indian Ocean

Three essential pieces are visible in the geopolitics and economics of the Indian Ocean Region.

First, the Chinese economy depends on access to this region. Energy imports from the Middle East, resources from Africa, and trade with Europe must transit the Indian Ocean in order to reach China. To make things more difficult, Indian Ocean shipping towards China must pass through the two-mile-wide Strait of Malacca. Former PRC Chairman Hu Jintao termed this chokepoint ‘the Malacca Dilemma’, both because of the difficulty of transiting trade back to China through this narrow waterway, and also because of its vulnerability to blockade or maritime interdiction. As such, China must deal with a very difficult geography in the region which it depends on for economic survival and growth.

Second, the region is home to a rising India which possesses much more advantageous geography than China does when it comes to maritime trade and security. As China builds up its expeditionary naval forces to embark on a ‘two-ocean strategy’ that focuses on the Pacific and Indian Ocean, India, in its most recent maritime strategy, made clear that it considers the Indian Ocean, from the Cape of Good Hope to the Lombok Straits, as its primary area of interest. The Indian Navy plans to field three aircraft carrier groups, one which will patrol the Eastern Indian Ocean, a second for the Western Indian Ocean, and a third to be held in reserve. Chinese naval visits to Indian Ocean nations such as Sri Lanka and Pakistan, two essential nodes on China’s ‘Maritime Silk Road’, have led to discomfort in New Delhi.

Image result for Modi and Xi

India’s  Prime Minister Narendra Modi and Chinese President Chinese President Xi Jinping –Indian Ocean Diplomacy

Third, while the Indian Ocean is increasingly the realm in which the geopolitics of China-India relations will take shape in the coming decades, many other nations are also dependent on its waterways for commerce, and it is increasingly becoming a feature in national strategy documents, where the ‘Asia-Pacific’ often becomes the ‘Indo-Pacific’ as nations measure their global and regional strategic interests. If the Pacific links the Americas to Asia, the Indian Ocean links East, South, Southeast, and West Asia, as well linking Asia to Africa and Europe. It is the waterway that makes an Asian trading system possible, and with it the possibility of a world with Asia increasingly at its economic center. As such, while access to the Indian Ocean is essential to many, domination of the Indian Ocean by any single power is likely to be resisted.

In this vital region, initiatives that attempt to secure access and influence are already underway. China’s ‘One Belt, One Road’ (OBOR) initiative, half of which is focused on Indian Ocean trade routes from China to Africa to Europe, aims to build infrastructure that will link these other continents more tightly with China. While ‘OBOR’ is marketed as an economic project, key places on the ‘Maritime Silk Road’ have also been used for military purposes. China’s most recent defense strategy emphasizes that the People’s Liberation Army (PLA) must ‘safeguard the security of China’s overseas interests’, as well as tasking the PLA Navy to ‘shift its focus from “offshore waters defense” to the combination of “offshore waters defense” with “open seas protection”. In addition to building military infrastructure in the South China Sea, China has begun construction of its first overseas military base in Djibouti, on the Horn of Africa, at the opposite end of Indian Ocean sea lines of communication that are vital to China. In addition to visits by Chinese naval assets to the East African coast during anti-piracy operations, underway since 2008, Chinese submarines docked in Pakistan in 2015, and in Sri Lanka in 2014, at a Chinese owned terminal in the port of Colombo. This month, three Chinese warships arrived in Pakistan where a joint naval exercise is scheduled. A Chinese naval officer said of prior exercises with Pakistan in November, 2016 that they would ‘improve the naval capability of both countries to protect Gwadar port activities’ – Pakistan’s Gwadar is a hub on OBOR’s ‘Maritime Silk Road’.

Chinese investment in Indian Ocean countries has been rising, leading to concerns over indebtedness to China by smaller Indian Ocean states including Sri Lanka, the Maldives, and Djibouti. The possibility of an Indian Ocean Rim constructed of heavily indebted poor countries (HIPCs) beholden to China should not be overlooked as the geopolitical future of this vital region takes shape.

The military dynamics of the Indian Ocean Region are evolving rapidly, particularly as China and India build up expeditionary naval forces, and each one supplies partner nations with military material. China has agreed to provide Pakistan with eight diesel-electric submarines, exercising with Pakistan’s navy last year in the East China Sea, and this month in the Indian Ocean. India has upgraded its relationship with Vietnam to a ‘comprehensive strategic partnership,’ and has found substantial partners in the United States and Japan. Meanwhile, India has extended its naval relationships across the Indo-Pacific, inaugurating bilateral naval exercises with Japan, Australia, and Indonesia.

If there is a great game in the Indian Ocean, it may be a game of economics, infrastructure, and investment. At present, however, there are few players that can rival China’s influence and impact, particularly as OBOR gains ground in both developing and advanced economies around the world. India has not yet reached an economic position in which large levels of outbound investment can garner influence in other nations, and the Modi government is currently busy building much needed domestic port and infrastructure projects under the Sagarmala program.

The Asian Development Bank estimates that Asia has $26 trillion in infrastructure needs from 2016 to 2030, and HSBC estimates Asia’s needs at $11.5 trillion over the same period. Both numbers are well outside the scope of new Chinese initiatives including OBOR, the Asian Infrastructure Investment Bank (AIIB), or the OBOR-focused Silk Road Fund. However, the Indian Ocean Region – which comprises East Africa, the Red Sea and Suez, the Persian Gulf, South Asia, South East Asia, and Australia – is rarely studied as an economic region unto itself. Data from AEI’s China Global Investment Tracker shows that China invested nearly $500 billion in the region from 2005-2016, more than double its investments in Europe or East Asia and triple its investments in the United States in the same period. As the vital interests of major Asian nations are increasingly linked to this ocean, and as a contest for security and assured access is likely to continue, we can expect many players, near and far, to realize the importance of this ocean to a world system in which Asia plays a major role, and, accordingly, to turn attention to the shape that this region will take in the coming decades.

About the Author

Dr. Jonathan Ward has recently completed his Ph.D. at the University of Oxford, specializing in China-India relations. He is the founder of the recently established Atlas Organization, a consultancy which advises on China, India, and their strategic interests. He can be contacted at Ward@AtlasOrganization.com.

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.

For comments/responses on APB issues or article submissions, please contact washington@eastwestcenter.org.

East-West Center | 1601 East-West Road | Honolulu, HI | 808.944.7111
East-West Center in Washington | 1819 L Street, NW, Suite 600 | Washington, DC | 202.293.3995

The Entire Trump Agenda Is at a Tipping Point–The Mess in US Senate and House


June 29, 2017

The Entire Trump Agenda Is at a Tipping Point–The Mess in US Senate and House

by Ryan Lizza*

http://www.newyorker.com/news/ryan-lizza/the-entire-trump-agenda-is-at-a-tipping-point

Image result for Trump and Mitch

Ryan, Trump and McConnell and the Legislative Mess they created in the House and Senate. I label them the Dysfunctional Trio –Din Merican

Earlier this month, a senior White House official deeply involved in enacting President Trump’s agenda on Capitol Hill laid out the Administration’s ideal legislative schedule for the rest of this year.

“Between now and the August recess, we’d like them to get health care done, we’d like them to get the debt ceiling done, we’d like them to start tackling the budget,” he told me. “So when they get back from the August recess, first or second week of September, we can throw a tax proposal down and, literally, we can do taxes for September, October, and November.”

The G.O.P. has adopted a major—even radical—agenda: transforming a massive sector of the economy, slashing taxes and rewriting the entire tax code, passing a budget that would dramatically reduce the size of government, and, in the middle of all of that, raising the debt limit. They have a plan to accomplish almost all of it before the end of the year, with minimal transparency, and without relying on a single Democratic vote. But if health-care reform goes down this summer, the rest of the plan may sink with it.

For obscure parliamentary reasons, Republicans can’t move on with the rest of their wish list until they pass the health-care bill. And those prospects are not looking good. On Tuesday, Mike Lee, of Utah, became the fifth Republican senator to say that he would vote against even bringing the health-care bill up for debate. Senate Majority Leader Mitch McConnell, who announced, also on Tuesday, that he will delay the vote until after the July 4th recess, may yet broker a deal on health care, but if he fails to do so the legislative impact for Trump could be calamitous.

The parliamentary maneuver McConnell is using is called reconciliation. The process was created, in 1974, as a way to streamline the congressional budgeting process. It wasn’t intended to be used for major legislative changes. However, as partisan deadlock has grown, it has become an increasingly attractive legislative tool because it is protected from a filibuster in the Senate and therefore needs only fifty, rather than sixty, votes to pass. (Vice-President Mike Pence can cast a tie-breaking vote in both cases.)

Bill Clinton’s attempt at reforming health care was probably doomed the day that he decided not to use reconciliation. Obama passed his initial health-care bill through the Senate without using reconciliation, but he always kept it as a backup plan—and it turned out that he needed it. When he lost his sixty-vote majority in the Senate, Democrats used the process to pass a final package of tweaks to the bill.

This year, Republicans have been even more creative. They planned to use one reconciliation bill for health care and a separate one for the beast of tax reform. But one of the many arcane rules about the reconciliation process is that any new reconciliation bill cancels out the old one. “This is the first time anyone has tried to do this,” Stan Collender, a longtime budget expert who now works for the strategic-communications firm MSLGROUP, said. “You can only have one budget resolution in effect at a time. Their idea was to do health care and then move on to tax reform, but that strategy was based on doing health care quickly.”

If the Senate health-care bill dies and Republicans move on to tax reform, they will have an interesting choice to make: do they give up on health care and propose only a tax-reform bill? Or do they combine tax reform and health care into one monster bill, which would make passage even more daunting?

Some of these procedural issues might be overcome by a kind of nuclear option, whereby Republicans ignore or find a way to overrule the Senate parliamentarian who enforces the budget rules. But, however health care is resolved, the rest of the items on the Trump agenda consist of a series of fiendishly difficult political issues that divide Republicans. The budget, which must be resolved by October 1st, will pit congressional Republicans, who have decried the White House’s proposed budget, against Trump, who was so miffed about being ignored during the budget negotiations earlier this year that he tweeted, “Our country needs a good ‘shutdown’ in September to fix mess!” Republicans in the House are comfortable with defaulting on the debt, and the President himself has called for a shutdown. Things could quickly grow ugly.

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DJT and his Treasury Secretary Steve Mnuchin-Getting the US Economy moving again?

In the middle of this drama, the White House wants to pass a comprehensive tax-reform bill. The last time Congress approved such a piece of legislation was in 1986, and it was the result of a lengthy and bipartisan process of hearings and horse-trading. So how are Republicans approaching tax reform this year? They are writing a bill in secret that they intend to pass using reconciliation. The group writing it, which calls itself the Big Six, consists of Steve Mnuchin, the Treasury Secretary; Gary Cohn, Trump’s top economic adviser; Representative Kevin Brady, the chairman of the House Ways and Means Committee; Orrin Hatch, the chairman of the Senate Finance Committee; House Speaker Paul Ryan; and Senate Majority Leader Mitch McConnell. There are no Democrats and no women involved, and there have been no hearings.

“We are all on the same page,” the senior White House official told me, referring to tax reform. “There’s going to be one tax bill and one tax bill only.”

Before a tax bill can move forward, Republicans will have to agree on health care—or abandon the issue. The health-care reconciliation package is a giant iceberg that needs to be cleared out of the way before Republicans can move forward with the rest of their agenda.

*Ryan Lizza is the Washington correspondent for The New Yorker, and also an on-air contributor for CNN. Before joining the magazine, in 2007, he was a political correspondent for The New Republic, from 1998 to 2007, and, before that, a correspondent for GQ and a contributing editor at New York. He has also written for the New York TimesWashington Monthly, and The Atlantic Monthly. Since 1998, he has covered most of the country’s major political stories, including the last four Presidential campaigns, and has written many political profiles for The New Yorker, on Barack ObamaHillary ClintonJoe BidenMitt RomneyJohn McCainPaul RyanEric CantorMichele BachmannDarrell IssaPeter OrszagLarry SummersRahm Emmanuel, and John Hickenlooper, among others. His awards include the 2012 National Press Club’s Hood Award for Diplomatic Correspondence, for his article “The Consequentialist,” and the White House Correspondents’ Association’s Aldo Beckman Memorial Award, for a series on Obama’s Presidency and reëlection campaign. His article “Making It” was a 2009 National Magazine Award finalist, and his 2010 article “As the World Burns” received honorable mentions from the Toner Prize for Excellence in Political Reporting and the National Press Foundation Dirksen Award for Distinguished Reporting of Congress.

Reading List: Ryan Lizza recommends “Trump Solo,” Mark Singer’s 1997 profile of Donald Trump.

Watch: Ryan Lizza discusses campaign politics and the future of the G.O.P. on Comedy Central’s “The Daily Show.”

Nurhisham is Back– Batting for Najib’s Malaysia


May 9, 2017

Nurhisham is Back– Batting for Najib’s Malaysia

Nurhisham Hussein outlines why it’s disingenuous and dangerous to dismiss economic data from Malaysia.

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Playing Malaysia’s number game

by Nurhisham Hussein

http://www.newmandala.org

I read with some interest a recent article on New Mandala by Manjit Bhatia on the effect of the assassination of Kim Jong-nam on the political fortunes of Malaysian PM Najib Razak. That the assassination has distracted attention from Malaysia’s domestic political scene is not in doubt. However, the author makes some strong allegations regarding the veracity of Malaysian economic statistics, as well as making some misleading and outright untrue statements on the state of the Malaysian economy.

Let me deal with each of the statements I found problematic in turn. The article makes the bold claim that, “Most credible economists, even the market type, know Malaysia’s official numbers are as rubbery as North Korea’s or China’s.” In my role as Chief Economist of the Employees Provident Fund (EPF), I meet nearly every market economist who covers Malaysia, as well as those in policy circles such as from the World Bank and IMF. I don’t know of any who have hesitated to take Malaysia’s official statistics at face value. One of the key tests to determine whether economic data is falsified is internal consistency and statistical irregularity. China for example fails on both counts. Malaysia does not.

The article further states that there is no data for the job participation rate in Malaysia. This is rather unconventional classification, as everyone else uses the term labour force participation rate (LFPR) instead. In any case, the article is completely mistaken. The LFPR for Malaysia has been available at monthly frequencies since 2009, quarterly since 1998, and annual frequencies going back to 1982. The annual numbers are further broken down by age, gender, education, and ethnic background. The data shows, far from a decline in labour market conditions, a steeply rising LFPR from 62.6 per cent in 2009, to a near record high of 67.6 per cent in 2016 (with a long term average of 65 per cent). It should also be noted that Malaysia’s long term average unemployment rate is just under 4 per cent. At the current rate of 3.6 per cent, the labour market would still be considered to be at full employment.

The article goes on to say that Malaysia’s minimum wage is scarcely enforced. On the contrary, data from the EPF, to which all salaried workers are required to contribute, show a massive shift in Malaysia’s salary distribution when the minimum wage was introduced in 2013. Fully 10 per cent of the workforce shifted from below the minimum wage to above it, and the wage effect was evident across the entire bottom half of the distribution.

Fourth, the article claims that, “In Kuala Lumpur alone, credible estimates put inflation at least twice the ‘official’ number”, and “inflation hits close to double-digits, in real terms, according to some investment banks’ research.” The second statement is nonsensical – there is no such thing as inflation in “real” terms, because in economics real prices of goods refer to inflation-adjusted prices. But the larger point – that inflation is perceived to be higher than official statistics – is actually well known. Well known because the same discrepancy has been documented nearly everywhere.

A recent Federal Reserve research note explicitly addressing this issue, found that US citizens perceptions of inflation were consistently twice as high as the official statistics. Why that is so is an interesting question in itself and would take far too long to explore, but the larger point is that differences between perception and official statistics cannot be taken as prima facie evidence that those statistics are false. There is plenty of evidence that the opposite is true, for example via MIT’s Billion Prices Project, that it is perceptions that are mistaken and not the statistics. Furthermore, research into the methodology and mechanics of constructing consumer price indices conclude that if anything, the CPI tends to overstate inflation, not understate it.

Fifth, the article claims Malaysia’s fiscal deficit and national debt are “ballooning”. In fact, the deficit has been halved since 2009, to just 3.1 per cent for 2016, while the debt to GDP ratio has been kept under the 55 per cent limit the government imposed on itself. Manufacturing, far from being routed, has continued to thrive, with sales breaching an all time high of ringgit 60 billion a month over the past few months. Moreover, Malaysia has been one of the very few countries in the region to record positive trade growth over the past two years.

In the Age of Trump, democratic institutions are under attack everywhere. Trust in public institutions has declined, not just in Malaysia, but globally. Globalisation itself is in retreat, and schisms and conflicts that we thought were gone, have arisen anew. Be that as it may, undermining confidence in public institutions without substantive evidence reinforces these troubling trends, and works against the very foundations of a democratic society. Without them, the very thing that Manjit Bhatia appears to be arguing for, becomes further from reality.

Nurhisham Hussein is General Manager, Economics and Capital Markets at Employees Provident Fund, Malaysia.